Re Excel Finance Corp Ltd; Worthley v England

Background 5 Since his appointment as the liquidator of Gallop International Group, the respondent has applied for a number of summonses under Part 5.9 of the Corporations Act 2001 (Cth) (the Act). Those summonses have included summonses for mandatory examinations under s 596A and discretionary examinations under s 596B. Section 596B of the Act is in the following terms: (1) The Court may summon a person for examination about a corporation's examinable affairs if: (a) an eligible applicant applies for the summons; and (b) the Court is satisfied that the person: (i) has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or (ii) may be able to give information about examinable affairs of the corporation. (2) This section has effect subject to section 596A. 6 Section 596C(1) provides that a person who applies for a summons under s 596B must file an affidavit that supports the application and complies with the rules. Section 596C(2) is in the following terms: (2) The affidavit is not available for inspection except so far as the Court orders. 7 The respondent applied for a summons directed to Ms Gerber under s 596B of the Act. His application was supported by an affidavit sworn by the respondent himself on 24 October 2019. 8 On 7 November 2019, a registrar of this Court made a number of orders, including the following orders: 3. Pursuant to section 596B(1) and 596D(2) of the Corporations Act 2001, Ms Sophie Gerber be summoned to attend before the Federal Court of Australia to be examined in respect of the examinable affairs of Gallop International Group Pty Ltd (in Liquidation) (ACN 147 664 551) on 13 December 2019 at 2:15 pm by summons in terms of Annexure C to these orders. … 6. The persons to whom these orders are directed have liberty to apply to set aside or vary these orders by filing an interlocutory application together with supporting affidavits, with such liberty to be exercised within 3 days of service of this order or service of a summons referred to in this order. 9 Ms Gerber was examined before a registrar of the Court on 31 January 2020. At the conclusion of her examination on that day, the registrar made an order that the examination of Ms Gerber be adjourned and that, if the examination of her was not resumed within six months from 31 January 2020, the summons addressed to her be discharged. The registrar also made the usual orders, as she described them, for the signing of the transcript in respect of Ms Gerber. The registrar also made an order pursuant to s 597(9) of the Act that Sophie Grace Pty Ltd by its proper officer produce certain documents and voice recordings to the Court on 2 March 2020. 10 On 2 March 2020, a registrar noted that the proper officer of Sophie Grace Legal Pty Ltd had produced a USB drive. 11 On 23 June 2020, the respondent as applicant made an application by Interlocutory process said to be brought under s 596B(1) and s 597(9) of the Act, and pursuant to Order 3 of the orders made on 31 January 2020, that is, the order providing that the examination of Ms Gerber be adjourned. In the application, the respondent said that he requests the Court to resume the examination of Ms Gerber pursuant to the "sunset" orders made in the proceeding on 31 January 2020, and seeks orders for the production of documents in the possession of Sophie Grace Pty Ltd and Sophie Grace Legal Pty Ltd at the resumed examination of Ms Gerber. The respondent's Interlocutory process was supported by an affidavit of Mr Renfrey sworn on 22 June 2020. That affidavit has been suppressed on the electronic court file. Neither party asked me to read the affidavit and, other than to identify the affidavit and note that it has a number of annexures, I have not done so. 12 The respondent's Interlocutory process came on for hearing before a registrar of the Court on 25 June 2020. The registrar made the following orders: 1. The examination of Ms Sophie Gerber continue on 23 July 2020 at 10:15 am. 2. For the purposes of order 3 made on 31 January 2020, Ms Gerber's examination be taken to have resumed as at the date of these orders. 3. The arrangements for the production of the books and the conduct of the examination the subject of these orders be listed for mention on 9 July 2020 at 2:15 pm by telephone. Parties are to dial (02) 9235 4371 five minutes before the appointed hearing time. 4. Pursuant to subsection 597(9) of the Corporations Act 2001 (Cth), the Proper Officer of Sophie Grace Pty Ltd ACN 122 434 584 (Sophie Grace Pty Ltd) produce to the Court at Ms Gerber's examination on 23 July 2020 at 10:15 am the following books: (a) All engagement letters entered into at any time by Sophie Grace Pty Ltd with Gallop International Group Pty Ltd (in Liquidation) ACN 147 664 551 (howsoever named); (b) All professional indemnity insurance policies held by Sophie Grace Pty Ltd relevant to the periods 1 July 2016 to 30 June 2020 inclusive, including any endorsements in force over this period; (c) Any notification of claim or circumstance in relation to Gallop International Group Pty Ltd (in Liquidation) ACN 147 664 551 made by Sophie Grace Pty Ltd that may give rise to a claim by or on behalf of Sophie Grace Pty Ltd to its insurer(s) or insurance broker(s); and (d) That record or evidence the current assets and liabilities of Sophie Grace Pty Ltd. 5. Pursuant to subsection 597(9) of the Corporations Act 2001 (Cth), the Proper Officer of Sophie Grace Legal Pty Ltd ACN 151 901 665 (Sophie Grace Legal Pty Ltd) produce to the Court at Ms Gerber's examination on 23 July 2020 at 10:15 am the following books: (a) All engagement letters entered into at any time by Sophie Grace Legal Pty Ltd with Gallop International Group Pty Ltd (in Liquidation) ACN 147 664 551 (howsoever named); (b) All professional indemnity insurance policies held by Sophie Grace Legal Pty Ltd relevant to the periods 1 July 2016 to 30 June 2020 inclusive, including any endorsements in force over this period; (c) Any notification of claim or circumstance in relation to Gallop International Group Pty Ltd (in Liquidation) ACN 147 664 551 made by Sophie Grace Legal Pty Ltd that may give rise to a claim by or on behalf of Sophie Grace Legal Pty Ltd to its insurer(s) or insurance broker(s); and (d) That record or evidence the current assets and liabilities of Sophie Grace Legal Pty Ltd. 6. … 7. The persons to whom these orders are directed have liberty to apply to set aside or vary these orders by interlocutory application, together with supporting affidavits within 3 days of service of this order. 13 The submissions have proceeded on the basis that the evidence relied on by the respondent on 25 June 2020 and which would be the subject of the order sought in paragraph 3 of the applicants' Interlocutory application (if made) is the affidavit of Mr Renfrey sworn on 22 June 2020. 14 The order sought in paragraph 4 of the applicants' Interlocutory application is that Orders 4(b) and 4(c) be set aside. The orders in paragraph 4 are expressed to be made under s 597(9) of the Act. Section 597 relevantly provides: (4) An examination is to be held in public except to such extent (if any) as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private. … (5B) The Court may put, or allow to be put, to a person being examined such questions about the corporation or any of its examinable affairs as the Court thinks appropriate. … (7) A person who attends before the Court for examination must not: (a) without reasonable excuse, refuse or fail to take an oath or make an affirmation; or (b) without reasonable excuse, refuse or fail to answer a question that the Court directs him or her to answer; or (c) make a statement that is false or misleading in a material particular; or (d) without reasonable excuse, refuse or fail to produce books that the summons requires him or her to produce. (9) The Court may direct a person to produce, at an examination of that or any other person, books that are in the first mentioned person's possession and are relevant to matters to which the examination relates or will relate. (9A) A person may comply with a direction under subsection (9) by causing the books to be produced at the examination. … (10A) A person must not refuse, or intentionally or recklessly fail, to comply with a direction under subsection (9). … (13) The Court may order the questions put to a person and the answers given by him or her at an examination to be recorded in writing and may require him or her to sign that written record. … (17) The Court or another court before which an examination under this Division takes place may, if it thinks fit, adjourn the examination from time to time.

Analysis 15 The first order sought by the applicants is that to the extent necessary, time be extended for the applicants to bring their Interlocutory application pursuant to r 1.39 of the Federal Court Rules 2011 (Cth). The applicants accept that an extension of time is necessary. The registrar's orders made on 25 June 2020 require that any application by persons to whom the orders are directed to have the orders set aside or varied be made by interlocutory application together with supporting affidavits within three days of service of the orders. The respondent served the orders made on 25 June 2020 on the applicants on that day. The applicants filed their Interlocutory application on 23 July 2020. 16 The respondent submits that an extension of time should not be granted. He identifies r 11.5(2) of the Federal (Corporations Rules) 2000 (Cth) as an additional source of the requirement that a person served with an examination summons may apply to the Court for an order discharging the summons and if he or she chooses to do so, then that must be done within three days after service. I do not need to examine the correctness of this proposition, having regard to the nature of the applicants' application because, on any view, there was a time limit in this case of three days after the service of the orders. Nor do I need to examine the correctness of the respondent's proposition that r 1.10 of the Corporations Rules is an additional source of the power to extend time. 17 The three key considerations in determining whether an extension of time should be granted are as follows: (1) the explanation for the delay provided by the applicants' (2) whether, and the extent to which, the applicants have an arguable case; and (3) the prejudice, if any, to the respondent if an extension of time is granted. (See, for example, Re Bell Group NV (in liq) [2016] FCA 851; (2016) 116 ACSR 294 at [22]-[24] per Yates J.) 18 The explanation for the delay is provided by Ms Gerber in her affidavit. The applicants' response to being served with the orders made on 25 June 2020 was to engage in correspondence with the respondent's solicitors. The key points to emerge from this correspondence are as follows: (1) Initially, the orders in dispute were those in paragraphs 4(b), (c), (d) and 5(b), (c) and (d) of the orders made on 25 June 2020. By 30 June 2020, the orders in dispute were those in paragraphs 4(b) and (c) and 5(b) and (c). The documents referred to in these orders may be referred to as the insurance documents. Further evidence from Ms Gerber and the applicants' Interlocutory application itself indicates that what is in dispute are the insurance documents in relation to Sophie Grace Pty Ltd (i.e., paragraphs 4(b) and (c) of the orders made on 25 June 2020). (2) The applicants sought from the respondent a copy of the Interlocutory application for the orders made on 25 June 2020 and "all evidence that was put before the Court on the application". The respondent refused to provide such documents. (3) Various matters were unresolved as at 30 June 2020. The applicants were aware that they needed to exercise the liberty to apply to set aside or vary the orders made on 25 June 2020 by the end of the day on 30 June 2020. The respondent's solicitors wrote to the applicants' solicitors on 30 June 2020 and, in the course of their letter, they said the following: Without intending to waive confidentiality and privilege in the supporting affidavit filed by our client, we confirm that all correspondence between our firms commencing with our letter dated 10 June 2020 up to and including your letter of 19 June 2020 was put before the Court for the purposes of obtaining the 25 June Orders. 19 The "supporting affidavit" referred to in this passage is an affidavit sworn for the purposes of the respondent's Interlocutory process filed on 23 June 2020. Counsel for the respondent has confirmed that the affidavit is an affidavit of the respondent's solicitor, Mr Renfrey, sworn on 22 June 2020. It should be made clear that it is not the respondent's initial affidavit sworn in support of the initial application for an examination summons under s 596B directed to Ms Gerber. 20 After addressing the matters which I have summarised above, Ms Gerber's affidavit addresses correspondence between Sophie Grace Pty Ltd and its insurer. It is convenient to set out the relevant paragraphs: 19. On 30 June 2020, I provided written notice to my insurance broker, Sean McDermott of Everest Risk Group advising that the Liquidator in this matter may have a potential claim against Sophie Grace Pty Ltd. I have not exhibited this notice as I am opposing the production of same. 20. On 20 July 2020, after not receiving a response, I again followed up the broker confirming that the notice had been received. I have not exhibited this notice as I am opposing the production of same. 21. On 20 July 2020, I received an email from DUAL Australia advising that they oppose production of the documents specifically orders 4(b) and (c) in the 25 June Orders on the basis that it breached the confidentiality of the insurance policies held on behalf of Sophie Grace Pty Ltd. I have not exhibited this notice as I am opposing the production of same. 22. I have sought consent of my insurer to produce the documents contained in orders 4(b) and 4(c) of the 25 June Orders. Consent has not been provided and I am accordingly required to bring the application accompanying this affidavit to set aside orders 4(b) and 4(c) of the 25 June Orders. 23. Sophie Grace Pty Ltd have agreed to provide and provided all requested documents which relate to the Company pursuant to orders 4(a) and (d) of 25 June Orders. 24. Despite repeated requested [sic] from our office, the Liquidator continues to insinuate some wrongdoing on the part of Sophie Grace Pty Ltd and refuses to advise the basis of these claims. 25. Sophie Grace Pty Ltd and Sophie Grace Legal Pty Ltd have complied with all orders for production and assisted the Liquidator with his enquiries throughout the Proceedings. 26. I seek the orders contained in the application to apply to set aside or vary orders 4(b) and (c) as contained in the 25 June Orders. 21 As I have said, the only orders which the applicants by their Interlocutory application seek to have set aside are those in paragraphs 4(b) and (c), that is, the insurance documents of Sophie Grace Pty Ltd. Ms Gerber's evidence as set out above suggests that Sophie Grace Pty Ltd is not prepared to provide those documents because its insurer will not consent to it doing so. The evidence suggests that after initial resistance, Ms Gerber may have been prepared to provide the insurance documents, but was not prepared to do so after she became aware of the insurer's attitude. That that was, in fact, what occurred is confirmed by the correspondence attached to Mr Renfrey's affidavit sworn on 29 July 2020 which correspondence occurred between the making of the orders on 25 June 2020 and the issuing of the present application on 23 July 2020. The correspondence is between the parties and the registrar's chambers and relates to the relisting of the application and the production of documents. 22 With respect to the merits of the applicants' case, the "case" for the purposes of a consideration of this issue relates to the order concerning the production of the affidavit and does not include that part of the application seeking the setting aside of the orders in paragraphs 4(b) and 4(c) of the orders made on 25 June 2020. Clearly if the order for the production of the affidavit is made, the affidavit may throw light on whether the orders in those paragraphs should be set aside. For the reasons set out below, the applicants have not only established an arguable case that the affidavit should be produced to them, but I am satisfied that an order to that effect should be made. 23 With respect to prejudice to the respondent if an extension of time is granted, no specific prejudice has been identified by the respondent. He submits that he wishes to proceed with the liquidation as quickly as possible. 24 I have considered the above matters and I am of the view that they support an extension of time. 25 The second order sought is that the evidence relied on by the respondent on 25 June 2020, namely, the affidavit of Mr Renfrey sworn on 22 June 2020, be made available for inspection by the applicants. 26 The applicants' argument in support of an order in these terms is simple. The affidavit is not protected by s 596C because it was not filed in support of a summons for examination under s 596B. In the case of Ms Gerber, such an order was made on 7 November 2019 and the summons remained extant and not discharged after her examination on 31 January 2020 and until the end of July 2020 as recognised in the order made by the registrar on 31 January 2020. There was no need to summons Ms Gerber again or to establish the matters in s 596B. The effect of the fact that Ms Gerber's examination was only adjourned is that the resumption of her examination on a particular date fixed by order of the Court was purely procedural; she was not served with another summons and she was simply advised of the date upon which her examination would resume. Mr Renfrey's affidavit supported the orders made under s 597(9) and, although that subsection itself contains a link with an examination under Part 5.9 of the Act because it refers to the books being produced, "at an examination of that [person] or any other person", it is not a supporting affidavit for an application under s 596B. It should be considered as an affidavit relied on in support of an interlocutory application which was heard ex parte. The hearing should not have been conducted ex parte, but, in any event, in order to decide whether to challenge an order made ex parte, the party considering a challenge is entitled to be given the material upon which the order was based. 27 The respondent submits that the affidavit is protected by s 596C. The Interlocutory application issued by the respondent which led to the orders made on 25 June 2020 was issued pursuant to s 596B(1) and s 597(9) of the Act. One of the orders made was that the examination of Ms Gerber, who had been summonsed pursuant to s 596B, continue on the date specified in an order and the orders made pursuant to s 597(9) against the applicants were for books to be produced to the Court at Ms Gerber's examination. The respondent submits that on the assumption that the affidavit is protected by s 596C, then the applicants have presented no evidence to support an order under s 596C(2). In other words, having regard to the authorities, there is no evidence of an arguable case that the respondent's application was an abuse of process or was brought for an improper purpose. This last proposition is not disputed by the applicants and it is not necessary for me to refer to the relevant authorities, other than to note Re Excel Finance Corp Ltd; Worthley v England (1994) 52 FCR 69; (1994) 34 ALD 85; Ford HAJ, Austin RP and Ramsay IM, Principles of Corporations Law, (Butterworths, subscription service) at pp 27,734-27,736 (update 141). However, as I have said, this is not the applicants' argument. Their argument is simply that the affidavit is not protected by s 596C of the Act and in order to exercise their right to challenge orders made against them on an ex parte basis, they are entitled as a matter of course to the material relied on for the purpose of obtaining the orders. 28 The registrar did not provide reasons for making the challenged orders. The nature of the application and the orders he made were such that it is not to be expected that he would do so. There is no evidence as to the nature of the submissions made to the registrar. The respondent is the only party who would have been in a position to put forward such evidence. 29 The applicants submit that the respondent was not required to provide evidence relating to the resumption of Ms Gerber's examination and whether he did so or not is irrelevant and I should proceed on the basis that the affidavit did not relate to the resumption of Ms Gerber's examination and related only to the orders made under s 597(9) against the applicants. It seems that the position is not that straightforward. There may be cases where the circumstances are such that the Court requires a fresh affidavit to justify the continuation of an examination (Ford, Austin and Ramsey at pp 27,785-27,786; Re Stoliar; Australian Securities and Investments Commission v Karl Suleman Enterprises Pty Ltd (in liq) [2003] NSWSC 163; (2003) 44 ACSR 694 at [42]-[44] per Austin J). Having said that, there is no indication in this case that a fresh affidavit was required to justify the resumption of Ms Gerber's examination. In fact, the indications are to the contrary. As the evidence and submissions make clear, a substantial volume of information, including voice recordings, was given to the respondent by Ms Gerber after her examination on 31 January 2020. A resumption of Ms Gerber's examination was to be expected in those circumstances. I proceed on the basis, therefore, that the necessary purpose of the affidavit was to support the orders under s 597(9) of the Act. 30 There does not appear to be any authority directly on point. The cases to which the applicants referred, being Re BPTC Ltd (in liq) (No 5) (1993) 10 ACSR 756 (BPTC) and Re South Pacific Energy Trading Pty Ltd (In Liq) (1996) 40 NSWLR 264, go so far as to suggest that the application of the practice of an ex parte hearing and an affidavit not available for inspection by the party against whom the direction is made in the case of an application under s 596B to an application under s 597(9), is not axiomatic even though directions under s 597(9) are ancillary or related to orders under s 596B because a direction is to produce books at a person's examination and those books are to be books that are relevant to matters to which the examination relates, or will relate. In BPTC (at 759), Bryson J outlined circumstances where it would and would not be appropriate to apply the practice on obtaining an examination summons to the obtaining of an order under s 597(b) of the Act. 31 I have reached the conclusion that it is appropriate to characterise the respondent's application of 23 June 2020 as, in essence, an application for directions to third parties (albeit related third parties) under s 597(9). The affidavit of Mr Renfrey sworn on 22 June 2020 supported that application and not an application under s 596B. The affidavit is not protected under s 596C(2). It should be disclosed by the respondent to the applicants to give content and meaning to the applicants' right to apply to set aside the directions. The disclosure of the affidavit is not contingent on the applicants showing a prima facie or arguable case that the directions will be set aside. 32 The order in paragraph 5 of the applicants' Interlocutory application was not the subject of submissions. That may be because a stay is not necessary at this stage. I will grant liberty to apply on two days' notice and the applicants can pursue this order if necessary.

Conclusions 33 In my opinion, an extension of time should be granted and an order should be made that the respondent produce Mr Renfrey's affidavit sworn on 22 June 2020 to the applicants within seven days. The applicants' Interlocutory application will be listed on a date to be fixed and the applicants can then indicate whether they wish to pursue the order sought in paragraph 4. I will reserve the question of costs until the outcome of that process is known. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko.