Re Pesic, D. & Official Trustee in Bankruptcy v Ex parte Pesic, D

IN THE FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	)
) No. 573 of 1981
BANKRUPTCY DISTRICT OF THE STATE	)
OF NEW SOUTH WALES AND	)
THE AUSTRALIAN CAPITAL TERRITORY	)

Re: DOBROSOV	PESIC
A Discharged Bankrupt

Ex Parte: DOBROSOV PESIC and BORKA PESIC

Applicants

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER	: Neaves J.
DATE OF ORDER	: 25 February 1987
WERE MADE	: Canberra

THE COURT ORDERS THAT:

1. The summons herein directed to Dobrosov Pesic be amended -

(a) by deleting the words and figures

"All

documents including the files of your

solicitor relating to the purchase and

sale of 5 Gillies Street, Curtin by

you and your wife" ; and

(b) by substituting

for the words "both

Curtin

and

Mawson

properties"

the

words "the Mawson property".

2. The

summons

hereln

directed

Borka

Pesic

amended -

(a)

by deleting the words and figures

"All documents including the files

your

solicitor

relating

the

purchase and sale

of 5 Glllies Street,

Curtin by you and your husband"; and

L .

(b) by substltutlng for the words "the

C u r t m

and

Mawson

a d

Torrens

properties"	the	words	"the	Mawson
property".

3. Otherwlse the appllcatlons be dismissed.

4. There be no order as to costs.

Note:

Settlement and entry of orders 1 s dealt with In rule 124

of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
GENERAL DIVISION	) 1 No. 573 of 1981
BANKRUPTCY DISTRICT OF THE STATE	)

OF NEW SOUTH

WALES

AND

)

THE AUSTRALIAN CAPITAL TERRITORY

)

Re: DOBROSOV	PESIC
A Discharged Bankrupt

Ex Parte: DOBROSOV PESIC and BORKA PESIC

Applicants

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

CORAM: Neaves

m:	25 February 1987

REASONS FOR

JUDGMENT

Before the Court are two applications.

The first

is an

appllcation by Dobrosov Pesic to set aside a summons

requlring him to attend for public exammation pursuant to sub-s.81(1) of the Bankruptcv Act 1966 (Cth) (“the Act”).

The second is a similar application by his

wife, Borka

Pesic, in

respect of a summons directed to her pursuant to

that sub-section.

The applications are brought pursuant to

sub-s.14(5) of the Act.

Mr Pesic became a bankrupt

on 3 July 1981 upon the

acceptance and endorsement

by the Registrar in Bankruptcy of

a debtor’s petition presented on the preceding day

(s.55 of

L .

the

Act).

The

Officlal

Trustee

Bankruptcy

("the

trustee") became the trustee of hls estate. He was, by

force of s.149 of the Act, discharged from bankruptcy

from 4 July 1384. Mrs Peslc,

so far as appears, is not and

has never been

a bankrupt.

The summons dlrected to Mr Pesic was Issued by

Deputy Reglstrar In Bankruptcy on

26 November 1985 on the

appllcation of

the trustee.

The summons requlred

Mr Peslc

to attend before

a Deputy Reglstrar

"to glve evldence in connection

with the question

of your equlty In Block 17 Sectlon 2 3 Mawson at the time of its sale on 26 May 1981 and to glve evldence and to produce any of the documents In your custody or power relating to yourself or to

your trade dealings, property or affairs and, in

particular, the following documents:-

All documents

mcluding the flles of your

solicitor relating to the purchase and sale

of Block

1 7 Section 23 Mawson by

you and

your wife.

All documents

mcluding the files of your

solicitor relating to the purchase and sale

of 5 Gillies Street, Curtin by	you and your
wlf e.

A copy of Income Tax Returns for the years ending 30 June 1975 to 30 June 1982.

A copy of the Bank Statements, Pass Books,

Finance Company Statements and Pass Books,

cheque

butts,

deposlt

slips

and

other

flnancial documents

relatmg to

the years

endlng 30 June 1975 to 30 June 1982.

All records evidenclng payments of mortgage

payments in respect	of	both Curtin and
Mawson properties.

3 .

The summons directed to Mrs Pesic was issued on 27

November 1985. She was required to attend -

"to give evidence in connectlon with the question

of your equity in Block 17 Section 23 Mawson at

the time of its sale on 26 May

1981 and to give

evidence and to produce any of the documents in

your custody or power concerning the bankrupt

Dobrosov

Pesic or his dealings,

property or

affairs,

and

particular,

the

following

documents:-

All documents including the files of your solicitor relating to the purchase and sale

of Block

17 Section 23 Mawson by

you and

your husband.

All documents including the files of your solicltor relating to the purchase and sale

of 5 Gillies Street, Curtin by	you and your
husband.

A copy of

Income Tax Returns for the years

ending 30 June 1975 to 30 June 1982.

A	copy of the Bank Statements and Pass

Books, Finance Company Statements and Pass Books, cheque butts, deposit slips and any other financial documents relating to the years ending 30 June 1975 to 30 June 1982.

All records evidencing payments of mortgage

payments

respect

the

Curtin

and

Mawson and Torrens properties."

The justification for the public examination of Mr

and Mrs Pesic

is said by the trustee to lie in the following

circumstances. Mr and Mrs Pesic were prior to

26 May 1981

registered jointly as proprietors of a Crown lease of Block

17, Section 23, Mawson in the Australian Capital Territory.

On 23

March 1981

and 20 April L981 respectively Mr Pesic

obtained

personal

loans

from

Capital

Finance

Co.

Pty.

Limited ($4,000) and Mercantile Credits Limited

($1,500).

According to

Mr Pesic the moneys

so obtained were used to

renovate

the

kitchen

and

landscape

the

garden

the

property at Mawson "to put the

home in order for sale".

26 May 1981 the property was sold for

a consideration of

$51,000, the net amount

available from the sale (after the

discharge of

a mortgage and the payment of legal costs and

agent's fees) being said by Mr Pesic to be $23,518.93. That amount was used by Mrs Peslc to purchase the Crown lease of

a property

being

Block

7, Section 21, Torrens

the

Australlan

Capltal

Territory

and

she

became

the

sole

registered proprletor of that lease on or about

3 June 1981.

In his

statement of affairs sworn

on 30 June 1981 Mr Peslc

disclosed no beneficlal interest in any real property but

did disclose Capital Finance Co. Pty. Limited and Mercantile

Credlts Limited

as creditors in the sums of

$4,000 and

$1,500

respectively.

The trustee

wishes

conduct

the

public exammations

to ascertain whether, having regard to

the

above

circumstances,

Pesic

was, prior t o hls

discharge, entitled to property	which	formed part of	his
bankrupt estate.

No issue has been raised as to the locus standi

the applicants to brlng the present applications before the

Court.

Two	grounds are relied upon in support of the

appllcatlons. First, it is

ubmltted

that

power

conferred on the Court

the Registrar by sub-s.81(1)

the Act

does not survlve the discharge of

a bankrupt from

his bankruptcy. The second ground, which is relied upon in

5 .

the event of the flrst ground being determined adversely to

the applicants, is that the Court should,

In the particular

clrcumstances to whlch it

will

be necessary to refer, set

aside the summonses in the exercise of Its dlscretion. A

further submlsslon was put, though not developed, that the

summonses were, at least in part, expressed	In	such wide
terms as to be oppresslve.

Sub-section 81(1) of the Act provides:

"(1) The Court or the Registrar may, on the applicatlon of a creditor who has proved his debt

and on such terms

as to costs as the Court or the

Registrar

thinks fit

impose,

the

application of the trustee,

at any tlme summon

(a) the

bankrupt

the

spouse

the

bankrupt; or

(b)

person who is known or suspected to

have

his

possession

any of

the

property of the bankrupt, or is supposed to be indebted to the bankrupt or to be able to give information concerning the

bankrupt or his trade dealings, property

or affalrs,

to attend, on

a date and at

a time and place

fixed in the

summons, before the Court or the

Registrar or, if

the

Court

the

Registrar

thinks flt, before a magistrate, to give evidence

concerning, and produce any books (whether or not

in existence

at the time the bankrupt became

bankrupt) in	his custody or power relating to,
the bankrupt	or his trade dealings, property or
affalrs."

In the course of preparing

a ludgment that the

power conferred by sub-s.81(1) survlves the discharge

of a

bankrupt,

it came to my attention that that question had

been declded to the contrary effect by

a single judge of

this Court and that the judgment was the subject of appeal

t3 a Full

Court.

therefore,

delayed

further

conslderation of this matter pending the resolutlon of that

appeal.

Judgment

In the

appeal,

Officlal

Receiver

Eankruptcv v. T

was

delivered

a Full

Court

constituted

by Flsher, Lockhart

and

Spender

JJ. on 24

December 1986, the Court holding, by majority, that the

power conferred	by sub-s.81(1) survives the dlscharge of a
bankrupt.

In the liqht

of the decislon of the Full Court, the

first of the grounds relied upon in support of the present

appllcations cannot succeed.

I turn now to the ground that the Court should, in

the exercise of its discretion, set aside the summonses.

Essentlally, the applicants rely on the delay of

over three years which occurred between the time when the

trustee

became

aware

of the

matters

identified

the

summonses as

the matters in relation to which he now seeks

to have

them examined and more than 16 months after Mr Pesic

was discharged from bankruptcy by virtue of s.149

the

Act.

The delay is such,

so it is submitted, that to proceed

with the examlnations would be harsh and oppresslve.

The purchase of the Crown lease of the property

Block

7, Sectlon

21, Torrens took place In or about May

1981. Evldence was tendered on behalf

of the applicants of

certain correspondence between Mr Pesic and the trustee in

November 1981 and Aprll and May 1982.

The

evldence was

tendered not to prove the truth of the matters stated thereln but only to prove the extent of the trustee's

knowledge at that

t m e of the matters

In relatlon to whlch

he now seeks to

examme

the appllcants.

The evidence was

ob~ected

to and was admitted sublect to objection. Having

further

consldered

the

matter

I am

satisfled

that

the

evldence should be admltted	on the basls	on whlch	it was
tendered.

The earliest letter, that of

November 1981,

addressed to the trustee by Mr Peslc refers to

an enqulry

made by the trustee.

The terms of that Inquiry are not in

evidence though	its	general nature can be inferred. The
letter reads:

"In answer

to your enquiry, the

loans were

obtained

from the two

finance companies for

renovation of the kitchen of the Mawson house and

for landscaping of the gardens to put the house

ln order for sale.

The nett amount available from the sale of Mawson was $23,518.93 and my wife used this amount to

buy a home for our famlly and herself

at Torrens.

My wife had been working for seven

years and had

put all her money into our home while

I put my

money

into

the

business.

wife

used

the

proceeds of the sale

of the home to acquire the

family home at Torrens.

The remalnder of the money from the sale of the legal costs and agent's fees.

I did not receive any money from the sale of the

house.

The trustee wrote to

Peslc on 8

April 1982 in

the following terms:

"It

1 s

noted that you obtained the followlng

personal loans prlor	to	your bankrupt	[sic3 on
2nd July, 19E1.

1. Loan

$4,000.00 from Capital Finance

Co. Pty. Ltd. on 23 March,

1981,

2. Loan of $1,500.00

from

Mercantile

Credlts Ltd. on 20th April, 1981.

You are required to advise the purpose

for which

the above loans were obtained.

It is also noted that on 26th May, 1981 you and

your wlfe sold

a house property at Mawson Act

Cslc3 to Ralph Klngsley & Yvonne Gladys Kell for a consideration of $51,000.00.

You are required to advise the amount held by

you

and your wife on settlement of the sale and how

the proceeds of sale were dispursed Cslcl.

You are requlred to provlde the above information

by return mall.

The trustee again wrote to Mr Pesic on

24 May 1982

as follows:

"I refer to your letter of the

26th November,

1981 received at

my office on the 29th April,

1982, the contents of which have been noted.

You are required to advise by return mail

why the

property at Torrens was registered in the name of

your wife only, as it would appear that the funds

used for its purchase had their source in the

sale of the Mawson property, which was registered

m joint names of

your wife and yourself.

You are also required to advise:

1. whether

you conslder you have any equity

in the Torrens property; and

2. the name and address of the firm of solicitors who acted for your wlfe on

the purchase.

Peslc replled by letter dated

31 May 1982

follows :

"Wlth reference

your

letter

the

24th

Instant.

would advise that the property at

Torrens was purchased and reglstered in the name

of my wlfe

for the reasons set out In the thlrd

last paragraph	of my letter to	you of	the 26th
November 1981.

I do not consider	I have any Interest in the
Torrens property.

The	sollcitors who acted for my wlfe on the

purchase were Messrs. Allan

Nelson &

Co.,

Prudential

Building,

Darwin

Place,

Canberra

City.

The evidence does not disclose that any further

action was taken In the matter by the trustee until the

filing on 26 November

1985 of the applications for the issue

of the summonses directed to the applicants. In particular,

no public examination of Mr Peslc took place prior to his

discharge from bankruptcy on

4 July 1984.

On behalf of Mr Pesic reliance was also placed on

the hardshlp he is said to have suffered in the business

a licensed builder which he is currently carrying

on in the

sense

that

questions

are

being

asked

concerning

his

financial standing.

He attrlbutes those questlons to the

notlflcations

which have appeared in

"The Canberra Times"

newspaper that he was to be examlned before the Deputy

Registrar in Bankruptcy.

He clalms that the notlfications

have adversely affected

hls business.

10.

There is

no doubt that the power conferred by

sub-s.81(1) is to be very carefully exerclsed	and the Court
must be astute to prevent any oppressive, vexatious or

unfalr use of the power: Re Csldel; Ex parte Andrew

(1979)

39 F.L.R. 387 and the cases cited therein. Considerable

weight must, however, be given to the news of the trustee

"as I t

is he who 1s most conversant with the problems that

exlst in relatlon to the affairs of the bankrupt and the

information that is necessary" Ibid., at p.392.

Apart from the questlon of dllatoriness

on the part

of the

trustee

and

subject

qualiflcation

mentioned, there is no doubt that the matters ldentified in

the summonses

are matters upon which it is proper that the

applicants

be exammed. The

material

before

the

Court

clearly establishes	a	case for such examinations to take
place.

Were it approprlate to have regard only to the

interests of the trustee,

I would have no hesitation in

settlng aside the summonses

no explanation has been

offered for what 1 s clearly a long period of delay between

the	t m e when the trustee had knowledge of the subject

matter

into which he now wishes to enquire further.

However, It is not the interests

of the trustee but the

Interests of the credltors

as a

whole that must be taken

11.

into account. Their interests must be consldered In the

context of

a bankrupt estate In whlch, accordlng to the

bankrupt's statement of affalrs, hls estate had assets of

$15 and credltors wlth debts

totalling

In excess of $ 3 2 , 0 0 0 .

Havmg consldered the whole of the circumstances I

am not satisfled that the exerclse

of the power In thls case

1 s oppresslve, vexatious or unfalr.

The quallflcation to which

I prevlously referred is

this.

Each

of the summonses requires the production of

documents relating to the purchase and sale of

a property

known as 5

Gillles Street, Curtin in the Australian Capital

Territory.

I have, with the concurrence of the parties,

examined the materlal which was placed before the Deputy

Registrar as the basis for the issue of the summonses. That

material contains

no lnformatlon relatlng that property to

the bankrupt and provides no basis for the Inclusion In the

summonses of the requirement to which I have referred.	The
summonses should, therefore, be amended by deleting that

requlrement and I so order.

The summons directed to Mrs

Pesic should also

be amended

by deleting the requirement

that she produce all records evidencing mortgage payments in

respect

the

Torrens

property.

That

property

not

otherwise identified in the body of the summons and the

connectlon, if any, between it and the matter in relatlon to

which Mrs Peslc is to be examined does not appear on the

1 2 .

face of the summons.

Nor does It

appear from the material

which was placed before the Deputy Registrar.

should also advert to another aspect

the

summons dlrected to Mrs Pesic. Sub-section

81(1) permits a

summons

Issued

requiring

her

attend

glve

evldence concerning, and produce any books

In her custody or

power relatlng

to, the bankrupt or

his trade dealings,

property or affalrs.

The language used in the summons is

somewhat ambiguous in that

requiring Mrs Pesic to glve

evidence in relatlon to the property at Mawson, the summons

refers to her equity thereln. It is only

with knowledge

that Mr Peslc was registered as proprietor of that property

jointly with Mrs Pesic that the connection between the

summons and the affairs

of the bankrupt becomes apparent.

It	would have been preferable for the summons to show

clearly on its

face the connection with the bankrupt but the

defect is not such	as to warrant the summons being set
aside.

For the reasons

I have given each of the summonses

should be amended by deletlng the requirement to produce

documents relating to the purchase and sale of	5 Gillies
Street, Curtin in the Australian Capital Territory. The

summons directed to Mrs Pesic should also

be amended

deleting

the

reference

the

Torrens

property.

Orders

accordlnqly. Othgrwlse the appllcatlons are dlsmlssed.

In all the circumstances, I thlnk It 1 s approprlate

to make no order a5 to costs.

I	certlfy that this and

the precedlnq 12 pages are

a true copy of the Reasons

for Judgment hereln of the

Honourable	Mr Justice
Neaves .

Assoclate

Dated:

25 February 1987

Counsel for the applicants

: Mr B.J. Salmon, Q.C.

and Mr B. Batchelor

Solicitor for the appllcants : Allan R. Nelson & Co.

Counsel for the respondent	: Mr I.A. Curlewis
Solicltor for the respondent	: Australian Government

Solicitor

Date of hearing

: 7 April

1986

[1987] FCA 83

25 Feb 1987