Re Joiner, J.F. Ex Parte Official Trustee in Bankruptcy
[1992] FCA 526
•29 Jun 1992
1
| m R I A | DISTRICT R e G I S m | l | No VB 787 of 1990 |
BANKRUPTCY DIVISION
RE: JOHN FRANCIS JOINER (Bankrupt)
EX PARTE: QFFICIAL TRUSTEE IN
BANKRUPTCY (Applicant)
AND : JQAN ELIZABETH JOINER, PHILIP ANTnONY JOINER, NOELINE ELIZABETH J O I N E R a n d J F J
MANAGEXENT PT'Y LTD
(Respondents)
Ryan J
Melbourne29 June 1992
EX TEMPORE REASONS FOR JULXXE a?&-- . P'
m : On 15 June 1986, John Francis Joiner, ("the bankrupt"),
| transferred to his wife, the first respondent, Joan Elizabeth Joiner, afterwards referred to in these reasons as Mrs Joiner, his right, title and interest in the land comprised in Certificate of Title Volume 9435 Folio 125 ("the Eaglemont property"). The transfer was expressed to be in consideration of natural love and affection. It is cormnon ground that the Eaglemont property was sold by Mrs Joiner in 1987 for a net price of $487,553.03 which was paid directly to the bankrupt. | of the fourth respondent, J.F.J. Management Pty Ltd ("J.F.J."), | The proceeds of that sale were subsequently paid to the credit |
L
which was the trustee of the Joiner Family Trust. The proceeds were then invested in the joint names of the bankrupt and J.F.J. in units in the B.T. Hi Yield cash management trust to a value
of $475,000. Thereafter proceeds from the redemption of the units were applied to the purchase in the names of the second and third respondents, who are the son and daughter of the bankrupt, of a property known as 18 Castella Street, Ivanhoe ("the Ivanhoe property").
The purchase price of the Ivanhoe property was approximately
| $28&000. ' - On 5 December 1988, the first respondent became | 8 . |
. \
registkred as the proprietor of a property known as 10 Thomas
Street, -Preston ("the Preston property"). It is accepted on
. *
both side% that the moneys to complete the purchase of the Preston property came from the redemption of some of the B.T. Hi Yield Units. Thereafter, an amount of $37,466.05 was re-invested in B.T. Hi Yield Units in the name of J.F.J.
On 16 May 1990 the bankrupt and his wife, Mrs Joiner, applied to
| made by consent under the Family Law Act: | the Magistrates Court at Preston for the following orders to be | "(a) the husband acknowledges that he hae no interest in the property situate at and known as 10 Thomas Street, Preston registered in the name of the wife; |
| (b) the husband acknowledges that he has no interest in the Subaru motor vehicle in the wife's posseseron; | ||
| (c) the husband shall transfer to the wife all his right, title and interest in the Porsche motor vehicle registered number CVW-070; | ||
| (d) unless otherwise specified in these orders and save for the purpose | ||
| of enforcing any moneys due under these or subsequent orders: |
(a) each party shall be solely entitled to the exclueion of the
other to all other property (including choses in action) in the possession of such party as at the date of these orders (the chattels in the formerly owned matrimonial home at Eaglemont being deemed to be in the possession of the wife);
(b) each party foregoes any claims he or she may have to any
superannuation benefits belonging to or earned by the other;
(c) insurance policies shall remain the sole property of the
beneficrary named therein;(d) each party shall be solely liable for and indemnify the other against any liabll~ty encumbering any item of property to which that party is entitled pursuant to these Ordere."
Apparently effect was given to that consent order on or about 16 May 1990 by transferring the Porsche motor car into the name of the first respondent. On 29 May 1990 a sequestration order was made against the estate of the bankrupt on the petition of the
| Commissioner of Taxation. | By application dated 16 August 1991, |
the Official Trustee ("the trustee") as trustee of the estate of the bankrupt, sought declarations that the transactions which I have detailed are void as against the trustee under s.120(2) or
| alternatively s.121 of the Bankru~tcv | Act. |
The making of that application was prompted in part by the sale by the second and third respondents of the Ivanhoe property
| against which the trustee had lodged a caveat. The second and |
third respondents moved in the Supreme Court of Victoria for the removal of that caveat. An order was made in those proceedings by consent that the caveat be removed on terms that $200,000 of the proceeds of sale be retained in the trust account of the second and third respondent's solicitors. The consent order concluded:
"(C) that if the Official Trustee should make an application in respect of the proceeds of the sale of the Ivanhoe property before 16 August, 1991, the solicitors for the Bankrupt's children should further undertake to continue to retain the money in the trust account until further order;
(d) that if no such application were made, the money in the trust
account should be dealt w ~ t h as instructed by the Bankrupt's children."
On 23 July 1991, the trustee applied for the public examination of the bankrupt under s.69 of the Bankru~tcv Act and applied for the issue of summonses under s.81 for the examination of the first, second and third respondents. Although attempts were made to have it stayed, the examination of the bankrupt has now occurred and he has been questioned at some length about his financial affairs. The trustee sought an extension of the time stipulated by the Supreme Court Order to 31 October 1991 to enable the proposed examinations under s.81 to be completed before the substantive application was issued.
In the absence of a reply to that request the trustee was compelled to issue the substantive application on 16 August 1991, the last day on which it could be made and still preserve intact the sum of $200,000 which was the subject of the consent order
' in the Supreme Court.
| application dated 2 October 1991, for orders: | The first, second and third respondents then applied by | "1. That the Summons under Section 81(1) of the Bankru~tcv Act issued by the Registrar on 19 August, 1991, to NOELINE ELIZABETH JOINER, PHILIP ANTHONY JOINER and JOAN ELIZABETH JOINEB ("the Summons") be set aside. |
| 2. Alternatively, that any examination pursuant to the Summons be adjourned to a date subsequent to the hearing and determination of the |
In opposing that application, the Acting Deputy Official Receiver on behalf of the trustee has deposed:
"The matters about which the Official Trustee has insufficient information for the proper administration of the Bankrupt's estate are as follows:
(a) the circumstances surrounding the registration of the Eaglemont
Property in the sole name of the Bankrupt's wrfe;(b) the circumstances surrounding the sale of the Eaglemont Property and the distribution of the proceeds of the sale to the Bankrupt and the trustee of the family trust;
(C) the circumstances surrounding the purchase of the Ivanhoe Property in the name of the Bankrupt's two children, using funds derived from the sale of the Eaglemont Property;
(d) the circumstances surrounding the purchase of the Preston Property in the name of the Bankrupt's wife and the source of the funds used for the purchase of the property;
(e) the circumstances surrounding the making of the agreement pursuant to which the consent orders were made on 16 May, 1990 which by their terms left the Bankrupt with no part of the joint matrimonial property except for the ancillary items mentioned in paragraph (d) thereof;
(f) the nature and extent of the respective interests of the Bankrupt and his wife in the Subaru and Porsche motor vehicles prlor to the making of the consent orders on 16 May, 1990;
(g) the nature and details, and the circumstances surrounding the making of the loan for which the Porsche was used as security (as to which see paragraphs 15 and 16 below);
(h) the subsequent disposition of the deposit recerved on the sale of
the Eaglemont Property;
(i) the operation, transactrons and distributions of the Joiner Family
Trust. "
| In my view, the attitude which the Court should take to an |
application for a stay or deferral of an examination under s.81 is essentially governed by a wide general discretion. That
emerges clearly from the judgment of the Full Court in Karounog v Official Trustee (1988) 19 FCR 330. The Court observed at 335:
"In our view the relevant principles may be summarised as follows:
1. The power given by S 81 of the Act is an unusual and far-reaching parte Wrllev (1883) 23 Ch D 118 at 128) and its use could easily become oppreseive and vexatious if it is not approached responsibly by applicants for sumonses, and controlled carefully by the Registrar and the court: see Bg Price (No 31 (1948) 14 ABC 137 at 139-140.
one
( Re No r
t h Australian Territorv C o m ~ a m
(1890) 45 Ch D 87 at 93;
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: see pe Price (No 4L (1948) 14 ABC 142 at 144; pe Andrews (1958) 18 ABC 181 at 184; pe Poulson [l9761 1 WLR 1023 at 1032; [l9761 2 All ER 1020 at 1029.
3. The grounds stated in the application for a summons must clearly identify which part of par (b) of s 81(1) is relied upon and provide sufficient information to show how the knowledge, suspicron or supposition referred to in that paragraph has been arrived at: see
Werss: Ex Darte Official Trustee Clvne v Official Trustee (1983) 74 FLR 259. The statement of grounds need not be compendious: Re Csidei: Ex parte Andrew (1979) 39 FLR 387 at 393-394."
The court then went on to consider other matters going to the form of the summons and the approach which should be taken to its issue by the Registrar, and continued;
"7. If a person summoned belreves 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 trme. Such an application to the court will usually be determined on a broad view of the issues in the uarticular case and a weiahina of comuetina principles: see Re caitle New Homes Ltd [l9791 1 WLR 1075; 2 All ER 775 and cases there cited; Re John Arnold's Surf Shoe (supra); Re Nalanda
Ptv Ltd (19831 1 Qd R 269.
8. Discharge or adjournment of a summons may be appropriate where there is litigation pending or likely to be instituted and it is alleged that: (a) the summons is being improperly sought as an aid to that litigation (cf Re Northern Australian Terrrtorv CO (supra); Bletchlev Boat CO Ltd (19741 1 WLR 630 at 637; (19791 1 All ER 1225 at 1232), 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 examinatron under s 81 of the Act until
the particular litigation has been disposed of.
9. If such an applicat~on is made to the court by a person summoned,
the court must consider afresh, on the mater~al before it, whether the summons should be set aside or adjourned to a more convenrent trme. It is not merely deciding whether, on the material before the Registrar, he correctly exercised his d~scretion.
10. There is no difference in principle between cases where proceedings have actually been instituted and where they are merely in contemplation (see pe Huah J Roberts Ptv Ltd lIn Lipr (1970) 91 WN (NSW) 537 at 541); but where litrgation 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.
11. 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 summans will be set aside or adjourned. It would normally only be set aside rf 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 Reaistrar or the court will be careful to see that inlustice is not occasioned in the course of examination by particular questions asked: see, for example, Re Anderson: Ex narte Official Receivef (1937) 10 ABC 284 at 288-289; Be Andrews (aupra) at 184-185; pe Roberts (supra) at 539, 542.
12. Both the Registrar and the court will give due weight to the fact
that a summons is sought by the Official Trustee, who wrll not be presumed to have acted unfairly or for an improper purpose except on convincing ev~dence: Re Price (No 31 (supra) at 141. The same is true of an official liquidator: see u a s t l e New Homes Ltd (supra) at 791; Re John Arnold's Surf S h o ~ (aupra) at 229-230. But an application by the Official Trustee will still be subject to proper scrutiny and w ~ l l
be refused if the Registrar or court is not satisfied that it should be
granted. "
I consider that it is reasonable for the trustee to seek the examination of the three persons who have directly benefited from a substantial voluntary disposition of property before deciding whether to persevere with the substantive application he has instituted for declarations in respect of that property and the subsequent transactions into which it can be traced. That is not to say that the s.81 examination should be used for collateral purposes such as an attack on the credit of the first, second and third respondents with a view to undermining the utility of his or her evidence in the substantive proceeding.
| oppressive or vexatious to any of the first, second and third | I am not persuaded that the proposed examinations would be |
| respondents, merely by virtue of their position as adversaries of the trustee in the substantive application. It has been submitted by M r Sifris of Counsel for the first, second and third respondents, that the ordinary process of discovery, interrogatory and subpoena are available to achieve the legitimate ends of the trustee. However, as Mr Lenczner of | |
| Counsel for the trustee pointed out, s.81 provides for a wider- ranging, less structured, method of eliciting evidence which may be relevant to the administration of a bankrupt's affairs. | |
| I am not persuaded that the present trustee should be denied | |
| recourse to that machinery merely because he has available the procedural devices to which the Pull Court in Karounos referred in paragraph 8 of its identification of the governing principles | |
| in this area. Essentially, the preservation of a reasonable | |
| balance between the competing interests of the trustee and the first, second and third respondents in the light of the pending substantive application, should be left to the registrar conducting the examination. That registrar can decide what questions to allow and whether any part of the examination should be deferred until after the substantive application has been determined. | |
| For these reasons, the application to set aside the summonses for examination under section 81 is refused. | |
| |
| The application will be refused with costs. I order that the substantive application dated 16 August 1991 be adjourned for further directions on a date to be fixed after the completion of the examinations under S. 81. I reserve liberty to any party to apply on not less than 48 hours notice in writing to the other parties. |
I certify that the preceding eight (8) pages
are a true copy of the ex tempore reasons
for judgment herein of his Honour Mr Justice Ryan. Associate :
Date : 29 ~ u A e 1992
| Counsel for the applicant: | Mr J Lenczner | ||
| Solicitor for the applicant: |
| ||
| Solicitor | |||
| Counsel for the respondents: | Mr M Sifris | ||
| Solicitor for the respondents: | Felman and Associates |
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