Adams v Eta Foods Ltd

[1987] FCA 402

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(For Llmlted Dlstrlbutlon Only)

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I	IN THE FEDERAL COJJRT OF AUSTRALIA	1
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BANKRUPTCY	DISTRICT OF THE	) No. 404 of 1982	I ' ,I
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STATE OF-VICTORTA 1

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Re: ALEXANDER SCOTT HACK

(A Bankrupt)

Ex Parte: ALEXANDER SCOTT HACK

(The Applicant)

THE OFFICIAL TRUSTEE IN

BANKRUPTCY (as Trustee of

the property of Alexander

Scott Hack, a bankrupt)

(The Respondent)

- Coram: -- Ryan J.

Date:	29 July 1987	.,
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REASONS FOR JUDGMENT

On 15 May 1987, a Deputy Registrar in Bankruptcy issued

to Alexander Scott Hack	("the bankrupt") a	summons in the
following form:

" IN PURSUANCE of the powers conferred on the

Registrar by Sectlon 81 of the Bankruptcy Act

1966, the Req 'istrar hereby summons you to attend

before the Registrar at Federal Court Building,

451 Little Bourke Street, Melbourne on Thursday

18 June 1987 at 10.15 o'clock in the forenoon to

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give evidence in connet:tlon iJ1 th your conduct ab

a barlkrupt and your trade dealings, property and

!	affairs, in particular:-
(4) Your alleqed use O F the names 'Alan

Haynes', 'Alan Hayes', 'E.Z.Sales', 'K.T.

Sales', 'C. & I. Sales', 'Dlrection 2000 ' and 'Cost Less Sales'.

(b)	Your alleged Incurring of liabilities to
People Magazine, West Australia Mail, 'The
Age', 3K2, Telecom Australia, The State

Electricity Commission of Vlctoria and the

National Australia Bmk.
(C)	Your alleged operation of a husiness or
buslness' under the names of 'Randy
Rhonda's', 'Lust Line', 'Sexy Sally',

'Fanny's' and 'Fantasy Land',

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AND to produce ahy of the following documents

that are in your custody or power and relate to

your trade dealings, property and affairs:-

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1. Any deed, contract, note or memorandum of

a contract or other written document as
may relate to evidence you are hereby
summoned to give in connection with any of
the matters hereinbefore mentioned.
2.	Any journals, receipt books, cheque butts,
bank statements, ledgers or other books of
account as may record any receipt,
payment, disbursement, appropriation or

other transaction by ou or on your behalf

with any debtors or creditors of yourself;

and any items of correspondence, journals,

receipt books, cheque b tts, bank

statements, ledgers or other books of

account as may relate to evidence you are

hereby summoned to give in connection with any of the matters hereinbefore mentioned.

3 .	Any copies of any of the documents
referred to in paragraphs 1 and 2 hereof
where the originals are not in your

custody or power."

The summons was Issued on the application of the Official disclosed by affidavits by the Official Receiver and two of

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hls officers which had been sworn in support of an

application for an order pursuant to s.149(0) of the

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Bankruptcy Act ("the Act") f o r an extension of the t l m p at

I whlch an ob~ection under s.l49(3)(c) of the Act would lapse.

That order was made by Jenkinson J. on 13 April 1987 when his

Honour ordered that the period at which the objection of the

Official Trustee under s.l49(3)(c) wlll lapse be the period

of five years and eight months commencing on 27 April 1982

(the date of the bankruptcy). The matters contained in those

affidavits included references to a telephone call to each of

the officers of the Ofricial Receiver on 10 and 11 March 1987

respectively, one from an anonymous female and the other from

a female who identified herself only as "Lisa". The

substance of the allegations contained in those telephone !

calls was that the bankrupt had carried	on business under, or
otherwise used, the names referred to	in the summons of 15

May 1987, and had incurred liabilities to the businesses or

entities referred to in paragraph (b) of that summons.

Application has now been made on behalf of the bankrupt

for an order pursuant to s.14(5) of the Act that the Deputy

Registrar's summons be set aslde on the ground that it is too

wide and oppressive. Alternatively, an order is sought

rescinding the order for examination by the Registrar in

Bankruptcy pursuant to which the summons of	15 May 1987 was
issued.

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The pollcy conslderations which underlle the presence

in the Act o€ s.81 were canvassed by a Full Court of thls

Court in Official Receiver v. Todd	(1986) 70 ALR 119	where
Flsher J. observed at 121:

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"Section 81 forms part of Pt V of the Act headed

'Control over Persons and Property of Debtors and

Bankrupts'. Section 77 imposes an obligation on

a bankrupt to 'discover' his property to his

trustee and 5-81 is headed 'Discovery of

Bankrupt's Property'. In this regard it is

apparent that its thrust is to ascertain the

nature, extent and whereabouts of the property of the bankrupt, In the interests of creditors. Its emphasis on property and its reference to the

I 'trade dealings, property or affairs' of the

bankrupt coincides with the power of the court	I
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under s.50 to direct a trustee to take control of

property of a debtor subsequent to

the

presentation of a petltion but prior to the P

making of a sequestration order. Subsection ( 2 )	I .
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of this section is virtually in pari materia with

5.81 and expressly refers to	an examination under
that latter section.

Each of these two sections, 81 and 50, is

available to be used in the administratlon of the

estate in bankruptcy, an administration which may

not be completed prlor to discharge. They L ,.

contrast with the public examination of a

bankrupt under s . 6 9 , the completion of which is

in some circumstances pre-condition a to !. .

discharge, and the purpose of which is the

examination of the bankrupt not only in relation

to his 'trade dealings, property and affairs' as .,

irl s.81 but also in relation to his 'conduct'.

The scope of a public examination under s.69 is

therefore wider than an examination under s.81.

In so far as the word 'conduct' is included in

5 . 6 9 , Re Smith (1960) 19 ABC 13 refers to it as

contemplating the ascertainment of information

'which could or might have something to do with

bringing about the bankruptcy of the debtor'. In

this way it contrasts with the ascertainment of

hls assets as part of the administration of hls estate. It is significant that, in circumstances where a 5.81 examination could ex hypothesi take

place subsequent to discharge, the matter of a

bankrupt's conduct whlch would have been reviewed

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in a public examination and taken into ticcount on

his dlscharge was not stated as a matter upon

l whlch €urther evidence could be requlred to be

given. " l

Mr. Barton €or the bankrupt has drawn my attention to his

Honour's indication in that passage of the width of the

concept of "conduct" and has argued that summons addressed

to a bankrupt which requlres him, as the present summons

does, to give evidence in connection with "your conduct as a

bankrupt" is, on its face, too wide and travels beyond the !-

legitimate purposes for which such a summons may be issued.

It is clear that the power to conduct an examination

which is conferred by 5.81 is in aid of the discovery and

getting in of a bankrupt's property. To use an examination

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under s.81 for what Cave J. in Re Easton (1891) B Morr. 168

at 171 called an "indirect purpose" and not to ascertain the

nature, extent or whereabouts of the property of the bankrupt

is impermisslble. See Re Alafaci (1976) 9 AI;R 262 at 270

where Riley J. cited with approval R v. West (1971) 18 FLR

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333 where s veral of the l ading authorities are

comprehensively reviewed.

However, in my view, the issue of a summons pursuant to

a power to require "evidence concerning the bankrupt or his

trade dealings, property or affairs" cannot be said to have

been procured for an indirect or ulterior purpose merely

because, on its face, it commands a witness to give evidence

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In connexlon with the bankrupt's "conduct as a bankrupt". A

bankrupt's conduct is an aspect of the bankrupt himself,

concernlng whom	s.81 expressly contemplates that evidence may
be requlred.

Bttentlon was also drawn to the fact that the summons

here in requiring production of documents does not follow

precisely the terms of Form 49 of the forms contalned in

Schedule 1 to	the Bankruptcy Rules. Rule	1 2 9 ( 2 ) of those	I	'.
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Rules prescribes that a summons under sub-s.50(2) or 81(1) of

the Act shall be in accordance wlth Form 49. The body of

that form is in the following terms:

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"In pursuance of the power conferred on the Court (or the Registrar) by section 81 of the Bankruptcy Act 1966, the Court (or the Registrar) hereby summons you to attend before the Court (or

the Registrar or a magistrate) at L:

the day of .l9 , at the hour of

o'clock in the noon to give evidence in

connexion with (give short particulars of the

matters concerning which the person is to be

examined) and to produce any of the €allowing '.

documents that are in your custody or power and	, %
relate to the abovementioned bankrupt or his	i

trade dealings or affairs: - (or, if the summons

is directed to the bankrupt, to give evidence and

to produce any documents in your custody or power

relating to yourself or to your trade dealings,

property or affairs, and, in particular, the

following documents:-

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Here, it is said, the summons does not specify particular

documents but requires the bankrupt to produce originals or i-

coples of any documents in two general classes that relate to

hi5 trade deallngs, property and affalrs. That objection may I

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well have much €orce if taken tn a summons requirmg

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production of documents by somebody other than the bankrupt.

i	may requlre a bankrupt to "produce m documents in your
flowever, Form 49 expressly contemplates that the Registrar
custody or power relating to yourself or to your trade
dealings, property or affairs". The fact that the Registrar has chosen to confine the requirement made of the bankrupt himself to a more limited class of documents than the
extremely general one indicated in Form 49, cannot, in my
opinion, invalidate the summons or provide evidence that its
issue has been procured for an ulterior or indirect purpose.

It may be easier to discern an indirect or ulterior

1	purpose in asking	a particular question	on an examination
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under s.81. If that can be done, the officer conducting the

I	examination can, and should, dlsallow the question. If that
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l	course is not followed it is always open to the court before
!	which evidence obtained in response to such an Improper
i	question is sought to be adduced, to refuse to admit that
evidence. The Oueen v. West and Re Alafaci (supra) were both
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cases in which that power was exercised. It has been

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conceded	by	Mr.	Bigmore	for	the	Official	Trustee	that	!
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questions going to "conduct" of the bankrupt unrelated to his

trade dealings, property or affairs would be impermissible as irrelevant or as directed to an indirect or ulterior purpose.

Mr. Bigmore also accepted that it is open to the bankrupt

himself or any other witness, in the course f an examination

under 5.81 to object to answer a particular question as

tendlng to incriminate hlm; (contrast s . 6 9 ( 8 ) which

expressly excludes any absolute privilege against self-incrimlnation in the public examination of a bankrupt). For example, objectlon could properly be taken to a question whether the liability to one of the businesses or entities

referred to in paragraph ( 6 ) of the present Summons, was

incurred by the bankrupt without informing the relevant

person that he was an undischarged bankrupt. (An omisslon of

that kind would contravene s.269 o f the Act) Such an

objection could be based on the ground that the question is

extraneous to the purposes which s.81 1 s framed to serve, or

on the privilege against elf-incrimination. It is

undesirable to multiply examples of that kind without the

benefit, which the Registrar will have, of full argument In

the context of each specific question to which objection may

be taken.

However, to acknowledge that certain questions in an

examination under s.81 may be impermissible for one or other

of the reasons I have just indicated, does not entail that

the issue of a summons to a bankrupt to attend for

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examination under that section has been procured solely	for
an illegitimate purpose. Some guidance on the question of

what circumstances may permit a purpose of that kind to be

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inferred is provided by the following observations of

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Lockhart J. in O€ficlal Receiver v. Todd (Supra) at 127:

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I, c ~2ct~orl 5 5 ( 8 ) propetly construed provides no

barrier to the exercise of the power conferred by

s.Rl(1) after the bankrupt is discharged rrom

bankruptcy. It may be said that this produces

hdrsh consequences. A person may be discharged

from bankruptcy and many years later brought

before the court pursuant to 5.81 to provide

information relating to events long past. There

is no substance In this argument. A discharged

bankrupt 1s expressly required by 5.152 to give

assistance to the trustee in the realisation and

distribution of such of his property as vested in

the trustee upon pain of contempt of court.

Since the undistributed property of the bankrupt

I	remains vested in the trustee after discharge there are sound reasons of policy why the machinery of the law and the administration of bankruptcy should continue to be available to the
trustee and the creditors to assist the trustee
m the performance of his continuing duties of
collection, realisation and distribution of such
of the bankrupt's assets as are vested in him
before the discharge. Section 81 is an important
weapon in the trustee's armoury. Also, the
person to be examined 1 s protected against any
misuse of the power. It is necessary for the
trustee or a creditor who seeks to examine the
bankrupt: to satisfy the court or the Registrar
that the circumstances are appropriate for the
issue of summons under s.Bl(1). Where a summons
is issued by the Registrar it is subject to
review by the court: s.14(5). It is well
established that the power conferred by s.81 must be exercised for legitimate purposes to aid the process of finding, recovering, realising and
distributing assets of the bankrupt and not as an
instrument of oppression: Re Csidei; Ex parte
Andrew (1979) 28 ALR 381; 39 FLR 387 and cases
there cited hy me."

Almost always the use of a summons under 5-81 for an indirect

purpose or as an instrument of oppression will be a matter to

be inferred from the surrounding circumstances including the

identity of the witness to whom the summons is directed. The

inference may more readily be available where the summons is

to a person other than the bankrupt. It must be remembered

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that by 9.116 of the Act property acquired by a bankrupt

before discharge is divjsibl? amongst his credltors, and th t

under s.131(2) a trust,ee may seek an order tha t all or part

of the income of a bankrupt be made available for the benefit

of his creditors. In the light of those considerations, the

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present applicant has failed to discharge the onus which, i n

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my opinion, he bears, of establishing circumstances that on

balance raise the lnference that the lssue of the summons

i	under 5.81 has been procured solely	for some indirect purpose
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l	o r as an instrument of oppression.	Accordingly,	the
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I certify that this and the ,~ ,

preceding nine ( 9 ) pages are a . ..

true copy of the Reasons for	c
Judgment of the Honourable Mr.	: '
Justice Ryan.
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Dated: 29 July 1987	_.

,ze7--2%zLQ *X

Associate

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