Trevor (Liquidator) v Evans

JAGOT J: 2 This is an application for leave to appeal against the orders made by the primary judge granting the respondents an extension of time to seek to discharge examination summonses, and ordering that access to the affidavit in support of the application for issue of the summonses be granted to the respondents, as provided for in s 596C(2) of the Corporations Act 2001 (Cth). The orders were consequential on the primary judge's reasons for judgment in Trevor, in the matter of Bell Group NV (in liq) [2016] FCA 851. 3 As the respondents submitted, the judgment is properly characterised as an interlocutory discretionary judgment on a matter of practice and procedure, which explains why leave to appeal is required (s 24(1A) of the Federal Court of Australia Act 1976 (Cth)). 4 In accordance with orthodox principle, for a grant of leave to be obtained, the applicant must demonstrate, first, that there is sufficient doubt about the judgment to warrant reconsideration by the Full Court and, second, that substantial injustice would arise if the decision below were incorrect and leave not granted: Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397 at 399. Given that this application concerns a discretionary judgment about a matter of practice and procedure, as the respondents also submitted, to establish the first of those requirements, namely, the existence of sufficient doubt, it is necessary that there be disclosed error of the kind described in House v The King (1936) 55 CLR 499 at 504 to 505. Further, in matters such as this, courts generally exercise "particular caution" before granting leave: see Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177. 5 In dealing with the application for the extension of time, the primary judge correctly noted that there were three issues which he needed to consider. The first was the reason for the delay in the making of the application to discharge the examination summonses. His Honour referred to this at [22] of his reasons. The second was whether any prejudice would be suffered if the extension of time was granted. This his Honour referred to at [23] of his reasons. The third matter, and the one with which the application for leave to appeal has been mostly concerned, was the merits of the applications for which the extensions of time were sought. This his Honour referred to at [24] of his reasons. 6 As his Honour noted at [24], it would not be an appropriate exercise of discretion to shut out a party who could demonstrate that they had an arguable case for relief. After considering all of the relevant background circumstances and the submissions put by both parties on each of the three classes of relevant matters, that is delay, prejudice, and the merits of the application, his Honour set out his conclusions at [125] to [135]. 7 As to delay, at [130] his Honour said that he was satisfied that the respondents had moved with reasonable diligence to bring their application before the Court. Accordingly, it is apparent that his Honour was satisfied that there had been a reasonable explanation for the delay. 8 As to prejudice, at [133] to [135] his Honour accepted that there would be a delay in any examination of the respondents, because it would be necessary for their application for discharge to be heard and determined. Nevertheless, his Honour was not satisfied that the delay was such as to suggest that the extension of time should be refused. In balancing the interests of the various parties, his Honour reached the view that there was not sufficient prejudice to the applicant to warrant refusing the grant of the extensions of time. 9 As to the merits of the claims for ultimate relief, his Honour at [131] and [132] explained why he was satisfied that there was a sufficiently arguable case to warrant the grant of the extension of time, taking an overall view of all of the arguments which had been put to him. When this is read in the context of his Honour's earlier consideration of the arguments made in support of the merits (summarised at [93]-[121]), it is readily apparent that his Honour had concluded that the respondents had established an arguable case that the examination summonses involved an abuse of process. 10 In oral submissions, in particular when dealing with the issue of the merits of the discharge applications, the applicant accepted that the relevant question was whether the conclusions that his Honour reached in [131] and [132] were reasonably open upon all of the material which was before him. The applicant submitted that the eight reasons which his Honour summarised in [93] to [112] of the reasons for judgment, on analysis, could not and did not meet this test, so that, in concluding that the respondents had made good an arguable case that the examination summonses involved an abuse of process, the primary judge reached conclusions which were not reasonably open on the available material. 11 The difficulty with this contention is that, as was appropriate, his Honour reached an overall view, as he explained at [132], having regard to all eight reasons which had been put in support of the extensions of time. The applicant submitted that his Honour's approach was inadequate, and that he ought to have closely examined all of the arguments. In particular, the applicant said that his Honour's approach as explained in [132], that a full investigation of the merits had to await the hearing of the primary relief sought (citing in support the decision in Lucic v Nolan (1982) 45 ALR 411 at 417), was inapplicable and inappropriate. 12 I disagree with this submission. At least in this part of his reasons for judgment, his Honour was dealing with nothing more than applications for an extension of time. In that context, as in Lucic v Nolan at 417, there are obvious reasons why his Honour should not have attempted "a full investigation of the merits of the application for review...". This is because the question whether or not the examination summonses in fact involve an abuse of process is the ultimate issue which will need to be determined in the substantive applications having regard to all of the relevant material. All his Honour was doing was deciding whether there was a sufficiently arguable case to reach a view that the respondents should not be deprived of the opportunity to have the merits of their arguments determined one way or another. 13 It is also apparent that when the submissions for the applicant in respect of each of the eight reasons are considered in substance, they reduce to nothing more than a disagreement with the particular conclusions his Honour reached rather than amounting to a case that his Honour reached a conclusion that was not reasonably open. 14 Accordingly, in respect of the first reason with which his Honour dealt at [94] and [95], the applicant said that the distinction between the company BGNV (Bell Group NV (in liquidation)) on the one hand and "the Bell legislation proposal" on the other hand, was a mere "distinction without a difference", and that it was beyond argument that the examination summonses related to matters within the scope of BGNV's examinable affairs, having regard to the breadth of the relevant definition of that term in ss 9 and 53 of the Corporations Act. 15 Relevantly, however, his Honour was pointing out the existence of an argument which, when taken into account with all of the other arguments which the respondents put forward, was capable of supporting the conclusion of an arguable case of abuse of process. As a result, it is not appropriate to consider the first reason in isolation. Whether or not the distinction between BGNV (Bell Group NV (in liquidation)) on the one hand and "the Bell legislation proposal" on the other hand ultimately is one without a difference is something that will have to be decided in the context of the applications to discharge the examination summonses. 16 In respect of the second reason put forward, namely, that the examination summonses cannot be seen as being directed towards "protecting or increasing the assets of the corporation concerned", as set out in [96], the applicant's contention is that the reasoning in the submissions, involves a non sequitur. This, however, is by no means immediately apparent given that the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA), with which the "Bell legislation proposal" is concerned, was declared wholly invalid. In any event, and again, the second argument of the respondents is one the weight of which must be considered as part of the overall cumulative effect of the reasons said to support the existence of the arguable case of abuse of process; whether or not the examination summonses concern any effect on the assets of BGNV is a matter for ultimate determination at the hearing in respect of the discharge of the examination summonses. 17 A somewhat different proposition relates to the applicant's submissions in respect of the third reason which was described by his Honour in [30] to [37] of his reasons for judgment. The reason involves the proposition that, given the existence of proceedings which his Honour referred to as the WASC proceedings, an inference could be drawn that the examination summonses have been deployed to gain a forensic advantage in those proceedings. The applicant submitted that the primary judge in these paragraphs must be taken to have misunderstood what Lander J said in Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176, in particular at [250] and [252.5]. I do not accept the submission that the primary judge misunderstood any relevant principle. His Honour had set out the relevant parts of the judgment of Lander J in Evans v Wainter at [15], [16] and [17]. In [17], the primary judge recorded the statement of Lander J at [252.5] that: 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. 18 It seems clear that when [252.5] is read in context, it is apparent that what Lander J meant was that if a party's purpose is the obtaining of a forensic advantage in other litigation, then there will be an abuse of process. This is consistent with principle. I do not consider that the primary judge misunderstood this. His Honour was merely accepting that it was arguable that the inference which ought to be drawn was that the applicant's purpose in deploying the examination summonses was to gain a forensic advantage in the WASC proceedings. 19 The factors which the primary judge then identified at [98] and [99] were also matters rationally capable of supporting the existence of an arguable case of abuse of process. The applicant submitted that none of these factors were of any weight. However, again, the difficulty is that the weight to be given to those factors was essentially a matter for the primary judge. Unless, in so doing, his Honour engaged in some error of the relevant kind as described in House v The King (1936) 55 CLR 499 at 504-505, the conclusion which he reached, based on all of the arguments which have been put, is not amenable to review on appeal. 20 As to the fourth point which was dealt with in [100] of the primary judge's reasons, the applicant submitted that the mere fact that the examination summonses might result in the production of a substantial number of documents, most of which would be the subject of various claims for privilege, was a mere matter of procedure and could not inform any conclusion as to the existence of an arguable case of abuse of process. I disagree. The fact, if it be the fact ultimately established, that what will be required involves oppression because of the production of a vast number of documents most of which are privileged, may well rationally inform a conclusion as to the existence of an abuse of process. That is to say, the scope of what is sought under a summons is not unconnected to the existence or otherwise of an abuse of process. The same proposition can be made about an argument which was put as recorded in [101] of his Honour's reasons that there should have been disclosure made on the application for the issue of the examination summonses of the prospect of the substantial claims for various kinds of privilege. Lack of disclosure, if required, might also inform a conclusion of abuse of process. 21 I accept that the fifth reason, which his Honour dealt with in [102], is an expansion of the fourth argument about the number of documents required to be produced. For the same reasons as for the fourth reason, this is not a matter which is incapable of bearing on the question of the existence or not of abuse of process. Accordingly, it cannot be said that his Honour erred by taking these matters into account in reaching his overall conclusions at [131] and [132]. 22 The sixth, seventh and eighth reasons should be understood as arguments which were put before his Honour to negative any suggestion of the existence of a legitimate purpose for the examination summonses. The applicant submitted that these arguments had no substance, but did not point to any error of principle in the way in which his Honour describes the arguments or ultimately chose to accept that, when considered with all other arguments the respondents had put, an arguable case for the existence of an abuse of process had been established. 23 Insofar as it was submitted that his Honour engaged in a fundamental misunderstanding by not appreciating that the relevant arguable case was of abuse of process in respect of the examination summonses, I disagree. It seems to me beyond doubt that his Honour understood the relevant issue. So much is clear from his Honour's recitation of the relevant principles, in particular at [14] through to [17], and his summary of the arguments put in respect of the merits of the respondents' arguments about this very question at [93] to [135]. Those paragraphs are replete with references which disclose that, when he came to deal with the "merits" and the existence of an "arguable case", his Honour had in mind the "merits" or existence of an arguable case in respect of the examination summonses involving abuse of process. His Honour did not confuse this with any other proceedings, whether or not the WASC proceedings. 24 As I have said, I consider that no error of law of any kind is disclosed in [131]-[132] of his Honour's reasons, and nor is any error of fact of the kind that might enliven review by an appellate court of the kind referred to in House v The King disclosed. In addition, as I have also said, to the extent that the applicant submitted that his Honour's reasoning is insufficient, I disagree. His Honour set out the arguments that were put and explained that he had taken an overall view of the cumulative effect of all of the arguments. Nothing more was required or appropriate in the context of applications for an extension of time. 25 Nor do I consider that any error warranting appellate intervention is disclosed by his Honour's conclusions in respect of delay or prejudice. All of the applicant's submissions in this regard amount to no more than a disagreement with his Honour's overall conclusion, which is insufficient to justify appellate intervention. 26 The only other issue is access to the affidavit in support of the examination summonses, with which his Honour dealt at [136]-[147] of his reasons. As his Honour said at [145], he was satisfied that the respondents had established an arguable case to discharge the examination summonses. Read in context, this is a finding that an arguable case had been established that those processes involved an abuse of process. His Honour then said that he was satisfied that the justice of the case required that access be given to certain parts of the affidavit. At [146] his Honour said that he was satisfied that access: …is necessary to ensure that there is a proper engagement between the applicants and Mr Trevor on the issues that truly matter as to whether the examination summonses and the orders to produce should be discharged. 27 In [147], his Honour explained why, in respect of other parts of the affidavit where he refused access, he was not: …persuaded that the applicants would be unfairly prejudiced in the consideration and disposal of the discharge application if access to these parts is refused. 28 The essential complaint of the applicant is that his Honour has not applied the correct test and, instead, has set the bar far too low for the grant of access to an affidavit in circumstances where the statutory provisions disclose that, in the ordinary course, access will not be obtained and fishing expeditions will not be permitted (see, relevantly, s 596C(2) of the Corporations Act which provides that "[t]he affidavit is not available for inspection except so far as the Court orders"). 29 The most convenient summary of the relevant principles is that of Lander J in Simionato & Farrugia v Macks & Macks (1996) 19 ACSR 34 at 63 to 64 where his Honour said: The applicant must demonstrate that the applicant has an arguable case, without recourse to the material to which the applicant seeks access, for setting aside the orders made, summoning the applicant for examination about a corporation's examinable affairs. Even if the applicant shows an arguable case, the applicant must show that the material sought will be, or at least, ought to be, relevant to that arguable case. It is not enough to show merely an arguable case. The applicant is required to point to the relevance of the material to show that the absence of the material will unfairly prejudice the applicant in the consideration and disposal of the application. 30 In my view, it is clear from his Honour's reasons at [145] to [147] that he had reached the view, without recourse to the material, that there was an arguable case. His Honour was satisfied that the "justice of the case" required the respondents to have access to certain parts of the affidavit. He considered that access to these parts was "necessary" to ensure "proper engagement" on the "issues that truly matter" and that there was no "unfair prejudice" to the respondents in respect of those parts of the affidavit to which access was not granted. From this, it is clear that his Honour was well aware of, and in fact applied, the relevant test. 31 It must also not be overlooked that the primary judge examined the affidavit and reached the view that it contained material relevant to the arguable case. 32 In these circumstances, I can see no error by his Honour in reaching the view that access should be granted to certain parts of the affidavit. 33 Further, I cannot see why there was any discretionary error by his Honour not ordering that access be limited to the legal representatives of the respondents. It must be relevant to this exercise of discretion that his Honour had read the whole of the affidavit and had reached views about it, as described above. In the face of this, and in circumstances where I should note I have not read the affidavit in question, I cannot see how it could be said that there is any error by his Honour in the making of the access orders. 34 It follows that, for these reasons, I consider that the applicant has not made good either of the two essential components for the grant of an application for leave to appeal. The applicant has not established the existence of any real doubt about the correctness of his Honour's decision. Nor has the applicant established substantial injustice if the decision of his Honour was incorrect. The applicant engaged with the question of substantial injustice only in written submissions in reply. The applicant gave three reasons said to involve substantial injustice: first, the need to disclose the affidavit which would otherwise be confidential and which would provide information to the respondents which might enable them to defeat the process of the examinations; second, delay in the conduct of the examinations; and third, that the applicant will be put to the substantial cost of defending the applications to set aside the examination orders. 35 The problem with these submissions is that, as to the first, there is no error which can be discerned in his Honour's decision to grant access to the affidavit. Accordingly, to suggest that that is a substantial injustice for this reason involves a circularity which I am unable to unravel. Second, delay was a matter which his Honour took into account in reaching the view that there was not sufficient prejudice to the applicant to justify refusing the extensions of time. Again, I can see no error in his Honour's conclusion in this regard, and it necessarily follows that the delay which will be occasioned is not sufficient to give rise to substantial injustice. The only other reason was the substantial cost of defending the applications. Of course, if the respondents had brought the applications within time, the applicant would have been put to exactly the same cost in any event. Again, I cannot see that this is substantial injustice of the relevant kind. For my part, I can see no injustice to the applicant at all in the merits of the applications for discharge of the summonses being heard and determined. 36 As a result, for my part, I would not grant leave to appeal. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

WIGNEY J: 37 I also agree with the reasons of Justice Jagot. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

SCHEDULE OF PARTIES NSD 1293 of 2016 Respondents Fourth Respondent: ROD WHITHEAR