In the matter of AE&E Australia Pty Limited (in liquidation) [2013] NSWSC 123

Supreme Court New South Wales

Medium Neutral Citation: In the matter of AE&E Australia Pty Limited (in liquidation) [2013] NSWSC 123 Hearing dates: 7 February 2013 Decision date: 07 February 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Interlocutory process dismissed. Applicant to pay costs. Catchwords: CORPORATIONS - Liquidators examination - Application to vacate dates fixed for examination - Whether advances interests of creditors - Whether prejudice to liquidators - Whether prejudice to public interest. Legislation Cited: Civil Procedure Act 2005 (NSW) s 56 Corporations Act 2001 (Cth) Category: Interlocutory applications Parties: Martin John Green and Peter Paul Krejci as joint and several liquidators of AE&E Australia Pty Limited (in liquidation) (Plaintiffs) Representation: Counsel: C. Harris SC (Plaintiff) F. Kunc SC/K. Williams (Applicant) Solicitors: Colin Biggers & Paisley (Plaintiff) Clayton Utz (Applicants) File Number(s): 2013/313308

Judgment - EX TEMPORE 1The applicants Sino Iron Pty Limited ("Sino Iron") and Mr Dong Yi Hua ("Dr Hua") apply to vacate an examination of Dr Hua which has been set down before a Registrar of the Court for two days on 11-12 February 2013. They seek an order that the examination instead be listed on 25 February or on a date after 6 March 2013. There is an difficulty with the second order sought, which will have implications for the wider application, namely that the next available date on which a Registrar would be available to hear an examination would be a single day on 11 March 2013, a second single day in March 2013 or dates in April 2013. 2By way of background, Dr Hua was summoned for examination on the application of Martin John Green and Peter Krejci ("Liquidators") as joint and several liquidators of AE&E Australia Pty Limited (in liquidation). The applicants tendered paragraph 7 of an affidavit of Mr Green dated 9 October 2012 which indicates that, inter alia: "The examinations and order for production relate, firstly, to AE&E's prospects of recovering any amounts that might be awarded against [Sino Iron] in a pending arbitration relating to a project in Western Australia." 3The applicants accept in submissions before me that the purpose identified in Mr Green's affidavit was a proper purpose for an examination. A second purpose for the examination was also identified by the Liquidators; the applicants do not accept that second purpose is a proper purpose for an examination; but it is not necessary to resolve that question for purposes of this application where it is accepted that the first purpose is a proper purpose for an examination and no application to set aside the examination had been made. 4By way of further background, the Liquidators in late 2012 sought production of documents relating to Sino Iron's financial position from its auditors PricewaterhouseCoopers, and a narrower range of documents than originally sought were produced by agreement. Dr Hua was originally summoned to appear for examination, by a summons dated 16 October 2012, on 11 November 2012, but that date was then varied to 11-12 February 2013. It follows that the present dates for the examination are four months after the examination summons was issued and three months after the present dates were set. 5There has been correspondence between the applicants' solicitors and the Liquidators' solicitors as to the purpose of Dr Hua's examination. On 14 January 2013, Sino Iron and Dr Hua filed an application to uplift a copy of the Liquidators' affidavit in support of the examination summons; that application did not proceed after the Liquidators made available a redacted version of that affidavit to the legal representatives of Sino Iron and Dr Hua subject to confidentiality undertakings. By letter dated 5 February 2013, shortly after the redacted version of the Liquidators' was made available to them, the solicitors for Sino Iron and Dr Hua wrote to the Liquidators' solicitors contending that the material made available by PricewaterhouseCoopers demonstrated that Sino Iron was capable of meeting any judgment or order against it in the arbitration; that there was nothing further that Dr Hua could add; and inviting the withdrawal of the summons for Dr Hua's examination. That letter indicated that Sino Iron was willing to make its finance director Mr Charles Yau, who is also a director of Sino Iron and its holding company, available for examination on "specified financial queries" in place of Dr Hua on the dates presently allocated for Dr Hua's examination. 6The letter dated 5 February also indicated, for the first time, that Dr Hua would seek an adjournment of the examination presently set down for 11-12 February (dates which, I repeat, had then been in place for three months since November 2012) which fell at a time of "critical importance" for Sino Iron's business because, in the following week commencing 18 February, the global chairman of Sino Iron's ultimate parent company and senior officers of a financier to it were travelling to Perth to inspect Sino Iron's key project, which is a $10 billion iron ore project in Western Australia. That letter stated that the timing of the meeting was not "dictated" by Dr Hua and that he was busy preparing for the meeting and would be involved in internal and external meetings and site visits in the week commencing 11 February and that Sino Iron was concerned as to disruption to that preparation and potentially serious consequences for the project if he were required to attend for examination at that time. I will return to these matters below. 7The Liquidators did not take up the suggestion for an examination of Mr Yau in place of Dr Hua, and also did not agree to an adjournment of Dr Hau's examination, when they were then advised by the Court that the next available dates for an examination of Dr Hua were, at that time, in April 2013 and they contended that the arbitration proceedings would by that time be significantly advanced. I interpolate that those proceedings had been under way for some considerable time with the hearing due to take place in late 2013. 8The applicants do not, in this application, seek to set aside Dr Hua's examination. They rely on an affidavit of their solicitor, Mr Alistair Fleming dated 6 February 2013, which advances the suggestion that it would be preferable if the Liquidators identified what Dr Hua could add to the documents produced by PricewaterhouseCoopers or instead examine, at least in the first instance, Sino Iron's director of finance, Mr Yau, on the dates presently allocated for the examination of Dr Hua. Mr Fleming's affidavit also indicates, on information and belief from Sino Iron's general counsel, Mr Knowles, the matters referred to in the letter dated 5 February 2013. There is one slight difference between that letter and the information contained in the affidavit, namely that the letter dated 5 February referred to Sino Iron's "concern" that any disruption to Dr Hua's preparation for the meeting in the week of 18 February may have serious consequences for the project, whereas the affidavit adopts the somewhat more emphatic language that: "Any disruption to Dr Hua's preparation for that meeting is likely to adversely affect the conduct of that meeting and may have serious consequences for the project". 9During the course of counsels' submissions, I raised the fact that there was no indication in Mr Fleming's affidavit of when the meeting to take place in the week of 18 February was organised. The applicants reopened their case, by leave, to lead a further affidavit of Mr Fleming which indicated, on information and belief from Mr Knowles, that the relevant meeting: "was first floated in January 2013, however Sino Iron was not told that the meeting was confirmed for the week commencing 18 February until late in the afternoon on Tuesday 5 February 2013". 10It will be noted that 5 February 2013 is also the date of the letter to which I referred above, which in turn referred to the fact that Dr Hua would be seeking an adjournment of his examinations. It will also be noted that, both in the 5 February letter and in the affidavit, it is stated that the timing of the meeting was not "dictated" by Dr Hua. There is, however, no indication of what, if any, account was taken when the date of the meeting was set of the dates for Dr Hua's examination which had already been set by the Court, or whether Dr Hua then raised any concern that the proposed date for the meeting might cause difficulty given the dates already allocated by the Courts for his examination. There is also no explanation in the letter or in Mr Fleming's affidavit of what, if any, steps had been taken by Dr Hua or Sino Iron to organise their affairs so as to seek to accommodate both Dr Hua's examination and the preparation for the proposed meeting in the following week. There is no detailed identification of the basis of the apprehension of prejudice to Dr Hua's preparation for the meeting or of how that disruption to his preparation "may" adversely impact on Sino Iron and the project. There is also no explanation as to why that issue had not be raised with the Liquidators, or with the Court, when the meeting was first floated in early January rather than being deferred to the letter dated 5 February to the Liquidators' solicitors. I will return to that matter below. 11The question whether to vacate the dates fixed for the examination needs to be determined having regard to several matters. These include, relevantly, the need for all proceedings in the court to be conducted with a view to the just, quick and cheap resolution of matters in dispute reflected in s 56 of the Civil Procedure Act 2005 (NSW); the importance of the statutory regime for the liquidators' examinations in effecting the purposes of Chapter 5 of the Corporations Act 2001 (Cth), including specifically advancing the interests of the creditors of insolvent companies; the respective prejudice to the Liquidators of vacating the dates presently allocated for Dr Hua's examination and to Dr Hua and Sino Iron of maintaining them; and finally, the prejudice to the public interest of the loss of court time, when the application to vacate the examination dates are made too late for alternative matters to be listed before the Registrar. 12I have ultimately concluded that the balance favours maintaining the present dates for Dr Hua's examination, rather than vacating them for several reasons. 13First, I should proceed on the basis that the examination is being conducted for a proper purpose, since the examination summons was issued by a Registrar who was satisfied of that matter in order to issue it; no application to set it aside has been brought; and the applicants have properly conceded that at least the purpose to which I referred above is a proper one. 14Second, I should proceed on the basis that Dr Hua is a person who is properly examined for the same reasons. I give little weight to the suggestion that the Liquidators should be satisfied with the documents produced by PricewaterhouseCoopers or the offer of Mr Yau for examination in place of Dr Hua. As a matter of fact, they are evidently not satisfied by those matters, and the Court has previously been satisfied that Dr Hua may properly be examined. I do not consider that the Liquidators are obliged, having justified that course to the Registrar at the time the summons for Dr Hua's examination was issued, to then go further to demonstrate that alternative courses that may be proposed by Sino Iron or Dr Hua should not be adopted in its place. 15Third, the evidence as to the detriment suffered by Sino Iron is put in very general terms and, in my view, has significant gaps. Where the proposed meeting for the week of 18 February was floated at some time in January, although not confirmed until 5 February, there is no explanation why Sino Iron and Dr Hua could not have organised their affairs so as to accommodate both Dr Hua's obligations in respect of attendance at the examination and the time needed to prepare for those meetings. The identification of the other internal and external meetings proposed for the week of 11 February is so general that the court is unable to be satisfied that those meetings are of such significance that they should take priority over the public interest in Dr Hua attending for examinations at a time that was set three months ago. There is no detailed identification of the apprehended detriment to Sino Iron's preparation for the meetings and no detailed explanation of the link between any such detriment and the apprehended risk of detriment to the project. 16I also give considerable weight to the delay in raising this matter with the Liquidators' legal representatives. I accept, as Mr Kunc who appears for the applicants submits, that Sino Iron and Dr Hua may in fact have focused first on the proper purpose for the examination and only then on Mr Hua's availability. However, on the evidence now before me, Sino Iron and Dr Hua knew since sometime in January of the possibility of the meetings in the week of 18 February and they presumably knew or could have known at that time of any difficulty that would arise from those matters for Dr Hua's availability for the examination. They did not raise that matter with the Liquidators until 5 February. I think I can properly infer that the availability of alternative dates for an examination will, in the ordinary course, and even over the court vacation, reduce with the passage of time. It seems to me that an applicant who seeks to vacate the dates set for an examination for reasons, even strong reasons, of corporate convenience needs to act promptly to do so, and is more likely to succeed if such an application is brought early than in circumstances where delay will have meant the examination can only be rescheduled at a date some further time in the future. I do not regard the offer of making Mr Yau available for examination in Dr Hua's place as a mitigant of that difficulty for the reasons I have noted above. 17On the other hand, it sees to me that the prejudice to the Liquidators from vacating the examination is real. Mr Kunc properly draws attention to the fact that the Liquidators have led no evidence of such detriment, but it must be recognised that they are today meeting an application which was first foreshadowed on 5 February and was made returnable instanter today. It seems to me I can readily infer that the Liquidators, their counsel and their solicitors will have organised their affairs on the basis of dates for the examination of Dr Hua set three months ago. No offer was made in the application before me to compensate the Liquidators for the costs thrown away by vacating the examination dates, although I could, no doubt, have imposed such an order as a term of vacating the examination. Given the identified purpose of the examination, now accepted as a proper purpose, it is likely that delay will be disadvantageous and longer delay more disadvantageous, since it is inevitable that costs will be incurred in respect of the arbitration on an ongoing basis. Third, and importantly, it is not clear that the examination, which it appears will require at least some use of an interpreter, would be able to be completed in the one day available to the Court on 11 March. Finally, it should not be forgotten that there is a prejudice to the public interest in vacating the examination at short notice, since two days have been set aside for a considerable time for the Registrar to hear that examination, and other litigants, including other liquidators who might have conducted other examinations on those days, have now lost the ability to use those days in circumstances that it is now likely to be too late to list other matters before the Registrar on those days. 18For all these reasons, I decline to order that the examination of Dr Hua scheduled for 11 and 12 February 2013 be vacated. The interlocutory process made returnable before me today be dismissed. In the ordinary course, costs will follow the event and the applicant should pay the liquidators' cost of the application. I make orders that: 1. The interlocutory process dated 7 February 2013 be dismissed. 2. The applicant pay the liquidators' costs of and relating to the interlocutory process.

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