Supreme Court New South Wales Medium Neutral Citation: In the matter of Clarecastle Pty Ltd (in liq) [2011] NSWSC 490 Hearing dates: 6 May 2011 Decision date: 25 May 2011 Jurisdiction: Equity Division - Corporations List Before: Ward J Decision: Application for stay of examination summons and order for production refused. Direct that examinations be held in private and restrictions on manner in which documents transcribed Catchwords: CORPORATIONS - application for stay of examination summons and order for production - HELD - application refused - direction that examinations be held in private and as to manner in which examinations to be transcribed Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Balog v Independent Commission Against Corruption (1989) 18 NSWLR 356 BP Australia v Brown (2003) 58 NSWLR 322 Freshkept Technology Pty Ltd (in liq) v Goodwin [2000] VSC 500 Friedrich v Herald and Weekly Times Ltd (1990) VR 995 Global Finance Group Pty Limited (in liq) v Margaria; Global Finance Group Pty Ltd (In Liq) (Supervisor Apptd); Ex parte Read and Herbert [2001] WASC 50 Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 Hong Kong Bank of Australia Limited v Murphy (1992) 28 NSWLR 512 McMahon v Gould (1982) 7 ACLR 202 O'Brien v Wily (2009) 74 ACSR 145 Onefone Australia Pty Limited v One.Tel Ltd [2007] NSWSC 69; (2007) 61 ACSR 246 Parbery Re Trio Capital Ltd [2010] NSWSC 775 Re Cortaus Ltd (1996) 19 ACSR 591 Re Emanuele Investments Pty Ltd (1996) 19 ACSR 198 Re Eurostar Pty Ltd [2003] NSWSC 633 Re Fox Home Loans Pty Ltd (in liq) [2005] NSWSC1050 Re New Cap Reinsurance Corp Holdings Ltd; Gibbons [2001] NSWSC 835 Re New Tel Limited (In Liquidation); Evans v Wainter Pty Ltd (2005) 221 ALR 331; 54 ACSR 284 Re Southland Coal Pty Ltd (rec and mgrs apptd) (in liq) [2006] NSWSC 184; (2006) 58 ACSR 113 Re Total Entity Pty Ltd (in liq) (2003) 47 ACSR 577 Re Strarch International Pty Ltd (in liq) [2005] NSWSC 583 Texts Cited: Austin & Black's Annotations to the Corporations Act Category: Procedural and other rulings Parties: Ozem Kassem and Bruno Secatore as liquidators of Clarecastle Pty Ltd (in liq) (Plaintiffs/Respondents) Representation: Counsel R Harper SC with M Condon (Plaintiffs/Respondents) D R Pritchard SC (Interested Parties) Solicitors Sage Solicitors (Plaintiffs/Respondents) Atanaskovic Hartnell (Applicants) File Number(s): 10/158014 Judgment 1HER HONOUR: Before me for hearing on 6 May 2011 were applications in two sets of proceedings commenced by Messrs Ozzem Kassem and Bruno Secatore in their capacity as liquidators of Clarecastle Pty Limited (in liq) and also of ACN 050 070 463 Pty Limited (in liq) (formerly Ladycare Services Pty Ltd) (those being proceedings 81756 of 2010 and 81786 of 2010, respectively). Not listed before me, as such, but argued on 6 May 2011, was an application brought in other (to an extent related) proceedings commenced by the liquidators in about June 2010 in which earlier examination summonses and orders for production had been issued (proceedings 158014 of 2010). 2Messrs Kassem and Secatore were appointed as the liquidators of the said companies on 5 April 2007. In 2010 (in what might fairly be described as a flurry of activity) they commenced a succession of proceedings (some of which on first blush appear to overlap with each other to a lesser or greater degree). The first three sets of proceedings were commenced on 1 April 2010, prior to the filing on 5 April 2010 of the applications in the two other sets of proceedings that came before me on 6 May 2011 and the remaining proceedings commenced in about June 2010 (158014 of 2010). 3The respective proceedings commenced by the liquidators are as follows: on 1 April 2010 (i) proceedings 81810 of 2010 brought in the name of the liquidators and Ladycare against Jasmic Nominees Pty Ltd (the sole shareholder of Clarecastle), Mr James Shea (a co-director, with his wife, of Ladycare and its sole shareholder (LCS IT Pty Limited), and the sole director of Clarecastle), and his wife, Mrs Jan Shea (a co-director of both Ladycare and LCS IT). (I refer to these proceedings as the "Jasmic proceedings" and the defendants in those proceedings collectively as the "Jasmic parties"); (ii) proceedings 81795 of 2010 brought in the name of the liquidators and Ladycare against LCS IT and Mr and Mrs Shea (the "LCS IT proceedings"); (iii) proceedings 81774 of 2010 brought in the name of the liquidators and Clarecastle against Jasmic and Mr Shea (to which I will refer as the "Main Clarecastle proceedings"); on 5 April 2010 (iv) the Clarecastle proceedings (81756 of 2010) brought in the name of the liquidators and Clarecastle (to which the Jasmic parties have not been joined but with which they have been served as interested parties); and (v) the Ladycare proceedings (81786 of 2010) brought in the name of the liquidators and Ladycare (to which, again, the Jasmic parties have not been joined but with which they have been served for the same reason); in about June 2010 (vi) proceedings 158014 of 2010 (to which I will refer as the "Examination Proceedings") brought by the liquidators seeking the issue of examinations summonses in relation to the examinable affairs of Clarecastle and/or orders for production against various persons and entities, including Mr and Mrs Shea as well as others who were involved in a particular transaction which remains the subject of investigation in relation to Clarecastle (namely, Mr Ross Edward Seller, Mr Patrick David McCarthy and Grant McKenzie Pty Ltd, for whom Mr Castle of Atanaskovic Hartnell appeared and to whom I will refer as the Applicants, as they are the applicants on the motion heard by me on 6 May 2011.) 4In each of the Jasmic, LCS IT and Main Clarecastle proceedings, orders are sought pursuant to ss 180,181, 182, 588FE(3), (4) and (5), 588FH(2) and 1317H of the Corporations Act 2001 (Cth) in relation to various transactions or dealings by the directors of the respective companies. Orders are further sought in each of those proceedings under s 588FF(3)(b) of the Act extending the time within which claims under s 588(1) of the Act can be made in relation to various of the transactions the subject of those proceedings. In the Clarecastle and Ladycare proceedings commenced on 5 April 2010 all that is sought is the extension of time for the making of claims for uncommercial transactions (in somewhat broader terms than in the earlier proceedings and criticised as being "blanket orders"). Thus, it is noted by Senior Counsel for the Jasmic parties, Mr Pritchard SC, that there are in fact five separate applications for relief under s 588FF(3)(b) (although only two were before me on 6 May 2011). 5As to the substantive relief claimed in the first three sets of proceedings, briefly, in the Jasmic proceedings, the liquidators seek to have declared void an alleged write off by Clarecastle in June 2006 of a loan in the sum of $352,788.00 and to have the transfer to Jasmic of a sum of $1,086,516.00 in December 2006 declared to be an insolvent transaction; in the LCS IT proceedings, they seek to recover the sum of $270,000.00 paid as a dividend to LCS IT; and in the Main Clarecastle proceedings, they seek orders in relation to the transfer to Jasmic of an asset (that being an interest in what is referred to as the " Windsor Village Partnership") in exchange for a reduction in a loan account between Jasmic and Clarecastle (as a consequence of which it is said that the sum of $601,875.50 is due and payable by the Jasmic parties). 6While the Jasmic parties have not been named as parties in either the Ladycare proceedings or the Clarecastle proceedings, as noted above the liquidators served them with the originating process and affidavits in those proceedings, acknowledging that it was likely that they would assert (as they have) that they are ' persons likely to be adversely affected by the order of the Court', in the sense considered in BP Australia v Brown (2003) 58 NSWLR 322 at [134]. 7In the Examination Proceedings, the Applicants had brought an application by Further Amended Interlocutory Process filed in February 2011 seeking (among other things) orders discharging the examination summonses and order for production issued in June 2010 against them. That application seems to have been overtaken by subsequent events insofar as the liquidators (in the Examination Proceedings) in November 2010 obtained the issue of fresh examination summonses against each of Mr Seller and Mr McCarthy and a fresh Order for Production against Grant McKenzie and do not now seek to enforce the earlier June 2010 orders against those parties. On 6 May 2011, I gave leave for the Applicants to file a Second Further Amended Interlocutory Process seeking to discharge or stay those November orders. 8Of the Applicants, Mr Seller is the solicitor who had advised Clarecastle in relation to one of the transactions the subject of the liquidators' investigation into Clarecastle's affairs (the Scotch Whisky Scheme); Grant McKenzie Pty Limited is a firm that had entered into a management agreement with Clarecastle in respect of that transaction; and Mr McCarthy is the sole director of Grant McKenzie and the person through whom (according to the liquidators' enquiries) communications in relation to the Scotch Whisky Scheme on behalf of Clarecastle with other participants occurred. The relevant events in which those parties were involved date back to early 2001. In essence, what is sought by the Applicants is a stay of the November examination summonses and Order for Production pending a criminal trial presently scheduled to commence in October this year against Messrs Seller and McCarthy in relation to the Scotch Whisky Scheme . 9In support of the applications made by the liquidators in the Clarecastle and Ladycare proceedings for an extension of time under s 588FF(3)(b), Mr Kassem affirmed four affidavits (one each in the respective proceedings on both 31 March 2010 and on 24 September 2010, respectively). Shortly before the date listed for the hearing of the extension applications, however, the liquidators served additional affidavits made variously by a solicitor, Mr Andrew Rollins, (on 5 May 2011); an accountant assisting in the conduct of the liquidation, Mr Mark Hutchins (on 4 May 2011), and a former employee of Ladycare, Mr Tony Carmona, (in March 2011). At the outset of the hearing before me, objection was taken by Mr Pritchard to the late filing of those affidavits. The upshot of the debate in relation to that objection was that I gave leave for the Jasmic parties to file further evidence in response to the late affidavits (should they be so minded, once they had had an opportunity to consider the matters raised by the new affidavits) and, in any event, to permit Mr Pritchard an opportunity to obtain instructions in relation to that new material and to prepare for cross-examination on the basis of that new material (which related largely to the Ladycare proceedings) and I acceded to a request for an adjournment of the proceedings for that purpose. 10At the request of the liquidators (represented on this application by Mr Harper SC and Mr Condon of Counsel), and after some discussion acceded to, or at least not objected to, by Mr Pritchard and Mr Castle, I commenced hearing the extension application in the Clarecastle proceedings (on the basis that it was accepted that this would not be concluded on that day and that the matter would be resumed on a date fixed late in June 2011, to be completed concurrently on that occasion with the similar application in the Ladycare proceedings). I also heard the stay application in the Examination Proceedings (that had been listed for 26 May 2010 before Palmer J but which Mr Castle indicated was a matter that might more efficiently be dealt with together with the extension applications). 11Accordingly, on 6 May 2011 Mr Harper opened the case for the liquidators on the extension applications and formally read the evidence in the Castlecare proceedings, and Mr Kassem was cross-examined by both Mr Pritchard and Mr Castle, before that application was adjourned part-heard to 29 June 2011 and I then heard the stay application in the Examination Proceedings. 12The relevant examinations are scheduled for 16 and 17 June 2011. I indicated at the close of the day on 6 May 2011 that if it were possible I would rule on that application in advance of the 16 June date (and the parties confirmed that no procedural fairness issue would be taken if I were to do so notwithstanding that the liquidators' extension application in the Castlecare matter then remained part-heard and notwithstanding that there would be further cross-examination of Mr Kassem when the hearing of the liquidators' applications resumed on 29 June 2011). Mr Castle indicated that on 29 June 2011 there would be nothing more that the Applicants would wish to say in relation to either application other than perhaps to adopt anything Mr Pritchard might wish to say about BP Australia v Brown so far as the extension application was concerned. 13Accordingly, the only issue presently for determination by me is the application for a stay of the examinations and order for production until after the criminal proceedings have concluded. Background 14Some of the background to the stay application has been traversed in the above introduction. However, I briefly add to that the following (and, in so doing, I note that while Mr Castle accepts that I must proceed on the basis that the background facts are as set out in Mr Kassem's September affidavit in the Clarecastle proceedings he also made it clear that for other purposes Mr McCarthy is not to be taken as accepting that the description of the Scotch Whisky Scheme contained therein is accurate or complete). 15On or about March 2001, Clarecastle invested the sum of approximately $1.5m in a transaction that has become known as the Scotch Whisky Scheme. Of that amount, $375,550 seems to have come from Clarecastle's own funds (though perhaps these were also borrowed funds) and the balance of $1,126,650 was borrowed from Chambers Finance Limited pursuant to a loan agreement for a 12 year term entered into on 27 March 2001. Interest on the loan was payable at the rate of 5%. In cross-examination (at T 38 and T 48) it was put to Mr Kassem (and he agreed) that the mortgage security over the whisky was of a limited nature, being a limited recourse obligation. Mr Castle has since drawn my attention to the information memoranda in relation to the transaction (p 156 of the CB) which discloses that the loans are full recourse and secured over the product of the venture.) By way of security for the loan, Chambers Finance was given a mortgage over a quantity of the whisky to be produced under the scheme. 16Also on 27 March 2001, Clarecastle entered into a management agreement with Grant McKenzie, whereby the latter was appointed to assist Clarecastle in the manufacture and distribution of the whisky. (As noted earlier, Mr Kassem's enquiries have led him to conclude that all communications that Clarecastle had in relation to the Scheme were through Mr McCarthy.) 17Mr Kassem deposed, in his September affidavit, to the complexity of the transactions involved in the Scotch Whisky Scheme (and that it involved a number of entities based in Scotland and possibly Hong Kong). It has been the subject of a lengthy investigation by the Australian Tax Office and the Australian Crime Commission (it being those investigations that have apparently led to the forthcoming criminal proceedings). 18It is Mr Kassem's evidence that the Scotch Whisky Scheme looked to him to be part of a tax minimisation scheme (T 33.33-43) but he accepted that he had no reason to believe that the March 2001 transaction was with the purpose of delaying, defeating or interfering with the rights of any or all of the creditors of Clarecastle (T 33.30). 19The maturity of the whisky (and hence the investment by Clarecastle under the scheme) was forecast to be 8 to 10 years (and hence any return on the investment might be expected around the present time). Mr Kassem has deposed to the receipt of information from Mr McCarthy to the effect that there will be insufficient recoveries from the investment to provide any return to the company. It is Mr Kassem's understanding that if there is actually any whisky referrable to this transaction (and he has not been able to verify this) then it is being held in a bonded warehouse of Speyside Distillery Co Ltd in the name of Chambers Finance. Mr Kassem has deposed that he has been unable to obtain information to confirm the status of the investment (or, indeed, the actual making of the loan by Chambers Finance in relation to that investment which is recorded in Clarecastle's accounts). 20There is an issue as to what steps were or should have been taken by the liquidators during the period from 5 April 2007 (when Clarecastle was placed into liquidation) until around October 2009 to investigate matters such as the Scotch Whisky Scheme and, in particular, as to the delay in the action taken by the liquidators in relation to that and other matters relating to Clarecastle and Ladycare (this being of relevance not only to the liquidators' extension applications but also to the exercise of discretion in relation to the present stay application). 21It does not seem to be until around October 2009 that there was specific focus by the liquidators on the Scotch Whisky Scheme, at which time Mr Hutchins (who had been retained by the liquidators firm as a consultant) became actively involved in the investigation of this matter. (For the reasons set out later, I do not consider it necessary to come to any conclusion as to the reason for the delay at this stage - suffice it to note that it was not until 2010 that the liquidators sought to invoke the powers available to them under the Corporations Act in order to compel the provision of information in relation to the Scotch Whisky Scheme.) 22In relation to Clarecastle, Mr Kassem has deposed to two matters of interest which he wishes to investigate - the transfer of an interest in the Windsor Village Partnership to Jasmic on 7 July 2006 and the investment in the Scotch Whisky Scheme in March 2001. (It is only the latter to which the proposed examinations of Messrs Seller and McCarthy relate.) Mr Kassem deposed in his March affidavit to difficulties encountered in obtaining information as to this investment and to a lack of co-operation on the part of Mr Shea and Mr McCarthy in that regard. However, Mr Kassem in cross-examination was unable to point to any correspondence he had had with Mr Shea in relation the Scotch Whisky Scheme prior to October 2009 or the making of any allegation of breach of directors' duties in relation to this matter (of the kind that had, for example, been made in relation to the Windsor Village Partnership transaction). (Mr Kassem thought that there would have been such discussions by Mr Hutchins.) 23The correspondence with Chambers Finance, to which Mr Kassem was taken by Mr Castle in cross-examination, on its face discloses no unwillingness on the part of Chambers Finance to assist the liquidators in their enquiries. Mr Castle also pointed to information contained in the liquidators' report to creditors that appear to have been derived from information provided by Chambers Finance (such as the volume of whisky held in a hogshead) as indicative of the co-operation that the liquidators (contrary to the assertions in Mr Kassem's affidavit) had received. There is, therefore, a factual dispute as to the extent of any hindrance of the liquidators' efforts or lack of co-operation by any one or more of the Jasmic parties, the Applicants or others involved in the Scotch Whisky Scheme. I am not in a position to determine that issue on the evidence currently before me, nor am I able to make any findings at this stage as to where the responsibility for the delay lies (and it would not be appropriate that I do so in circumstances where the evidence is incomplete in that regard). That said, for the reasons set out later in this judgment, I do not consider that this precludes a determination of the stay application in relation to the examination summonses. 24Mr Kassem said in cross-examination that what was preventing him from commencing proceedings in relation to the whisky transaction was that he had not been able to identify the asset (by which I understood him to be referring to the whisky itself). Mr Kassem said that the documents given to him by the company's accountant (Mr Roy) disclosed the Chambers Finance loan "so it appears in the company account as a liability but there's no corresponding asset in the balance sheet" and that he had not been able to obtain confirmation as to whether there was an asset (T40.26). Mr Kassem said that what had not been identified in relation to the Scheme is whether it was a sham or was a genuine investment by the company (T 40.6). As to a claim to set aside the transaction (whether or not the whisky exists), Mr Kassem said that he had no confirmation of the complete transaction by which I understood him to be expressing a doubt as to whether any loan funds had actually been provided by Chambers Finance. The liquidators' report to creditors, referring to the Chambers Finance arrangements, for example, said: The Liquidators have received no evidence to support this claim other than a loan agreement.... Based on information presently known CFL [Chambers Finance] would have no claim in the liquidation (page 5). 25Mr Kassem also seemed to be concerned that if the whisky exists, it may have been assigned to some third party, referring to a lack of information in that regard. 26At T 40.47, Mr Kassem, responding to a question as to what claims he has in mind in relation to the Scotch Whisky Scheme, was unclear whether the claim might be to set aside the loan transaction (or any assignment of the whisky) or to seek the recovery of the whisky itself. The potential proceedings apparently in contemplation by Mr Kassem in relation to the Scotch Whisky Scheme include proceedings to recover the whisky held in Scotland (assuming it exists); proceedings seeking to set aside the "purported" loan by Chambers Finance; and proceedings to recover the sum of $375,550 "purportedly paid" by Clarecastle in relation to the Scheme (para [6] of his September affidavit). Mr Kassem has identified in his affidavit the kinds of documents that he would have expected to be available in relation to an investment of this nature. He has deposed to the deficiency in documentation available to him and has said that as late as October 2009, Chambers Finance had directed him to make his enquiries with Grant McKenzie and its directors (as noted earlier, issue is taken by Mr Castle with the assertion by Mr Kassem as to lack of co-operation in this regard). 27On 5 April 2010, the three year time period within which the liquidators could apply to the Court for orders under s 588FF(1) was due to expire. Shortly prior to or on that date the various extension applications were filed by the liquidators and then on 25 June 2010, the liquidators obtained the issue of examination summonses (including a summons requiring Mr McCarthy to attend an examination about the examinable affairs of Clarecastle) and an order for production of, inter alia, documents concerning Clarecastle's interest and involvement in the Scotch Whisky Scheme. 28Meanwhile, on or about 27 October 2009 (the pivotal date in Mr Castle's submission), the Commonwealth Director of Public Prosecutions commenced criminal proceedings against Mr Seller and Mr McCarthy in relation to their involvement or alleged involvement in the Scotch Whisky Scheme. (As at the time the matter was before me it was said to be unclear precisely what was being alleged against Messrs Seller and McCarthy in relation to the Scheme, though service of the part of the Crown brief was then said to be imminent .) 29Mr Castle submits that the evidence filed on behalf of the liquidators shows that they were aware, at the time of their application for the examination summonses and the order for production, of the investigation into the Scotch Whisky Scheme and the existence of the criminal proceedings. Mr Kassem has deposed that documents relevant to the venture have been seized by the investigative bodies and that they have refused to release any information on public interest grounds. Accordingly, it is his belief that he has no option but to carry out the examinations of those (such as the sole director of Grant McKenzie, Mr McCarthy) whom he expects will hold information in relation to the Scotch Whisky Scheme.) Mr Castle submits that a significant proportion of the documents sought in the Order for Production may include documents comprising the Crown brief in the criminal proceedings. 30The relevant order for production now sought to be set aside seeks a broad range of documents over the period 1 January 2001 to 5 April 2007, recording evidencing or relating to Clarecastle's interest in the Scotch Whisky Scheme, the value of that interest, communications with Chambers Finance or Speyside Distillery Co Ltd regarding that interest, communications between Clarecastle and Grant McKenzie with respect to that interest, the Management Agreement with Grant McKenzie (including entry into it and its operation) and the loan agreement with Chambers Finance. 31A challenge was made in relation to the initial examination summonses and orders for production (filed for hearing on 7 October 2010, together with the liquidators' extension application). Those applications were stood over to 7 February 2011 by Palmer J, pending the committal hearing against Messrs McCarthy and Seller, which occurred in November 2010. 32According to the transcript of the hearing on 7 October 2010, Palmer J expressed concern as to the potential oppression in having the examinations so close to the committal hearing and noted the then uncertainty as to the overlap between the two. On 1 November 2010 the liquidators obtained a fresh examination summons as against Mr McCarthy and an examination summons against Mr Seller, both returnable on 7 March 2011, and a further Order for Production as against Mr McCarthy and Grant McKenzie. 33The present position is that on 25 November 2010 Messrs Seller and McCarthy were committed to stand trial. That trial is scheduled to commence on 10 October 2011 for a four-week period (although it was suggested that there was some doubt as to whether that date might change and hence the potential of further delay if the examinations were to be stayed until after the criminal hearing and that hearing were to be postponed). 34The examination summonses as against Mr McCarthy and Mr Seller, as noted earlier, are now returnable on 16 June 2011. Mr Castle submits that the examination summonses and the Order for Production should be stayed pending the conclusion of the trial. 35For completeness, I note that the creditors of Clarecastle, as currently advised, appear to be Ladycare in the sum of $538,205; Chambers Finance (on its loan of somewhere around $1.4m but limited to recovery out of the whisky itself, assuming it exists); Jasmic Nominees for a relatively small amount and Mr Shea for an undisclosed and perhaps unascertained amount. (i) Examination Summons 36I was referred to the summary by Barrett J in Onefone Australia Pty Limited v One.Tel Ltd [2007] NSWSC 69; (2007) 61 ACSR 246 of the general principles in relation to the proceedings relating to applications for, or to discharge, an examination summons. His Honour there noted the principles outlined by Warren J (as her Honour then was) in Freshkept Technology Pty Ltd (in liq) v Goodwin [2000] VSC 500 at [10], including that the prevailing right or interest in the examination is the right of the public, particularly in public companies, and the rights of the creditors and shareholders (noting Re Cortaus Ltd (1996) 19 ACSR 591). 37In Onefone Barrett J said at [3]: In approaching the present applications for discharge of examination summonses, I must be guided by established principles summarised by Buchanan JA (with whom Vincent JA agreed) in a passage in his judgment in Sent v Andrews (2002) 6 VR 317 ; [2002] VSCA 209 at [11] ...: [11] Orders for the issue of summonses for examinations will be set aside if they are oppressive, unfair or an abuse of the process of the court. Where an examination relates to proposed or current litigation, in general terms the question is "whether the examination is genuinely for the information of the liquidator to aid him in considering whether there is a cause of action upon which he will proceed; and the Court will be alive to the possibility of oppression where the application is merely to advance the action, whether actual or proposed" [Re Narlanda Pty Ltd [1983] 1 Qd R 269 at 272]. The strength or weakness of the claim of a company in liquidation against a third party concerns the examinable affairs of the company [Grosvenor Hill (Qld) Pty Ltd v Baker (1994) 48 FCR 301 at 304 ; 120 ALR 262 ; 12 ACSR 646]. Gathering information may involve testing and assessing the credibility of the witnesses who provide the information [Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 582 at 585]. The liquidator is not entitled, however, to conduct a dress rehearsal of the cross- examination in an action or to seek to damage the opposing party's case by attacking the credibility of that party's witnesses [Re Francis; Ex parte Gittins [1892] 1 QB 646 at 648 and other cases cited]. (my emphasis) 38More recently, the approach to an application to discharge an examinations summons was set out by Barrett J in O'Brien v Wily (2009) 74 ACSR 145. His Honour noted that an examination summons may be set aside where the examination summons was issued for an improper purpose so as to constitute an abuse of process; in the case of an examination under section 596B, where the exercise of the discretion by the Court has miscarried or in reviewing the decision of the Registrar with the benefit of additional evidence, the summons ought to be set aside; or where there has been material non disclosure by the applicant in making the application for the examination summons. 39The application as argued before me was not for discharge of the examination summonses but rather for their stay. 40Lander J in Re New Tel Limited (In Liquidation); Evans v Wainter Pty Ltd (2005) 221 ALR 331; 54 ACSR 284 (at [252]) summarised the principles relevant to the question of a stay, including that it is not improper to seek an order of the court to summon a person for examination while litigation is pending against that person or entities connected with that person and that the question whether, in any particular case, the applicant has used the procedure abusively will depend upon the applicant's purpose in seeking the order and all of the surrounding circumstances (Lander J there saying that it will not be an abuse unless an offensive purpose is at least the predominant purpose). 41In Hong Kong Bank of Australia Limited v Murphy (1992) 28 NSWLR 512 Gleeson CJ (at 518-519) noted that the fact that current proceedings are pending makes it necessary for the court to be alert to the possibility that a proposed application might be used for an improper purpose. 42It was not submitted by Mr Castle that there had been any material non-disclosure in the application for the summonses in question nor that they were for an improper purpose, but rather that it is oppressive for the summonses to be pursued having regard to the pending criminal proceedings. 43Emphasis was placed by Mr Castle, in this regard, on the weight accorded in the context of criminal proceedings to the right to silence. Reference was made to Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 where the Hight Court said: The public examination on oath or affirmation of a person charged with an indictable offence on matters with which the charge is concerned will ordinarily be viewed as seriously and unfairly burdensome, prejudicial or damaging if for no reason other than that it will ordinarily be viewed as constituting a real risk to the fairness and integrity of the trial of that charge. That is so whether or not the examination involves questions the answers to which have a tendency to incriminate. If the answers have a tendency to incriminate, an even greater risk is constituted by the public claiming of the privilege against self-incrimination. That claim must be made to ensure that an answer given in a s.541 examination is not used in criminal proceedings other than those specified in sub-s.(5). Public adherence to the procedure of claiming privilege followed by the equally public giving of answers thus acknowledged as tending to incriminate may involve an additional and greater unfairness to the examinee, notwithstanding that the answers given may not be used in the trial of the pending charge. For example, quite apart from the danger of the creation of an atmosphere of pre-trial prejudice, there is the possibility that the answer may involve the disclosure of a defence or lead to the discovery of other evidence, these being consequences against which a person charged with a criminal offence is usually entitled to be protected. See Rank Film Ltd. v. Video Information Centre (1982) AC 380 , at p 443; Sorby , at pp 293-294. ... the injustice occasioned when an examination will involve matters the subject of pending criminal charges is not only that the examination arises out of or will disclose the commission of an offence, but that the examination will impose an unfair burden upon the examinee in defending the pending charges. The power to control and supervise examinations for the purpose of preventing injustice conferred and confirmed by sub-s.(5) produces an inescapable tension between the operation of that sub-section and the operation of sub-s.(12) in cases where the examinee is charged with a criminal offence arising out of matters intended to be the subject of examination. The pendency of the charge will ordinarily constitute a special circumstance warranting the conduct of the examination in private and a direction to that effect may be an appropriate resolution of that tension in some cases. But if it is not, the powers conferred and confirmed by s.541(5) are apt to encompass other means, including the giving of directions limiting the matters to be examined. Given the wide terms of sub-s.(5) and given that it extends to authorize directions limiting the matters to be examined, there is no reason why it should not be construed to encompass a power to adjourn or defer an examination either in whole or in part. (my emphasis) 44In Balog v Independent Commission Against Corruption (1989) 18 NSWLR 356, which the Court of Appeal expressed the view that what was said in Hamilton v Oades did not change the attitude of the courts to these matters, noting that what the court was asked to do in Hamilton was to give "directions" as to how the examination under s 541 of the Code was to be conducted, saying that "It was not asked merely to rule upon the questions which had been asked or not answered or to express an opinion upon those or similar questions" and that "The problem with which this Court was faced in the Oades case was to decide what considerations could and should be taken into account in deciding whether that power should be exercised." 45The Court of Appeal noted the distinction between the consideration given to the privilege against self-incrimination and the consideration given to the prevention of injustice and said that the Court in Hamilton had accepted the argument that "whatever might be the position in relation to the self-incrimination consideration, the injustice consideration warranted a direction being given. It took the view that, self-incrimination apart, there were some questions which it would be unjust to force a defendant to answer when he was in the context of a pending criminal trial. Thus, self-incrimination apart, it felt it unjust that the liquidator should be able, in aid of the prosecution at the trial, to force the defendant to "disclose (his) defence to the charges". 46Mr Castle submits that here the injustice is not simply that Messrs Seller and McCarthy might be required, as part of the examinations, to disclose their defence to the charges against them but also that they may suffer a further disadvantage if not permitted to rely on the right of silence (in effect because of the theoretical possibility that questions might be answered in such a fashion as to render it unethical for their legal representatives to continue to represent them in the later criminal proceedings). I hasten to add that this was put on a wholly hypothetical basis - there being no suggestion that either Mr Seller or Mr McCarthy would be in such a position. 47Mr Harper, however, points to what was said in McMahon v Gould (1982) 7 ACLR 202 at 206-7 by Wootten J in relation to an application there made for a stay of civil proceedings on the basis that there were pending criminal proceedings. His Honour there said: I approach the decision of this matter with the following guidelines: (a)Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court (Rochfort v John Fairfax & Sons Ltd [[1972] 1 NSWLR 16] at 19); (b)It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid); (c)The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff's ordinary rights should be interfered with (Jefferson v Bhetcha at 905); (d)Neither an accused (ibid) nor the Crown (Rochfort v John Fairfax & Sons Ltd at 21) are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding; (e)The court's task is one of "the balancing of justice between the parties" (Jefferson Ltd v Bhetcha at 904), taking account of all relevant factors (ibid at 905); (f)Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors (ibid at 905); (g)One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused's "right of silence", and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding (ibid at 904). I return to this subject below; (h)However, the so-called "right of silence" does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. (i)The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding (ibid at 904-5); (j)The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid at 905); (i) In this regard factors which may be relevant include: (ii) the possibility of publicity that might reach and influence jurors in the civil proceedings (ibid at 905); (iii) the proximity of the criminal hearing (ibid at 905); the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid at 905); (iv) the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton [(1986) 5 ACLR 33]; (v) whether the defendant has already disclosed his defence to the allegations (Caesar v Somner [[1980] 2 NSWLR 929] at 932; Re Saltergate Insurance Co Ltd [(1980) 4 ACLR 733] at 736); (vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Re Saltergate Insurance Co Ltd at 735-6); (k)The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant's obligation to the plaintiff; (l)In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed Beecee Group v Barton). 48Returning to the reasons why the right of silence, under the law as it stands, is a right of a defendant in a criminal proceeding, Wootton J said: In considering the reasons why "the right of silence" exists (para (g) above), one enters a realm of controversy (see, for example, the discussion of the Eleventh Report of the English Criminal Law Revision Committee (1972) Cmnd 4991 in The Right of Silence, being papers presented at a seminar of the Sydney University Law School Institute of Criminology in June 1973). The phrase is a convenient rubric for several rules and practices which have various origins and serve various purposes. In the process of investigation of crime and the interrogation of suspects it comprehends the fact that it is not normally an offence to refuse to answer questions or to fail to provide an explanation or account of events. Not only is refusal or failure not an offence, but it cannot be used to draw an adverse inference against the person concerned at his trial. This aspect of the right of silence was greatly strengthened by the Judges' Rules which provided for the cautioning of suspects. Serving some of the same purposes but of different origin is the law relating to confessions in criminal cases, which cannot be used unless they are fully voluntary. In terms of procedure at a criminal trial, the "right of silence" covers the situation that the accused is not obliged to give evidence - indeed he may make an unsworn statement about which he cannot be questioned - and for the most part no comment can be made to the jury on his failure to go in the box. Finally, in legal proceedings generally, civil and criminal, a witness has a privilege to refuse to answer a question which might tend to incriminate him. Naturally this does not apply to a defendant who chooses to give evidence in a criminal case. The various rules that may be grouped under the "right of silence" have, as I have said, various origins, and some of the historic conditions that gave rise to them - eg the inability of a man to give evidence at his trial, the use of torture, religious persecution, are no longer with us (Neasey "The Rights of the Accused and the Interests of the Community (1969) 43 ALJ 482 Hobson et al, The Silence of the Accused (1970), Stephen, History of the Criminal Law (1883) Vol 1 Chapters XI and XII). In considering why the "right of silence" exists, it is more fruitful to consider the reasons now argued in support of it, whether generally accepted or not. Many of them, and in particular those relating to the process of criminal investigation, are of no obvious relevance to the present problem. I refer to matters such as unfair pressure on a suspect in custody; the discouragement of improper police methods; the inducement of unreliable evidence; the absence of satisfactory methods of recording statements; the lack of time for reflection or of opportunity to take legal advice; the abhorrence of forcing a man to convict himself ("the cruel simple expedient" as Warren CJ called it in the Miranda case (1966) 384 US 436), and the maintenance of dignity and humanity in criminal trials. Perhaps the most relevant is the argument that because of the possibility that an innocent man forced into the box may give an impression of guilt through being stupid, slow, overawed or simply nervous, he should have the choice of whether he gives evidence or not, without the risk of adverse comment. On the other hand, the scope and role of "the right of silence" in the criminal process should not be exaggerated. As Lord Devlin has observed: "... while the English system undoubtedly does give the accused man the right to say nothing, it does nothing to urge him to take advantage of his right or even to make that course invariably the attractive one" (The Criminal Prosecution in England (1960) at 50). Nor has "the right" been understood to give a man freedom from being confronted at his trial with prior inconsistent statements of his own, provided they were made voluntarily. Even at the high point of its protection of the "right of silence" in the Miranda case, the Supreme Court of the United States held that statements made voluntarily but barred by the Miranda case could be used for purposes of cross-examination. In Harris v New York (1971) 401 US 222 the Court said: "The shield provided by Miranda cannot be perverted into a license to use perjury by way of a defense, free from the risk of a confrontation with prior inconsistent utterances." In this context there are some consequences of the "right of silence" which no one, so far as I am aware, puts forward as legitimate reasons for its existence. These include the opportunity it may give the accused to remain silent till the end of the evidence against him at the trial, and then produce a fabricated story perfectly tailored to meet that evidence. They include the possibility of depriving the prosecution of any opportunity to check the accused's story and obtain evidence to refute it before the trial is over. In one particular matter - the last minute production of alibis - the injustice was so frequent and obvious that the legislature made an inroad into the "right of silence" by requiring notice of such an intended defence. These are advantages which "the right of silence" gives to an accused, but they cannot reasonably be regarded as part of the reason why the right exists. In exercising its discretion to stay civil proceedings the court need not be concerned to preserve these advantages. It should be concerned to avoid the causing of unjust prejudice by the continuance of the civil proceedings, not to preserve the tactical status quo in the criminal proceedings whether it be just or unjust. (my emphasis) 49Wootton J there did not consider that there had been demonstrated such a real risk of injustice to the defendant that the court would be justified in denying the plaintiff his fundamental right to a hearing in ordinary course. Balancing any possibility of prejudice to the defendant against the interests of the liquidator acting in the interests of creditors and shareholders, and said: I think it proper to have regard to that policy in this case, and to weigh against the granting of the application the importance in the public interest that persons entrusted with property on behalf of others should be compelled to account without undue delay for their dealings with the property. 50Here, the application for a stay is based primarily on the justice consideration identified in Hamilton v Oades and Balog . Mr Castle submits that the right to silence is jealously guarded and that injustice cannot be ruled out simply by holding the examination in private, though conceding that if the examination were to be held in private this would minimise the risk of prejudice to Messrs Sellers and McCarthy. However, he submits that even a private examination carries with it oppression and the risk of prejudice if that examination is at large (and not limited to, for example, an enquiry as to the present location of the whisky). It is said that enquiry into the original transaction will directly collide with the subject matter of the criminal proceedings. 51It is submitted that the delay is the product of a deliberate choice by the liquidators not to pursue the matter at an earlier stage and that this is relevant in considering the exercise of the discretion. It is further submitted that the liquidators have adduced no evidence to support the contention that there will be prejudice to their investigations if the examinations do not proceed in June 2011 and are stayed pending the conclusion of the criminal hearing. Mr Castle submits that it would be open to the liquidators or their representatives to attend the committal hearing and to take notes of the evidence given in those proceedings in relation to the Scotch Whisky Scheme (after which a decision could then be taken by the liquidators as to whether it is necessary to proceed with the examination summonses and, if so, in relation to what topics). (Mr Harper's response to that is to point to the obvious difference between that scenario and the liquidators having access to the relevant documents and being able to ask their own questions relevant to the company's position.) 52In contrast, it is submitted that there would be manifest prejudice to Messrs Seller and McCarthy if the examinations were to proceed in advance of the committal hearing because this would require them, and their legal advisers to divert resources in relation to the preparation for and attendance at the examinations, in circumstances where the same issues that have been foreshadowed by the liquidators as being matters on which they wish to examine the examinees are likely to be covered, in some detail, at the committal hearing . 53It is said that it would be oppressive to require production of the documents sought by the Order for Production and to attend an examination by the liquidators in this matter, and the defence of the criminal proceedings will be severely compromised because the examinees' legal advisers will have to spend a significant amount of time reviewing more than 160 folders of documents to identify which of the documents are required for production and to confirm that there is no objection to the production of the documents; will not have access to the documents called for by the Order for Production to the extent that original documents are required for production on photocopying; and will have to attend to preparation for the Examination Summons, which will be at the expense of preparing for the committal hearing. Similarly, it is submitted that it is oppressive that the examinees will have to refocus attention onto the Examination Summons and not be available to provide instructions to legal advisers in relation to the criminal proceedings. 54In that regard, it seems to me that the potential overlap between the examinations and the criminal proceedings suggests that it is likely there will be economies of scale to be gained in the simultaneous preparation of both proceedings (and that preparation for the examinations is unlikely to be a wasted endeavour when it comes to the preparation for the criminal proceedings). The examinees are represented by a firm experienced in the conduct of major commercial litigation. It seems to me unlikely that there will be a difficulty in resourcing the preparation for both matters. Moreover there is some time between the examinations and the criminal proceedings. Therefore, while I accept that there will be added expense incurred in the preparation for the examinations, I am not satisfied that the preparation for the criminal proceedings is likely to be prejudiced by the need to prepare for and attend an examination some months before the trial. 55Mr Harper submits that the liquidators have a prima facie right to proceed with the examination; that the examinees have not identified any "real" danger of injustice if the examinations were to proceed nor the basis of any apprehension that there may be a miscarriage of justice; and that no attempt has been made to identify whether, and if so to what extent, the civil processes overlap with the prosecution (the court being left to speculate about the charges that have been laid and the facts proposed to be relied upon by the prosecution). It is submitted that delay in the conduct of the examination will engender delay in the liquidators' further investigation of possible voidable dispositions (assuming leave is granted under section 588FF(3)). Even if leave is not granted for the extensions of time, continuing delay in ascertaining the position in relation to the Scotch Whisky Scheme may well pose difficulties for recovery of the subject matter of those transactions. (It seems somewhat ironic that on the one hand the liquidators are criticised for delay in the investigation of these matters to date and, on the other hand, it is said that further delay in holding the examinations will not be to the prejudice of any claims the company might have in relation to those matters.) 56The liquidators refer to the reasoning of Sanderson M in Global Finance Group Pty Limited (in liq) v Margaria ; Global Finance Group Pty Ltd (In Liq) (Supervisor Apptd); Ex parte Read and Herbert [2001] WASC 50 at [13]: Although there is a paucity of evidence on the question I accept that there will be a burden on the first defendant in dealing with both sets of proceedings, particularly when, in the face of an asset preservation order, he is obliged to find employment to support himself and his family. But I am not satisfied on the evidence as it stands at present that the burden would he so great as to justify a stay of the civil proceedings. The evidence does not contain any detailed assessment of what tasks the first defendant will need to undertake with respect to the two actions. There is no evidence as to the time involved, the material which must be assessed, the other demands on his time - indeed the evidence led by the first defendant on this question is limited to a bald statement in para8 of his affidavit of 8 February 2001 and what is to be found in the affidavit of David Brian Shaw sworn 27 December 2000, the first defendant's solicitor, which is singularly unhelpful. In my view the first defendant has failed to discharge the onus which is upon him to establish that the burden of preparing for both sets of proceedings concurrently is such as to warrant the grant of a stay. 57In Global, Sanderson M went on to note the safeguards built into s 597 and expressed doubt as to whether the principles in McMahon were relevant in the context of examination summonses. At [22]- [23] Master Sanderson said: There, there are safeguards built into s597 which offer protection to a witness who is being examined. Under s597(5B) only questions that the court "thinks appropriate" can be put to a witness who is being examined. Perhaps more importantly, under s597(12A) a person who is required to answer a question which might tend to incriminate him can claim privilege. If privilege is claimed the evidence is not admissible against that person in any criminal proceeding. Of course, if different evidence is given under oath in later criminal proceedings, the witness is open to a charge of perjury. But that is not to the point. It is the fact that privilege is available to a witness answering questions on an examination summons. Furthermore, the court can, in appropriate circumstances, order that the examination be held in private: s597(4). While the record of the interview is generally available for public inspection (s597(14A)), if privilege is claimed with respect to certain questions then access to the record is limited. In light of the specific provisions within s597 I have some doubts as to the relevance of the guidelines set out in McMahon v Gould and adopted by White AJ in Norilya Minerals Pty Ltd. Insofar as the guidelines are relevant, the prime concern must be that the examination of Mr Margaria pursuant to the witness summons will require him to divulge his defence to the Criminal Proceedings. Assuming that is a risk, I am satisfied that the safeguards built into s597 are sufficient to protect his position. It may be that the questions asked by the examiner which require disclosure of Mr Margaria's defence would be inappropriate and ruled as such by the person conducting the examination. If questions which tend to disclose his defence are permitted he will be entitled to privilege. That should properly protect his position. I would not be prepared to set aside the examination summons directed to Mr Margaria. (my emphasis) 58(The timing of the issue of the examination summonses and order for production was also criticised by Mr Castle, it being suggested that the timing was designed to enable the liquidators take the benefit of the work that has been undertaken to date in the criminal proceedings, without providing the examinees with the benefit of the full rights that would be available to them in the criminal proceedings. If it is suggested by that submission that the liquidators should not be permitted to have access, via the order for production, to the Crown brief in the criminal proceedings, that might be a basis on which an order limiting the scope of the order for production might be sought. However, it does not seem to me that the mere fact that there might be overlap between documents in the Crown brief and documents held by the examinees relating to the Scotch Whisky Scheme renders the production of documents under the orders oppressive.) 59In Excel , the court said of the question of improper purpose: Street J said in Re Hugh J Roberts Pty Ltd (In liq) [1970] 2 NSWR 582 at 585, in a passage quoted with approval by the Court of Appeal in the HongkongBank case (at 518) and by Mason CJ in Hamilton v Oades (at 497): A liquidator needs information concerning his company just as much in connection with current or contemplated litigation as in connection with other aspects of its affairs. In using the statutory machinery of private examination he will in many cases be gathering evidence as an ordinary and legitimate use of this procedure ... In my judgment it is immaterial in basic substance whether the private examination is sought to be used by a liquidator to gather information in connection with proceedings he believes he might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought. There is no presently relevant distinction in substance between gathering information referable to commencing proceedings and gathering information referable to continuing proceedings. On the same page Street J counselled liquidators not to be diffident in using a private examination for the ordinary and legitimate purpose of gathering in information. 60A further issue raised in submissions was the fact that the extension applications had not yet been determined. I accept that there is force in the argument that if there were a possibility that the examinations would be rendered otiose by a refusal (assuming there were to be a refusal) of the liquidators' current applications for an extension of time, then this would be a strong factor pointing to a stay of the examinations at least until such time as the extension applications are determined. 61However, I am not persuaded that a refusal to grant the extensions of time will necessarily render the examinations otiose. Both Mr Castle and Mr Pritchard have noted that the Scotch Whisky Scheme was put in place by a transaction occurring in 2001 (outside the "Relevant Period" as described in the Order for Production). It is submitted that, as a matter of logic, if the proposed proceedings are intended to enforce a right which exists under the transaction documents, then it is difficult to see how Part 5.7B, Division 2 of the Act would be enlivened. Nevertheless, the potential for a claim to set aside the transaction or for a breach of directors' duties arising at common law in relation thereto, or to recover assets acquired or brought into existence under the Scotch Whisky Scheme will not necessarily be statute barred (even though the transaction occurred in 2001), particularly if there has been any fraudulent conduct or the arrangement was a sham, and therefore it seems to me that, irrespective of the outcome of the extension applications, the liquidators have a basis for seeking to exercise their coercive powers under the Act in order to ascertain more precisely the nature of a not insubstantial transaction apparently entered into by Clarecastle and the company's rights and obligations in relation thereto. 62As to the question of delay generally, Mr Harper submits that the liquidators have been delayed in their efforts to investigate this and other transactions. Criticism is levelled at what are said to be the 'best efforts' of the Jasmic parties and the Applicants to delay and impede the liquidators. I am not in a position to determine where responsibility for the delay properly lies but it seems to me that this is not necessary for the purposes of the present application since (whether or not it be the case that there has been a deliberate decision on the part of the liquidators, as Mr Castle asserts, not to investigate or investigate more fully at an earlier time (or there is a failure to act with expedition), I am not satisfied that the delay since April 2007 is such as should tip the balance in favour of a stay. Therefore it is not necessary to make a finding on the issue of delay because, even accepting Mr Castle's submissions as to the cause of the delay this would not lead me to decide in favour of the stay application. (I therefore leave the question of delay to be determined once I have had the benefit of all the evidence on the extension applications.) 63Provided that safeguards can be put in place to protect the position of the examinees in the subsequent criminal proceedings (by directing that the examinations be held in private and imposing restrictions on access to the transcript), I am of the view that there is not sufficient prejudice likely to be suffered by the examinees being required to prepare for and attend public examinations to outweigh the public interest in the liquidators being able to perform their obligations in the winding up and to ascertain for the benefit of creditors what occurred in relation to the Scotch Whisky Scheme, without further delay. I consider below in (iii) the manner in which I consider that such safeguards can be implemented. (ii) Order for Production 64An order for production for the purposes of an examination under s 596A or s 596B of the Corporations Act may be issued provided that the order is for the purposes of a particular examination and if the court is satisfied that there is sufficient connection between the production of the documents sought in the order and the particular examination (per Barrett J in Onefone Australia Pty Limited v One Tel Limited [2007] NSWSC 1188). An order for production of documents not required for the purposes and within the scope of the examination is oppressive and in excess of the liquidator's power and can be set aside on that basis ( Re Southland Coal Pty Ltd (rec and mgrs apptd) (in liq) [2006] NSWSC 184; (2006) 58 ACSR 113). 65It is submitted by Mr Castle that the November Order for Production is too broad in that it seeks the production of all documents "evidencing or relating to" the matters particularised in paragraph (1)(i)-(vi) of the Order for Production, but fails to identify a time period or sufficient particulars to enable the documents sought to be identified (despite the Order for Production nominating 1 January 2001 to 5 April 2007 as the "Relevant Period"). However, that time period (if not clarified in the latest order for production) was clarified by Mr Harper as being from 1 January 2001 to 5 April 2007. 66Mr Castle points to the evidence of the burden of compliance with the Order for Production (given in paragraphs [4] and [6] of Mr Hartnell's affidavit, namely that there are at least 90 folders of documents that have been served by the Australian Crime Commission in relation to Mr McCarthy's matter and that Mr McCarthy has in his possession more than 75 folders of documents relevant to the Scheme which are required to be produced pursuant to the terms of the Order for Production. Mr Hartnell deposes to an understanding that the Commonwealth Director of Public Prosecutions will shortly serve a further 38 folders by way of a committal brief of evidence in the criminal proceedings. 67The oppression identified was as to the vast number of documents sought to be produced and the risk of steps being taken which would be adverse to the examinees' representation in the criminal proceedings. Concerns were raised as to the fact that the liquidators' legal representatives had deposed to discussions with the Crown DPP and it was intimated that there was a prospect of information becoming known through the examination process to the prosecution. 68The liquidators do not press for the production of any original documents if copies are available. Therefore, any prejudice due to the unavailability of original documents will not arise. 69Insofar as complaint is made that no provision has been made for payment by the liquidators of the costs of copying any or all of these documents for the purpose of production (Mr Hartnell's estimate of those costs as exceeding $9,000), in Re Southland it was said that the usual procedure where a party seeks its costs of the production of documents in answer to such an order it that this will be addressed after the documents have been produced (at [98]). Austin J there accepted the submission of the receivers that a determination as to costs should not be made until after production and assessment of privilege claims, and the examinations, had taken place (the receivers relying on decisions of Barrett J in Re Total Entity Pty Ltd (in liq) ( 2003) 47 ACSR 577 and Re Fox Home Loans Pty Ltd (in liq) [2005] NSWSC1050). In the Total Entity case, his Honour had expressed the view that the court had inherent power to require the payment of expenses and thus that the order for payment could be made after the conclusion of the examination process (and did not need to be made at the time the primary order was made). 70Austin J in Re Southland expressly adopted the reasoning in Total Entity to the effect that the claim for expenses would more sensibly be addressed "when the court can see what expense, trouble and inconvenience the persons concerned have in fact been put to and can properly assess the general quality of the [eligible applicant's] conduct in imposing those burdens". 71(As to the oppression of incurring additional photocopying costs at this stage, it might be expected that in the course of preparation for the criminal proceedings there would be multiple copies of the relevant transaction documents brought into existence for the benefit of Counsel and solicitors advising Messrs Seller and McCarthy and that the cost of producing an extra set of some or all of those documents would not be unduly oppressive. Further, it may be that other arrangements could be made whereby the liquidators were permitted to inspect documents falling within the order and to indicate those of which they required copies to be made.) Therefore, I do not consider the potential cost of the exercise to outweigh the interest of the liquidators in ascertaining the facts relating to this particular transaction. 72Nor am I satisfied that the scope of the order for production is too broad. I did have some concern as to whether the call for communications between Clarecastle and Grant McKenzie in relation to the company's interest in the scheme over the period from 2001 to 2007 might be regarded as too broad. If, indeed, this was a genuine transaction and there were ongoing communications over the period (perhaps in relation to minor matters of administration and the like) then it might be that there could be a volume of communications that of themselves would shed very little light on the circumstances of entry into the transaction and the current location or status of the whisky. (If on the other hand the transaction was a sham or, by reference to the time involved in the maturing of the whisky, there was little need for communication over much of the period in question then it may be that there is very little to be produced in this category.) If there were to be a volume of communications covered by the order for production which would be unlikely to have any immediate relevance to the liquidators' investigations in relation to the company's interest Scotch Whisky Scheme (and I am not in a position to comment on that), then there might be a basis to limit the scope of the order for production to address that situation. However, that is a matter that I am not in a position to deal with at this stage and might more usefully be the subject of discussion between the liquidators' representatives and those acting for the recipients of the order for production. Suffice it to say that the categories specified in the Order for Production seem to me to have relevance and not to be oppressive on their face. Conclusion 73It seems to me that there is a legitimate basis for the liquidators to seek information as to what in fact happened under a transaction in which Clarecastle appears to have expended not inconsiderable funds (and assumed a significant liability) for the acquisition of an asset the existence of and title to which seems to be in doubt and where there is a reasonable basis to expect that Messrs Seller and McCarthy could shed light on that transaction. 74It is submitted that these enquiries could have been carried out in 2007 before the risk of prejudice in the criminal proceedings arose. That may well be the case. However, in that event, it is likely that in the absence of any orders to preclude this the transcript would have been accessible by the prosecution (and thus it is arguable that there will be less prejudice to the examinees if the examinations are held now but held privately and with some restriction on access to transcript than had they been held earlier). True it is, that the memory of the examinees may be worse than it was 3 years ago but that does not in my view make it oppressive for the liquidators now to examine them (particularly if there are claims which would not yet be statute barred in relation to the transaction). 75As to the cause of the delay on the liquidators' part, it is not necessary for me to determine this issue at this stage because I consider that even if a deliberate decision had been made not to investigate the matter at an earlier stage (or there had been a failure fully to investigate it due to the liquidators' own actions), the delay from April 2007 to around June 2010 (when the first examination summonses were sought) of itself is not sufficient to warrant further delay in the investigation of the matter once the liquidators did decide to pursue their enquiries in relation to the Scotch Whisky Scheme. 76I have noted earlier that a relevant factor in the exercise of discretion on the stay application would be whether the need for the examinations would be likely to fall away if extension of the time to bring an uncommercial transaction claim were not to be granted, since if so it would be sensible for the outcome of the stay application to be deferred to the conclusion of that application. However, the potential claims that the liquidators wish to investigate in relation to this transaction seem to go largely, if not wholly, to matters other than an uncommercial transaction claim. 77In the end, I am not satisfied that the potential prejudice to which Mr Castle points (placing emphasis, as he does, on the right to silence) is sufficient to warrant a stay. If the examinations are held in private then the only advantage sought to be preserved in this instance as a result of the right to silence is a tactical advantage of the kind considered by Wootten J not to be the underlying rationale or basis for the existence of that right. The prejudice against which Messrs Seller and McCarthy have an entitlement to be protected by reference to the right to silence (apart from self-incrimination) is the disclosure to the prosecution, in advance of the trial, of their defence. That prejudice is avoided (as Mr Castle largely concedes) by directing that the examinations be held in private and be conducted in circumstances where the confidentiality of the transcript can be preserved. 78I am therefore of the view that the appropriate course is not to stay the examinations in question but to direct that they be held in private and to make further directions necessary to protect the examinees' position in relation to the defence of the criminal proceedings (limiting access to the transcript and directing that the liquidators and the legal representatives of the liquidators not disclose to the prosecution the evidence given during the examinations). I have set out the orders that I propose in that regard and will hear submissions as to whether the content of those orders should be amended more fully to protect the confidentiality of the examinations and the transcript. 79I do not think that the tactical advantage that there may be in not being placed in the position where answers at an examination may cause an ethical difficulty for the examinees' advisers in representing the examinees in the subsequent criminal proceedings (which would only arise if in those proceedings the examinees wished to adopt a position inconsistent with admissions of guilt made in earlier sworn evidence in the examinations) is an advantage of the kind that the right to silence is recognised as protecting. (iii) Access to transcript of examinations - discretion under s 597 80In Austin & Black's Annotations to the Corporations Act it is said (at [5.597] that: ... The presumption that an examination be held in public reflects a legislative recognition that a public examination is beneficial to the commercial and general community, and that the privilege of incorporation is given on terms that the company's affairs can be examined and any examination will ordinarily be held in public if the company fails. The court will not order that an examination proceed in private unless a question and answer or line of questioning would result in prejudice which outweighs that presumption: Friedrich v Herald and Weekly Times Ltd [1990] VR 995; (1989) 1 ACSR 277; 8 ACLC 109; Jagelman v Sheahan (2002) 41 ACSR 487; [2002] NSWSC 419; BC200202390; Re Pan Pharmaceuticals Ltd (2003) 176 FLR 341; 48 ACSR 452; [2003] NSWSC 1204; BC200307729; Re Euro Star Pty Ltd (in liq) [2004] NSWSC 462; BC200403286; Re New Tel Ltd (in liq); Evans v Wainter Pty Ltd (2005) 145 FCR 176; 54 ACSR 284; [2005] FCAFC 114; BC200504041 at [91 81In Parbery Re Trio Capital Ltd [2010] NSWSC 775, Barrett J at [7] - [8] It noted that the court cannot order that an examination or any part of it be conducted in private unless it is satisfied that there are "special circumstances" by reason of which it is desirable that the examination be held in private and that a positive case of the desirability of examination in private must be established by reference to "special circumstances". His Honour referred to John Fairfax Publications Pty Ltd v District Court (NSW) [2004] NSWCA 324; (2004) 61 NSWLR 344 and to the philosophy recognised in Friedrich v Herald and Weekly Times Ltd (1990) VR 995, at p 1003 as underlying the requirement that such examinations be held in public: There can be little doubt, therefore, that an examination in public, in contrast to one in private, is seen as the norm under the present legislation. One may venture some opinions as to why this is so. The legislature must have seen it to be desirable that, whenever an examination is ordered, it should be given as much publicity as the matter deserves. Since no dispute is resolved upon the hearing of an examination, the benefit must be seen in the general publication of the proceedings, whether by press, radio, television or by word of mouth. Not only might that lead to the possibility of further information being provided from other sources to the liquidator or other person in control of the company, but the risk that improper activities of company officers might thereby be spread abroad may have been thought as some form of deterrence to them: cf McPherson on Company Liquidation, 3rd ed, p 431. One may doubt that the more thick skinned of the company "sharks" of this world would be especially conscious of the risk of examination, but at least the possibility of public examination may be seen as part of the price paid for the privilege of incorporation and the right to transact business as a company, albeit that the price is usually paid by those who become directors or officers of that company. However, it is not for this court to query the policy of the statute, whatever views one may have as to the need for a public examination for the purposes of para (b) of subs(2). 82In Parbery , his Honour was satisfied that there was a competing public interest in the protection of investigative and law enforcement functions of the kind dealt with by the international agreement there before him and that this outweighed the general expectation that proceedings should take place in public. 83However, even if the examination takes place in private, the weight of authority favours the conclusion that a direction under s 597(4) or 596(1)(e) cannot restrict the statutory right of access to transcript in s 597(14). 84In Re Strarch International Pty Ltd (in liq) [2005] NSWSC 583, Barrett J (addressing a claim for orders by the liquidator pursuant to s 569F(1)(e) of the Corporations Act that no person or organization have access to documents produced to this court in these proceedings or the records of the examinations in these proceedings apart from the liquidator or his legal advisors without first obtaining an order of this Court) held that there was no power to make orders under that section restricting the right to access to transcript that was the subject of an order under s 597(13). His Honour concluded (at [25]) that: In my opinion, the provisions in question must, despite what is said in the Emanual Investments case, be approached on the basis that s 597(14A) is a legislative directive that every person who wishes it is to have the ability to inspect any written record of question and answers made pursuant to s 597(13). A fee must be paid where the person desiring to inspect is not within s 597(14A)(a); otherwise, inspection is free of charge. There is also, in my view, a manifested legislative intention that the ability to inspect is not to be curtailed through an order under s 596F(1)(e), even though such an order may preclude access to the whole or any part of the remainder of the "records of the examination" in the wider sense referred to by Santow J; and this is so whether or not the examination is conducted in private or in public. 85With respect to his Honour, I consider that to be correct. However, relevantly for present purposes, his Honour went on to note the distinction between a transcript as ordered by s 597(13) and otherwise and considered that this enabled a result to be achieved whereby orders precluding access to the transcript could be made (from [27]): In drawing the valid distinction between a written record made under s 597(13) and the "records of the examination" referred to in s 596F(1)(e) and observing correctly that the latter comprehends the former, Santow J had no need, in the New Cap Reinsurance case, to mention another species of documentary recording expressly contemplated by s 597. I refer to "any transcript of an examination of a person that is authenticated as provided by the rules". Section 597(14) refers to such a transcript as well as to "any written record of an examination so signed by a person". It is thus clear that there may be either a written record made under s 597(13) or a "transcript" of the kind mentioned in s 597(14) - or, indeed, there may be both. The reference to a "transcript", it seems to me, acknowledges that, as was recognised by Campbell J in Re Doran Constructions Pty Ltd (2002) 194 ALR 101, an examination under s 596A is a proceeding in the court. Where a transcript of an examination is made and authenticated as contemplated by s 597(14) but there is no order under s 597(13) (and accordingly no written record of questions and answers made pursuant to an order under s 597(13)), s 597(14A) does not create any right to inspect the particular form of record of the examination, being the transcript. A transcript of the kind mentioned in s 597(14) is therefore amenable to directions under s 596F(1)(e) in a way that a record made pursuant to an order under s 597(13) is not. That is a circumstance that would no doubt be relevant to a decision as to the more appropriate way of proceeding in a particular case in which the existence of the statutory rights of inspection created by s 597(14A) gave cause for concern. 86The relevant interests to be balanced in this regard are said to be "on the one hand, the interests of the public and the creditors to permit the collecting of all necessary information relating to the winding up of the relevant company and, on the other hand, that the proposed witness is accorded justice and the right to privacy" (Ford's Principles of Corporations Law at [27.170.1]; Australian Corporation Law Principles and Practice at [5.7B.0005]-[5.7B.0100]; McPherson's Law of Company Liquidation at Ch 15; G Parker, "Liquidator's Examinations" (1993) ABR 25; PJ Keenan, "Investigations by External Administrators" (1995) 13 C&SLJ 368; S Maiden, "Tensions between the Public and Private Purposes of Examinations under Pt 5.9 of the Corporations Act 2001 (Cth)" (2004) 12 Insolv LJ 28.) 87In the circumstances, I consider that the appropriate course is to make orders for the examinations to be held in private and to put in place a regime that would maintain the ability of the Court to preclude access to the transcripts of the examinations until after the conclusion of the hearing in the criminal proceedings and then subject to any further order of the Court. It seems to me that in this way the appropriate balance is struck between the interests of the creditors in having the liquidator investigate the circumstances of a substantial transaction. While there was a suggestion that the investigation could be limited to the location and whereabouts of the whisky (and that the examinees might not have an objection to an examination as so limited), it is not apparent that this will address the concerns of the liquidators to ascertain the company's interest in the transaction at its inception. Orders 88Therefore, I propose to make the following orders: 1. Dismiss the application for a stay of the examination summonses/order for production. 2. Direct pursuant to s 597(4) that the examinations of Messrs Seller and McCarthy be held in private and that there be no order for transcript to be authenticated pursuant to s 597(13). I further direct that the conduct of the examinations and the transcript of the examinations be kept confidential and not disclosed published to any person without the leave of the Court pending the hearing of criminal proceedings against the said examinees. 3. Direct that there will be sufficient compliance with the order for production by the production of photocopies of documents rather than the originals. 89I make no order at this stage as to the costs of the production of documents but note that this would appropriately be dealt with after production has taken place and I will give the Applicants leave to apply in that regard. 90Before finalising the orders I will give the parties an opportunity to make submissions as to the form of the orders with a view to ensuring the privacy of the examinations pending the criminal proceedings. I will also hear any submissions in relation to the costs of this application at a convenient time. ********** Amendments 08 June 2011 - Adding after the 4th sentence, the words "In cross-examination (at T 38 and T 48) it was put to Mr Kassem (and he agreed) that the mortgage security over the whisky was of a limited nature, being a limited recourse obligation. Mr Castle has since drawn my attention to the information memoranda in relation to the transaction (p 156 of the CB) which discloses that the loans are full recourse and secured over the product of the venture.)" Amended paragraphs: 15 08 June 2011 - Typographical errors Amended paragraphs: 35, 65 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 June 2011