On 23 May 1997, orders were made as follows:
.Orders for the examination of a number of persons, as a result of which on 26 May 1997 summons were issued, inter alia, against Rodney Adler ("Mr Adler"), John Austin ("Mr Austin"), John Glenn Crane ("Mr Crane"), Joseph Grant Jagelman ("Mr Jagelman") and John Landerer ("Mr Landerer"), requiring them to attend for examination on 23 June 1997. It is convenient to call those orders "the examination orders".
.Orders for the production to the Court for the purpose of certain of the proposed examinations, certain documents by a number of entities, including orders made against County Natwest Securities Australia Ltd ("County") and against FAI Insurances Ltd, FAI Traders Insurance Company Ltd and FAI General Insurance Company Ltd (together, "the FAI Group"). It is convenient to call those orders against those entities "the production orders". Of course, each of the production orders did not necessarily relate to each of the examinations under the examination orders, but it is not presently necessary to refer to each of them separately.
Under the Rules of Court applicable to such orders (s 9 of the Law, O 71 r 81 of the Federal Court Rules hereinafter called "the Rules"), any application to discharge any of the examination orders was required to be made within three days of service of the examination orders. When the examination orders were made, the Court required that at the time of service each proposed examinee be informed that the examination as fixed would not proceed on the date nominated but would then be adjourned to a later date so as to enable any challenges to the examination orders to be addressed with as little inconvenience to the proposed examinees as possible. A number of applications were brought to discharge the examination orders within the time so fixed: O 71 r 81(6) of the Rules, including the applications by Mr Crane and Mr Jagelman. Subsequently, such applications were also brought by Mr Adler, Mr Austin and Mr Landerer together with applications seeking extensions of time within which to bring those applications. Nothing turns on the lateness of those particular applications in the resolution of the present interlocutory issues.
Each of the applications to discharge the examination orders, and where necessary each of the applications for extension of time to do so, has been listed for hearing on 15 September 1997.
THE ISSUES
On 10 July 1997 directions were given with respect of a notice of motion issued by Mr Crane under s 596C(2) of the Law for access to the affidavit. That application was fixed for hearing on 22 July 1997. Subsequently, on 16 July 1997 Mr Adler and Mr Landerer made a similar application and on 17 July 1997 Mr Jagelman also made a similar application. I heard those applications also on the same date.
Mr Austin served upon the liquidator a notice dated 18 July 1997 to produce the affidavit, returnable on 22 July 1997. He did not himself seek by notice of motion or otherwise any order from the Court under s 596C(2) of the Law. He contended that the liquidator, if he did not wish to comply with the notice to produce, should apply on motion under O 33 r 12 of the Rules for an order that he need not comply with the notice to produce. I entertained an oral application on 22 July 1997 that the procedures sought to be adopted by Mr Austin was not an appropriate one in the circumstances, and that the liquidator need not produce the affidavit as required by that notice.
In relation to the production orders, a number of entities against which such orders were made have applied by notice of motion to discharge or vary those orders. That includes such applications being made by County and by the FAI Group. Those notices of motion have also been listed for hearing on 15 September 1997. Order 71 r 81 of the Rules does not prescribe any procedure required to be followed to do so, nor the time within any such application should be made. The production orders each also require production of the orders specified in each order on 23 June 1997, the date notionally fixed for the examinations under the examination orders, but again the Court required it to be made plain that, provided any challenge to the production orders was brought before that date, the production of documents would also be deferred to a convenient date pending resolution of any such issues, again in an endeavour to minimise inconvenience to any entity the subject of a production order.
By notices of motion dated 2 and 7 July 1997, County and the FAI Group have respectively sought access to the affidavit. Those applications involve claims for the affidavit either by order to be made under s 596C(2) of the Law, or alternatively without the need to address that subsection because the production orders made under s 597(9) of the Law do not require consideration of the policy for protection of the affidavit which s 596C(2) seems otherwise to recognise. Those motions were also heard on 22 July 1997.
The submissions on those various matters were heard successively. With the consent or acquiescence of the parties, sensibly, material filed and submissions made with respect to one application were variously adopted by counsel for the other applicants.
There were further interlocutory steps taken with respect to the applications to discharge the examination orders and the production orders.
By subpoenas issued on 2 July 1997 at the request of the FAI Group and directed respectively to Westpac Banking Corporation Limited ("Westpac") and to Claremont Petroleum NL ("Claremont"), Westpac and Claremont were each required to produce to the Court the following the documents:
"all agreements, documents and other records including letters, memoranda, accounts and statements or copies thereof, minutes of meetings, reports, evidencing or referring to an arrangement whereby John Sheahan in his capacity as liquidator of Moage Limited (In Liquidation) obtained funding for and/or an indemnity in respect of proceedings number SG 3011 of 1997 [the proceedings now before the Court] and proceedings number SG 3069 of 1995."
The proceedings numbered SG 3069 of 1995 are very substantial proceedings brought by the liquidator in the name of Moage initially against Mr Jagelman and a number of companies with which he is alleged to have been associated, and later against a much broader range of persons or entities. I shall call those proceedings "the Moage proceedings" and refer to them in detail shortly.
I note that Westpac and Claremont were the two creditors appointed to the Committee Inspection of Moage following its liquidation.
By notice of motion dated 9 July 1997 the liquidator applied for orders that neither Westpac nor Claremont should be required to produce such documents pursuant to the subpoenas and for the subpoenas to be set aside. That motion was heard on 29 July 1997. The liquidator's status to bring and maintain that motion was not put in issue: see Botany Bay Instrumentation and Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 101-102; Trade Practices Commission v Kimberley Homes Pty Ltd (No 1) (Federal Court, Hill J, 19 July 1989, unreported).
Finally both County and the FAI Group each served on the liquidator a notice to produce dated 2 July 1997 requiring the production by the liquidator to the Court on 10 July 1997 of a number of specified documents. It will be necessary to refer severally to those documents in due course. Each of those notices to produce resulted in the liquidator applying by notice of motion dated 8 July 1997 for orders that he not be required to produce the documents specified in them. Each of those notices of motion was also heard on 29 July 1997.
I note that one question which arose in the course of the submissions relating to that motion was whether it should be dealt with at this stage in the proceedings. The question arose because each notice to produce was given by an entity against which a production order only had been made. Such orders are made only with respect to an examination of a person under s 596A or s 596B of the Law. If the relevant examination orders were discharged, then the production order would ipso facto also be discharged. If the examination orders were upheld, despite the challenges to them, it was unclear the extent to which an entity against which a production order was made under s 597(9) of the Law could then, in an endeavour to set aside that order, further attack the validity of the examination order itself. It may have been inappropriate for the entity against which a production order had been made to be entitled to mount a separate and second attack upon the integrity of the examination order, at least upon grounds which had been ventilated between the liquidator and the proposed examinee. One solution to that possible problem was to adjourn the notice of motion challenging the production orders, and the interlocutory proceedings relating to it, until the final status of the examination orders was decided. That course of action, in a practical sense, would have been unsatisfactory. One of the persons against whom an examination order had been made could equally have given a notice to produce in similar terms, and the matters now sought to be argued would then have required ventilation in any event at a later date. Consequently, as solicitors on the record for the FAI Group are also solicitors on the record for Mr Adler and Mr Landerer, leave was sought to amend the notice to produce given by the FAI Group to include Mr Adler and Mr Landerer as persons on whose behalf such notice was given. That course of action was, sensibly, not opposed by counsel for the liquidator. I will give leave accordingly.
Thus, with respect to the applications to discharge the examination orders and the production orders, the following interlocutory matters have been addressed:
(1)applications for orders under s 596C(2) for access to the affidavit, made by persons against whom the examination orders have been made
(2)applications for orders, whether under s 596C(2) or otherwise, for access to the affidavit, made by entities against which the production orders have been made
(3)whether the affidavit should be produced to Mr Austin, against whom an examination order has been made, upon his notice to produce and without any application having been made for an order under s 596C(2), and whether in the circumstances the liquidator need not comply with that notice to produce
(4)the liquidator's application for orders that the subpoenas directed to Westpac and Claremont not be required to be met and that those subpoenas be set aside, and
(5)the liquidator's application for orders that he not be required to produce the documents the subject of the notices to produce served upon him, now given both by the entities against which the production orders were made and by Mr Adler and Mr Landerer.
I shall deal separately with each of those issues, but as the material variously relied upon overlapped to a considerable extent, it is convenient first to note the facts said to be of general significance.
That material related to the Moage proceedings, to the extent of the liquidator's work since his appointment, especially during 1996, and in respect of the issues concerning the subpoenas and the notices to produce which are challenged to the nature of an arrangement between the liquidator and an entity Tiger Investments S A ("Tiger") with respect to the funding of the Moage proceedings and this application, and of any interest of Tiger in the outcome of the Moage proceedings. I note that, to some extent, the applications of Mr Jagelman and Mr Austin were in large measure treated as discrete matters in the course of the hearing.
THE EVIDENCE
On 31 May 1995 the liquidator commenced the Moage proceedings. Those proceedings were initially, and until November 1996, brought only against Mr Jagelman and against entities with which he is alleged to have been involved. They did not progress beyond the filing and service of the statement of claim up to November 1996. It is unnecessary to refer to the circumstances explaining that apparent lack of activity.
On 4 November 1996 the Moage proceedings were expanded by the addition of a number of other parties as respondents including Mr Crane, County and the FAI Group. A much more detailed amended statement of claim was filed. None of Mr Adler, Mr Austin or Mr Landerer are parties to those proceedings.
On 11 March 1997, an order was made transferring those proceedings to the New South Wales Registry of the Court. The application for that order was not opposed by the liquidator. The material now before me indicates that the reasons for that application included the location of witnesses and potential witnesses, the location of documents, and the location of solicitors and counsel for the various respondents; it was asserted that there was no particular nexus of the proceedings to South Australia. In the absence of any contesting material, the New South Registry of the Court was the more suitable Registry having regard to the interests of all the parties, and the interests of justice: National Mutual Holdings Pty Ltd v Century Corporation Ltd (1988) 83 ALR 434 at 442.
On 3 June 1997, pursuant to leave, a further amended statement of claim was filed. This alleges that in July 1987 an agreement was entered into to implement a scheme, and that over the succeeding period of twelve months or so that scheme was implemented, involving a conspiracy between Mr Jagelman, County, the FAI Group, Mr Crane and others to enable Malcolm Johnson, Independent Resources Limited and related entities to achieve control of Moage and of Claremont from Mr Jagelman and related entities and from the FAI Group by unlawful means. It sets out the series of transactions and arrangements by which that alleged illicit plan was given effect to. It alleges that the plan, and its implementation, involved dishonesty and fraudulent conduct on the part of those respondents, and involved breaches of the Companies (Acquisition of Shares) (Victoria) Code and the Foreign Takeovers Act 1975. There is one additional respondent against which allegations are made of negligence and breach of duty; it is not said to be involved in the dishonest and fraudulent conspiracy asserted.
On 2 June 1997 directions were given, including leave to file and serve the further amended statement of claim referred to above. Those directions required defences to be filed by 4 August 1997 or notices of motion to strike out all or parts of the further amended statement of claim to be issued by that time. The next directions hearing is listed in those proceedings on 11 August 1997. One respondent has issued a notice of motion to strike out the statement of claim, and to dismiss the action. It is listed for 14 August 1997. Similar applications are threatened, and may in accordance with the directions be instituted to 4 August 1997. There is also a threatened application for security for costs by at least one respondent, proposed to be pursued against Moage under s 1335 of the Law and O 28 of the Rules. No defences have yet been filed by any respondent.
There is, therefore, no certainty as to whether defences will be filed prior to the next directions hearing, or whether all respondents or at least the respondents who are involved in the current proceedings will have taken steps to have the statement of claim struck out or to have the action dismissed. There is some prospect, although it is in the circumstances by no means certain, that on the next directions hearing for the Moage proceedings on 11 August 1997 orders for discovery will then be made in those proceedings. It is for present purposes unnecessary to decide whether, if the examination orders are maintained despite the attacks upon them, discovery in the Moage proceedings will have taken place before the examinations to which the examination orders relate. It is also for present purposes unnecessary to decide whether the documents required to be produced under the production orders overlap entirely with the documents which County and the FAI Group will be obliged to discover in the Moage proceedings, although it is apparent that there are at least categories of documents required to be produced under the production orders which would not be so caught.
Whilst the attitude of the liquidator to the application for the transfer of the Moage proceedings to the New South Wales Registry fo the Court was both understandable and appropriate, the evidence before me also indicates that the liquidator and his staff working on the Moage proceedings are in Adelaide. All his documents are in Adelaide. His solicitors and counsel are in Adelaide. Each examination is estimated to take between two hours and two days. The relative considerations of the convenience of the liquidator and of a proposed examinee, or of an entity against which a production order has been made, are quite different from the considerations applicable to the overall conduct of the Moage proceedings. At present there is no application to have the examinations conducted in New South Wales or to have the documents required to be produced under the production orders so produced in New South Wales. If such an application is made in a particular instance this can be addressed at that time. I do not think it can be said, and I reject the submission, having regard to those matters, that the liquidator's purpose in seeking the examinations and the production orders is in any sense seeking to subvert or get around the order for the transfer to the New South Wales Registry of the Moage proceedings. To the extent to which it has been argued that such a purpose on his part in procuring the examination orders and the production orders is "arguable", I reject it.
The liquidator has lodged with the Australian Securities Commission accounts and statements pursuant to s 539(1) of the Law, covering each six monthly period from his appointment up to 31 May 1997. One period to 31 May 1996 was not covered in evidence, but a comparison of the material for the preceding and succeeding periods shows that there were no significant changes in receipts and payments in that six month period. He has also lodged certain minutes of meetings of the creditors of Moage, and a preliminary report dated 3 January 1995.
That material reveals that, until 31 May 1996, the receipts by the liquidator and the payments made by him in the liquidation of Moage were relatively small. Receipts to that date totalled only $7993, and payments only $6477. In addition, the amount owing to the liquidator for remuneration to 30 November 1995 was only $34372 and he had received no monies for work done by him or his staff to that date.
The position changed during 1996 and to the present time. Total receipts by the liquidator in the liquidation to 30 November 1996 was $74618, and by 30 May 1997 $259804. Those receipts were made up in large measure by amounts received from Tiger, a limited company registered in Luxembourg on 6 December 1996. Tiger is shown to have advanced $221075 by way of loan in four tranches as follows: $66377 on 18 November 1996, $44188 on 24 January 1997, $71730 on 18 March 1997, and $38780 on 21 May 1997. That the first tranche was lent before the registration of Tiger was not the subject of submission. I have not overlooked that, although the accounts and statements presented for the period to 31 May 1997 were lodged with the Australian Securities Commission apparently on 23 June 1997, those accounts were not proved until after the first hearing date on 22 July 1997. It is of course for the parties to determine what material they rely upon for the respective notices of motion. I have discounted that information in determining the motions which were argued on 22 July 1997, although ultimately I am confident that such information confirms the inferences or conclusions which were otherwise apparent from the material made available to the Court by 22 July 1997.
That material also shows that, as at 30 November 1996, the amount owing to the liquidator for remuneration had increased to $230735, and he had still by that time received no payment in respect of the work he had done. By 30 May 1997, he had been paid $81458 and there was still owing to him for work done $294125.
The material also discloses two principal creditors who have proved in the liquidation totalling $17244600 and certain other lesser creditors. Finally, for what it is worth, it also shows that the liquidator had reported having not disposed of any assets of Moage other than for cash at any time.
It is unnecessary for present purposes to make final determinations of fact on what that material demonstrates. It is sufficient to note that it provides a sound basis to support findings that, up to the end of 1995, the liquidator had not done a great deal of work in relation to the Moage proceedings, but did do a great deal of work in relation to those proceedings at least in the second half of 1996 and subsequently. It is a reasonable inference that the charging for work done was effected soon after the work itself was done. As that material indicates that there are no other assets of significance in Moage, it is also a reasonable inference that that work involved investigations largely, if not exclusively, concerning the Moage proceedings and including the role of the respondents to those proceedings as added by order of 4 November 1996 and of persons associated with them. That material also is capable of supporting a conclusion that the liquidator has entered into some form of arrangement with Tiger for the financing of the conduct of the Moage proceedings and, presumably, these proceedings. Indeed so much was acknowledged by counsel for the liquidator. It was accepted that on 20 December 1996, the Court had granted the liquidator leave pursuant to s 477(2B) of the Law to enter into a certain arrangement with Tiger which related to the conduct of the Moage proceedings. That is a confidential order, and the terms of the arrangement are not before me.
Finally, I should note that no submissions were put by any party with respect to the present issues that the liquidator was not an eligible applicant to have applied for the examination orders nor that he was not an appropriate person to have sought the production orders, or that the proposed examinees under the examination orders are not able to give information about Moage and that the type of information to be sought does not relate to the examinable affairs of Moage. Nor was any submission put with respect to the present issues based upon the terms of the examination orders or the terms of the production orders, that is, no submission was put to suggest that by reason of the nature or breadth of the materials sought, or the topics identified, or any difficulty in complying with them, that such matters provided any basis for the interlocutory orders sought.
ACCESS TO THE AFFIDAVIT: APPLICATION BASED UPON THE EXAMINATION ORDERS
Each of Mr Adler, Mr Crane and Mr Landerer presented a common position. Material produced by or on behalf of Mr Jagelman, after objections to its form or relevance, was also limited in effect to reliance upon the grounds advanced by others.
It is common ground that the liquidator's purpose for procuring the examination orders and the production orders in support of them is to get information with respect to his conduct of the Moage proceedings. The orders for production, for example against County, identify the documents to be produced by reference to the amended statement of claim in the Moage proceedings. It also appears from the material before me that that information will relate not only to factual matters touching upon the making out of the cause or causes of action against the various respondents, or whether those matters can be maintained as perceived on the basis of the information presently presumably available to the liquidator, but also to the resources of the various respondents to those proceedings to determine whether, for practical reasons, it is worthwhile proceeding against them.
Each of the applicants on the various motions to discharge the examination orders or the production orders was directed to provide a short statement of the grounds upon which that motion was brought. That given on behalf of Mr Adler and Mr Landerer and the FAI Group, identified those grounds as follows:
"1.Delay of the Applicant in making application for issue of the Summonses, such delay causing prejudice to the FAI Group.
2.Imminence of a discovery order in the Principal Proceedings.
3.The classes of documents sought to be produced in the summonses are excessively wide and include documents that do not relate to the examinable affairs of Moage.
4.The summonses are otherwise oppressive against the FAI Group.
5.Issuing the summonses is an abuse of process."
Although those grounds initially were expressed on behalf of the FAI Group only, the subsequent motions of Mr Adler and Mr Landerer also to discharge the examination orders against them was acknowledged as being on the same grounds, or upon some of them.
Only ground five was relied upon in relation to the application for access to the affidavit. The alleged delay was treated as but one feature relevant to that point. There was no attempt to identify, nor make out, prejudice at this point in the proceedings. Similarly, the stage of the Moage proceedings, including the prospects of there being a discovery order made in those proceedings in the near future, was treated as a consideration relevant to the alleged abuse of process. Such arrangement as existed between the liquidator and Tiger was not relied upon in submissions on this aspect of the interlocutory issues.
It is convenient also to note the statement of grounds provided by County, as it was referred to in the course of submissions. That statement, dated 2 July 1997, identified a number of grounds to support County's application to discharge the production order. Specifically in relation to the affidavit, it asserted that:
"County Natwest will contend that the applicant has sought and obtained the order to gain a tactical or forensic advantage in the main proceedings, which is an impermissible purpose."
That statement of grounds was amended by notice dated 28 July 1997. To identify the alleged impermissible purposes as including one or more of the following:
"(a)To circumvent the transfer of the main proceedings from Adelaide to Sydney;
(b)To enable a "dress rehearsal" for cross-examination in the main proceedings;
(c)To enable the applicant the opportunity to destroy the credit of people who may be witnesses in the main proceedings;
(d)To secure admissions from people who are parties to the main proceedings who may not be available for cross-examination in the main proceedings;
(e)For the benefit of the third party, namely Tiger Investments S A."
I have already indicated that I have rejected the submission that there is material before me which is capable of establishing that the liquidator's purpose in procuring the examination orders or the production orders was to circumvent the transfer of the Moage proceedings from Adelaide to Sydney. The complaint that the purpose of those orders was for the benefit of Tiger was not developed in submissions in support of the application for the affidavit, but only to support the notices to produce directed to the liquidator, and the subpoenas directed to Westpac and to Claremont, which were dealt with on 29 July 1997.
Division 1 of Part 5.9 of the Law deals with examining a person about a corporation. Much of that Division was amended by the Corporate Law Reform Act 1992, effective from 23 June 1993, including in particular ss 596A, 596B, 596C and 597(9). The history of those provisions, and their ancestors, is set out in some detail in Re Excel Finance Corporation Limited (Receiver and Manager Appointed); Worthley v England (1994) 52 FCR 69 at 79-81, discussing the relevant provisions before their amendment to their current form, and in Simionato v Macks (1996) 19 ACSR 34 at 53-56. It is unnecessary to repeat that history.
The current provisions provide for the mandatory examination of certain persons upon the application of a liquidator or other identified category of person, if the person sought to be examined is an "examinable person of the corporation" (as defined) and certain other conditions are met: s 596A. Section 596B(1) then provides:
"The Court may summon a person for examination about a corporations 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."
Section 596C provides:
"(1)A person who applies under s 596B must file an affidavit that supports the application and complies with the rules.
(2)The affidavit is not available for inspection except so far as the Court orders."
It is also convenient here to note the terms of s 597(9):
"The Court may direct a person to produce, at an examination of that or any persons, books that are in the first-mentioned person's possession and are relevant to matters to which the examination relates or will relate."
The purpose of an examination under s 596A or s 596B of the Act is primarily to enable a liquidator or some other eligible applicant to bring an examinee before the Court to procure information about the affairs of a corporation. This is not the occasion to review the scope of the legitimate exercise of that power, or where its boundaries are exceeded. That may arise in the course of determining the various motions to discharge the examination orders and the production orders. It is sufficient for present purposes to note that it is established clearly by authority that it is a legitimate use of that power by a liquidator to obtain information which might assist in the conduct of litigation. Such information may be sought whether or not proceedings are sought to be commenced or to be continued. It may be sought to identify the nature and extent of evidence available to support a claim in proposed or actual proceedings, and to determine the probability or otherwise of success in those proposed or actual proceedings. It may be sought to assess the prospects of recovery in proceedings. It should also be noted that the mere fact that proceedings have been commenced does not, of itself, mean that the examination power cannot be used, or that its use in relation to those existing proceedings is necessarily an abuse of process on the part of the liquidator: see generally Hamilton v Oades (1988-1989) 166 CLR 486; Hong Kong Bank v Murphy (1992) 28 NSWLR 512; Gerah Imports v The Duke Group Limited (1993) 61 SASR 557; Worthley (above); Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301.
Furthermore, it has been recognised that, in bringing a proposed examinee before the Court, it is generally or often desirable that the proposed examinee not be forewarned of the subjects upon which the examination is proposed. The informal practice of keeping confidential the grounds for the application for examination, which has existed over many years, is now reflected in s 596C of the Act. Order 71 r 81(3) also recognises that it may be appropriate for the affidavit to be sealed, so that access to it is not given to proposed examinees. The reason is that liquidators should not have to disclose to the proposed examinee the matters upon which that person is to be examined, as such disclosure may enable the person to defeat the purpose of the examination, or any proceeding contemplated to be taken against him: Re Gold Co (1879) 12 Ch.D 77 at 82-84, Worthley at first instance (1993) 41 FCR 346 at 355-356; Simionato (above at 63). As Lander J pointed out in Simionato, the proposed examinee is nevertheless subject to various protections in the examination, including the right to representation, to take objection to questions, to lead evidence if the Court considers it just for the purpose of enabling the examinee to explain or qualify any answers for evidence given, and the general overall role of the Court in regulating the examination so as to ensure the examinee suffers no injustice: s 596F and s 597(5B); Hamilton (above).
The discharge of the examination orders will, on the ground identified in submissions, be made out only if the purpose of the liquidator in procuring the examination orders was an impermissible one. The Full Court in Worthley (above) at 89-91 discussed certain decisions dealing with that topic. The relevant test, as it indicated, is:
"whether the person seeking the examination order has the purpose of obtaining a forensic advantage not otherwise available: see per Gleeson CJ in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 519."
However, it is also plain that the possibility that a forensic advantage will be gained by an examination does not mean that the making of an order will not advance a purpose intended to be secured by the legislation. The comments of Street J in Re Hugh J Roberts Pty Ltd (in liquidation) [1970] 2 NSWR 582 at 585, much quoted with approval, recognises the position of a liquidator needing information concerning his company in connection with current or contemplated litigation, and the legitimacy of using the examination procedure to gather information in connection with such proceedings.
The Full Court in Worthley (above, at 91) noted some illustrations where the purpose for conducting such an examination might be an abuse. In particular, it identified the summonsing of a prospective or probable witness to be examined simply for the purpose of destroying that person's credit, as that would involve using the examination process to obtain a forensic advantage in litigation. It noted also that to conduct an examination to enable a "dress rehearsal" of cross-examination of an impending or contemplated proceeding would also amount to an improper purpose. It referred to other examples, including the use of the examination summons to obtain defacto discovery where a discovery order had been refused in proceedings already on foot. Those examples were relied upon by the various applicants before me. Appropriately, the Full Court concluded its reference to those illustrations in the following terms (at 91):
"It is neither possible nor desirable to catalogue all the circumstances where use of an examination summons might constitute an abuse of process.
Whether there will be, in a particular case, a use of the process or an abuse of it will depend upon purpose rather than result. The consequence may well be that the examiner has conducted a "dress rehearsal" of cross-examination which may take place in a subsequent trial. The fact that the trial has commenced, or is contemplated, may throw light upon the purpose. But merely because other proceedings had been commenced or are contemplated would not involve, of itself, an abuse of process. This follows having regard to the nature of the investigative process which could throw light on the question, inter alia, whether there was evidence which would warrant a liquidator, for example, proceeding against an examinee."
This is not the occasion to decide whether that impermissible purpose is made out. That is because at present I am merely considering interlocutory applications preceding the hearing and determination of that question.
It is plain from the terms of s 596C(2) that the Court has a discretion to release the affidavit. Lander J in Simionato (above, at 63) said that:
"... ordinarily the Court would exercise its discretion to order disclosure where the justice of the case so required it. ... It is not in every case where a party makes an application to set aside an order for examination that the proposed examinee ought to be entitled to inspect the affidavit upon which the original order was made. Otherwise the very reason for sealing the affidavit would stand frustrated and the examination process would be likely to be frustrated."
He referred to British and Commonwealth Holdings Plc (Nos 1 & 2) [1992] 1 Ch 342 where Nourse LJ said at 355:
"In my judgment inspection of the statement should prima facie be allowed where the Court is of the opinion that it will or may be unable fairly and properly to dispose of the application if part of the evidence is withheld from the person against whom the order is sought. It will then be for the office holder to satisfy the Court that confidentiality in whole or in part is nevertheless appropriate."
I agree with those observations.
Thus, the applicants on the present motions must establish some reason why the Court should exercise its discretion to make available the affidavit for inspection. The fact of the application itself will not be sufficient. Although in Worthley (above), the receiver and manager's affidavit in support of the examination order under challenge had been provided voluntarily to the proposed examinee, there was a dispute as to whether the Court should direct release of the documents upon which the receiver and manager had sought authorisation from the Australian Securities Commission to apply for the examination orders under the then s 597(1) of the Law. It was accepted by counsel before me that, in the case of an application such as the present, the observations of the Full Court in Worthley (above) nevertheless set out an appropriate "test" for determining how the discretion should be exercised.
There are two particular passages in the judgment of the Full Court in Worthley (above) which it is important to note. Firstly, the Court (at 93), stressed the Court has a discretion to order the disclosure to a prospective examinee of material lodged in support of the application for an examination order, and should do so where the justice of the case so requires. That discretion being unrestricted on its face, I bear in mind the words of Bray CJ said Ulowski v Miller (1968) SASR 277 at 280:
"It must be remembered that we are dealing here with a discretion and in my view it ought not to be fettered by any absolute or inflexible rules."
The Full Court referred with approval to Re British and Commonwealth Holdings (above). It affirmed that the mere application is not itself a reason for granting such access, lest the examination process be frustrated, or lest confidential information which should properly be withheld be released. Then, the Court said (at 94):
"An applicant will not be permitted access to such material to enable him or her to "fish" for a case. There must be material before the Court from which it appears that the applicant has an arguable case, to which the matter is relevant, before the discretion should be exercised in favour of that applicant. But once that appears the discretion will normally be exercised in favour of the application."
It is tempting, but in my view inappropriate, to seek to elevate those observations of the Full Court in Worthley (above), which were relied upon by Lander J in Simionato (above), beyond their terms. It is entirely sensible, as the Full Court has said, that the discretion to authorise the inspection of the affidavit should not be exercised in favour of a proposed examinee without reason. The fundamental judgment is based upon what the justice of the case in the particular circumstances demands. In making that determination, regard will need to be had to the content of the affidavit, so that where appropriate the purpose of the examination is not frustrated or confidential information or potentially significant information which might if released impinge upon an effective examination is not inappropriately released. If there are no particular considerations arising from the affidavit or its terms, or from the material referred to, then provided that the applicant for the release of the affidavit presents "an arguable case" or some sensible grounds for maintaining the application, to which the affidavit is relevant, then generally the discretion will be exercised in favour of that applicant. The context of those observations of the Full Court illustrate that the expression "arguable case" was not used as a refined term of art. In my view, it is an unnecessary and ultimately sterile inquiry at this point of the proceedings to determine whether it is necessary upon the ultimate hearing of the application to discharge the examination orders to decide whether the alleged inappropriate purpose of the liquidator need be his sole purpose or only a predominant purpose. Similarly, I think it is both inappropriate and sterile for the purposes of the present applications to seek to attribute some scientific exactitude to the degree of satisfaction of "an arguable case" which needs to be made out by the applicant. In my view it involves no more than that the Court requires to be satisfied to an appropriate level of satisfaction that the applicant is not pursuing the application without good cause or without good reason, and in particular is not doing so purely in the hope that, by procuring the release of the affidavit, some evidentiary foundation for the allegation will be made out. In other words, if the applicant is merely "fishing" for a case, then no reason for exercising the discretion in its favour will exist; if it presents material from which it is shown that it has passed the threshold beyond fishing, and has an arguable case based on that material, then the discretion may be exercised in its favour. Refinements of degrees of arguability is, in my view, unnecessary.
It must also be borne in mind that, at this stage of the proceedings, the Court is not adjudicating in point of fact upon whether the purpose is, or is likely to be, made out in any sense. It is asked only to review the material presented to it, absent the affidavit, to determine whether the application is brought making such allegation without any foundation or with a foundation which is not frivolous or without some rational basis. What will satisfy the necessary degree of arguability will vary from case to case, and will need to be assessed in all the particular circumstances.
I turn then to consider the particular material before me for the purposes of determining how I should exercise my discretion on these particular applications.
The applicants on the notices of motion presently before me point to the following matters as indicating that they have "an arguable case" as I have interpreted that expression. The purpose of the examinations is directed to the Moage proceedings. Those proceedings involve serious allegations, including allegations of fraud and conspiracy involving Mr Crane, Mr Jagelman, County and the FAI Group. It is the case, and acknowledged by the liquidator and his legal advisers, that there is an obligation on the part of the liquidator and his legal advisers to be satisfied that there is an appropriate evidentiary foundation, direct or inferred, for the making of those particular allegations and that there is held a belief on reasonable grounds that the factual material available provides a proper basis for those allegations: Allstate Life Insurance Co Ltd v ANZ Banking Group (1995) 57 FCR 360 at 369; Spies v The Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 693 and 700. Thus it is said that the liquidator must have sufficient information upon which to pursue the claims made in the Moage proceedings.
Even if that be true, as counsel for the liquidator points out, it does not mean necessarily that the liquidator requires no further information regarding his decision to prosecute those proceedings, so that his sole or predominant purpose must be an improper one. However, as I have indicated, in my judgment it is not necessary at this point in the proceedings to select between those competing contentions, or indeed to do other than be satisfied that the applicants' contention and the reasons or grounds for that contention are arguable. Whether it is appropriate to express that test of arguableness in terms similar to the terms which are used in deciding whether or not to dismiss an action under O 20 r 2 of the Rules (cf Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Ltd v Commissioner for Railways of New South Wales (1964) 112 CLR 125; Walton v Gardiner (1993) 177 CLR 378 at 393) is, in my view, unnecessary to decide. If I were applying a judgment in those terms to the material identified and relied upon by the applicants, to determine whether the claim so made and the inferences said to be available were so clearly untenable that an action in those terms should be dismissed, I would decline to dismiss the action. That is a matter of fine judgment. I do not need, in my view, to extend to that level of refinement for present purposes.
The applicants, in addition, also rely upon the material which shows when the Moage proceedings were commenced, the probability that the liquidator procured a lot of work to be done with respect to those proceedings during 1996 and indeed subsequently, both enabling the addition of the several new parties to these proceedings by order made on 4 November 1996 and the filing then of the amended statement of claim, and the yet further amended statement of claim on 3 June 1997, the fact that the proceeding seeking examination orders and supporting production orders was brought only at about the time at which the third version of the statement of claim had been put in place, the fact that the proposed examinees are all either parties to or likely witnesses in the Moage proceedings, and that the documents sought to be produced from the proposed examinees or by the entities against which production orders have been made are likely to be discovered in any event in the Moage proceedings in the immediate future.
Thus it is said that the material makes out "an arguable case", to use the term to which the Full Court in Worthley (above) referred, that the purpose, either sole or predominant, of the liquidator in seeking the examination orders at this point is to enable a dress rehearsal of the cross-examination of respondents or critical witnesses in the Moage proceedings, to provide the applicant with an opportunity to destroy the credit of those persons, or to otherwise secure a tactical or forensic advantage in the proceedings rather than to pursue the legitimate objective of seeking information relating to those proceedings.
At this interlocutory stage, I am cautious about expressing any firm view as to the likely weight to be given to such material, or as to the prospects or otherwise of the applicants supporting the claimed inferences from that material (assuming no other material is adduced at the hearing). I content myself with saying that, it seems to me, the applications made based upon the material identified do present, in the relevant sense, an arguable case. In so expressing my judgment, I am not to be seen in any way as having reached any view adverse to the liquidator as to his purposes, nor as having indicated that, if the evidence on the principal motions remains as at present, the applications are or are not likely to succeed. It is simply a matter of having regard to that material to determine whether it provides some foundation from which such inferences adverse to the liquidator might properly be drawn, in the absence of any other material, at the hearing of the application.
It is apparent that, once that ground of challenge is identified as an arguable one, the affidavit is relevant to it. It is also necessary to have regard to other considerations relevant to the exercise of the discretion. No other particular considerations have been identified by the applicants. On the other hand, the liquidator through his counsel has quite properly identified that the order made should properly reflect that the proposed examinations or their purpose should not be subverted unnecessarily by ordering the inspection of the affidavit, and further that confidential material supplied to the Court in or with the affidavit by way of exhibit to it should also not be released if that would frustrate the purpose of the proposed examination. I have had regard to the affidavit and the material exhibited to it relating to each of the applicants in forming the view which I have formed on the applications. I think it is fair to say, without embarking on a particular mathematical balancing exercise, and as both the Full Court in Worthley (above) and Simionato (above) indicate, that once proper reasons in favour of the exercise of the discretion to order the affidavit be available before inspection exist, the interests of justice will normally be exercised in favour of the application unless there is a reason not to do so. That reason will generally, but not necessarily exclusively, be founded in the affidavit itself and in recognising and giving effect to the reasons underlying the existence of the examination procedure generally. There may be other reasons. Thus, for example, in the present circumstances, the lateness of the application by Mr Jagelman might give rise to the suspicion that he is simply "jumping on the band wagon", an observation which might also later be said if other persons against whom examination orders or production orders were made now seek similar access. That is a matter of speculation at the present time, and in Mr Jagelman's case I do not use that factor as a discretionary consideration adverse to him. The category of potentially relevant considerations is not closed.
In making the decisions which I announce, I have however had regard to the affidavit. Although one affidavit only was filed, it was on its face, apart from the introductory paragraphs, including those which identify the purpose of the proposed examinations, refined specifically to identifying then the particular material relevant to each of the individual proposed examinees or entities against which production orders were sought. The liquidator could have made the application by a series of separate affidavits. He should not be disadvantaged by having included relevant material relating to the various applications in the one affidavit. In my view, if the affidavit is to be released, it should be released only to each applicant to the extent to which it relates to that applicant, and upon terms that it should not then otherwise be available. To the extent to which I order that it is available for inspection, I shall make orders limiting its inspection in that way. I should also reconfirm that I have not accepted that there is any "arguable case" to circumvent the transfer of the main proceedings from Adelaide to Sydney.
Although it was not argued, as the amended statement of grounds filed on behalf of County refers to one of the impermissible purposes being that the proceedings were brought for the purpose of the benefit of a third party, namely Tiger, I should also indicate for reasons which appear later in my judgment that, if it had been addressed in respect of these applications, I would have rejected it. I would not find, for reasons which appear below, that it is arguable that the sole or a predominant purpose of the liquidator in seeking and procuring the examination orders and the production orders was for the benefit of Tiger, and not for the benefit of Moage.
I also rejected the suggestion that the examination orders in so far as they require production of documents, or the production orders, pre-empt discovery in the proceedings. The fact that there is likely to be a considerable overlap in documents produced under the production orders or under the examination orders, and documents discovered in the Moage proceedings, is in my view but a consequence of requiring the production of documents which at present I assume properly relate to the examinable affairs of Moage. For present purposes, and in light of the submissions made, I make the assumption that the documents so requested do have that relationship to the examinable affairs of Moage. No submission to the contrary was put. That fact itself would therefore provide no basis upon which to grant a finding of an improper purpose: see Sherlock v Permanent Trustee Australia Limited (1996) 22 ACSR 16 at 49.
In relation to the applications made by Mr Crane, Mr Adler and Mr Landerer, to which the applications by County and the FAI Group were effectively joined as one block, I am satisfied that the applications are not ones which fall into the "fishing category". I have considered in each case the terms of the affidavit, and the exhibits referred to in respect of each of the individual examinees or the entities against which the production orders were made. Where appropriate, I have also considered the exhibits to those paragraphs of the affidavit. Having taken into account that material, I have reached the view that the application to set aside the examination orders will, in the words of the Court in Worthley (above at 94), be unfairly prejudiced if at the hearing of their application to discharge the examination they do not have available to them the affidavit.
In the light of those considerations, therefore, in my view an order should be made under s 596C(2) that the affidavit, or those parts of it relating to each of the applicants, be available for inspection. I propose, therefore, to order in respect of the application by Mr Crane that pars 1-7 and 35-36 of the affidavit be available for his inspection and that of his legal advisers. To properly ensure that the availability of that material is limited so as not otherwise to frustrate the purpose of the examination orders made against Mr Crane or others, I also propose to direct that the availability for inspection of that material be confined to Mr Crane and his legal advisers. I will give liberty to apply with respect to that direction. In my view it is appropriate to reserve the question of costs of his motion and to deal with that at the time when the motion to have the examination order discharged is dealt with.
On the motion of Mr Adler and Mr Jagelman, similarly I make orders to the same effect but in relation to Mr Adler the relevant paragraphs of the affidavit are pars 1-7 and 42 and in relation to Mr Landerer pars 1-7 and 56.
In relation to Mr Jagelman's application, as I have indicated, his application was entirely ultimately a derivative one. Having regard to the material which he adduced on his application, it is very close to one which falls into the "fishing" category. However, I do not base my decision upon that matter because ultimately his claim on his motion was said to be based upon the material adduced by the other respondents and upon the grounds relied upon by the other applicants. However, in his case, having regard to the terms of the affidavit in so far as it relates to him, the nature of the particular allegations made against him in the further amended statement of claim and his role in relation to the transactions the subject of the Moage proceedings, and the appropriate consideration of protecting the integrity of the proposed examination of him, in the exercise of my discretion I decline to make an order. Again I think the costs of the application on his motion should be reserved, and be dealt with when his application to have the examination order discharged is dealt with.
ACCESS TO THE AFFIDAVIT: APPLICATION BASED UPON THE PRODUCTION ORDERS
It is unnecessary to deal with these applications at great length. They were presented jointly with the applications of Mr Crane, Mr Adler and Mr Landerer, and indeed solicitors for the FAI Group are the same solicitors on the record as the solicitors for Mr Adler and Mr Landerer.
Upon the assumption that an order under s 596C(2) can be made in favour of an entity against which a production order has been made under s 597(9) of the Law, then I would reach the same conclusions. In particular, I have again considered the affidavit in so far as it relates both to County and to the FAI Group, and having regard to its contents in relation to those entities would exercise my discretion for the same reasons as apply in the case of Mr Adler and Mr Landerer and Mr Crane to ordering that the affidavit be available for inspection to those entities to the extent that it relates to them.
In the case of County, the relevant paragraphs of the affidavit are pars 1-7 and 55, and in the case of the FAI Group the relevant paragraphs of the affidavit are pars 1-7 and 52-54.
There are two additional matters, however, to note. The first is whether there is any right on the part of entities against which a production order has been made under s 597(9) to seek such an order in any event either under s 596C or at all, and the second is to address the submission put to me that, for the purposes of the application made by County for access to the affidavit, it need not even overcome the hurdle which s 596C(2) imposes because it is in a different position to a potential examinee.
There are practical reasons why the FAI Group position should not be treated differently from the position of Mr Adler and Mr Landerer. It is apparent from the allegations in the further amended statement of claim in the Moage proceedings that Mr Adler and Mr Landerer are likely to be officers of the FAI Group involved in giving instructions with respect to the matter on behalf of the FAI Group generally. At an even more practical level, the solicitors on the record for those entities and persons are the same. It is an unrealistic expectation to think that those solicitors, having received the affidavit to the extent that it relates to Mr Adler and Mr Landerer could put out of their mind that material for the purpose of giving advice to the entities which they may effectively be guiding minds. In the case of County, it is a principal respondent in the Moage proceedings, and significant allegations are made against it.
Compliance with the production orders where those orders were sought for an impermissible purpose, that is, either as part of a package with an examination for an impermissible purpose, or where the seeking of the production order in its terms is for an impermissible purpose, should no more be able to be achieved than in the case of an examination order. Whilst the potentially impermissible purposes which are discretely relevant to a production order are likely to be more confined, (for example such issues as rehearing cross-examination would not apply), if they can be made out then I do not think that an entity against which a production order has been made should be precluded from the right to seek to make them out. If the ground of attack is that the examination order itself, rather than the production order, has been procured for an impermissible purpose, and the proposed examinee has not made such a complaint, it will be as a matter of practical common sense more difficult for the entity against which the production order has been made to succeed on that point.
For those reasons, in my view, both County and the FAI Group had the right to raise the matters which they did. The liquidator did not assert otherwise. Whether the application for the affidavit then is made under s 596C(2) or whether it is an order sought under a motion to set aside the order under O 27 r 9, the statutory policy reflected in s 596C(2) should be given effect to. Thus, I think, the same principles would apply whatever the nature of the procedure adopted. That view appears to accord with the view of McLelland CJ in Equity in Re South Pacific Energy Trading Pty Ltd (1996) 40 NSWLR 264 at 268.
THE NOTICE TO PRODUCE BY MR AUSTIN
The procedure adopted by Mr Austin to get access to the affidavit, namely simply by giving the liquidator a notice to produce it under O 33 r 12 of the Rules, is not the common procedure adopted to get access to the affidavit.
A notice to produce, duly given, has the same effect as a subpoena for production, and compliance is mandatory unless production is excused by the Court: CCOM Pty Ltd v Jiejing Pty Ltd (1992) 37 FCR 1 at 3; Trade Practices Commission v Abbco Ice Works Pty Ltd (1994) 123 ALR 503 at 536. Thus, it was contended for Mr Austin that the liquidator must produce the affidavit, unless the liquidator by motion seeks and obtains an order from the Court that he need not do so. Why O 33 r 12, which obliges production "unless the Court otherwise orders" should so operate when s 596C(2) does not as against Mr Austin although it protects the affidavit from inspection "except so far as the Court orders" was not developed in submissions.
The liquidator's first response to the notice to produce, and not a flippant one having regard to s 596C(1) and O 71 r 81(3), was that the affidavit is in the custody of the Court. It is not within the liquidator's control to produce it. That is obviously correct. In my view the notice to produce directed to the liquidator was misconceived. The Court has the affidavit, and controls its inspection. If a proposed examinee seeks inspection, that person should seek an order under s 596C(2) of the Law.
In any event, even if the notice to produce were able to operate on the affidavit in the Court's custody, I indicated that I would entertain an oral application by the liquidator for an order under O 33 r 12 for an order that it (or assuming the notice to produce were amended to require production of the liquidator's copy of the affidavit, or a copy) need not be produced. Neither Mr Austin nor the liquidator sought to adduce any evidence on that application. Any application must be determined in the light of any relevant statutory provisions, including relevantly s 596(2) of the law. In the absence of any material whatsoever there is no reason why the discretion should be exercised other than by reflecting the evident policy of that subsection. Mr Austin did not contend that, as against him, there were considerations going to the purpose of the liquidator in procuring the examination order which might indicate that the purpose was impermissible.
Accordingly, there is probably no need to make any order with respect to the notice to produce given by Mr Austin, but to the extent necessary I would order that the liquidator need not produce to Mr Austin the affidavit.
I also indicate, that in considering other applications, I have considered the paragraphs of the affidavit touching upon Mr Austin. If he had applied by notice of motion for an order to inspect it under s 596C(2), and had relied on the material common to the other applications referred to above, for reasons which are discussed in relation to Mr Jagelman's affidavit I would probably in the exercise of my discretion decline to grant any such order. I do not have any such application before me, and I am not to be taken as expressing any concluded view on that topic.
THE SUBPOENAS
The purpose of the subpoenas to Westpac and to Claremont is clear. It is to identify the arrangement between the liquidator and Tiger referred to above. That there is such an arrangement relating somehow to the financing of the Moage proceedings, and presumably these proceedings, is acknowledged.
The FAI Group contends that the subpoena is directed to procuring material to support its claim that the production order against it should be set aside because the Moage proceedings and the production orders themselves are being maintained on the basis of an arrangement which amounts to maintenance or champerty.
The liquidator's motion that those subpoenas need not be complied with, and be set aside, is made under O 27 r 9 of the Rules. He contends that a properly issued subpoena for production of documents must be "for the purpose of evidence": O 27 r 1, and that whatever the arrangement between himself and Tiger, that arrangement could not operate to impugn the production order. If in fact the examination orders were procured, and the production orders made in support of them, for the purpose of benefiting a third party and not Moage, then there would be an impermissible purpose: eg Worthley (above). But, it was contended, there could be no suggestion that that was the case. Thus, whether the liquidator had simply contracted with Tiger to finance the Moage proceedings upon some terms which might include (say) very high interest rates, or had assigned to Tiger some part of the fruits of the Moage proceedings, or had assigned to Tiger all or some part of the causes of action of Moage as asserted in the Moage proceedings, was not, and could not be, used to attack the production order against the FAI Group.
I have referred above to the material before me touching on the arrangement between the liquidator and Tiger. In that material, the inflow of funds from Tiger is described as a loan. The liquidator has also asserted in those materials that he has made no disposal of any of Moage's assets other than for cash. He did not suggest that this information in any respect is incorrect; as an officer of the Court, he would have done so had such materials been erroneous whether through changed circumstances or through possible inaccuracy in those returns lodged with the Australian Securities Commission through any inattention to the precision of language now appropriate before the Court. In addition, approval was granted by the Court to the arrangement (whatever its terms) on 20 December 1996 pursuant to s 477(2B) of the Law. In Re Feastys Family Restaurants Pty Ltd (In Liquidation) (1996) 14 ACLC 1058 Young J made an order under that section in relation to an insured litigation finance agreement, describing it as a "perfectly proper agreement", where the liquidator did not have personal liability and the company's risk if the litigation failed was minimal. that case did not really address in detail the principles upon which approval should be given under that section, but Young J addressed those principles in Re G A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308 at 311 where he said:
"If the Court can see that the transaction that is to enure past three months is really for the proper realization of the assets of the company or assists its winding up, then the leave should be granted ... The Court's duty is to see that despite the prolongation of the [process of liquidation], the transaction is in the interests of the company, the creditors and the community."
It is appropriate to assume that the Court addressed those considerations when granting the order sought on 20 December 1996.
I thus have the view at this point that, whether simply on the material before me and ignoring the order made on 20 December 1996, or in the light of all the material before me including the fact of that order, there is no basis whatsoever for considering that the arrangement with Tiger has resulted in the liquidator conducting the Moage proceedings other than for the purposes of Moage. That Tiger may in some way also stand to benefit from the conduct of those proceedings is, in my view, not to the point.
If there were some arguable point to be taken in the current proceedings, relevant to setting aside the production orders, in those circumstances and arising out of the arrangement between Tiger and the Liquidator, I would not set aside the subpoenas as fishing: cf Commissioner for Railways v Small (1938) 38 SR (NSW) 564; Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38. But the question remains whether there is some arguable point available to the FAI Group arising out of the arrangement. It would have to be a point which, if established, would in law be capable of basing an order for the discharge of the production orders against the FAI Group. In that regard, I observe that the defences in the Moage proceedings are not yet filed. If the FAI Group files a defence which alleges that those proceedings are not maintainable against it due to maintenance or champerty, no doubt then issues will be considered as to whether that pleading is sustainable, and if so, the extent of discovery appropriate in the light of it. But those matters are for another occasion. The attack upon the production orders should not be used as a vehicle to determine whether any such defence is, or might be, available. As I have said, the question for me is whether, in the light of the material before me concerning the arrangement between the liquidator and Tiger, that arrangement provides or could provide an arguable basis for setting aside the production orders.
In my view it does not. The submission of the FAI Group, and of County in respect of certain documents specified in its notice to produce, rely in large measure upon the decision of the Full Court in Magic Menu Systems Pty Ltd v AFA Facilitation Ltd (1997) 142 ALR 198 to support the asserted ground of relevance to the application to discharge the production orders, namely some form of maintenance or champerty.
I have set out above my reasons for not being prepared to find that it is arguable that the Moage proceedings, and these proceedings, are being conducted for purposes of Tiger and not for the purpose of benefiting Moage. In the light of that position, I do not think Magic Menu (above) assists the FAI Group, or County, in the proposition for which they contend.
In Magic Menu (above), the appellants were franchisors against whom certain franchisees brought proceedings under the Trade Practices Act 1974 for breaches of a franchise agreement. The franchisees had entered into a litigation support agreement with the respondent to the appeal. The franchisors, by cross claim, alleged that that agreement was champertous and that by carrying out its terms the respondent was unlawfully maintaining the franchisees in their action and sought an injunction restraining the franchisees and the respondent from giving effect to the agreement and for damages. The injunctions were refused; issues as to any damages were deferred. The appeal against the refusal of the injunctions was dismissed. The Full Court (Lockhart, Cooper and Kiefel JJ), in discussing the historical background to maintenance and champerty, observed (at 205):
"It may now be observed, for example, that concerns expressed earlier this century, as to the potential for the maintenance of actions to give rise to an increase in litigation, might now be considered of lesser importance than the problems which face the ordinary litigant in finding litigation and gaining access to the courts."
The offence and the tort of maintenance, and of champerty, have been abolished in Victoria, South Australia and New South Wales, although they remain torts actionable in Queensland. The conduct complained of in those proceedings occurred in Queensland. I do not think that is a sufficient reason not to have regard to that decision, as the policy considerations which gave rise to the offence and the tort have not lost all significance, and the ability of the Courts to treat agreements for maintenance as contrary to public policy and thus illegal is unaffected by the statutory provisions: Magic Menu (above, at 206 and cases cited thereat).
However, the Full Court then recognised that the questions of public policy with which the courts will be concerned are those which have regard to litigation and its funding in the contemporary world. It referred with approval to the helpful analysis of Byrne J in Roux v Australian Broadcasting Commission [1992] 2 VR 577 at 605ff, as a result of which Byrne J observed (at 606):
"The general consequence of these considerations has been a liberalisation of the law in this area, so that normally accepted funding arrangements are not treated as tortious or as criminal acts."
The Full Court then (at 206) identified the appropriate focus of the Courts as being whether the courts should enforce champertous agreements, or issues as to the integrity of the court processes including the conduct of the maintained party and of the maintainer in respect of the proceedings.
There has been nothing identified to me which provides any arguable case that, whatever the arrangement between the liquidator or Tiger, there are any relevant considerations of public policy which in any way impinge upon the purpose of the liquidator in procuring the examination orders or the production orders. Nor has any such matter been identified which in any other way as a result of that arrangement provides a proper basis for attacking those orders. The approval of the arrangement on 20 December 1996 reinforces those views, but I have reached those conclusions independently of it. Whether the arrangement has a relevance to the ongoing conduct of the Moage proceedings generally can be addressed when, and if, that question arises.
The approval to the arrangement between the liquidator and Tiger given under s 477(2B) of the Law adds additional weight to that conclusion. Although decisions under s 134(1)(a) of the Bankruptcy Act 1966 to which I was referred are more directly relevant to the equivalent provision in s 477(2)(c) of the Law, it is in my view of some significance that a liquidator may sell or otherwise dispose of a bare chose in action, and including the fruits of litigation: Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238; Brookfield v Davey Products Pty Ltd (1996) 14 ACLC 303; Re Movitor Pty Ltd, ex parte Sims (1996) 136 ALR 643 in which Drummond J makes it plain that there is no difference between the sale of the cause of action and the sale of the fruits of some or all of a cause of action. Of course, I should point out that there is nothing before me to suggest a sale at all. Here, the arrangement is not, on the material presently before me, of that nature but (as Drummond J contemplated in respect of a statutorily sanctioned sale : see at 653) the Court sanctioned agreement does not really leave scope for making out that the agreement is an abuse of process, see also the observations of Drummond J at 655.
Finally, I refer to Re Tosich Construction Pty Ltd, ex parte Wily (1997) 143 ALR 18, a decision of Lindgren J giving directions that a liquidator has the power to enter into a litigation funding agreement to enable him to proceed with certain proposed litigation for the benefit of the creditors of the company, the critical term of which was a 'premium' payable to the financier only if the litigation was successful. Lindgren J reviewed in detail (at 24-32) four recent cases on maintenance and champerty, including Movitor (above). As a result of the terms of the agreement before him, he concluded that the proposal was a sale or other disposition of the property of the company and so statutorily sanctioned under s 477(2)(c) of the Law. The case thus fell into one of the two recognised exceptions to the maintenance and champerty prohibition, the other being the "general commercial interest" exception. It was contended that the agreement which apparently exists here does not fall under either of those exceptions.
I do not think that decision is inconsistent with my conclusion. It was a case in which the liquidator sought directions as to whether he could enter into the proposed agreement. It did not involve the question of identifying whether proper grounds might be available to challenge the examination orders or the production orders by reason of the sort of arrangement which apparently exists here (whatever its detailed terms). it did not involve consideration of the significance to be attributed to the approval given under s 477(2B) on 20 December 1996. As I have concluded, the terms of the arrangement will not, on my view in the light of my findings on the material before me, provide a proper foundation to attack the examination orders or the production orders: Halsbury, Laws of England, 4ed, Vol 9, par 404; Skelton v Baxter [1916] 1 KB 321; Martell v Consett Iron Ltd [1955] 1 All ER 481; Roux at 608-609; Southern Cross Assurance Company Ltd v Shareholders Mutual Protection Association (No 2) [1935] SASR 480; even if the dissenting judgment of Angas Parsons J in that last mentioned case were to be relied upon as providing an argument to the contrary, the fact of the approval granted under s 477(2B) would of itself be sufficient to stifle that argument.
Accordingly, in my view, Westpac and Claremont should not be obliged to produce the documents specified in the subpoenas. I set them aside.
My observations above have canvassed also the submissions of County and the FAI Group and Mr Adler and Mr Landerer with respect to the notices to produce.
THE CHALLENGE TO THE NOTICES TO PRODUCE
The above reasons dictate the outcome of the challenge of the liquidator to the notices to produce given by County and the FAI Group, and Mr Adler and Mr Landerer.
In respect of the County notice to produce, the documents numbered 1-9 in the schedule relate to the allegation that the liquidator's purpose in procuring the orders was impermissible. It follows that the documents should be produced to the Court, and subject to proper objections, be made available to the parties for inspection. The same applies to the documents numbered 1-5 in the schedule to the notice to produce of the FAI Group and Mr Adler and Mr Landerer.
In respect of the documents numbered 10-12 and 6 in those schedules respectively, as they relate only to the arrangement between the liquidator and Tiger, in accordance with my ruling in relation to the subpoenas, I direct that the liquidator not be required to produce them.
The document numbered 13 in the schedule to the County notice to produce is not pressed by it.
National Employers' Mutual General Association Ltd v Waind & Hill (1978) 1 NSWLR 372 at 381-385 sets out the three steps involved in the production of documents under subpoena, namely the production to the Court, the decision of the Court as to access of the parties to the documents including any rulings as to privilege and the like, and the admission into evidence of the documents.
The orders I propose on the notices to produce involve only the first of those steps. I will give directions by which, I hope, issues as to privilege or other proper objections on the part of the liquidator to the parties having access to the documents to be produced will be identified and refined for resolution if necessary as part of the second stage.
As these reasons for decision were published after the orders made were announced, I direct that the time within which any application for leave to appeal from the decision run from 1 August 1997, the date of publication of the reasons. I also stay the operation of the order authorising inspection of the affidavit until 4.00 pm on 4 August 1997.
I certify that this and the preceding twenty five (25) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.