Walton v Arrium decision – key issues on public examinations, public interest, private benefits
This judgment was an appeal from the New South Wales Court of Appeal judgment in ACN 004 410 833 Ltd (in liq) v Walton [2020] NSWCA 157.
Section 596A of the Corporations Act requires a court to issue an order to persons for summons for examination or to produce documents where a company is under administration, being restructured, operating under a deed of company arrangement or had been wound up.
The Court decided that the key question in determining whether to allow an examination is whether a litigant's predominant purpose is inconsistent with the scope and purpose of the statutory process.
The New South Wales Court of Appeal had set aside a summons under s 596A because a proposed examination of a former Arrium director had been sought for a private purpose to benefit a limited group of former Arrium shareholders and as such constituted an abuse of process, despite the shareholders being authorised to apply to the court by ASIC. The shareholders’ application to ASIC was based on the examination being of eventual benefit to the company’s creditors, although future court proceedings would be confined to a limited class of former Arrium shareholders.
A 3:2 majority of the High Court held that the summons was not an abuse of process because s 596A permits examinations to pursue claims against a corporation in external administration or one of its officers or advisers, regardless of whether it is in the corporation's interests or whether claims relate to all or only some of the corporation's creditors or contributories. The public interest is now more relevant to the definition of abuse of process.
This judgment will be discussed in forthcoming updates to annotations to provisions of the Corporations Act 2001 (Cth) in Corporations Legislation by Edmund Finnane and in Robson’s Annotated Corporations Legislation by Dr Robin Bowley.