Sutherland v Pascoe; in the matter of Matrix Group Limited as Trustee for... [2012] FCA 453 | Case summary

REASONS FOR JUDGMENT 1 This is an interlocutory application made by some of the examinees named in examination orders issued under s 596B of the Corporations Act 2001 (Cth) for access to the affidavit relied upon by the liquidator in support of the orders. 2 The applicants seek access to the affidavit in aid of the determination of a further interlocutory process filed by them, seeking to set aside the examination orders and orders for production of documents. Those orders were made by a Registrar of the Court on 9 March 2012. 3 The essential ground on which the applicants will rely to seek to set aside the orders, is that the examination orders were issued in furtherance of an abuse of process or otherwise for an improper purpose. The claims of abuse of process arise out of the consent dismissal of proceedings in the Supreme Court of New South Wales, brought by Mr Tom Oates against Mr Garrick Hawkins and others. 4 Importantly, for reasons referred to below, Matrix Group Limited (Matrix) was joined as a defendant in those proceedings. The proceedings were dismissed by consent against the first to ninth defendants (described as the active defendants) and discontinued against Matrix. 5 The applicants' claim that the consent orders gave rise to a res judicata, issue estoppel or "Anshun" estoppel, prohibiting Matrix from issuing proceedings against Mr Hawkins and others in respect of matters which were the subject of the Supreme Court proceedings. 6 The applicants contend that the only matters which are likely to form the basis for examination of the examinees are matters which were the subject of the proceedings in the Supreme Court. The applicants therefore contend that, to make good a claim of abuse of process, it is necessary for them to have access to the liquidator's affidavit. 7 Section 596C(2) of the Corporations Act provides that the affidavit filed in support of an application for an examination order is not available for inspection, except so far as the Court orders. 8 The principles upon which the Court will exercise its discretion to permit inspection are well established. An applicant for disclosure of the affidavit will generally be given access to it if "an arguable case" is established that the issue of the summons for examination exceeded the power of the Court under s 596B and that access to the affidavit is likely to assist in determining the correctness of the challenge: see Ariff v Fong (2007) 63 ACSI 384 at [17] to [26] and the authorities there referred to. See also Wily re LED (South Coast) Pty Limited (2009) 76 NSWLR 428 at [27]. 9 Mr Lockhart SC, who appears for the liquidator, submits that what is required to be established in the present case is a good, arguable case that the examination summonses and associated orders were issued in circumstances amounting to abuse of process. 10 He submits that the necessary standard is not established and that, in any event, access to the affidavit will not assist the applicants in establishing res judicata or the related grounds of abuse. 11 In my opinion, the applicants have established an arguable case. In saying this, I do not seek to suggest any conscious impropriety on the part of the liquidator, nor to express any more than a preliminary view. However, it seems to me that the background to the settlement of the Supreme Court proceedings and the consent orders in that case suggest a sufficient possibility of abuse of process within the principles referred to above. 12 The background to the Supreme Court proceedings can only be described as extraordinary. I referred to it in some part in my judgment on 6 September 2011 in Pascoe; in the matter of Matrix Group Limited (in liquidation) [2011] FCA 1117. 13 The evidence now before me shows that Matrix was established in the 1990's as an arranger of high value, structured finance transactions. The evidence suggests that Matrix conducted that business as the trustee of the Matrix Unit Trust although I was not told last year of the existence of the trust. 14 In the late 1990's and early 2000's, Matrix arranged two complex and unusual transactions with the Government of Western Australia. These transactions are described as the WA Car Transaction and the WA Bus Transaction. Matrix appears to have received payment of approximately $15 million from the government in respect of the WA Car Transaction and $2.5 million as a result of the termination of the WA Bus Transaction. Those payments appear to have been directed into bank accounts overseas and later paid to offshore interests associated with Mr Hawkins and another principal of Matrix, Mr Tyne. 15 Mr Oates was a director and employee of Matrix from 1998 to about 2001. He claims to have agreed with Matrix or its principals that he would be issued with units in the Matrix Unit Trust which would have entitled him to receive 5 per cent of the $2.5 million received from the Western Australian Government in respect of the WA Bus Transaction. 16 In 2005, Mr Oates commenced proceedings against Matrix, alleging his entitlement to a 5 per cent interest in the $2.5 million payment. He obtained a default judgment against Matrix on 17 October 2006 for an amount of approximately $188,000 plus costs of $12,000. Subsequently, there were various other proceedings between what I will call the Matrix interests and Mr Oates. I do not need to refer to them in this judgment. 17 However, importantly on 8 February 2008 on the petition of Mr Oates, Matrix was ordered to be wound up by the Federal Court and Mr Pascoe was appointed liquidator. No other creditor has yet come forward in the liquidation apart from Mr Oates. 18 In 2009, Mr Oates commenced the Supreme Court proceedings to which I have referred. Those proceedings were brought, initially, against Mr Hawkins and Mr Tyne and other related interests. The substance of the claim was for orders under s 37A of the Conveyancing Act 1919 (NSW) in respect of the transfer of the "Matrix receipts", which seem to have comprised the payments from the WA Government under the two transactions. 19 Importantly, an order was sought that those payments be disgorged to Matrix. Notably, orders were also sought under s 1324 of the Corporations Act and claims were made that, in concealing the Matrix receipts and transferring them to entities associated with Mr Hawkins and Tyne, those persons breached their statutory duties to Matrix under ss 181 and 182 of the Corporations Act. 20 In Oates v Hawkins (2010) NSWSC 491 at [69], Bergin CJ in Eq said that while she was not satisfied that Mr Oates brought the Supreme Court proceeding on behalf of Matrix, he did seek an order that the Matrix receipts be restored to Matrix, thus her Honour suggested it may be necessary to join Matrix as a necessary party in the proceeding. Matrix was subsequently joined as tenth defendant, although no relief was sought against it. The Supreme Court proceedings were listed to commence before Ball J on Monday, 5 September 2011 for a three week trial. 21 On Friday afternoon, 2 September 2011, the liquidator made an ex parte application to me to approve litigation funding for the conduct of examinations of Mr Hawkins and others. I raised a number of concerns about the application and stood it over to 6 September 2011. On 6 September 2011, the application for approval of the litigation funding was again before me. I made orders on that day and gave an ex tempore judgment. 22 I expressed some reservations about the overlap between the matters which the liquidator wishes to investigate and the subject matter of the Supreme Court proceedings. I foreshadowed the possibility of abuse of process, see at [22]. Ultimately, I was persuaded that oppression was not an inevitable outcome of the funding agreement, see at [28]. 23 It is now quite apparent that, at least in one important respect, I was misled as to the nature of the proceedings in the Supreme Court. I was told by counsel who then appeared that the claim in the Supreme Court proceeding was brought under s 37A of the Conveyancing Act but I was not informed that the breaches of ss 181 and 182 of the Corporations Act were also alleged in the Supreme Court statement of claim. 24 I do not suggest that counsel deliberately omitted to disclose that information but the non-disclosure is a serious one and is part of the background against which the present application has to be considered. There were several other non-disclosures but I do not need to address them here. 25 On 8 September 2011, consent orders were made in the Supreme Court by Ball J, dismissing the proceeding brought by Mr Oates against the active defendants in the Supreme Court. As I have said, the orders provided for the proceeding against Matrix to be discontinued. It is clear enough that the liquidator consented to the discontinuance and that he knew that orders were to be made dismissing the proceedings against the active defendants, although it would also appear that the liquidator did not participate in the settlement negotiations. 26 It appears that the settlement negotiations between the parties in the Supreme Court ensued from the afternoon of 6 September at about the time that the application was before me for the approval of litigation funding. My orders were not brought to the attention of the active defendants when the matter was settled in the Supreme Court, but it is important, as I have already said, to note that the liquidator was not involved in the settlement negotiations. 27 The issue which now arises is whether the nature of the proceedings against the active defendants and Matrix, which took no active part in the proceeding, were such that the effect of the orders for dismissal created a res judicata or otherwise gave rise to an issue estoppel or an "Anshun" estoppel. Mr Aldridge SC who appears for the examinees, submits that the Supreme Court proceeding was in the nature of a derivative proceeding and that, notwithstanding the observations of Bergin CJ in Eq referred to above, the proceeding was brought for the benefit of Matrix. 28 Mr Aldridge submits that this gives rise to a good, arguable case that the dismissal against the active parties gave rise to a res judicata or otherwise bars further proceedings in respect of the subject matter of the Supreme Court action. He submits that the material before me indicates that the only conceivable matters which would be the subject of the examination are matters which are now barred from further litigation. 29 It seems to me that, while the issue is one which may be debatable on the application to set aside the examination orders, there is sufficient evidence in the material which I have endeavoured to summarise and in other matters referred to by Mr Aldridge in argument to suggest that the applicants have a good, arguable case. Thus, as Mr Aldridge submits, although I was told in September last year that there was some overlap between the matters which the liquidator wishes to investigate and the subject matter of the Supreme Court proceedings, the material now before me establishes an arguable case that there was a complete overlap. 30 I am satisfied that access to the liquidator's affidavit will assist in determining the correctness of the applicants' challenge to the examination orders. 31 Mr Aldridge also argues that there is an arguable case that the examinations are a dress rehearsal for cross-examination in future proceedings and hence an abuse of process on that ground. In view of what I have said above, I do not need to address the correctness of that submission. 32 For the reasons set out above, I propose to make orders giving access to the applicants. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Sutherland v Pascoe; in the matter of Matrix Group Limited as Trustee for the Matrix Group Unit Trust

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