Re Morris, Theodore Constantine Ex Parte Donnelly, Max Christopher as trustee of the Bankrupt Estate of T C Morris

[1997] FCA 905

FEDERAL COURT OF AUSTRALIA

Bankruptcy - evidence - admissibility of transcript taken under s 81 inquiry into bankrupt’s affairs - against whom can such evidence be tendered - whether s 135 of the Evidence Act limits admissibility of transcript evidence.

Evidence Act 1995 - s 135
Bankruptcy Act 1966 - s 81

Re Schofield; Ex parte Rangott v P & B Barron Pty Ltd (1997) 143 ALR 185 - considered

Douglas-Brown v Furzer (1994) 13 ACSR 184 - considered

RE THEODORE CONSTANTINE MORRIS;  EX PARTE: MAX CHRISTOPHER DONNELLY AS TRUSTEE OF THE BANKRUPT ESTATE OF T C MORRIS v COLONIAL MUTUAL LIFE ASSURANCE SOCIETY LIMITED & ORS

No. NB 3283 of 1993

REASONS FOR JUDGMENT (No. 2)

JUDGE:        Beaumont J
PLACE:        Sydney
DATE:          8 August 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NB 3283 of 1993

RE:	THEODORE CONSTANTINE MORRIS
EX PARTE:	MAX CHRISTOPHER DONNELLY AS TRUSTEE OF THE BANKRUPT ESTATE OF T C MORRIS APPLICANT
AND:	COLONIAL MUTUAL LIFE ASSURANCE SOCIETY LIMITED FIRST RESPONDENT
MONARTH PTY LIMITED SECOND RESPONDENT (Ordered to be struck out of the proceedings on 7 August 1997)
CEDRIM PTY LIMITED THIRD RESPONDENT (Ordered to be struck out of the proceedings on 7 August 1997)
LOUIS CONSTANTINE MORRIS FOURTH RESPONDENT (Ordered to be struck out of the proceedings on 7 August 1997)
ENID ROSLYN SIVELL (WHITBREAD) FIFTH RESPONDENT (Ordered to be struck out of the proceedings on 7 August 1997)
HELEN ANASTOPOULOS (ELLEN MONTZOUROPOULOS) SIXTH RESPONDENT
YIANOULA (JENNIFER ) MORRIS SEVENTH RESPONDENT
THEODORE CONSTANTINE MORRIS EIGHTH RESPONDENT
JUDGE:	BEAUMONT J
DATE:	8 AUGUST 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT (No. 2)
(ruling on admissibility of transcript under s 81 of the Bankruptcy Act 1966)

Objection has been taken to the tender of a transcript of an examination of Mr Morris, one of the respondents to the proceedings, under s 81 of the Bankruptcy Act 1966. The transcript shows, amongst other things, explanations offered by Mr Morris as to the circumstances in which it is said that he purchased three of the bank cheques that are central to the present litigation. Although Mr Morris is, as I have said, a party to the proceedings, he has not appeared, at least at the final hearing.

On behalf of the applicant, it is said that the tender is justified by virtue of the operation of the provisions of s 81(17)(a) of the Bankruptcy Act. Under that provision, the transcript of the evidence given at the examination of a person under s 81 “may be used in evidence in any proceedings under this Act in which the person is a party”.

It is now common ground that the present matter is, for these purposes, a proceeding under the Bankruptcy Act.

The operation of s 81(17) was considered by Finn J in ReSchofield; Ex parte: Rangott v P & B Barron Pty Ltd (1997) 143 ALR 185. His Honour there held that certain transcripts of evidence, given at an examination conducted under s 81, were not admissible, for reasons which are not here material. However, Finn J there considered the history of s 81(17) and its predecessors. In particular, his Honour noted that, in its current form, s 81(17) does not contain the previous provision that the evidence could be used in any proceedings against the person examined. As has been seen, the only relevant condition of the operation of sub-paragraph (a), in its present form, is that the proceedings under the Bankruptcy Act are proceedings “in which the person [examined] is a party”.

It is submitted on behalf of the applicant that the omission, from the present form of the legislation, of the limitation that the evidence could only be used in a proceeding against the person examined, has the consequence that the transcript is now admissible in this matter, not only as against Mr Morris but also as against Colonial Mutual Life Assurance Society Ltd, the first respondent.

I accept that the transcript is admissible against Mr Morris, as being material in the nature of an admission.  Admission of this evidence, for that limited purpose, is not seriously disputed by counsel for the first respondent.  (See Duke Group Ltd (in liq) v Pilmer (1994) 15 ACSR 255 at 281). However, I cannot accept that, by force of s 81(17)(a), the transcripts are necessarily admissible as against the first respondent. It may be, when the whole of the evidence is considered, that the material in the transcript, or part of it, may be relied upon by the applicant in seeking to make out the cause or causes of action against the first respondent. That is a substantive question which is the ultimate issue in the proceedings and need not, of course, be addressed at this point. However, in my opinion, the operation of s 81(17)(a) is limited only. It will be noted that in its terms, s 81(17)(a) does not speak of admissibility of evidence, rather it speaks of the use of the transcript in evidence. These issues are different conceptually and in principle.

In my view, the purpose of s 81(17)(a) and its language, when taken literally, both serve to indicate that this provision is intended to ensure that there should be no bar or prohibition placed upon the legitimate use of a transcript in other proceedings. The policy underlying the provision is firstly, to eliminate any uncertainty that may be thought to arise, by reason of the circumstance that the examination was inquisitorial in nature and conducted compulsorily, which considerations might be thought to lead to possible limitations on the use to which such material could be put; and secondly, by the omission of the words which previously limited the use of the transcript against the person examined, to enable a more flexible and less rigid application of the evidence contained in the transcript, where that is appropriate.

There does not appear to be any authority squarely on point, but an analogy may, I think, be found in the approach taken to the operation of s 597(14) of the Corporations Law.  In Douglas-Brown v Furzer (1994) 13 ACSR 184, Malcolm CJ, with the agreement of Ipp and Anderson JJ, said (at 194):

“At one stage in the argument a suggestion was canvassed that s 597(14), which provides that a written record signed by the person examined or an authenticated transcript ‘may be used in evidence in any legal proceedings against the person’, imported a discretion on the part of the court to include a direction to the contrary in the order for the examination.  In my opinion, the provision is facilitative only and does no more than provide that both a signed written record and an authenticated transcript may be used in evidence in any legal proceedings.  The provision does not confer any relevant discretion on a court to determine at the stage of making the order for examination whether or not the record or transcript is admissible.  The provision does not have the effect that the whole of the record or transcript is necessarily admissible as evidence in the court or tribunal before which it is sought to be used in other legal proceedings.  Clearly, it would be for that court or tribunal to determine whether all or any part of the record or transcript was admissible according to the ordinary rules of evidence:  Re Norman Baker Pty Ltd (1981) 6 ACLR 257 at 260-1; (1982-83) 1 ACLC 79 at 81-82 per Brinsden J (with whom Burt CJ and Jones J agreed). In my opinion, s 597(14) simply has nothing to say on the subject of admissibility. It is concerned only with proof of the answers in other legal proceedings. The question of admissibility, including any question of relevance or oppression, is a matter for the court or tribunal in those other proceedings.” (Emphasis added).

A similar approach was taken, and the reasoning in Douglas-Brown v Furzer, above, applied by Mulligan J in Duke Group (in liq) v Pilmer, above.

I respectfully agree.

It follows from the foregoing, subject to the possible application of s 135 of the Evidence Act 1995, to which I will come shortly, that I propose to admit the transcript into evidence as an admission made by Mr Morris. As I have said, the ultimate significance of this admission in the proceedings and in particular, its significance so far as any cause of action is sought to be made as against the first respondent, will depend upon the whole of the evidence and the submissions made in that connection. I say nothing about that matter at this stage. However, I rule that, subject to the possible application of s 135 of the Evidence Act, the transcript is admissible as an admission made by Mr Morris and I admit it for that purpose only at this stage.

I come now to the possible application of s 135, which is in the following terms:

“The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:

(a)be unfairly prejudicial to a party;  or

(b)      be misleading or confusing;  or
(c)       cause or result in undue waste of time.”

On behalf of the first respondent it is now submitted that I should not even admit the transcript as an admission by Mr Morris. In support of this submission, reliance is placed upon the nature of the evidence given by Mr Morris in the transcript. In particular, it is said that, on its face, there are doubts as to the credibility of that evidence. It is also said on behalf of the first respondent, that the Court should invoke s 135 because counsel for the applicant has already foreshadowed a submission that this transcript, together with other transcripts of other respondents, will show, when taken together, that there are grave doubts, at the very least, as to the credibility of certain significant assertions made in the course of the examination of those respondents.

I accept that a serious question arises on the face of these transcripts as to the credibility of at least some of the statements there made. However, it is important, in my view, for present purposes, to have regard to the context in which the tender is made. The applicant is suing as the trustee in bankruptcy of Mr Morris. As such trustee, the applicant is virtually entirely dependent upon others for the provision of information and evidence in the pursuit of any proper claim that may be made in the winding up of the affairs of Mr Morris. Moreover, as has been noted, Mr Morris has not appeared at this hearing and none of the respondents, including the first respondent itself, has indicated a willingness to give evidence. I do not think this is an appropriate situation for the application of s 135. In these circumstances, given the inevitable paucity of evidence or even information, I propose to admit the transcript on the limited basis earlier indicated.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont

Associate:

Dated:            8 August 1997

Counsel for the Applicant:	F Lever with J Gooley
Solicitor for the Applicant:	Swaab & Associates
Counsel for the Respondent:	R Weber with J Hennessy
Solicitor for the Respondent:	Minter Ellison
Date of Hearing:	7-8 August 1997
Date of Judgment:	8 August 1997