Oades, M.G. (Bankrupt) Wolf, P. & Anor (applicants) v Official Trustee in Bankruptcy

[1989] FCA 782

NOT FOR DISTRIBUTION

$ 2 4 $7:-

JUDGMENT No. ........ .....	...
- -

IN THE FEDERAL COURT OF AUSTRRLIA	1
GENERAL DIVISION BANKRUPTCY DISTRICT	)
Or THE STATE OF llCW SOUTH I'JALEES	)

AND THE AUST'RALIAN CAPITAL TERRITORY ) No. NB1028 of 1989

GENERAL DIVISION )

RE: NICHAEL GEORGE OADES

sankrupt

PETER WOLFE

~ i r s t Applicant

BUNORA PTY LIMITED

second Applicant

OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

CORAM:  GUMMOW J.

PLACE: SYDNEY

DATE:  30 NOVEMBER 1989.

REASONS FOR JUDGMENT (EX TEMPORE)

GUMHOW J.: The bankrupt became a bankrupt on hls own petitlon on 11 July 1989 and the Officlal Trustee in Bankruptcy was appointed trustee of his estate. BY appllcatlon flled 15 September 1989 the Offlcial Trustee seeks, Inter alia, a declaration agalnst Bunora Pty. Llmlted as respondent that the transaction whlch occurred on or about 20 September 1988 whereby a certaln promissory note dated 25 July 1988 was transferred or delivered by the

A Deputy Registrar on 23 November 1989 Issued two

bankrupt to the respondent was a settlement of property of the bankrupt wlthln the meanlng of subsection 120(1) of the Bankruptcy Act 1966 ("the Bankruptcy Act") and is void as against the trustee.

d l r e c t e d t o t h e p r o p e r o f f l c e r , Bunoro P t y . L iml t ed and t h e

o t h e r	t o ~r	P e t e r	Wolfe.	Both	summonses	r e q u i r e	a t t e n d a n c e
b e f o r e	t h e	R e g l s t r a r ,	t oday ,	30 November,	a t 2.00	p.m.	The

applicants move b e f o r e me t h l s mornlng t o s e t a s i d e t h e

summonses. I n t h e meantime, an o r d e r f o r d i r e c t i o n s unde r

t h e s e c t l o n 120 p r o c e e d i n g s was made by c o n s e n t by t h e

R e g i s t r a r on 10 October 1909. Thc directions c a l l f o r t h e

applicant t o f i l e and s e r v e any affidavits by 7 November

1989 and I u n d e r s t a n d from what h a s been s a i d t o d a y t h a t

t h e r e i s o n l y one affidavit s o f a r , a n a f f i d a v i t o f Mr Caddy

sworn 4 Oc tobe r 1989.

The directions f u r t h e r c a l l f o r t h e r e s p o n d e n t t o

f l l e and s e r v e a n y a f f l d a v l t s on o r b e f o r e 5 December 1989

and p r o v i d e f o r t h e m a t t e r t o be l i s t e d f o r ment ion on 1 2

December 1989. The d i r e c t i o n s a l s o s t a t e d t h a t t h e

a p p l i c a n t ,	t h e	O f f i c l a l	T r u s t e e ,	under took	t o	a p p l y	t o	t h e
R e g l s t r a r	a s	soon	a s	p o s s i b l e	f o r	e a r l y	d a t e s	f o r

e x a m l n a t l o n u n d e r s e c t l o n s 69 and 8 1 o f t h e Bankrup tcy A c t , and t h e summonses whlch I have mentioned f low from t h a t

provision.

There i s a l r e a d y some litigious h i s t o r y c o n c e r n i n g

t h e p r o m i s s o r y n o t e r e f e r r e d t o i n t h e a p p l i c a t i o n f i l e d 1 5

September 1989. I n t h e Supreme Cour t o f New Sou th Wales ,

E q u i t y D i v i s i o n , i n Mat t e r No. 4509 of 1988 , 13r J u s t i c e

McLelland g r a n t e d l n t e r l m r e l l e f i n proceedings under

subsection 573(1A) of t h e Companies (New Sou th Wales ) Code

1981 (N.S.W.) a r l s i n g o u t of prosecutions i n s t i t u t e d a g a i n s t

t h e b a n k r u p t f o r o f f e n c e s a g a l n s t t h e Code.

On 15 November 1988 hls Honour ordered that until the flnal determination of those proceedings or further order the second defendant in those proceedings (whlch was Bunora Pty Ltd, the second applicant before me), be restrained by itself, its servants and agents, from making any payment In total or partlal discharge of any debt to the first defendant (that 1s to say the bankrupt), or to any other person at the dlrectlon or request of the first defendant, and from paylng any money or transferring or otherwise partlng with possession of any securlties or other property, belng money, securlties or property held by the second defendant on behalf of the flrst defendant, to the first defendant or to another person at the direction or request of the flrst defendant.

In the result, as appears from the affldavlt of Mr Svehla sworn 29 November in the present proceedings and flled in Court today, the proceeds of the promissory note in questlon have been paid progressively into a joint account at the Macquarie Cash Management Trust wlth the Corporate Affalrs Commission and a partner of Messrs. Baker and	I-IcKenzle, solicitors, as trustees, pending determination of	the Supreme Court proceedings.
In the course of his judgment, Mr Justice McLelland described Bunora Pty Ltd as a company controlled by Mr Peter Wolfe. He 1s the other party to whom a summons has been dlrected and who 1s the first applicant in the appllcatlon before me today. It therefore is to be expected that it is Mr Wolfe who will he the proper offlcer who would respond to the summons dlrected to Bunora Pty Llmlted.
There 1s materlal referred to by Mr Justice McLelland in hls judgment whlch lndlcated a lack of record of any indebtedness whlch might have supported the promissory note, and PIr Chlppendall, who appears for the Offlclal Trustee, seeks to gather some support from that circumstance in supporting the summonses.
The applicants complain, flrst, as to the form of the summonses and in particular as to the identification of the documents sought by the summonses. Havlng looked at the documents and heard the evldence I am not satisfied that there 1s any real problem concerning the form of the summonses.
I should also state that the evidence indicates - and Mr Chippendall has afflrmed - that the purpose of the oral examination this afternoon is directed to the subject of whether any, and if so what, consideration was given for the promissory note in question. The applicants also
in particular in the light of the existence of the timetable complain of the shortness of the notice that has been given,
in relation to the sectlon 120 application.
They further complain that the Official Trustee must have had access to voluminous materials already generated In the company proceedings in the Supreme Court of New South Wales. They also say that in the ordinary course it would be expected that discovery would be given by both partles pursuanL to directions in this Court in the section 120 appllcatlon.
rurther they say that in the meantime the promissory note and the proceeds thereof are secure due to the interim relief which has been granted before Mr Justice McLelland and to the arrangement which has Involved the investment of the proceeds, as they have come in, on all lnterest bearlng account with the cash management trust.
In substance, the appllcants' complaint is that this 1s a case where the processes of sectlon 81 of the Bankruptcy Act are being used lmpermlssibly as an extra tool In the lltigatlon which the Offlclal Trustee set in train by the application filed 15 September 1989.
Mr Chippendall says that even if that be so there is no real prejudice suffered by the applicants in
compliance with the summonses. However, the solicltor for
the appllcants polnts to the admlssibillty of admissions made in the course of those examinations, in the proceeding
Bankruptcy Act. Although Mr Wolfe himself is not a party to against Bunora Pty Limited under section 120 of the
the section 120 application, his solicltor says that in substance he is the only relevant actor on behalf of the company and that any relevant admlsslons he made would be admlsslble agalnst the corporate respondent.
The relevant principles in deallng with this kind of appllcatlon are to be found in three decisions: first, a declslon of Street J. ln Re Hugh J. Roberts Pty Llmited (in llquldatlon) and the Companies ~ c t , [l9701 2 NSWR 582, in particular at 584-585; secondly, the ludgment of Lockhart J. In thls Court in Re Csidei; Ex parte Andrew, (1979) 39 FLR 387, in partlcular at 393; and the thlrd declslon is that of the Full Court of this Court in Karounos v Official Trustee, (1988) 80 ALR 626.
As the solicitor for the applicants polnts out, the strength of the statements made by Street J. in the declsion to which I have referred may require some qualiflcatlon in the llght of proposltlon 10, set out at page 633 of the report of the Full Court decision. The Full Court decislon sets out the relevant principles in ten
propositions and those to whlch partlcular reference has
been made by both sldes thls mornlng are propositions
numbers 8, 9, 10, 11 and 12. They are as follows:-

(8) Discharge or adjournment of a summons may be approprlate where there is litigation pending or likely to be instituted and it is alleged that:

discovery, interrogation br subpoena would be

falrer and more approprlate, or

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

(9) If such an application is made to the court by a person summoned, the court must conslder afresh, on the material before it, whether the summons should be set aslde or adjourned to a more

convenient tlme. It is not merely deciding

whether, on the material before the Registrar, he
correctly exercised his discretion.
(10) There is no difference in principle between
cases where proceedings have actually been
InsLltuted and where they are merelv in
contemplation: ?PP Re Hugh J.-~oherts Pty ~t'd (in

- llq) (1970) 91 WN (NSW) 537 at 541; but where

lltlgatlon 1s afoot the lssues wlll be clearer, procedures of discovery, inspection and subpoena

available, and a tlme of hearing more certain.

Any of these factors may affect the court's
declsion in a partlcular case.
(11) Where lltlgation 1s pendlng or likely to be
brought and the information sought under a summons
could affect that lltlgation, there 1s no
presumption that the summons wlll be set aside or
adjourned. It xould normally only be set aside if
the application were defective in some way or the
court found some Improper motlve behlnd the
application. It would be adjourned if the balance
of lustlce and convenlence 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

partlcular auestlons asked: see. for examule. Re

knderson; EX- parte Official ~eceiver (1937j 10' A=

284 at 288-9; Re Andrews, [ (1958) 18 ABC 1811 at

184-5; Re Hugh J. Roberts, su ra, at 539, 542.

due weight to the-fact that a summons is soughf by

(12) Both the Registrar an 2% t e court will qive

the Official Trustee, who will not be presumed to have acted unfairly or for an imurouer DurDose except on convincing evidence: Re K.J.- price ?NO. - 3), [ (1948) 14 ABC 1371 at 141. The same is true of an offlcial llquldator: see Re Castle New Homes Ltd, [[l9791 2 AllER 7751 at 791; Re John Arnold's Surf Shop, (1979) 23 SASR 222 at 229-30: ACLR at 670-71. But an application by the Official Trustee will still be- subject to -proper scrutiny and wlll be refused if the Registrar or court is not satisfied that it should be granted.

I should say that in the circumstances as revealed the issue of the summonses, nor do I find that the balance	thls mornlng I find no evidence of improper motive behind
of lustlce and convenlence in these cases requlres any adjournment or deferring of examination, nor in the circumstances as they have been revealed in the evidence do
I vlew the summonses as being used improperly as an aid to
the lltlgation that 1s on foot.
As the Full Court indicated in proposition 7, an applicat~oli to Lhu Cuurt of thls kind usually has to be determined on a broad vlew of the issues and the weighlng of competing principles. That having been done, I reach the conclusion that the rellef sought in the application filed in Court this morning by Mr Peter Wolfe and Bunora Pty Limited should be refused. The applicants should pay the costs of the respondent of this morning's application.

I certify that this and the seven (7) preceding pages are a true copy of the Reasons for Judgment of the Honourable Mr. Justice Gummow.

Associate: I'I-J&L.

Date:  30 ~ovember 1989.

Solicitor for the Flrst and	J.T. Svehla, Esq. of
Second Applicants:	Messrs. Baker and McKenzie

Counsel and solicltor for	J. Chippendall, Esq.
the Respondent:	instructed by the Australian Government Solicitor.