Re Edelsten, G.W.; Ex Parte Donnelly, M.C. v Edelsten, G.W.

[1992] FCA 457

TN THE FEDERAL COURT OF AUSTRALIA	JUDGMENT NO. .....,. 4s=tI	........	..... .....
EXERCISING FEDERAL JURISDICTION IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN

CAPITAL TERRITORY

GEOFFREY WALTER EDELSTEN

Bankrupt

EX PARTE:  MAX CHRISTOPHER DONNELLY

AS TRUSTEE FOR THE ESTATE OF

GEOFFREY WALTER EDELSTEN

Applicant

AND :  GEOFFREY WALTER EDELSTEN AND OTHERS

Respondents

COURT :	NORTHROP
PLACE :	MELBOURNE  RECEIVED '
-- ----- - - - -  30JUN1992 1H
DATE :

"134. The Court may, on the application of a party to proceedings, order that scandalous, irrelevant or

On Friday, 1 May of this year, counsel then appearing for

the first respondent, Dr Edelsten, moved the Court for an
order that the affidavit of Rodney Kenneth Richards, sworn on

29 October 1991 and filed herein on behalf of the applicant,

be removed from the file of the Registrar in Bankruptcy.	The
basis of the motion was sub-rule 134(1) of the Bankruptcy Rules. That rule reads:

objectionable matter included in a document filed in
connexion with proceedings be struck out and may further
order that the costs of the application be paid as
between solxitor and client by the person by or on whose

behalf the document was filed."

Counsel, relying upon what he described as the inherent

jurisdiction of the Court, sought to rely on that rule to support the motion to have the affidavit removed from the file.

In my opinion, the Court has power, in an appropriate

case, to do that but, as a matter of form, I prefer to rely on this Court in Parsons v Martin (1985) 5 FCR 235, the Court comprising the then Chief Justice, Sir Nigel Bowen, Toohey J, who was then a judge of this Court, and myself. At pages 240 and 241, the Court considered the question of the so-called inherent jurisdiction of a court, and said:

what has been described as the incidental power of the Court.

"The Court of Petty Sessions is of course a creature of

statute. So too is the Supreme Court of Western

Australia though its jurisdiction, as spelled out in Pt	I11 of the Supreme Court Act 1935 (WA), is largely tied
to the jurisdiction of the superior court in England as at 1861.
In its strict sense the term "jurisdiction" means:

"... the authority which a court has to decide

matters that are litigated before it or to take

cognisance of matters presented in a formal way for

its decision." (Halsbury's Laws of England (4th ed,

1975), v01 10, par 715).

The expression "inherent jurisdiction" has come to be used, not so much to refer to the authority of the court to decide matters before it but rather to describe the power which a court may have, independent of statutory authority, express or implied.

In Australia, with its federal system, there is in truth no court of unlimited jurisdiction though the term continues to be used. Thus in Walsh v Giumelli [l9751 WAR 114 at 116 the Full Court referred to the jurisdiction, powers and authority of magistrates sitting in Petty Sessions and said:

"But their jurisdiction is statutory, and they have
no inherent jurisdiction such as is possessed by
superior courts of unlimited jurisdiction."

In Smith v Brown [l9781 WAR 157 at 159, Burt CJ reiterated:

"The jurisdiction of courts of petty session is
entirely statutory. They have no inherent

jurisdiction."

In _R v Forbes: Ex Darte Beven (1972) 127 CLR 1 at 7

Menzies J spoke of inherent jurisdiction as "the power which a court has simply because it is a court of a particular description". He added:

"Inherent jurisdiction is not something derived by
implication from statutory provisions conferring
particular jurisdiction; if such a provision is to
be considered as conferring more than is actually
expressed that further jurisdiction is conferred by
implication according to accepted standards of
statutory construction and it would be inaccurate to
describe it as 'inherent jurisdiction', which, as
the name indicates, requires no authorising
provision. Courts of unlimited jurisdiction have
'inherent jurisdiction'."

In our opinlon a court exercising jurisdiction conferred by statute has powers expressly or by implication conferred by the legislation which governs it. This is a

matter of statutory construction. We are of opinion also that it has in addition such powers as are incidental and	necessary to the exercise of the jurisdiction or the
powers so conferred.
In view of the way in which the phrase "inherent jurisdiction" is used in many of the cases, it seems advisable generally to avoid the use of it to refer to this incidental and necessary power of a statutory
court. "

I rely upon that statement. The Federal Court is a court

which has jurisdiction conferred upon it by statute. The that jurisdiction to enable it to exercise that jurisdiction.

It is important to remember, however, that in this case

the Court is exercising jurisdiction in bankruptcy and that a Registrar in Bankruptcy is not an officer of this Court. The Registrar and District Registrar of the Court are officers of the Court, and the Federal Court Rules contain provisions

under which the Court exercises control over those officers.
A Registrar in Bankruptcy is not an officer in the same sense.
A Registrar in Bankruptcy is appointed under the Bankru~tcy
Act 1966, and all the powers and duties of the Registrar in

Bankruptcy are conferred and imposed by the Bankruptcv Act and

Bankruptcy Rules. In this context it is interesting to note

the similarity and differences between Bankruptcy Rule 134(2)
applying to Registrars in Bankruptcy, and 046, r7A of the
Federal Court Rules, and I quote:

"7A. If a document presented to a Registry in any the Court or to be frivolous or vexatious, the Registrar may refuse to accept or issue it or may seek the direction of a Judge who may direct him:
proceeding, including any document which is or will if

issued become an originating document, appears to a

(a) to accept or issue it; or

(b) to refuse to accept or issue it; or

(c) to refuse to accept or issue it without the leave of a Judge first had and obtained."

Reference may be made also to Federal Court Rule, 014, r8, which reads:

"Where there is scandalous or oppressive matter in an

affidavit, the Court may order that the affidavit be

taken off the file."
That rule is to be compared with Bankruptcy Rule 134,

which I referred to and quoted earlier. It must be remembered
that the Federal Court Rules have no application when the
Court is exercising jurisdiction in bankruptcy, 01, rll. It
is not clear why 041 is excluded. It is clear that rule 1 of

041 can have no application. Documents in bankruptcy matters

are not filed in the District Registries of the Court.	In
addition it is interesting to note 041, r5.

The general principles to be applied on a motion of the

kind before the Court at the moment are described in a number
of authorities referred to in the course of submissions, and
in particular to Rossaae v Rossaae [l9601 1 All ER 600, re J
[l9601 1 All ER 603, and B v Secretary for DeDartment of the

Chief Minister; ex Darte Boswell (1987) 47 NTLR 1, published

in 73 ALR. Essentially, these were cases arising on

interlocutory matters before the final hearing.

In the present case the motion was moved at the hearing

of the application. Instead of objection being taken to the

admissibility of parts of the affidavit of Mr Richards,
counsel for Dr Edelsten sought an order that the whole
affidavit be removed from the file as being scandalous,
indecent or objectionable and in reality constituting an
embarrassment to the Court as well as to the parties
concerned. To that extent the motion is an interlocutory
motion, but at the same time the Court is in a position to
determine the relevance and admissibility of the evidence
which is being challenged. Counsel for Dr Edelsten contended
that large parts of the affidavit were scandalous,
inadmissible and objectionable on the ground of being hearsay
evidence, not evidence of fact but expressions of opinion or
conclusions, or irrelevant to any issue arising at the

hearing. The definition of scandalous as appearing in the

Oxford dictionary is very wide, and reference is made to some of those meanings:

"Scandalous; of the nature of or causing an occasion of
offence, also, bringing discredit on one's class or
position; of the nature of a scandal; grossly

disgraceful; of words and writing: defamatory,

libellous; of a statement, not pertinent to the case,

irrelevant. "

One should also look at the word "scandal" as defined in the same dictionary, and one of the meanings given is:

"An irrelevancy or indecency introduced into a pleading

to the derogation of the dignity of the court."

There has been very little authority really in the cases that I have discovered in relation to the meaning to be given	to the word "scandalous". But what is clear is that the mere
fact that evidence may be scandalous in its proper sense does not mean that it is not admissible in evidence. And this is made clear by the authorities referred to earlier. I do not propose to read the passages from those authorities which make this very clear.

What is being sought is to strike out the affidavit at

this stage, but, in my opinion, what should be done now is for

the Court to go through the affidavit in some detail and hearing, a court may strike out and cause an affidavit to be removed from the registry if so much of it is scandalous as to

decide what parts are admissible and what are not admissible.

adversely affect the whole of the affidavit. When such an

order is made there is still time for another affidavit to be they are relevant that is just too bad. The mere fact that the material may be scandalous does not mean that it is not admissible and Rossaae's case is the most important authority of this, together with the decision of the Northern Territory Supreme Court which summarises all the earlier authorities.

filed to consist of relevant material which is not scandalous.

The ultimate order being sought in the present case is

against the fourteenth respondent, but in the process the case
for the applicant essentially is that Dr Edelsten controlled,

influenced and exercised authority over the companies and

businesses conducted by the VIP companies, and that in so	doing he used other respondents, as it were, as his
subordinates. It is in this context that it is necessary to decide the question of relevance of the material which has been challenged, and I propose to go through the affidavit and deal with the objections.

The affidavit of Mr Richards essentially contains

evidence of facts, of conversations and, on some occasions,

conclusions and opinions but, essentially, all relating to an
issue arising in this application, namely, the question of
whether Dr Edelsten exercised control, supervision or power
over the activities of the VIP companies. It is with this
background that I turn to the particular paragraphs of the

affidavit.

Paragraphs 1 and 2 are not really in dispute. Paragraph 3 is

said to be irrelevant but, in my opinion, the contents of that	I
I
paragraph are relevant to the general issue raised on the	I
i.:
application. They relate to the various sites which were	I
f
being sought to establish the activities of clinics in	!
relation to the VIP group of companies. Parts of paragraph 4,	, -
!..
in relation to, amongst other things, the furniture, are
:
inadmissible for various reasons, mainly because of hearsay	I .
I
t
and irrelevance and the parts which are excluded are on page	L ! ,
, ,
3, the fourth last line commencing "I spoke", down to the end
L'
of the first quotation on page 4. On page 4, the second-last	:
line of the substantive part commencing "During the course",	L
down to the end of the quotation are excluded. They are
inadmissible because they are hearsay.	Paragraph 6 was not

really challenged and is admissible. Paragraph 7 is hearsay
and is inadmissible. Paragraphs 8 and 9 really were not

challenged and are admissible. Paragraph 10 was challenged on	\
the ground of not being relevant but, in my opinion, the	I t
!
evidence is relevant to an issue in relation to the question
I
of the control, the conduct and the activities at the clinics.	!
i
I

Paragraph 11 does contain suggestions of criminal i I

misconduct, hearsay and inducements and is said to be

irrelevant but the mere fact of criminal misconduct arising
from what was said or what is being done does not, of itself,
make the evidence inadmissible on the question of control.

The Court in these proceedings is not concerned with the

criminal misconduct.

It is concerned with the control of the

itself is hearsay but it may become relevant and admissible in the result of oral evidence being given by the deponent and leading in to what is there said but, at the moment, I rule inadmissible the quotation appearing in paragraph 11 at the middle of page 7. Paragraph 12 is said to be hearsay and irrelevant. The last paragraph of paragraph 12 is inadmissible but the rest of the paragraph is, in my opinion, relevant to issues arising on this application. What I said about misconduct in relation to the previous paragraph applies equally here. Paragraph 13 is, in my opinion, relevant.

companies. The quotation appearing at the middle of page 7 irrelevant and is inadmissible.

Paragraph 15 is a long paragraph. It contains material

which is said to be scandalous and, on a superficial reading, it is relevant to the issues raised in this application and the whole of paragraph 15 is admissible. The same may be said about paragraph 16. Paragraph 17 was not disputed. Part of paragraph 18 is irrelevant because those parts relate to matters which, really, are not within the knowledge of the deponent and I refer to the last two sentences of that paragraph which are, in my opinion, irrelevant and therefore inadmissible. Paragraph 19 is said to be irrelevant and scandalous and evidence of an abuse of the health insurance system but, in my opinion, it is all relevant to the general issue of control and paragraph 19 is admissible. Likewise paragraph 20 is admissible. Paragraphs 21 and 22 are not challenged. Parts of paragraph 23 are inadmissible as being irrelevant and, in particular, the part commencing about halfway down page 13 with the words "He also arranged for Leanne Stirling" down to the end of the quotation is, in my opinion, inadmissible as being irrelevant. Likewise, thereafter, the rest of that paragraph is inadmissible as being hearsay. The rest of the paragraph is admissible.

there is some substance in that allegation but this is
evidence of what can be said to be admissions by Dr Edelsten
of conduct which can be used and was in fact used by him, so
it is alleged, to exercise control over persons who were in
fact working for the companies but illustrating the means by
which Dr Edelsten, it is said, exercised that control.

means by which control was exercised and the management of the companies were being directed by Dr Edelsten. Paragraph 26 is certainly admissible against one of the respondents, Ruth

comes within the same category. It is an illustration of the used as a ground for saying that it is inadmissible. Paragraph 26 may be related to criminal matters but, for reasons already given, it is admissible as against at least Ruth Davoren and is admitted on that basis. Paragraph 27 comes within the same category, but this paragraph also contains evidence of conversations between the deponent and Dr Edelsten and is admissible. In paragraph 28, the first sentence is inadmissible as being irrelevant, but the rest of the paragraph consists basically of the conversations between Dr Edelsten and the deponent and is admissible. Paragraph 29 comes back again to the question of admissibility, with conversations between Dr Edelsten and the deponent, and although it may contain material which is said to be scandalous, that does not make it inadmissible. Likewise in relation to paragraphs 30 and 31, they are all admissible. Paragraph 32, likewise is admissible. Paragraph 33, the first sentence is admissible, the rest of it is inadmissible and is excluded. Paragraph 34 is admissible, at least as against the respondent Rodney Edelsten. Also it relates to conduct of Dr Edelsten.

Paragraph 24 is said to be scandalous and irrelevant but, in

my opinion, it is relevant to the issue of control and therefore any scandalous nature of the contents, in my opinion, cannot make the paragraph inadmissible. Paragraph 25

Some of parts of paragraph 35 are hearsay, the rest is

admissible on the basis of relevance. The hearsay part is the
part of the sentence on page 23, commencing on the second
line, "the general fraudulent way in which the companies were

operated". It is inadmissible as constituting comment which

this witness is not qualified to make. Paragraph 36 is all

directed to the question of this general issue of control. possible that oral evidence may be obtained from this witness to make it admissible, but at the present time the part commencing on page 24 in the second sentence, the third line, commencing with the words "and Thurtell said that under no circumstances", from there on down to the end of the sentence ending "went to his house", about two-thirds of the way down, are inadmissible. Also, the last part of that paragraph, the words, "Geoff had told Thurtell he was only doing five or six laser treatments per week, where in fact he was doing well over 1000" is in my opinion inadmissible. It is comment again which is in a form which should not be admitted. The rest of that paragraph is admissible.

Paragraph 38 is evidence of acts which were within the

40 again is relevant on the

knowledge of the deponent and is admissible. The whole of by the deponent. Paragraph

paragraph 39 at the moment is inadmissible as being hearsay.

question of the control by Dr Edelsten. Paragraphs 4 1 may be

said to contain certain conclusions, but in my opinion, they

which then led to the conversations which are disclosed in	are all directed to the activities of the deponent himself
paragraph 4 1 and that paragraph is admissible. Paragraphs 4 2 ,
4 3 and 4 4 are relevant and in my opinion are admissible.

It follows, therefore, that in the light of the rulings,

some parts of the affidavit are inadmissible but this, in my opinion, is not a case where the affidavit should be ordered to be struck out and removed from the file of the Registrar in

Bankruptcy. It is to be treated in the ordinary way as

evidence in the case in which certain objections have been
taken and upheld.

In the circumstances therefore the motion on behalf of the respondent Dr Edelsten is refused and in the process, I have given rulings on the admissibility of certain parts of the affidavit of Mr Richards. At an earlier stage and during

the course of the hearing in this matter, the Court made orders as to the confidentiality of the contents of this affidavit and the non-disclosure of what was said in Court in

the course of submissions. In view of the rulings I have now
made, that order is revoked and set aside, and is to have no

effect on any of the proceedings in this Court.

I certify that this and the preceding twelve (12) pages are a

true copy of the Ex Tempore Reasons for Judgment of the

Honourable Mr Justice R.M. Northrop delivered on 25 May 1992.

Associate:

0 c

Date: /+ ZLU; / / / X