EATON v WOODGATE
[2011] FMCA 1010
•7 December 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EATON v WOODGATE | [2011] FMCA 1010 |
| PRACTICE AND PROCEDURE – Review of decision of Registrar – where application to adjourn examination – where Registrar refused to adjourn examination – where summons issued with Federal Court of Australia stamp instead of Federal Magistrates Court of Australia stamp – whether summons valid – whether compliance with Rule 6.15(2)(a) should be dispensed with – whether to grant adjournment – whether to order examinee not to discuss his questioning with persons other than his legal advisors. |
| Bankruptcy Act 1966 (Cth) ss.5(1), ss.81, 306 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) Acts Interpretation Act 1901 (Cth) 25C Federal Magistrates Court Rules 2001 (Cth) |
| Sydney Market Credit Services Cooperative Limited v Pisciuneri [2011] FMCA 968 Adams v Lambert (2006) 228 CLR 409 Karounos and Ors v The Official Trustee (1988) 9 FCR 330 |
| Applicant: | MITCHELL MALONEY WARR EATON |
| Respondent: | GILES GEOFFREY WOODGATE IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF STUART ALEXANDER EATON |
| File Number: | SYG 2477 of 2011 |
| Judgment of: | Raphael FM |
| Hearing date: | 7 December 2011 |
| Date of Last Submission: | 7 December 2011 |
| Delivered at: | Sydney |
| Delivered on: | 7 December 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. T. Johnson |
| Counsel for the Respondent: | Mr M. Henry |
| Solicitors for the Respondent: | TurksLegal |
ORDERS
Pursuant to Rule 1.06 of the Federal Magistrates Court Rules 2001, compliance with Rule 6.15(2)(a) of Federal Magistrates Court (Bankruptcy) Rules 2006 be dispensed with in regard to the seal of this Court in the summonses issued to Mitchell, Stuart and Matthew Eaton on 11 November 2011.
Application for review is dismissed.
The examination of Mitchell Eaton be adjourned to a date to be fixed by the Registrar after 11 December 2011.
The costs of the respondent to the application be paid by Mitchell, Stuart and Matthew Eaton, such costs to be taxed if not agreed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006.
The Court notes the undertaking of Mr Beazley, solicitor for the examinees, to file an application in this Court by 9 December 2011.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2477 of 2011
| MITCHELL MALONEY WARR EATON |
Applicant
And
| GILES GEOFFREY WOODGATE IN HIS CAPACITY AS TRUSTEE FOR THE ESTATE OF STUART ALEXANDER EATON |
Respondent
REASONS FOR JUDGMENT
There comes before me today, as a matter of urgency, an application to review a decision of Registrar Tesoriero made in the context of a s.81[1] examination to continue the examination of Mitchell Maloney Warr Eaton who was called to be examined by Mr Giles Woodgate in his capacity as trustee of the bankrupt estate of Stuart Alexander Eaton, who I understand to be his father.
[1] Bankruptcy Act 1966 (Cth)
The decision which is the subject of review appears to be the Registrar’s refusal to adjourn the examination of Mr Mitchell Eaton on the grounds that the questioning of him was confusing and possibly did not respond to the summons which was issued requiring him to attend.
When the matter came before me, Mr Johnson, who appears for Mr Eaton and for various other persons the subject of summonses in this matter, added an additional argument which had not been raised before the Registrar which concerned the form of the summons itself.
A summons for examination under s.81 is dealt with in the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) in Part 6 of the Rules. There are several divisions to Part 6. Division 6.4 deals with summonses in relation to the examination of an examinable person. It is common ground that Mr Eaton is an examinable person to whom the provisions of Division 6.4 apply.
Rule 6.15 sets out the requirements for a summons. It states:
6.15 Requirements for Summons
(1) A summons must be in accordance with Form 9.
(2) A Registrar must:
(a) sign and affix the stamp of the Court to the summons; and
(b) give it to the applicant for service on the examinable person.
(3)If the summons requires the examinable person to produce books at the examination, the summons must identify the books that are to be produced.
The summons which was issued to Mr Mitchell Eaton is in Form 9 and I understand it is common ground that it was signed by the registrar. It bears four seals upon it. At the top there is a seal of this Court dated 8 November 2011 indicating that the summons has been filed. Just underneath that there is another seal; it is of the Federal Court of Australia. The seal of the Federal Court of Australia is the seal over which the registrar has signed the summons. And then on the third page of the summons the seal of the Federal Court of Australia also appears.
Mr Johnson argues that the provisions of Rule 6.15 have not been complied with, that they are mandatory and that, therefore, the summons itself is invalid and of no effect.
Mr Henry appears for the trustee. He says that it cannot be denied that the seal of the Federal Court of Australia appears on the document. But he believes that the validity of the document can be saved in one of a number of ways. Firstly, he says that the document can take the benefit of s.25C of the Acts Interpretation Act 1901 (Cth), where it states relevantly:
Compliance with Forms
Where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient.
Mr Johnson argues, attractively, that it is not the form that requires the seal of the Court, but the Rule and, therefore, a failure to comply with the rule is not a matter to which s.25C is attracted. I agree.
The second piece of statutory assistance relied on by Mr Henry is s.306 of the Bankruptcy Act 1966 (Cth). That is in the following form:
Formal defect not to invalidate proceedings
(1)Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the Court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that Court.
(2)A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.
Is the defect a formal defect or is it more? These are matters which I considered in Sydney Market Credit Services Cooperative Limited v Pisciuneri [2011] FMCA 968. At [14] I made reference to Adams v Lambert (2006) 228 CLR 409 at [18] where the High Court made it clear that:
“Whether the defect or irregularity is a formal defect or irregularity, and whether substantial injustice has been caused and cannot be remedied, are separate and distinct, the latter question arising only if the former is answered in the affirmative.”
At [28] the Court said:
“The other exclusionary aspect of the expression "a formal defect or an irregularity" in section 306 was said, in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71, to consist in a failure to meet a requirement made essential by the Act.”
I went on to note:
“The Court in Lambert expressly excluded as a requirement made essential by the Act the correct completion of the form in all its respects but it still had to be completed in a way that answered the essential requirements.”
The requirement in R.6.15 to affix the stamp of the Court is a mandatory requirement. Mr Johnson points to the serious effects of non-compliance with the summons. At note 2 of the document it says:
“If you do not comply with this summons a warrant for your apprehension (arrest) may be issued under section 264B of the Bankruptcy Act 1966”
Mr Johnson also points out that a person who has not answered questions truthfully whilst under examination may be liable for offences, and a person who declines to answer questions may be summonsed for contempt. These repercussions are serious, so it is important that the rule is observed.
I am of the view that the placing of a stamp of a Court which is not the Court that has issued the summons is not a formal defect or irregularity. As I said in Sydney Market Credit Services Cooperative Limited v Pisciuneri, “one has to look at what the statute requires and that the form sets out to provide”. The statute requires the stamp of this Court and the form, as it appears, does not provide it.
However, there is one further saviour upon which Mr Henry relies, and that is R.1.06 of the Federal Magistrates Court Rules 2001 (Cth).
“Court may dispense with rules
(1)The Court may in the interests of justice dispense with compliance, or full compliance, with any of these Rules at any time.”
I would hazard a guess that the counter clerk who took this summons for examination and who was also the counter clerk for the Federal Court mistakenly picked up the wrong red stamp and utilised it on the examination summons. The existence of the wrong stamp has not been utilised as an excuse why Mr Eaton has not attended. He understood the document well enough to come to the Court and present himself for examination. In my view, the substitution of the Federal Court of Australia stamp for the Federal Magistrates Court of Australia stamp is something which in the interests of justice should be corrected, and the way to correct it is to dispense with R.6.15(2)(a) insofar as it refers to the stamp of the Court, noting always that it is not in dispute that the registrar of the Court was the signatory to it.
Mr Johnson’s further concerns relate to the questioning of Mr Eaton. As I understand his argument, it is that Mr Eaton was given no indication by the summons as to what he would be questioned about and that when he was being questioned about certain issues in respect of a company whose name had been changed, he became confused. Mr Johnson supported his argument by reference to the decision of the Full Bench, Foster, Woodward and Spender JJ in Karounos and Ors v The Official Trustee (1988) 9 FCR 330. That was a case under the old s.81(1)(b) of the Bankruptcy Act, and it appears from my reading of it to involve an application to set aside one of the summonses before the witness had taken the stand. But nonetheless it contains some useful dicta. Described by the Court at [335] as “the relevant principles”, Mr Johnson takes particular comfort from principles 1, 4, 5, 7 and 12. These are set out below. He is particularly exercised by principle 4.
“(1)The power given by section 81 of the Act is an unusual and far-reaching one (In re North Australian Territory Company (1890) 45 ChD 87 at 93; Ex parte Willey 23 ChD 118 at 128) and its use could easily become oppressive and vexatious if it is not approached responsibly by applicants for summonses, and controlled carefully by the Registrar and the Court; see Re H.J. Price (No 3) (1948) 14 ABC 137 at 139-140.
(4)The summons itself should be expressed in terms which make the intended areas of inquiry as clear as the circumstances of the case permit, and which specify as clearly as possible any books and records which the person summoned has to produce (see Re Robert Henry Andrews, above, at 186-7).
(5)The Registrar should examine the application and form of summons carefully to satisfy himself that the grounds of the application are sufficiently clear and the form of the summons is not oppressive or vexatious, by reason of being uncertain, too wide or otherwise objectionable.
(7) If a person summoned believes that compliance with the summons would be oppressive or vexatious, he can apply to the Court to have the summons set aside or adjourned to a more convenient time. Such an application to the Court will usually be determined on a broad view of the issues in the particular case and a weighing of competing principles; see Re Castle New Homes Ltd (1979) 2 All ER 775 and cases there cited; Re John Arnold's Surf Shop, above; Re Nalanda Pty Ltd (1983) 7 ACLR 596.
(12)Both the Registrar and the Court will give due weight to the fact that a summons is sought by the Official Trustee, who will not be presumed to have acted unfairly or for an improper purpose except on convincing evidence; Re H. J. Price (No 3), above, at 141. The same is true of an official liquidator; see Re Castle New Homes Ltd, above, at 791; Re John Arnold's Surf Shop, above, at 229-30. But an application by the Official Trustee will still be subject to proper scrutiny and will be refused if the Registrar or Court is not satisfied that it should be granted.”
But it seems to me that matters may have advanced somewhat since that case insofar as the Rules now require the summons to be in Form 9, and Form 9 itself provides an indication of the evidence that a person summonsed is to give. Paragraph 1 of the standard form, and in the form with which I am dealing, it states:
“You are required to attend before a registrar at the time, date and place stated above, to be examined on oath under section 81 of the Bankruptcy Act 1966, and to give evidence in relation to the examinable affairs of [blank] - ”
in the instant case, the examinable affairs of Stuart Alexander Eaton. Further on in the form it makes reference to s.5(1) of the Bankruptcy Act which defines examinable affairs. And so it can be said that the requirement in principle 4 is made out by the current form.
Mr Johnson had some complaints about the documents that his client was asked to produce. They do not appear at first sight to have any relevance whatsoever to the bankrupt. They refer to documents relating to the bank accounts and facilities, credit cards, etcetera, that the witness has. It refers to gas or electricity accounts of the witness, statements and invoices issued by Sydney Water for water services provided to the witness, and council rates which the witness was obliged to pay. It refers to documents relating to the witness’ motor vehicles, and then documents relating to leasing of property whether commercial or residentially, finally ending with taxation documents, all of which are referable only to the witness and bear no mention of the bankrupt. But these documents have either been produced or are the subject of a “no relevant document” advice to the trustee. They have not been called upon. No doubt, if they are, a fiery argument as to their relevance will ensue, but they have not yet been so called.
I do not have the benefit of a transcript and so I am unable to make any judgment as to whether or not the witness was confused by the questioning. And, equally importantly, I am not able to make any judgment as to whether or not the Registrar acted fairly towards the witness. As principle 7 notes:
“If a person summoned believes that compliance with the summons would be oppressive or vexatious, he can apply to the Court to have the summons set aside or adjourned.”
I understand that it was an application for an adjournment that was made. Principle 11 notes:
“In all cases, the Registrar or the Court will be careful to see that injustice is not occasioned in the course of the examination by the particular questions asked; see, for example, Re Anderson; ex parte Official Receiver (1937) 10 ABC 284 at 288-9; Re Robert Henry Andrews, supra, at 184-5; Re Hugh J. Roberts, supra, at 539, 542.”
As things stand at the moment I could not possibly set aside this summons on the basis of the alleged unfairness. I do not know what questions were complained about and I do not know what commentary the registrar made upon them. The fact that the registrar did adjourn the matter so that this hearing could take place has provided the witness with some time in which to collect his thoughts. He will have been aware of the questions he was asked and the nature of the investigations being made. I understand that the examination is due to be continued tomorrow and I believe that by that time this witness should be in a position to answer reasonable questions. I note that he has the benefit of Mr Johnson’s presence to ensure that any perceived unfairness is made known to the registrar so that it can be ruled upon.
As her Honour said in Karounos:
“The power given by section 81 is an unusual and far-reaching one.”
It is being utilised in aid of the trustee’s duty to come to an understanding of the bankrupt’s affairs, and to try and recover for his creditors as many assets as possible. It is not a procedure which should be unduly hampered.
Perhaps this application will have given the trustee and those who represent him cause to understand the concerns raised by this witness and, I gather, by others to come. I fully accept that there is a responsibility to be fair to these witnesses who are not themselves in the position of a bankrupt subject to the control of a trustee, and I am sure that the registrar is equally aware so that when the examinations resume tomorrow, as I believe they should, there will be no further necessity to approach this Court. The application is dismissed.
Mr Johnson, on behalf of Mr Mitchell Eaton, asks that an order be made that his examination be adjourned because he has made arrangements to travel to New Zealand. Mr Johnson has tendered an itinerary which indicates that the arrangements were made on 1 November 2011. The summonses for examination were not issued until 8 November 2011. The application is resisted by Mr Henry on the basis that if this unsuccessful application before me had not taken place, then Mr Mitchell Eaton’s examination would have been completed by today. I understand that several other parties are due to be examined, and it seems to me that it would be unreasonable not to grant the adjournment for Mr Mitchell Eaton’s examination until a date following his return, to be arranged by the trustee. I have not been given any information or submission in relation to prejudice to be suffered by the trustee if this does not occur.
Mr Henry also applies for costs which he seeks against Mr Mitchell Eaton, Mr Stuart Eaton and Mr Matthew Eaton, all of whom have been summonsed utilising the Form 9 which was the subject of Mr Johnson’s complaint. Mr Johnson says that he was successful in his arguments save for the discretionary one under Rule 1.06. But that is not really the case because Mr Johnson wasn’t arguing those other points, they were being argued by Mr Henry. And whilst they were unsuccessful, Mr Johnson’s substantive application was also unsuccessful for reasons which an experienced practitioner such as Mr Johnson may well have foreshadowed.
There really is hardly any prejudice in the clearly mistaken substitution of the stamp of one Court for another. In those circumstances I think that the proper procedure should be that costs should follow the event so that I shall order that the trustee’s costs of this application be paid by Mr Mitchell Eaton, Mr Stuart Eaton and Mr Matthew Eaton, such costs to be taxed if not agreed, pursuant to the Federal Magistrates Court (Bankruptcy) Rules.
Mr Henry has requested that I make an order that Mr Mitchell Eaton not discuss the content of the trustee’s questioning of him with any other person than his legal advisers, presumably until further order. Mr Johnson resists that application noting that an examination is not a trial, it is an administrative procedure. The witness is not being cross-examined, he is being examined. I’m reluctant to make such an order into some indefinite time into the future. It seems to me to be almost impossible to police, and I have no real understanding of what questions he was asked which makes it very difficult for me to form an opinion about whether other persons having knowledge of them would in some way prejudice the examination. In the absence of this evidence I’m not prepared to make the order.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Raphael FM
Date: 15 December 2011
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