A recent Western Australian judgment confirms, and sets out the requirements for, full and frank disclosure when seeking orders for examination.
Griffin was the wholly owned subsidiary of Devereaux Holdings Pty Ltd. The Deed Administrators for Griffin obtained orders for examination including orders requiring that Devereaux make production at the public examinations.
Devereaux had previously issued proceedings against the Deed Administrators appealing their rejection of Devereaux's proof of debt.
As well as filing a defence the Deed Administrators had applied to join Griffin to the proceedings so as to prosecute a cross-claim against Devereaux.
The Court set out the relevant principles on an application for examination orders under s596A and 596B of the Corporations Act:  Kershaw & Rocke as Deed Administrators of Griffin Energy Group Pty Ltd (Subject to Deed of Company Arrangement)  WASC 389
- because the application for such orders is made ex parte, the applicant "must make full and frank disclosure of all matters which may impact upon the decision of the court";
- the examination summons will be set aside if there has been material non-disclosure;
- the test is whether there has been material non-disclosure not whether full disclosure would have made a difference to the court's decision; and
- it makes no difference whether the non-disclosure is innocent or intentional.
"In an ex parte hearing, it is the obligation of the party seeking orders, through its representatives, to take the place of the absent party to extent of bringing forth all the material facts which that party would have brought forward in defence of the application… That does not mean stating matters obliquely, including documents in voluminous exhibits, and merely not misstating the position. It means squarely putting the other side's case, if there is one, by coherently expressing the known facts in a way such that the Court can understand, in the urgent context in which the application is brought forward, what might be said against the making of the orders. It is not for the court to search out, organise and bring together what can be said on the respondent's behalf. That is the responsibility of the applicant, through its representative." (per Allsop J in Walter Rau Meusser  FCA 955)
So, was there material non-disclosure by the Griffin Deed Administrators? No, not in this instance. The Court concluded that failure to expressly refer to the cross claim did not amount to non-disclosure at all, let alone material non-disclosure, because:
- "any reading of the claim made by Devereaux… makes clear the nature of the dispute";
- "the claim and cross claim are different sides of the same coin";
- and"success on the cross claim would follow if Devereaux's cross claim is unsuccessful".
But full disclosure is critical and applicants for examination orders should be alert to the necessity for the utmost frankness and candour.