In the matter of Agriculture.com Pty Ltd (In liq); Application of Sherman [2001] NSWSC 628

New South Wales Supreme Court

CITATION : In the matter of Agriculture.com Pty Ltd (In liq); Application of Sherman [2001] NSWSC 628 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3405/01 HEARING DATE(S) : 19 July, 2001 - Ex tempore JUDGMENT DATE : 19 July 2001

PARTIES : Andrew MacPherson and Ian Gibson & Ors (Applicants) Steven Sherman in his capacity as Deed Administrator of Agriculture.com Pty Ltd (Respondent) JUDGMENT OF : Palmer J

COUNSEL : M.R. Aldridge SC (Applicants/Examinees) T.D. Castle (Respondent/Deed Administrator) SOLICITORS : Rodd Peters (Applicants/Examinees) Henry Davis York (Respondent/Deed Administrator) CATCHWORDS : CORPORATIONS LAW - EXAMINATION - DEED OF COMPANY ARRANGEMENT - Examination by Administrator under s.596B - application by examinees for postponement of examinations - pending application under s.445D to terminate deed of company arrangement - insufficient time for examinees' Counsel to take instructions on documents to be examined upon - whether unfairness to examinees - the role of Counsel representing examinees - no ground shown for postponement of examinations. LEGISLATION CITED : Corporations Law s.569B and s.445D CASES CITED : Re Robert Stirling Pty Ltd (In liq) (1979) 4 ACLR 377 DECISION : Applications dismissed.

1 Before the Court is an application for review of the decision of a Deputy Registrar of the Court delivered this morning. The application is pursuant to Pt 61 r3 of the Rules. 2 There are listed for today and for the following three days examinations before the Deputy Registrar of a number of persons who are either directors or employees of Accenture Australia Limited ("Accenture"), a company which is an incorporated partnership of accountants formerly known as Arthur Anderson. 3 Those examinees are sought to be examined under s.596B of the Corporations Law ("CL") in relation to the affairs of Agriculture.com Pty Ltd ("Agriculture"), which has entered into a deed of company arrangement with its creditors. The deed has been expressly entered into for purpose of providing funds for the prosecution of certain proceedings against Accenture. The object of the examinations is to assist the administrator and the creditors to determine whether to commence those proceedings. 4 Mr Aldridge SC, who appears for the examinees, concedes that there has been no invalidity in service of the Summonses for examination. They have been served within the time limited by the rules although, as he says, only just within that time. Mr Aldridge also concedes that the examinees are properly examinable in relation to the affairs of Agriculture. 5 This morning, before the Deputy Registrar, Mr Aldridge sought an adjournment of the examinations. There are, essentially, two grounds advanced for the adjournment application. The first ground is that an application under CL s.445D has been made by Accenture to the Court for the termination of Agriculture's deed of company arrangement. That application is due to be heard on 2 August this year. If that application is successful, it may well be that Agriculture is placed in liquidation. It will then be a matter for the liquidator rather than the administrator, says Mr Aldridge, to determine whether or not the proceedings foreshadowed against Accenture should continue. 6 Mr Aldridge submits that, in the exercise of the Court's discretion, the examinations should be postponed to await the fate of the application to terminate the deed of company arrangement. 7 The second ground upon which the application for adjournment is made is that the examinees have produced only yesterday and today a considerable volume of documents in answer to orders for production obtained by the administrator. No doubt the examinees will be confronted with those documents and will be asked questions about them. Mr Aldridge submits that there has been insufficient time for him and his instructing solicitors to inspect the documents produced by the examinees and to take instructions about them. 8 Mr Aldridge submits that an examinee who is being examined under the compulsory process of CL s.596B has a right to properly informed legal advice. That right includes, in appropriate circumstances, the right to have his or her counsel and solicitors afforded the opportunity to inspect in advance of the examinations documents upon which the examinee is proposed to be examined in order that the legal representatives may take instructions from the proposed examinee in respect of those documents. 9 In this case, because of the lack of time available to the examinees' legal representatives to inspect documents and take instructions, it is said that it would be unfairly prejudicial to the examinees for their examinations to proceed. 10 I am not satisfied that either of the grounds put forward justifies the postponement of the examinations. My reasons are as follows. 11 Firstly, I do not think it is a proper exercise of the Court's discretion to defer the conduct of the examinations upon the possibility that the deed of company arrangement may be terminated and that a liquidator may take a view as to the prosecution of proceedings against Accenture different from that of the body of creditors which has assented to the deed of company arrangement. 12 This is not at all to reflect on the strength of the case which Accenture may have in seeking termination of the deed but I do not think that it is right for the Court to speculate that the probabilities are in favour of the deed being brought to an end. 13 If there were a serious prospect that an examination by a company administrator under CL s.596B could be postponed merely because an application had been made to the Court under CL s.445D to terminate the deed under which the administrator has been appointed, it is quite clear that that stratagem would be resorted to frequently by persons seeking to avoid or delay their examinations. The filing of an application under CL s.445D to terminate a deed of company arrangement should not, without more, afford grounds for an application to the Court to postpone an examination under CL s.596B. 14 It appears, on the evidence presently available, that a considerable amount of time, money and effort have already been expended by the administrator in preparing for these examinations. It seems to me that the information which may be procured from the proposed examinees may very well be relevant, not only to the administrator if the deed of company arrangement is not terminated, but also to a liquidator, if the deed is terminated and Agriculture is wound up. No doubt a liquidator would be called upon to consider whether the proceedings against Accenture should be prosecuted by the company in liquidation. The information obtained from the examinations would be of great assistance in that consideration. 15 Accordingly, I am not satisfied that the first ground relied upon is sufficient to move the Court to adjourn the examinations. 16 As to the second ground relied upon, I am not satisfied that undue prejudice would be caused to the examinees by reason of the fact that they and their representatives have not had prior opportunity to study the documents upon which they are to be examined. The transactions to be investigated, I am told, occurred some twelve months ago, perhaps a little longer, and the examinees are persons who are said to have actively participated in those transactions. It is unlikely that their recollections will have faded to such an extent that they will be able to give no useful or accurate evidence unless they have had the prior opportunity of studying documents and discussing those documents with their legal advisers. 17 I turn now to considerations of fairness. The right to the assistance of a legal adviser at a compulsory examination is, of course, not the same kind of right that a party has to representation in adversarial litigation. The role of counsel assisting an examinee is quite circumscribed. An examinee is entitled to the benefit of counsel for the purpose of protecting the examinee against unfair questions and abuses of process and to assist the examinee to claim privilege against self-incrimination, where necessary, and to understand his or her rights and obligations in the examination process. In most cases, after a relatively brief conference Counsel will be aware of the general subject matter of the examination, and the scope of the enquiry with the particular examinee. Counsel will then be fairly able to form a view as to whether or not the process of the Court is being abused by the particular line of questions being pursued or the manner in which those questions are asked. Questions likely to produce self-incriminating answers should, likewise, be fairly obvious both to Counsel and to the examinee. Ordinarily, to enable Counsel to discharge his or her duty to the examinee properly, it will not be necessary that Counsel spend a substantial period of time in preparation with the examinee and the documents to be examined upon. 18 On the other hand, in many cases actual prejudice may be caused to an administrator or a liquidator conducting a compulsory examination if the examiner is required to provide to the examinee well in advance of the examination the material to be examined upon in order to enable the examinee to embark upon a careful preparation for the examination in consultation with his or her advisers. In this respect, I adopt the remarks of Needham J. in Re Robert Stirling Pty Ltd (In liq) (1979) 4 ACLR 377. At p.388, his Honour said: "Everybody who has practised the law knows that in cross examination truth will out on some occasions when it would not if the questions were, in effect, dribbled to the witness either orally or in writing. I think the whole function of [a compulsory examination under the companies legislation] would be utterly frustrated if the witness were entitled, except in the most extraordinary circumstances, either to have conferences with his counsel or solicitor about questions or to have such questions delivered to him in writing." 19 In some cases it may be conducive to the search for truth that the examinee and his or her advisers are not provided in advance with the documentary material to be examined upon. In other cases, the process may be aided by enabling the examinee to refresh recollection of long past transactions by a prior study of contemporaneous documents. Which course is adopted is very much a matter for the discretion of the examiner in each case. 20 In my view the second ground for adjournment has not been made out. 21 Accordingly, I dismiss the application for review and direct that the examinations proceed tomorrow. 22 I order that the applicants pay the administrator's costs of this application. – o0o –