Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd (No. 2)

By notice of motion filed on 24 November 2015, Aircraft Support Industries Pty Ltd (the defendant) seeks to have the examination order made on 22 September 2015 set aside; or, in the alternative, an adjournment of the hearing of the examination which was listed to take place on 2 December 2015.

The defendant challenges the examination order on the ground that Quadunion Builders Pte Ltd (the plaintiff) failed to make full and frank disclosure to the Court when the application, which was made ex parte, was made.

On 14 August 2014 a determination was made following an adjudication of a dispute between the plaintiff and the defendant. The adjudication was made under the Singaporean Building and Construction Industry Security of Payment Act 2004 (the Singapore Security of Payment Act), which follows broadly similar lines to its New South Wales equivalent, the Building and Construction Industry Security of Payment Act 1999 (NSW) (the NSW Security of Payment Act). The Adjudicator determined that the defendant pay the plaintiff the sum of S$1,508,323.75 plus costs and interest (the Adjudication Determination).

On 3 September 2014 a judgment (which reflected the Adjudication Determination) was entered in favour of the plaintiff against the defendant in the High Court of the Republic of Singapore (the Singapore Judgment).

The plaintiff commenced garnishee proceedings against the defendant to recover the amount owing. A sum of S$635,855.14 was paid out of the defendant’s bank accounts in reduction of the amount.

On 8 December 2014, on the basis of the Singapore Judgment, the plaintiff served on the defendant a statutory demand pursuant to s 459E(2)(e) of the Corporations Act 2001. The debt of S$899,237.10 was described as follows:

On 24 December 2014 the defendant filed an originating process in the Federal Court of Australia for an order setting aside the statutory demand. Mark Langbein, the defendant’s managing director, swore an affidavit on 23 December 2014 in support of the application. Mr Langbein deposed to a claim (described as an offsetting claim) made by the defendant against the plaintiff, which was alleged to be in the sum of S$1,119.19 plus unliquidated damages, which was the subject of an arbitration proceedings in the International Chamber of Commerce in Singapore (ICC) (the Defendant’s Arbitration). Mr Langbein also deposed:

On 12 February 2015 consent orders were made by the Federal Court setting aside the statutory demand.

On 20 March 2015 this Court registered a foreign judgment under the Foreign Judgments Act 1991 (Cth) for the sum of S$915,442.28 (comprising the sum of $882,776.91 together with interest of $32,665.37) plus $3,719 for costs. The amount outstanding comprised the amount of the Singapore Judgment less amounts paid as a result of the garnishee order. By operation of s 6 of the Foreign Judgments Act and Part 53 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the registration of the Singapore Judgment became a judgment of this Court (the Judgment) and had the same force and effect for the purposes of enforcement as a judgment originally given in this Court: s 6(7) of the Foreign Judgments Act.

On 20 April 2015 the defendant commenced arbitral proceedings in Singapore against the plaintiff (the Defendant’s Arbitration). Its statement of case included the following claims:

By notice of motion filed on 22 April 2015 in this Court the defendant sought that the Judgment be set aside, or, in the alternative, stayed. The motion was heard by Adams J on 28 May 2015. The defendant relied on three grounds: the Judgment was contrary to public policy; the Judgment was subject to an off-setting claim in excess of the judgment; and the defendant had commenced an arbitration which was effectively an appeal against the basis for the Judgment.

Justice Adams dismissed the notice of motion on 28 May 2015 and delivered ex tempore reasons. Justice Adams made an order refusing the stay of the Judgment and ordering the applicant (defendant) to pay the respondent’s (plaintiff’s) costs. A copy of his Honour’s reasons (Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd [2015] NSWSC 1833) was not made available until 3 December 2015, after the hearing of the present application. I invited the parties to make any further submissions in light of the reasons; however, no further submissions were forthcoming.

On 8 June 2015 the Arbitral Tribunal in Singapore (consisting of a single arbitrator) for the Defendant’s Arbitration made directions for a procedural timetable and fixed the hearing of the arbitration for five days from 1 to 5 February 2016.

By examination notice dated 12 June 2015, the plaintiff required the defendant to complete the signed examination notice and produce the documents sought by 14 July 2015.

The completed examination notice, which was signed by David Pearson, who identified himself as the Chief Financial Officer of the defendant, included the following answers (which are italicised below):

On 16 September 2015 the plaintiff filed a notice of motion for an examination order. The motion was supported by an affidavit of Emily Martins affirmed on 14 September 2015. Ms Martins deposed that the Judgment remained wholly unsatisfied. Ms Martins did not annex the completed examination notice to her affidavit. However, she paraphrased its contents in part, including the following:

Ms Martins also deposed:

The Registrar made the examination order on 22 September 2015. It required Mr Langbein to do the follows:

The defendant tendered the Singapore Security of Payment Act, the long title of which is:

Section 21(1)(b) of the Singapore Security of Payment Act provides:

Section 108 of the Civil Procedure Act 2005 (NSW) provides:

Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 38.1 entitles a judgment creditor to serve an examination notice on the judgment debtor in accordance with an approved form. UCPR 38.2 provides, so far as is relevant to judgments of this Court:

Mr Allen, who appeared on behalf of the defendant, submitted that the Registrar’s order ought be set aside on the ground that the plaintiff, when it applied for an examination order, was not “full and frank” with the Court. He relied on several authorities which concerned summons filed on behalf of liquidators for examinations and orders for production under ss 596A and 596B of the Corporations Act 2001 (Cth) (or their statutory equivalents), including: Re Southern Equities Corporation Ltd (in liquidation); Bond and another v England (1997) 25 ACSR 394 (Cox, Lander and Bleby JJ); Re Mendarma Pty Ltd (in liquidation) [2006] NSWSC 1306 (White J) and Re Owston Nominees No. 2 Pty Ltd [2013] NSWSC 538 (Black J). He submitted that any difference between the examination order in the present case and a liquidator’s examination was “a difference of no importance”.

In its written submissions the defendant contended that the plaintiff had failed to disclose to the Registrar the following matters.

The defendant also criticised the plaintiff for not annexing the completed examination notice (which would have revealed the Defendant’s Arbitration) to its affidavit in support of its application for an examination order. The defendant did not press its written submission that the plaintiff failed to disclose that the plaintiff and the defendant were competitors in Singapore.

Mr Allen submitted as follows:

The defendant submitted further that the examination order ought be set aside in so far as it required the production of documents. It argued that the order was ambiguous because it did not indicate whether the documents to be provided were limited to the defendant’s documents; or whether the two-year period is limited to the tax returns or whether it applies to all of the listed categories of documents. Mr Allen relied on Attorney-General for New South Wales v Chidgey [2008] NSWCCA 65 in support of the submission that a party seeking documents (pursuant to a subpoena or an examination order) was obliged to identify the legitimate forensic purpose of such documents.

Mr de Meyrick, who appeared on behalf of the plaintiff, informed me that the defendant’s application for a stay was heard over the course of half a day before Adams J before it was dismissed. He contended that Adams J had rejected the defendant argument for a stay in so far as it was based on the Defendant’s Arbitration. He contended that, in these circumstances, the defendant ought not be permitted to reargue the point in the context of an application to set aside the examination order. He submitted that the present application was no more than a delaying tactic by a judgment debtor which was unwilling or unable to pay a judgment debt.

The plaintiff also relied on the distinction between, on the one hand, a liquidator’s examination, and, on the other, an order for examination by a judgment creditor. Mr de Meyrick submitted that the sole purpose of the latter examination was to recover a judgment debt. He also relied on the limited matters required to be put before this Court in support of an order for examination and submitted that there was no indication in the UCPR or the Civil Procedure Act that any other matters were required to be disclosed to the Court.

I reject the defendant’s submission that the Judgment is somehow less of a judgment because it was entered as a result of registration of a foreign judgment, which, in turn, was based on an Adjudication Determination. First, whatever be the effect of s 21 of the Singapore Security of Payment Act as to the status of the underlying Adjudication Determination, such a submission is inconsistent with s 6 of the Foreign Judgments Act. Secondly, it fails to take account of the purpose of statutes such as the Singapore Security of Payment Act. Of the New South Wales equivalent, the Court of Appeal (McDougal J, Spigelman CJ agreeing) said, in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; 78 NSWLR 393:

I also reject the defendant’s submission that the plaintiff’s consent to the setting aside of the statutory demand ought be taken as a concession or admission that the Judgment could not be enforced pending determination of the defendant’s claim the subject of the Defendant’s Arbitration. The plaintiff’s consent is consistent with its acceptance that it did not, at that stage, have a judgment of an Australian court. It thereafter proceeded to register the Singapore Judgment and obtain the Judgment. That it decided to endeavour to enforce the Judgment before serving a further statutory demand ought not, in my view, be regarded as a concession on its part.

I am not persuaded that the comparison between an examination by a liquidator under the Corporations Act and an examination by a judgment creditor under s 108 of the Civil Procedure Act is necessarily helpful. The first is an investigative tool to inform a liquidator as to a range of matters, including as to potential causes of action and where assets of the company might be located, whereas the second is an adjunct to the enforcement of a judgment of the Court by a judgment creditor.

UCPR 38.2, in so far as it applies to a judgment of this Court, imposes only a requirement that the judgment creditor establish by affidavit that the judgment or order remains unsatisfied and whether an instalment order has been made. The “material questions” in s 108(5) of the Civil Procedure Act relate only to the means whereby the judgment debtor can satisfy the judgment. The answers to the material questions are designed to inform the judgment creditor as to what, if any, enforcement action, such as a garnishee order, can be taken; or whether, there being no real prospect that the judgment debtor can satisfy the judgment, the judgment creditor ought move to wind up or bankrupt the judgment debtor.

The purposes of a liquidator’s examination are much broader. Although the liquidator may conduct an examination to ascertain the assets of a company in liquidation, he or she may also wish to conduct an examination to ascertain a range of matters, including whether the company has engaged in insolvent trading; whether there are actions which may be brought against the directors; and so on.

However, in order to address the defendant’s arguments, it is necessary to descend into some detail regarding the statutory regime for liquidator’s examinations since the cases relied on by the defendant largely concerned such examinations.

The Corporations Act provides for mandatory examinations as of right (s 596A) and discretionary examinations (s 596B). Section 596B provides:

Section 596C provides:

As the cases relied on by the defendant show, there is a risk that a liquidator may use such an examination as a rehearsal for the cross-examination of someone who might be called by the opposing party in proceedings brought by the liquidator on behalf of the company. In those circumstances there is a potential for the processes of the court to be abused. The court must be alert to ensure that this does not occur. For this reason the general obligation of a party who seeks relief, ex parte, to disclose relevant matters to the court is particularly significant when an application for an examination is made by a liquidator.

However, what is required to be disclosed requires careful identification. A consideration of the authorities reveals that the question depends on the facts and circumstances of each application. The court’s principal concern is that the liquidators’ examination be conducted for a proper purpose. That there are other proceedings between the applicant for the examination and those affected by an order for examination is not determinative.

The principles were summarised by Jacobsen J in Sutherland v Pascoe, in the matter of Matrix Group Ltd as Trustee for the Matrix Group Unit Trust (in liq) ACN 061 549 371 (No 2) [2012] FCA 1361 as follows:

A related principle is that the examination must be for a proper purpose. The purposes that are proper are to be gleaned from the Corporations Act. The following “proper purposes” of such examinations were identified by Wainter Pty Ltd, in the matter of New Tel Limited (in liq) ACN 009 068 955 [2005] FCAFC 114; 145 FCR 76 at [252] per Ryan J (Lander and Crennan JJ agreeing):

The following principles were said to follow:

I propose to address the principal authorities on which the defendant relied.

In Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512, trustees, who were appointed to replace a trustee that had gone into liquidation, applied to the Registrar for orders for examination of witnesses and production of documents from Hong Kong Bank of Australia and others. The Registrar granted the orders ex parte. The persons affected by the orders (the appellants) applied to McLelland J to set aside the orders on the ground that they were obtained for an impermissible purpose: namely, pre-trial interrogation and discovery for the benefit of other litigation (Victorian proceedings) and material non-disclosure (of the fact that, although they had expressed a wish to be heard at the application for examinations, they had not been notified by the trustees prior to the application). Justice McLelland was not satisfied that the purpose for which the trustees were intending to conduct the examinations was other than to obtain information which may assist them in prosecuting causes of action in the Victorian proceedings; to determine whether any of those causes of action should be abandoned; and to determine if any other causes of action should be added. His Honour did not consider that the trustees were obliged to inform the appellants of the application since they had no right to be heard at such an application.

An application for leave to appeal against McLelland J’s decision was granted but the appeal was dismissed. An application for special leave to appeal to the High Court was refused. In the Court of Appeal, Gleeson CJ, after addressing the authorities germane to the potential for abuse of process, said at 519:

As to the allegation of inadequate disclosure, Gleeson CJ said, at 520:

The defendant relied principally on Re Mendarma Pty Ltd (in liquidation) in which a liquidator sought to examine Mr and Mrs King about the affairs of Mendarma Pty Ltd (Mendarma). Mr and Mrs King were directors of Denham Properties Pty Ltd (Denham). Mr Peters was the sole director of Mendarma. On 12 May 2004 Denham had lent money to Mendarma which was guaranteed by Mr Peters and secured by an all-moneys mortgage over certain named horses owned by Mendarma, and their future progeny.

On 11 October 2005 Mr and Mrs King commenced proceedings against Mr and Mrs Peters for a declaration that they had dissolved a racing syndicate partnership between themselves and Mr and Mrs Peters (the Proceedings). On the same day Denham notified Mendarma requiring it to remedy its default under the mortgage by repaying the principal and interest. On 26 October 2005 Denham appointed receivers and managers of the horses secured by the mortgage.

On 3 November 2005 Mr Peters appointed administrators of Mendarma. On 9 November 2005, Mr and Mrs Peters filed a cross-claim in the Proceedings for a declaration that they, not Mendarma, owned the horses.

On 4 August 2006 the liquidators of Mendarma applied for an examination of Mr Peters. They also applied for an examination of Mr and Mrs King. The latter application was supported by an affidavit of Mr McDonald, one of the liquidators, pursuant to s 596C(2) of the Corporations Act. Mr McDonald referred to his earlier affidavit to examine Mr Peters. Mr McDonald annexed Denham’s proof of debt and set out the loan agreement and the fixed charge. He expressed his opinion that the charge may amount to an uncommercial or insolvent transaction. He made no reference to the Proceedings or to the fact that claims had been made by Mrs Peters on behalf of Mendarma against Mr and Mrs King and Denham.

Mr and Mrs King objected to the examination and contended that they were not involved in the affairs of Mendarma and did not know anything about the affairs of Mendarma which would not already be known to the liquidators. They contended that there had been a material non-disclosure and that there was a risk that the examination would be used for an improper purpose. Justice White set aside the order for examination on the basis that there was a risk that the transcript of the examination could be used in the Proceedings to give Mrs Peters a forensic advantage, which would not be obtainable in the Proceedings per se. His Honour also considered there to have been a material non-disclosure to the Registrar when the application was made for an order that Mrs Peters be examined, since the Proceedings were not disclosed. Justice White set aside on the grounds of material non-disclosure. However, his Honour indicated that the discharge of the summons was no bar to a further application based on an affidavit which made full disclosure of all material matters.

I do not accept Mr Allen’s submission that these cases are analogous to the present case of an examination by a judgment creditor of a judgment debtor. Unlike a liquidator’s examination, which may have several different purposes, an examination such as the one ordered in the present case by the Registrar had a relatively straightforward purpose: to identify the means, if any, whereby the defendant could pay the Judgment. The differences between these two types of examinations are plain from the context in which they arise; the applicable legislation; and the rules of court that govern them.

However, even if the cases that concern liquidators’ examinations are, contrary to my view, analogous, I do not consider there to have been any material non-disclosure. The plaintiff, in my view, disclosed all that was material: namely that there was a judgment that had not been the subject of an instalment order and that was still outstanding. That the defendant had a claim against the plaintiff in Singapore was, for the purposes of enforcing the Judgment, beside the point, and, accordingly, not material. In any event, I do not consider there to have been any real prospect that the Registrar, upon becoming aware of other proceedings, would have done other than order the examination summons. I regard the suggestion that the Registrar would have, in that event, required the defendant to be heard on the application for an examination summons as fanciful.

In my view, the plaintiff was not required to disclose the matters listed in (1)-(8) of the summary of the defendant’s submissions set out above as none was material to the Registrar’s decision whether to make the examination order. In these circumstances the plaintiff was not required to give any explanation for not disclosing the matters to the Registrar.

The plaintiff is entitled to enjoy the fruits of the Judgment and ought not be obliged to await the resolution of an outstanding claim by the defendant against it which has yet to be determined.

Further, I do not discern any basis for inferring that the purpose of the examination was other than the stated, and proper, purpose.

If, in the course of the examination, the plaintiff asks questions that are not germane to the purposes of the examination, objection can be taken to particular questions. But that does not make the examination other than a proper one.

The defendant also objected to the order in so far as it required it to produce certain documents. I regard the list of documents sought as unexceptional. Each of the categories was potentially relevant to the defendant’s means to satisfy the Judgment. For example, whether it had money in bank accounts, and the details of such accounts, would be germane to the question whether there was any utility in a garnishee order. Whether it was solvent would also be a material matter: see s 108 (5)(ii) of the Civil Procedure Act.

I do not regard Attorney-General for New South Wales v Chidgey as supporting the defendant’s contentions. In Attorney-General for New South Wales v Chidgey the respondent was charged with supplying ecstasy to undercover police officers. He requested that a subpoena be issued to the Commissioner requiring production of documents relating to the controlled operations. The Commissioner of Police sought to have the subpoena set aside on the basis that there was no legitimate forensic purpose in seeking access to those documents. The Magistrate refused to set aside the subpoena in the course of committal proceedings. The Court of Criminal Appeal allowed an appeal under s 5F of the Criminal Appeal Act 1912 (NSW) on the basis that the respondent was unable to articulate a legitimate forensic purpose for requiring production of, or access to, the documents. This case is distinguishable from the present: the documents listed in the examination order are plainly relevant to the purpose of the order, for the reasons given above.

I do not discern any ambiguity in the reference to “for the past 2 years” since I regard the phrase as limiting each and every one of the categories listed above. I consider that a fair reading of the examination order is that it seeks the judgment creditor’s documents in those categories. The examination order is, in my view, sufficiently clear. The defendant has not established any textual basis on which to set aside paragraph 2 of the examination order.

For the foregoing reasons I make the following orders: