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Pastimes : Raymond L. Dirks Internet Research Tribunal Thread -- Ignore unavailable to you. Want to Upgrade?

To: rrufff who wrote (453)	7/9/2005 3:37:26 PM
From: StockDung	Respond to of 544

More on the former "AOL of China " New Tel Directors Freehills and Deloitte both had directorship conflicts of interest on the New Tel board. FEDERAL COURT OF AUSTRALIA findlaw.com.au IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD194 OF 2004 IN THE MATTER OF NEW TEL LIMITED (IN LIQ) ACN 009 068 955 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: PAUL DOMINIC EVANS AND DAVID WOOLFE APPELLANT AND: WAINTER PTY LTD ACN 008 725 586 RESPONDENT WAD228 OF 2004 IN THE MATTER OF NEW TEL LIMITED (IN LIQ) ACN 009 068 955 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: PETER FRANCIS MALONE APPELLANT AND: WAINTER PTY LTD ACN 008 725 586 RESPONDENT JUDGES: RYAN, LANDER AND CRENNAN JJ DATE: 15 JUNE 2005 PLACE: BRISBANE (HEARD IN PERTH) REASONS FOR JUDGMENT LANDER J: The Proceedings 1. On 12 February 2004 the respondent, Wainter Pty Ltd (Wainter), issued proceedings seeking orders under s 596A and s 596B of the Corporations Act 2001 (Cth) (the Act). 2. The respondent sought an order pursuant to s 596A of the Act for the Court to issue examination summonses directed to Peter Francis Malone and Paul Dominic Evans to attend before the Court to be examined in respect of the examinable affairs of New Tel Limited (in liq) (New Tel) and to produce certain documents to the Court. 3. The respondent also sought an order pursuant to s 596B of the Act for the Court to issue an examination summons directed to David Woolfe requiring him to attend before the Court for the purpose of being examined in respect of the examinable affairs of New Tel and to produce certain documents to the Court. 4. The application for the orders for the issue of the examination summonses was supported by an affidavit of a director of the respondent, Barry Granville Waller. 5. On 4 March 2004 District Registrar Jan made the following orders: ‘1. Summonses for examination under section 596A of the Corporations Act be issued to Peter Francis Malone and Paul Dominic Evans in the form of the draft summonses as amended filed on 27 February 2004 and addressed to those persons respectively. 2. A Summons for examination under section 596B of the Corporations Act be issued to David Woolfe in the form of the draft summons as amended filed on 27 February 2004 and addressed to him. 3. Each of the summonses be returnable before a Registrar on a date and time to be fixed by the District Registrar. 4. The examinations be recorded in writing and the examinees do sign the written transcripts of their respective examinations.’ History 1. Mr Evans was a director of New Tel between 27 September 1996 and 16 August 2001. Since 23 June 2000 he has been a partner in the law firm, Freehills. Mr David Woolfe was a partner in Freehills at least between 23 June 2000 and September 2003. 2. Mr Peter Malone was also a director of New Tel who remained in office until that company went into administration on 10 December 2002. 3. In April 2000 the respondent entered into an agreement with Cable and Telecom Ltd (CAT) to sell its shares in its subsidiary company, UDC Group Pty Ltd (later called E Communications & Networks Ltd) to CAT. 4. The consideration payable by CAT to the respondent was cash of $5 million payable in two tranches; $1.5 million at settlement; and a further $3.5 million within 12 months of settlement; and the allotment to the respondent of 35 million ordinary shares in CAT. 5. On 23 September 2001 New Tel announced a conditional script takeover of CAT subject to a number of conditions. 6. Mr Waller deposes that on 27 November 2001, and before New Tel issued a formal bidder’s statement in respect of the takeover of CAT, he had a telephone conversation at which both Mr Malone and Mr Woolfe were present and both spoke at times. He said that during that telephone conversation Mr Malone and Mr Woolfe told him that New Tel required Wainter to forgo the debt owed by CAT under the agreement. The debt then stood at $3.6 million, which included interest of $100,000. 7. Mr Waller said that he was told that such a course was in the respondent’s interests because otherwise the New Tel takeover would not proceed. He was told that if the debt to Wainter were extinguished, the shares in New Tel (which Wainter would acquire by reason of the takeover) would increase in value. Also, if Wainter were to agree to the proposal, New Tel would issue 2 million options in New Tel to Wainter. 8. Mr Waller said that he thought about the offer and later telephoned Mr Woolfe and advised him that the respondent agreed to the proposal. 9. Later, documentation was executed whereby the respondent assigned the $3.6 million debt to New Tel and acquired shares and options in New Tel in consideration of the CAT shares and options owned by the respondent. 10. On 10 December 2002 an administrator was appointed to New Tel. On 13 January 2003 Philip Patrick Carter and Gregory Winfield Hall were appointed liquidators of New Tel pursuant to a creditors voluntary winding up. On 4 March 2003 Mr Hall was appointed official liquidator. 11. Mr Waller has deposed: The liquidators will examine Messrs Paul D Evans (former director of New Tel and current partner of Freehills) and David Woolfe (former solicitor of New Tel and current partner of Freehills) pursuant to the Corporations Act examination procedures and require them to produce to the court all relevant documents held by them in relation to New Tel Ltd. Further, the liquidators will waive, in relation to our client Wainter Pty Ltd (“Wainter”), any legal professional privilege between Freehills and/or Messrs Evans or Woolfe and New Tel. The Proceedings before the Primary Judge 1. The appellants contended before the primary judge that the sole purpose of the proposed examination was to elicit evidence in relation to causes of action said to have arisen out of the representations made by Mr Malone and Mr Woolfe on 27 November 2001. They contended that the examinations would be of no benefit to New Tel. The examinations, it was submitted, were sought to be conducted to give the respondent a forensic advantage. Indeed, it was suggested that the examinations could be used to obtain evidence to bring proceedings against New Tel thereby disadvantaging other creditors. 2. The appellants argued that the examination summonses should be set aside because the purpose of the examinations was improper and an abuse of the Court’s processes. 3. The primary judge found that the respondent’s purpose was not improper and did not amount to an abuse of process. First, he concluded that the examinations could provide information of use to the liquidator in respect of claims of possible insolvent trading by directors. That, he said, would depend upon the examinations themselves. 4. Secondly, he found that, if the examinations provided evidence upon which the respondent could rely in an action against Freehills and thereby recover its losses from Freehills, the respondent would not seek to recover any of those losses from New Tel or from New Tel’s director, Mr Malone, or his insurers. It followed that, if the respondent recovered its losses from Freehills that would mean the other creditors would be likely to receive an increased dividend. The application of those principles to the facts on these appeals 1. The respondent was a creditor and shareholder in CAT but after the 27 November 2001 conversation assigned that debt to New Tel in consideration of taking shares and options in New Tel. 2. There was no debt owing to the respondent at the time when New Tel went into liquidation. It claims to have a chose in action against New Tel arising out of that conversation which would lead to an award of damages in the order of $60,000,000. The chose in action is said to arise under s 1041H and s 1041I of the Act. The claim against New Tel arises because Mr Malone was at the relevant time a director and Mr Woolfe was acting on behalf of New Tel. 3. The respondent also claims that Mr Woolfe and Freehills (because Mr Woolfe was a partner in Freehills at the relevant time) are liable to it apparently under the Trade Practices Act and Fair Trading Act (WA). 4. Mr Waller has deposed in his affidavit that the respondent is seeking to establish what the respondent and Messrs Malone and Woolfe knew at the time of the conversation of 27 November 2001. 5. The respondent wishes to use that information in an action which it contemplates bringing against Freehills which, if successful, would compensate the respondent for the loss it suffered and would increase the pool of funds available to the other creditors of New Tel. 6. In paragraph 33 of Mr Waller’s affidavit he has deposed to the potential benefits to New Tel if the examinations were allowed to proceed. 7. If the respondent were to bring proceedings against Freehills or Messrs Malone and Woolfe and were to recover the amount of the damages suffered by the respondent, then New Tel and its creditors would thereby benefit. New Tel would benefit by being released from any liability it owed to the respondent. The creditors would also benefit. 8. There is no doubt that, if the presentations are allowed to stand, the respondent will obtain a significant advantage which would not have been available to the respondent if New Tel had not gone into liquidation. 9. However, the fact that it will obtain an advantage does not mean that its application for these orders amounts to an abuse of process. 10. Because New Tel stands to benefit from any action brought by the respondent against Freehills, in my opinion, it cannot be said that this application is an abuse of process. 11. For those reasons, I would dismiss the appeals. 12. The appellants should pay the respondent’s costs of the appeals.

To: rrufff who wrote (453)	4/10/2006 4:34:12 PM
From: StockDung	Read Replies (1) \| Respond to of 544

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