Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 301

New South Wales Supreme Court

CITATION : Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 301

HEARING DATE(S) : 03/04/07

JUDGMENT DATE : 3 April 2007

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

EX TEMPORE JUDGMENT DATE : 3 April 2007

DECISION : Directions under s.596F(1)(a)

CATCHWORDS : CORPORATIONS - winding up - examination of officers and others - application for directions as to scope of examinations by special purpose liquidator with limited powers

LEGISLATION CITED : Corporations Act 2001 (Cth), Part 5.9, s.596F(1)(a)

Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff Talent2 Works Pty Ltd - Fourth Plaintiff PARTIES : One.Tel Limited - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant Paul Gerard Weston - Special Purpose Liquidator Martin Green and Darren Miller - PBL Examinees

FILE NUMBER(S) : SC 5291/03

COUNSEL : Mr N.A. Cotman SC/Mr R.D. Glasson - Special Purpose Liquidator Mr A.S. Bell SC/Ms K.C. Morgan - PBL Examinees

SOLICITORS : NOT Lawyers - Special Purpose Liquidator Atanaskovic Hartnell - PBL Examinees

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

TUESDAY 3 APRIL 2007

5291/03 ONEFONE AUSTRALIA PTY LTD & 3 ORS v ONE.TEL LIMITED

JUDGMENT

1 The special purpose liquidator of One.Tel Limited is in the process of conducting certain examinations under Part 5.9 of the Corporations Act 2001 (Cth). 2 As a result of events during the course of the first day of the examinations yesterday, he has this morning approached the court with a view to obtaining certain directions under s.596F(1)(a) of the Act with respect to matters that may be inquired into at those examinations. 3 The application is made, of course, in a context where the special purpose liquidator is, by virtue of the terms of his appointment as varied by the court from time to time, in office for a specific purpose. The most recent delineation of the powers of the special purpose liquidator appears in the order made by the court on 14 March 2007: "Order number 1 made in these proceedings on 26 April 2006, specifying the purpose of the SPL's appointment, be varied such that the purpose of the SPL's appointment shall be to consider and make recommendations to creditors of One.Tel Limited as to whether: (a) any rights of action exist in relation to the cancellation of the RRI; (b) any rights of action exist in relation to the decision to appoint voluntary administrators to One.Tel on 29 May 2001: (e) any action should be commenced against any persons in relation to any such rights of action referred to in sub-paragraphs (a) and (b) above." 4 This order contains the following definition of "RRI": "' RRI ' means the Renounceable Rights Issue announced to the Stock Exchange by One.Tel on 17 May 2001, and underwritten by Publishing and Broadcasting Limited and News Limited." 5 For the purposes of the examinations and having regard to the terms of the special purpose liquidator's appointment, the relevant subject matter is the cancellation of the renounceable rights issue announced to the Stock Exchange by One.Tel on 17 May 2001. The announcement included the following sentence: "The renounceable rights issue is underwritten by PBL and News, who will take up new shares not accepted". It is that sentence that has caused the renounceable rights issue to be described, in general terms, as one that was underwritten by PBL and News. 6 The tension that apparently developed in the course of yesterday centres largely on the question of the period to which the examinations may properly relate. As I have said, the rights issue was announced to the Stock Exchange on 17 May 2001. The decision to cancel it was made on 29 May 2001. On one view (which is advanced on behalf of certain examinees by Mr A.S. Bell SC), the inquiries by the special purpose liquidator should be confined to the period 17 May to 29 May 2001. An alternative which Mr Bell advanced, but not as his preferred position, is that the period would be the period 8 May 2001 to 29 May 2001, since what is regarded as a crucial cash analysis forecast was produced on 8 May 2001. 7 Against that it is argued on behalf of the special purpose liquidator by Mr Cotman SC that to understand the cancellation of the rights issue and its implications, and, of course, the related cancellation of the underwriting or proposed underwriting, one has to know what the termination really was, how it arose and, most importantly, what it related to. I accept that submission. It is an artificially narrow approach to say that inquiries into the cancellation cannot pay attention to anything that occurred before the announcement of the rights issue on 17 May 2001 or, indeed, to anything that occurred before what is regarded as the crucial cash analysis forecast document of 8 May 2001. A proper understanding of the cancellation may well entail consideration of matters leading up to or motivating the decision to undertake the rights issue in the first place. 8 I have already mentioned the two dates that have been suggested on behalf of certain of the examinees as dates before which inquiry should not be allowed. It seems to me that any cut-off chosen would necessarily be arbitrary. The position pertaining on 8 or 17 May may only be intelligible if one knows of something that happened on 7 or 16 May or 6 or 15 May. 9 Turning to another aspect, I would add that the fact that a particular area or subject matter was covered in earlier examinations undertaken by the general liquidators of One.Tel does not mean at all that that area or subject matter is closed to the special purpose liquidator. For obvious reasons, the general liquidator's legitimate preoccupations cannot be assumed to coincide, even in part, with those of the special purpose liquidator. It is not necessary to go over again the reasons for the appointment of the special purpose liquidator or to dwell upon the position of potential conflict of the general liquidators that led to that appointment. 10 I intend to make directions under s.596F(1)(a) generally in accordance with the form sought by the special purpose liquidator. 11 To that end I grant leave to the special purpose liquidator to file in court the interlocutory process which I initial and date. 12 Pursuant to s.596F(1)(a) of the Corporations Act I make directions in the terms set out in paragraphs 1 to 4 of the interlocutory process, but with the following modifications: In paragraph 1(b) omit "the bridge loan" and substitute "any actual or proposed bridge loan"; also in paragraph 1(b) omit "the underwriting agreement" and substitute "any actual proposed underwriting agreement"; also in paragraph 1(b) omit "the agreement to subscribe for the RRI" and substitute "any actual or proposed agreement to subscribe for shares under the RRI".