Eriksson v Melluish
[2015] FCCA 1223
•5 May 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ERIKSSON v MELLUISH | [2015] FCCA 1223 |
| Catchwords: BANKRUPTCY – Public examination – application to discharge summons – examinable person. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5, 81, 120, 121 |
| Karounos and Others v Official Trustee (1988) 19 FCR 330; [1988] FCA 180 |
| Applicant: | HUGH BARTON JOHN ERIKSSON |
| Respondent: | JOHN MELLUISH AS TRUSTEE APPOINTED TO THE ESTATE OF TREVOR JAMES ERIKSSON (A BANKRUPT) |
| File Number: | SYG 3508 of 2014 |
| Judgment of: | Judge Barnes |
| Hearing date: | 5 May 2015 |
| Delivered at: | Sydney |
| Delivered on: | 5 May 2015 |
REPRESENTATION
| Counsel for the Applicant: | Ms Arulrajah |
| Solicitors for the Applicant: | Thompson Madden |
| Counsel for the Respondent: | Mr Rose |
| Solicitors for the Respondent: | Norton Rose Fulbright |
ORDERS
The interim application filed on 24 April 2015 be dismissed.
The Applicant pay the costs of the Respondent as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules.
| FEDERAL CIRCUIT COURT AT SYDNEY |
SYG 3508 of 2014
| HUGH BARTON JOHN ERIKSSON |
Applicant
And
| JOHN MELLUISH AS TRUSTEE APPOINTED TO THE ESTATE OF TREVOR JAMES ERIKSSON (A BANKRUPT) |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This is an application filed on 24 April 2015 in which the Applicant Hugh Eriksson sought an order that a summons for examination dated 19 December 2014 be discharged. The other party to these proceedings is John Melluish, Trustee of the bankrupt estate of Trevor Eriksson. The proceedings are brought in relation to a summons to give evidence at a public examination under s.81 of the Bankruptcy Act 1966 (Cth) issued to a Mr Eriksson. Mr Eriksson is the son of the bankrupt, who for present purposes I will call Mr Eriksson Senior.
In support of this application Mr Eriksson relies on an affidavit that was sworn by him on 24 April 2015. Mr Eriksson acknowledged that he was served with a summons for examination on 23 February 2015. He raised a number of issues in his affidavit.
However, in oral submissions his Counsel indicated that it was primarily contended that Mr Eriksson was not either a “relevant person” and/or an “examinable person” within the meaning of the Bankruptcy Act for the purposes of the operation of s.81 of the Act. In addition, reliance was placed on an issue raised in Mr Eriksson’s affidavit with respect to perceived reputational harm.
Section 81 of the Act provides that where a person (the relevant person) becomes a bankrupt the Court or a Registrar may, on the application of the Trustee, summon the relevant person or an “examinable person” in relation to the relevant person for examination in relation to the bankruptcy. I note that there is no suggestion that Mr Eriksson is a relevant person. He is not a bankrupt. The argument in this matter proceeded on the basis that the issue was whether or not he was an examinable person in relation to the relevant person.
No issue was taken in relation to the Trustees’ compliance with the procedural requirements in s.81. The Registrar has the power to issue such a summons to require Mr Eriksson to attend in the sense of the procedural requirements being met. In support of that proposition that Mr Eriksson was not an examinable person in relation to his father reliance was placed on the definition of examinable person in s.5 of the Act.
There is no issue taken in relation to Mr Eriksson’s compliance with the technical requirements of the Rules in relation to his application that the summons be discharged. In particular, while the affidavit is to set out the grounds in support of the application (see r.6.17), no issue has been taken by the Respondent in relation to the manner in which the ground relied on was raised by Ms Arulrajah today.
Before looking at that definition I note that it is well established that the power under s.81 of the Act is, as stated in Karounos and Others v Official Trustee (1988) 19 FCR 330 at 335; [1988] FCA 180, an “unusual and far-reaching one”. It is to be exercised in the interests of creditors. There is considerable authority to say that those interests should not be defeated by an unduly technical or restrictive approach to the issue of the power. “The procedure is basically designed to establish what assets the bankrupt had, what has happened to those assets, and whether action should be begun (or continued) to recover them” (Karounos at 335).
However, the manner in which s.81 is worded would appear to suggest that it is a prerequisite that there be an examinable person in relation to the relevant person. No authority was cited to me in relation to this aspect of s.81.
Section 5 defines “examinable person” as follows:
(a) if the relevant person is a debtor and property of the debtor is known or suspected to be in the possession of a person--that person;
(b) if the relevant person has become a bankrupt and any of the property of the bankrupt is known or suspected to be in the possession of a person--that person;
(c) in any case--a person who is believed to be indebted to the relevant person;
(d) if a person, including:
(i) a person who is an associated entity of the relevant person; or
(ii) a person with whom an associated entity of the relevant person is or has been associated;
may be able to give information about the relevant person or any of the relevant person's examinable affairs--that person;
Paragraph (e) of the definition is not relevant as it relates to books being in the possession of a person, including in relation to a person who is an associated entity of the relevant person or with whom an associated entity of the relevant person is or has been associated.
Paragraph (d) of the definition of examinable person uses the concept “associated entity” which is also defined in s.5 of the Act. Relevantly, in relation to a person it means, among other things, an entity that is not a company that is or has been associated with that person.
No authority was cited in relation to the definition of examinable person. Ms Arulrajah submitted generally that on the information available and her instructions Mr Eriksson was not an examinable person within any of the paragraphs within the definition. It was submitted, relevant to paragraph (d) that there was no evidence that Mr Eriksson had any business dealings with his father of a financial nature. It was suggested that paragraph (d) must be confined to a business or financial association of some sort and submitted that there was no evidence of such an association. Insofar as Mr Eriksson disclosed that he was the owner of a property in Orange he purchased from his mother, his Counsel made some submissions from the bar table about the circumstances that preceded the purchase of that property. It was submitted that the property had been owned by Mr Eriksson’s mother because the property was transferred to her by his father post-separation under orders of the Family Court. Subsequently his mother transferred it to him. It was submitted that insofar as there was a transfer of that property, the transfer from the bankrupt was from before he became a bankrupt and that this meant that the property and the purchaser Mr Eriksson, was outside the definition of examination person.
No authority was cited in relation to the definition of “examinable person”. As stated in Karounos, it is necessary to avoid an unduly technical or restrictive approach to the use of the power in s.81 of the Act. The definition of examinable person must be seen in the context of s.81 and of the Bankruptcy Act generally, including the fact that on becoming bankrupt, the bankrupt’s assets vest in the Trustee, so that in that sense a bankrupt has no property after they become bankrupt. Clearly the definition has to be given a meaning which acknowledges that this will have occurred at the date of the bankruptcy even though the definition is relevant to an examination which, of its nature, is to occur some time after the bankruptcy has occurred.
The Respondent’s submissions relied in part on the content of an affidavit which, I am told from the bar table, was filed as a confidential affidavit in support of the application for an examinable person to be summoned as provided for in r.6.13 of the Federal Circuit Court (Bankruptcy). As a consequence it must not be made available for public inspection. Counsel for the Applicant did not demur from the proposition that insofar as I needed to have regard to matters in that affidavit I ought do no more than refer to the existence of the confidential affidavit.
I am satisfied that Mr Eriksson is an examinable person within the meaning of s.5 of the Act and is also an examinable person in relation to the relevant person. Mr Eriksson is the son of the bankrupt. On his own evidence, his father lives in the property purchased from his mother. Mr Eriksson Senior provides Mr Eriksson assistance around the property with chores and with the cattle. In return Mr Eriksson assists him financially, albeit he provides limited cash (beyond accommodation) to the extent of $2,500. On this basis alone, I am satisfied that Mr Eriksson comes within para (d) of the definition as an “associated entity” of the relevant person who may, having regard to the nature of the relationship attested to by Mr Eriksson, be able to give information about the relevant person’s examinable affairs. In this respect I bear in mind the purpose of an examination under s.81 and the scope of the Trustees powers in that respect.
While I do not accept that the concept of “associated entity” is necessarily limited to circumstances in which there is financial association, but even if it is, on Mr Eriksson’s own evidence there is a financial association in the sense that he is an entity other than a company associated with his father, given the evidence about his payment to his father for work done on the Orange property. It may well be that a familial relationship with the relevant person would suffice to bring a person within this definition. It is however not necessary for present purposes for me to determine this, because there is, on Mr Eriksson’s own evidence, a financial association with his father.
In addition, there are circumstances explained in the Trustee’s confidential affidavit which satisfy me for other reasons that Mr Eriksson is an examinable person. Mr Rose took me to a number of paragraphs in that affidavit. I consider it appropriate to refer to the paragraphs (while not explaining their content) relevant to whether or not Mr Eriksson is an examinable person either within paragraph (d) or paragraph (b).
Paragraph (b) of the definition that it refers to circumstances in which the relevant person has become a bankrupt and any of the property of the bankrupt is known or suspected to be in the possession of a person. Clearly this provision has to be read in light of the fact that property of the bankrupt vests in the Trustee. Having regard to this and to the purpose of an examination, I am not persuaded by the Applicant’s contention that property must be within the present ownership of a bankrupt for the purposes of the definition of examinable person is not such as to satisfy me that Mr Eriksson is not an examinable person
Paragraph [14] of the Trustee’s affidavit provides the background to certain orders and paragraph [18] refers to an agreement as a result of such orders. Paragraph [23] has particular relevance as it sets out concerns of the Trustee in relation to the previous matters relevant to the purposes of the public examination. Paragraph [29] addresses how certain property of the bankrupt moved between other persons and paragraphs [32] and [33] explain the Trustee’s concerns in relation to the circumstances set out in paragraph [29].
In my view the concerns of the Trustees raised and referred to in these paragraphs are such as to enliven either paragraph (b) or paragraph (d) of the definition of examinable person.
Even if that were not the case, an additional issue was addressed at paragraphs [53] – [56] of the affidavit and elaborated on at paragraphs [64] and [65]. It provides an independent basis on which Mr Eriksson is an examinable person within paragraph (b) of the definition which I note is widely drafted to refer to property “known or suspected to be” in the possession of a person.
Beyond that, I have considered whether in any sense it can be said that the summons was sought for an improper purpose or as an abuse of process or whether compliance with the summons would be oppressive or vexatious in some sense. Having regard to the balance of competing interests referred to in Karounos and subsequent cases I am not satisfied that any such circumstances are made out. I note in that respect that no authority was cited by the Applicant in support of any such proposition. Taking a broad view of the issues in this case and weighing the competing principles, I am not satisfied that a discharge of the summons is appropriate.
I am satisfied that Mr Eriksson is within the definition of examinable person. The fact that he was served at Council premises where he serves as a councillor and/or the fact that he will be required to give evidence in a public examination are not such as to indicate an improper purpose in the issue of the summons to Mr Eriksson (the son of the bankrupt) in the circumstances outlined in the confidential affidavit.
Nor is there anything to support any claim of an abuse of process. Insofar as submissions were made from the bar table as to whether or not any transaction in relation to the Orange property, might be within ss.120 and 121 of the Act, consideration of that issue would be rather putting the cart before the horse. That is a matter to be determined after a public examination. There is no other litigation involving the Mr Eriksson of which I am aware and there is nothing to suggest that it would be just or equitable to defer his examination for some reason.
Insofar as Mr Eriksson raised a concern about perceived reputational damage based on fact of the public examination and the service at Council premises as opposed to at his home, I am not satisfied that this shows that compliance with the summons would be oppressive or vexatious in any sense or that the issue of the summons to Mr Eriksson was in any way an abuse of process. I note in that respect that there are other constraints on the exercise of powers under s.81 of the Act, including the fact that the Registrar makes orders in relation to and controls the conduct of the public examination, that a person who is summonsed may be legally represented, and the fact that the Court has a supervisory role by way of review of Registrars’ actions. Such matters are relevant to Mr Eriksson’s concerns as to possible reputational damages based on what may occur in the conduct of the public examination.
In these circumstances the interim application should be dismissed. At the start of the hearing Counsel for the Applicant indicated that ground two in the interim application was not pressed.
The Applicant has been unsuccessful. While he exercised a right to bring proceedings and notwithstanding his concerns about the onerous nature of the obligation to be the subject of a summons to a public examination, I am not satisfied that the Court should depart from the normal principle that an unsuccessful applicant should meet the costs of the successful party.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 22 May 2015
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