McComish, P.A. v McComish, T.P

[1990] FCA 544

Re: PETER ANTHONY McCOMISH
Ex Parte: TERESA PEARSON McCOMISH and BERNARD PUTNIN as Trustee in the Estate
of PETER ANTHONY McCOMISH
No. 476 of 1989
FED No. 544
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
French J.(1)

CATCHWORDS

Bankruptcy - examination under s.81 - bankrupt's wife - application to adjourn or set aside summons - examination proposed in relation to property transfers from bankrupt - litigation in contemplation - position of trustee - requisite standards of care - status as officer of Court - examination not oppressive or inappropriate.

Bankruptcy Act 1966 s.81

Re: Hurt (1988) 80 ALR 236

Karounos v Official Trustee (1988) 19 FCR 330

HEARING

PERTH

#DATE 5:10:1990

Counsel for the Applicant: Mr J. Hammond

Solicitors for the Applicant: Kott Gunning

Counsel for the Trustee: Mr M.J. Hawkins

Solicitors for the Trustee: Robertsons

ORDER

The application is dismissed.

There be no order for costs.

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

JUDGE1

Peter Anthony McComish became a bankrupt on 11 August 1989. By a resolution passed on 19 January 1990 at a meeting of his creditors, Bernard Putnin was appointed as trustee of the bankrupt estate. On 11 July 1990, Putnin applied for the issue of a summons under s.81 of the Bankruptcy Act 1966 requiring McComish's wife, Teresa Pearson McComish, to give evidence and produce documents and records relating to a number of companies and trusts. On 25 July, the Deputy Registrar issued a summons returnable on 27 July. On that day Mrs McComish was represented by counsel, who applied for and was granted an adjournment of the examination to 1 August after producing a medical certificate. On 1 August, she was again represented and various documents were produced by counsel, together with an affidavit and further certificate from the medical practitioner. Mrs McComish was ordered to file an affidavit verifying that the documents produced were all those required by the summons. The trustee was given access to the documents to inspect and copy them, and the examination was adjourned sine die.

1. The summons was relisted for 7 September, at which time a further medical certificate was tendered. An order was made for examination of the doctor at a convenient time in the following week. When the matter came on again on 12 September, Mrs McComish was present and her counsel submitted that the summons ought to be set aside or the examination adjourned indefinitely. In the submissions in support of that application, no reliance was placed on medical grounds. Counsel referred to proceedings instituted by the Trustee to set aside the transfer to Mrs McComish of the bankrupt's interest in their matrimonial home and threatened proceedings in relation to her interest in a motor launch, a boat mooring and mooring gear at Rottnest Island. It was submitted that having regard to the actual and threatened proceedings, adjournment of the s.81 examination was appropriate. The trustee could have resort to the usual procedures of discovery, interrogation and subpoena in the litigation that he was contemplating against Mrs McComish. It was further submitted that the bankruptcy proceedings were in effect a means of seeking to recover a judgment against Mr McComish in this Court which was the principal occasion of his becoming bankrupt in the first place.

2. The Deputy Registrar adjourned the examination to 20 September and on that day, having received further submissions in writing, dismissed the application and relisted the examination for the following day. Mrs McComish then filed an application in the Court for a review of the Deputy Registrar's decision and sought an order that the examination be adjourned sine die. In support of her application Mrs McComish swore an affidavit in which she referred to allegedly oppressive and unfair conduct by the trustee aimed at forcing her to settle his claims against her assets on terms favourable to him. There have been, she said, continual threats of proceedings made in relation to her home, the boat and mooring and so far the only action brought against her by the trustee has been unsuccessful.

3. In May 1989, an order was made in action number WAG 18 of 1983, in which judgment had previously been awarded against the bankrupt, restraining Mrs McComish from disposing of or dealing with her Floreat Park land and residence. On 9 May 1990 she applied to me for an order discharging the injunction, and that was granted. The trustee sought to be joined as a party and applied the following day before Lee J. to reinstate the injunction. That application, which was in fresh proceedings claiming permanent injunctive relief and the setting aside of the transfer of the bankrupt's interest in the matrimonial home, was dismissed. It appears also that the substantive application was dismissed after excision, by amendment, of the claim for an order setting aside the transfer. In effect, this had the result that the claim for permanent injunctive relief was dismissed although the opportunity remained to bring a further application for an order to set aside the transfer. These proceedings are those to which Mrs McComish referred when she spoke of the trustee's unsuccessful action against her.

4. Mrs McComish exhibited to her affidavit correspondence between the trustee, his solicitors and her solicitors. The letters included requests for information and threats of legal proceedings, especially in relation to the motor launch and the boat mooring. One curious and disturbing incident occurred on 1 August when the trustee wrote to Mrs McComish direct in the following terms:
   

"This is to advise you that on 1st August 1990, the Deputy Registrar in Bankruptcy adjourned your Section 81 examination to a date to be fixed. The Registrar made an order that you be examined by an independent psychiatrist, and I shall shortly advise you of the name of the psychiatrist with whom you should make arrangements for the examination."

As a perusal of the transcript of proceedings before the Deputy Registrar shows, no such order was made. The Deputy Registrar had expressed the view that if the trustee wished to press the examination it would be appropriate for her to be examined by an independent psychiatrist, by which she meant somebody other than the doctor that she had been seeing. Counsel had no instructions on the proposal and could not agree to it. The Deputy Registrar indicated that she would like the parties to come to some arrangement about it, and if possible to agree to or nominate a psychiatrist and in the absence of any agreement to suggest some other means of choosing a psychiatrist. In the event, the matter was adjourned sine die apparently on the basis that the trustee would make inquiries with a view to proposing an independent psychiatrist to Mrs McComish's solicitors.

1. In his affidavit filed 26 September 1990, the trustee conceded "that no formal order was made" and apologised for what was said to be a "misunderstanding" on his part. The misunderstanding is inexplicable, as is the decision to write directly to Mrs McComish when she had been represented before the Deputy Registrar by a solicitor. The trustee's conduct in this respect fell short of the standard of care to be expected of him. The weight of authority favours the view that a trustee in bankruptcy is an officer of the Court - Re: Hurt (1988) 80 ALR 236 at 240. That is a status which requires scrupulous adherence to proper standards of conduct and care, especially when dealing with members of the public in connection with the exercise of coercive powers under the Bankruptcy Act 1966.

2. Mrs McComish contended that the proposed examination was designed to obtain evidence that could be used against her in the threatened proceedings. She also contended that the trustee could obtain the evidence he required in such proceedings through the normal processes of discovery and interrogatories.

3. Notwithstanding my concerns about the misstatement by the trustee in his letter of 1 August 1990, it does not follow that the s.81 examination of Mrs McComish in the circumstances of this case would be oppressive or in bad faith. Her counsel also rested his submissions on the recent decision of the Full Court in Karounos v Official Trustee (1988) 19 FCR 330. In that judgment the relevant principles applicable with respect to s.81 examinations were set out at pp 335-336. I do not restate them in full here beyond those which are material for present purposes:
   1. The power given by s.81 of the Act is an unusual
   

and far-reaching one 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.

2. However the power is exercised in the interests

of creditors, and those interests should not be defeated by an unduly technical or restrictive approach to the use 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.

3. 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.

4. Discharge or adjournment of a summons may be

appropriate where there is litigation pending or likely to be instituted and it is alleged:

(a) the summons is being improperly sought as an aid to that litigation where ordinary procedures of discovery, interrogation or subpoena would be fairer and more appropriate; or

(b) it would be more just and equitable to defer the examination under section 81 of the Act until the particular piece of litigation has been disposed of.

5. If such an application is made to the Court by a

person summoned the Court must consider afresh, on the material before it, whether the summons should be set aside or adjourned to a more convenient time. It is not merely deciding whether, on the material before the Registrar, he correctly exercised his discretion.

6. There is no difference in principle between

cases where proceedings have actually been instituted and where they are merely in contemplation, but where litigation is afoot the issues will be clearer, procedures of discovery, inspection and subpoena available, and a time of hearing more certain. Any of these factors may affect the Court's decision in a particular case.

7. Where litigation is pending or likely to be

brought and the information sought under a summons could affect that litigation, there is no presumption that the summons will be set aside or adjourned. It would normally only be set aside if the application were defective in some way or the Court found some improper motive behind the application. It would be adjourned if the balance of justice and convenience in the particular case so required. In some cases it might be appropriate to defer examination on a particular topic. In all cases the Registrar or the Court will be careful to see that injustice is not occasioned in the course of examination by the particular question asked.

1. In this case the trustee seeks to examine Mrs McComish about transactions in which the bankrupt was involved prior to his bankruptcy, including the transfer of his interest in the matrimonial home to her, the transfer to her of 30 out of 32 shares that he held in the motor launch, and his renunciation of all rights and benefits as a beneficiary of the P.A. McComish Family Trust. Mrs McComish, it is said, is a director of Marocaine Pty Ltd, which acts as trustee of the P.A. McComish Family Trust. Her fellow director, Mr Peter Johnson (who is her brother), is said to have given evidence to the effect that he knew nothing of the trust's activities.

2. In my opinion, and subject to appropriate controls by the Deputy Registrar to ensure that the examination is not unduly protracted or oppressive, it should be allowed to continue despite the threatened litigation. Discovery and interrogatories in a case such as the present are likely to be poor substitutes for direct questioning under examination before the Deputy Registrar. And it may be, depending on the information elicited, that the trustee will decide not to proceed with one or more of the mooted applications. I am not satisfied that the proposed examination would be inappropriate by reason of the pending litigation or otherwise.

3. For these reasons I will dismiss the application. But the trustee should not be surprised that it was brought. His letter of 1 August could well engender the suspicion that he was applying unfair pressure to the applicant. I do not find that that was the case. The more likely explanation is carelessness. In my opinion, although the application to adjourn the examination will not succeed, there should not be any order as to costs.