Re Staples, Bryan Douglas & Anor Ex Parte Baker, Peter James & Ors v Staples, Bryan Douglas

[1996] FCA 615

IN THE FEDERAL COURT OF AUSTRALIA     )
GENERAL DIVISION  )
   No. QX 40 of 1994 
BANKRUPTCY DISTRICT OF THE             )
STATE OF QUEENSLAND  )

RE:Bryan Douglas STAPLES and Susan Jane STAPLES

Debtors

EX PARTE:Peter James Baker, Noela May Baker, David Sutcliffe Firth and Arthur Henry Carrick

Applicants

AND:Bryan Douglas STAPLES and Susan Jane STAPLES

Respondents

MINUTES OF ORDER

JUDGE MAKING ORDER:     Spender J

DATE OF ORDER:          10 July 1996

WHERE MADE:              Brisbane

THE COURT ORDERS THAT:

1. The report of Arthur Henry Carrick sworn on 6 June 1996 and filed as Exhibit B to the affidavit of Arthur Henry Carrick filed on 7 June 1996 be admitted as evidence in these proceedings.

NOTE:     Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA     )
GENERAL DIVISION  )
   No.  QX 40 of 1994
BANKRUPTCY DISTRICT OF THE             )
STATE OF QUEENSLAND  )

RE:Bryan Douglas STAPLES and Susan Jane STAPLES

Debtors

EX PARTE:Peter James Baker, Noela May Baker, David Sutcliffe Firth and Arthur Henry Carrick

Applicants

AND:Bryan Douglas STAPLES and Susan Jane STAPLES

Respondents

CORAM:    Spender J
DATE:     10 July 1996
PLACE:    Brisbane

REASONS FOR ORDER

The principal proceedings are applications by Peter James Baker and Noela May Baker as one applicant, Mr D.S. Firth as another applicant, and by Mr A.H. Carrick as a person authorised in writing by the Inspector-General as a further applicant, for orders that a certain deed of compromise entered into by Bryan Douglas Staples and Susan Jane Staples, pursuant to Part X of the Bankruptcy Act 1966 ("the Act"), be set aside or terminated pursuant to ss 222, 239 or 242 of the Act. Section 222(1) provides:

"Where there is a doubt, on a specific ground, whether a deed of assignment or a deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted for a special resolution of a meeting of creditors under section 204, the Inspector-
General, a person authorised in writing by the Inspector-General, the Registrar, the trustee, a creditor or the debtor may apply to the Court for an order under subsection (2). "

Section 239 confers rights on a creditor to apply to set aside a composition. It relevantly provides:

"A creditor may, within 21 days from the date on which the special resolution accepting a composition under this Part was passed, apply to the Court for an order setting aside the composition and may also apply for the making of a sequestration order against the estate of the debtor. "

Section 242 provides that the Court may, on the application by a trustee, a creditor or the debtor, or, if the debtor has died, a person administering the estate of the debtor, on satisfaction of certain matters that are set out in that subsection, make an order terminating the composition.

Mr Carrick, a qualified accountant, has for some years been an officer concerned with official duties relating to insolvency, and he is currently an officer of the Insolvency Trustee Service Australia. 

The person occupying the office of Inspector-General in Bankruptcy, Peter Thomas Lowe, authorised Mr Carrick by writing on 5 June 1996, pursuant to ss 221(1), 222(1) and 222(4) of the Act, to make application to the Court for orders under s 222(2) and/or s 222(4) in respect of the composition
QX40 of 1994 proposed by Bryan Douglas Staples and Susan Jane Staples, and accepted by their creditors on 24 May 1994.

Mr Carrick has sworn an affidavit in which he says that, pursuant to s 12(2)(d) of the Act, he was and continues to be authorised by the Inspector-General in Bankruptcy to make inquiries and investigations with respect to the conduct and examine the affairs of Bryan Douglas Staples and Susan Jane Staples, debtors, whose creditors purportedly accepted the composition proposed at an adjourned meeting on 22 May 1994. There seems to be an error in the date; it should be 24 May 1994. Mr Carrick continues, in his affidavit:

"Subsequent to that meeting and in accordance with my authorisation I conducted an investigation into the Debtors' conduct and examinable affairs and I have produced an interim report a true copy is now produced and shown to me and marked with the letter B and exhibited hereto. "

The present question concerns the admissibility of Mr Carrick's report. Section 12 of the Act provides for the functions of the Inspector-General. Section 12(1) relevantly provides:

"The Inspector-General: 

...

(ba)may make such inquiries and investigations as the Inspector-General thinks fit with respect to so much of the conduct and examinable affairs of: 

...

(iii)a debtor under a deed of assignment, deed of arrangement, or composition, under Part X;

as is relevant to the bankruptcy, deed of assignment, scheme or deed of arrangement, or composition, as the case may be; and

... "

Section 12(1B) provides:

"Where the Inspector-General makes an inquiry or investigation referred to in paragraph (1)(b) or (ba), the Inspector-General shall file with the Registrar a report setting out the results of the inquiry or investigation and may file such supplementary reports as the Inspector-General thinks fit. "

Section 12(2) provides:

"For the purposes of discharging his functions under this Act, the Inspector-General may:

(a)require the production of any books kept by a Registrar, Deputy Registrar or Official Receiver or by a trustee;

(b)require a trustee to answer an inquiry made to him in relation to a bankruptcy, an administration under Part XI or a deed of assignment, deed of arrangement, scheme of arrangement or composition in which the trustee is, or has been, engaged;

(c)at any time investigate the books of a trustee; and

(d)appoint an Official Receiver, Registrar, Deputy Registrar or any other person, in writing to conduct an inquiry or investigation on behalf of the Inspector-General.

It was submitted on behalf of all the applicants that Mr Carrick's report is admissible in evidence. Presumably pursuant to s 12(1B), Mr Carrick's report was filed with the Registrar in Bankruptcy on 7 June 1996.

Mr Varley of Counsel, who appeared with Mr Drysdale of Counsel for all the applicants, submitted that there were
three independent bases on which the Court should receive Mr Carrick's report into evidence. 

The first relies on the admissibility of public documents as an exception to the hearsay rule.  The locus classicus of admissibility on this ground is said in the authorities to be Sturla v Freccia [1880] 5 App Cas 623, considered by the Court of Appeal in R v Halpin [1975] 1 QB 907. It appears from the judgment of Lane LJ, as he then was, in Halpin at 913 that the court accepted that there were four conditions that had to be satisfied before a document could be admitted in evidence on the public document exception, namely:

"First, the document must be brought into existence and preserved for public use on a public matter.  Secondly, it must be open to public inspection.  Thirdly, the entry must be made promptly after the events which it purports to record.  Fourthly, the entry must be made by a person having a duty to inquire and satisfy himself as to the truth of the recorded facts.  "

It was held by the Court of Appeal in Halpin at 915 that:

"Where a duty is cast upon a limited company by statute to make accurate returns of company matters to the Registrar of Companies, so that those returns can be filed and inspected by members of the public, the necessary conditions, in the judgment of this court, have been fulfilled for that document to be admissible.  All statements on the return are admissible as prima facie proof of the truth of their contents. "

The Court of Appeal expressly applied Sturla v Freccia.

The admissibility of company returns required to be filed with a register was the subject of a ruling by Franki J in Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647, particularly at 665. His Honour, following Halpin, held that an annual return of a company under the Victorian Companies Act was admissible to the extent that the document was lodged in compliance with a statutory obligation.  His Honour considered a number of applicable authorities and noted that Halpin's Case had been accepted by the recognised text book writers, referring to Phipson On Evidence, 13th ed., para 25-12, page 513; Archbold Criminal Pleading Evidence and Practice, 41st ed., para 10-29, page 838; Halsbury's Laws of England, 4th ed., vol 17, para 76, p 57; and Cross on Evidence, 2nd Aust ed., para 18.81, p 500.

It is in the area of company records that Halpin is most frequently applied.

In Gaggin v Moss [1983] 2 QdR 486, MacPherson J was concerned with whether, pursuant to the admissibility of public documents test, evidence given at a Marine Board of Inquiry was admissible. His Honour, at 495, set out the four conditions referred to by Lane LJ in Halpin, and then said:

"In the present instance those four conditions appear to be satisfied in the case of the transcript of evidence of Moss [who was the skipper of one of the vessels involved in a collision] at the Marine Board inquiry. "

On appeal in Gaggin v Moss [1984] 2 QdR 513, Campbell CJ and Matthews J agreed with the reasons of Connelly J, who concluded at 522 that, in his view, the assertions of Moss in evidence before the Marine Board were not admissible. He said at 522:

"...it is essential that the purpose of the document's coming into existence be its preservation for public use and its being open to public inspection.  If the transcript before the Marine Board in this case was admissible on this basis then the transcript of evidence at a coronial inquiry or at committal proceedings would equally be admissible in both criminal and civil proceedings.  I could well understand that, if the certificate of Moss, as a master had been cancelled or suspended as a result of the formal investigation, an entry to that effect in a register of master's certificates would be admissible.  With all respect to the learned trial judge I do not think that the assertions of Moss in evidence before the Marine Board were admissible. "

His Honour proceeded to dismiss the appeal on other grounds. 

More directly, and recently, in Re Robinson; Ex parte Geroff v Turner (1993) 117 ALR 131, Cooper J was concerned with the admissibility of a report of the result of an investigation by a Trustee in Bankruptcy into the assets and liabilities of the bankrupts at earlier times. While it does not appear from the report, it seems that the Trustee had made a report pursuant to the duties of a Trustee set out in s 19AA(1) of the Act, which provides:

"Where a person becomes a bankrupt:

(a)the trustee shall, to the extent that the trustee, having regard to all the circumstances of the case, considers it desirable to do so at any time (whether
before or after the end of the bankruptcy), investigate; and

(b)the Official Receiver may, to the extent that the trustee has indicated to the Official Receiver that the trustee does not propose to do so, investigate at any time (whether before or after the end of the bankruptcy);

the following matters:

(c)so much of the bankrupt's conduct and examinable affairs, and the books, accounts and records kept by the bankrupt, as is relevant to the bankruptcy;

(d)the cause of the bankruptcy. "

Section 19AA(2) provides:

"A person who conducts an investigation under subsection (1) shall file with the Registrar:

(a)a written report about the results of the investigation; and

(b)such supplementary written reports about the matters to which the investigation relates as the person considers desirable, having regard to all the circumstances of the case." 

The similarity of language between the provisions in s 19AA to which I have referred, and those earlier set out from s 12 is apparent. Cooper J held the report to be admissible. He referred at 132 to old authority in the following passage:

"Evidence of the type sought to be tendered has been received by the courts in the administration of bankrupt estates where that evidence has been obtained by trustees in the discharge of their duties.  In Roberts v Doxon (1791) Peake 116; 170 ER 99, Lord Kenyon allowed such evidence.  The report states:

One of the assignees under the Commission against Wilkinson and Cooke was called as a witness, to prove
that Wilkinson and Cooke's debts, a little time before their bankruptcy, amounted to a much larger sum of money than their credits.  He produced no papers, but said he collected his information from having inspected their accounts.

Lord Kenyon thought that though he could not state the particulars of the books without producing them, yet he might speak to the general amount, not by saying that one page was so much and another so much, but what, from his general observation, he perceived to be the general state of their accounts.

Similarly, in Assignees of Meyer v Sefton (1817) 2 Stark 274; 171 ER 644 Holroyd J allowed such evidence.  In particular his Honour treated as relevant that the evidence was provided on oath by the bankrupts.  The report states (at 171 ER 645):

Evidence was afterwards adduced, to show the value of the property, and a witness was produced on the part of the plaintiffs, who examined the accounts and books of the bankrupt, and it was proposed to examine him as to the result, as a means of ascertaining what the value of the property in question was.  This was objected to on the part of the defendants.

Holroyd J was of opinion that the evidence was admissible; such evidence had been admitted in a case before Lord Kenyon, after it had been objected to, where the question was as to the solvency of a party at a particular time.  From the very nature of the case, such an inquiry could not be made in court, and therefore evidence on such a point must be given by someone who had had the means of inquiry, and who could state the result.  With respect to the source from which the knowledge of the witness was drawn, in the present instance, a commission of bankruptcy had issued, and the documents from which the result was obtained had been rendered by the bankrupt.  He had been obliged to render up his accounts, with a view to the state of his affairs, under the severest penalties, and therefore the result was admissible.

Both of these cases were cited with approval by Dixon J in Potts v Miller (1940) 64 CLR 282 at 302, 303. "

His Honour concluded at 133:

"In my view the trustee, having regard to the duties he has discharged in the administration of the estate, the nature of the information and documentation received in that capacity, the sources of the information and his qualifications as an accountant, can express an opinion as to the general financial situation of the bankrupt at the relevant dates and can express an opinion as to their solvency at that time.

Such opinion evidence is admissible.  The report of Mr Geroff falls into that category.  The source of the information and the nature of the documentation disclosed in the report provides a sufficient foundation to enable the opinions to be expressed without formal proof of every fact contained in the information or documentation or without formal proof of the documentation.  The fact that the report is admissible does not mean that it is not open to the respondent to submit that no weight ought to be given to it or that it does not suffice to establish insolvency as a matter of law or fact.

There is no doubt that the respondent is entitled to require that the material be produced for inspection. "

The applicants rely on the approach of Cooper J as an alternative ground to the public documents basis of admissibility reception into evidence of Mr Carrick's report.  It would be curious if it was a statutory function of the Inspector-General to make an inquiry and investigation of the kind Mr Carrick did in this case and to require such a report to be filed with the Registrar if that was simply to be the end of the matter. 

Subrule 200(1) provides:

"Except where otherwise expressly provided in the Act, a person may, subject to subrule 179(1) and subrule (3), inspect any document filed in connection with the proceeding or in relation to a debtor. "

It seems to me that the public would be entitled to inspect Mr Carrick's report.

The final basis for admissibility is said to be s 259 of the Act, which relates to evidence of bankruptcy documents in all legal proceedings. Section 259(1) relevantly provides:

"Any -

...

(c)instrument, affidavit, document, deed, certificate or extract from a deed or register made or used in the course of proceedings under this Act; or

(d)copy of a document referred to in paragraph (a), (b) or (c),

that appears to be sealed with a seal of the Court or to be marked with a stamp referred to in section 14A or that purports to be signed by a Judge of the Court is receivable in evidence in all legal proceedings. "

Section 259(2) provides:

"A copy of a document referred to in paragraph (1)(a), (b) or (c) that is certified to be a true copy by the Registrar is receivable in evidence in all legal proceedings. "

There is no doubt that the report by an officer authorised by the Inspector-General to enquire, as Mr Carrick has been, is a document produced in the discharge of important functions of insolvency supervision. The question is whether, on filing (as s 12(2) requires) the document becomes "a document made or used in the course of proceedings under this Act".

It appears that the document, on filing, is "marked with a stamp referred to in section 14A".

With some hesitation, it seems to me that I ought to regard an inquiry or investigation made by an Inspector-General, or a person appointed by him to conduct an inquiry or investigation on his or her behalf, is a proceeding under this Act.  Proceeding is referred to in s 5(1) but not helpfully.  That sub-section provides:

" 'proceeding' means proceeding under this Act. "

I think the word "proceeding" has to be read more widely than a reference to a proceeding in Court, and in my opinion it extends to the conduct of an inquiry or investiga- tion under s 12 of the Act.

I am conscious that the word "proceedings" is used in some sections of the Act as being a reference to Court proceedings. One example is s 27(1A), which provides:

"Where proceedings under this Act were instituted in the Federal Court of Bankruptcy before the date of commencement of this subsection and the hearing of the proceedings had commenced or been completed before that day, that Court continues to have jurisdiction in bankruptcy under this Act in relation to those proceedings and in relation to proceedings incidental to those proceedings. "

But it is not, in my opinion, an inapt use of language to describe an inquiry or investigation under s 12 as being a proceeding under the Act. I am prepared to hold that the report required to be filed pursuant to s 12(2) is a
document "made in the course of proceedings under the Act", within s 259(1).

I have reservations as to whether the document is admissible by the application of the public documents test referred to in Halpin.  I think, however, its reception is justified on either of the other alternative grounds sought to be relied on.  It seems to me that the situation of Mr Carrick's report is in all material respects the same as the report of the trustee in Re Robinson, which Cooper J admitted into evidence. With less confidence, the report is also admissible pursuant to s 259 of the Act.

Having regard in particular to the statutory obligations placed on a person entrusted with the duty of carrying out an inquiry and investigation under s 12 of the Act, having regard to the evident purpose of such an inquiry, and to the undoubted assistance that courts in bankruptcy get from inquiries conducted by experienced officers concerning the conduct of, amongst others, debtors, bankrupts, and on occasions trustees, and having regard to the personal qualifications of Mr Carrick, it seems to me that the report should be admitted into evidence.

Having reached that conclusion, however, it seems to me that Mr Carrick ought to be made available for cross-examination because it is open to the respondents to the application to later make submissions as to what weight, if
any, ought to be given to any particular part of it, or to make submissions that the Court should reach conclusions at variance with particular matters in the report, either as a matter of law or of fact.  It goes without saying that nothing in the report can affect the obligation on that Court of reaching its own conclusion in respect of any issue that these present applications raise.

I will receive Mr Carrick's report as an exhibit in these proceedings, but require Mr Carrick to swear to his report and to be cross-examined as to its contents, should counsel for the respondents choose to do so. 

I certify that this and the  preceding thirteen (13) pages are a true copy of the reasons herein of the Honourable Justice Spender.

Associate

Date: 10 July 1996

Counsel for the applicants     :         Mr M D Martin
instructed by                  :         James Conomos

Counsel for the respondents     :         Mr K Varley and
  Mr M Drysdale
instructed by                  :         Barwicks

Dates of Hearing               :         10 July 1996