Doukidis v Williamson
[2008] FMCA 1352
•24 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DOUKIDIS v WILLIAMSON & ANOR | [2008] FMCA 1352 |
| BANKRUPTCY – Wife’s alleged interest in property of which bankrupt husband registered proprietor – constructive trust. PRACTICE & PROCEDURE – Adjournment – prejudice – case management – nature of bankruptcy proceedings involving claims on bankrupt’s property – necessity for early hearing date – lassitude of respondents. PRACTICE & PROCEDURE – Particulars. PRACTICE & PROCEDURE – Discovery and interrogatories – whether appropriate in the interests of the administration of justice – whether specific rather than general discovery appropriate. PRACTICE & PROCEDURE – Discovery – third party discovery – effect of trustees’ failure to request documents from bankrupt. |
| Bankruptcy Act 1966 (Cth), ss.19, 19AA, 77(1), 120, 120(1), 120(1B), 127(3) and 152 Federal Magistrates Act 1999 (Cth), ss.3, 42 and 45(1) Federal Magistrates Court Rules 2001 (Cth), rr.1.03, 10.01(3)(j) and 10.01(3)(m) |
| Bailey & Ors v Beagle Management Pty Ltd & Ors (2001) 182 ALR 264; [2001] FCA 60 Victorian Producers’ Co-Operative Co Ltd v Kenneth (1999) 1 ABC (NS) 198; [1999] FCA 1488 | ||
| Applicant: | RUTH GWENDOLYN DOUKIDIS | |
| Respondents: | CHRISTOPHER MICHAEL WILLIAMSON AND KIMBERLY ANDREW STRICKLAND AS TRUSTEES OF THE BANKRUPT ESTATE OF EMMANUEL GEORGE DOUKIDIS |
| File Number: | PEG 121 of 2008 |
| Judgment of: | Lucev FM |
| Hearing date: | 23 September 2008 |
| Date of Last Submission: | 23 September 2008 |
| Delivered at: | Perth |
| Delivered on: | 24 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr P Hannan |
| Solicitors for the Applicant: | Dwyer Durack |
| Counsel for the Respondents: | Mr S Leslie |
| Solicitors for the Respondents: | Talbot Olivier |
ORDERS
The Applicant have leave to file an amended Application in the form filed on 10 September 2008 but further amended to incorporate the particulars requested in paragraph 3 of the minute of proposed orders tendered by the Respondent in Court on 23 September 2008, and for the Applicant to do so by 4:00pm on 26 September 2008.
Order 4 of the Orders of 1 September 2008 be amended by inserting 28 October 2008 in lieu of 19 September 2008.
Order 5 of the Orders of 1 September 2008 be amended by inserting 11 and 12 November 2008 in lieu of 1 and 2 October 2008.
Costs be reserved.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 121 of 2008
| RUTH GWENDOLYN DOUKIDIS |
Applicant
And
| CHRISTOPHER MICHAEL WILLIAMSON AND KIMBERLY ANDREW STRICKLAND AS TRUSTEES OF THE BANKRUPT ESTATE OF EMMANUEL GEORGE DOUKIDIS |
Respondents
REASONS FOR JUDGMENT
(Edited and revised from the transcript)
Background
By an application made on 28 July 2008, the applicant asserts an interest in a property of which her bankrupt husband is the registered owner. That interest is said to arise by way of a common intention or joint endeavour constructive trust.
Prior Orders
In relation to the application, the Court made orders on 1 September 2008 including orders that an application for interim orders in the nature of injunctive relief be adjourned sine die because the Court was able to bring the matter on for final hearing relatively quickly and the remaining orders reflected that fact – the applicant being required to file and serve further affidavits by 5 September 2008, the respondents by 19 September 2008 and the matter being set down for hearing at 10.15am on 1 and 2 October 2008.
Orders Sought
The respondents on 18 September 2008 filed the affidavit of Mr Ioppolo and as a consequence the matter was brought back on for further hearing yesterday. In essence, what the respondents sought were orders vacating the requirement to file and serve affidavits by 19 September 2008 and the vacation of the hearing date set down for 1 and 2 October 2008. In the course of the hearing a minute of proposed orders was tendered by Mr Leslie, who now appears as counsel for the respondents, in which certain other orders were sought in the nature of particulars and discovery and interrogatories: discovery from both the applicant and the bankrupt and interrogatories from the applicant. Mr Hannan who appeared as counsel for the applicant also sought leave of the Court to file an amended application.
The matters in Mr Ioppolo’s affidavit
Paragraph 5
In paragraph 5 of Mr Ioppolo’s affidavit in support, he asserts that the trustees have no direct knowledge of the facts underlying the applicant’s claim and were unable to commence preparation of the defence of the claim until after receipt of the applicant’s evidence. That is contradicted in my view by an earlier affidavit filed in these proceedings of Mr Trpcevski, sworn on 27 August 2008 in opposition to the earlier application which was effectively for injunctive relief, but also expressly relied upon in these proceedings. At paragraph 4 of that affidavit, Mr Trpcevski says that the trustees became aware of the facts that became the basis of the applicant’s application for a constructive trust upon the filing by the applicant of an affidavit in proceedings in the Supreme Court of Western Australia, on 9 July 2008.
Whilst the trustees themselves may have no direct knowledge of the facts underlying the applicant’s claim, they were certainly put on notice of those facts by reason of the filing of the applicant’s affidavit in the Supreme Court proceedings on 9 July 2008. Thus the assertion by Mr Ioppolo at paragraph 5 cannot stand as it is contradicted by Mr Trpcevski (who works in the office of the trustees), and furthermore the bald assertion made by Mr Ioppolo, as indicated, belies the fact that the trustees were certainly on notice from early July 2008 of the facts upon which the applicant relies now, in these proceedings. Therefore it is the Court’s view that the better evidence of the trustees’ position is that in Mr Trpcevski’s affidavit. It follows, therefore, that the trustees have been on notice of the facts underlying the claim by the applicant for a period, of some 11 weeks.
Paragraphs 6 and 7
Paragraphs 6 and 7 of Mr Ioppolo’s affidavit say that the trustees received the applicant’s evidence in support of the claim on 5 September 2008. In paragraph 7 he says:
Before the trustees can file affidavits in opposition to the claim, the trustees require a reasonable opportunity to consider the applicant’s evidence, the applicable law and what interlocutory steps are required to properly defend the claim or otherwise deal with it on behalf of the creditors of the bankrupt estate.
The Court is of the view that there has been a reasonable opportunity to consider the evidence of the applicant, that evidence in one form or another and certainly a form which the trustees apprehended constituted the basis for the constructive trust claim having been on, albeit in the Supreme Court and then in this Court, since 9 July 2008.
The applicant swore an affidavit in these proceedings prior to the affidavit filed on 5 September 2008, the earlier affidavit being sworn on 28 July 2008. That affidavit annexes a number of documents primarily concerned with the Supreme Court proceedings. They set out the relevant law in some detail. They also set out some further general evidence at paragraphs 33 to 42 and paragraphs 33 to 37.
As Mr Hannan pointed out yesterday, the relevant facts are extensively summarised in an outline of submissions tendered to the Supreme Court in the proceedings there and that outline of submissions is based essentially upon the affidavit of the applicant of 9 July 2008. It is clear that that evidence has been considered by those acting for the trustees. At page 58 of the applicant’s affidavit of 28 July 2008, in submissions signed by Mr Leslie as Counsel for the first defendants in the Supreme Court proceedings, now the respondents in these proceedings, reference is made to the receipt of details of the new claim, that being the constructive trust claim, in the affidavits of the applicant as plaintiff in those proceedings and the bankrupt sworn 9 July 2008 and the submissions dated 17 July 2008, and the fact that the first defendants did not contend that there was no serious question to be tried on the constructive trust claim, and likewise in these proceedings.
So it is clear that some detailed consideration had obviously been given by the trustees at an early stage to the nature of the claims and the evidence in support of them tendered by the applicant in the Supreme Court proceedings. It is also clear from the documents in relation to the Supreme Court proceedings that the respondents in these proceedings had an opportunity to consider the law in those proceedings, and the Court refers to the paragraphs just referred to, and also those submissions in general, and notes that the relevant law with respect to constructive trust is extensively set out at pages 46 to 49 of the applicant’s affidavit and in submissions made on her behalf before the Supreme Court. It follows from the concessions made by the respondents, both in these proceedings and before the Supreme Court, that they must have considered that law in order to have been in a position to concede that there was a serious question to be tried.
Paragraph 8
Mr Ioppolo’s affidavit continues on at paragraph 8 to say that the trustees have identified the following avenues of inquiry, and then at paragraph 8.1 refers to the fact that they have discovered that the bankrupt was earlier bankrupted on 17 September 1984, some 17 months after the bankrupt and the applicant reached a matrimonial property settlement on 12 April 1983, and that that settlement appears to have put beyond the reach of the creditors in the 1984 bankruptcy the assets settled in the matrimonial property settlement.
Mr Ioppolo goes on to say that the trustees have commenced the process of gathering documents relating to the 1984 bankruptcy and that they intend to make an application for specific discovery against the applicant for documents relating to the 1983 property settlement, and then says documents relating to property settlement will show the assets of the applicant and the bankrupt at that time.
The Court notes that a period of some 13 days elapsed between the filing of the applicants and the applicant’s witness’ affidavits and the affidavit of Mr Ioppolo being sworn. There has been no application during that time with respect to discovery of any documents as is said to be the intention in that affidavit, and as the Court observed to Counsel for the respondents yesterday, the Court finds that a little extraordinary in the circumstances, particularly when the matter is listed for hearing on 1 and 2 October 2008. In the Court’s view, that demonstrates on the part of the respondents a lack of urgency in relation to these proceedings.
In paragraph 8.2, Mr Ioppolo proceeds to say that paragraph 7 of the applicant’s affidavit of discovery refers to documents of the bankrupt which the bankrupt has not provided to the applicant. The trustees wish to apply for an order for third party discovery against the bankrupt. Depending upon the outcome of that application and compliance with any order, the trustees may need to issue subpoenas for documents against other third parties. In that regard, the Court repeats the comments made with respect to the lack of urgency and the lack of action and the lack of any application with respect to those issues in the time that has elapsed both since the affidavit was filed of Mr Ioppolo, and the earlier affidavits of the applicant and her witnesses were filed. The Court will return to the issue of third party discovery later on, but the failure to make an application with respect to third party discovery is one which is perhaps all the more extraordinary in the circumstances of this case, given the close relationship between the applicant and the bankrupt, that relationship overcoming a number of problems which otherwise might exist in relation to third party discovery orders.
At paragraph 8.3, Mr Ioppolo continues on and indicates that the trustees are considering making an application for an order requiring the applicant to swear an affidavit in the nature of an interrogatory setting out her assets, liabilities and other financial resources. He says the trustees are developing an argument that the applicant’s assets accumulated as a result of the alleged joint endeavours are relevant to assessing the extent of or ability to claim any constructive trust in the property, and that the trustees are considering the need to put questions to the bankrupt and perhaps formally examine the bankrupt in relation to the matters in issue.
The Court again repeats the comments made earlier. There seems to be a lot of consideration perhaps, but no action and no application, which in the circumstances and given the deadlines in this case, exhibits a lack of urgency and perhaps an unwarranted assumption that the hearing date might be vacated.
The Court also notes in relation to those issues raised in paragraphs 8.1 to 8.3 of Mr Ioppolo’s affidavit, they might all at hearing be the subject of cross-examination in any event.
Paragraph 9
Paragraph 9 of the affidavit refers to the fact that the trustees have briefed in-house Counsel on the matter and are awaiting an opinion on the applicant’s evidence, and advice as to management of the defence of the action.
Mr Leslie, who appeared yesterday for the respondents, identified himself as the in-house Counsel referred to, and has told the Court, as the Court understands it, that that advice is complete, that it has been given orally to the trustees, or the gist of it, at least, has been given orally to the trustees, but has not yet been reduced to writing, and that further instructions will need to be sought from the trustees and reference will also need to be made to what Mr Leslie described as the principal creditor, being a person resident in the United States, and certainly the bankruptcy notice indicates that the judgment debt which is relied upon is a debt of $US800,000 or more than $A1 million, and that would appear to be the principal creditor being referred to.
The Court has to say that it is not immediately apparent to it why advice of that type would take more than a fortnight and close to three weeks to give, given that the nature of this particular claim is not an uncommon one in bankruptcy proceedings, and in circumstances where the law is relatively well set out in the applicant’s Supreme Court submissions, and the factual basis for the constructive trust claim has, on the evidence of Mr Trpcevski, been known to the trustees for some 11 weeks. That is subject to some matters to be adverted to later.
Counsel for the applicant, Mr Hannan, submitted that the applicant had its procedural house in order and that the further affidavits filed on 5 September 2008 on behalf of the applicant did not take the applicant’s claim, with respect to the constructive trust issue, beyond the bounds of the claims already made in the application itself, and by inference before the Supreme Court in the earlier submissions. That submission in my view is correct subject to some matters again to be adverted to later, but in particular, it ignores the fact that some significant factual issues have emerged from the filing of the further affidavits of the applicant, the bankrupt and the daughter of the applicant and bankrupt on 5 September 2008.
In these reasons the Court only refers to the factual issues as they have emerged from the further affidavits of the applicant and the bankrupt. The applicant filed on 5 September 2008 a relatively lengthy affidavit of some 142 pages including some 20 annexures. It does raise a new matter of some significance. That is a family law property settlement in 1983 which relates to the disposition of property in Armadale which it was contemplated would be transferred to the applicant but in relation to which the bankrupt would assume liability for relevant mortgages, and also the transfer to the applicant of certain chattels at the Pioneer Village Motel and the Old Narrogin Inn at Armadale.[1]
[1] See paras.16 to 31 of the applicant’s affidavit of 5 September 2008.
It would appear that notwithstanding the family law proceedings that the applicant and bankrupt were never divorced and eventually and perhaps even shortly thereafter reconciled. The property settlement in 1983 in the context of the asserted common interest and joint endeavour constructive trust and in the context of a marriage of some 45 years and various business arrangements traversing that period is a matter of some importance. It is a matter which warrants appropriate investigation by the trustees.
The Court notes that the trustees have been in possession of the material affidavit since on or about 1 September 2008 and it is not apparent what, if anything, the trustees have done in relation to it apart from the indication in Mr Ioppolo’s affidavit at paragraph 8.1 that they intend to make an application for specific discovery against the applicant.
The bankrupt also filed an affidavit sworn on 5 September 2008. It is not overly lengthy, 76 pages with seven annexures. An earlier affidavit of 9 July 2008 of the bankrupt filed in the Supreme Court proceedings, is annexed to the affidavit of the applicant filed on 28 July 2008. Like the applicant’s earlier affidavit of 9 July 2008, the bankrupt’s earlier affidavit did not raise the issue of the 1983 family law proceedings and the settlement of the Armadale property and chattels at the Pioneer Village Motel and Old Narrogin Inn.[2]
[2] See the bankrupt’s affidavit at paras. 17 through to 23.
Perhaps most significantly the bankrupt failed to disclose an earlier bankruptcy in 1984. The Court queries whether he was obliged to do so, but in the context of an affidavit filed in support of a common interest and joint endeavour constructive trust in the circumstances just outlined that bankruptcy, which occurred 17 months after the family law property settlement is perhaps significant for two reasons. The first of those is adverted to by Mr Ioppolo in the affidavit at paragraph 8.1 and that is that it shows the assets of the applicant and the bankrupt at that time. The second is whether the settlement of the property as opposed to the transfer of the property in 1984 was void under the predecessor of the current s.120 of the Bankruptcy Act 1966 (Cth)[3] which dealt with settlement rather than transfer of property and, if it was, what, if anything the effect of that might now be noting, of course, that s.127(3) of the Bankruptcy Act contains a limitation of actions provision on s.120 actions of six years from the date of bankruptcy. It may ultimately be that nothing turns on that second issue but it is nevertheless an issue which, no doubt, the trustees are entitled to examine.
[3] “Bankruptcy Act”.
Thus the earlier bankruptcy is of some importance and is a matter which, as indicated, warrants appropriate investigation by the trustees. That the trustees do not appear to have discovered the bankruptcy until late in the piece is somewhat surprising. The Court also notes that the trustees have been in possession of the material affidavit of the bankrupt since 1 September 2008 and apart from a fleeting reference in paragraph 8.1 of Mr Iopolo’s affidavit to having commenced the process of gathering documents relating to the bankruptcy, does not refer to anything else that was done in that regard.
Paragraphs 10 and 11
Paragraphs 10 and 11 of Mr Ioppolo’s affidavit deal with the question of prejudice. Perhaps predicably he asserts that the trustees, and importantly the creditors of the bankrupt estate, will be prejudiced:
a)by a requirement to file evidence in response to the application by 19 September 2008; and
b)if the trustees are forced to defend the application at hearing in seven working days’ time.
The Court notes that the “seven working days’ time” is probably ‘gilding the lily’ a little, given that the application was filed on 28 July 2008 and the trustees were on notice of the matter from at least as early as 9 July 2008 by virtue of the affidavits filed in the Supreme Court proceedings. The question of prejudice is something the Court will return to, together with a consideration of the issues of case management later in these reasons.
Minute of proposed orders - particulars
Mr Leslie tendered on behalf of the respondents yesterday a minute of proposed orders. That minute of proposed orders, amongst other things, sought particulars of the common intention constructive trust and the joint endeavour constructive trust in the terms set out at paragraph 3 of the minute of proposed order.
With respect to the granting of particulars in this Court, this Court observed in Olsen v Wellard Feeds Pty Ltd:
The provisions of the Federal Magistrates Act 1999 (Cth)[4] and Federal Magistrates Court Rules 2001 (Cth),[5] in particular ss.3 and 42 and rule 1.03, together with rule 10.01(3)(m), are required to be considered in the exercise of the Court’s discretion as to whether or not to order particulars.
In Goodall v Nationwide News Pty Ltd[6], this Court said as follows:
“Reading together the objects of the FM Act in s.3, the mode of operation in s.42, and having regard to the objects of the FMC Rules in r.1.03, it is apparent that the Court is intended to operate in a manner:
(a) as informal as possible in the exercise of judicial power;
(b) which is not protracted in its proceedings;
(c) which resolves proceedings justly, efficiently and economically;
[4] “FM Act”.
[5] “FMC Rules”.
[6] [2007] FMCA 218 (“Goodall”).
(d) uses streamlined procedures; and
(e) avoids undue delay, expense and technicality.”[7]
It is in that context that the power to order particulars in rule 10.01(3)(m) of the FMC Rules is required to be exercised and considered. Ordinarily, in this Court, proceedings are commenced, as they were here, by application supported by affidavit, and no more, and in that regard the affidavits provide the particulars and the evidence.
In this case a statement of claim and a defence were ordered, but it is nevertheless the case that the matter requires to be considered against the background of the statement of claim and defence and the initiating process and such affidavits as have been filed.
Determining the necessity for particulars by having regard to the totality of the pleadings and the evidence that has already been filed, is a proper course to adopt. It is not inconsistent with modern principles of case management.[8]
There is provision in the rules for particulars, as there is, for example, for discovery and interrogatories. Unlike the latter two, particulars orders do not require the Court to make a declaration that it is in the interest of the administration of justice to do so.[9] Nevertheless, particulars are very rarely ordered and probably more rarely than discovery and interrogatories which require the declaration. It is fair to say that generally it is only in the most complex cases before this Court that particulars are ordered.[10]
[7] Goodall at para. 21 per Lucev FM.
[8] See for example, Bailey & Ors v Beagle Management Pty Ltd & Ors (2001) 182 ALR 264 at 272 per Heerey, Branson and Merkel JJ; [2001] FCA 60 at para 34 per Heerey, Branson and Merkel JJ: “modern techniques of case management suggest a more pragmatic and flexible approach than the structured, rule-laden regime proposed by the applicants.”; Woodroffe & Anor v National Crime Authority & Ors (1999) 168 ALR 585 at 590-591 per Drummond, Sundberg and Marshall JJ; [1999] FCA 1689 at para 23 per Drummond, Sundberg and Marshall JJ.
[9] FM Act, s.45(1).
[10] [2007] FMCA 1885 at paras. 3-8 per Lucev FM (“Wellard Feeds”). Footnotes 2-7 above are the footnotes in the judgment quoted.
In Verge & Anor v Devere Holdings Pty Ltd & Ors[11] the Court said in relation to the giving of particulars in the context of a s.120 case:
In relation to s.120(1) of the Bankrupty Act it is relevant that “the court is required to assess the value of the consideration given.”[12] Section 120(1)(b) requires the Court to identify the consideration actually given by the transferee, rather than the consideration which might have been given but was not in fact given.[13] It must be remembered also that actions in bankruptcy are not necessarily strictly inter partes, but often actions for the benefit of creditors as a whole, and in that regard actions with an element of public and community benefit and interest.
It is that legislative context, and in particular the requirement for the Court to identify whether the particular transfer has been at an undervalue, that sets the broader context for consideration of the application for particulars in this case.[14]
[11] [2008] FMCA 591 (“Verge (No.1)”).
[12] Victorian Producers’ Co-Operative Co Ltd v Kenneth (1999) 1 ABC (NS) 198 at 201 per Merkel J; [1999] FCA 1488 at para. 11 per Merkel J.
[13] Sutherland v Brien (1999) 149 FLR 321 at 327 per Austin J; [1999] NSWSC 155 at para. 21 per Austin J; Victorian Producers’ Co-Operative ABC at 202 per Merkel J; FCA at para. 18 per Merkel J.
[14] Verge (No.1) at paras. 15–16 per Lucev FM. Footnotes 10 and 11 above are the footnotes in the judgment quoted.
Those views can be applied to a case such as this where it is alleged that there is a constructive trust. The question of particulars also needs to be considered, as was submitted by Mr Leslie for the respondents, against the application for leave to file an amended application. The draft amended application quite properly spells out the nature of the application in greater detail than was previously the case, and was described yesterday by Mr Hannan as either a quasi pleading or a quasi statement of claim, but it still does not descend to the level of particularity sought by the respondents with respect to the constructive trust claim.
Given:
a)the relative complexity of this case, and notwithstanding that it is a not uncommon type of case in this Court, it is still, nevertheless, relatively complex in the circumstances;
b)the quasi pleading nature of the amended application; and
c)that the particulars sought are confined and will assist, in the Court’s view, in narrowing and clarifying the issues, it is appropriate, in the Court’s view, that there be an order for the particulars sought and that order would be in the following terms, that is, that the applicant have leave to file an amended application in the form filed on 10 September 2008 but further amended to incorporate the particulars requested in paragraph 3 of the minute of proposed order tendered by the respondents in Court on 23 September 2008, and that the applicant do so by 4.00pm on 26 September 2008.
Minutes of proposed orders – discoveries and interrogatories
The minute of proposed order also deals with the issue of discovery and interrogatories, and the minute of proposed order seeks broad general orders of a type that this Court does not generally make and which, in any event, require the requisite declaration under s.45(1) of the FM Act.
The requirements for discovery in this Court have been set out in Abrahams v Qantas Airways Limited:
The Court must therefore in considering an application for a discovery declaration determine whether the interests of the administration of justice, that is the interests of the management of justice, being the management by the Court of the proceedings pending before the Court, require such a declaration, and in doing so the Court “must have regard to” whether discovery “will be likely to contribute to the fair and expeditious conduct of the proceeding” and such other matters as the Court considers relevant. [15]
…
[15] (2007) 210 FLR 314 at 317 per Lucev FM; [2007] FMCA 639 at para. 11 per Lucev FM (“Abrahams”).
In summary, it appears that in order to obtain an order for discovery in this Court the Court must determine on the available evidence that it is in the interests of the administration of justice to do so, and in making that determination must have regard to whether allowing discovery would be likely to contribute to the fair and expeditious conduct of the proceedings, and such other matters as the Court considers relevant. Those other matters might include:
(a) the relevance of any documents sought to be discovered;
(b) the volume of documents sought to be discovered;
(c) whether there is a court book containing relevant documents, and the extent to which relevant documents are included in the court book;
(d) whether discovery would narrow the issues;
(e) whether both parties seek discovery;
(f) whether there is consent to discovery;
(g) whether discovery is “of benefit” in the litigation; and
(h) the effect of discovery on litigants, especially, vulnerable litigants.[16]
The Court further noted:
The categories of relevant factors are not closed.[17]
[16] Abrahams FLR at 321 per Lucev FM; FMCA at para. 25 per Lucev FM.
[17] Abrahams FLR at 321 per Lucev FM; FMCA at para. 25 per Lucev FM. See also Sherwood Overseas v Jaymac International (No. 2) (2008) FMCA 690, where similar principles are discussed.
The Court also observes that in the context of this particular case other factors which might be relevant to the issue of discovery include the conduct of the party requesting discovery in relation to the litigation, as well as the extent to which discovery might already have been made, by reason of affidavits already filed, which affidavits were, by order, required to attach relevant documents. There were no particular submissions made by the respondents concerning the discovery sought, either generally or particularly.
The only material that the respondents have identified that might be necessary for discovery appear to be those matters referred to in Mr Ioppolo’s affidavit, at paragraphs 8.1 and 8.2. They are:
a)documents related to the 1984 bankruptcy, which have been gathered, but in respect of which there does not appear to be an intention evinced to apply for discovery;
b)specific discovery against the applicant of documents related to the 1983 property settlement, which it is said the respondents intend to make an application in relation to; and
c)the apparent intention to seek third party discovery against the bankrupt in relation to documents not provided by the bankrupt to the applicant.
In the circumstances of this case it would seem that if discovery is to be ordered that it would be more appropriate to order specific rather than general discovery.
In relation to the 1984 bankruptcy documents, the Court notes that no application has been made. It is fair to infer in the circumstances that the applicant herself is unlikely to have any such documents; also that in any event the discovery of the 1984 bankruptcy documents is a matter which probably primarily lies within the control of the respondents as trustees in bankruptcy. The Court further notes that no request has been made to the bankrupt for the documents in his control in relation to the 1984 bankruptcy.[18] In the circumstances the Court does not propose to order discovery of the 1984 bankruptcy documents.
[18] Bankruptcy Act 1966 (Cth), ss. 19AA, 77(1) and 152 (“Bankruptcy Act”).
With respect to the intention to apply for specific discovery against the applicant for documents relating to the 1983 property settlement, the Court notes that documents in relation to that settlement are attached to the relevant affidavits of the applicant and bankrupt and appear to deal either fully, or if not fully certainly adequately for present purposes, with that property settlement. The respondents have not identified any specific documents or any specific types of documents or specific categories of documents that have not been provided in relation to the 1983 property settlement. The Court does not propose to make an order with respect to discovery of the 1983 property settlement documents.
Third party discovery
With respect to third party discovery, the Court does have power to order third party discovery.[19] This case in its context might have been a classic case for third party discovery to be granted in circumstances where the third party was the husband of the applicant. The third party is a bankrupt whose bankruptcy has given rise to the application, in broad terms, and the third party bankrupt seems to be a person with the only copies of the relevant documents.[20] Again, however, there is no application before the Court by the respondents with respect to third party discovery. There is no specification of documents required, rather there is a reference to a reference in the applicant’s discovery affidavit to documents not provided by the bankrupt. The Court notes again that there has been no request to the bankrupt from the respondents to peruse documents, as the respondent trustees are entitled to do.[21]
[19] Verge and Another v Devere Holdings Pty Ltd (No 3) [2008] FMCA 1220, at paras. 30 and 31 per Lucev FM (“Verge (No. 3)”).
[20] Verge (No. 3) at para. 32 per Lucev FM and the reference there to McIlwain v Ramsey Food Packaging (2005) 221 ALR 785 at 800 per Greenwood J; [2005] FCA 1233 at para. 33 per Greenwood J.
[21] Bankruptcy Act, ss. 19AA and 77(1).
The Court will not grant, other than in exceptional circumstances, general third party discovery. Had the respondents had before the Court an application for third party discovery, properly and particularly framed to have certain documents discovered, the Court would have entertained that application. There is no such application and the Court, therefore, does not propose to grant an order for third party discovery.
The Court notes that the minute of proposed orders seek general discovery or the early return of a subpoena against the bankrupt. There is nothing to prevent the respondents:
a)requesting the documents from the bankrupt; or
b)absent cooperation from the bankrupt, issuing a subpoena for production of the documents at, or if necessary before, the hearing.
The Court can indicate that in the event that there is no cooperation or limited cooperation from the bankrupt and it is necessary for the respondents to make an application for the return of a subpoena, that return will be listed urgently in the circumstances of this case.
Discovery – generally
Everything that the Court has said above relates to the circumstances of this case, the affidavits which have been filed, the nature of the application and the minute of proposed order, as it presently stands. It does not preclude a further application for specific discovery or, as indicated, the issuance of subpoenas for the production of documents at/or before hearing and if any such applications are made, if it is necessary to make any such applications, those will be considered on their merits.
Interrogatories
With respect to interrogatories, again there is a very general application in the minute of proposed orders for leave to make an application for interrogatories against the applicant. The affidavit of Mr Ioppolo identifies the desire to have the applicant swear an affidavit “in the nature of an interrogatory” as to her assets, liabilities and other financial resources.
The Court has the power to order interrogatories.[22] It is a power which is rarely used. Since the appointment of a resident Federal Magistrate to Perth in August 2006, it is not a power which has been exercised in the Perth Registry. The reasons for that are probably evident from matters referred to previously in these Reasons for Judgment. In any event, the Court will not make, other than in the most exceptional circumstances, a general order for leave to a party to make an application for general interrogatories at a future stage. There was no particular argument in relation to the matter and no application for any specific interrogatories and without that the Court does not propose to make the orders sought in the minute of proposed orders, with respect to interrogatories.
[22] FM Act s.45 and FMC Rules, r.10.01(3)(j).
Miscellaneous procedural matters
The Court also observes, perhaps repeating what it said earlier, that given the amount of material presently before the Court, these are, in any event, matters on which the applicant might fruitfully be cross-examined at hearing. The Court notes that in paragraph 8.3 of Mr Ioppolo’s affidavit there is a reference to the trustees examining the bankrupt. Again, it is a general reference to the possibility that the trustees might do so. Whether the trustees apply to do so clearly is a matter for the trustees. But if the trustees do so it is not necessarily a matter which will result in any adjournment of the hearing date.
Adjournment of hearing date
The Court turns now to the issue of the vacation or adjournment of the hearing date and the ancillary issue of the filing of affidavits by the respondents in relation to the application.
The question of adjournment requires the Court to balance issues such as case management and prejudice.[23]
[23] The State of Queensland & Anor v JL Holdings Pty Limited (1997) 189 CLR 146; Myers v Myers [1969] WAR 19; Patrick v Wadoon Pty Ltd (No.2) [2007] FMCA 1766 and Mahmoud v The Owners’ Corporation Strata Plan 811 (No.2) [2006] FMCA 1711.
Case management considerations are particularly relevant in the modern context. They are particularly relevant in bankruptcy and a case of this type, where there are competing interests. Those competing interests include the applicant who, as a wife and mother, lives and has lived for many years in what is the family home, the property the subject of the application. They include the interests of the bankrupt. They include the interests of the trustees and the various duties that the trustees must perform in the interests of the public and the creditors. It also includes the interests of the creditors and the undoubted desire, on their part, to get some early return on the moneys they say they are owed. It is also the case, as indicated earlier in the quote from Verge (No.3),[24] that bankruptcy proceedings of this type, involving issues of constructive trust and possibly issues of transfer of property at under value, are proceedings which in the Court’s view ought not be allowed to drag on given the nature of the interests concerned. Case management considerations, however, do not prevail over or against the interests of justice. The interests of justice require consideration of the issue of whether either party will be prejudiced if the case proceeds on the current timetable, and a weighing of that prejudice.
[24] Verge (No.1): see para. 32 above.
An adjournment of the current hearing date will not cause prejudice to the applicant, in the sense, as the Court understands it, that there is no likelihood that she will be required to move out of the property in the short term, or in any event, before the determination of the matter by the Court. There is, however, prejudice associated with the uncertainty of the litigation in relation to what has been, on the evidence, the family home and the prospect of its sale and loss, and that type of prejudice is certainly not to be underestimated.
The Court accepts that there is prejudice to the respondents by reason of:
a)the raising recently rather than earlier of the family law property settlement; and
b)the discovery of the earlier bankruptcy, although in that respect, that is a matter which although not put in issue or adverted to by the applicant or the bankrupt is also an issue which is within the ken of the respondents to perhaps deal with or discover earlier than the respondents did.
Those are matters which the Court considers, as it has already indicated, that the trustees, given the natures of the duties of a trustee, particularly those in ss.19 and 19AA of the Bankruptcy Act, are entitled to have a reasonable opportunity to investigate but not an unduly long time to investigate. Further, if the trustees do not have such a reasonable opportunity, the Court considers that there will be prejudice to the trustees as respondents in these proceedings, and more likely, and more particularly, prejudice to the interests of the creditors, and the Court notes, as it already has done, that there are significant sums apparently owed to creditors and that the judgment debt is for some $US800,000, and there are, on the evidence, other substantial creditors.
In assessing prejudice, two factors, the family law settlement and the earlier bankruptcy, tip the balance so that the prejudice to the trustees as respondents of having to file affidavits by 19 September 2008, a date which has already passed without compliance, and of having a hearing on 1 and 2 October 2008 are greater than the prejudice suffered by the applicant.
In arriving at a determination on this issue, the Court has also weighed, in assessing whether to vacate the existing hearing date and in relation to the issue of prejudice, the following matters:
a)that the matter was initially brought on quickly and listed for trial quickly in lieu of dealing with the issue of injunctive relief;
b)the fact that yesterday and after submissions in this matter were finished, that another matter, which was listed before the Court on 11 and 12 November 2008, settled in mediation before a Registrar of the Court, and those dates have become available, and in the Court’s view, a further period of seven weeks is sufficient time to allow the trustees to conduct the necessary investigations and prepare for a hearing at that date; and
c)the almost extraordinary lassitude exhibited by the respondents since early July in relation to an application made in late July 2008 and the setting down of a hearing of this matter for 1 and 2 October 2008. That lassitude almost tipped the balance of prejudice in favour of the applicant.
The Court has also considered, as it is obliged to do, the objects of the FM Act, the FMC Rules, as outlined in the quote from Goodall referred to earlier and in particular, the fact that proceedings are not to be unnecessarily protracted. The Court considers that by vacating the existing hearing dates and having new hearing dates on 11 and 12 November 2008, which have become available, those objects will be satisfied given the nature of the prejudice suffered by the respondents which the Court has referred to.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Lucev FM
Deputy Associate: Michele Lord
Date: 7 October 2008
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