Case: HongKong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512
Outcome: cited
The extension of the examination power to companies under external administration, not limited to winding up, was noted by Gleeson CJ (Mahoney and Priestley JJA agreeing) in HongKong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 521. His Honour said: 'The statutory context of " external administration ", in which s 597 has its place, throws light on the purposes for which the power to order examinations (or to authorise persons to apply for examination orders) is conferred. Those purposes include the protection of shareholders and creditors and of interested members of the public. They are not however confined to the need for such protection in the case of winding up. Winding up is only one form of external administration. The scope of s 597 is wider.' The company whose officers were the subject of examination in that case was the former trustee of unit trusts known as the Estate Mortgage Trust. The trustee itself was in liquidation. The question whether s 597 was limited to companies in liquidation was relevant because s 601 of the Corporations Law stated that its provisions with respect to winding up did not apply to any body corporate, the winding up of which was started before the commencement of the chapter. The section was held not to apply to s 597 because that section was not a law with respect to winding up. 62 The Corporations Law was amended by the Corporate Law Reform Act 1992 (Cth) which introduced a new Div 1 in Pt 5.9. That Division was entitled "Examining a person about a corporation". It comprised ss 596A to 596F inclusive. Section 597 was reduced to its present form as a provision about the way in which examinations authorised under ss 596A and 596B are to be conducted. 63 The 1992 amendments implemented the Report of the Australian Law Reform Commission in its General Insolvency Inquiry Report No 45 (The Harmer Report). In par 584 of that Report the chief purposes of inquisitorial examinations in bankruptcy and company insolvency law were described thus: '... to facilitate the recovery of property, to discover whether conduct of the insolvent led to the insolvency and to investigate possible causes of action against third parties.' The Commission recommended that company law be brought into closer alignment with bankruptcy law by allowing examination without court order of any person who had been a relevant company officer within two years before winding up commenced (par 586). It also recommended the retention of the requirement for a court order for examination of persons other than officers of the company who might nevertheless be able to provide information relating to the company's affairs. The Commission recommended as wide a definition of "examinable affairs" as applied to bankrupts under recent amendments. It agreed with the observation by Lockhart J in re Csidei that "the very nature and breadth of the inquisitorial power ... requires the exercise by the Court or Registrar of considerable care before it is invoked". On that basis it recommended that applications to the Court for examination orders be supported by affidavit. 68 In New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 Hayne J, in the Supreme Court of Victoria, quoted and evidently adopted for the purposes of s 596B of the Corporations Law, what Gleeson CJ had said in HongKong Bank v Murphy . His Honour did so in aid of the proposition that (at 616): '... no longer are the examination provisions of the companies legislation to be regarded as restricted to cases in which the company has been wound up and it therefore follows that the provisions are not to be limited to cases in which the examination will be for the purpose of a winding up and the benefit of those interested in that winding up.' In New Zealand Steel the company whose examinable affairs were in issue had a receiver and manager appointed. The question before the court was whether the examination proposed was an abuse of process because it was directed to obtaining a private forensic advantage in pending litigation.