The long held contention over whether receivers and mortgagees in possession had the same powers as liquidators to hold public examinations has finally been put to bed.
The decision in Saraceni v Jones  WASCA 59 is the first time an appellate court in Australia has considered the constitutional validity of the compulsory examination powers in section 5.9 of the Corporations Act, as they apply to corporations whose assets are controlled by receivers or mortgagees in possession.
The plaintiff disputed that it was constitutionally valid because the examination power in such a context involves ‘neither the exercise of judicial power or power that is incidental to a judicial power.’
While this is a decision of the WA Court of Appeal, the ramifications apply nationally in relation to the Corporations Act and its regulations.
Until such time as the High Court hears a similar matter and rules otherwise, it is now acknowledged that powers of compulsory examination in sections 596A and 597 of the Corporations Act are constitutionally valid in connection with corporations in private receivership and in respect of which a mortgagee has entered into possession.
Additionally, the judgements in this case apply to external company administrations, such as voluntary administrations, deeds of company arrangement, and to the examination powers under section 596B of the Act.
We welcome this ruling and its implications; we expect that it will assist in deterring those intending to impede ‘examinable affairs of corporations in external administration’ actions. Perhaps we will even see receivers use these powers more readily.