Case: Rees v Kratzmann [1965] HCA 49 ; (1965) 114 CLR 63
Outcome: cited
argument ignores the difference between the two stages of the process and assumes that it was mandatory for ASIC to form a view that successful litigation on behalf of Allstate would ensue. In the first place, there is no mandatory consideration of that kind in the statute. Secondly, it mistakes the nature of examinations. They are for the purpose of information gathering. The potential result would only be known at the conclusion of that exercise rather than at the beginning. Thirdly, it assumes that the only potential causes of action were those expressly dealt with by ASIC and that the only examinations proposed were those of the listed persons. That was not the basis of the application and was not the basis of the approval. Fourthly, it ignores the more general purposes of public examination of those connected with insolvent companies ( Rees v Kratzmann [1965] HCA 49 ; (1965) 114 CLR 63). It is also submitted that the common law right to maintain silence will be encroached upon. It is not clear to me that the so called common law right to silence is a right or interest in the sense outlined in Annetts v McCann [1990] HCA 57 ; 170 CLR 596 . The only authority that was cited to support that proposition, apart from the reference in the passage from the reasons of Dawson J in Johns v Australian Securities Commission 178 CLR at 437, was that of Branson J in Re Cortaus Ltd (in liq); Sheahan v Joye (No 2) (1996) 20 ACSR 576 at 578. That was an examination of the balance of convenience on an application for a contested adjournment and did not involve the present issue. There is merit in the submission by counsel for ASIC that it is hardly correct to say that an officer of a company that is in external administration has any right to silence concerning the affairs of the company. On the contrary, the officer is bound by statute, when called upon, to provide information. That has been the case for a very long time ( Rees v Kratzmann [1965] HCA 49 ; 114 CLR 63; Evans v Wainter 145 FCR per Lander J at [44] [82]; per French J in Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd [2007] FCA 13 at [46] [78]). For the sake of completeness I should deal with two arguments raised on behalf of ASIC, each of which I would reject if I had been of a different view concerning the duty to accord natural justice. The first was that the decision here was a step or stage in a process, the end result of which would entail procedural fairness ( Ainsworth per Mason CJ, Dawson, Toohey and Gaudron JJ 175 CLR at 578; South Australia v O'Shea [1987] HCA 39 ; (1987) 163 CLR 378 per Mason CJ at 389). It was argued that the position was not dissimilar to the lack of any requirement to afford a hearing prior to the commencement of a prosecution of a like proceeding ( Barton v The Queen [1980] HCA 48 ; (1980) 147 CLR 75 at 95; Cornall v AB (A Solicitor) [1995] 1 VR 372 at 396 397; Commissioner of Police v Reid 16 NSWLR at 461; Australian Securities and Investments Commission v Plymin (No 3) [2002] VSC 358 ; (2002) 170 FLR 128 at 135 136). In the first place, it is doubtful whether there is a single decision making process of the kind referred to in the present circumstances. The decision by ASIC in relation to authorisation involves different questions and different issues than would a decision to issue a summons by the Court or the conduct of the proceeding itself (cf McHugh J in Johns v Australian Securities Commission 178 CLR at 473 474 and see Re Excel 52 FCR at 83 84 and 86). It is difficult to see how failure to accord natural justice in relation to the decision in question could be cured by later events. In the second place, the examination procedure is not designed to accord natural justice to a party in relation to any allegations made, directly or indirectly, against the examinee. The process is inquisitorial rather than adversarial. There is no case put against the examinee or any case in reply. As Windeyer J said in Rees v Kratzmann (114 CLR at 80): 'The honest conduct of the affairs of companies is a matter of great public concern to-day. If the legislature thinks that in this field the public interest overcomes some of the common law's traditional consideration for the individual, then effect must be given to the statute which embodies this policy.' (See also Hamilton v Oades [1989] HCA 21 ; (1989) 166 CLR 486.) The fact that the Court maintains considerable control over the examination does not change the information gathering nature of the function being performed. The analogy with the institution of Court proceedings is not apt.