In the matter of Bernsteen Pty Ltd & Anor [2006] FCA 1791

FEDERAL COURT OF AUSTRALIA

In the matter of Bernsteen Pty Ltd & Anor [2006] FCA 1791

PETER MACKS AS LIQUIDATOR OF BERNSTEEN PTY LTD (IN LIQ) AND NEWMORE PTY LTD (IN LIQ) SAD 132 OF 2006

MANSFIELD J

14 DECEMBER 2006

ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SAD 132 OF 2006

BETWEEN: IN THE MATTER OF BERNSTEEN PTY LTD AND NEWMORE PTY LTD ACN 056 650 929

PETER IVAN MACKS LIQUIDATOR

OF BERNSTEEN PTY LTD (IN LIQUIDATION)

AND NEWMORE PTY LTD (IN LIQUIDATION)

PLAINTIFF

Plaintiff

JUDGE: MANSFIELD J

DATE: 14 DECEMBER 2006

PLACE: ADELAIDE

REASONS FOR DECISION 1 Peter Macks was appointed the liquidator of Bernsteen Pty Ltd (in liq) and Newmore Pty Ltd (in liq) by a resolution of the creditors to wind up those companies and to appoint him as the liquidator in December 2001. 2 On 10 July 2006, Mr Macks applied for an order that Ian Lock and John Sheahan be appointed as joint and several additional liquidators of the companies solely for the purpose of investigating any breaches of section 588G of the Corporations Act 2001 (Cth) (the Act) in relation to the affairs of the companies and, if they deem it appropriate, for taking all necessary steps to recover compensation for losses incurred by the companies by reason of any such breach or breaches of section 588G of the Act. That order was made on 16 August 2006. 3 On 14 November 2006, Mr Lock applied for an examination of John Viscariello in the form of an examination summons annexed to his supporting affidavit. On 17 November 2006, a Registrar of the Court made an order on that interlocutory application for Mr Viscariello's examination, pursuant to s 596A of the Act, and for him to produce specified books and records pursuant to s 596D of the Act. As is customary, and in accordance with Rule 11.5 of the Federal Court (Corporations) Rules 2000, the examination order gave Mr Viscariello three days after service upon him to apply to set aside or vary the examination order. 4 The examination is to take place tomorrow, that is, 15 December 2006. 5 The summons for his examination and to produce documents was served upon Mr Viscariello on 27 November 2006. Belatedly, by motion of 13 December 2006, Mr Viscariello has applied for an order that the orders for his examination and for the production of documents be discharged or permanently stayed, and for an order that the affidavit filed in support of the application for his examination and for production of documents be produced to him, as well as another order to which I do not need presently to refer. That is well outside the three day limit within which he was given, under the Corporations Rules, to apply to set aside or vary the examination order and production order. It expired on 30 November 2006 as he was served on 27 November 2006. 6 Given the imminence of the examination, that motion was listed urgently and was directed to be served by not later than 5 pm yesterday evening. It has come on for hearing at 2 o'clock today, that is, 14 December 2006. I accept the submission of counsel for Mr Viscariello that his motion is a proceeding under the Act. Consequently I accept that the Court may, in appropriate circumstances, extend the time for having brought the proceeding beyond that fixed pursuant to the Rules and in the order for examination and for production of documents: see ss 1322(1)(a) and 1322(4)(d). 7 There is, however, no evidence upon which the Court could exercise its discretion to extend the time within the application to set aside or discharge the examination order and the production of documents order should be made. Counsel for Mr Viscariello acknowledged that. I do not know why the application of Mr Viscariello was brought so late. There may be very good reasons for that. There may not. As I put to his counsel, at one extreme he may have elected to bring the application at the last minute for strategic purposes. I have no reason to think that is the case. At the other extreme, he may have been quite unfit to have done anything about bringing the application until the last few days through illness. I have no reason to know whether that is or is not the case. 8 Given that lack of knowledge, I do not think that I should, in the exercise of my discretion at present, extend the time for the bringing of his motion and it is therefore technically incompetent. His counsel has indicated that he would seek the opportunity to adduce further evidence in support of the timing of the application and to explain the delay. He has also sought, on behalf of Mr Viscariello, an adjournment of the motion to discharge the examination order. 9 The adjournment of the application is not opposed. I will grant it and I will adjourn the hearing of the motion of Mr Viscariello to 10 am on 17 January 2007. He will, in the meantime, have the opportunity to produce such further evidence as he may be advised, so that Mr Lock, who procured the orders for examination and for production of documents, has a reasonable opportunity to respond to it. In my view, any such further material should be provided by 5 January 2007. 10 Counsel for Mr Viscariello then applied, following the intimation that I would adjourn his application, for an order staying the examination to take place tomorrow, pending the hearing and determination of the motion to discharge the orders for examination and production of documents. He pointed out firstly that the summons, on its face, appears to seek personal documentation from Mr Viscariello which does not, at least obviously, relate to an inquiry about any breach of s 588G of the Act. He secondly pointed out that on the face of the summons, Mr Lock is not shown to have been an eligible applicant under s 596A to seek the examination. The issue is not that he is not, in fact, an eligible applicant. It is that he is not disclosed as having been an eligible applicant. In fact, whilst the order does not record that, the summons records that it was issued at the request of Mr Lock as a joint and several liquidator of the companies. I do not think there is any merit in that point. The third point which, it was submitted, indicated some merit in the application, is a lengthy affidavit of Mr Viscariello filed yesterday which was said to show a long history of dealings between Mr Viscariello and Mr Macks which in some way are said to support an inference of an improper motive on the part of Mr Macks in seeking the examination of Mr Viscariello, an improper motive which should be visited also upon Mr Lock. 11 I do not need to determine the correctness of those contentions. Neither Mr Macks nor Mr Lock has had an opportunity to respond to that lengthy affidavit. It is not uncommon in an examination under s 596A and in respect of the production of documents under s 596D for the liquidator not simply to investigate the possible cause of action involving a recovery of money by the company in liquidation, but the prospects of successfully recovering any judgment, and for that purpose to seek information from the person being examined as to their assets. 12 However, as I have said, I do not need to finally determine those issues at present. As I have indicated, presently the motion is not competent. Rather than dismiss it, I will adjourn it and I will give Mr Viscariello the opportunity to adduce further evidence in support of an extension of time application, which can be made orally, to regularise that circumstance. In the meantime, I am not prepared to make an order staying the examination. I have considered the matters which have been put on Mr Viscariello's behalf to indicate that there is some prospect of his application succeeding. 13 I am endeavouring to use neutral language as to the strength of those prospects. My remarks are not to be taken as indicating that I think those prospects are good or bad. I accept there is some prospect of his application succeeding. If he succeeds, the Court may order Mr Lock to return all documents and copies of documents produced at the examination. Mr Lock, through his counsel, has indicated that he will do so. The Court can also order that the transcript of the examination be returned and be maintained in a sealed record not available to Mr Lock or to the liquidators of the companies generally or to any other person. In other words, the effects of the examination can, to a large measure, be undone if it is found that the examination summons should be discharged and by the return of documentation. 14 I have also taken into account that at least on the material at present, Mr Viscariello, being informed by the order that was made that he had three days within which to apply to discharge the examination and production order, has not done so. He has not sought at present to adduce evidence to explain why he did not make his application in a timely manner. The liquidator has prepared for the examination, including engaging counsel. 15 Overall, for those reasons, as I have indicated, I am not prepared at present to make an order staying the examination. 16 I will reserve the costs of today to the next hearing of the motion, which is on 17 January 2007.