Public examinations are a powerful tool used by liquidators to investigate a company’s affairs, uncover misconduct, and pursue asset recovery. These examinations, conducted under the Corporations Act 2001 (Cth), compel individuals to provide evidence relevant to a company’s liquidation. However, some individuals attempt to avoid appearing for examinations by citing health issues. This begs the question: is poor health a legitimate excuse to avoid a public examination? This article explores this issue, using the case of Robert Michael Kirman and Robert Conry Brauer as Joint and Several Liquidators of Renbec Pty Ltd (In liq) and of Seawest International Pty Ltd (In liq) [2019] WASC 130 (“Renbec”) as a case study.
Public Examinations: The Legal Framework
Under section 596A of the Corporations Act, liquidators have the right to summon individuals for public examination if they are an officer of the company or were involved in its management. Section 596B extends this power to individuals who may have relevant knowledge of the company’s affairs. Courts generally take a firm stance in enforcing these summonses, recognising their importance in ensuring transparency and asset recovery in corporate insolvencies.
While individuals can seek to set aside an examination order, the legal threshold for doing so is high. Courts require compelling evidence that appearing would cause undue hardship or be oppressive. One commonly cited reason is medical incapacity. But does this argument hold up in practice?
The Renbec decision
Background
In Renbec, the liquidators of Renbec Pty Ltd (In Liquidation) and Seawest International Pty Ltd (In Liquidation) (together, the Companies) sought to examine the director of related entities to the Companies regarding the Companies’ financial affairs. The examinee (Mrs Hawes), sought to have the examination summons set aside, arguing that serious health issues prevented her participation.
Mrs Hawes presented a letter from her GP claiming that stress and anxiety would have a severe impact on their health if required to participate in the examination. The letter did not make any diagnosis but rather contained general statements that Mrs Hawes was unfit to attend court and that if forced to do so, she “may suffer a further deterioration in her mental health”. The argument was that appearing would pose a significant risk to her well-being, making Mrs Hawes’ participation oppressive.
The Court’s Decision
The Court noted that one of the main criteria for assessing whether a summons for examination could set aside on the basis that the examinee was not in good health was whether the examinee could understand the matters at issue. Other relevant considerations were whether the health conditions made participation impossible and whether accommodations could be made. Based on the affidavit filed by Mrs Hawes, the Court determined that she had demonstrated that she had knowledge of the companies’ examinable affairs. The affidavit did not suggest any inability to understand the relevant matters in issue.
The liquidators were particularly interested in certain transfers of assets, apparently for no consideration, to entities controlled by Mrs Hawes which were related to the Companies. The Court ultimately found that there was no basis to set aside the summons and that the liquidators were entitled to examine Mrs Hawes about those transactions.
The Court ultimately ruled that the examination should proceed. It found that while the individual had health concerns, the medical evidence did not establish that participation was entirely unfeasible. The Court emphasised that stress and discomfort alone are not sufficient grounds to avoid a public examination.
Can Health Issues Excuse Non-Appearance?
- Medical Evidence Must Be Strong and Specific: Courts require clear, objective medical evidence that attending an examination would pose a significant health risk. Vague claims of stress or discomfort are unlikely to succeed.
- Courts Will Consider Reasonable Adjustments: If a person has legitimate health concerns, the Court may allow accommodations such as:
- Conducting the examination remotely (via video link);
- Shortening sessions or allowing breaks; and
- Deferring the examination until the individual’s condition improves.
- Prior Conduct Matters: If an individual claiming ill health has been engaging in business activities, travel, or other demanding tasks, the Court is likely to view their claim with skepticism.
- Examinations Are Rarely Set Aside Entirely: A complete exemption from examination is unlikely unless the person is truly incapable of participating in any form. Courts are reluctant to deprive liquidators of critical evidence without compelling justification.
Practical Advice for Individuals Citing Health Issues
- Obtain Detailed Medical Reports – Ensure any medical reports specifically address the impact of the examination and provide clear conclusions on incapacity. Such reports should also contain specific diagnoses and explain how the condition would inhibit the examinee’s ability to participate.
- Be Prepared for Alternative Solutions – Rather than seeking to avoid examination entirely, request accommodations that allow participation while considering health constraints.
- Be Transparent – Courts take a dim view of individuals who exaggerate health issues to avoid scrutiny. Ensure all claims are supported by credible evidence.
- Seek Legal Advice Early – If health is a genuine concern, legal counsel can help frame the argument in a way that maximises the chances of obtaining reasonable accommodations.
Conclusion
Claiming bad health to avoid a public examination is a high-risk strategy that is unlikely to succeed unless there is strong medical evidence demonstrating true incapacity. Courts recognise the importance of public examinations in uncovering misconduct and recovering assets for creditors. While genuine health concerns are considered, they will not automatically exempt an individual from appearing. Instead, courts are more likely to grant modifications to the examination process rather than setting aside the order entirely.
For individuals facing a public examination, the best approach is to engage proactively with the process, seek reasonable adjustments if necessary, and ensure any medical claims are well-supported by clear, objective evidence.