FEDERAL COURT OF AUSTRALIA Ailwood v Colwell, in the matter of Octaviar Investment Notes Ltd (in liq) [2011] FCA 294 Citation: Ailwood v Colwell, in the matter of Octaviar Investment Notes Ltd (in liq) [2011] FCA 294 Parties: ELIZABETH AILWOOD v WILLIAM MARTIN COLWELL, GREGORY MICHAEL MOLONEY AND PETER JAMES GOTHARD AS LIQUIDATORS OF OCTAVIAR INVESTMENT NOTES LTD (IN LIQUIDATION) ELIZABETH AILWOOD v WILLIAM MARTIN COLWELL, GREGORY MICHAEL MOLONEY AND PETER JAMES GOTHARD AS LIQUIDATORS OF OCTAVIAR INVESTMENT BONDS LTD (IN LIQUIDATION) File number(s): QUD 41 of 2011 QUD 42 of 2011 Judge: LOGAN J Date of judgment: 14 March 2011 Catchwords: CORPORATIONS – summons as to examinable affairs of a company under s 596B of the Corporations Act 2001 (Cth) – application to set aside summons – whether summons was unduly oppressive to examinee – where related examination in New South Wales Supreme Court – examinee resident in Queensland – examination not oppressive Legislation: Corporations Act 2001 (Cth) s 596B Cases cited: Re Octaviar Ltd (No 10) [2009] QSC 283 considered Date of hearing: 14 March 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 26 Counsel for the Applicant: Mr J Lockhart SC with Mr J Arnott Solicitor for the Applicant: Allens Arthur Robinson Counsel for the Respondent: Mr DB O'Sullivan Solicitor for the Respondent: Clayton Utz IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 41 of 2011 IN THE MATTER OF OCTAVIAR INVESTMENT NOTES LTD (IN LIQUIDATION) ACN 112 141 986 BETWEEN: ELIZABETH AILWOOD Applicant AND: WILLIAM MARTIN COLWELL, GREGORY MICHAEL MOLONEY AND PETER JAMES GOTHARD AS LIQUIDATORS OF OCTAVIAR INVESTMENT NOTES LTD (IN LIQUIDATION) Respondent JUDGE: LOGAN J DATE OF ORDER: 14 MARCH 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The requirement to produce the documents referred to in paragraph 1(g) of the schedule to the summons issued to Elizabeth Ailwood on 4 March 2011 by this Court be dispensed with. 2. Otherwise, Elizabeth Ailwood's interlocutory process filed 9 March 2011 is dismissed. 3. Elizabeth Ailwood pay the respondent's costs of and incidental to the interlocutory process filed 9 March 2011. The Court directs that: 4. It is desirable in the interests of justice for the preparation of the transcript of Elizabeth Ailwood's examination to be expedited. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 42 of 2011 IN THE MATTER OF OCTAVIAR INVESTMENT BONDS LTD (IN LIQUIDATION) ACN 126 878 608 BETWEEN: ELIZABETH AILWOOD Applicant AND: WILLIAM MARTIN COLWELL, GREGORY MICHAEL MOLONEY AND PETER JAMES GOTHARD AS LIQUIDATORS OF OCTAVIAR INVESTMENT BONDS LTD (IN LIQUIDATION) Respondent JUDGE: LOGAN J DATE OF ORDER: 14 MARCH 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The requirement to produce the documents referred to in paragraph 1(g) of the schedule to the summons issued to Elizabeth Ailwood on 4 March 2011 by this Court be dispensed with. 2. Otherwise, Elizabeth Ailwood's interlocutory process filed 9 March 2011 is dismissed. 3. Elizabeth Ailwood pay the respondent's costs of and incidental to the interlocutory process filed 9 March 2011. The Court directs that: 4. It is desirable in the interests of justice for the preparation of the transcript of Elizabeth Ailwood's examination to be expedited. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 41 of 2011 IN THE MATTER OF OCTAVIAR INVESTMENT NOTES LTD (IN LIQUIDATION) ACN 122 141 986 BETWEEN: ELIZABETH AILWOOD Applicant AND: WILLIAM MARTIN COLWELL, GREGORY MICHAEL MOLONEY AND PETER JAMES GOTHARD AS LIQUIDATORS OF OCTAVIAR INVESTMENT NOTES LTD (IN LIQUIDATION) Respondent IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 42 of 2011 IN THE MATTER OF OCTAVIAR INVESTMENT BONDS LTD (IN LIQUIDATION) ACN 126 878 608 BETWEEN: ELIZABETH AILWOOD Applicant AND: WILLIAM MARTIN COLWELL, GREGORY MICHAEL MOLONEY AND PETER JAMES GOTHARD AS LIQUIDATORS OF OCTAVIAR INVESTMENT BONDS LTD (IN LIQUIDATION) Respondent JUDGE: LOGAN J DATE: 14 MARCH 2011 PLACE: BRISBANE REASONS FOR JUDGMENT 1 In 2009, in the Supreme Court of Queensland, a controversy arose in the context of winding up proceedings concerning Octaviar Limited and subsidiaries of that company with respect to the appointment of liquidators. The end result of that controversy, as is evident from Re Octaviar Ltd (No. 10) [2009] QSC 283, was that McMurdo J determined that the public company Octaviar and one subsidiary, Octaviar Administration Pty Ltd (Administration), should not have the same liquidators as two other subsidiary companies, Octaviar Investment Notes Pty Ltd (Investment Notes) and Octaviar Investment Bonds Pty Ltd (Investment Bonds). 2 The occasion for that difference is explained at paragraph 45 of his Honour's reasons. Suffice it to say, as a result of an objection taken by a creditor, Wellington Capital Pty Ltd, his Honour formed a view that it was preferable that there be a differentiation in the office of liquidator as between the companies mentioned. In many ways, today's application is a sequel to that bifurcation, that necessary bifurcation, in the offices of liquidator as between the public company Octaviar and Administration on the one hand, and Investment Notes and Investment Bonds on the other. 3 Today's application concerns an endeavour on the part of an employee of the former auditors of the group under the control of the public company, Ms Ailwood of KPMG, to set aside a summons, which has been issued by a registrar of this Court, to her. By that summons she is required pursuant to s 596B of the Corporations Act 2001 (Cth) to attend before the Court later this week (on 16 March 2011) and be examined on oath or affirmation about the examinable affairs of Investment Notes. She is further required to produce, at the examination, books described in schedule 1 of the summons. 4 In that schedule, paragraph 1(g) has proved controversial. That seeks the production of, materially, all books relating to: …or communications with any person relating to or concerning (i) the summons issued by the Supreme Court of New South Wales to Mitch Craig or Liz Ailwood or (ii) the summons issued by this court to you save for and accepting communications with the solicitors for the liquidators of Administration, Messrs Henry Davis York, or the solicitors for Octaviar Investment Notes and Octaviar Investment Bonds (Messrs Clayton Utz). 5 In the reference to the Supreme Court of New South Wales one finds more particular occasion for today's proceeding. That is because, though the winding up orders and appointments of liquidators were orders of the Supreme Court of Queensland, it has proved convenient for the liquidators of Octaviar and Administration to conduct public examinations in respect of the examinable affairs of those companies in the Supreme Court of New South Wales. Those examinations have been conducted before a senior deputy registrar of that court with corporations list responsibilities. 6 Thus far, it has proved convenient for the liquidators of Investment Notes and Investment Bonds to participate in that particular public examination. The rationale for that participation is exposed in two letters from their solicitors, Messrs Clayton Utz, to the Australian Securities and Investments Commission of 19 March and 1 April 2010 respectively (exhibits 1 and 2). Such is the breadth of the definition of examinable affairs for the purposes of the Corporations Act that there is considerable scope for overlap as between the examinable affairs of Octaviar, Administration, Investment Notes and Investment Bonds. 7 That is not to say though that the interests of the respective liquidators are identical. So much was initially put on behalf of Ms Ailwood. However, the more one explores the background to the respective liquidations and interests of the liquidators, as is revealed in the material read before me, the more one comes to appreciate that though there is overlap, the two liquidators have, at least potentially, divergent interests. These in particular relate to scope for disputation as between Octaviar and Administration on the one hand and Investment Notes and Investment Bonds on the other in relation to loan debt, and further, the subject of uncommercial transactions on the part of the holding company. 8 This case nicely illustrates the benefits and burdens which can arise by the present conferral under the Corporations Act of jurisdiction, both in this Court and also in the Supreme Courts of the States and Territories with respect to corporations matters. That is in contrast with the position which prevails in relation to personal insolvency where, for reasons which commended themselves to the Parliament, federal jurisdiction in bankruptcy was withdrawn from State and Territory Supreme Courts. 9 The present system requires, in my opinion, courts having jurisdiction in corporations matters to realise that each is but part of an intended system for the exercise of the judicial power of the Commonwealth in respect of corporations matters. The benefits can be seen in the sense that a winding up order made by the Supreme Court of Queensland has borne fruit, in terms of investigatory effort on the part of liquidators, in the Supreme Court of New South Wales. It would be a serious mistake though to regard the Supreme Court of New South Wales as having any "ownership" of the conduct of examinations pursuant to the liquidation orders made in the Supreme Court of Queensland any more than it would be a mistake to regard this Court as having "ownership". 10 What is necessary, in my opinion, is to consider as a matter of balancing of interests, whether the summons, as issued to Ms Ailwood, is oppressive or an abuse of process. In that regard, she carries the onus of proof. If it be the case that her attendance is necessary to answer relevant questions concerning the examinable affairs of Investment Notes and Investment Bonds then that attendance is a necessary attendance, whether the examination is conducted in the Supreme Court of Queensland, the Supreme Court of New South Wales or, materially, in this Court. 11 There is no doubt that there has been to date a convenience in the conduct of the public examinations in the holding company and Administration in New South Wales before the senior deputy registrar. One might also apprehend, as was submitted on behalf of Ms Ailwood, that by virtue thereof, the senior deputy registrar has gained a familiarity with the subject of the examinable affairs of those companies. He has also, by virtue of the participation of the liquidators of Investment Notes and Investment Bonds, doubtless gained a familiarity with the examinable affairs of those companies and where they intersect with those of the public company and Administration. 12 It is though, apparent from the correspondence between the respective solicitors that there is recognition that it may not always prove convenient, although undoubtedly desirable, for the examination, even in respect of the examinable affairs of Octaviar and Administration, where they intersect with those of Investment Notes and Investment Bonds always to be conducted before that very official, even in that court. In other words one does see in the correspondence acknowledgement of the possibility of another deputy registrar in the New South Wales Supreme Court having to conduct an examination. 13 One also sees, in the correspondence, an acknowledgement of the possibility of an examination in respect of the examinable affairs of Investment Notes and Investment Bonds having to be conducted before a registrar of this Court. That recognition is, with respect, fitting having regard to the scheme of cooperative federalism that presently prevails in respect of the exercise of Commonwealth judicial power under the Corporations Act. It is apparent, on the material, that inquiries have been made of the New South Wales Registrar on behalf of the liquidators of Investment Notes and Investment Bonds for times when they might examine Ms Ailwood. Such times seem to be available in late March and perhaps early April this year. As it happens earlier time is available before a registrar of this Court on the 16th (and it is also apprehended, in terms of length of examination, the 17th of March 2011). 14 There is nothing in the material which suggests any particular personal, ie, personal to Ms Ailwood, hardship in her attending before a registrar of this Court later this week. It was put that it would be burdensome in terms of her encountering another unfamiliar environment, apart from that to which she is already necessarily to be exposed next week; in other words another court room. I do not see this as weighing terribly heavily at all in terms of oppression. 15 Another consideration, and one pressed on behalf of the liquidators for Investment Notes and Investment Bonds, is that Ms Ailwood is an employee in the Brisbane office of KPMG and it is here that the public examination is proposed to be conducted. If anything, that has an element of reducing oppression otherwise associated with interstate travel. Particularly that is so in times when, at least until shortly, daylight saving will prevail as between New South Wales and Queensland. 16 The more one reflects on things the more one sees that it is not so much the length of the examination, for if that is relevant it will be just as relevant in New South Wales, but rather a matter of place, and perhaps also, the sequence of being examined here and then being examined in New South Wales. There is though, again, nothing in the material which shows any particular hardship to Ms Ailwood in having to be examined here and then later in New South Wales in terms of the orderly flow of her personal life or, for that matter, other professional engagements with KPMG. 17 The liquidators of Investment Notes and Investment Bonds raised for consideration a difficulty which they have encountered in pressing the interests of the companies of which they are liquidators in the course of the examination conducted by the liquidators of Octaviar and Administration. It seems to me, at least on the material to hand, that the two sets of liquidators, as one might hope and expect, have endeavoured to cooperate. Equally though the conduct of the examinations in New South Wales, the responsibility for organising them and the length of questioning are primarily at the behest of the liquidators for Octaviar and Administration. 18 It is not difficult to see how the liquidators for Investment Notes and Investment Bonds, even allowing for that degree of cooperation which one is entitled to expect, may feel something of the poor relation with respect to those public examinations. That is not, in any way, to criticise the liquidators of Octaviar and Administration, but rather to recognise that there are separate interests at play and that their complete reconciliation in the public examination may, with the best will in the world, not always prove to be possible. 19 I see nothing more in the application which has been made by Investment Notes and Investment Bonds than a manifestation of this and also of the separate interest which they have in terms of the winding up for which they are responsible. Were it other than this, then as a court exercising corporations jurisdiction, I would have very particular concerns in relation to liquidators who are, in the final analysis, officers of this Court and for that matter all other courts exercising federal corporations jurisdiction. 20 It seems to me also that this particular examination later this week is a proceeding in respect of an examination of the examinable affairs of Investment Notes and Investment Bonds. In that sense, it is strictly separate, though obviously not unrelated, to the examination which is occurring in respect of the examinable affairs of Octaviar and Administration in which the liquidators of Investment Notes and Investment Bonds have every right to participate in relation to those companies' examinable affairs. There are obvious savings to be had and these seem, commendably, to have been had, as much as possible, by the liquidators of Investment Notes and Investment Bonds participating in the other public examination. It is important though, not to elevate as much as possible. The liquidators of Investment Notes and Investment Bonds have separate rights which they are separately entitled to pursue. This is what they are doing. 21 There was some concern raised about the availability of transcript as between the conclusion of an examination in this Court this week and when examination might commence in the New South Wales Supreme Court next week. It is true that to be tendered in any later proceedings the transcript of an examinee needs to be signed by that person. It should not, though, be beyond the wit of man to secure an unsigned copy of the transcript which ought suffice to inform, if need be, a registrar of the New South Wales Supreme Court as to any question of unnecessary duplication of questioning should those appearing for Investment Notes and Investment Bonds before that registrar seek to open up afresh matters which have already been explored before a registrar of this Court. That is not, of course, to foreclose questions on the same subject which have been inspired by revelations which occur before the registrar of the New South Wales Supreme Court. It would not in any way be appropriate for me to seek to second guess rulings which might justly be made by that official in that examination. 22 Reference was made on behalf of Ms Ailwood to comity as a consideration telling in favour of the setting aside of the summons. Such is the allocation of jurisdiction under the Corporations Act that comity very much is more than a one way street. This particular corporate insolvency is eloquent in that regard, witness already the courts of Queensland and New South Wales lending judicial resources to the winding up and examination. I see no particular reason why this Court's resources, if available, and if available in a way that is not oppressive, ought not also be allocated to the winding up and to the examination. 23 In short then, so far as the attendance of Ms Ailwood is concerned, I see no sufficient basis upon which to set aside the summons on the basis of oppression or abuse of process. There is though, a question in relation to paragraph 1(g). That seems to me to be cast in a way which is not manifestly connected with the examinable affairs of Investment Notes or Bonds. It may readily be conceded that a broad charter ought to be given to a liquidator in seeking to inquire into subjects about which, necessarily, the liquidator will be at the disadvantage of being an outsider to transactions and events. This acknowledged, the breadth of paragraph 1(g) and its disconnection, on its face, with examinable affairs looks to me such as to leave it to Ms Ailwood, in effect, to form her own value judgment as to what she ought and ought not to produce in terms of the examinable affairs of the two companies. It just looks to me to be something of an afterthought. In its present form I regard it as oppressive. I therefore set aside so much of the summons as would require the production of documents as set out in paragraph 1(g). 24 Save as aforesaid I dismiss the application. 25 It is highly desirable that, to the extent possible, product of the transcript of the examination on the 16 and 17 March 2011 be expedited so that it may be available for use in proceedings in the Supreme Court of New South Wales. 26 The applicant is to pay the respondent liquidators' costs of and incidental to the application to be taxed. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate: Dated: 30 March 2011