Bride & Anor, Re E.J.; Stewart,G.S. & Anor, Ex Parte
[1988] FCA 395
•26 JULY 1988
Re: EDWARD JAMES BRIDE and WENDY MARGARET BRIDE
Ex parte: BRYAN GUTHRIE STEWART
And: BERNARD PUTNIN
No. 455 of 1984
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT
OF THE STATE OF WESTERN AUSTRALIA
GENERAL DIVISION
French J.(1)
CATCHWORDS
Bankruptcy - compulsory examination under s.81 - application to set aside summons - third party accountant allegedly involved in affairs of bankrupts prior to bankruptcy - alleged delay on part of trustee in seeking examination - alleged collateral purposes - disputed facts as to examinee's involvement - relevant principles - application dismissed.
Bankruptcy Act 1966 s.56, s.81
Official Receiver v Todd (1986) 70 ALR 119
Ex parte Willey. In re Wright (1883) 23 ChD 118
In re Northern Australian Territory Company (1890) 45 ChD 87
Re Maundy Gregory Ex parte Norton (1935) 1 Ch 65
Re Andrews (1958) 18 ABC 181
Re Csidei; Ex parte Andrew (1979) 28 ALR 381
Re H.J. Price (No.3) (1948) 14 ABC 137
Rees v Kratzmann (1965) 114 CLR 63
Re Rolls Razor Limited (No.2) (1970) Ch 576
Re Abrahams; Ex parte Thomas (1985) 70 ALR 784
HEARING
PERTH
#DATE 26:7:1988
Counsel for the Applicant: Mr K. Dundo
Solicitors for the Applicant: Robinson Cox
Council for the Respondent: Mr. R.G.S. Harrison
Solicitors for the Respondent: Warren Harrison
ORDER
The application is dismissed.
The applicant is to pay the respondent's costs of the application.
The application is dismissed
Costs
Note: Settlement and entry of orders is dealt with in
Rule 124 of the Bankruptcy Rules.
JUDGE1
Prior to 6 September 1984 Edward James Bride and his wife, Wendy, carried on a partnership business producing and selling stock food under the firm name "Oat Milling of Katanning". On 6 September 1984 they became bankrupt on their joint petitions filed pursuant to s.56 of the Bankruptcy Act 1966. On 24 February 1986 they were discharged from bankruptcy by order of Muirhead J.. On 23 March 1987, their trustee in bankruptcy, Bernard Putnin, procured the issue of a summons under s.81 of the Act requiring that Bryan Guthrie Stewart, an accountant who had had an involvement in the business affairs of the Brides and related companies, attend before the Registrar to give evidence in connection with various matters said to arise out of that involvement.
Mr Stewart subsequently filed an application that the summons be set aside. Affidavits were filed by the parties and some oral evidence received as well as submissions as to the propriety of the summons.
Factual BackgroundThe background to the present application is not without complexity. Prior to 1982, it appears that Mr and Mrs Bride carried on their stockfeed business in partnership only. In 1982 they incorporated two companies, Swan Stock Foods Pty Ltd and Bride Foods Pty Ltd. Swan Stock Foods Pty Ltd was formed to manufacture and sell stock food, while Bride Foods Pty Ltd was to produce and sell oatmeal and muesli for human consumption.
Their incorporation was carried out at the suggestion of the then State Manager of the Australian Bank Limited, no doubt to facilitate finance and security arrangements in relation to the two businesses. Floating charges over the assets of the companies in favour of the bank were registered on 1 and 21 December 1982 respectively.
According to Mr Bride, neither entity carried on business while he and his wife were in control of them as their directors. The manufacture and sale of stock and other foods continued, he said, to be an activity of the partnership. In 1983 the business, through whatever vehicle it was operated, became significantly indebted to the bank. Mr Bride estimated that he and his wife had borrowed about $2 million from the bank in that year.
Mr Stewart was an accountant, then employed by K.M.G. Hungerfords, as manager of its Senior Management Consulting Division. He became involved in the financial affairs of the Brides at the request of the Australian Bank. As Bride explained it, the bank had requested that an independent accountancy firm should conduct a feasibility study of the businesses and had nominated K.M.G. Hungerfords. According to Mr Putnin, Stewart came to Katanning in February 1983 for two days to examine the financial affairs of the Brides and companies controlled by them. He then returned to Perth and prepared a report as to the partnership business and that of the companies. After April 1983, at the request of the bank, he was supplied by the Brides with further budgets and cashflow figures and, according to Putnin, a further report was prepared. The account given by Putnin and the Brides differs somewhat from that given by Stewart. According to him, K.M.G. Hungerfords undertook on a consultancy basis a review of the production processes and costing in respect of the companies' business. That review was undertaken not to examine the Brides' personal assets or those of the partnership, but to verify the budget and cashflow projections prepared on behalf of the companies by Bird Cameron, Chartered Accountants, of Katanning. During Stewart's visit to Katanning he did not examine the financial affairs of the Brides and his report related only to the affairs of the companies. Further budget and cashflow figures were prepared by Bird Cameron as a result of Stewart's report. He did not, he said, review further figures supplied to him, nor did he prepare any final report.
Putnin claimed that in the same year, Stewart was appointed the "financial controller of all the Bride businesses". His appointment, according to Putnin, was made by Bride on the express instruction and direction of officers of the Australian Bank. Stewart denies that any such appointment was made in 1983. And in that respect it appears that Putnin is in error, for Bride makes no such suggestion in his affidavit.
As to Stewart's involvement in the affairs of the companies, he had, according to his own affidavit, while undertaking the consultancy role, authorised officers of the company to place orders for raw materials necessary to maintain their cashflow.
After leaving K.M.G. Hungerfords and starting his own practice, Stewart continued to have intermittent contact with the officers of the companies. He was, he said, a member of a review committee established by the bank to review products, status of orders, stock and the cash position of the companies. He was asked from time to time by that committee to review figures submitted by Mr Bride. According to Putnin there was a management committee established by the Australian Bank at which Stewart was "appointed by Edward James Bride as the absolute financial controller and chief executive of the Bride businesses". Stewart says he has no knowledge of any management committee being established and denies that he was appointed on 18 June 1984 as alleged.
Bride's account of the appointment differs from Putnin's in that he attributes it to his former solicitor, Mr J. Fitzgerald, who wrote to Stewart on 19 June 1984 in terms which included the following:-
"We confirm your appointment by Bride and his associated companies as from 19th June, 1984, as Chief Executive with unfetted (sic) powers to hire and fire, assume sole responsibility for the day to day operations of the Katanning investment by the Australian Bank, implement all necessary policy and action to attempt to get the operation up and running on a viable basis, maintain control of all fiscal and financial dealings and operations, secure buyers for certain assets available to be sold off, investigating the potentiality of selling the investment off at an appropriate point in time and attend to all matters necessary and incidental to the guardianship of the investment and hopefully its ultimate sale."
Bride says he learned of the appointment on or about 27 June 1984 and cancelled it by letter dated 27 June.
It is common ground that on 6 July 1984 he appointed Stewart by his own letter in the following terms:-
"To the extent to which we have engaged you in the interim to oversee certain of the affairs of our Companies and the affairs of the Partnership and Trust, we wish to point out that in no way are you assuming the prerogative of becoming a Director, either actual or applied, (sic) of either of our Companies (Bride Foods Pty Ltd and/or Swan Stock Foods Pty Ltd). Neither are you engaged to assume the role of Managing Partner, either actual or applied (sic) of the Partnership (E.J. and W.M. Bride) and in no way will you be connected with the affairs of the Pinwernying Trust.
We are concerned that certain appearances may be given, by your appointment that, to third parties (creditors and the like), you have assumed the responsibility of ourselves as Directors/Partners.
We will ensure that third parties are properly informed as to the true nature of your appointment. Needless to say, we are just as concerned to ensure that third parties recognize that we are still the Directors/Partners and owners of our own concern.
The designation of your appointment will be that of "Consultant" and your duties will be those generally assumed by Consultant, including the power to hire and fir;(sic) implement policy; control and generally oversee the entire business operation, to assist in the general running of the operation and be concerned with every aspect thereof, at the direction and control of the Chairman of Directors. Your appointment is viewed by us and the Australian Bank Limited as an interim caretaking operation to attempt to secure the preservation of the business.
We hereby indemnify and release you from any obligation or claim to or from any third party arising out of any act, matter or thing during the course of carrying out your duties.
Mr E.J. Bride will be in control and responsible for all sales of goods and responsible for sale of surplus assets.
All your disbursements and out of pocket expenses will be paid to you weekly. This appointment to last eight weeks or shorter if circumstances require. Your salary of $30,000.00 will be paid in advance of 5th July 1984 for the aforementioned eight week period, or shorter irrespective of the period. Based on 30 hours consultancy any additional time or payment to be by mutual agreement."
Following Stewart's appointment, Bride was required to surrender his credit cards to him. According to Stewart, these were returned within a fortnight. Bride however denies that he ever recovered them.
Stewart says he was sole signatory to the companies' bank accounts and no other accounts whatsoever. He says he worked closely with Bride in the day to day activities of the companies and that all stock orders were done in consultation with him. This was denied by Bride.
Stewart's appointment continued until August 1984 when the Australian Bank appointed representatives of the accountancy firm, Peat Marwick Mitchell & Co., as receivers and managers of the companies. In the same month the Brides signed authorities under Part X of the Bankruptcy Act 1966 appointing Putnin as their controlling trustee. On 6 September 1984 they became bankrupt on their own petition.
It is common ground that during the course of the bankruptcies,Putnin requested information from Stewart. Between 13 September 1984 and 3 April 1985 he sought the provision of papers and documents relating to the affairs of the Brides which were in Stewart's custody or power. On numerous occasions, according to Stewart, his solicitors, Robinson Cox, told Putnin that documentation in his possession was not and never was the property of the Brides. On 14 May 1985 Robinson Cox, acting for Stewart, wrote to Putnin saying:-
"As we have previously indicated, we believe that most of the documentation in Mr Stewart's possession is not and never was the property of Mr and Mrs Bride. Although our client maintains this view, he is prepared to co-operate in the administration of the bankrupt's estate and accordingly he has instructed us to make available correspondence, reports and other documents which came into his possession during his appointment at Brides Foods Pty Ltd. (sic) These documents clearly go beyond what could be viewed as the property of the bankrupt, however, our client in good faith is prepared to provide access in an effort to put an end to this matter."
On 22 May 1985 a considerable number of documents were made available to Putnin who wrote on 23 May to say that the files indicated very little information not already known and of which he did not already have copies or originals. They were said to have failed completely to reveal the information he required in the administration of the bankruptcies. Some 15 categories of information were then specified in his letter. He went on to say:-
"As Mr Stewart was deeply involved in the Brides' affairs for a considerable time, I feel that Mr Stewart will be in a position to give much more information in relation to the affairs of the Brides, their trade dealings, their property or their affairs than is portrayed by the files handed over to me."
He threatened that if the information sought were not forthcoming within seven days of that letter he would insist upon his right to examine Stewart before the Registrar or the Court in accordance with the provisions of s.81 of the Bankruptcy Act. Messrs. Robinson Cox responded to the letter on 14 June 1985. They dealt with various of the contentions raised by Putnin and concluded:-
"Finally, we wish to advise that Mr Stewart is prepared to state in an affidavit that he believes that he holds no further files, writing, papers, etc. that could be described as property of the Bankrupts. He is also prepared to meet with the Trustee and answer questions related to the affairs of the Bankrupts generally."
Putnin did not respond until 7 January 1986 when he indicated that Stewart's offer to meet with him to answer questions relating to the bankruptcy was accepted. This was followed by a letter dated 30 January from Messrs. Chalmers & Irdi, solicitors for Putnin, to the effect that they had been advised that the request from Putnin to meet Stewart had yielded no response. They sought a reply within 10 days. Stewart's solicitors answered on 4 February 1986 referring to the delay which had occurred in Putnin's enquiries and requesting that he put any questions in writing.
The next step appears to have occurred on 23 March 1987 when Putnin procured the issue of a summons for the examination of Stewart under s.81 of the Bankruptcy Act. The summons sought evidence on the following matters:-
"1. Your terms and scope of employment in relation to
the business affairs of E.J. and W.M. Bride ("the Bankrupts").
2. Your accounts for professional fees in relation to
the business affairs of the Bankrupts.
3. The authority by which you assumed control of the
Bankrupts' business affairs.
4. Minutes of meetings attended by you concerning the
business operations of the Bankrupts.
5. Directions and orders given by you concerning the
day to day operation of the business affairs of the Bankrupts.
6. Negotiations, discussions and correspondence in
relation to the financial affairs of the Bankrupts between you and:-
i. The Australia Bank.
ii. The solicitors acting for the Bankrupts.
iii. The solicitors acting for the Australia Bank.
iv. The accountants acting for the Bankrupts.
v. Receivers and Manager of the business of the Bankrupts.
vi. Government Departments.
7. Moneys received by you on behalf of the Bankrupts.
And to produce any of the following documents that are
in your custody or power and relate to the Bankrupts
or their trade dealings or affairs..." (and there then
follows a list of some 17 classes of documents which it
is not necessary to set out here.)
Counsel for Stewart in support of the application to set aside the summons submitted that his client had provided all necessary information to Putnin on 22 May 1985. As he contended there were considerable delays on Putnin's part in identifying the information he required from Stewart. He submitted also that the proposed examination was by way of collateral purposes, to wit, establishing a possible liability on the part of Stewart and the bank.
The Statutory FrameworkSection 81 of the Bankruptcy Act 1966 provides in the relevant parts:-
"(1) The Court or the Registrar may, on the application of a creditor who has proved his debt and on such terms as to costs as the Court or the Registrar thinks fit to impose, or on the application of the Official Receiver or the trustee at any time summon -
(a) the bankrupt or the spouse of his bankrupt; or
(b) a person who is known or suspected to have in his possession any of the property of the bankrupt or is supposed to be indebted to the bankrupt or be able to give information concerning the bankrupt and his trade dealings, property or affairs,
to attend, on a date and at a time and place fixed in the summons, before the Court or the Registrar or, if the Court or the Registrar thinks fit, before a magistrate, to give evidence concerning, and produce any books (whether or not in existence at the time the bankrupt became a bankrupt) in his custody or power relating to, the bankrupt or his trade dealings, property or affairs.
(2) An examination under this section shall be held in public.
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(7) A person summoned to attend before the Court, the Registrar or a magistrate for examination under this section is entitled to be represented, on his examination, by counsel or a solicitor, who may re-examine him after his examination.
(8) The trustee or a creditor of a bankrupt may take part in the examination and, for that purpose, may be represented by counsel or a solicitor or by an agent authorized in writing for the purpose. .
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(10) The Court, the Registrar or the magistrate may put to a person being examined under this section,or allow to be put to a person being examined under this section, such questions concerning the bankrupt or his trade dealings, property or affairs, as the Court, the Registrar or the magistrate, as the case may be, thinks proper.
(11) A person being examined under this section shall answer all questions that the Court, the Registrar or the magistrate puts or allows to be put to him. .
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(13) Where the bankrupt or another person admits on examination under this section that he has in his possession or power any of the property of the bankrupt, then, the Court, the Registrar or the magistrate, as the case may be, may, on the application of the trustee or a creditor who has proved his debt, order the bankrupt or the other person, as the case may be, to deliver that property to the trustee at or by such time, in such manner and on such terms as the Court, the Registrar or the magistrate, as the case may be, thinks fit. .
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(15) The Court, the Registrar or the magistrate, as the case may be, may cause such notes of the examination of a person under this section to be taken down in writing as the Court, the Registrar or the magistrate, as the case may be, thinks proper, and the person examined shall sign the notes.
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(17) Notes taken down and signed by a person in pursuance of sub-section (15), and the transcript of the evidence given at the examination of a person under this section (being a transcript certified, or certified, signed and sealed, in pursuance of section 255) -
(a) may be used in evidence in any proceedings under this Act in which the person is a party
(b) shall be open to inspection by the person, the bankrupt, the trustee or a person who states in writing that he is a creditor of the bankrupt without fee and by any other person on payment of the prescribed fee."
Application of Relevant Principles
The trustee in this case seeks to examine Mr Stewart upon the basis that he is a "person who is known or suspected ... to be able to give information concerning the bankrupt or his trade dealings, property or affairs". The Brides, of course, have been discharged from their bankruptcies but the power to issue a summons and conduct an examination under s.81 survives discharge - Official Receiver v Todd (1986) 70 ALR 119. As Lockhart J., with whom Fisher J. agreed, said at 127 in that case:-
"Since the undistributed property of the bankrupt 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 in 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 is 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.81(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 by me."
Courts have traditionally regarded the power of examination in bankruptcy and companies legislation as extraordinary. An early and oft cited statement of that view is to be found in the judgment of Jessel M.R. in Ex parte Willey. In re Wright (1883) 23 ChD 118 at 128 where, speaking of s.96 of the Bankruptcy Act 1869, he said of the power of examination:-
"Now that is a very grave power to entrust to any Court or any man, viz., power to summon any other man whom you suspect (for mere suspicion will do) to be capable of giving information, and to get any information from him, although that information may be extremely hostile to the interests of the man himself. It is a power which, so far as I know, is found nowhere except in bankruptcy and the winding-up of companies (which is a kind of bankruptcy); it is a very extraordinary power indeed, and it ought to be very carefully exercised."
Like statements will be found in In re Northern Australian Territory Company (1890) 45 ChD 87 at 93; In re Maundy Gregory. Ex parte Norton (1935) 1 Ch 65, 71; Re Andrews (1958) 18 ABC 181, 184; Re Csidei; Ex parte Andrew (1979) 28 ALR 381.
It has been said that the power cannot be exercised unless there are some grounds for believing or suspecting that the proposed witness is capable of giving relevant information. The court, it is said, ought not to lend itself to a mere fishing enquiry based upon the trustee's hope to build up some case, as to which there is before the court no information showing that the witness was implicated - In re Maundy Gregory. Ex parte Norton (supra at 74 per Lord Hanworth MR; Slesser and Romer LJJ agreeing); Re H.J. Price (No. 3) (1948) 14 ABC 137 at 140.
The object of an examination held pursuant to the exercise of the power under s.81, where such examination is conducted by the official receiver or trustee, is to inform the minds of these persons as officers of the court so that they may know what future action to take - Re H.J. Price (No. 3) (supra) at 139, per Clyne J.
On the other hand, as Menzies J. said in Rees v Kratzmann (1965) 114 CLR 63 at 78, in commenting on s.250 of the Companies Act 1961, which provided a power analogous to that provided under s.81:-
"In a section so providing, I can find no justification for reducing the wide words describing the subject matter of the examination to the narrow limits of the particular conduct which, in the opinion of the Official Receiver, amounted to the commission of a fraud or the concealment of a material fact. A liberal construction to avoid manifest injustice is permissible if it be consistent with the terms of a statute."
Windeyer J. speaking of the same section at 79 said:-
"But I see nothing in the Act that requires the court to limit the examination of a person to particular matters or transactions mentioned in the liquidator's report. Something of importance may emerge as the inquiry proceeds. How far trails may be followed cannot, I think, be laid down in advance, for the purpose of the inquiry is the discovery of facts. I need say no more on this aspect, for anything that I would wish to say has been said by my brother Menzies whose judgment I have read and in whose conclusion I agree."
Barwick CJ agreed with the reasons for judgment of Menzies J. in that case. It is also relevant to take into account the views of the trustee as to the necessity for and propriety of the examination. In Re Csidei; Ex parte Andrew (supra) at 387 Lockhart J. said:-
"Considerable weight must be given to the views of the trustee as it is he who is most conversant with the problems that exist in relation to the affairs of the bankrupt and the information that is necessary. The very fact that the order for examination is made ex parte; that the examination is a compulsory process with penal consequences for failing to attend, or to properly answer questions or to produce documents; and that the transcript of evidence or notes of examination may be used against the witness in proceedings under the Act, all point to the conclusion that the court or the registrar has a discretion to issue the summons ...and that in the exercise of that discretion the court or the registrar must "be astute to prevent any oppressive, vexatious
And further in the same case, dealing with the relevance of prior application on the part of the trustee for voluntary disclosure of the information sought, his Honour said at 387:-"It is going too far to say that a trustee should not apply for the issue of a summons under s.81 unless he has previously applied to the proposed examinees themselves who have declined or refused to give the information sought or otherwise acted unsatisfactorily, although this was said by Connolly J. of the Supreme Court of New Zealand in Re The Ngunguru Coal Co. Ltd
(1899) 18 NZLR 256 in relation to the section in the New Zealand Companies Act (s.177) equivalent to s.249 of the Uniform Companies Act."
His Honour also applied to s.81 the comments about s.268 of the Companies Act 1948 made by Megarry J. in Re Rolls Razor Limited (No. 2) (1970) Ch 576, at 595:-"There may well be some cases in which it would plainly be oppressive or unreasonable not to submit written questions first. There will also be other cases in which there plainly ought to be an oral examination without the prior submission of any written questions. Between these two categories there may be many cases in which the court must determine which course is best suited to discover the relevant facts without being oppressive, vexatious or unfair. In order to do this, the court must, I think, look at the facts of the case as a whole, without yielding to preconceptions; and in doing this, the court should give all proper weight to the views of the liquidator without, of course, abandoning the proper exercise of its discretion, or treating the liquidator's views as being in any way decisive of the matter. The prior submission of written questions will sometimes aid and speed the ascertainment of the relevant facts; but sometimes it may hamper or delay the process. There may be a marked difference between the information obtained from unsworn written answers which may have been drafted by lawyers and that obtained, from viva voce answers on oath."
CONCLUSION26. In an affidavit sworn on 24 April 1987 in opposition to the present application, Putnin says that the information supplied by Stewart on 22 May 1985 largely consisted of copies of correspondence, information and reports relating to Bride Foods Pty Ltd and Swan Stock Foods Pty Ltd. Both companies, according to Putnin, although controlled by the Brides, were inactive at the relevant time, all trading being done in the name of the Brides or partnerships consisting of them and a family trust, the beneficiaries of which were the Brides and their children. The information, says Putnin, is not that which was sought by him. He deposes at para.10 of the affidavit to his belief that Stewart can assist him considerably in piecing together the financial affairs of the Brides at the time he was appointed. There is a need, he says, for Stewart to give oral evidence on matters attended to by him on behalf of the Brides during the time of his appointment and prior to his appointment when in the employ of K.M.G. Hungerfords.
27. Putnin also denies "most strongly" that the proposed examination of Stewart is vexatious and submits that the examination is important in the administration of the bankrupt estate. In further elaboration of the rationale for his examination, Putnin says in an affidavit sworn on 12 May 1987 that he seeks explanations from Stewart as follows:-
(a) To explain the source of certain entries in the financial affairs of the Brides.(b) To ascertain what part Australian Bank Limited played in Stewart's appointment to ascertain whether it could be said that he was an agent of the Bank.(c) What the true position was with respect to all minutes of meetings of the committee or management, having regard to the fact that Stewart is said to be the person responsible for preparing the minutes of those meetings.(d) What information was given to creditors of the Bride businesses as to the order in which they were to be paid and whether debts incurred during Stewart's involvement were to be treated to any form of preference.(e) The true position as to which of the Bride businesses certain creditors of the Brides were dealing with. According to Putnin some of the creditors have claimed they thought they were dealing with the Brides direct, when it appears they might have been dealing with companies of which the Brides were directors.(f) What part Stewart played in giving instructions to the Australian Bank Limited and its solicitors in connection with Bills of Sale executed by the Brides in August 1983 and March 1984 in favour of the Bank.(g) Explanation as to raw material orders placed by Stewart during his involvement in the Bride businesses.
28. Giving due weight to the views of the trustee and accepting that the information sought may be sought at least in part for the purpose of possible civil litigation, I cannot characterise the purpose of the summons as improper or vexatious. It is not a purely fishing exercise as there is some basis, albeit disputed, about Stewart's involvement in the affairs of the bankrupts. Indeed the existence of a dispute about his involvement rather highlights the desirability of some form of formal inquiry. The refusal by the trustee to accept the proposal by Stewart's solicitors that the trustee submit written questions is not decisive of the matter. In a case of some complexity and involving a number of transactions such a course may be inconvenient and inconclusive. In a matter of some complexity, as this is, it is open to the trustee to form the view that an effective inquiry requires the flexibility of oral examination.29. The delay in pursuing the inquiry was not fully or satisfactorily explained. However the interests affected are wider than those of the parties to this application and in the absence of any real evidence of prejudice accruing to Mr Stewart, I do not regard that, in the circumstances of the case, as a ground for setting the summons aside.
30. Accepting that there may be inconvenience imposed on Stewart in this case by reason of having to submit to this examination it is for the Registrar hearing the examination to ensure that it does not become so lengthy or wide-ranging as to impose a hardship on the witness which is out of proportion to any benefit that might accrue to the administration of the estates. It is worth repeating in that regard the warning sounded by Lockhart J. in Re Abrahams; Ex parte Thomas (1985) 70 ALR 784 at 790:-
"The trustee must remember when interrogating any witness under s.81 that:. the power conferred by s.81 is "an extraordinary power of inquisitorial nature": see Re North Australian Territory Co. (1890) 45 Ch D 87, per Bowen LJ at 93 - the examinee is not a witness in the ordinary sense;. the ordinary rules or procedures do not govern the examination; and. that just as the court or the Registrar must "be astute to prevent any oppressive, vexatious or unfair use of this extraordinary process", so must the trustee and his advisers bear that cautionary note in mind when examining witnesses under s.81: Re Csidei, supra (28 ALR) at 386; (39 FLR) at 391-2."
As his Honour then went on to say, a fine line exists between legitimate and impermissible examination of persons under the compulsory process of s.81. I agree with his observation that while it would be wrong to specify the limits of that examination in advance, it must be remembered that "The purpose of the section is to elicit information that may be relevant for the proper conduct of the bankruptcy and that may aid the process of finding and recovering assets available for distribution". The parties will also, no doubt, have in mind the possible application of sub-s.81(14), particularly having regard to the circumstances that what is proposed is an examination of neither the bankrupt nor a creditor but a third party.31. Having regard to all the considerations, however, I am of the view that the application to set aside the summons should be dismissed and I will so order.
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