Case: Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England (1994) 52 FCR 69
Outcome: cited
is then submitted that Gray's reasoning was based upon the analysis in Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England (1994) 52 FCR 69 of the statutory provisions as they stood prior to the amendments which were in force at the time relevant to this case in particular by reference to the former s 597 rather than by reference to the present s 596A and s 596B. A particular complaint is that this caused no attention to be paid to the mandatory nature of s 596A. It will be recalled that par 19(b) and par 19(c) of the Gray memorandum were in the following terms: '(b) Different matters arise for consideration at each stage of the two stage process. The first stage requires ASIC to consider the relationship which the applicant has to the corporation, and may also include matters personal to the applicant, such as the applicant's relationship to the person to be examined. The second stage requires the Court, in deciding whether to grant the examination order, to take into account different matters including the relationship between the examinee and the corporation as well as relationship between the applicant and the examinee. (c) Contributories (including members) are a class of persons that would normally have the appropriate connection to the company to be an appropriate person to be authorised by ASIC.' It is argued that, as a result, ASIC did not take into account a relevant consideration namely the current form of the statute, did take into account an irrelevant consideration, namely the former provision, and made an error of law. In my opinion, the point which is made, whilst correct insofar as it goes, does not affect the validity of the reasoning adopted. The discussion by Gummow, Hill and Cooper JJ in Re Excel 52 FCR between 79 and 88 explains the difference between the authorisation decision, on the one hand, and the issue of the summons on the other and puts the issue in its historical context. Their Honours said (52 FCR at 83 84): 'What subs (1) does, in its reference to authorisation, is permit the Commission to extend the class of persons who may, in a particular case, have standing through the grant by the Commission of authorisation. The Commission, in determining whether to grant authorisation, will consider the relationship which the person seeking authorisation has to the relevant corporation and the external management of that corporation which is in progress. Contributories and creditors would normally have the appropriate connection with the corporation (as the history of examination orders, already set out, demonstrates), although other factors relevant to a particular case may make the authorisation of such persons inappropriate.' And their Honours said (52 FCR at 86): 'But while the purpose of examinations ordered to take place under s 597(3) may be so stated, the role to be played by the procedure of authorisation contained in subs (1) is much narrower. It is to the subject matter, scope and purpose of subs (1) to which attention must be given to resolve the present question, not the subject matter, scope and purpose of subs (3). As we have already noted, the grant of authorisation under subs (1) does no more than confer standing upon the person authorised to make an application. That being the case, reference to the subject matter, scope and purpose of subs (1) leads to the conclusion that the decision-maker, in determining whether to authorise a particular person to make applications in relation to a particular corporation, will be required only to consider the relationship which that person has to the external administration and in a particular case the appropriateness of that person being given standing to apply to the Court under subs (2).' In my respectful opinion, those statements remain apposite notwithstanding the amendments to the provisions. The two stage process remains and there is nothing about the amendments which renders inappropriate the explanation of the proper approach to the first stage. It should be noted that historically any contributory could apply for an examination order. Furthermore, the relevant parts of the Gray memorandum refer to the authorities relevant to the new provisions and expressly refer to the new provisions themselves. It can be assumed that the decision maker, Taylor, was familiar with the statutory provisions. He was, after all, the delegate of ASIC. The question is whether the decision in question prejudiced the rights of the Administrators. There is some debate as to whether the relevant power being exercised is that conferred by s 11(4) of the ASIC Act or the substantive provisions of the Corporations Act . The better view in this Court is the former ( Re Excel 52 FCR at 82). Whether the correct answer is either or both is of little significance for the resolution of the present issue. The power is unconstrained by any express provision and the only effect of the impugned decision is to put the appointee in a position to apply for a summons pursuant to s 596A and s 596B of the Corporations Act as an eligible applicant. That appointment has no effect upon any other person. The interests of other persons are not affected unless and until a summons is issued. The focus upon the Administrators in this case tends to distort perspective. It does not even follow that the issue of a summons for examination and the conduct of the examination will have an adverse impact upon all potential examinees. An examinee may be asked to give an account of what occurred in the affairs of the company without any reflection upon the examinee or the disclosure of any information personal to the examinee. Examinations may be conducted in order to obtain information without any defined target and, even if there is a defined target, many examinees will not be that target. Given the width of s 596A and s 596B , it is apparent that it would be quite impractical to give notice to all persons who might be conceivably affected by the appointment of a person as an eligible applicant in relation to the affairs of a particular corporation either as a potential examinee or a person potentially affected by evidence to be given by an examinee. In the present case it may be accepted that, at the time the decision was made, the Administrators had been identified as both targets and examinees. Thus, in a practical sense, a grant of the status of eligible applicant was a step towards an examination which was either inevitable or highly likely. In my opinion, that practical consequence does not mean that the difference between the stages explained in Re Excel 52 FCR 69 can be elided. In Ainsworth Mason CJ, Dawson, Toohey and Gaudron JJ said (175 CLR at 576): '... what is decisive is the nature of the power, not the character of the proceeding which attends its exercise.' Either the statutory power is subject to the obligation to afford prior notice or it is not. The circumstances of the particular application for exercise of the power do not affect the question as to whether the implied obligation has any operation in relation to the power in question. The decision to authorise the Evans did not itself directly adversely affect the interests of others in the manner required to bring the statutory presumption into play. 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.