The High Court this afternoon unanimously dismissed Clive Palmer and Ian Ferguson's challenge to the constitutional validity of section 596A of the Corporations Act.

This means that a liquidator's power to publicly examine and compel the production of documents remains intact and removes any doubt about the powers of liquidators under section 596A of the Corporations Act.

Arguments made by Clive Palmer and Ian Ferguson

It was argued by the Applicants that for the following reasons, the Federal Court had no power to issue examination summonses under the Corporations Act. The submissions in support were, in summary:

  • the power to summon a person under s 596A does not satisfy the “classical test” of judicial power and thus does not fall within the core of the judicial power of the Commonwealth. This is because the issue of a summons pursuant to s 596A does not call upon the Court to determine rights, duties or liabilities in relation to the party summoned;
  • the power under s 596A is not incidental or ancillary to the exercise of judicial power, at least in the case of a voluntary winding up;
  • the power under s 596A is not sufficiently analogous to a power historically exercised by the courts at Federation so as to constitute an exercise of the Commonwealth’s judicial power under s 71 of the Constitution;
  • in the alternative, the test of historical analogy should no longer be applied;
  • a section 596A summons is not a “matter” that meets the requirements of s 76 of the Constitution;
  • the form of the s 596A summons is substantially different to how summonses were issued pre federation;
  • by issuing an examination summons, there is a real risk that the Court may not be, or be seen to be, independent and impartial in the exercise of any judicial function in subsequent proceedings; and
  • the exercise of a non-judicial function under s 596A impairs a judge’s ability to perform judicial functions.

Arguments made by the Liquidators supported by the Attorney Generals for the Commonwealth, Queensland, Victoria and South Australia

It was argued by the Defendants that the power to summon a person for examination may be validly conferred on federal courts and courts exercising federal jurisdiction as:

  • there is no exhaustive or exclusive test of judicial power; rather, the characterisation of a power requires regard to the powers that were exercised by the courts at Federation;
  • there is a long established power of the Federal Court to issue summonses to examine a person concerned in the affairs of a company that pre dates Federation;
  • the power to order an examination is incidental to the general supervisory jurisdiction of the court over the winding up of a company, including a company in voluntary liquidation; and
  • the conferral of power under s 596A to order an examination does not undermine the institutional integrity of the courts. On the contrary, the power to order and supervise an examination is properly conferred as allows courts to ensure the process is not abused.