Re Kukas, Juraj (George) Ex Parte Morton, Robert William
[1997] FCA 386
•16 May 1997
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION ) No. VB 1567 of 1994
BANKRUPTCY DISTRICT OF THE STATE )
OF VICTORIA )
RE: BANKRUPT ESTATE OF JURAJ (GEORGE) KUKAS
EX PARTE: ROBERT WILLIAM MORTON
Trustee of the Estate of JURAJ (GEORGE) KUKAS
JUDGE MAKING ORDER: Ryan J
DATE OF ORDER: 16 May 1997
WHERE MADE: Melbourne
MINUTES OF ORDER
THE COURT ORDERS:
That the summons issued herein on 5 December 1996 to Constantine Bilionis be set aside.
That costs of both parties of the application herein dated 13 December 1996, be reserved pending filing and service of written submissions on the question of costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION ) No. VB 1567 of 1994
BANKRUPTCY DISTRICT OF THE STATE )
OF VICTORIA )
RE: BANKRUPT ESTATE OF JURAJ (GEORGE) KUKAS
EX PARTE: ROBERT WILLIAM MORTON
Trustee of the Estate of JURAJ (GEORGE) KUKAS
CORAM: Ryan J
DATE: 16 May 1997
PLACE: Melbourne
REASONS FOR JUDGMENT
RYAN J: This is an application by Constantine Bilionis to set aside a summons dated 5 December 1996 issued pursuant to s. 81(1) of the Bankruptcy Act 1966. The summons was issued on the application of Robert William Morton ("the Trustee") as trustee of the bankrupt estate of Juraj Kukas ("the bankrupt"). In support of that application, the Trustee had made an affidavit sworn 5 December 1996 to which was exhibited a copy of an affidavit ("the search warrant affidavit") by the Trustee in support of an application to this Court for search warrants in respect of various premises. The Trustee's affidavit of 5 December 1996 continued:
I refer to paragraph 19 of the search warrant affidavit. Exhibit RWMA11 is a letter which I wrote to Mr Constantine Bilionis ("Mr Bilionis") on 20 August 1996. In that letter I specifically asked Mr Bilionis "What I am seeking to find out is whether there is any contract between you or an entity associated with you and the bankrupt or his company Equipped (Equipped Builders Pty Ltd)." Exhibit RWMA12 is a letter dated 20 August 1996 which responds to my letter of the same date. Paragraph 2 of that letter is unclear and does not specifically deal with the question of contractual arrangements between the bankrupt and Mr Bilionis.
On 4 December 1996 I executed a warrant at the bankrupt's current address at 515 Belmore Road, Box Hill North ("the Belmore Road property"). On execution of that warrant I seized a number of documents which clearly relate to the development of the Belmore Road property. Annexed hereto and marked with the letters "RMA3" is a true copy of documents that I seized that appear to be invoices relating to development of the Belmore Road property which are made out to `Kukas Constructions'. Annexed hereto and marked with the letters "RMA4" is a true copy of documents that I seized that appear to be invoices relating to development of the Belmore Road property which are made out to `the bankrupt'. Annexed hereto and marked with the letters "RMA5" is a true copy of documents that I seized that appear to be invoices relating to development of the Belmore Road property which are made out to `Mr Bilionis'.
It is clear from the material in the search warrant affidavit and also from the material in annexures RMA3, RMA4 and RMA5 that Mr Bilionis appears to have some contractual arrangement with the bankrupt that has not been disclosed to me as Trustee. Any contractual arrangement concerning the Belmore Road property, which was purchased in June 1996 should have been disclosed to me in response to my letter to Mr Bilionis on 20 August 1996.
I do not believe that there is any point in further communicating with Mr Bilionis concerning the Belmore Road property. The only way that I can be reasonably certain of what the arrangement between Mr Bilionis and the bankrupt was is to have Mr Bilionis examined pursuant to the provisions of Section 81 to the Bankruptcy Act 1966.
The summons issued on the Trustee's application was in these terms:
To:Mr Constantine Bilionis
C/- 190 Kerr Street
FITZROYVIC 3065
The Registrar hereby summons you under subsection 81(1) of the Bankruptcy Act 1966 to attend the Registrar at the Federal Court at 450 Little Bourke Street, Melbourne, Victoria on the 16th day of December 1996, at 10.15 o'clock in the fore noon, to give evidence in connection with the affairs of Juraj (George) Kukas.
The Deputy Registrar's reasons for issuing that summons were dated 13 December 1996 and expressed as follows:
On 5 December 1996 the Trustee of the bankrupt estate of the Bankrupt filed an application for the issue of a summons pursuant to section 81(1) of the Bankruptcy Act 1996 for the examination of Constantine Bilionis of 190 Kerr Street, Fitzroy, Victoria 3065.
In accordance with Rule 129 of the Bankruptcy Rules the Trustee also filed an affidavit which complied with paragraph 129(1)(d).
I was satisfied that the summons did not contain a requirement for the production of books as mentioned in subsection 81(1B) of the Act and that the requirements of sub-rules 129(2), (2A) and (3) did not apply.
I was further satisfied that the affidavit of the Trustee set out the matters required by sub-rule 129(1)(d) and gave adequate reasons why further inquiries of the proposed witness would be fruitless.
I therefore issued the summons on 5 December 1996.
The letter dated 20 August 1996 referred to in paragraph 5 of the Trustee's affidavit was in these terms:
RE:BANKRUPT ESTATE OF JURAJ (GEORGE) KUKAS
NO VB 1567 OF 1994
I am the trustee of the abovementioned person's bankrupt estate. Enclosed herewith is a copy of my Certificate of Trusteeship. The bankrupt is to be examined in the Federal Court of Bankruptcy on 28 August 1996.
In the course of my investigations into his activities I have become aware that the bankrupt may have completed a contract on your behalf or alternatively for an entity associated with you, for the sum of $240,000. According to the documentation in my possession the location of the contract was Buckley Street, Brunswick (Barkly).
The bankrupt also operated through a company named Equiped Builders Pty Ltd ("Equiped"). It may be that the contract was in the name of Equiped.
What I am seeking to find out is whether there was any contract between you or an entity associated with you and the bankrupt or his company Equiped. This information is part of the examinable affairs of the bankrupt. Further, if such a contract existed, I wish to know the dates on which you or an entity associated with you made payments to the bankrupt or to Equiped and if so, what were the dates and the amounts of those payments.
Attached to this correspondence is a Notice under Section 77A of the Bankruptcy Act 1966. That Notice requires you to provide me with such information as you have by close of business Monday 26 August 1996.
If you have any queries would you please contact me or Ms Donna Colville on the telephone number mentioned below.
The notice under s. 77A attached to that letter was in these terms:
BANKRUPTCY ACT (1966)
Bankruptcy District of Victoria NO VB 1567 of 1994
RE:BANKRUPT ESTATE OF JURAJ (GEORGE) KUKAS
Notice under Section 77A
TAKE NOTICE that I, Robert William Morton, as Trustee of the estate of the abovementioned Bankrupt, am conducting an investigation under Section 19AA of the Bankruptcy Act (1966) relating to the Bankrupt.
I require Mr Con Bilionis, P O Box 2135, Fitzroy in the State of Victoria, to make available to me, Robert William Morton, the following:-
A copy of any contract between you or an entity associated with you and the bankrupt;
Details of any payments made (including dates and amounts) by you or any entity associated with you to the bankrupt or to Equiped Builders Pty Ltd from January 1993 to the current date.
This information is required to be produced to the offices of Mortons Accountants, Level 15, 600 Bourke Street, Melbourne by 26 August 1996.
TAKE NOTE: Pursuant to S.265A of the Bankruptcy Act (1966) it is an offence to refuse or to fail to comply with a requirement of this notice without reasonable excuse.
Penalty:Twelve (12) months' imprisonment.
On the same day, the Trustee sent to a Mr Phillips at the same address as that for Mr Bilionis a letter which was in identical terms to that reproduced above save for the second paragraph which read:
In the course of my investigations into his activities I have become aware that the bankrupt may have completed a contract on your behalf or alternatively for an entity associated with you, for the sum of $210,000. According to the documentation in my possession the location of the contract was 5 Little Chapel Street, Prahran.
A joint reply to those letters was made on the same day in these terms:
Re:Bankrupt estate of Juraj (George) Kukas
No VB 1567 of 1994
We refer to your two letters dated today and forwarded by facsimile transmission today and provide you with the following information:-
In relation to property at 5 Little Chapel Street, Prahran, Mr George Kukas was engaged by us to undertake all internal demolition, carpentry and plaster works and to liaise with other trades independently engaged by us in relation to the internal refurbishment of this property.
There is not and never was any written agreement but only an oral agreement and payments were made to Mr Kukas for labour and materials upon production of accounts and times worked. We have not retained copies of these accounts. The works carried out to this property did not involve any expenses of a tax deductable nature.
The only records kept by us are cheque butts and the information provided to you emanates from this source.
The following amounts were paid to Mr Kukas or at his direction on his behalf, namely -
DATEPAYEE AMOUNT CHEQUE NO.
19/11/93G. Kukas $2,000.00 830
24/11/93G. Kukas $2,000.00 835
16/12/93Equipped Builders $10,000.00 853
21/12/93G. Kukas $400.00 861
21/12/93Equipped Builders $ 9,000.00 863
21/12/93Equipped Builders $ 3,898.60 864
In relation to the property at Buckley Street Brunswick, we assume that this refers to a property at 299 Barkly Street, Brunswick which was purchased by us on 25 March, 1995. There has never been any work carried out to this property by Mr Kukas or any entity in which he was involved.
We also own a property at 67-77 Sydney Road, Brunswick which is on the corner of Barkly Street. Apart from some minor maintenance work, no work to this property was carried out by Mr Kukas or any entity in which he was involved. The maintenance work performed by Mr Kukas involved several hours on one day in which he fixed several prints onto a wall, attached a lock to a hot water service cabinet and fixed a bronze metal strip in a doorway joining a carpet and tiled area.
We wish to express our concern that your letters, with the attached Section 77A notices, were forwarded to us without any prior consultation with us and requiring information being provided to you within a short space of 6 days.
Fortunately the records relating to the above matters were at close hand but we would have expected a reasonable time to have been specified for the provision of information.
The Trustee responded to the letter of 20 August 1996 from Mr Bilionis and Mr Phillips by a further letter dated 21 August 1996 which read:
I refer to your facsimile dated 20 August 1996 relating to the abovenamed bankrupt.
The information you have supplied will be very useful to my investigations and I thank you both for your assistance in this matter.
If you have any queries please contact me or Ms Donna Colville of my office.
That letter was not exhibited to the Trustee's affidavit of 5 December 1996 or to the search warrant affidavit. It was, I find, not disclosed to the Registrar.
The search warrant affidavit contained a good deal of material which had no relation to any dealings between the bankrupt and Mr Bilionis and continued, so far as is relevant:
In the course of the conduct of an examination of the bankrupt under Section 81 of the Act on 28 August 1996 I became aware that the bankrupt was residing at 515 Belmore Road, Box Hill North ("the Belmore Road property"). In evidence he said to Justice Sundberg that he had left the first property and had gone to live at the Belmore Road property. The bankrupt in the course of the examination on a previous day before Deputy Registrar Young had refused to give his current address or the registration number of his motor vehicle and had prevaricated. Deputy Registrar Young referred the matter to Justice Northrop and by a series of Orders the examination continued before Justice Sundberg on 28 August 1996.
...
As a result of learning the bankrupt's new address I conducted a search of the Belmore Road property. Now produced and shown to me and marked with the letters "RWMA5" is a true copy of the search of the Belmore Road property that I undertook at the Land Titles Office on 16 September 1996 ("the Belmore Road property search"). Now produced and shown to me and marked with the letters "RWMA6" is a true copy of the Transfer of Land document in relation to the Belmore Road property that I obtained from the Land Titles Office on 16 September 1996 ("the Belmore Road transfer of land document").
Both the search note and the transfer disclosed that Mr Bilionis was the registered proprietor of the Belmore Road property.
The search warrant affidavit continued:
As a result of enquiries that I made in respect of the Belmore Road transfer of land document I discovered that the solicitors acting for the vendor, Ms Fiona Christine Peck ("Ms Peck"), were Ballards Solicitors at 4/426 Burwood Highway, Knoxfield in the State of Victoria.
On 16 October 1996 I wrote to Ballards Solicitors requesting an inspection of their file in relation to the sale of the Belmore Road property. Now produced and shown to me and marked with the letters "RWMA7" is a true copy of the letter that I sent to Ballards Solicitors on 16 October 1996. I later telephoned a person who identified himself as Mr Windebank, a partner in Ballards Solicitors. Mr Windebank informed me that he had received my letter of 16 October 1996 and that he would need to obtain instructions from his client to allow me to inspect the file. Following a number of telephone conversations to Mr Windebank I was eventually informed by him on 27 November 1996 that he had obtained Ms Peck's instructions to allow me to inspect the file concerning the sale by her of the Belmore Road property.
On 28 November 1996 I attended the offices of Ballards Solicitors at approximately 10.30a.m. I reviewed the file of the sale of the Belmore Road property and obtained photocopies of documents which I considered to be relevant. Now produced and shown to me and marked with the letters "RWMA8" is a true copy of the documents that I obtained from the file held by Ballards Solicitors on behalf of Ms Peck concerning the sale of the Belmore Road property ("the sale documents").
The sale documents contained two (2) file notes in which there is mention of the builder being a person identified as "John Kay". Now produced and shown to me and marked with the letters "RWMA9" are true copies of the file notes identifying John Kay extracted from the sale documents.
As a result of the information that I obtained from the sale documents I became aware that the Real Estate Agents who effected the sale were Woodards at Balwyn. I attended the Balwyn offices of Woodards at 11.30 a.m. on 28 November 1996 and I there spoke with a person who identified himself as Paul Walker ("Mr Walker"). Mr Walker showed me the file maintained by Woodards in respect of the sale of the Belmore Road property ("the Woodard's file"). Now produced and shown to me and marked with the letters "RWMA10" is a true copy of the documents that I extracted from Woodard's file.
In the course of the conversation I had with Mr Walker on 26 [sic] November 1996 he said to me words to the effect "I have never met Con Bilionis, I have only met John Kay. I have seen John Kay at the Belmore Road property. He told me he lives there. About one week ago I went to do an appraisal across the road at 2 Morris Avenue and John Kay was out the front of the Belmore Road property. He said, `Hey Paul come and have a look at what I have done.' He then showed me through the Belmore Road property and then said to me `I think I paid too much for it, now what I have spent on the property I will have to rent it out for two years and then contemplate selling it.'" I asked Mr Walker if he had ever questioned John Kay about his name. In reply he said to me words to the effect "When I first met John Kay I said what is your full name. John Kay avoided giving me an answer and eventually said Let's just leave it at John Kay." I then had a discussion with Mr Walker as to the
signing of the documents in relation to the sale. Mr Walker said to me words to the effect "John Kay would always take the documents away for signature. On the first occasion I delivered the contract to him at the first property. I have no telephone number for Con Bilionis only one for John Kay."
In relation to the discussion between the Trustee and Mr Walker, the latter has filed an affidavit in these proceedings in which he deposes, after indicating that he had read paragraphs 17 and 18 of the search warrant affidavit and pointing out an immaterial error in that affidavit:
Further, the said paragraphs do not reflect the entirety of the conversations and information provided to Mr. Morton on 28 November 1996.
From the initial contact I had with John Kay whom I now know to be one George Kukas, and throughout all dealings I had with him, I was told by him that the property at 515 Belmore Road, Box Hill was being purchased by and owned by Con Bilionis and that he, Kay, was the builder carrying out the building works for Con Bilionis.
During the course of the conversation with Mr. Morton on 28 November 1996 and referred to in his affidavit, I told Mr. Morton of these matters. I specifically told Mr. Morton that at all times during my dealings with Mr. Kay that the property was being purchased by and owned by Con Bilionis and that Mr. Kay was the builder carrying out the building works.
In a later affidavit sworn 24 December 1996 and filed in the present proceedings, the Trustee does not deny in its essentials Mr Walker's version of their meeting. However, he emphasised that in response to a question, "Have you ever met Con Bilionis?", Mr Walker replied, "No, I have only met John Kay" and effectively repeated that statement later in the conversation.
The search warrant affidavit continued:
On 20 August 1996 I wrote to Con Bilionis ("Mr Bilionis") and I asked him if there was any contract between him and the bankrupt or a company in which the bankrupt had been involved namely Equiped Builders Pty Ltd. On the same day I made a
telephone call to Mr Bilionis. In that telephone conversation Mr Bilionis said to me words to the effect "The bankrupt is currently living at one of my properties and is doing some work for me in return for rent." Now produced and shown to me and marked with the letters "RWMA11" is a true copy of the letter that I wrote to Mr Bilionis on 20 August 1996. Now produced and shown to me and marked with the letters "RWMA12" is a true copy of the reply that I received to the letter that I wrote to Mr Bilionis on 20 August 1996.
Now produced and shown to me and marked with the letters "RWMA13" is a true copy of the Proprietor Enquiry that I undertook at the Land Titles Office on 28 November 1996 under the name of "Constantine Bilionis". I note that there are eight (8) properties registered under the name Constantine Bilionis. Now produced and shown to me and marked with the letters "RWMA14" is a true copy of the Proprietor Enquiry that I undertook at the Land Titles Office on 15 October 1996 under the name "Con Bilionis". There is only one property which is registered under the name Con Bilionis and that property is the Belmore Road property.
As a result of my investigations into the Belmore Road property I am of the opinion that John Kay is the bankrupt. Furthermore, I am concerned that there may be an arrangement between the bankrupt and Mr Bilionis which is for the specific purpose of putting the Belmore Road property beyond the reach of creditors of the bankrupt. I do not believe that there is any point in raising this matter any further with Mr Bilionis or with the bankrupt. I ask that this Court give warrants that I seek. All properties registered in the name of Constantine Bilionis have been mortgaged to a bank - either the National Australia Bank, in the majority of cases or the State Bank in one case. This is the only property without a mortgage. Amongst other things, it is quite clear that the Belmore Road property has been purchased for the purpose of commercial re-development. It is therefore surprising that Mr Bilionis has paid cash for the Belmore Road property. Finally, I point out that the Bretmill property was also purchased for cash and for the purpose of commercial re-development in almost the same fashion as that proposed for the Belmore Road property.
By an affidavit in support of the present application which was sworn 13 December 1996, Mr Bilionis has deposed, amongst other things:
The first communication I had with Mr. Morton was in January 1996 when he came unannounced to my office and introduced himself. He told me he was the Trustee for Mr. Kukas. He asked me whether I had any dealings with a number of companies or recognised a number of companies that he had specified. I answered all questions that he put to me. The meeting was short duration and was amicable. He then left my office.
After referring to the communication between himself and the Trustee on 20 and 21 August 1996, Mr Bilionis' affidavit continued:
The next communication I had with Mr. Morton was a telephone call in or about September 1996. He asked me where Mr. Kukas was living. I told him that I knew Mr. Kukas was living in a property of mine situated at 515 Belmore Road, Box Hill South which I was renovating and that Mr. Kukas was living there rent free and was renovating the property for me. This conversation was short and no further questions were asked. I again provided Mr. Morton with all information he had requested.
Reference was then made to the execution of one of the search warrants issued out of this Court on 2 December 1996. That occurred at the office of Giasoumi Papasavas Zervos Pty., the solicitors for Mr Bilionis, on 4 December 1996 in circumstances described as follows by Mr Bilionis in his affidavit of 13 December 1996:
After the telephone call in September or October 1996 I had not heard from Mr. Morton or had any request for any information from him until I received a telephone call from Nick Giasoumi on 4 December 1996, whereby I was advised that Mr. Morton was attending my Solicitors office with a search warrant seeking to execute a warrant which was not directed at me, but Mr. Kukas.
Mr. Giasoumi advised me and I believe that Mr. Morton had requested access to my file relating to the Belmore Road property. I stated to him that I had nothing to hide and that Mr. Morton could have access to my conveyancing file. I instructed Mr. Giasoumi to make appropriate arrangements to have the file provided to Mr. Morton and provided a copy of the file was retained by him. If I had been requested for access of this file or the documents contained therein, then this material as in the past, would have been provided to Mr. Morton.
On the day after the application for examination under s. 81(1), another of the search warrants issued on 2 December 1996 was executed by the Trustee in person at 190-196 Kerr Street, Fitzroy, the premises shared by Mr Bilionis and Mr Phillips. Mr Phillips then provided the Trustee with a file belonging to Mr Bilionis containing cheque books, bank statements and other documents related to the development of the Belmore Road property.
In an affidavit sworn 24 December 1996 in reply to those relied on by Mr Bilionis in support of this application, the Trustee has deposed that among the documents which he obtained upon execution of the search warrants was a "quotation dated 30th June 1996 from the bankrupt to `Con Bilionis' for `job at 515 Belmore Rd, Box Hill North ... building works carried out." The total cost of the works detailed in that document was $13,726. The Trustee's affidavit of 24 December 1996 continued in paragraph 11:
Further, the bankrupt has been paid the following amounts on the following dates by Mr Bilionis:
(a)21.10.96 $3,726.00
(b)18.11.96 $1,000.00
(c)28.11.96 $1,000.00
(d)04.12.96 $1,000.00
Those payments must have been made pursuant to a prior agreement, arrangement or understanding which Mr Bilionis failed to disclose to me.
Paragraph 13 and 14 of the same affidavit are in these terms:
I refer to the second paragraph 36 of the Bilionis affidavit. I am certain that I spoke to Mr Bilionis on 20 August 1996. I telephoned him on that day for the purpose of obtaining his facsimile telephone number. After he gave it to me I faxed him a notice pursuant to s.77A of the Bankruptcy Act and a letter dated 20 August. I obtained Mr Bilionis' telephone number from a document which I seized from the bankrupt on 26 October 1995 when I executed a search warrant at the premises then occupied by him at 24 Tonkin Avenue Balwyn. That document did not contain Mr Bilionis' facsimile number. It was in the course of my conversation with Mr Bilionis on 20 August 1996 that he advised me with words to the effect:
"The bankrupt is currently living at one of my properties and he is doing some work for me in return for rent."
I now know that the property he was referring to is the Belmore Road property. In my view, that statement is a blatant misdescription of the present relationship between the bankrupt and Mr Bilionis.
I refer to paragraph 37 of the Bilionis' affidavit. For the reasons set out in the preceding paragraph I am not confused about the conversation. It was not until the bankrupt appeared
before Justice Sundberg on 28 August 1996 that he disclosed that he was living at 515 Belmore Road Box Hill North. When he was examined on that topic before Deputy Registrar Young on 15 August 1996 he repeatedly refused to disclose his residential address. It was not until 28 August 1996 that counsel retained by me had a further opportunity to examine him on that point.
The Trustee's affidavit of 24 December 1996 goes on to assert that the bankrupt had used the alias "Wayne Hurst" in connection with another property development at 4 Amaroo Court, Box Hill North undertaken by a company, Bretmill Pty Ltd, controlled by the bankrupt's wife and eldest son, and had asked for correspondence in respect of that development to be sent to him under the name "Wayne Hurst" c/- Star Step Investments Pty Ltd at 190 Kerr Street, Fitzroy. That, it will be recalled, is the address of the premises jointly occupied by Mr Bilionis and Mr Phillips. The Trustee's affidavit of 24 December 1996 continued in paragraphs 24 and 25:
... After I ascertained that information I went to 190 Kerr Street Fitzroy and met with Mr Phillips and Mr Bilionis. That meeting took place on 7 May 1996 and I asked Mr Phillips and Mr Bilionis whether they knew Wayne Hurst. They both denied any knowledge of that person.
In the presence of Mr Bilionis, Mr Phillips admitted that he knew the bankrupt but stated that he had not seen him for some time. After Mr Phillips said that Mr Bilionis made no comment despite the fact that he had spoken with the bankrupt by telephone on a number of occasions prior to that meeting. He also spoke with the bankrupt by telephone after that meeting. Now produced and shown to me and marked with the letters "RWMA19" are true copies of the bankrupt's mobile telephone account which I obtained from Telstra for the period July 1995 to June 1996. Mr Bilionis' mobile telephone number is 018 367 496.
In response to paragraph 25 of the Trustee's affidavit of 24 December 1996, Mr Bilionis claimed in his affidavit of 15 January 1997 that the Trustee's assertion that the first meeting at 190 Kerr Street, Fitzroy, occurred on 7 May 1996 is
contradicted by paragraphs 5 to 7 of an affidavit by the Trustee sworn in proceedings numbered 8479 of 1995 in the Supreme Court of Victoria. However, those paragraphs detail investigations by the Trustee into activities of "Wayne Hurst" and Star Step Investments Pty Ltd in the course of which the Trustee attended at 190 Kerr Street, Fitzroy, on 25 April 1996 and spoke to an employee of Flat Laundry Lease which was apparently conducted from those premises. There was no suggestion in those paragraphs that the Trustee had spoken on that occasion to either Mr Bilionis or Mr Phillips. For reasons which appear below, it is unnecessary for me to resolve the conflict on the evidence as to whether the first contact between the Trustee and Mr Bilionis occurred in January 1996 or on 7 May 1996.
The other significant conflict on the evidence is between the Trustee's assertion that Mr Bilionis disclosed to him in the telephone conversation of 20 August 1996 that the bankrupt was living in one of his (Bilionis') properties and doing some work in return for rent, and Mr Bilionis' assertion that a more detailed disclosure to similar effect was not made by him until in or about September 1996. Without having had the benefit of cross-examination of either deponent on this issue, I am led to prefer the recollection of Mr Bilionis. I consider that it is more probable than not that had Mr Bilionis made the disclosure which the Trustee claims he did on 20 August 1996, the Trustee would have enquired in his facsimile letter of the same date for details of the arrangements between Mr Bilionis and the bankrupt in relation to the latter's residence. Moreover, I regard the earlier paragraphs of the search warrant affidavit as probably indicating the true sequence of events inasmuch as the Trustee became aware on 28 August 1996 that the bankrupt was living at the Belmore Road property and identified Mr Bilionis as the transferee and registered proprietor of that property only after he procured the title search on 16 September. On that view, whatever enquiry was made of Mr Bilionis in that respect probably occurred after 16 September.
The Court was invited to review the facts which I have just summarized in order to understand the contention of the applicant that certain facts known to the Trustee on 5 December 1996 were not disclosed to the Registrar and that other matters were disclosed in a way which was misleading. To permit an understanding of the statutory context in which that submission is made, it is necessary first to set out s. 81(1) of the Bankruptcy Act ("the Act"):
Where a person (in this section called the "relevant person") becomes a bankrupt, the Court or a Registrar may at any time (whether before or after the end of the bankruptcy), on the application of:
(a)a person (in this section called a "creditor") who has or had a debt provable in the bankruptcy;
(b)the trustee of the relevant person's estate; or
(c)the Official Receiver;
summon the relevant person, or an examinable person in relation to the relevant person, for examination in relation to the bankruptcy.
"Examinable person" is defined as follows in s. 5(1) of the Act:
"examinable person", in relation to a person (in this definition called the "relevant person"), means:
(a)if the relevant person is a debtor and property of the debtor is known or suspected to be in the possession of a person - that person;
(b)if the relevant person has become a bankrupt and any of the property of the bankrupt is known or suspected to be in the possession of a person - that person;
(c)in any case - a person who is believed to be indebted to the relevant person;
(d)if a person, including:
(i)a person who is an associated entity of the relevant person; or
(ii)a person with whom an associated entity of the relevant person is or has been associated;
may be able to give information about the relevant person or any of the relevant person's examinable affairs - that person; or
(e)if books (including books of an associated entity of the relevant person):
(i)are in the possession of a person, including a person of a kind referred to in subparagraph (d)(i) or (ii); and
(ii)may relate to the relevant person or any of the relevant person's examinable affairs;
that person;
The circumstances in which a natural person may be an associated entity of a bankrupt in the sense indicated in the definition of "examinable person" are indicated as follows in s. 5C of the Act:
For the purposes of this Act, a natural person (in this section called the "associate") is associated with another person if the other person:
(a)holds property jointly with the associate; or
(b)is a trustee of a trust under which the associate is capable of benefiting; or
(ba)can benefit under a trust of which the associate is a trustee; or
(c)is employed, or is engaged under a contract for services, by the associate; or
(d)acts as agent for the associate in any transaction or dealing; or
(da)is a principal for whom the associate acts as an agent; or
(e)is an attorney of the associate under a power of attorney; or
(f)has appointed the associate as the other person's attorney under a power of attorney; or
(g)gives professional advice to the associate; or
(h)is given professional advice by the associate.
A natural person (the "associate") is also associated with another person if the associate has acquired or disposed of property as a result of dealing with the other person.
The circumstances set out in subsections (1) and (2) are the only circumstances in which a natural person is associated with another person for the purposes of this Act.
"Examinable affairs" is defined thus also in s. 5(1):
"examinable affairs", in relation to a person, means:
(a)the person's dealings, transactions, property and affairs; and
(b)the financial affairs of an associated entity of the person, in so far as they are, or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs;
In aid of s. 81(1) the Bankruptcy Rules provide by r. 129(1):
Unless the person to be examined is a relevant person within the meaning of section 81 of the Act, an application to the Court or the Registrar for a summons under subsection 81(1) of the Act must:
(a)be in writing;
(b)identify the person whom it is sought to examine, and the bankruptcy in relation to which it is sought to examine the person; and
(c)if the summons applied for is to contain a requirement mentioned in subsection 81(1B) of the Act - specify the books or classes of books that the person is to produce at the examination;
(d)be supported by an affidavit setting out:
(i)the enquiries that have been made concerning the subject-matter of the proposed examination and, where applicable, the reason for requiring the production of any books or classes of books;
(ii)details of the request made to the person to provide the required information and, where applicable, to produce the books or classes of books for inspection, and the result or, where no request has been made, the reason; and
(iii)the circumstances of any refusal or failure of the person to co-operate in complying with the request.
Rule 129(1) in its present form was considered by Pincus J in Re: Huybrechts; Ex parte Huybrechts v Knight (1991) 31 FCR 394 where his Honour observed, at 396:
Rule 129 does not imply, as I read it, that a s 81 summons should necessarily be refused if there has not been a request made to provide the information or produce the books sought, which request has been ignored or refused. But if no request for information has been made before a summons is sought and no reason is given for the failure to make a request, that is a circumstance which must be taken into account in determining whether a summons under s 81 should be issued. In my opinion, some special reason would have to be put forward to justify issue of a summons where, as here, there has been neither a request for information nor any reason given for the absence of such a request. The spirit of the rule is that persons who might otherwise have sought a summons under s 81(1) are encouraged to seek to obtain the information privately and to come to the court only if that course does not produce satisfaction, or is impractical. Counsel for the trustee pointed out that, in some circumstances, the trustee might think it desirable to cause an examinee to come before the court with no specific prior warning of the matters to be inquired into; but the rule covers that case and, if there is a good reason for taking that course, it can be sworn to in the affidavit.
Before its amendment in 1991, r. 129(1) embodied a quite different regime governing applications for the issue of summonses under s. 81(1). Most significantly, the application for the issue of the summons was required to set out the grounds on which the application was made and to be accompanied by an affidavit setting out the facts relied on. A trustee in bankruptcy was excepted from the latter requirement.
Because of the significant recasting of r. 129(1) in 1991, judgments in cases requiring the application of the rule in its earlier form are of limited utility although the history of judicial exposition goes some way to explaining why the rule is in its present terms. However, I regard as still applicable to a case such as the present the following principles which were distilled by a Full Court of this Court in Karounos v Official Trustee (1988) 19 FCR 330 at 335. (Some modifications have to be made to some of those principles to accommodate the changed form of r. 129(1)):
The power given by s 81 of the Act is an unusual and far-reaching one (Re North Australian Territory Company (1890) 45 Ch D 87 at 93; Ex parte Willey (1883) 23 Ch D 118 at 128) 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; see Re Price (No 3) (1948) 14 ABC 137 at 139-140.
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 Re Price (No 4) (1848) 14 ABC 142 at 144; Re Andrews (1958) 18 ABC 181 at 184; Re Poulson [1976] 1 WLR 1023 at 1032; [1976] 2 All ER 1020 at 1029.
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, suspicion or supposition referred to in that paragraph has been arrived at: see Re Weiss; Ex parte Official Trustee Clyne 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 summons itself should be expressed in terms which make the intended areas of inquiry as clear as the circumstances of the case permit, and which specify as clearly as possible any books and records which the person summonsed has to produce: see Re Andrews (supra) at 186-187.
The Registrar should examine the application and form of summons carefully to satisfy himself that the grounds of the application are sufficiently clear and the form of the summons is not oppressive or vexatious, by reason of being uncertain, too wide or otherwise objectionable.
...
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: see Re Castle New Homes Ltd [1979] 1 WLR 1075; 2 All ER 775 and cases there cited; Re John Arnold's Surf Shop (supra); Re Nalanda Pty Ltd [1983] 1 Qd R 269.
...
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.
...
Both the Registrar and the court will give due weight to the fact that a summons is sought by the Official Trustee, who will not be presumed to have acted unfairly or for an improper purpose except on convincing evidence: Re Price (No 3) (supra) at 141. The same is true of an official liquidator: see Re Castle New Homes Ltd (supra) at 791; Re John Arnold's Surf Shop (supra) at 229-230. But an application by the Official Trustee will still be subject to proper scrutiny and will be refused if the Registrar or court is not satisfied that it should be granted.
The affidavit relied on should show a prima facie probability that some benefit will result from the proposed examination to the creditors of the bankrupt. Facts must be demonstrated to support the supposition that the proposed examinee is able to give information respecting the bankrupt, his dealings or property; (Re Andrews (1953) 18 ABC 181 at 184).
The present form of r. 129(1) requires modification of the following observation of Lockhart J in Re Csidei; Ex parte Andrew (1979) 39 FLR 387 at 392:
It is going too far to say that a trustee should not apply for the issue of a summons under s. 81 unless he has previously applied to the proposed examinees themselves who have declined or refused to give the information sought or otherwise acted unsatisfactorily, although this was said by Connolly J. of the Supreme Court of New Zealand in Re Ngunguru Coal Co. (Ltd.) (1899) 18 N.Z.L.R. 256 in relation to the section in the New Zealand Companies Act (s. 177) equivalent to s. 249 of the Uniform Companies Act.
In Re Rolls Razor Ltd. (No. 2) [1970] 1 Ch. 576 it was argued in relation to s. 268 of the Companies Act, 1948 (U.K.), that in order to avoid oppression "and to focus the view of the examinee on the matter in issue, this is the course which ought usually to be adopted", i.e. the course of first submitting written questions to the proposed examinee for answer. Megarry J. rejected the submission and said: "In my judgment the exercise of the court's discretion ought not to be fettered in any such way. There may well be some cases in which it would plainly be oppressive or unreasonable not to submit written questions first. There will also be other cases in which there plainly ought to be an oral examination without the prior submission of any written questions. Between these two categories there may be many cases in which the court must determine which course is best suited to discover the relevant facts without being oppressive, vexatious or unfair. In order to do this, the court must, I think, look at the facts of the case as a whole, without yielding to preconceptions; and in doing this, the court should give all proper weight to the views of the liquidator without, of course, abandoning the proper exercise of its discretion, or treating the
liquidator's views as being in any way decisive of the matter. The prior submission of written questions will sometimes aid and speed the ascertainment of the relevant facts; but sometimes it may hamper or delay the process. There may be a marked difference between the information obtained from unsworn written answers which may have been drafted by lawyers and that obtained from viva voce answers on oath. In all the circumstances of this case, in the exercise of my discretion, I hold that there ought to be an oral examination without any prior submission of written questions being made requisite. I would have reached the same conclusion even if (contrary to my opinion) there were any rule, whether of law or of practice, that prima facie there should be no oral examination unless written questions had first been submitted" [1970] 1 Ch., at pp. 595-596.
In my opinion these observations of his Lordship are applicable generally to the exercise by the court or the Registrar of the power conferred by s. 81 of summoning persons to attend for examination.
No rigid or inflexible rules can be laid down as to the exercise of this power. Proper material must be adduced to enable the court or the Registrar to decide whether it is an appropriate case for the exercise of the power. The court and the Registrar are not mere rubber stamps for the trustee, although proper weight should be given to his views.
In my view, the draftsman of r. 129(1) in its present form is to be taken as intending generally to require application for the relevant information to be made in the first instance to the proposed examinee without resort to the coercive force of s. 81(1) unless the trustee can demonstrate special circumstances making it inappropriate for that to be done. Despite the change in the structure of r. 129(1) I do not construe it as obliging a trustee to articulate in the affidavit each and every consideration which has influenced the decision to apply for an examination under s. 81(1). I agree generally with Lockhart J in Csidei (supra) when he said at 394:
There should be no pre-conception that because the application is made by the trustee, as it generally is, this in itself is a good reason for exercising the power. The power belongs to the court or the Registrar, not the trustee.
I do not suggest that the court necessarily should require voluminous material or elaborate statements or reasons to be placed before it by the trustee before issuing a summons. The path of a trustee in performing his duties under the Act is difficult enough and must not be impeded; but the very nature and breadth of the inquisitorial power conferred by s. 81 requires the exercise by the court or Registrar of considerable care before it is invoked. Each case must be determined on its merits.
The Court, in considering the sufficiency of the facts disclosed to the Registrar should undertake a broad, rather than a minutely detailed, examination of the Trustee's affidavit to see whether it embodies a balanced presentation of the matters tending for and against a public examination. If, upon such a scrutiny, the Court concludes with a reasonable degree of satisfaction that the preparation of the affidavit has been consciously or unconsciously selective, or that the facts influencing the trustee to seek the examination have been insufficiently identified, the summons should be set aside.
Taking this approach to the affidavit material that was before the Registrar on 5 December 1996, I have concluded that it lacked what I consider to be the balanced enumeration of matters contemplated by r. 129(1). That deficiency may have stemmed in part from a failure to identify and keep steadily in mind the "subject matter of the proposed examination" which is the touchstone against which compliance with r. 129(1)(d) falls to be assessed. In the course of argument before me, Counsel for the Trustee came to refine that subject matter as any hidden agreement between Mr Bilionis and the bankrupt as to ownership of the Belmore Road property or as to the sharing of profits on the sale of that property and any direct or indirect payment by Mr Bilionis to the bankrupt for work carried out on the property. It will be apparent from even a cursory reading of the Trustee's affidavit of 5 December 1996 and the search warrant affidavit that many of the inquiries detailed in those affidavits range far beyond the subject matter of the proposed examination as identified in the course of argument. Indeed, if the Trustee and his advisers did form, at the outset, a coherent concept of the subject matter of the proposed examination, they were probably distracted from it by the indiscriminate incorporation by reference in the affidavit of 5 December 1996 of the search warrant affidavit and its myriad of exhibits. At the very least, I regard the adoption of that drafting technique as tending to obscure the Registrar's view of the field of inquiry made relevant by r. 129(1). My reservations in this respect are confirmed by the very wide terms of the summons as issued. Although it conforms with Form 49 appended to the Bankruptcy Rules, that form has long been unchanged and has not been regarded as relieving the Registrar from the need to specify with reasonable particularity the matters about which the person to whom the summons is addressed is to be examined. (See e.g. Re Andrews (supra) at 186 and Re Aitken (unreported judgment of Einfeld J 30 October 1987). Had it not been for the deficiencies in the affidavits discussed in these reasons, I would myself have amended the present summons to conform with this principle.
The disclosure of "the inquiries that have been made concerning the subject-matter of the proposed examination" which is required by r. 129(1)(d)(i) must be full and frank. It is confined to inquiries made of the proposed examinee. The rule, in my view, requires the applicant to set out in a summary way all those inquiries which have been made which indicate a continuing need for the required information concerning the subject matter of the proposed examination. They will include inquiries which have been fruitful, in the sense that they tend to obviate the need to obtain information or further information from the person whom it is sought to examine. The affidavit should also, of course, detail those inquiries which have been unavailing. Substantial compliance with this part of the rule should enable the Registrar to form his or her own view as to whether the proposed examination is reasonably necessary to obtain relevant information not procurable from the proposed examinee or other sources without resort to s. 81(1). Where appropriate, the affidavit will also indicate enquiries which the trustee intends to make but has not undertaken at the time of the application to the Registrar.
Without pretending to exhaust the deficiencies in this respect of the affidavit material which was before the Registrar on 5 December 1996, I point to the following:
(a)There was no disclosure to the Registrar of the enquiry made by execution of the search warrant at the office of Mr Bilionis' solicitors on 4 December 1996 or of the results of that enquiry.
(b)I do not regard the inquiry made of Mr Walker on 26 November 1996 as being sufficiently full. It failed to disclose that, as Mr Walker has deposed, it was made clear to the Trustee that Mr Walker always understood that Mr Bilionis was the owner of the Belmore Road property and that the bankrupt was working on it for Mr Bilionis.
(c)I infer that the Trustee had in mind on 5 December 1996 that he would execute in the near future the search warrant in respect of the premises at 190-196 Kerr Street, Fitzroy which was in fact executed on the next day. That intention should have been disclosed to the Registrar as it might have influenced him to defer the issue of the s. 81(1) summons until after the results of the proposed search had become known.
Rule 129(1)(d)(ii) requires disclosure of each request made of the proposed examinee for the relevant information and the result of each such request. As well, r. 129(1)(d)(iii) requires the applicant for examination to detail the circumstances of any refusal or failure to co-operate with the request.
When the requests which were, or could have been, made of Mr Bilionis are related to what has now been identified as the required information, these deficiencies become apparent on the face of the affidavits that were before the Registrar:
(a)The Trustee apparently regarded the request made by the letter of 20 August 1996 as being directed to, amongst other things, the relationship between Mr Bilionis and the bankrupt in respect of the Belmore Road property. An examination of the letter in conjunction with the parallel inquiry directed to Mr Phillips of the same date, I consider, does not bear out that view. At least the inquiry was ambiguously capable of being read as confined to the property at Barkly Street, Brunswick. The Registrar might have been alerted to that ambiguity had there been before him the parallel letter to Mr Phillips of 20 August 1996 and the Trustee's letter of 21 August describing the information which had been provided as "very useful to my investigation" and thanking Mr Bilionis for his assistance.
(b)If, as I have found, specific enquiry was not made of Mr Bilionis about the Belmore Road property until September 1996, the terms of that enquiry should have been disclosed to the Registrar. On the other hand, if, as the Trustee contends, Mr Bilionis had volunteered on 20 August, without identifying the property, that the bankrupt was living at a property owned by him, the Trustee should have explained the reason why a further request for additional information was not made in the light of what he says was volunteered by Mr Bilionis.
(c)I do not regard paragraph 6 of the Trustee's affidavit of 5 December 1996 as setting out details of the reason why no request, or further request, was made of Mr Bilionis for information concerning the subject matter of the proposed examination. That paragraph proceeds from the premise that there had been a communication with Mr Bilionis which was unambiguously directed to the Belmore Road property. Secondly, it does no more than express a conclusion or state of mind attained by the Trustee after considering unstated facts. The Trustee's reasoning process seems to have taken account of the following known or assumed facts:
(i)The bankrupt had been involved in concealing his interests (subsequently recovered) in other properties being developed in a way similar to the Belmore Road property.
(ii)The bankrupt had given the address at 190 Kerr Street, Fitzroy as his own in relation to one of those other developments.
(iii)The bankrupt had used the alias "John Kay" while working at the Belmore Road property.
(iv)Mr Bilionis had apparently paid for the Belmore Road property without borrowing any part of the purchase price. (Subsequent information from Mr Bilionis' bank records shows this assumption to have been incorrect.
(v)Mr Bilionis had not co-operated or had been insufficiently forthcoming when other enquiries have been made of him on 7 May 1996 and by the letter dated 20 August 1996.
If that process or something like it constituted the Trustee's reason for not making further enquiry of Mr Bilionis, it should have been explicitly exposed to the Registrar and not left to be inferred from an apparently random collection of facts asserted in the search warrant affidavit. I have already adverted to the ambiguity inherent in the letter of 20 August 1996 and Mr Bilionis' response to it. The communication with Mr Bilionis which occurred on 7 May, whether it happened then or earlier, was not disclosed to the Registrar at all. It should have been disclosed if, as the Trustee seems to suggest, it was the first thing to make him suspicious of Mr Bilionis' willingness to co-operate and was an operative part of the reason for his making no request of Mr Bilionis for the required information between 20 August and 5 December.
Conclusion
For these reasons I have concluded that the issue of the summons under s. 81(1) was procured in reliance on affidavits which did not comply in substance with r. 129(1) and should be set aside. As requested by Counsel for the Trustee I shall allow the parties an opportunity to file and serve written submissions on the question of costs.
I certify that this and the preceding twenty-seven (27) pages are a true copy of the Reasons for Judgment of his Honour Justice Ryan.
Associate:
Date:
Counsel for the Applicant : Mr T. North
Solicitors for the Applicant : Giasoumi Papasavas Zervos
Counsel for the Respondent : Mr T. McLean
Solicitors for the Applicant : Norton Smith Gledhill
Date of Hearing : 8 and 9 May 1997
Date of Judgment : 16 May 1997
0
2
0