Matson, R.G. v The Official Trustee
[1986] FCA 207
•19 MAY 1986
Re: ROGER GREGORY MATSON
And: THE OFFICIAL TRUSTEE
No. G23 of 1986
Bankruptcy - Evidence
COURT
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Bowen C.J.
Beaumont J.
Spender J.
CATCHWORDS
Bankruptcy - application by Official Trustee that bankrupt not be discharged - conduct of bankrupt - exercise of discretion under s.l42(l2) Bankruptcy Act.
Evidence - objection to affidavit evidence on basis that deponent not available for cross-examination - effect of Rule l35 Bankruptcy Rules - whether waiver of right to call deponent for cross-examination - whether s.l6(2) Income Tax Assessment Act prevented use of affidavit of tax auditor.
Re a Debtor; Ex parte Taylor v. Debtor (198O) 1 All ER 129
Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305
Mobil Oil Australia Pty. Ltd. v. Federal Commissioner of Taxation (1963) 113 CLR 475
Canadian Pacific Tobacco Co. Ltd. v. Stapleton (1952) 86 CLR 1
Vanguard Service Print v. Mercovich, unreported, Full Federal Court, 20 September 1985
HEARING
BRISBANE
#DATE 19:5:1986
ORDER
Leave to appeal granted.
Appeal dismissed
The appellant pay the respondent's costs of the appeal.
Note: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
JUDGE1
The appellant, who was made bankrupt on 21 November 1977, appeals from an order made by a single judge of the Court on 10 March 1986 that, pursuant to s.149(12) of the Bankruptcy Act 1966 ("the Act"), he not be discharged from his bankruptcy.
A question, only briefly dealt with on the hearing of the appeal, arises as to whether the order made by the learned judge was final or interlocutory. If the order were merely interlocutory, leave to appeal would, of course, be required. The respondent having indicated that he did not oppose the grant of leave, we think that the proper course, in the absence of full argument on the point, is to grant leave to appeal in this case without expressing any view on the question whether an order made under s.149(12) is final or interlocutory.
The history of the bankruptcy is as follows. The appellant became bankrupt on his own petition on 21 November 1977. His statement of affairs sworn on 21 November 1977 disclosed assets of $87,005.00 and liabilities of $919,887.00. On 30 May 1980, the Official Receiver objected to the discharge of the appellant from bankruptcy by force of s.149 of the Act on the ground that "there is a deficiency of assets to liabilities exceeding $900,000.00." On 18 October 1985, the appellant pleaded guilty and was convicted of a charge under s.265(1)(a) of the Act that he had failed to disclose to the respondent certain of his property, namely certain lands then valued at $15,000.00. The District Court of New South Wales ordered that the appellant be released upon condition that he gave a recognizance to be of good behaviour for a period of three years from 18 October 1985 and gave security in the sum of $1,000.00 in that connection.
Objection was successfully taken on behalf of the appellant before the learned Judge to the tender of evidence in a report, proferred by the respondent, giving details of the administration of the appellant's estate. However, we were informed by counsel appearing on the appeal, without objection, that the proofs of debt of external creditors totalling $93,044.00 had been admitted; that a dividend of 9 cents in the dollar had been paid to those creditors from assets realised; and that the appellant had made no contribution to his estate.
On 23 January 1986, the learned Judge ordered that the period at the expiration of which the objection entered by the Official Receiver under s.149(3)(c) would lapse be extended until 31 March 1986. Leave was then granted to the respondent to amend his application to include an application under s.149(12). On 12 February 1986, the respondent filed an amended application seeking an order under s.149(12) that the appellant not be discharged from his bankruptcy.
Section 149(12) and (13) provide:
"(12) The Court may, at any time before the discharge of a bankrupt, on the application of the Registrar, the Inspector-General, the trustee or a creditor, direct that the bankrupt shall not be discharged from bankruptcy by virtue of this section.
(13) In deciding whether to make an order under sub-section (12), the Court shall take into account such matters (if any) as are prescribed for the purposes of this sub-section."
Rule 51A of the Bankruptcy Rules provides, so far as is relevant:
"51A. The following matters are prescribed for the purposes of sub-section 149(10) and (13) of the Act:
....
(d) The conduct of the bankrupt, in respect of the period both before and after the date of the bankruptcy;...."
The respondent's application was heard and determined by the learned Judge on 10 March 1986. In ordering that the bankrupt not be discharged from his bankruptcy, his Honour expressed his essential reasons as follows:
"The bankrupt has claimed to be the owner of a substantial quantity of gold and jewellery and is apparently conducting a business, which is said to be extremely profitable, presumably in breach of one or more of the paragraphs of s.269 of the Act. As his counsel, Mr. Bell, has pointed out, he has denied in correspondence that the business is his. He has, indeed, denied through his solicitor that he has even worked for it. However, the records of interview which have been placed before me make both of those denials ones which should be taken very cautiously and indeed, it would be astonishing if the facts did not turn out to be as they appear from the interviews, namely that both Mr. and Mrs. Matson are in the business, he having the dominant role. The question I have just mentioned would no doubt have to be further investigated but as things stand, in the absence of any evidence from the bankrupt, the prima facie conclusion must be as I have stated.
The basis upon which I consider the application, then, is that there is good evidence that the bankrupt has flouted his obligations under the Bankruptcy Act and is, rather surprisingly, being allowed to get away with that. No attempt has been made to secure the property to which I have made reference or to achieve a cessation of the carrying on of this business. Again, that may be due, for all I know, to an inadequacy of resources.
The impression created by allowing the bankrupt to achieve the status of a discharged bankrupt on 31 March 1986 would be that the court was unconcerned about the sort of conduct in which Mr. Matson was apparently engaged. The case demonstrates, if demonstration is needed, that there are those in the community who are under the impression that bankruptcy is not a matter which need greatly affect those who are prepared to create a quite superficial appearance that the business they are engaged in is one in which they are not legally interested. It seems important to do what can be done to dispel that impression.
Counsel for the bankrupt referred me to the principle which seems to emerge from at least some authority, that one should have regard to "acceptable standards of commercial morality". In my view, the matter may be put more broadly and in exercising the relevant jurisdiction, the court should so act as not to encourage the notion that the Bankruptcy Act and those who administer it are toothless, because to do so would be harmful to the administration of the Act and tend to bring it into contempt.
I also take into account the nature of the business which the bankrupt is apparently carrying on; it is one notoriously open to fraudulent practices."
The appellant sought to attack his Honour's order on a number of grounds. In the first place, it was contended that the respondent should not have been permitted to read in evidence an affidavit sworn by Constable Moore on 11 February 1986. The affidavit was filed on behalf of the respondent and served upon the appellant but no formal notice that Constable Moore be produced for cross-examination was given on behalf of the appellant. At a late stage, apparently on the day of the hearing of the application, an informal request was made on behalf of the appellant that Constable Moore be produced for cross-examination. He was then not, and apparently could not be, made available for that purpose.
Rule 135 of the Bankruptcy Rules provides:
"135. (1) Where a party to a proceeding has served on another party to the proceeding a copy of an affidavit filed by that first-mentioned party in connexion with the proceeding, the second-mentioned party may, a reasonable time before the date fixed for the hearing of the proceeding, serve on the first-mentioned party a notice in writing requiring the production of the deponent for cross-examination on the hearing.
(2) Where a notice under sub-rule (1) has been served on a party who filed an affidavit, the affidavit shall not be used as evidence unless the deponent is produced for cross-examination before the Court or the Court gives special leave to use the affidavit.
...."
At the commencement of the hearing of the application, counsel for the respondent informed the learned Judge that he read a number of affidavits, including Constable Moore's affidavit. His Honour then called on the appellant's counsel and was informed that although the appellant did not wish to adduce any evidence, he objected to the reception of Constable Moore's affidavit on the ground that he was not present for cross-examination. A discussion then took place between both counsel and the learned Judge as to the possible exercise of the Court's discretion under r.135(2) (cf. Re A Debtor; Ex parte Taylor v. Debtor (1980) 1 All ER 129). It was suggested that Constable Moore's evidence might have been merely corroborative of the evidence of other deponents. The learned Judge then indicated that until this question was further explored, he would defer ruling on the objection. However, the matter was not subsequently adverted to. It is common ground that, in some respects, Constable Moore's evidence went beyond the material contained in the other affidavits. It is also common ground that his Honour relied upon his evidence in making the findings of fact cited earlier.
As has been said, no notice under sub-rule (1) of r.135 was given by the appellant. The respondent argued that, in the absence of such a notice, the provisions of sub-rule (2) could have no application. But it was submitted on behalf of the appellant that the need to give a notice under sub-rule (1) had been waived by the respondent.
In our view, no such waiver occcurred. Waiver is a doctrine introduced by the law to prevent a man from taking up two inconsistent positions. It looks chiefly to the conduct and position of the person who has waived, in order to see whether he has "approbated" so as to prevent him from "reprobating"; that is, "whether he has elected to get some advantage to which he would not otherwise have been entitled" (see Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305 at p 326 per Isaacs J.); and it is an essential ingredient of the doctrine that the party said to have waived has done some distinct act intending to waive a right otherwise available (ibid).
In the present case, in our opinion, the respondent did no such act: the appellant having failed to give the notice required to be given under sub-rule (1), no response was made or called for by the respondent. It is true that the appellant made an informal request for the production of Constable Moore, but the respondent never indicated that he was prepared to treat such a request as a notice given under sub-rule (1) of r.135.
In the absence of any waiver, the provisions of sub-rule (1) were not complied with. In the result, the appellant had no right to insist upon the production of Constable Moore as a condition of the respondent's right to read his affidavit. It follows, in our view, that the affidavit was properly admitted into evidence.
It was next submitted on behalf of the appellant that the respondent should not have permitted to read the affidavit of Mr. J.D. Lynch, a taxation auditor employed in the Brisbane office of the Australian Taxation office. In his affidavit, sworn on 12 February 1986, Mr. Lynch gave evidence of an investigation of the taxation affairs of the appellant. No objection to the reading of the affidavit was taken before the learned Judge. However, on the appeal, it was contended that Mr. Lynch's evidence should have been rejected by reason of the provisions of s.16 of the Income Tax Assessment Act 1936. So far as relevant, s.16 provides:
"16.(1) In this section, unless the contrary intention appears -
"officer" means a person who is or has been appointed or employed by the Commonwealth.... and who by reason of that appointment or employment, or in the course of that employment, may acquire or has acquired information respecting the affairs of any other person, disclosed or obtained under the provisions of this Act...;
(2) Subject to this section, an officer shall not either directly or indirectly, except in the performance of any duty as an officer, and either while he is, or after he ceases to be an officer, make a record of, or divulge or communicate to any person any such information so acquired by him.
(3) An officer shall not be required to produce in Court any return, assessment or notice of assessment, or to divulge or communicate to any Court any matter or thing coming under his notice in the performance of his duties as an officer, except when it is necessary to do so for the purpose of carrying into effect the provisions of this Act...."
The absence of any objection at the hearing of the application is, of itself, probably fatal to the appellant's submission. Also, it may well be that giving the evidence was something done by Mr. Lynch in the performance of his duties as an officer and thus within the exception to s.16(2) (see Mobil Oil Australia Pty. Ltd. v. Federal Commissioner of Taxation (1963) 113 CLR 475 per Kitto J. at p 500). But, in any event, the evidence is not, in civil proceedings at least, inadmissible or otherwise excluded by the operation of a provision such as s.16(2) (see Canadian Pacific Tobacco Co. Ltd. v. Stapleton (1952) 86 CLR 1 per Dixon C.J. at p 7; per McTiernan, Williams and Kitto JJ. at pp 10-11). In our opinion, Mr. Lynch's affidavit was properly admitted into evidence.
The appellant also sought to challenge a number of the findings of fact made by the learned Judge. It was submitted on behalf of the appellant, and we accept, that allegations of misconduct of the kind involved here must be established to the comfortable satisfaction of the Court in the form of admissible evidence (see Vanguard Service Print v. Mercovich, unreported, Full Federal Court, 20 September 1985). It will be necessary to deal with each of these matters separately.
First, it was contended on behalf of the appellant that the learned Judge erred in relying upon the evidence contained in paras.2 and 3 of Constable Moore's affidavit as follows:
"2. On 17 December 1985 I accompanied Detective Sergeant Cacciola during an interview with Roger Gregory Matson at 135 Lancaster Road, Ascot.
3. On that date Matson showed me the following articles which were on the premises:-
(a) two figurines which Matson stated were valued at $25,000;
(b) An antique lounge with Matson stated he bought at an auction and was worth $20,000;..."
As to para.3(a), it was argued that a bare statement of value was not of itself sufficient to constitute an admission of ownership. Looked at in isolation, this may well be so but there was other material in evidence before the learned Judge to justify his finding that the appellant owned the goods. Moreover, the appellant did not object to the admission of this paragraph, did not seek to cross-examine Constable Moore and called no evidence himself.
Para.3(b) of the affidavit contains an admission that the appellant bought the lounge. It was reasonable for his Honour to infer from this that the appellant owned it at the time of the application.
Then it was submitted on behalf of the appellant that the learned Judge erred in finding that the appellant was apparently conducting a horseracing "tipping" business under the name "Matson Computer Services". Reference was made to correspondence written by solicitors acting for the appellant in August and October 1985 denying his involvement. But, of course, such self-serving assertions could not assist the appellant on this issue. There was sufficient evidence before his Honour to justify the finding he made.
It was further argued on behalf of the appellant that parts of paras.4 and 5 of Constable Moore's affidavit were bad in form. It is true that, to some extent, this material was framed in the form of conclusions rather than as material in primary form. However, since no objection as to form was taken before the learned Judge, it is not open to the appellant to raise these matters now.
It was next contended on behalf of the appellant that the learned Judge erred in admitting into evidence a criminal offence report of the Queensland Police Department dated 17 December 1985 prepared by Senior Constable I.L. Smith. The report dealt with the appellant's complaint of the robbery on 16 December 1985. The report noted that Detective Sergeant Cacciola and Detective Senior Sergeant Collins attended on the appellant in response to his complaint. The tender of the report was objected to at the hearing on the ground that it was merely hearsay.
Each officer swore an affidavit deposing to his version of the events the subject of the report. They also adopted the report as accurate. Their affidavits were read by the respondent but, as has been said, they were not cross-examined.
Whilst, strictly speaking, it may not have been permissible to prove the report in this fashion on a final, as distinct from interlocutory hearing, it is unnecessary to pursue the question here. So far as concerns the findings of fact adverse to the appellant made by the learned Judge, there is evidence aliunde of the matters contained in the report in the form of the primary evidence of Detective Sergeant Cacciola and Detective Senior Sergeant Collins. This evidence, together with the evidence given in the records of interview referred to by his Honour, justified the findings made by the learned Judge that the appellant claimed to be the owner of a substantial quantity of gold and jewellery and was apparently conducting a business which was said to be extremely profitable.
It follows, in our view, that the report was, at best, of peripheral importance in the application. If the hearing were a final, as distinct from an interlocutory one (a question which it is not necessary to decide) it may be that the report was, strictly speaking, inadmissible hearsay under the general law, although it may have been made admissible by statute as a business record. But, as has been said, it is unnecessary to pursue this question because of the existence of other evidence which justified the learned Judge's findings in respect of the gold and jewellery.
On behalf of the appellant, it was also argued that the learned Judge failed to give any weight, or insufficient weight, to the duration of the bankruptcy.
At the commencement of his reasons, his Honour said that "the history of the matter goes back to 21 November 1977, when Mr. Matson became bankrupt." The period which had elapsed was, no doubt, a relevant consideration to be taken into account in the appellant's favour. But it was to be balanced against the serious misconduct found against the appellant. We do not think that his Honour erred in failing to hold that a period of eight years of bankruptcy was of such significance as to warrant the dismissal of the application. Nor do we think that his Honour could have overlooked this consideration as a matter relevant to his discretion under s.149(12).
It was also suggested that the learned Judge erred by failing to mention in his reasons first, that the business name of the business "Matson Computer Services" and secondly, a Mercedes Benz motor vehicle and a Daihatsu Charade motor vehicle were registered in the name of Mrs. Matson. However, the identity of the repository of the legal title is of little, if any, significance here. No error has been demonstrated in this respect.
Finally, the appellant attacked the finding made by his Honour at the end of his reasons as follows:
"I also take into account the nature of the business which the bankrupt is apparently carrying on; it is one notoriously open to fraudulent practices."
It was submitted that since there was no evidence that a "tipping" business was "open to fraudulent practices", his Honour's discretion miscarried.
It could hardly be suggested that this matter was central to his Honour's process of reasoning. In the way in which the learned Judge expressed his reasons, it is apparent that, this particular matter apart, his Honour would have acceded to the application by reason of the considerations previously mentioned. Moreover, if we were called upon to exercise the discretion under s.149(12) de novo, we also would grant the application by virtue of those other considerations alone. To this extent, the point is of academic interest only. In any event, it is to be noted that his Honour did not make a finding that fraudulent practices had, in fact, been engaged in. Rather, his view was that a "tipping" business is one that is "open" to such practices. There may well be room for debate as to whether judicial notice could be taken of this matter. But, given its academic significance, it is unnecessary to pursue the point.
In the result, the appeal must be dismissed.
We propose to make the following orders:
1. Grant leave to appeal.
2. Appeal dismissed.
3. Order that the appellant pay the respondent's costs of the appeal.
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