ACN 004 410 833 Ltd (formerly Arrium Limited) (in liq) v Michael Thomas Walton

THE COURT: This is an application for leave to appeal from a decision of a judge of the Equity Division dismissing an application to set aside an order for examination made under s 596A of the Corporations Act 2001 (Cth) (the Corporations Act) and production orders made under s 68 of the Civil Procedure Act 2005 (NSW) and s 597(9) of the Corporations Act (the production orders) whilst staying those orders in part.

The applicant (formerly Arrium Ltd (in liq)) (Arrium) was a significant producer of steel and iron ore, its assets including the Southern Iron mining operation. Up to the time it was placed into administration, Arrium was listed on the Australian Stock Exchange (ASX).

On 15 September 2014 Arrium announced a fully underwritten $754 million capital raising. Retail shareholders were given a one for one pro rata entitlement offer, the offer price being 0.48c per share said to be a discount of 26 percent to Arrium’s closing share price on 12 September 2014. It was stated in the announcement that the proceeds would be used to pay down debt.

As would be expected, an Information Memorandum was provided to shareholders in respect of the offer (the Equity Capital Raising Presentation). It provided information concerning the company, including a financial analysis and a business outlook and update with an earnings guidance.

In August 2014, shortly prior to the capital raising, Arrium published its results for the financial year ended 30 June 2014.

The capital raising was successfully completed by 14 October 2014.

In January 2015 after a decline in the export price of iron ore, Arrium announced that the Southern Iron mining operation would be suspended or closed. In its half yearly reports published on 18 February 2015, it recognised an impairment in the value of its mining operations in an amount of $1,335 million. It was placed into administration on 7 April 2016 and on 20 June 2019 the administrators were appointed liquidators.

The applicants for the examination orders, who are the respondents in these proceedings (the respondents), were shareholders of Arrium. On 5 April 2018 their solicitors wrote to the Australian Securities and Investments Commission (ASIC) advising that they acted for former members of Arrium and in particular the respondents. In that letter they sought that the respondents be given eligible applicant status within the meaning of s 597(5A)(b) of the Corporations Act. The letter referred to the capital raising and stated their clients’ concern was whether the financial results for the financial year ended 30 June 2014 announced in August 2014 and the information supplied in respect of the capital raising did “not adequately or fairly” portray the “true state of Arrium’s business”. The letter summarised the result of the solicitors’ investigation up to that time and stated that the respondents wished to participate in s 597 examinations of certain persons to determine whether any claims should be brought against Arrium, its directors or its auditor. The letter summarised the nature of the claims and purpose of the examinations contemplated in the following terms:

The letter nominated proposed examinees, none of whom were the subject of the ultimate examination order.

The letter stated that “[t]he purpose of the examinations would be to investigate the potential for claims to be made on behalf of creditors or shareholders in Arrium” relating to the matters set out in the letter.

In a subsequent email from the solicitors for the respondents to ASIC it was stated that the persons in respect of whom examination orders were sought were persons who the administrators would not seek to examine themselves. It was also stated that the examinations would not be an abuse of process since the examinees would be officers of the company and its auditor, the examination would be in respect of the examinable affairs of the company and the application was made expressly for the benefit of shareholders and creditors of the company.

On 24 April 2018 ASIC authorised the respondents as eligible applicants in relation to Arrium.

By originating process filed on 6 May 2019 the respondents applied to the Court for orders under s 596A of the Corporations Act that a summons for examination be issued to Mr Colin Galbraith to appear for examination and produce certain documents. Mr Galbraith was a Director of Arrium until December 2015, chair of its Governance and Nominations Committee and a member of its Audit and Compliance Committee.

In addition, orders were sought under s 68 of the Civil Procedure Act and s 597(9) of the Corporations Act that Arrium, KPMG (the company’s auditor), and UBS AG (who advised on the capital raising) produce certain documents.

The application was supported by an affidavit sworn by the respondents’ solicitor, Ms Amanda Banton on 3 May 2019. She stated that the purpose of the application was “to obtain further information about potential claim(s) the Plaintiffs [the respondents] and shareholders may have arising out of the examinable affairs of Arrium”. Her affidavit referred to potential claims arising out of the announcement of the capital raising, the Equity Capital Raising Presentation, certain representations in the financial reports for the year ended 30 June 2014 and in the half yearly report for the period ended 31 December 2014. In her affidavit she described the purpose of the application in the following terms:

There was at one stage confidentiality orders in respect of Ms Banton’s affidavit and in respect of the respondents’ letter to ASIC of 5 April 2018. However, no objection was taken to the material being utilised before the primary judge or on the appeal and it was not suggested that any portion of this judgment should remain confidential.

On 15 May 2019 the Registrar in Equity made the examination and production orders sought by the respondents.

By interlocutory process dated 11 June 2019 Arrium sought to have the examination and production orders stayed or set aside. Prior to the hearing before the primary judge, KPMG and Mr Galbraith, although not themselves making a formal application, participated in the proceedings seeking similar orders. It was common ground at the hearing before the primary judge that if the examination summons was stayed or set aside, the orders for production should also be set aside.

The evidence on the application was summarised in an uncontroversial fashion in the primary judgment.

In dealing with the evidence before him, the primary judge referred to the affidavit of Ms Caroline Goulden, the solicitor for Arrium, sworn on 11 June 2019. He noted that Ms Goulden referred to the 94 entities in the group that entered into separate deeds of company arrangements and the sale of the core Australian operating business. Ms Goulden stated that the group entities entered into what were described as “‘transaction support’ deeds of company arrangement” and referred to the process for submission of debts under those deeds. She stated (and it was not disputed) that a provision of the distribution deed had the effect that an “‘Arrium Group Creditor” (as defined) would be taken to have abandoned all ‘Claims’ (as defined) and entitlements in the Arrium distribution fund which were not, relevantly, lodged with the deed administrators in accordance with that proof of debt process”. He noted that Ms Goulden stated that the deed administrators did not receive a proof of debt from either of the respondents prior to the barring date in the deed.

The primary judge noted that Ms Goulden also referred to investigations carried out by the deed administrators. She stated that the September 2014 capital raising was not the subject of detailed investigation since the administrators (and the liquidators) “considered it unlikely that its circumstances gave rise to any cause of action which would potentially benefit the Arrium Group or its creditors”. He referred to the evidence of Ms Goulden that the deed administrators and their legal representatives had conducted informal interviews with Mr Galbraith.

The primary judge referred to the evidence of Ms Goulden to the effect that the class action in which it was proposed the respondents be the lead plaintiffs would be of no benefit to Arrium or its creditors because there was nothing to indicate that Arrium or its creditors had suffered loss as a result of these matters. She also referred to the possibility that the joinder of Arrium in a class action would be detrimental to Arrium and its creditors. He said he did not need to address that matter where the respondents had made it clear in the course of the hearing that they would not seek to join Arrium in the class action. Although his Honour did not refer to it that does not necessarily mean that defendants in the class action would not seek to do so.

The primary judge noted that in a subsequent affidavit filed by Ms Goulden dated 19 July 2019 she referred to the making of a distribution to unsecured creditors of Arrium and the liquidator’s assessment that, even with recoveries from litigation, there would be no prospects of surplus assets in the liquidation such that any shareholder would receive a dividend. He noted that Ms Goulden also referred to the commencement of proceedings by the liquidators against certain former directors of Arrium and two of its subsidiaries in respect of insolvent trading.

The primary judge referred to the affidavit of Ms Banton of 3 May 2019 to which we have referred above and her subsequent affidavit of 28 June 2019 in which she suggested that the examination summons and orders for production were issued “to obtain further information about the potential claim(s) Arrium and its shareholders … may have arising from the examinable affairs of Arrium”. The primary judge noted that any claim instituted by the respondents, on behalf of Arrium, would be in the nature of a derivative action. He noted that counsel for the respondents ultimately did not seek to rely on any prospect of a derivative action in support of the examination summons and orders for production. He noted that Ms Banton indicated that the respondents did not seek to join Arrium in the proceedings or to obtain recovery against it.

The primary judge also referred to the affidavit of Mr Masi Zaki, a solicitor assisting Ms Banton, in which she acknowledged that the respondents had abandoned any claim as unsecured subordinated creditors of Arrium and accepted they had no right to any distribution under the deeds of company arrangement.

The primary judge referred to the letter from the respondents’ solicitors to ASIC of 5 April 2018 to which we have referred above and in particular to what was set out in paragraph 61 of that letter. He stated that the last statement in that paragraph would only be correct if a derivative action brought by the respondents on Arrium’s behalf led to recoveries by Arrium as the respondents accepted that they had no claim against Arrium as creditors, and any recovery by them against third parties would not reduce any such claim or improve the position of other creditors. He noted that ultimately the respondents did not seek to rely on the possibility of a derivative action.

The primary judge also referred to the email from the respondents’ solicitors to ASIC of 17 April 2018. He stated that to the extent that it was contended in that email that the examinations would not be an abuse of process because the proposed examinees had not been examined by the administrators, Arrium’s liquidator had already conducted an informal interview of Mr Galbraith in lieu of the examination.

The primary judge also referred to information made available to potential participants in the class action in a website established for that purpose. He noted that the information provided referred to possible proceedings against certain directors and auditors of Arrium to recover losses incurred by investors who bought securities in Arrium after its financial year 2014 results announcement and its September 2014 capital raising. He noted that it was indicated that the claim was based on allegations of misrepresentations concerning the financial position of Arrium in the second half of 2014, the adoption of the financial year 2014 accounts and the September 2014 capital raising and also referred to an alleged failure by Arrium’s auditors to identify the true position of Arrium in respect of the financial year 2014 reporting documentation. He noted that a funding agreement with the third party funder identified a range of potential defendants in a potential class action.

The primary judge noted that the criteria for the issue of an examination summons, namely that the respondents were eligible applicants and the persons to be examined were, during the specified period, officers of the corporation had been established, and thus the Registrar was correct in making the examination order. He noted however that the examination order may nonetheless be discharged if it is found that the applicant for the order had an improper purpose in securing that order or if that order otherwise amounts to an abuse of process. He said that the power to set aside an order on that basis “should be exercised with caution and only in exceptional or extreme cases”.

The primary judge referred to statements by the Full Court of the Federal Court in Re Excel Finance Corp Ltd (Receiver and Manager Appt); Worthley v England (1994) 52 FCR 69 (Re Excel) to the effect that it would be an abuse of the Court’s process to obtain an examination summons “not for the benefit of the corporation, its contributories or creditors”, but only for the benefit of the prescribed person to be used in other litigation. He also referred to Sandhurst Trustees Ltd v Harvey (2004) 88 SASR 519; [2004] SASC 157 (Sandhurst Trustees) where he stated the Court held an examination had a proper purpose where it might expose misconduct by an audit firm that would be of legitimate interest to ASIC and provide evidence founding the basis of a claim, including by noteholders, against that audit firm. The primary judge stated that it seemed to him that that rationale may be available in the present case, although he recognised and gave weight to the fact that liquidators had already formed the view there was little prospect of benefit to the company from a claim in respect of the capital raising or the relevant financial accounts.

The primary judge noted that the Full Court of the Federal Court of Australian in Re New Tel Ltd (in liq); Evans v Wainter Pty Ltd (2005) 145 FCR 176; [2005] FCAFC 114 (Evans v Wainter) held that examinations to be conducted by a creditor did not amount to an abuse of process, although the creditor could not have taken that course had the company not been placed in liquidation. He stated the Full Court there held that the company and its creditors would benefit from examinations to be conducted by the creditor as the successful outcome of proceedings by that creditor would reduce its claim against the company and increase distributions to other creditors accordingly. He noted that could not occur in the present case because the respondents did not have any claim against Arrium.

The primary judge referred to the comments by Lander J in Evans v Wainter at [245] and [247] to the effect that the examination proceedings are intended “to aid persons who have the responsibility of the external administration of the company in carrying out their duties” and that those persons “are entitled only to seek an order for an examination summons where the purpose of the examination is … for the benefit of the corporation, its creditors or its contributories”. He accepted the submission that the reference to benefitting the corporation, its creditors or contributories, does not refer to the private or personal benefit of individual contributories or creditors.

His Honour accepted the submission by senior counsel for the respondents that the decision of the Full Court of the Federal Court in Kimberley Diamonds Ltd v Arnautovic (2017) 252 FCR 244; [2017] FCAFC 91 (‘Kimberley Diamonds’) was authority for the proposition that “the applicant for an examination summons need not demonstrate that the possible results of the examination justify the issue of the summons or that there is any ‘realistic prospect’ that the examination will reveal conduct capable of supporting a claim and therefore have ‘practical utility’”.

In dealing with the submissions of the respondents, the primary judge stated he accepted that the onus of satisfying the Court there was an abuse of process such that the orders for examination and production should be set aside rests upon Arrium and KPMG and that the onus is “a demanding one”. He also accepted the matters the subject of the examination canvassed possible breaches of duty owed by Arrium’s directors and KPMG to Arrium and so are of potential benefit to Arrium, its creditors and the public. He accepted that one purpose of the examination power is to permit discovery of abuses that may have attended the management of the affairs of a company in liquidation but stated that the authorities to which he referred indicated that that “does not authorise the use of that power for the predominant purpose of pursuing private claims of creditors or contributories, as distinct from a claim that has the requisite benefit for Arrium, its creditors or contributories in the relevant sense”.

The primary judge also noted the submission that the examinations might disclose a basis for the company to recover its costs of the capital raising. He said that is no doubt a possibility but it seemed to him that the evidence did not suggest that it formed any part of the plaintiffs’ (respondents’) purpose in conducting the examinations.

The primary judge concluded that the information provided by the respondents’ legal representatives to ASIC “does tend to indicate that their predominant purpose in seeking the issue of the examination summons was to investigate, and pursue, a personal claim in their capacity as shareholders against directors of Arrium or against its auditors”. However, he stated that he was not satisfied that Arrium had “discharged the heavy onus of establishing that the examination of Mr Galbraith would be an abuse of process”. He said that it seemed to him that there was “a degree of similarity” between the circumstances in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 (‘Hong Kong Bank v Murphy’) and the present case, where Arrium was a large listed company, the plaintiffs and many other shareholders had likely suffered loss from their investment in it, and, on the face of it, the respondents seek to examine Mr Galbraith on matters which the liquidators could properly have examined him, although the liquidators made a reasoned decision that their resources were better directed to the insolvent trading claim. He stated that the information likely to be produced by the respondents’ examination would also likely advance the interests of Arrium and its creditors, so far as it produces relevant information that supports further causes of action by Arrium. or does not do so and therefore supports the liquidators’ present assessment that their insolvent trading claims are more likely to benefit Arrium and its creditors than the claims that the respondents seek to investigate.

In those circumstances, the primary judge dismissed the application to set aside the summons.

Section 596A of the Corporations Act (the relevant section for present purposes) deals with mandatory examinations whilst s 596B deals with discretionary examinations. They are in the following terms:

Eligible applicant is defined in s 9 in the following terms:

Compulsory examinations of company directors and officers have a lengthy legislative history. It was summarised by Lander J in Evans v Wainter (at [44]-[97]) and what we have set out below is supplementary to that summary.

As was pointed out in Re Excel at 79, the provision owed its origins to the provisions in the Bankruptcy Act 1542, 34 & 35 Hen 8, c 4 providing for the examination of debtors. However, the first application to companies appears to have occurred in s 15 of the Joint Stock Companies Winding Up Act 1844, 7 & 8 Vict, c 111. It is unnecessary to set out the terms of the section but it conferred wide powers on the Court of Chancery to summon people who the court believed were capable of giving evidence concerning the commercial dealings or trading of the company and persons suspected of having property of the company in their possession, including debtors of the companies. The preamble to the Act, so far as relevant, was in the following terms:

It will be noted that both purposes of the legislation expressed in that preamble were consistent with what were described as the legislative objectives of such an examination by Hayne J in Re Marvin Manufacturers (Aust) Pty Ltd; New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 (‘Marvin Manufacturers’) at 619.

As was pointed out by Lockhart J in Re Compass Airlines Pty Ltd (1992) 35 FCR 447 at 452 equivalent provisions were introduced into ss 115 and 117 of the Companies Act 1862, 25 & 26 Vict, c 89 . Equivalent provisions were introduced into NSW by the Companies Act 1874 (NSW) and the Companies Act 1899 (NSW).

As Lockhart J pointed out public examinations were introduced into the United Kingdom by s 8 of the Companies (Winding Up) Act 1890, 53 & 54 Vict, c 63 which provided for public examinations of promoters, directors and other officers of a company on the official receiver’s application if the company was being wound up by the court but such an examination could not take place unless the official receiver had in a further report named that person as one who had committed fraud in the activities of the company since its incorporation. Equivalent provisions were introduced in subsequent manifestations of the legislation in this State and other States. Thus ss 253 and 254 of the Companies Act 1936 (NSW) were in the following terms:

It can be seen that the precondition for the making of an order was either that a provisional liquidator had been appointed or the company had been wound up. There was no provision in the legislation indicating who may apply for the issue of a summons under s 253. However, it had been held that an application may be made by a liquidator, a creditor or a contributory: Re Gold Co (1879) 12 ChD 77; Re Silkstone and Dodsworth Coal and Iron Company (Limited); Whitworth’s Case (1881) 50 LJ Ch 752; Sir John Moore Gold Mining Co (1837) 37 LT 242; Percy Spender and Gordon Wallace, Company Law and Practice (1937, The Law Book Co. of Australasia Ltd) at 414.

The successor provision for private examinations in the Companies Act 1961 (NSW) s 249 was wider in its terms compared with its predecessor as on its face it was not limited to a company in liquidation or one in the course of being wound up. Section 249(1) was in the following terms:

The power to order public examinations was contained in s 250 of the 1961 Act subject to the same conditions as those contained in its predecessor, s 254 of the 1936 Act.

Sections 249 and 250 remained in that part of the Act dealing with winding-up.

Once again, the 1961 Act did not identify those persons who were entitled to seek an examination.

The limitation on the use of these provisions and their purpose was considered by Street J (as his Honour then was) in Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWR 582. In two well-known passages his Honour made the following remarks at 583 and 585:

The examination provisions were significantly amended by s 541 of the Companies (NSW) Code. Unlike its predecessors, the provision did not appear in that part of the Act relating to winding-up. While there was no equivalent provision to s 596A of the present legislation, s 541 was the immediate predecessor to s 596B. So far as relevant it provided as follows:

Two things may be noted. First, the legislation for the first time specified the persons who were entitled to apply for an order for examination. The right to apply was conferred on the Commission itself, a person authorised by the Commission to make an application and an official manager as well as a liquidator or a provisional liquidator. It did not include creditors or contributories (subject to them being authorised by the Commission) and except as otherwise ordered provided that the examinations were to be held in public.

In Hamilton v Oades (1989) 166 CLR 486; [1989] HCA 21 Mason CJ emphasised the public purpose served by the provision and said at 496-497:

Mason CJ further stated at 497:

Mason CJ noted that the Court had not thereby abrogated its “inherent power” to control the proceedings. He said at 498:

Dawson J stated at 510 that “[w]hilst the discretion conferred upon the court to control proceedings under s 541 is to be exercised within the limits indicated by the nature and purpose of the examination for which the section provides, it may never the less be a safeguard against the use of the section in an oppressive or unjust way” (citations omitted). Toohey J was also of the opinion that there was sufficient power within s 541 itself to control examinations so as to protect an examinee against oppression or injustice.

Following the commencement of the Corporations Law (Cth), which was enacted by the Corporations Act 1989 (Cth) and took effect in NSW by force of s 7 of the Corporations (NSW) Act 1990, s 541 of the Companies (NSW) Code was replaced by s 597 of the Corporations Law. The section was in substantially the same form as s 541 of the Companies (NSW) Code.

The Corporate Law Reform Act 1992 (Cth) repealed s 597(1), (2) and (3) and inserted ss 596A, 596B, 596C, 596D, 596E, 596F.

The Corporate Law Reform Act also amended section 9 of the Corporations Law to insert a definition of eligible applicant. An eligible applicant was defined to mean ASIC, a liquidator or provisional liquidator of the corporation, an administrator of the corporation, an administrator of a deed of company arrangement executed by the corporation or a person authorised by ASIC to make such an application in relation to the corporation.

The sections, subject to an amendment which is immaterial for present purposes, were in the same form as the current provisions.

The Attorney General’s Explanatory Memorandum in relation to ss 596A and 596B made the following remarks concerning the introduction of the section:

Brennan CJ and Toohey J in Gould v Brown (1998) 193 CLR 346; [1998] HCA 6 stated at [36] that “the powers available under ss 596A and 596B of the Corporations Law may be exercised to order and conduct examinations otherwise than in the course and for the purposes of a winding up”.

Section 596 of the Corporations Law was considered in Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301; (1994) 120 ALR 262. The Full Court stated at 306 that s 596B of the Corporations Law and its predecessors were intended by the legislature to address the problem of the liquidator being in a position of disadvantage as “the liquidator comes to the company with limited or no knowledge of the company’s assets, business and affairs”. The Full Court stated at 306 that

The Full Court further stated at 308 that “the language of s 596B of the Law, having regard to the definition of ‘examinable affairs’ in s 9 of the Law, has a broader operation than s 115 of the Companies Act 1862 and the later Australian versions of it”.

As will be seen the respondents placed considerable reliance on the decision of this Court in Hong Kong Bank v Murphy. The proceedings were an appeal from a judgment of McLelland J in Re BPTC Ltd (in liq) (1992) 7 ACSR 539.

The proceedings involved an application to set aside an examination summons obtained by the new trustees of a number of trusts known as the Estate Mortgage trusts. The previous trustee, BPTC Ltd (in liq), had been removed as trustee by order of the Court.

The orders for examination were made against officers of Hong Kong Bank of Australia (HKBA) and Mercantile Mutual Life Insurance Co Ltd (MML). The orders were made in the context of litigation concerning assignments of interests in mortgages by BPTC, whilst it was trustee of the Estate Mortgage trusts, to HKBA and MML and the validity of a deed of priority. The new trustees alleged that BPTC entered into the deed of assignment and priority in breaches of trust, in which HKBA and MML participated, and from which they sought to take the benefit. The new trustees were seeking to recover money and other property from HKBA and MML.

It was submitted that the application for the summons was an abuse of process and the examination was sought for private purposes and sought pre-trial depositions that were not available to an ordinary litigant. McLelland J rejected the submission and made the following remarks at 544:

The decision was affirmed on appeal. Gleeson CJ, with whom the other members of the Court agreed, made the following remarks concerning the ambit of the then s 597 of the Corporations Law at 519-520 referring to the judgment of Street J in Re Hugh J Roberts Pty Ltd (in liq):

In dealing with the question of whether s 597 was a law with respect to winding-up, Gleeson CJ made the following comments as to the extent of its operation at 521:

In Marvin Manufacturers Hayne J, sitting as a judge of the Supreme Court of Victoria, adopted a similar approach to the width of s 596B as Gleeson CJ had in respect of s 597. He made the following remark at 616:

After citing the passage from the judgment of Gleeson CJ in Hong Kong Bank v Murphy to which we have referred at [70] above, his Honour went on to make the following comments concerning the question of abuse of process at 616:

In dealing with the purpose of the section, his Honour made the following remarks on which considerable reliance was placed by the respondents in these proceedings at 619:

As will be seen from the passage of the judgment of Hayne J to which we have referred, the applicant for the examination summons was a creditor of the company and claimed that the debt due to it had been incurred whilst the company was insolvent. The insolvent trading provisions which existed at the time (s 592 of the Corporations Law) made the directors (subject to certain exceptions) and the company jointly and severally liable for the debt. Thus recovery by the applicant from the directors would have the effect of reducing the debt owed by the company to it.

Marvin Manufacturers was decided before the decision of the Full Court of the Federal Court in Re Excel. In Re Excel the receiver and manager of Excel appointed by the trustee for debenture holders requested authorisation to make an application for an examination summons under s 597 of the Corporations Law. He stated that his predominant purpose was to ascertain the existence of company assets for the benefit of his appointer. The authorisation was granted, a summons was issued, and the appellant sought to have it set aside. Between the time of the making of the application to set aside the summons and the time it was originally determined, the trustee and the debenture holders had commenced proceedings asserting that the applicant, who was the auditor of the company, breached the duty owed to them (not to the company) and that a breach of that duty caused the debenture holders to appoint a receiver later than it would otherwise have done as a result of which the debenture holders suffered loss.

The Full Court of the Federal Court allowed the appeal on the basis that the principal purpose of the respondent in making the application had not been “completely explored” and remitted the matter to a judge of the Court to deal with the issue. In reaching that conclusion, the Court made the following remarks at 81-82 and 91:

In dealing with Re BPTC Ltd, the Court described the context in which that case was decided as “somewhat special and quite outside the present”. They described the litigation in the case before them in the following terms at 93:

Re Excel unlike Marvin Manufacturers was decided under the provisions of s 597 rather than s 596B. In Douglas-Brown v Furzer (1994) 11 WAR 400 the Full Court of the Supreme Court of Western Australia concluded that s 597 and its successors had expanded the right to an examination beyond which was anticipated by its predecessor s 541 of the Companies (Western Australia) Code. Malcolm CJ, with whom Ipp and Anderson JJ agreed, made the following remarks at 408:

It should be noted that although ASIC is empowered to authorise a creditor to conduct an examination, creditors are not one of the specified persons in the definition of eligible applicant.

A similar conclusion was reached by the Full Court of the Supreme Court of Victoria in Flanders v Beatty (1995) 16 ACSR 324 per Ormiston J at 331 and 333, Tadgell and Harper JJ agreeing. Ormiston J stated the effect of the extension of the provisions in the following terms at 335:

Boys v Quigley (2002) 26 WAR 454; [2002] WASCA 99 involved an application by the receivers of an insolvent company (Geneva Finance Ltd) to examine former partners of the auditors of the company as to their assets for the purpose of assessing their capacity to meet any judgments in proceedings that had been instituted against them by Geneva claiming damages for negligence in respect of an audit. The applicants appealed against a refusal to set aside the examination summons.

Anderson J, with whom Wallwork J agreed, noted at [20] that “[i]t is of benefit to the receiver and manager in the discharge of his duties to know what amount is likely to be recovered” in the action. He rejected the submission by senior counsel for the auditors that because the respondent was a receiver rather than the liquidator, the public interest considerations in making an order were “not as pressing”. In rejecting that submission, he made the following remarks:

Sandhurst Trustees concerned an application to set aside an examination summons obtained by the trustee for the whole of the convertible notes in a company, Normans Wines Ltd. The trustee instituted proceedings against the company’s auditors of whom the respondent was an employee alleging breach of duty in providing unqualified audit reports. An appeal was allowed from orders setting aside the summons.

It was submitted on behalf of the respondent that the power conferred by s 596B was “not able to be exercised for the sole or predominant purpose of assisting a single creditor or class of creditors” there being “no benefit” to the corporation Normans Wines. Doyle CJ at [32] accepted what was said in Flanders v Beatty, stating that the statutory provisions were “wider in their reach than their predecessors”. In that context, his Honour made the following remarks:

His Honour concluded that the examinations were for a proper purpose in the following terms:

The Full Court of the Federal Court again considered the question in Evans v Wainter Pty Ltd. The respondent company had sought and obtained orders under s 596A and s 596B of the Corporations Act to examine the directors of a company, New Tel Ltd (in liq) and a firm of solicitors in respect of misleading and deceptive conduct arising from representations said to have been made in respect of a transaction between it and New Tel. It should be noted that the respondent had also filed a proof of debt with the liquidator of New Tel claiming the amount the subject of the proposed proceedings.

Lander J, who delivered the principal judgment of the Court, extensively reviewed the history of the legislation and the authorities. He stated at [119] that “[a]ny purpose that will benefit the company, its creditors, its members or the public generally will be within the contemplation of the section”. However, subsequently he made the following remarks:

In dealing with s 596A and s 596B, he expressed a view at [206] contrary to that expressed in Flanders v Beatty and Sandhurst Trustees that the statutory provisions were no wider than their predecessors except to the narrow extent by including ‘business affairs’ in ‘examinable affairs’. However, he agreed at [220] with that portion of the judgment of Doyle CJ in Sandhurst Trustees at [51] which we have set out at [84] above. He subsequently stated at [244] that he agreed with the passages from the judgment of Hayne J in Marvin Manufacturers to which we have referred at [71]-[72] above. However, he expressly approved at [234] the comments of Santow J in Re New Cap Re Insurance Corp Holdings Ltd [2001] NSWSC 835 to the effect that “[t]o interpret s 596A and s 596B as allowing the examination procedure to be used for the purpose of obtaining a forensic advantage, and for that purpose only, would not fulfil the statutory objective” (at [237]). He ultimately expressed his conclusion in the following terms:

Ryan J and Crennan J agreed with the reasons of Lander J, save to the extent that they reserved the further consideration whether what was said in Flanders v Beatty and Sandhurst Trustees concerning the width of the sections was correct.

In Meteyard v Love (2005) 65 NSWLR 36; [2005] NSWCA 444 Santow JA cited with approval at [7] the passage from the judgment of Lander J at [245]-[251] which we have set out at [88] above.

In Kimberley Diamonds the Full Court of the Federal Court following Evans v Wainter stated the principles in the following terms:

Although as the respondents pointed out, it was stated in that case at [103] that “[t]he obtaining of answers to otherwise unanswered questions, or the quelling of a perceived controversy concerning the management of a company can, in a broad sense, be regarded as amounting to a benefit to the company, its creditors or contributories, and as therefore fulfilling a purpose of s 596A”. That does not seem to me to extend to an examination in aid of a private purpose where there was no discernible benefit to the corporation or to its creditors.

Senior counsel for Arrium stated that “the primary question” was whether it was an abuse of process for shareholders of Arrium to obtain examination orders for the purpose of investigating and pursuing a class action against the directors and auditors where there is no suggestion it could produce any benefit to the company. He submitted that the benefit identified by the primary judge, namely that the examinations may confirm the existence or non-existence of causes of action which the liquidator had decided not to pursue, was not one which formed any part of the respondents’ purpose.

He referred to the evidence of Ms Goulden which we have summarised at [21] above and the assessment by the liquidator that the circumstances of the capital raising would be unlikely to give rise to any cause of action which would potentially benefit Arrium or its creditors. As noted, it was common ground that the respondents were not creditors. He submitted that unless the liquidator’s assessment could be shown to be wrong, “the mere theoretical possibility” that information might be produced that has that effect is “hardly a benefit in the liquidation”.

Senior counsel referred to the submission made on behalf of the respondents in the Court below that the respondents stated purpose was to investigate potential causes of action against officers and auditors of the company in which the respondents were shareholders. He also referred to the respondents’ submission in the Court below to the effect that it was common ground that the liquidators had not investigated the capital raising, agreeing that it was “a little bit of an overstatement” because Mr Galbraith had been informally interviewed. He noted the submission by the respondents both on the appeal and in the Court below that a potential benefit may be the recovery of the cost of the capital raising.

He submitted that purpose was not the purpose for which the examination summons was sought but rather that it was contended before, and accepted by the primary judge, that there might be “an incidental benefit to the company” of that nature.

Senior counsel for Arrium referred to the letter written by Ms Banton to ASIC to which we have referred at [8] above, particularly to paragraphs 60 and 61 of that letter, and to the contents of her affidavit to which we have referred at [15] above.

Senior counsel for Arrium also referred to what he described as “the key findings” of the primary judge to which we have referred at [36] above. He noted the finding that the respondents’ “predominant purpose … was to investigate, and pursue, a personal claim in their capacity as shareholders against directors of Arrium or against its auditors”. He submitted that should have been determinative.

He referred to the statement by the primary judge that the question of whether or not Arrium had any claim arising out of the capital raising may have been clearer as a result of the examinations. He stated that was “just identifying the theoretical possibility that there might be such a purpose”.

Senior counsel for Arrium submitted that the primary judge in effect concluded that although the respondents had a private interest in advancing their claims as shareholders, a by-product was that information may be obtained which may or may not show that Arrium or the liquidator had a cause of action. He submitted that was not the purpose of the examination and “the mere fact” than an examination may produce a benefit “does not save it from being an abuse of process”, emphasising that it is the purpose, not the result which matters.

He submitted that the decision of the Full Court in Re Excel was of particular importance first because it was the only intermediate Court of Appeal decision where proceedings were brought by a person other than the company which did not produce a benefit to the company. He also submitted that it had been approved by the High Court in Palmer v Ayres (2017) 259 CLR 478; [2017] HCA 5. He noted the statement of the Full Court at 89 that the question of abuse will depend upon the purpose of the applicant in seeking the order and for an abuse to be found it was necessary that the offensive purpose be the predominant purpose.

He also referred to the Full Court’s comments in Re Excel at 91 that whether there will be an abuse of process “will depend upon purpose rather than result”. He submitted that demonstrated the error made by the primary judge who he said focused on the “beneficial result, which was no part of the purpose”. He also referred to the Full Court’s comment at 91 that “merely because other proceedings had been commenced or are contemplated would not involve, of itself, an abuse of process” and that “[t]his follows having regard to the nature of the investigative process which could throw light on the question, inter alia, whether there was evidence which would warrant a liquidator, for example, proceeding against an examinee”. He also noted the Full Court’s comment that “it may be quite a different question where proceedings contemplated or instituted are not proceedings to be brought by the company, but proceedings brought by some other party for the advantage of that party rather than the company”. He noted that the Full Court rejected the proposition that what was said by them was inconsistent with the decision of McLelland J in Re BPTC Ltd and on appeal in Hong Kong Bank v Murphy. He also referred to what he described as “the key statement of principle” to which we have referred at [77] above.

Senior counsel for Arrium submitted that that statement of principle applies directly in the present case as the predominant purpose of the respondents was to further their own interests in litigation against third parties which was not for the benefit of the company, its contributories or its creditors.

He submitted that the respondent was incorrect in submitting that the examination was for a proper purpose on the basis that the subject matter related to matters on which the liquidators could properly examine, pointing to the fact that in Re Excel the receiver was contemplating bringing actions in the name of the corporation to recover assets as a result of the breaches of duty. He submitted that showed that whilst there could be “an incidental benefit to the company”, it would not matter if the purpose was improper.

Senior counsel for Arrium also referred to the decision in Hong Kong Bank v Murphy. He referred to the statements by Gleeson CJ at 519 which we have set out at [69] above, submitting that what the Chief Justice was saying was not that there was “no strict dichotomy” between pursuing a forensic advantage and a purpose which benefits the company, but rather if the purpose was proper, it did not matter that a forensic advantage would be obtained.

He also referred to Evans v Wainter submitting that Lander J at [139]-[144] and [247] affirmed that Re Excel was correctly decided.

He also referred to that passage from the judgment of Kimberley Diamonds to which we referred at [91] above which he submitted was consistent with what was said in Re Excel.

He submitted that the subsequent statement in that case at [103] that “[i]t would be entirely proper for an eligible applicant to apply for and obtain an examination summons under s 596A for the purpose of obtaining information concerning legitimate issues” even if it could not be said that “the examination was likely to reveal conduct capable of supporting a claim” was made in answer to a submission that an examination can be stayed as an abuse of process simply because the Court is not satisfied that the examination will reveal wrongdoing on the part of the examinee.

He also referred to the statement by Doyle CJ in Sandhurst Trustees at [53] which we have set out at [84] above. He submitted that in that passage, Doyle CJ mischaracterised what occurred in Re Excel for two reasons. First, it misstates what he described as “the critical passage” at 93 (see [77] above) which focussed “not on the objective question of whether an advantage or benefit exists but rather on whether the purpose is to procure an advantage or benefit for the corporation, as opposed to a private purpose”, second, that it could not be accepted that Re Excel was a case “where there was no possibility of [an] advantage or benefit to the corporation from the examination going forward”.

In relation to Marvin Manufacturers, senior counsel for Arrium, referring to his written submissions, noted that it was decided before the Full Court decision in Re Excel and that it was important to note that the potential cause of action, if successful, would have reduced the debt owed to New Zealand Steel.

In relation to ground 3 of the grounds of appeal, senior counsel for Arrium referred to the fact that the liquidator had determined that there was no claim in respect of the costs of the capital raising.

Counsel for KPMG encapsulated his submissions in four propositions. First the question for the primary judge was whether the respondents’ “actual subjective relevantly predominant purpose in securing the examination summons was an improper one”. Second, “an examination summons must be used for the purpose of securing a benefit for the company, its creditors or contributories” and “not for the purpose of securing a private benefit or advantage for the applicant”.

His third proposition was that in undertaking the characterisation task, it may be relevant “whether a benefit to the company, its creditors or contributories would result from the achievement of the applicant’s purpose” and “in that way … what appears to be a wholly private purpose can instead be characterised as being for the benefit of the company”.

The fourth proposition was that for a purpose to be proper, it is “insufficient to observe merely that a benefit may result to the company, its creditors or contributories” incidentally from the conduct of the examination.

Senior counsel for the respondents referred to Marvin Manufacturers. He noted the submission made in that case in support of the application to set aside the summons was that it was an abuse of process if the sole or predominant purpose of the applicant was to advance private litigation. He submitted that Hayne J explained at 616 that the question was whether the coercive powers in s 596B were to be used for “a purpose foreign to the purposes for which those powers are conferred”. He also referred to Hayne J’s statement at 619 that whilst New Zealand Steel sought to hold the examination so that it might further its own interests, that is not to say that the examination is to be characterised as one to be conducted for “purely private purposes”. He submitted that in those circumstances, the question was “whether the examination can properly be characterised as one that would advance an interest provided by the legislative framework”. He submitted that if the examination can be seen to benefit the company, irrespective of the subjective purpose of the applicant, there is not an abuse of process.

He submitted that it followed from Marvin Manufacturers that where the liquidator could have examined about the same subject matter, the fact that the examination was intended by creditors to purely further their own purposes did not mean that the examination was an abuse of process. He submitted in the present case that the matters in respect of which the respondents sought to examine Mr Galbraith were matters on which he could have been examined by the liquidator. He submitted that there was no clear distinction in the authorities between purpose and outcome.

He submitted referring to Williams v Spautz (1992) 174 CLR 509; [1992] HCA 34 that one does not look purely at the subjective intention, but rather discern “the objective purpose” which “necessarily involves an enquiry into … the possible outcome of it”.

Senior counsel for the applicant emphasised that ASIC had to authorise the examination. He submitted that once the ASIC threshold is past, the purpose of the person examining did not have any relevance at all. He stated that was because the matters the subject of the examination were matters that were proper for a liquidator to investigate. He submitted that counsel for KPMG’s fourth proposition was inconsistent with what was said by Hayne J in Marvin Manufacturers.

Senior counsel for the respondent noted that Ms Goulden conceded that the 2014 capital raising was not the subject of detailed examination in the public examination. He also referred to the evidence of Ms Zaki who said she had inspected the public examination transcript which had only one reference to the capital raising being in the context of financing options available in January 2016.

He also referred to the suspected breaches by the directors of their obligations to Arrium alleged by Ms Banton in paragraphs 55 and 56 of her letter to ASIC of 5 April 2018 (see [8] above). He said they involved possible claims by Arrium. He accepted that the only loss that could be identified was the cost of the capital raising. He referred to the Equity Capital Raising Presentation which stated that $732 million of the net proceeds would be used to pay down debt which left a balance of $22 million which he submitted suggested that “the cost of the capital raising would not have been insubstantial”.

In relation to Hong Kong Bank v Murphy, senior counsel for the respondent stated that Gleeson CJ did not rely on the proposition that success by the new trustees would not reduce the liability of the old trustees to creditors. He noted that Gleeson CJ rather referred at 516 to the new trustees proceeding in order to recover benefits improperly taken by the third parties. He also referred to the reference at 520 to the primary judge’s finding that the purpose of the new trustees was to conduct the examinations “to obtain information which may assist them in prosecuting [their] causes of action, … to determine if any of those causes of action should be abandoned, and to determine if any other causes of action should be added” and Gleeson CJ’s statement that these purposes were “legitimate purposes”. He stated the summons was justified on the basis that the shareholders’ loss arose as a result of misconduct of the company in liquidation.

There are a number of matters that may be stated at the outset. First, no point was taken that ASIC’s authorisation of the respondents as eligible applicants was obtained on the basis of a stated desire in the respondents’ solicitors’ letter of 5 April 2018 to examine specific nominated proposed examinees, none of whom were the subject of an examination summons (see [9] above), and that Mr Galbraith was not identified in that letter. There may be cases where the issue of an examination summons by an eligible applicant is open to challenge and apt to be set aside where it can be shown that the applicant is attempting to use examination summons in a way that differs from the basis put to ASIC in order to obtain eligible applicant status.

Secondly, the prospective litigation which the examination was designed to assist would not bring any commercial benefit to the company. The capital raising raised $754 million of which the better part, but not all, was used to pay down debt. Thus Arrium benefited from the capital raising. It is true that Arrium issued shares to those investors who participated in the capital raising but it suffered no loss as a consequence of doing so.

In Pilmer v Duke Group Ltd (In liq) (2001) 207 CLR 165; [2001] HCA 31 (‘Pilmer’), shares were issued and allotted by the respondent in connection with the takeover of another company, Western United Ltd. The liquidator of the respondent instituted proceedings against the expert retained by it in connection with the takeover alleging that the expert negligently stated the price to be offered for the shares for Western United was “fair and reasonable”. Its claimed loss included what was said to be a loss of $30.55 million for the value of the shares issued as a consequence of the takeover. The High Court held that the company suffered no loss on the issue of the shares. The majority pointed out at [18] that the relevant inquiry was not whether the shareholders suffered loss but whether the company itself had suffered loss as a result of the issue. They also stated at [20] that “[b]efore the shares were issued, they did not exist as an item of property whether of the company or anyone else” and it was “the act of issuing the shares and agreeing to allot them which created the relevant item of property – property which was never owned by the company”. The majority reached the following conclusion:

In the present case, the position is even clearer. Arrium received consideration for the issue of the shares which, in the present case, was alleged to be well in excess of their value to the shareholders. It not only suffered no loss on the issue of the shares, but on that hypothesis, benefited financially from the transaction. Absent any suggestion that it would be liable to shareholders who acquired shares on the basis of representations in the Equity Capital Raising Presentation, it could not be said that Arrium suffered any loss. There is no such suggestion of any such claim.

Although the High Court in Pilmer left open the possibility of the recovery of administrative costs, whatever were the costs of the capital raising, they were more than offset by the $754 million received by the company as a result of the transaction.

The primary judge seemed to accept that it was a possibility that the examinations might disclose a basis for Arrium to recover its costs of the capital raising (see [35] above) or produce relevant information that may suggest further causes of action. With the greatest respect to his Honour, the cost of the capital raising was far less than the funds received and it was speculation to suggest that other causes of action may arise.

The third matter is this. The announcement of the class action by the solicitors for the respondent stated that persons entitled to participate were shareholders who purchased shares on or after 19 August 2014. The proposed class did not include all contributories of Arrium. Further the questionnaire attached to the announcement made it clear that participants could include those persons who had purchased shares after 19 August 2014 but subsequently sold their shares. Thus it would include persons who were not contributories at the time the company went into administration. These matters highlight what might be described as the essentially private nature of the proposed claim.

Fourthly, his Honour was correct in concluding that the information provided by the respondents’ legal representatives to ASIC tended to suggest that the predominant purpose in seeking the issue of the examination summons was to investigate and pursue a potential claim in their capacity as shareholders against the directors or auditors or Arrium (see [36] above). Although the respondents’ letter of 5 April 2018 to ASIC stated that any recovery from the proposed litigation “would ensure that the pool of funds available to either the company or other shareholders would increase” (see [8] above) that was not suggested in Ms Banton’s affidavit of 3 May 2019 and the respondents quite properly made it clear at the hearing before the primary judge that a derivative action was not contemplated (see [24] above). In those circumstances, the predominant purpose was to pursue what we described as the essentially private nature of the proposed claim.

The respondents submitted that what was to be looked at was not the subjective purpose of the examination but the result intended to be achieved. It may be accepted that purpose in this context means the result intended to be achieved but it is the subjective purpose of the respondents (that is the result intended by them to be achieved) which is relevant to the question of whether there is an abuse of process: see Re Excel at 89-91 (cited in part at [76] above); Williams v Spautz at 526-526; 529-531.

The critical question in the present case is whether the purpose of the examination is foreign to the purpose for which those powers were conferred (see the passages from Hong Kong Bank v Murphy and Re Marvin Manufacturers cited at [70] and [72] above).

As can be seen from the review of the authorities, there has not been unanimity amongst courts as to the scope of the power. At least up to the time of s 541 of the Companies (NSW) Code, the power to order an examination appeared in that part of the legislation directed specifically to winding-up. Notwithstanding the fact that s 541 did not appear in that part of the legislation dealing with winding-up, it was generally accepted that the purpose of the power was limited to assisting the liquidator in the winding-up of a corporation or to support the bringing of criminal charges against the former officers of the corporation: see the passages from Hamilton v Oades cited at [53]-[54] above: c/f Hong Kong Bank v Murphy at 518.

It is true that subsequent cases, particularly Hong Kong Bank v Murphy and Marvin Manufacturers, expressed the scope of the power more broadly. However, the remarks made by Gleeson CJ and Hayne J in those cases must be considered in the context in which they were made. Hong Kong Bank v Murphy concerned claims against the former trustee, BPTC, in excess of $600 million which had been made on behalf of unit holders in the Estate Mortgage trusts. Monies recovered by the new trustees from parties who participated in the breaches of trust would be available to meet the claims of unit holders and at least satisfy in part claims against the former trustee. At first instance, McLelland J stated that there were “significant similarities between the position of the new trustees and that of a liquidator (see [68] above) whilst Gleeson CJ in the passage cited at [69] above made the same comment.

Marvin Manufacturers concerned a proposed examination for the purpose of obtaining information to support a potential claim against a former director under the insolvent trading provisions in s 592 of the Corporations Law. As we pointed out, subject to defences, the effect of s 592 was to render the company and persons who were directors or took part in the management of the company at the time the debt was incurred jointly and severally liable. Further s 592(5) provided that if the director or person who took part in the management of the company paid the debt, the company was not rendered liable to that person.

It can thus be seen that the proposed litigation directly concerned a debt for which the company was liable and which, if recovered by the applicant, would lessen than the overall indebtedness of the company and thus be to its benefit.

It is correct that Gleeson CJ and Hayne J in the passages which we have cited emphasised what might be said to be the public benefit in exposing conduct which may affect other creditors or go to the protection of shareholders, creditors and interested members of the public. This is consistent with what was said by Mason CJ in Hamilton v Oades that one purpose was to support the laying of criminal charges. We do not think their Honours were stating that any private examination would be within the scope of the power merely because the examination might reveal matters demonstrating such conduct if that was not the purpose of the examination and no benefit to the company could be identified.

Each of Hong Kong Bank v Murphy and Marvin Manufacturers were decided before the decision of the Full Court in Re Excel. The passage from Re Excel (which we have cited at [76] above) is clear authority for the proposition that an application for the predominant purpose of advancing the cause of the applicant in litigation against third parties and not for the benefit of the corporation, its contributories or its creditors is a use of the provision for a purpose foreign to the power.

It is true that in Boys v Quigley, Flanders v Beatty and Sandhurst Trustees the view was expressed that the 1992 amendments expanded the scope of the power and that Lander J reached a contrary view in Evans v Wainter. It is unnecessary to decide which is correct. Boys v Quigley was an application by a receiver in aid of potential proceedings on behalf of debenture holders. Any success in such proceedings would reduce the indebtedness of the company to the debenture holders and thus be to its benefit. Flanders v Beatty concerned an application by administrators of a deed of company arrangement, persons expressly designated in s 9 of the Corporations Law as eligible applicants to assist in seeking to investigate the worth of a claim expressly assigned to them under the deed. Sandhurst Trustees concerned a summons issued by the trustee for the holders of convertible notes. Doyle CJ stated at [56] that a successful claim by the trustee for the noteholders might reduce the claims against the company. In each case there was an identified potential benefit to the company or its creditors.

In Evans v Wainter, although Lander J expressed his agreement with the remarks of Hayne J in Marvin Manufacturers, he expressly stated at [143] and [247] that Re Excel established that it is an abuse of process to use the procedure “if the predominant purpose of the applicant seeking the order is not for the purpose of benefitting the corporation, its contributories or its creditors”. Ryan and Crennan JJ agreed with Lander J on this point.

It follows that there are two unanimous decisions of the Full Court of the Federal Court which state that an examination, the predominant purpose of which is not to benefit the corporation, its creditors or its contributories, is an abuse of process. None of the other cases to which we have referred have stated that Re Excel was incorrectly decided. Furthermore, they can all be reconciled on the basis that even if the examination was brought by an eligible applicant for its own purpose, that will not be foreign to the purpose for which the power was conferred if it can be shown that fulfilment of the purpose could confer a demonstrable benefit on the company or its creditors (and possibly on all of its contributories).

The present case does not fall into that category. The examination is sought for a private purpose for the benefit of a limited group of persons who bought shares in Arrium at a particular time irrespective of whether they held their shares at the time of the appointment of the administrators. In our opinion, such an examination is foreign to the purpose for which the examination power is conferred and there is an abuse of process.

It follows that the order for the examination summons and the orders for production under s 68 of the Civil Procedure Act should be set aside.

In the result, we would make the following orders: