Why You May Not Be Able to Avoid That Public Examination

In the recent case of Jane v Secatore (Liquidator), in the matter of Last Lap Pty Ltd (in liq) [2021] FCAFC 108, the Court heard an appeal of a decision that dismissed an application to discharge summonses issued concerning public examinations by the liquidator of Last Lap Pty Ltd (in liquidation) (Last Lap).

The fact of the Case

The applicant applied to the Court to discharge summonses issued to himself and various entities. 

The application was on two main bases: 

• The matters addressed by the summonses or which the liquidator intended to examine impermissibly strayed beyond the examinable affairs of Last Lap; and
• He claimed that the liquidator’s affidavit contained serious and material non-disclosures.

The Court at first instance dismissed the application on the basis that, in summary:

• The matters did not stray from the examinable affairs as they involved documents raising questions about entities, event and transactions that, based on the known facts, may have involved or been related to Last Lap.

• The allegations of serious and material non-disclosures were rejected, in brief on the basis that:
  • Documents that clarified matters complained of were annexed in full to the affidavit.
  • Matters which were unclear, unknown or in dispute ought to be dealt with in the examinations. This included the relationship between Last Lap and other entities.

The Court’s Findings

The grounds of appeal by the applicant, in summary, raised three issues:

• Whether a court must be satisfied that the issues the subject of the proposed examination and the documents to be produced fall within the examinable affairs of the Company before exercising its discretion to issue summonses;
• Whether six categories of documents set out in the schedule to the summons that issued to the applicant were beyond the scope of the examinable affairs of Last Lap; and 
• Whether the liquidator failed to disclose all material facts in his application for the summonses.

The Court rejected these grounds, in summary, on the basis that it is not the function of the Court to determine the scope of the examinable affairs; this takes place in the examinations. The liquidator only needs to show a relationship with the examinable affairs on the known facts, on which examinable affairs the examinee may be able to provide information, to enliven the power. The evidence before the Court in the liquidator’s affidavit was sufficient to warrant the summonses being issued. 

Results

The applicant’s appeal failed, and he was ordered to pay the liquidator’s costs of the application. 

Takeaway

The meaning of examinable affairs is very broad. The Court only needs to be satisfied that someone may be able to give such information, and it is sufficient if the known facts show a relationship between the examinable affairs and the proposed examinee or the documents sought.  

Potential examinees should consider this when contemplating applying to have a summons set aside, and the risk of the costs should be kept in mind. If a potential examinee has been issued with a summons, there will be time restrictions. The examinee should contact a solicitor urgently for advice, especially if intending to make an application to have the summons set aside.

 

If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.

 

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