Served Examination Summons?

If you’ve been involved in the affairs of an insolvent company, you may find yourself compulsorily summoned by an insolvency practitioner or the Australian Securities and Investments Commission to appear in the Federal Court or a Supreme Court and be publically examined about the affairs of the company.

The worst thing you can do is ignore an examination summons – it’s an order of the issuing court and, unless you get yourself specifically excused, you must comply with the order or risk being found in contempt of court.

Here’s a run-down of what you should do.

What’s an examination summons?

It’s a legal document issued by the Federal Court of Australia or a State / Territory Supreme Court at the request of person authorised under the Corporations Act 2001 (Cth) – such as a liquidator or ASIC – to compel a party to produce documents and attend the court to be examined about the “examinable affairs” of the insolvent company.

The aim of a public examination is to enable the examiner to hone in on the affairs of a failed company in a bid to expose and clarify information that may assist in the winding up of the company and to benefit its creditors.

There are two types of examination summonses:

  • One for a mandatory examination of past and present company officers (and provisional liquidators) where, in this context, “mandatory” means the court doesn’t have to be satisfied the target of the summons did take part or was concerned in the company’s examinable affairs before the court will issue the summons; and
  • One for a discretionary examination of parties external to the company where, in this context, “discretionary” means the court does have to be satisfied the target of the summons did take part or was concerned in the examinable affairs of the company before the court will issue the summons.

A company’s “examinable affairs” is wide-ranging and can encompass things like:

  • the events leading up to the company’s insolvency and winding up;
  • the formation, management and operations of the company;
  • the company’s relationship and trading term with debtors and creditors;
  • the company’s property; and
  • the conduct of the company’s directors.

Do you have to respond?

Yes, an examination summons is an order of the issuing court. Unless you get yourself specifically excused from compliance, failure to respond is a contempt of court. In severe cases, you may be arrested for that contempt.

Don’t panic – you’re not being sued – but you should get legal advice quickly so you understand what you’re being ordered to do and by when. Chances are you’ll need to search for the documents being summoned and your lawyer will need time to properly advise you whether you should seek to be excused from compliance with the summons.

How do you get excused?

If you can’t get the person summoning you to agree you’re excused from some or all of the summons requirements, you need to make an application to the relevant court to be excused from complying with the summons.

You’ll be excused from compliance only in very limited circumstances, including where the examination is being conducted:

  • vexatiously, for example, to bully settlement of a claim against the recipient of a summons or destroy a recipient’s credibility;
  • for an ulterior purpose, for example, to circumvent other court procedures or orders in litigation concerning the recipient of the summons; or
  • as a dress-rehearsal of current or anticipated litigation against the recipient of the summons.

Do you have to produce original documents?

No, unless the summons specifically asks for original documents. For example, original documents might be sought where the authenticity of a document is in dispute, or the insolvency practitioner can’t determine which version of a company document was the final one. Otherwise, a copy of a document is fine.

Do you have to answer every question asked during the examination?

Yes, the examination is compulsory and inquisitorial in nature, but there’s some protection against self-incrimination. It’s also important to remember that you’ll be answering questions in a court under oath, so you should tell the truth or risk your credibility being publically damaged.

In an ordinary court case, a witness can refuse to answer a question on the basis it will incriminate them. Not so with an examination under the Corporations Act where the examiner has the power and is required to investigate a matter to decide what legal action should be taken based on the information of the examinee.

In an examination, while you must answer every question put to you, you can protect yourself by asserting privilege against self-incrimination before answering a question. Claiming this privilege will prevent your evidence from being directly used against you in a criminal proceeding or a civil penalty proceeding, however, it doesn’t stop the examiner from using elsewhere information derived from your answer.

Who pays the costs of your compliance?

Broadly, the party who had the examination summons issued to you. However, given the aim of examinations under the Corporations Act, what is compensable is less than what would be compensable for complying with, say, a subpoena.

For example, a person summoned under the mandatory provision isn’t entitled to be compensated for their costs of complying with the examination summons. This is because the person is or was involved in the management of the insolvent company and, therefore, is obliged to assist the examiner to understand the affairs of the company.

Conversely, a person summoned under the discretionary provision is entitled to be compensated for their costs of compliance because this person is a stranger to the management of the company.

No examinee is entitled to the cost of legal representation during the examination, although you can have a lawyer attend court to act for you.

The talented team at Meyer Vandenberg can assist you with any of the issues discussed above, just call…

For more information contact the Commercial Dispute Resolution Team:

(02) 6279 4444 or