Operation of Div 1, Pt 5.9
59 The legislative histories of s 596A and s 596B of the Corporations Act and predecessor provisions have been traced in a number of decisions. I would mention for present purposes only the following decisions of this Court: Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England (1994) 52 FCR 69 (Re Excel); Wainter Pty Ltd, in the matter of New Tel Limited (in liq) ACN 009 068 955 [2005] FCAFC 114; (2005) 145 FCR 176 (Re New Tel) and Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd [2007] FCA 13; (2007) 156 FCR 501 (Highstoke).
60 In Re Excel, the Full Court of this Court (Gummow, Hill and Cooper JJ) had occasion to deal with s 597 of the former Corporations Law (Cth), a provision not dissimilar to s 596B of the current Corporations Act. The Court, at 81, pointed out that prior to the Uniform Companies Code 1981 (1981 Code) and the Corporations Law, the question of who should have standing to apply to the Court for an order was not specifically referred to by the legislation. The Court thereby inferred that the power (first contained in the 1981 Code and replicated in s 597 of the Corporations Law):
conferred upon the Commission [then the Australian Securities Commission or ASC] as an administrative matter to authorise a person to make an application reflected a legislative decision to move to the Commission the power to grant standing to apply to the Court, although without derogating from the discretion which was retained in the Court to grant or refuse an order on proper grounds.
61 As noted above, s 597 of the Corporations Law considered in Re Excel was in broad terms, similar to s 596B of the Corporations Act, in that:
Subsection (1) in effect defined a "prescribed person" to include "any other person authorised by the Commission".
By subs (2), ASC or a prescribed person could apply to the Court for an order where it appeared to them that a person concerned in the operation, generally speaking, of a corporation may have been guilty of fraud, negligence, default, breach of trust, breach of duty or other misconduct and may be capable of giving information.
By subs (3), the Court "may order" that the person attend to be examined on oath.
By subs (4), an examination "shall be held in public" subject to the Court order.
By subs (5), the Court on making an order for an examination may give directions as to the matters to be inquired into and the procedure to be followed.
62 The Court, at 81-82, considered the appropriateness of proceedings brought for judicial review of an authorisation of a person by Australian Securities Commission (ASC) for the purposes of s 597(1) and observed:
It is, if not explicit, certainly implicit, in his Honour's discussion of this question, both in Whelan [unreported, Federal Court, 11 May 1994] and in the present case, that the issues that would arise for decision on judicial review of an authorisation pursuant to s 597(1) and on a review of a Registrar's order under s 597(3) of the Corporations Law, would be identical. With respect, we do not agree. Section 597 envisages (where the applicant for an examination order is not one of the persons specifically granted standing to apply by the legislation) a two stage procedure culminating in an order of the Court for the examination, on oath, of a person on matters relating to the promotion, formation, management, administration, winding up or otherwise relating to the affairs of a particular corporation. The first stage in that procedure, where the prospective applicant for a Court order is not the Commission, official manager, liquidator or provisional liquidator of the corporation, is the authorisation by the Commission of the person to make an application to the Court under s 597(2).
63 The Court went on at 82 to note that in Hongkongbank of Australia Limited v Australian Securities Commission (1992) 40 FCR 402, a Full Court of this Court (Lockhart, Gummow and O'Connor JJ) held that the source of the power of ASC to authorise persons to make applications to the Court was to be found not in s 597(1) but in s 11(4) of the former Australian Securities Commission Act 1989 (Cth) (the ASC Act), a decision which was confirmed by another Full Court in Mercantile Mutual Life Insurance Co Limited v Australian Securities Commission (1993) 40 FCR 409. The Court noted, however, that in Burns Philp & Co Ltd v Murphy (1993) 29 NSWLR 723, a contrary view was taken to the effect that the power of authorisation was, by necessary implication, conferred by s 597(1) and vested in ASC by force of s 11(7) of the ASC Act.
64 In Re Excel, the Court then added, at 82, that the point of immediate significance was that it was for the ASC to make an administrative decision whether or not to authorise a person to apply to the Court under s 597(2). The Court added:
Once an authorisation has been made…the second stage of the procedure is an application by the authorised person…for an order for examination…. The result of the application to the Court is a decision whether or not to order an intended examinee to attend to be examined. Different matters will arise for consideration at each stage of this two stage process. The question at issue in the first stage would be whether the prospective application seeking authorisation is an appropriate person for the Commission to authorise to make the application to the Court. That question will require consideration of the relationship which that person has to the corporation in relation to which application to the Court will be made, although it may also encompass matters personal to that applicant, such as the applicant's relationship to the persons to be examined. The Court, in deciding whether to grant the examination order, may take into account different matters, specifically matters concerning the relationship between the examinee and the corporation as well, in an appropriate case, as the relationship between the applicant for the examination order and proposed examinee and the purpose of the applicant in seeking the examination order. (Emphasis added).
65 The Court then went on, at 82-83, to observe that were a question of standing to arise before the Court in a case where the applicant was a person authorised by the ASC, there would be practical difficulty in mounting a collateral attack upon the validity of the authorisation unless, on the face of that authorisation, it was apparent that it was outside power. Thus, a person seeking to challenge the validity of the appointment would not have available the specific provisions of the ADJR Act facilitating such a challenge. The Court observed that practically the fact of authorisation would preclude a collateral attack.
66 The Court then added, at 83, that once these matters are accepted, it becomes apparent that if a person seeks to challenge the validity of the ASC's authorisation, that question will appropriately be decided in proceedings for judicial review of the authorisation. A challenge going to the appropriateness of an examination order, on the other hand, will be appropriately raised before the Court in the review of a decision to grant an examination order. It will ordinarily not arise for consideration in relation to the validity of the authorisation.
67 In Re Excel, the Court then dealt with an ADJR Act appeal in respect of the ASC's authorisation. In this regard, s 597(1) of the former Corporations Law provided:
(1) In this section, a reference, in relation to a corporation, to a prescribed person, is a reference to an official manager, liquidator or provisional liquidator of the corporation or to any other person authorised by the Commission to make applications under this section or to make an application under this section in relation to that corporation.
At 83-84, the Court noted that official managers, liquidators or provisional liquidators are, by virtue of their office, prescribed persons under this provision and thus have standing. The Court added that, what subs (1) does, in its reference to authorisation, is permit ASC to extend the class of persons who may, in a particular case, have standing through the grant by ASC of authorisation. The Court reinforced what it had stated earlier by noting that:
The Commission, in determining whether to grant authorisation, will consider the relationship which the person seeking authorisation has to the relevant corporation and the external management of that corporation which is in progress. Contributories and creditors would normally have the appropriate connection with the corporation (as the history of examination orders, already set out, demonstrates), although other factors relevant to a particular case may make the authorisation of such persons inappropriate. A receiver and manager might, as is conceded by the appellant also in an appropriate case, be authorised, that is to say given standing to apply to the Court under subs (2) for an order or orders under subs (3). (Emphasis added.)
68 The Court, at 85, went on to note that no criteria were expressed in s 597(1) to guide the exercise by the ASC of its power or function to authorise persons to make applications to the Court. At 86, having considered a range of authority, the Court concluded that reference to the subject matter, scope and purpose of subs (1) led to the conclusion that the decision-maker, in determining whether to authorise a particular person to make applications in relation to a particular corporation, will be required only to consider the relationship which that person has to the external administration and in a particular case the appropriateness of that person being given standing to apply to the Court.
69 After further discussion concerning the appropriateness of receivers and others to be so authorised, the Court, at 87, further noted that in an appropriate case the material before the decision-maker on behalf of the ASC may indicate that a person seeking authorisation "is in a difficult conflict situation". Examples were given of a creditor who might be related to officers of the company who may seek authorisation to conduct an examination to forestall some other examination which may be in contemplation.
70 The terms of present s 596A of the Corporations Act concerning the Court's power to issue an examination summons, are different from those found in the former s 597 of the Corporations Law considered in Re Excel which, as noted above, reflect the terms of the current s 596B. The definition of an "eligible applicant" provided by s 9 of the present Corporations Act is also a little different from the reference to a "prescribed person" found in the former s 597(1) of the Corporations Law dealt with in Re Excel.
71 Furthermore, the circumstances in which ASIC or an eligible person may now apply for an examination summons under s 596A and the powers of the Court in dealing with an application are different from those which applied under s 597(2) of the former Corporations Law dealt with in Re Excel.
72 Whether these changes are significant and whether it continues to be accurate to say that ASIC in determining whether to grant an authorisation "will consider the relationship which the person seeking authorisation has to the relevant corporation and the external management of that corporation which is in progress" is an issue.
73 Under s 596A the Court is effectively bound to issue an examination summons once an eligible applicant applies for it and the Court is satisfied that one of the matters mentioned in para (b)(i), (ii), (iii) or (iv) applies - no doubt that is why the heading to the section refers to "Mandatory examination". The person who is to be summonsed under this section must be "an officer or provisional liquidator" at material times mentioned. The position that earlier prevailed under s 597(3) of the former Corporations Law considered in Re Excel, was that the Court had a discretion to order a broader range of persons to attend to be examined for the purposes described therein. This provision is now reflected by s 596B - the heading to which is "Discretionary examination".
74 By s 596B the Court has a discretion to summons a person for examination if an eligible applicant applies for the summons and the Court is satisfied that the person has taken part or been concerned in the "examinable affairs" of the corporation and has been or may have been "guilty of misconduct" in relation to the corporation or may be able to give information about examinable affairs of the corporation. Thus, s 596B reflects the substance of the terms of s 597 of the former Corporations Law.
75 Nonetheless, it has been broadly accepted that the "two stage" analysis given in Re Excel remains of continued relevance to the workings of Pt 5.9 of the Corporations Act: see Soper v Australian Securities and Investments Commission [2004] FCA 854; (2004) 207 ALR 509 (Soper) at [32]; Woolfe v Australian Securities & Investments Commission [2004] FCA 1020 (Woolfe v ASIC) at [50]; Ryan v Australian Securities and Investments Commission; in the matter of Allstate Explorations NL (Subject to Deed of Company Arrangement) [2007] FCA 59; (2007) 158 FCR 301(Ryan v ASIC) at [40]-[41].
76 In Soper, at [32], Hely J plainly considered that the two stage process described in Re Excel continued to apply in respect of his consideration of s 596B of the Corporations Act as it then applied. His Honour confirmed the view that the question at issue in the first stage is whether the prospective applicant seeking authorisation is an appropriate person for ASIC to authorise to make the application to the Court. He said, conformably with Re Excel, that that question will require consideration of the relationship that that person has to the relevant corporation, although it may also encompass matters personal to that applicant.
77 His Honour also noted that a judicial review application based on a failure to take account of the relevant consideration will only be effective where, in the manner described in Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24, the consideration in question is one which a decision-maker was bound to take into account in order to validly exercise the power - that is to say, a mandatory relevant consideration. His Honour noted what are mandatory relevant considerations are to be determined by a construction of the statute. In particular, where the terms of the power are unconfined, the factors that may be taken into account are similarly unconfined; except in so far as there is found some implied limitation on the factors to which the decision-maker may legitimately have regard - with the existence of any implied limitation turning ultimately on the subject matter, scope and purpose of the statute. His Honour added, at [33], that:
Where a power is cast in very general terms, it is generally a matter for the decision-maker to decide what is relevant and what is not.
78 At [34], Hely J noted that, as Re Excel makes plain, the question for ASIC to determine is whether a person is an appropriate person to receive the relevant authorisation. His Honour noted that an applicant seeking a written authorisation does not have to show that he or she is the most suitable person in the circumstances to conduct an examination, although that is not to say that if some more suitable person was seeking to conduct examinations, that ASIC would not be entitled to take that matter into account, if it thought appropriate, in deciding whether or not to grant an authorisation.
79 In Woolfe v ASIC, RD Nicholson J similarly considered that the statutory approach had not changed in principle in respect of establishing a two stage process. Thus, at [51], RD Nicholson J considered that, that being the case, the issue of purpose will ordinarily not arise for consideration in relation to the validity of the authorisation, given that the Court may control improper purpose or abuse of power in exercise of its powers arising in relation to the issue of summonses for examination. His Honour therefore did not consider the grounds of improper purpose or abuse of power or unreasonableness properly arose for consideration in the ADJR Act review proceeding before him.
80 In Ryan v ASIC, at [41], Gyles J considered that what the Court said in Re Excel about the factors that would be taken into account by ASIC at the first stage of the process had not been rendered inappropriate by the amendments to the Corporations Act.
81 In Re New Tel, Wainter, a creditor of New Tel, which was in liquidation, applied for orders that summonses be issued directed to two persons pursuant to s 596A of the Corporations Act, and directed to another person pursuant to s 596B of the Corporations Act. Each of the appellants had issued interlocutory applications to set aside the orders made by a district registrar. The Full Court dismissed an appeal against the conclusion of the primary judge (RD Nicholson J in Woolfe v ASIC) that the examination summonses were not an abuse of process.
82 Justice Ryan agreed generally with the reasons of Lander J, although his Honour considered it unnecessary to enter into the controversy which has been generated "by some readings of" Flanders v Beatty (1995) 16 ACSR 324 (Flanders v Beatty) and Sandhurst Trustees Ltd v Harvey [2004] SASC 157; (2004) 88 SASR 519 (Sandhurst Trustees Ltd v Harvey) as to whether the changes to the Corporations Act Pt 5.9 were significant.
83 Justice Lander considered the relevant provisions of Pt 5.9 of the Corporations Act and something of its history. I should note in passing that s 596A considered in Re New Tel has since been amended so that the expression "examinable officer" is no longer used in para (b), but rather the expression, "an officer or provisional liquidator of the corporation", is now used. The word "officer" is defined by s 9, which includes a receiver. He noted the definition of the expression "examinable affairs" in s 9 as extended by reference to other provisions.
84 Justice Lander, at [80], considered it was not necessary in that case to consider the precise ambit of an examination under the Corporations Act or under the Corporations Law after the Law was amended in 1992, except to observe that it is "extremely wide". Justice Lander, at [81], said that an examination to determine whether the corporation would be likely to succeed in litigation against its officers, auditors or third parties would be within the examinable affairs of a corporation. Such an examination would assist an eligible applicant in identifying a chose in action which is an asset of the corporation. His Honour also considered, at [82], that an examination to determine whether any chose in action will ultimately be recoverable from any party or that party's insurer is also within the contemplation of the section and that such an examination may be of a person against whom litigation is contemplated or even pending. His Honour further noted, at [83], that if the eligible applicant can satisfy the criteria in s 596A the Court has no discretion to refuse to issue the examination summons.
85 Justice Lander added, at [84], that s 596A is concerned with those persons who have had the responsibility of management of the corporation in the various capacities referred to in the definition of "examinable officer" (as the section then read). The eligible applicant, he said, is not obliged to establish that there has been any misconduct. The power must be exercised by the Court if the eligible applicant establishes that the proposed examinee is an examinable officer. The corporation may be in administration, subject to a deed of company arrangement, or being wound up. His Honour then added, at [84]:
However, that is not essential. ASIC, or a person authorised by ASIC, could apply to summon an examinable officer about the corporation's examinable affairs even where the company is solvent and still trading provided that person is an examinable officer at the time of the application: s 596A(b)(iv). Because there is no limit as to whom ASIC might authorise as an eligible applicant under (e) of the definition of eligible applicant, a creditor of a corporation might be authorised by ASIC and could then require a Court to summon an examinable officer of that corporation if that person was an officer at the time of the application even where the corporation is still trading.
86 Justice Lander recognised, however, at [85], that the Court could refuse to issue an examination summons if the Court were satisfied that the eligible applicant had an improper purpose for seeking the summons, referring to Hamilton v Oades (1989) 166 CLR 486 (Hamilton v Oades) and Flanders v Beatty.
87 Justice Lander compared and contrasted s 596A with s 596B and said, at [89], that it is not difficult to understand why the power given in s 596B is discretionary rather than mandatory as in s 596A, as the class of persons who may be examined under s 596B is much wider, s 596A only applying to "examinable officers" as defined since amended and presently applying to "an officer or provisional liquidator". His Honour noted that because the Court is given a discretion under s 596B it needs to be aware of the purpose and subject matter of the examination.
88 Justice Lander was also at pains to point out that the statutory position encapsulated in Pt 5.9 of the Corporations Act (as it then read ) had evolved since earlier cases that dealt with similar types of proceedings. He noted, for example, s 541 of the Companies (New South Wales) Code that was dealt with in Hamilton v Oades. Section 541 was similar to s 597 of the Corporations Law considered in Re Excel. In Hamilton v Oades, Mason CJ, at 497, said there were two public purposes that an examination serves. One is to enable the liquidator to gather information that will assist him or her in the winding up; that involves protecting the interests of creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connexion with a company's affairs. Those purposes were confirmed by Brennan CJ and Toohey J in Gould v Brown (1998) 193 CLR 346 at 387.
89 Justice Lander noted, however, at [116], that the two purposes identified by Mason CJ are not necessarily the only purposes for which s 596B had been enacted as the Chief Justice did not consider the section's purposes in the circumstances of an official manager seeking an order. Justice Lander added:
Having regard to those who are now entitled to be an 'eligible applicant' under the Act, the first purpose identified by Mason CJ would not be limited to circumstances where a liquidator is gathering information to assist in the winding up and only protecting creditors.
90 In noting the legislative history of the current provisions of the Corporations Act Lander J, at [123], noted that prior to the 1992 Act, Pt 5.3 of the Corporations Law provided for a system of external administration by way of official management. His Honour noted, at [124], that the important point was that under the Corporations Law prior to the 1992 Act an official manager could apply for an order under the then s 597. Under the Corporations Law, however, the ASC could authorise a party or parties generally to make applications under s 597 or could authorise a particular party to make an application under the section. Thus, said Lander J, ASC could authorise a receiver (as it did in Re Excel) or a creditor (as was contemplated in Re Excel) to make application under the section. His Honour noted that the Corporations Law did not prior to the 1992 Act have an equivalent of s 596A.
91 Following those observations, Lander J at [126] then observed that:
If the prescribed person, for the purpose of s 597(1) of the Law, was an official manager or a person authorised by the Commission, that person could apply for an order under s 597 even though the corporation was not in liquidation or in the case of a person authorised by the Commission, in any form of administration. The corporation did not need to be in any form of administration for the Australian Securities Commission to make an application and obtain an order. The criteria that had to be satisfied were those in s 597(2) and, of course, paragraphs (a) and (b) were alternatives. The Australian Securities Commission could authorise a creditor to make an application. Again, if that had been done, there was no need for the corporation to be in any form of administration and, in particular, in liquidation.
92 His Honour noted, at [127], that in Re Excel the ASC had authorised the receiver and manager of the company, which had been appointed by the trustee of the debenture holders, to make application under s 597.
93 In Re Excel the issue that arose was whether the examination was an abuse of process because on the same day as an order for an examination was obtained, the trustee and debenture holders commenced proceedings against the examinee claiming damages for losses said to have been occasioned by reason of his negligent audit.
94 Justice Lander referred to circumstances identified in Re Excel that might be considered an abuse of process if examination proceedings were used as a "dress rehearsal" of cross-examination that might take place in a subsequent trial. Justice Lander, at [138], noted that in Re Excel, at 92-93, the Court had said that they were of the view that the use of the power to obtain an examination summons "for the principal purpose of furthering the cause of the applicant for the summons or, as in this case, appointor of the applicant in litigation against third parties, not for the benefit of the corporation, its contributories or creditors (other than in the most indirect way)" is an abuse of the power. Justice Lander noted, however, at [141], that Re Excel also decided that it was not necessarily an abuse of power for either an unsecured creditor or a secured creditor to use the procedure for the purpose of recovering the unsecured or secured debt.
95 Thus, Lander J considered, at [143], that Re Excel stands for the proposition that it is an abuse of process to use the Pt 5.9 procedure if the "predominant purpose" of the applicant is not for the purpose of benefiting the corporation, its contributories or its creditors. Justice Lander confirmed his view, at [151], that after the 1992 amendments the position under the Corporations Law as now under the provisions of the Corporations Act considered in Re New Tel, a creditor could become an "eligible applicant" if authorised by ASIC. At [152], Lander J noted that ASIC would only authorise creditors to be eligible applicants "if that were appropriate having regard to its own charter under the Act which constitutes it".
96 Justice Lander then took issue with the observations of Ormiston J in Flanders v Beatty, where his Honour considered the Corporations Law provisions in s 596A and s 596B had introduced significant changes, compared with the earlier statutory provisions. Justice Lander, at [164], considered, however that the changes did not indicate so much an expansion of the class of persons who might seek an order under Pt 5.9 but merely recognised the different forms of external administration in the 1992 Act. His Honour, at [166], said therefore he could not agree that a "wider class" of persons had been identified so as to make the decisions and the dicta in previous cases under s 597 subject to any qualification.
97 Justice Lander dealt with other aspects of Flanders v Beatty, including Ormiston J's further observation that the scope of the examination provisions was greatly expanded by the 1992 amendments, such that the statement in Re Excel, that the purposes to be served by examinations ought be limited by reference to the benefit of the company or its creditors or contributories, should no longer be considered relevant. Justice Lander disagreed that the scope of the examination provisions had been greatly expanded.
98 Ultimately, Lander J, at [194], expressed the opinion that nothing in the 1992 amendments derogated in any way from the underlying assumption in Re Excel that the purpose in seeking the examination summons must be the interests of the corporation, its creditors or its contributories.
99 To similar effect, Lander J did not agree with statements made in Sandhurst Trustees Ltd v Harvey.
100 Following reference to what Hayne J had observed in relation to earlier legislation in New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 (New Zealand Steel), with which his Honour agreed, Lander J said, at [245], that the procedure in Pt 5.9 of the Corporations Law and the Corporations Act "is to aid persons who have the responsibility of the external administration of the company in carrying out their duties".
101 His Honour added, at [246]-[247], that in his opinion those persons who had the responsibility of external administration owe duties to the creditors and contributories, and to the corporation which they are managing, and they are entitled only to seek an order for an examination summons where the purpose of the examination is for the benefit of the corporation, its creditors or its contributories.
102 Justice Lander added, at [248]:
So also ASIC is only entitled to authorise a person as an eligible applicant if that person's purpose in seeking an examination summons is for the benefit of the corporation, its contributories or its creditors.
His Honour said that otherwise every corporation would be at risk of having its examinable officers or its officers or other witnesses examined to the possible detriment of the corporation. For example, a person claiming damages for a tort against a corporation could be authorised by ASIC as an eligible applicant and apply for an examination summons. His Honour added, at [251], that the purpose of Pt 5.9 is not to disadvantage corporations but to make the corporation's examinable officers and other persons accountable to those who are obliged to act in the interests of the corporation.
103 His Honour, at [252], then set out a number of oft-quoted propositions that flowed from his analysis:
1. The power given to the Court to summon a person for examination is a coercive power.
2. The purpose of the power is to be gleaned from the legislation.
3. The following legitimate purposes emerge:
3.1 First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.
3.2 Second, it assists the corporation's administrators to identify the corporation's assets, both tangible and intangible. It also allows the corporation's liabilities to be identified.
3.3 Third, the purpose is to protect the interests of the corporation's creditors.
3.4 Fourth, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation.
3.5 Fifth, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.
4. If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside.
5. The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside.
6. The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the Court to summon a person for examination whilst litigation is pending against that person or entities connected with that person.
7. The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant's purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose.
8. It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors.
9. A creditor may, if first authorised by ASIC, apply to the Court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole.
10. A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration.
104 Justice Crennan agreed with the orders proposed by Lander J and with his account of the history of legislative changes and conclusions that the findings of the primary judge were not affected by any error. However, as to his Honour's consideration of Flanders v Beatty and Sandhurst Trustees Ltd v Harvey her Honour stated, at [269], that while she respectfully agreed that questions of whether or not the relevant amending provisions in the 1992 Act are "significant changes" were important, it was not necessary to determine the questions raised for the purpose of the appeal.
105 In the event, the opinion of Lander J seems to stand alone, not being directly adopted by either Ryan J or Crennan J. I should note, however, that in Bridgeport - Advisers & Asset Managers Pty Ltd [2005] NSWSC 757; (2005) 221 ALR 146, Barrett J at [45] and [47] mentioned the distilled principles of Lander J at [252] with apparent approval, although without any need to consider the broader issues concerning the circumstances in which an examination may be sought.
106 In Highstoke, French J considered a circumstance where the trustee for debenture holders of a company, which had brought proceedings against the former trustee company claiming damages for breach of duties, obtained authorisation from ASIC to apply to the Court for the issue of summons for examination of a director of the former trustee company in respect of its insurance cover, to determine whether any judgment on damages was likely to be satisfied, the former trustee and its director challenged the issue of the summons on the basis that the power was to be exercised only in relation to a corporation in some form of external administration. Justice French reviewed the legislative history of the examination power and relevant judicial analysis. Amongst authorities his Honour considered were New Zealand Steel and Re New Tel.
107 In responding to a contention that a wide view should be adopted as to who might be authorised under s 596A, having regard to the use of the word "otherwise" in para (b)(iv), French J, at [82], observed that s 596A refers to examination of "a corporation's examinable affairs", and that it does not, by that language, limit the class of corporations to which it applies to those under some form of external administration. His Honour noted that the class of persons who may be subject to a mandatory summons is set out in s 596A(b). His Honour then said, at [83], that:
If 'otherwise' in s 596A(b)(iv) refers to other forms of administration then the section is properly construed as limited to corporations under one of the three specified forms of external administration and any other forms for which Ch 5 provides. If 'otherwise' refers to any other circumstance at all, then the section allows a summons to issue for examination of persons in respect of any corporation's examinable affairs whether it is in external administration or not.
108 His Honour, at [86], said the ordinary meaning of the words of both s 596A and s 596B would permit their application to the examinable affairs of any corporation, whatever its status. But, his Honour observed, they are words found in a chapter dealing with arrangements and reconstructions, receiverships, administration with a view to execution of a deed of company arrangement and winding up in insolvency and otherwise. Not all of these parts seem to fall readily within the term "External administration". His Honour considered that particularly so of arrangements and reconstructions. Nonetheless, he considered they were processes subject to court approval and supervision. In this regard his Honour further considered that "External administration" is not a term of particular statutory significance here beyond its use as the title to Ch 5. What his Honour considered to be of significance was the context provided by Ch 5, however it is described. His Honour considered, at [87], that:
The context in which Pt 5.9 of the Corporations Act appears, as a set of miscellaneous provisions in Ch 5, strongly suggests that the examination power is intended to be ancillary to the functions of the Court and/or the functions of external receivers, controllers or liquidators of corporations for which Ch 5 makes provision. In so far as Ch 5 validly confers judicial functions on the Court, the power to issue summonses for examination may be seen as incidental to such functions.
109 Justice French concluded that the context in which Pt 5.9 operates is inconsistent with the propounded construction of s 596A and s 596B as conferring a general power on the Court to issue summons for the examination of persons about the examinable affairs of any corporation whether or not affected by other processes for which Ch 5 provides. In other words, his Honour considered they and their predecessors have been considered as provisions "applicable to companies in one or other form of administration and not as applicable to companies at large".
110 Justice French, at [89], said that it followed that he would not agree with the "obiter observations" at [84] of Lander J in Re New Tel "which would see the application of ss 596A and 596B extended to solvent corporations not under any form of external administration". I should note, however, as explained above, that at [245] Lander J ultimately expressly considered that the procedure in Pt 5.9 of the Corporations Act is to aid persons who have the responsibility of the "External administration" of the company in carrying out their duties. While his Honour's comments at [248] concerning ASIC's authorisation power might be a little ambiguous, I read them as subject to a similar limitation.
111 Justice French, at [90], did not consider it necessary to extract from Ch 5 all of the conceivable classes of corporate circumstances covered by that chapter to which s 596A or s 596B may be incidental and applicable. His Honour said:
It is sufficient to say that they do not extend to the examinable affairs of a corporation which is not under any form of external administration nor subject to any other judicial or administrative process for which Ch 5 provides.
112 I note that in Ariff v Fong [2010] NSWSC 696; (2010) 79 ACSR 71 (Ariff v Fong) at [19]-[20] Barrett J considered the views of French J to be "compelling".
113 Leaving aside the apparent difference of view between what Lander J observed in [84] (and at [245]-[248]) of Re New Tel and French J in Highstoke, the respondents do not suggest French J was wrong to find that for the purposes of s 596A an "eligible applicant" authorised by ASIC must be a person authorised in relation to the examinable affairs of a corporation which is under some form of external administration or a judicial administrative process for which Ch 5 provides. The receivers say they were receivers and managers at all material times, a recognised other form of external administration and a category of person recognised in Re Excel and in Highstoke as one capable of authorisation by ASIC to make application under Pt 5.9 with this proposition the applicant joins issue. I return to the issue below.