Re: Miller; Ex Parte: Edwards v Official Trustee in Bankruptcy

[1995] FCA 1151

JUDGMEM No. .&.!...,./

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	)	NO. NB 1414 of 1995
BANKRUPTCY DISTRICT	)
OF THE STATE OF NEW SOUTH WALES	)
GARY MILLER

Bankrupt

parte I

Applicant

THE OFFICIAL TRUSTEE IN

BANKRUPTCY

Respondent

REaSONS FOR JUDGMENT

EINFELD J SYDNEY 6 DECEMBER 1995

Felicity May Edwards comes before the Court to seek an order of review of a Deputy Registrar's decision taken this morning not to discharge or strike out a summons issued pursuant to section 81(1) of the Bankruptcy Act and served upon her. The summons required her to attend before a registrar today "to give evidence in connection with the affairs of the bankrupt". This is basically in the form provided for in Form 49 in the Bankruptcy Rules.

On 23 October 1995 MS Edwards made an application to strike out an earlier version of this summons and after argument and for reasons given in the judgment given on that day, the summons was struck out, principally on the ground that it sought to examine

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MS Edwards in connection with her own affairs and not the affairs of the bankrupt.

During the course of argument on that occasion, a submission was made that the provisions of rule 129 had not been complied with. This rule provides that an application for a summons must be supported by an affidavit setting out, amongst other things, details of the request made to the person concerned to provide the information being sought and the circumstances of any refusal or failure of the person to cooperate in complying with the request.

When the earlier version of the summons was struck out, the failure of the affidavit in support to comply with rule 129 was another basis upon which the summons was struck out but there are clear differences between that circumstance and this. The affidavit in support of the issue of the present summons was sealed in an envelope by the Deputy Registrar not to be opened without an order of a Judge or permission of the Registrar. The parties argued that I may open the envelope and I have read the affidavit. The trustee has applied for those provisions of rule

129 to be dispensed with as require the supporting affidavit to

contain a request to the proposed examinee to provide the information and state the details of the request together with the circumstances of any refusal or failure to comply with the request.

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From what was submitted in Court and from my reading of the affidavit, the reason for the application to waive is that if the affidavit was made available and if the explanation as to why the examinee was not requested to supply the information was revealed to the examinee and the bankrupt, the very purpose of the examination would be defeated. As I pointed out in the judgment given on 23 October, this purpose is to obtain information concerning a property at Bondi Junction which has at some time apparently been owned by the bankrupt but was subsequently owned by MS Edwards. In fact, the summons under discussion is addressed to her at the address of the place concerned.

My attention has been drawn to some previous judicial considerations relevant to some of the present circumstances. The first in point of time was Justice Lockhart's decision in

&brahams [l9851 9 FCR 232. This judgment was given when the legislation and regulations were in a different form to their present form but it is important to emphasise Justice Lockhart's view that the section 81 power is extraordinary, that it must be carefully exercised, and that the Court or a registrar must not, however unwittingly, assist or facilitate an unfair or oppressive use of this powerful compulsory process.

The second of the two cases was a decision of a Full Court of this Court in Karounos v The Official Trustee [l9881 19 FCR 330. At 335-6 the Full Court (Forster, Woodward and Spender JJ) summarised the relevant principles applying to section 81 summonses. Their Honours described the section 81 power as

"unusual and far reaching" and pointed out t h a t the use o f the

power could

eas i ly become oppressive and vexatious i f it i s not

approached resp&isibly by applicants for summonses and controlled careful ly by the registrar and the court.

They point out t h a t the

power i s exercised i n the interest o f creditors and those in teres ts should not be defeated by an unduly

power. The procedure i s basically designed t o	technical or res tr ic t ive approach t o the use o f the
establish what assets the bankrupt had, what has happened t o those assets and whether action should be begun or continued t o recover them.

The Full Court went on t o state the rules that should apply i n respect o f the expressions used i n an application for a summons and each summons i t s e l f . I t called upon registrars t o examine

the applications and the forms o f summons t o sa t i s f y themselves

t h a t the grounds o f every application are su f f i c i en t l y clear and

that the form o f each summons i s not oppressive or vexatious b y reason o f being uncertain, too wide or otherwise objectionable. The Full Court pointed out, however, that the registrar:

i s under no duty t o inquire whether there may be some

a particular time or w i t h regard t o particular books the summons oppressive for a particular person or a t	further circumstance which would make compliance w i t h
or records.

Most relevantly for the present case, the Full Court said a t 336 that

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)

to that litigation ... where ordinary procedures the summons is being improperly sought as an aid

of discovery, interrogation or subpoena would be

fairer and more appropriate; or

(b)

examination under 81 of the Act until the it would be more just and equitable to defer the

particular piece of litigation has been disposed

of.

I permitted the bankrupt to speak on this application for setting

aside or discharging the summons although he was not a party to the proceedings and it seemed to me that he had no right to be heard. In the course of his argument, he put the point of view that this summons has been issued for the improper purpose of obtaining evidence -- he called it a "fishing expedition" -- for certain proceedings in the Supreme Court between one of the bankrupt's major creditors (I think it could properly be described as the principal creditor) and himself and MS Edwards. He pointed out that the solicitor appearing for the trustee is also the solicitor for that creditor.

On the other hand, the Supreme Court proceedings are effectively stayed at the present time, mostly because the principal defendant is presumably the bankrupt himself. I can see that such a concatenation of events could result in the solicitor for the trustee instructing counsel to conduct an examination which was designed to obtain evidential material that could be used by his other client in order to achieve success presumably against MS Edwards rather than the bankrupt. The bankrupt called this

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situation a conflict of interest which should be resolved. But

I have no application before me by anyone challenging the

retainer of the solicitor for the trustee. Even if such an application had been made, it is difficult to see how the conflict would arise in respect of the solicitor's representation of the trustee on the examination. The conflict might arise when there was an attempt to use the material obtained in the Supreme Court proceedings if they were resurrected against MS Edwards.

There is therefore no basis upon which I could now hold that the solicitor was in some way in a conflict situation in his representation of the trustee. In any case, as has been pointed out by Justice Lockhart and referred to in argument by the trustee, a section 81 examination is a public examination. If the trustee was represented by another solicitor, the solicitor for the creditor in the Supreme Court proceedings could just come along and listen to what was elicited in evidence and use that material in any event. I should add that there is no evidence before the Court at all, other than a statement by the bankrupt from the bar table, that the summons was obtained or sought by the trustee for a nefarious or mala fide purpose. Indeed, it would appear that if such a thing was done, the other creditors of the bankrupt would not be likely to remain silent while one creditor was being preferred. There are some substantial creditors in this bankruptcy in the form of corporations or entities not accustomed to sitting quietly while their interests were steadily and nefariously being suppressed.

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That brings me back to the question arising from the argument on behalf of MS Edwards whether in the circumstances of this case the failure of the trustee as applicant for the summons to comply with rule 129 should be waived. In my opinion there is every reason why rule 129 could and should not have been literally complied with in this case. The purpose of the intended examination of MS Edwards is to obtain her knowledge of the bankrupt's affairs. If the steps had been taken to ask her for this information in advance by informal methods, it would have been easily possible for her to defer answering the questions until she had consulted with the bankrupt or some other person or otherwise assisted herself to answer the question in a way which would be favourable to the interests of the bankrupt.

It is not for me to say whether that would have been done and I have no way of knowing what the present relationship between MS Edwards and the bankrupt is. She may be antagonistic towards him for all I know. But I am left to wonder why, if she was willing to give the information, as her solicitor asserted in argument, she has interrupted the examination proceedings before the Deputy Registrar to try to have the second summons struck out like the first. Her solicitor said Ln Court today that although his instructions were that his client was willing to cooperate with the trustee, she chose to challenge the summons because she was intimidated in some way -- that is my word, not her solicitorls -- or overborne by the procedure of a compulsory examination on oath and preferred the informal procedure.

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There has never been anything to stop MS Edwards telephoning the trustee, in the period during which this matter has been outstanding, and offering to give the information voluntarily and informally. Yet no such opportunity has been taken or availed of. There is nothing now to stop MS Edwards volunteering to see the officers of the Official Trustee this very afternoon and giving information to them about her knowledge of the matter under discussion. I therefore view with a degree of scepticism that the reasons she has not given expression to her cooperative spirit in the matter is because she was concerned by the formal nature of a compulsory examination under oath in a courtroom. As the whole day has now virtually gone, it is obvious that MS Edwards' examination will not be taking place today. There will be nothing to stop her visiting the Official Trustee's office this afternoon or tomorrow or on some mutually convenient day until the examination takes place.

I order that such provisions of rule 129 be waived as would

prevent the filed affidavit in support of the application for an examination summons addressed to MS Edwards adequately grounding the issue of the sumions. The application for the, striking out .. I certify tha, this 2nd the 3; ,..

preced.ing pzges are a true copy of the

of the summons is dismissed.	i Reasons for ~udgment herein of hi's Honour;
[After discussion]

Justic6 Einfeld : I

I order that MS Edwards pay the Officia

application and adjourn the summons to MS Edwards to a date to

be fixed by the Registrar.