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[2009] FCAFC 89
Federal Court of Australia (Full Court)
2009-07-31
Siopis JJ
Original judgment source is linked above.
THE COURT: 1 In 2001, New Tel Limited, a public company based in Western Australia and carrying on business in the telecommunications industry, sought to acquire control of another company in the telecommunications business, Cable & Telecoms Limited (CAT). Mr Andrew Waller, the applicant, was at the relevant time, a director of CAT. Mr Barry Waller, the applicant's father, was a director of another company, Wainter Pty Ltd. Wainter held shares in CAT and was also a creditor of CAT. In 2001, Wainter entered into an agreement with New Tel, whereby, in consideration for the transfer to it of two million options in New Tel, Wainter agreed to transfer its shareholding in CAT to New Tel, and to assign to New Tel the debt owed to it by CAT. The respondent, Freehills, a firm of solicitors, provided legal advice to New Tel in relation to the takeover of CAT by New Tel. Mr David Woolfe was at that time a partner of Freehills. Mr Peter Francis Malone was a director of New Tel at that time. 2 In December 2002, administrators were appointed to New Tel. On 13 January 2003, the creditors of New Tel resolved to put the company into liquidation. 3 Freehills is a creditor of New Tel for its unpaid legal fees and disbursements. Wainter has filed a proof of debt in the liquidation of New Tel claiming damages of $60 million for losses suffered by reason of alleged misleading or deceptive conduct by Mr Malone and Mr Woolfe in relation to the takeover of CAT. 4 In October 2004, Freehills obtained "eligible person" status from the Australian Securities and Investments Commission (ASIC) to apply for the issue of examination summonses in the liquidation of New Tel. 5 In November 2007, Wainter commenced a claim in this Court against Freehills, Mr Woolfe and Mr Malone alleging that they were liable for the losses which it allegedly suffered by reason of entering into the agreement with New Tel referred to above. 6 Freehills applied to this Court pursuant to s 596B of the Corporations Act 2001 (Cth) for the issue of a summons to examine Mr Andrew Waller. In support of the application, Freehills deposed that it wanted to examine Mr Waller to determine the merits of Wainter's claims against New Tel and Freehills, and whether the directors of CAT had revealed the true worth of CAT and its assets during the takeover of CAT. 7 On 18 October 2007, this Court granted Freehills' application. On 1 November 2007, the Court issued an examination summons directed to Mr Andrew Waller, the applicant. However, Freehills was unable to effect personal service of the examination summons on Mr Waller, an Australian citizen, whilst he was in Australia. Freehills applied to this Court for leave to serve the summons out of the jurisdiction. The primary judge granted Freehills leave to serve the summons on Mr Waller out of the jurisdiction and made orders that service could be effected by substituted service. 8 Mr Waller applied to set aside the decision of the primary judge. This application was refused and Mr Waller seeks leave to appeal against that decision.
THE PROCEEDING BEFORE THE PRIMARY JUDGE 9 By an ex parte application dated 28 April 2008, referring to O 7 r 9 and O 8 of the Federal Court Rules (the Rules) and r 11.4 of the Federal Court (Corporations) Rules 2000 (Corporations Rules), Freehills applied for the following relief:
APPLICATION FOR LEAVE TO APPEAL 22 On 9 July 2008, Mr Waller applied by notice of motion for leave to appeal from the orders of the primary judge. An amended notice of motion was filed on 5 August 2008. The draft notice of appeal set out the following grounds of appeal: 1. The learned judge erred in holding that a summons for examination issued pursuant to section 596B of the Corporations Law [sic] was an "originating process" within the definition set out in Order 8 rule 1 of the Federal Court Rules. 2. Even if the learned judge did not err in holding that a summons for examination issued pursuant to section 596B of the Corporations Law [sic] was an "originating process" within the definition set out in Order 8 rule 1 of the Federal Court Rules, the exercise of discretion by the learned judge miscarried in circumstances where the effect of the order for leave constituted a direct interference with the sovereignty of another country, and the threat to a resident of that other State with criminal sanctions not enforceable in that State. 23 Freehills also contended by way of a notice of contention that, if the examination summons was not an "originating process" to which O 8 r 2 and r 3 applied, the primary judge's decision could be supported on the basis that the examination summons was a "document" to which O 8 r 4 applied. 24 Order 8 r 4 of the Rules provides: (1) The Court may give leave to a party to serve a document issued by the Court (other than an originating process) on a person in a foreign country in accordance with a convention or the law of the foreign country, on such terms and conditions as it considers appropriate. (2) The evidence on an application for leave under subrule (1) must include the information mentioned in paragraphs 3(3)(a) to (c). (3) If a document (other than an originating process) was served on a person in a foreign country without the leave of the Court, the Court may confirm the service if the Court is satisfied that: (a) the service was permitted by: (i) if a convention applies - the convention; or (ii) in any other case - the law of the foreign country; and (b) the failure to apply for leave is sufficiently explained. 25 As a consequence of the debate that ensued during the course of the hearing before us, the Full Court gave Mr Waller leave to make an application to amend his proposed grounds of appeal, founded on a contention that issues in the proceeding raised a constitutional question. The Full Court also gave the parties leave to file supplementary submissions on whether r 11.4 of the Corporations Rules provided a basis upon which the orders made by the primary judge could be supported. 26 On 5 September 2008, Mr Waller applied for leave to amend his notice of motion for leave to appeal to rely upon an additional ground of appeal, namely, that "any examination by [Freehills] pursuant to the orders of the [judge below]…would be unconstitutional". Mr Waller also applied for leave to issue a notice pursuant to s 78B of the Judiciary Act 1903 (Cth). In addition, Mr Waller filed supplementary submissions dealing with the effect of r 11.4 of the Corporations Rules. 27 In support of the application to amend his notice of motion to include the additional constitutional ground, Mr Waller contended that insofar as the purpose of the examination was to determine the merits of Wainter's claim against Freehills, it could not be said that the examination was incidental to the winding up of New Tel. Further, it was said that the investigation by Freehills of whether the takeover of CAT was one of the reasons for the demise of New Tel was not incidental to the winding up of New Tel. In short, said Mr Waller, it was the function of the liquidator to investigate such matters. 28 Freehills opposed the applicant's application to introduce the constitutional ground, on the basis that it raised extraneous factual matters, and it would be necessary to adduce further evidence in order for a court to determine whether the examination at the instance of Freehills was incidental to a winding up. It was said that it was not appropriate for the Full Court to hear evidence of this nature. Rather, the matter should have been raised before the primary judge when evidence could then have been heard. 29 Following further directions from the Full Court, Freehills filed an affidavit of David Ronald Goodman sworn on 24 November 2008, in support of its contention that Mr Waller's amendment application should be refused. 30 On 23 December 2008, the Full Court advised the parties that it had considered and dismissed Mr Waller's application to amend his notice of motion for leave to appeal to include the proposed additional ground of appeal. The Full Court said that it would give reasons for its decision in this judgment. 31 Our reasons for not allowing the amendment are that the issues raised by the evidence would have required us to make factual findings and adjudicate upon the actions and proposed actions of a person, namely, the liquidator, who was not a party to the appeal. In short, the issue was not ripe to be dealt with as part of this appeal. 32 On 16 January 2009, Freehills filed a notice of contention supporting the decision of the primary judge on the basis that the primary judge was empowered to make the 19 June 2008 orders by the operation of the Corporations Act and r 11.4 of the Corporations Rules. 33 Mr Waller contended that there is no power, whether under the Rules, or the combined operation of the Corporations Act and the Corporations Rules, which permits the service out of the jurisdiction of an examination summons issued under s 596B of the Corporations Act.
THE ISSUES 34 The following questions have, therefore, emerged: (a) Whether the primary judge was empowered by the operation of the Corporations Act and r 11.4 of the Corporations Rules to make the orders he made on 19 June 2008. (b) Whether the primary judge was empowered to make orders for the service out of the jurisdiction under O 8 r 3(2) of the Rules on the grounds that an examination summons issued under s 596B of the Corporations Act is an "originating process". (c) Whether, if the primary judge was not empowered to make the orders for service out of the jurisdiction under O 8 r 2 and r 3 of the Rules, the primary judge was empowered to make the orders he made under O 8 r 4 of the Rules. (d) Whether the discretion of the primary judge miscarried in not declining to permit service out of the jurisdiction. (e) The question of costs reserved by the primary judge.
WHETHER THE CORPORATIONS ACT AND CORPORATIONS RULES AUTHORISED THE MAKING OF THE ORDERS 35 We deal first with the question of whether the primary judge was empowered by the Corporations Act and the Corporations Rules, to make the orders he made on 19 June 2008. 36 The respondent contended in its second notice of contention that the Corporations Act has authorised the Federal Court to summons a person falling into the category of persons referred to in s 596A and s 596B of the Corporations Act to appear before the Court, even if those persons are not resident within Australia. Further, the respondent contended that the Corporations Rules prescribe the means by which service of that summons is to be effected on that person, regardless of where that person is resident. Freehills submitted that pursuant to r 1.3 of the Corporations Rules, the Full Court should first have recourse to the Corporations Rules to determine whether they regulate the service of an examination summons out of the jurisdiction. If the Full Court found that the Corporations Rules did not do so, the Full Court should then have recourse to O 8 of the Rules. 37 Section 596A and s 596B provide as follows: 596A The Court is to summon a person for examination about a corporation's examinable affairs if: (a) an eligible applicant applies for the summons; and
(b) the Court is satisfied that the person is an officer or provisional liquidator of the corporation or was such an officer or provisional liquidator during or after the 2 years ending: (i) if the corporation is under administration - on the section 513C day in relation to the administration; or (ii) if the corporation has executed a deed of company arrangement that has not yet terminated - on the section 513C day in relation to the administration that ended when the deed was executed; or (iii) if the corporation is being, or has been, wound up - when the winding up began; or (iv) otherwise - when the application is made. 596B(1) The Court may summon a person for examination about a corporation's examinable affairs if: (a) an eligible applicant applies for the summons; and (b) the Court is satisfied that the person: (i) has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or (ii) may be able to give information about examinable affairs of the corporation. 596B(2) This section has effect subject to section 596A. 38 The relevant provisions of the Corporations Rules which applied at the time that Freehills made its application stated as follows: 1.3(1) Unless the Court otherwise orders, these Rules apply to a proceeding in the Court under the Corporations Act, or the ASIC Act, that is commenced on or after the commencement of these Rules. 1.3(2) The other rules of the Court apply, so far as they are relevant and not inconsistent with these Rules, to a proceeding in the Court under the Corporations Act, or the ASIC Act, that is commenced on or after the commencement of these Rules. … 1.5 In these Rules, unless the contrary intention appears: … originating process means an originating process in accordance with Form 2. … Division 11 - Examination and orders (Corporations Act Part 5.9, Divisions 1 and 2) 11.1 In this Division: examination summons means a summons under section 596A or 596B of the Corporations Act for the examination of a person about a corporation's examinable affairs. … 11.3(1)An application for the issue of an examination summons must be made by filing an interlocutory process or an originating process, as the case requires. 11.3(2)The application may be made without notice to any person. 11.3(3)The originating process, or interlocutory process, seeking the issue of the examination summons must be: (a) supported by an affidavit stating the facts in support of the process; and (b) accompanied by a draft examination summons. 11.3(4)The originating process, or interlocutory process, and supporting affidavit must be filed in a sealed envelope marked, as appropriate: (a) "Application and supporting affidavit for issue of summons for examination under section 596A of the Corporations Act 2001"; or (b) "Application and supporting affidavit for issue of summons for examination under section 596B of the Corporations Act 2001". 11.3(5)If the application is not made by the liquidator, the liquidator must be given notice of the application and, if required by the liquidator, served with a copy of the originating process, or interlocutory process, and the supporting affidavit. 11.3(6)If the application is not made by the Commission, the Commission must be given notice of the application and, if required by the Commission, served with a copy of the originating process, or interlocutory process, and the supporting affidavit. 11.3(7)Unless the Court otherwise orders, an affidavit in support of an application for an examination summons is not available for inspection by any person. 11.3(8)An examination summons must be in accordance with Form 17. 11.4 An examination summons issued by the Court must be personally served, or served in any other manner as the Court may direct, on the person who is to be examined at least 8 days before the date fixed for the examination. 11.5(1)This rule applies if a person is served with an examination summons. 11.5(2)Within 3 days after the person is served with the examination summons, the person may apply to the Court for an order discharging the summons by filing: (a) an interlocutory process seeking an order discharging the summons; and (b) an affidavit stating the facts in support of the interlocutory process. 11.5(3)As soon as practicable after filing the interlocutory process seeking the order and the supporting affidavit, the person must serve a copy of the interlocutory process and the supporting affidavit on: (a) the person who applied for the examination; and (b) unless that person is the Commission or a person authorised by the Commission - the Commission. (Original emphasis.) 39 Form 2 referred to in the definition of "originating process" in r 1.5 of the Corporations Rules provides as follows: FORM 2 (rule 2.2) ORIGINATING PROCESS [Title] A. DETAILS OF APPLICATION This application is made under *section/*regulation [number] of the *Corporations Act/*ASIC Act/*Corporations Regulations. [State briefly the nature of the proceeding, eg application for winding up on ground of insolvency; or complaint about a receiver.] On the facts stated in the supporting affidavit(s), the plaintiff claims: 1 2 etc AND Date: …………………………………………………….. Signature of plaintiff or plaintiff's legal practitioner This application will be heard by………………..at [address of Court] at………………..am/*pm on……………….. (Original emphasis.) 40 Mr Waller advanced a number of contentions as to why r 11.4 did not on its proper construction authorise service of any examination outside of the jurisdiction. 41 First, Mr Waller contended that s 596A and s 596B of the Corporations Act could not provide a source of statutory jurisdiction for the Court to summons a nonresident to appear before it and be examined, because the Corporations Act did not have extraterritorial effect. He contended that there was a presumption that legislation is intended to operate territorially and the presumption applied to the Corporations Act. 42 This contention raises the issue of the source of the Court's power to exercise its jurisdiction over persons not resident in Australia. In the case of Re Deposit, Lockhart J observed at 464‑465: It is well established that the court's jurisdiction in actions in personam depends at common law on the defendant's presence in the geographical jurisdiction of the court (this Court's jurisdiction being Australia‑wide) or the defendant's submission to the court's jurisdiction. There are, however, statutory extensions to this jurisdiction, dating back to the Common Law Procedure Act 1852 (UK), which provide for the service of process out of the jurisdiction where, speaking generally, there is some link between the forum and the subject matter involved… The rules of the High Court, of this Court and of all the Australian Supreme Courts contain provisions for the service of process outside the jurisdiction. 43 Order 8 of the Rules is an important statutory source permitting the Court to assume jurisdiction over persons not resident in Australia. In general, O 8 of the Rules gives the Court power to assume jurisdiction over persons not resident in Australia by authorising the service of the Court's process on those persons, in circumstances where there is a connecting factor between the subject matter of the proceeding involving the nonresident, and Australia. 44 A significant reason for regulating the circumstances in which a court may exercise power over nonresidents is the concern in international law that the assertion of jurisdiction by a court of one nation over the residents of another nation invades the sovereignty of the latter nation, and so threatens comity between nations. There is, in particular, a concern in international law about the assertion by one nation of an enforcement jurisdiction over residents and nationals of another nation. (See, Brownlie I, Principles of Public International Law (7th ed, Oxford University Press, 2008) pp 309‑311.) 45 However, notwithstanding international law concerns about comity, nations do pass laws with extraterritorial effect to protect their national interests. Examples of jurisdictions in which extraterritorial legislation has been passed are referred to by Bell A, Forum Shopping and Venue in Transnational Litigation (Oxford University Press, 2003) pp 9‑11. The courts in the United States of America have construed securities laws of that country to have extraterritorial effect where it is necessary to protect the interests of United States investors. In Schoenbaum v Firstbrook 405 F2d 200 (2d Cir 1968) (Schoenbaum), the United States Court of Appeals was required to determine whether the Securities Exchange Act 1934 (US) applied extraterritorially in respect of dealings in Canada in securities of a company which was listed on the American Stock Exchange. At 206, Chief Judge Lumbard observed: We believe that Congress intended the Exchange Act to have extraterritorial application in order to protect domestic investors who have purchased foreign securities on American exchanges and to protect the domestic securities market from the effects of improper foreign transactions in American securities. In our view, neither the usual presumption against extraterritorial application of legislation nor the specific language of Section 30(b) show Congressional intent to preclude application of the Exchange Act to transactions regarding stocks traded in the United States which are effected outside the United States, when extraterritorial application of the Act is necessary to protect American investors. 46 In the case of In re Seagull Manufacturing Co Ltd (In Liquidation) [1993] Ch 345 (Seagull) the Court of Appeal considered the question of whether, on its proper construction, s 133 of the Insolvency Act 1986 (UK) empowered an English court to summons a person not resident in the United Kingdom, to appear before it to answer questions about an insolvent company. At 353‑354, Peter Gibson J observed: On the face of section 133 it contains no territorial limitation. It is expressed to apply to "any person" who comes within any of the three categories in subsection (1). But there is a well established rule of construction that English legislation is territorial in effect in the sense that, in the absence of express enactment or plain implication, it is only to apply to British subjects or to foreigners within the jurisdiction: see Ex parte Blain; In re Sawers (1879) 12 Ch D 522. For a recent statement of the rule I refer to Clark v Oceanic Contractors Inc [1983] 2 AC 130, 145, where Lord Scarman described the general principle as being:
that, unless the contrary is expressly enacted or so plainly implied that the courts must give effect to it, United Kingdom legislation is applicable only to British subjects or to foreigners who by coming to the United Kingdom, whether for a short or a long time, have made themselves subject to British jurisdiction. That rule of construction…exemplifies what might be thought to be a proper reluctance of the court to construe English legislation in such a way as to enable it to assert jurisdiction over those subject to another jurisdiction by their presence in that other jurisdiction, unless compelled to do so by the language of the legislation. The case before Mummery J and this court has been argued on the broad question whether the absence from the jurisdiction of a person otherwise within section 133(1) prevents the application of the section to that person; and that is a question of construction. In the Clark case [1983] 2 AC 130, which raised a question as to the liability to English tax of a non‑resident corporation, Lord Wilberforce considered the rule of construction laid down in Ex parte Blain, 12 Ch D 522 and said [1983] 2 AC 130, 152: [it] requires an inquiry to be made as to the person with respect to whom Parliament is presumed, in the particular case, to be legislating. Who, it is to be asked, is within the legislative grasp, or intendment, of the statute under consideration? The contention being that, as regards companies, the statute cannot have been intended to apply to them if they are non‑resident, one asks immediately - why not? In considering Lord Wilberforce's question as to who comes within the legislative grasp of the section, one must look to the policy of the legislature in enacting the section in question. 47 The Court of Appeal upheld the decision of the primary judge who decided that it was to be inferred that s 133 of the Insolvency Act operated extraterritorially and that the court had power to summons the resident of the Channel Islands to appear before it. 48 At 354‑355, Peter Gibson J went on to refer to the policy considerations underlying the extraterritorial application of s 133 of the Insolvency Act. He said: Where a company has come to a calamitous end and has been wound up by the court, the obvious intention of this section was that those responsible for the company's state of affairs should be liable to be subjected to a process of investigation and that investigation should be in public. Parliament could not have intended that a person who had that responsibility could escape liability to investigation simply by not being within the jurisdiction. Indeed, if the section were to be construed as leaving out of its grasp anyone not within the jurisdiction, deliberate evasion by removing oneself out of the jurisdiction would suffice. That seems to me to be a wholly improbable intention to attribute to Parliament. Further, section 133 must be construed in the light of circumstances existing in the mid‑1980s when the legislation was enacted. By use of the telephone, telex and fax machines English companies can be managed perfectly well by persons who need not set foot within the jurisdiction. There is no requirement that an officer of an English company must live in England, nor of course need an officer of an overseas company which may be wound up by the court. Such a company is very likely to have officers not within the jurisdiction. I would emphasise that the question before this court is one of the scope of the Act and we are not concerned with whether the order for public examination can be effectively enforced against a person out of the jurisdiction: cf Theophile v Solicitor‑General [1950] AC 186, 195. When Parliament enacted section 133 it is very likely that it did so against the background of what Dillon LJ in Bishopsgate Investment Management Ltd v Maxwell [1993] Ch 1, 24, described as the "public worry and concern over company failures on a large scale, and the need to safeguard the public against such failures". 49 It follows that legislation which operates extraterritorially may comprise a statutory source, other than the rules of court, which vests in a court a power to assert jurisdiction over nonresidents. 50 The question, therefore, is whether there is a Parliamentary intention expressed in the Corporations Act that s 596A and s 596B are to have extraterritorial effect. As Peter Gibson J observed, there is a well‑established presumption that legislation is intended to operate territorially but this presumption will give way where the Parliamentary intention that a statute is to apply extraterritorially is clear. 51 Sections 5(1), 5(2), 5(4) and 5(7) of the Corporations Act provide: 5(1) Section 9 defines this jurisdiction as the area that includes: (a) each referring State (including its coastal sea); and (b) the Capital Territory (including the coastal sea of the Jervis Bay Territory); and (c) the Northern Territory (including its coastal sea); and (d) also, for the purposes of the application of a provision of Chapter 7 or an associated provision (see subsection (10)) - any external Territory in which the provision applies because of subsection (9) (but only to the extent provided for in that subsection). 5(2) Throughout this Act, this jurisdiction therefore consists of: (a) either: (i) the whole of Australia (if all the States are referring States); or (ii) Australia (other than any State that is not a referring State) if one or more States are not referring States; and (b) also, when used in or in relation to a provision of Chapter 7 or an associated provision (see subsection (10)) ‑ any external Territory in which the provision applies because of subsection (9) (but only to the extent provided for in that subsection). … 5(4) Subject to subsection (8), each provision of this Act also applies, according to its tenor, in relation to acts and omissions outside this jurisdiction. … 5(7) Each provision of this Act applies according to its tenor to: (a) natural persons whether: (i) resident in this jurisdiction or not; and (ii) resident in Australia or not; and (iii) Australian citizens or not; and (b) all bodies corporate and unincorporated bodies whether: (i) formed or carrying on business in this jurisdiction or not; and (ii) formed or carrying on business in Australia or not. (Original emphasis.) 52 In the case of Bray v F Hoffman‑La Roche Ltd (2002) 118 FCR 1 at 14‑16, Merkel J held that similar provisions in s 5 of the Trade Practices Act 1974 (Cth) (TPA) had the effect of causing those Parts of the TPA referred to in s 5 of that Act to operate extraterritorially. 53 In our view, s 5 of the Corporations Act comprises a clear expression of Parliament's intention that the provisions of the Corporations Act are, according to their tenor, to operate extraterritorially. This expression of Parliamentary intention operates to displace the presumption that the Corporations Act is to operate only territorially. 54 There is nothing in the tenor of s 596A and s 596B to suggest that Parliament intended that effect should not be given to the general position provided for in s 5, namely, that the provisions are to have extraterritorial effect. 55 First, the language of s 596A and s 596B of the Corporations Act is wide enough to apply to persons within their ambit, regardless of where those persons are resident. 56 Secondly, similar policy considerations, as are referred to in Schoenbaum and Seagull, would apply as a basis for the Parliament legislating to give s 596A and s 596B of the Corporations Act extraterritorial effect. It is to be observed that, in neither of the Schoenbaum and Seagull cases did the statutes in question contain provisions like s 5 of the Corporations Act setting out Parliament's express intention that the statute in question was to operate, according to its tenor, extraterritorially. 57 Thirdly, the Corporations Act contains provisions expressly modifying the territorial reach of certain provisions of the Corporations Act, otherwise capable of applying extraterritorially. An example is to be found in s 186 of the Corporations Act which modifies the extraterritorial application of ss 180‑184 of the Corporations Act in relation to directors and employees of foreign companies. 58 It follows, in our view, that when s 596A and s 596B are construed by reference to s 5 of the Corporations Act, it is apparent that Parliament intended that the Court is to have the power and jurisdiction to summons those persons falling within the ambit of those two provisions to attend the Court and be examined in relation to the "examinable affairs" of a company in liquidation, whether or not they are resident in Australia, and whether or not they are citizens of Australia. 59 There are some further matters that should be mentioned in this regard. First, there is no discretion in the Court under s 596A to determine whether to issue a summons requiring those persons within its ambit (which includes an officer of the company in liquidation) to attend for examination before the Court. The Court is required to issue the summons on the application of a qualified applicant. 60 However, the position is different under s 596B of the Corporations Act. That section applies to a wider range of persons, including within its ambit persons who may have no greater connection with the company than that they may be able to give information about the examinable affairs of the company. Thus, for example, the scope of the section is such that it would extend to nonresident advisers and bankers who have provided services to an Australian company in liquidation. In contrast to the position under s 596A, the Court has under s 596B a discretion as to whether to issue a summons requiring the attendance of a person falling within the class of persons to whom that section applies. 61 As the scope of persons to whom s 596B applies can embrace persons with a more remote involvement in the affairs of the Australian company in liquidation than those affected by s 596A, an order for examination made pursuant to s 596B has a greater risk of adversely affecting international comity on the basis of the absence of a sufficient connection with Australia. However, it appears this risk is recognised and accommodated within the section, by giving the Court a discretion as to whether to issue the examination summons. Thus, it appears that the legislative scheme seeks to meet in some respect international law concerns regarding comity by vesting in the Court discretion as to whether to issue a summons for the examination of a nonresident in the first place, as opposed to giving the Court a power to determine whether such summons once issued, should be served. 62 Mr Waller's second contention is that r 11.4 of the Corporations Rules did not permit service on persons outside of Australia because it did not refer in terms to service of the examination summons out of Australia. If the rule was intended to permit service outside of Australia, said Mr Waller, express language would be required. Mr Waller referred by contrast to the language used in O 8 r 2 and r 3 of the Rules, which expressly authorises the Court to give leave to permit a party to serve an "originating process" outside of the jurisdiction. 63 In our view, that contention should be rejected. Under the legislative scheme, it is unnecessary for r 11.4 to state expressly that it applies to the service of an examination summons upon a person resident outside of Australia. This is because s 596A and s 596B of the Corporations Act empowers the Court to summons the persons referred to in those sections to attend the Court whether or not the intended recipient of the summons is a resident of Australia. It would, therefore, be incongruous if the Corporations Rules were to undermine the extraterritorial application of those provisions of the Corporations Act, by restricting the service of the examination summons only to those who are resident in Australia. If that were the position, the clearly expressed Parliamentary intention that nonresidents who have participated in, or were involved in the affairs of Australian companies in liquidation, are liable to be examined, would be thwarted by the subordinate legislation. This would be contrary to the principle that an Act is not to be construed by reference to the terms of subordinate legislation. Rather, the effect of r 11.4 must be construed by reference to the legislative intent manifest in the Corporations Act, and not the other way around. The unqualified language of r 11.4 is capable of having application to service in respect of both residents and nonresidents and it should be construed as such to give effect to the manifest intent of Parliament. 64 It is apparent that the legislative scheme does not intend to give the Court a power to control whether, as opposed to how, a person should be served with an examination summons, once it issued. 65 Mr Waller's third contention was that there are textual indications in Div 11 of the Corporations Rules which show that it was not intended to provide for service on nonresidents out of the jurisdiction. Mr Waller said that r 11.4 provided that the examination summons must be served at least eight days before the date fixed for the examination. Further, said Mr Waller, there was no provision for conduct money, or for notification to the examinee of the nature of an examination under the Corporations Act, including the abrogation of any privilege against self‑incrimination. Mr Waller contended that this showed that it was unlikely that the framers of the rules contemplated or intended that r 11.4 would apply to an examinee who was not in Australia at the time of service. Further, said Mr Waller, r 11.5 affords the examinee only three days to apply to have the summons discharged. It was said that it was unlikely that, in setting this tight timeframe, the framers of the rules intended or contemplated service abroad on an examinee who would be in a different time zone and may possibly not have English as a primary language and have a familiarity with Australian law. 66 It is the case that the period of eight days notice of the examination is a short period of notice to a person who is resident overseas, as is the three day period for a person to apply to set aside the examination summons. However, under r 1.10 of the Corporations Rules there is a power in the Court to extend the time limits for the doing of acts provided for in the Corporations Rules. 67 In Seagull, the intended recipient of the summons, Mr Slinn, made a similar contention in respect of the presence in the rules made under the Insolvency Act of the requirement that the court's order for examination be served "forthwith" on the examinee. It was contended that it could not have been intended that the examination order should be served out of the jurisdiction because of the short time limit provided for in the rules. The Court of Appeal rejected that contention on the basis that it was "impermissible to construe the Act by reference to the rules made under it". 68 No inference in support of Mr Waller's contention arises from the absence of a requirement to provide an intended examinee with conduct money and advice as to the effect of the examination, because the same considerations apply whether the intended examinee is resident in Australia or not. 69 Fourthly, Mr Waller observed that r 11.10(1)(b) of the Corporations Rules refers to an examinee who has "absconded or is about to abscond" and contended that that language contemplated that an examinee who is to be served, was physically within the jurisdiction. The provisions of this rule are not inconsistent with a power in the Court to exercise jurisdiction over nonresidents. The fact that the rules address the position of a person, who having been served within Australia, seeks to abscond, does not undermine the Court having power to exercise jurisdiction over a nonresident, nor does it preclude a nonresident from being served overseas. 70 It was also contended that r 11.4 of the Corporations Rules did not authorise substituted service in the form ordered by the primary judge. 71 First, the applicant contended that the language of r 11.4 did not permit substituted service because the rule draws a distinction between "personal service" and service "in any other manner as the Court may direct, on the person who is to be examined". It was said that the emphasised words did not permit substituted service because the alternative method of service contemplated service "on" the examinee and did not permit service upon any other person. 72 In our view, the distinction sought to be drawn by Mr Waller should be rejected on the grounds that it is a distinction without any material difference. The distinction between "personal service" and "service on the person" is elusive. In our view, the framers of r 11.4 intended that the summons should be served personally on the examinee in the absence of any order made by the Court providing for another form of service. In exercising its discretion as to the appropriate alternative form of service to be ordered, the Court would be informed by the policy and constraints of the Corporations Act. Among the considerations to be taken into account is the fact that there is a criminal sanction for failing to answer the examination summons. 73 Mr Waller relied upon the decision of Goldberg J in the case of Takapana Investments Pty Ltd v Teco Information Systems Co Ltd (1998) 82 FCR 25 (Takapana) in support of his contention. In that case Goldberg J had on the ex parte application of the applicant, authorised a foreign respondent to be served in Australia under O 7 r 2 of the Rules without making orders under O 8 or having regard to whether the condition in O 7 r 9 for substituted service applied, namely, service under the other provisions of the Rules was impractical. On the application of the respondent following a contested hearing, Goldberg J set aside his previous orders. During the course of his reasons, Goldberg J observed that the words "or as the Court or the Judge may direct" at the conclusion of O 7 r 2 of the Rules did not authorise substituted service, namely, service on another person on the basis that that person would notify the person to be served of the service. Goldberg J observed that the discretion in O 7 r 2 was not at large but was informed by the context of the preceding elements of O 7 r 2 which described personal service. He said that the discretion in O 7 r 2 was to order some form of service which had a personal component, namely, service with a close connection to the person to be served. 74 The case of Takapana is distinguishable. Goldberg J made his observations in the context of construing O 7 of the Rules which contained in O 7 r 9 a specific provision for substituted service. This circumstance constrained and regulated the meaning that could be given to the general words at the conclusion of O 7 r 2. The language of r 11.4 of the Corporations Rules is different and there is no similar provision to O 7 r 9 of the Rules in Div 11 of the Corporations Rules to confine the construction of the general discretion referred to in r 11.4. 75 In any event, even if r 11.4 did not permit substituted service, by reason of r 1.3 of the Corporations Rules, O 7 r 9 of the Rules would apply and permit substituted service. 76 There was evidence before the primary judge that personal service would in the circumstances have been impractical and that, therefore, it was open to him to order substituted service in the manner in which he did. 77 It follows that Mr Waller's contention is rejected. 78 The application for leave to appeal is allowed but the appeal is dismissed.
WHETHER AN EXAMINATION SUMMONS IS AN "ORIGINATING PROCESS" FOR THE PURPOSES OF THE FEDERAL COURT RULES 79 In the light of our decision, it is strictly speaking unnecessary for us to consider the contentions founded on O 8 of the Rules as authorising the making of the orders made by the primary judge. 80 However, the primary judge dealt with the application on this basis and there was detailed argument addressed to the Full Court on those questions. In any event, it is also necessary to consider these contentions because if we are wrong in our view that the service of an examination summons out of the jurisdiction is regulated by r 11.4 of the Corporations Rules, it would, because of the application of r 1.3(2) of the Corporations Rules, be necessary to determine whether service out of the jurisdiction may be effected under the Rules. 81 Mr Waller contended that O 8 r 2 and r 3 of the Rules had no application to the service of an examination summons issued under s 596B of the Act because it was not an "originating process" within the meaning of those Rules. Order 8 r 2 and r 3, said Mr Waller, applied to the service out of the jurisdiction of the originating documents of a proceeding which is commenced by an application as that document is defined in the Rules. Mr Waller relied on the decision in Re Deposit, and the observations made by Emmett J in Re Absolutely Fabulous Exhibitions & Events (Management) Pty Ltd (1997) 25 ACSR 577 (Re Absolutely Fabulous) to the effect that an examination summons was not an "originating process" under O 8. Mr Waller contended that those authorities should be preferred to the case of Fiorentino which was followed by the primary judge. 82 In Re Absolutely Fabulous, the applicant was the liquidator of a company, Absolutely Fabulous Exhibitions & Events (Management) Pty Ltd. The applicant sought leave to serve a summons issued under s 596B(1) of the Corporations Law on Mr Robert Dwyer who was ordinarily resident in Australia but was at the time of the application, resident in England. Before adjourning the application for further hearing, Emmett J observed that in his view an examination summons issued under s 596B(1) of the Corporations Law, was not an "originating process" under O 8 of the Rules. At 578, Emmett J observed as follows: I have indicated to counsel for the applicant that I am not satisfied as presently advised that this is a case where an order can be made under O 8 r 2 because I do not consider that the summons is originating process within the meaning of O 8. The summons is issued pursuant to s 596B of the Corporations Law which provides that the court may summon a person for examination if an eligible applicant, which includes a liquidator, applies for the summons and the court is satisfied as to certain matters set out in s 596B(1)(b). Thus, there is a two stage process. First an application is to the court and then the court issues a document summoning an individual to attend to be examined. I was referred to the decision of Lockhart J in Re Sherlock (1991) 102 ALR 156; 5 ACSR 229 where his Honour held that an order under s 597, the predecessor of ss 596A and 596B, was not originating process within the meaning of O 8. Counsel for the applicant submitted that there is a significant change in the legislation from s 597 to ss 596A and 596B. As presently advised, I am not disposed to accede to that submission. As I understand s 597, before its repeal, the essence of the procedure was the same. Under s 597(2) a prescribed person could apply to the court for an order under s 597. Under s 597(3) where an application was made, the court could order the person to attend before the court to be examined. Thus, both provisions contemplate a two stage process whereby an application is made to the court and the court issues a document requiring attendance for examination. I am not satisfied, at present, that the Parliament intended to change the scheme of the provisions. Accordingly, I would be disposed to consider that the reasoning of Lockhart J applies to the new provisions. In any event, I am not persuaded, having regard to the language of O 8, that a summons such as is contemplated could ever be originating process. The court must be satisfied that the applicant has a prima facie case for the relief which he seeks. In the summons, the applicant seeks no relief. The recipient of the summons is simply bound by the summons to attend and be examined. The application for the issue of the summons may be originating process in that some relief is sought, being the issue of the summons. Such applications, of course, are almost invariably made ex parte. The summons itself, however, does not satisfy that requirement and accordingly it seems to me that the court could never be satisfied as to that matter. (Original emphasis.) 83 The application which was adjourned by Emmett J, came on for hearing before Foster J. It is this case which is reported as Fiorentino. As previously mentioned, Foster J held that the summons for examination was to be regarded as an originating process for the purposes of O 8 of the Rules. 84 Foster J declined to follow the case of Re Deposit, and determined the issue primarily by reference to the definition of "proceeding" in the Act. 85 Foster J observed at 330‑331: There does not appear to be any definition of originating process in the Federal Court of Australia Act 1976 (Cth) or the Rules. What one finds, however, in the definition section of the Federal Court of Australia Act (s 4) is a definition of the word "proceeding". It reads as follows: "proceeding" means a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal; This is a very wide definition indeed. I am satisfied that for present purposes one can regard the original application for the issue of the summonses in this matter as a proceeding in the Court and one can regard the current application by notice of motion for leave for the service of that summons outside Australia as a proceeding incidental to the original application or one relevantly in connection with it. One can also regard the contemplated examination of Mr Dwyer as a proceeding incidental to or connected with the original application. Indeed, I am persuaded that one need not look to these aspects of the definition in order to characterise the current proceedings for the obtaining of leave or the contemplated proceedings for examination as being proceedings of an ancillary kind. The definition is sufficiently wide, in my view, to confer upon them the title of proceeding in their own right. … I return to O 8, r 1. The paragraphs to which I have made reference, with the exception of par (e), make reference to "the proceeding". When one reads O 8, r 1 in its entirety and has regard to this use of the term "proceeding" one is able, in my opinion, to regard the term "originating process" as relating directly to the term "proceeding". It should be read as referring to any process of the Court which could properly be regarded as instituting a proceeding referred to in the various subparagraphs of O 8, r 1. If, as I think, the position is, the contemplated examination of Mr Dwyer pursuant to s 596B of the Corporations Law is relevantly a proceeding within the meaning of O 8, r 1 and, of course, the definition in s 4 of the Federal Court of Australia Act, then process of the Court which has the effect of instituting such a proceeding or bringing it about can relevantly be regarded as originating process within the meaning of O 8, r 1. This would mean that the summons sought to be served out of Australia on Mr Dwyer can be regarded and should be regarded as relevantly originating process within the meaning of O 8. Consequently, in my opinion, the requirements of O 8, r 1 are satisfied in the present case. Leave can be granted for the service of the summons outside the Commonwealth providing I am satisfied as to the matters in O 8, r 2(2). The requirements set out in r 2(a) and (b) are clearly satisfied. This Court has jurisdiction and, as I have already held, the proceedings are proceedings to which r (1) applies. Rule 2(c) speaks of "the relief" sought by the applicant in the originating process. Consistently with the view I have taken as to the wide meaning of the terms "proceeding" and "originating process" in these rules, I am satisfied that no narrow meaning should be ascribed to the term "the relief". The relief which is sought in the summons, in my view, is the attendance for examination before this Court of the respondent, Mr Dwyer. That being so I have no difficulty in finding that a prima facie case for that relief has been made out in the affidavit and other material which has been placed before me. In my view, therefore, the requirements of O 8, r 2 are also complied with. 86 There are two matters which affect the decisions in Re Absolutely Fabulous and Fiorentino. First, as Foster J observed, at the time of the decisions in Fiorentino and Re Absolutely Fabulous, the Rules did not contain a definition of "originating process". Order 8 was amended in August 2006 and now contains a definition of "originating process" (see [12] above). Secondly, neither Emmett J in Re Absolutely Fabulous, nor Foster J in Fiorentino, had regard to the provisions of Div 11 of the Corporations Rules in expressing their respective views. 87 In our view, for the following reasons, Mr Waller's contention that an examination summons issued under s 596B of the Corporations Act is not to be regarded as an "originating process" for the purposes of O 8 r 2 and r 3, is to be accepted. 88 First, Div 11 of the Corporations Rules expressly describes the process to be followed to obtain the issue of an examination summons. It is apparent that the rules in Div 11 do not characterise an examination summons as an "originating process", but as an order that is issued by the Court following the hearing and determination of an application commenced by an "originating process" or an "interlocutory process". This much is evident from r 11.3 which prescribes that an originating process is one of the means whereby a proceeding is commenced pursuant to which the relief claimed is the issue of an examination summons. In other words the analysis of the process adopted by Lockhart J in Re Deposit and Emmett J in Re Absolutely Fabulous is reflected in r 11.3 of the Corporations Rules. 89 In our view, the Rules and the Corporations Rules are to be applied harmoniously. This is so as a matter of common sense and also by reason of r 1.3 of the Corporations Rules which provides so expressly. It would be extremely curious if the Court, in construing whether an examination summons was an "originating process" for the purpose of O 8, was to ignore the characterisation adopted in the very rule which describes and characterises the procedure for obtaining such an order from the Court. In our view, effect must be given to r 11.3 when construing O 8. It follows that, in our view, the examination summons is not to be regarded as the originating process but as the product of the successful pursuit of such a process. It follows also that the reasoning in Re Deposit and Re Absolutely Fabulous is to be preferred to the reasoning in Fiorentino. 90 Secondly, the characterisation of the examination summons as "originating process" does not sit well with the O 8 r 3(2)(c) requirement that the Court must be satisfied that the applicant has a "prima facie case for the relief" that the applicant for leave claims. As Emmett J observed in Re Absolutely Fabulous, in the examination summons the applicant seeks no relief. All that is required is that the recipient of the summons attends court to be examined. Foster J in Fiorentino, on the other hand, found that the relief sought was the attendance of the examinee at the examination hearing and that the affidavit material supported that relief (see [85] above). It is not readily apparent what Foster J meant by his observation that the affidavit material supported the prima facie case for relief of such a nature, namely, the command that the examinee attend court. By contrast it is readily apparent that on the construction adopted by Emmett J such affidavit material would comprise the material in support of the essential elements of the relief set out in the application. There is an element of artificiality in the analysis of Foster J. We prefer the reasoning of Emmett J to Foster J on this question also.
WHETHER AN EXAMINATION SUMMONS IS A "DOCUMENT" WHICH MAY BE SERVED OUT OF THE JURISDICTION UNDER O 8 R 4 OF THE RULES 91 Mr Waller contended that O 8 r 4 had no application to an examination summons. He said that on the proper construction of O 8 r 4 the word "document" did not include a coercive order. Mr Waller went on to say that an examination summons was "materially indistinguishable from a subpoena". He further contended that if O 8 r 4 did not authorise the extraterritorial service of subpoenas, it could not rationally authorise extraterritorial service of an examination summons. There was, said Mr Waller, "a world of difference" between the extraterritorial service of a document on a person and the assertion of extraterritorial sovereignty over a person by issuing coercive orders on such a person. There would have to be statutory support for the power in the Court to issue a coercive order such as a subpoena or an examination summons because of the sovereignty issues arising from purporting to exercise coercive power over persons in foreign countries. Mr Waller referred to s 9 of the Evidence and Procedure (New Zealand) Act 1994 (Cth) and said that section would be otiose if O 8 r 4 of the Rules was given the construction contended for by Freehills. 92 Alternatively, said Mr Waller, O 8 r 4 should not on its proper construction be construed as providing a source of jurisdiction for the Court. The rule was procedural and not jurisdictional. Mr Waller also relied upon the following observations of Lockhart J in the case of Re Deposit: Order 8, r 3 [now O 8 r 4] of this Court's Rules relates to matters of procedure, not jurisdiction. The present question is one of jurisdiction, not procedure. Rule 3 is a very different provision to rr 1 and 2. The extensions found in r 1 to the common law rule that jurisdiction is based on presence within the geographical jurisdiction of the court provide significant connecting factors sufficient to justify the court exercising jurisdiction in relation to persons outside the jurisdiction. The connecting factors are necessary to respect the sovereignty of foreign jurisdictions. However, once they are shown, the court has power to assume jurisdiction. Rule 3 is couched in very wide terms and would include an examination order, but it must be read as a procedural provision and not as an extension of the court's jurisdiction to those served persons. To invade the sovereignty of another country's jurisdiction and interfere with its sole power over persons present within it, stronger and clearer language is needed than appears from r 3: see for example, ss 32G and 32L, Federal Court of Australia Act. There is therefore no statutory authority to authorise the making of the examination order in this case. 93 As we have previously held, s 596B of the Corporations Act provides the external statutory jurisdictional source for the Court to summons a person not resident in Australia but otherwise within the ambit of that section, to appear before the Court. Therefore, even if Mr Waller was correct in his contention as to the limited scope of O 8 r 4, s 596B of the Corporations Act comprises the external statutory source of jurisdiction to the Court to summons by way of coercive order, a nonresident to appear before the Court. It follows that Mr Waller's contention that O 8 r 4 was incapable of applying to an examination summons, is rejected. 94 It also follows that if we are wrong in our finding that r 11.4 of the Corporations Rules regulates the service of an examination summons issued under s 596A and s 596B of the Corporations Act on persons who are not residents of Australia, and it is necessary to find an alternative source of power to serve the summons once issued, out of the jurisdiction, the source of power is to be found in O 8 r 4 of the Rules. That source of power would be available to be utilised in respect of the examination summons by reason of r 1.3 of the Corporations Rules.
WHETHER THE PRIMARY JUDGE ERRED IN NOT REFUSING LEAVE TO SERVE THE EXAMINATION SUMMONS OUT OF THE JURISDICTION, IN THE EXERCISE OF HIS DISCRETION 95 Mr Waller next contended that even if O 8 otherwise applied to the service out of the jurisdiction of the examination summons, the primary judge erroneously failed to take into account an important discretionary consideration, namely, the intrusion upon the sovereignty of a foreign state arising from the service of the examination summons and the fact that there is a criminal sanction for non‑compliance with the summons. Mr Waller relied upon three cases: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV (2007) 157 FCR 558, Stemcor (Australasia) Pty Ltd v Oceanwave Line SA [2004] FCA 391 and Sweeney v Howard [2007] NSWSC 262. All three of these cases were concerned with interlocutory processes as part of the conduct of ordinary civil litigation. The first case dealt with the question of whether a foreign state, the Russian Federation, should give discovery. The other two cases dealt with the issue of a subpoena to a party not resident in Australia. 96 These cases are to be distinguished from the position where Parliament has by statute given the Court jurisdiction to summons nonresidents and foreigners falling within the ambit of s 596A and s 596B of the Corporations Act to attend Court in aid of the investigation into the affairs of an Australian company in liquidation. There are plainly different public interest policy considerations which apply. It is to be inferred that the Parliament would have appreciated that the exercise by the Court of the jurisdiction to summons foreigners or nonresidents to appear before it pursuant to s 596A and s 596B, would necessarily involve an invasion of the sovereignty of the state in which the foreigner or nonresident is resident. It is further to be inferred that Parliament has decided that any international opprobrium attached to the passing of extraterritorial legislation is justified in the public interest for the protection of the interests of Australian creditors and contributories. Accordingly, the fact that the issue of an examination summons would involve an invasion of sovereignty per se carried little weight as a discretionary consideration in determining whether leave should be granted to serve the summons in a foreign country. The same considerations apply in relation to the second discretionary factor referred to by Mr Waller, namely, that a recipient of the summons may choose to ignore the summons. As Peter Gibson J observed in Seagull at 355, the question before the Court is one relating to the scope of the Corporations Act, and not whether an order made for the attendance at an examination hearing can be effectively enforced. 97 In our view, the primary judge was aware of the fact that the examination summons would have the effect of comprising an invasion of the sovereignty of Monaco. However, there were other factors which indicated a close connection between Australia and Mr Waller. In particular, Mr Waller is an Australian citizen and has participated in the affairs of New Tel, an Australian company in liquidation. Further, Mr Waller had only been a resident of Monaco for a short period of time. Therefore, even if the question of comity was a factor to which weight should have been given by the primary judge, the strong connection between Mr Waller and Australia would assuage any concerns regarding comity. 98 The primary judge did not err in not declining to give leave to serve the examination summons out of the jurisdiction on discretionary grounds.
COSTS 99 In our view, there was no need for the primary judge to reserve to the Full Court the questions of costs. The question of whether the Chorley exception applies is settled, subject only to further consideration by the High Court. 100 The application for leave to appeal is allowed, the appeal is dismissed and the applicant is to pay the respondent's costs of the application before this Court and below. I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Finn, Dowsett and Siopis.
Associate: Dated: 31 July 2009 Counsel for the Applicant: Mr AS Bell SC
Date of Hearing: 28 August 2008
Date of Second Notice of Contention 16 January 2009
Waller
Freehills
(1991) 30 FCR 463
(1997) 79 FCR 327
(2002) 118 FCR 1
(1998) 82 FCR 25
(2007) 157 FCR 558
(1991) 102 ALR 156