James Louis Florance ex parte Peter Nelson Hardiman v William Edward Andrew

[1992] FCA 723

Re: JAMES LOUIS FLORANCE; Ex parte PETER NELSON HARDIMAN
And: WILLIAM EDWARD ANDREW
No. N B95 of 1980
FED No. 723
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
BANKRUPTCY DIVISION
Foster J.(1)

CATCHWORDS

Bankruptcy - application to review decision of Registrar granting trustee access to documents produced pursuant to s 81 of the Bankruptcy Act 1966 (Cth) - whether Registrar should consider whether access should be granted in relation to each particular document which may appear to have relevance during the course of a s 81 examination - whether considerations and procedures appropriate to granting of access to subpoenaed documents in adversary litigation applicable to granting of access to documents in s 81 examination proceedings.

Bankruptcy Act 1966 (Cth) - s 14(5), s 81

Re James Louis Florance; Ex parte Peter Nelson Hardiman; Peter Nelson

Hardiman v William Edward Andrew, unreported, Neaves J, 24 February 1992

Karounos v The Official Trustee (1988) 19 FCR 330

Re H.J. Price (No. 3); Ex parte The Commercial Banking Company of Sydney Limited (1948) 14 ABC 137

HEARING

SYDNEY

#DATE 3:8:1992

Counsel for the Applicant: Mr J. Johnson

Instructed by: Sally Nash and Co

Counsel for the Respondent: Mr D. Davies

Instructed by: Holman Webb

ORDER

THE COURT ORDERS THAT:

1. the application be dismissed;

2. access be granted to the Trustee to uplift and photocopy documents the subject of the present proceedings;

3. the matter return to the Registrar for the s 81 examination to continue;

4. the applicant pay the costs of the respondent.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

This is an application to the Court to review a decision of Registrar Segal on 25 June 1992. The application is brought under s 14(5) of the Bankruptcy Act 1966 (Cth) (the "Act"). The applicant, Peter Nelson Hardiman, was summonsed as a witness to attend before the Registrar on that date to give evidence and produce documents pursuant to s 81 of the Act. He produced a very large number of documents which are currently before me contained in a suitcase. He produced those documents to the Court.

1. The trustee of the estate sought permission to inspect the documents. That permission was granted by the Registrar. It is against the granting of that permission that these proceedings for review are brought. The bankrupt estate in question is that of James Louis Florance. A sequestration order was made in respect of Mr Florance as long ago as 1980. The trustee of the estate, Mr William Edward Andrew, sought the summons under s 81 only fairly recently.

2. Proceedings were taken by Mr Hardiman to have the summons set aside. Those proceedings were heard by Neaves J. His Honour gave judgment on 24 February 1992: Re James Louis Florance; Ex parte Peter Nelson Hardiman; Peter Nelson Hardiman v William Edward Andrew, unreported, Neaves J, 24 February 1992. He substantially dismissed the summons, although he made certain orders varying the wording of it. The summons as so varied was the summons which came before Registrar Segal. It is unnecessary to refer in detail to the summons.

3. It required Mr Hardiman to give evidence in connection with circumstances in respect of which the bankrupt, then practising as a solicitor, acted in connection with a transfer to a person described as "Peter Nelson" of Lots 4, 5 and 6 in strata plan 9650 Foamcrest Avenue, Newport, including the mortgaging of those properties, the subsequent discharge of the mortgages, the letting of the properties in the name of Peter Nelson and the involvement of the witness as letting agent for the said Peter Nelson in respect of those properties.

4. In relation to the summons to give evidence, there was also a requirement in it for the production of books, documents and records relating to these matters. It is plain that the books, records and documents sought were of a type which could have relevance to the general topics referred to in the body of the summons. Before Neaves J two principal submissions were made on behalf of witness, Mr Hardiman, in support of the application for the discharge of the summons.

5. The first of these was that the summons should be set aside on the ground that:
   

"It goes to matters that are not relative to the affairs of the bankrupt."

1. In his judgment, his Honour refers (at 10) to the fact that:
   

"Counsel made a critical examination of the application for the issue of the summons contending that it demonstrated no sufficient nexus between the applicant and the bankrupt or his property, trade dealings or affairs."

1. His Honour, for reasons which are set out in his judgment, rejected this submission.

2. The second submission made in support of the applicant's case was that the summons was too wide and was oppressive. Neaves J indicated (at 12) in his judgment:
   

"The primary argument relied upon in support of this submission was that the trustee had, prior to the making of the application for the issue of the summons, made up his mind to institute proceedings against the applicant in relation to the subject matter of the proposed examination."

1. His Honour considered this submission in the light of evidence that was placed before him. He also considered the submission in the light of the relevant principles which have been summarised by the Full Court of this Court in Karounos v The Official Trustee (1988) 19 FCR 330 at 335-6. I should add that I have also been referred to this authority, amongst other authorities, in support of the arguments that have been put before me.

2. His Honour considered the facts and in the light of those principles, also rejected this submission. In the upshot, as I have indicated, his Honour, whilst rejecting the main submissions directed to the setting aside of the summons, accepted some subsidiary submissions which led to the amendment of the summons, so that it came before the Registrar in a somewhat different and perhaps more restricted form than it did before his Honour. To a very large extent the submissions made to Neaves J have been repeated before the Registrar and before me, although, of course in the slightly different context of the consideration of a submission that the production of the documents to the Court should not be followed by a grant of access to the Trustee in respect of those documents.

3. I have given consideration to the principles which are set out in an exhaustive way in Karounos insofar as they may be said to have some bearing upon the question that I have to decide. There is no need for me in these short reasons to set them out. Again, the decision of Neaves J was not the subject of appeal. Accordingly, this review now sought before me, cannot in any shape or sense be regarded as or treated as some form of appeal against the findings made by his Honour when application was made to set aside the summons.

4. Considerations relating to the possibility or even the probability of proceedings being contemplated by the Trustee in relation to the transactions referred to broadly in the summons, were all considered by Neaves J. It is not appropriate that those matters be simply revived in this application. Indeed, the material placed before his Honour has not, in any real sense, been placed before me in these proceedings. In argument I was merely referred to the possibility of there being subsequent proceedings before his Honour. Quite clearly, evidence was placed in relation to these matters. His Honour heard the evidence and rejected that for being a basis for setting aside the summons.

5. The gravamen of the submission that has been made to me can be stated in this way. It is put by way of analogy that under a subpoena for the production of documents, the witness subpoenaed complies with the subpoena by producing the documents to the Court. It is said, and properly so, that thereafter the Court exercises a discretion as to whether the documents so produced should be released to other parties in the proceedings for their inspection. Certain considerations always apply in such circumstances. An obvious example of this nature is a claim for legal professional privilege, or some other form of privilege, being made in respect of those documents as being a basis justifying the denial of access to them by the Court.

6. In that regard it may be noted that certain documents that have been produced to the Registrar and which are before me today are the subject of a claim for legal professional privilege and that the legal professional privilege is claimed on behalf of the witness Mr Hardiman in respect of advice that he has sought from his own solicitors in relation to the s 81 proceedings. It is not contended that those documents should be made available and I need say no more about them.

7. It is put however, that the balance of the documents should become the subject of access only as the result of what can only be described as a fairly tortuous process. It is suggested that, in the course of the s 81 examination, only when it becomes apparent that a particular document may have some relevance that the Registrar should thereupon consider, in respect of that particular document, whether or not access should be granted. So far as I am aware no such procedure has ever been followed or even advocated in prior examinations under s 81.

8. I think it reasonable to refer to the well known passage from the old case of Re H.J. Price (No. 3); Ex parte The Commercial Banking Company of Sydney Limited (1948) 14 ABC 137. In that case Clyne J had for consideration the production of documents to the Court and their use in examination of a witness. His Honour said as follows, at 139:
   

"The power to summon witnesses in bankruptcy has a long history and it is now recognised as a power which is expressly vested in the Court, and the person summoned is not therefore in the ordinary position of a witness called by a litigant party in order that he may be examined by the two litigant parties before the Court, but he is so to speak, the witness of the Court, In re Scharrer: Ex parte Tilly (1888) 20 QBD 518 at pp 521-2. Where this examination is held at the instance of the official receiver or trustee, its object is to inform the minds of these persons, as officers of the Court, so that they may know what future action to take. But it is also a power of an inquisitorial kind and should not be put in motion if unnecessary mischief is going to be done or hardship inflicted upon a third person who is called upon to appear and give information."

1. Plainly, considerations and procedures appropriate to the granting of access to subpoenaed documents in adversary litigation are not binding when consideration is given to the question of granting access to a trustee in respect of documents produced to a Court as a result of a summons issued by the trustee for the purpose of examination of a witness under s 81. The trustee is acting as an officer of the Court; he is exercising the power of the Court. The production of the documents is very largely to enable him to make up his mind as to what future action should be taken.

2. It is not to be presumed that the access is sought to the documents for some improper purpose, or some purpose other than a bona fide purpose to inform his mind as to the appropriate procedures to be taken in the future. Obviously, as appears from the authorities, the Court must be astute to see that no improper use is made of proceedings under s 81. Nothing has been placed before me to suggest that anything of an improper nature is contemplated or could even conceivably occur if the trustee had access to these documents which have been subpoenaed, nor has anything been put before me to suggest that I should give effect to the exception contemplated in the passage that I have just referred to, namely, that a situation of unnecessary mischief being done to the witness might occur, or unnecessary hardship inflicted upon him if I granted access to these documents.

3. In my view, the application to review the decision of the registrar should be dismissed. I order the applicant to pay the respondent's costs. In respect of the documents the subject of the present proceedings I grant access to the trustee to uplift and photocopy them. I return the matter to the Registrar so the s 81 examination may continue.