Re Tooth, W.R.

[1994] FCA 231

23 1 99

JUDGMENT No. ..,..,.,., .... ,.,. .....,., ...,

IN THE FEDERAt COURT OF AUSTRALIA )

RBNKRUPTCY DISTRICT OF THE STATE	)	NO. NB 2011 of 1993
OF NEW SOUTH W U S	1

Re: WILLIAM RI- TOOTH

Bankrupt

Ex parte: PHILLIP POLLACK T/AS P.J.

POLLACK h CQ

Applicant;

EDEmL COURT OF

MAX CARISTOPAER DONNELLY

Respondent Trustee

REASONS FOR JUDGMENT

EINFELD J	SYDNEY	15 MARCH 1994
On 1 March 1994 a warrant designed to obtain documents of the bankrupt issued to the former solicitor for the bankrupt and his companies. The solicitor Phillip Pollack subsequently raised objection to producing to the trustee on the warrant some of the bankrupt's personal and company records. These matters have now at last been resolved and both parties seek costs in relation to the warrant. It seems to me that there is no basis at all on which costs should be awarded to M r Pollack in the proceedings. As the evidence reveals, his conduct prior to the issue of the warrant was discourteous, obstructive and contemptuous of his statutory obligations. With one exception to which I shall refer, his conduct after the issue of the warrant has been to say	conduct appears on the evidence to be justified or supported by	the least petty and wasteful. As it happens, none of this
instructions from the bankrupt himself. But even if it were, the
solicitor had a wider duty to the Court and the community which; on the evidence, was simply not addressed at all.
AS for the trustee's costs, it must first be noted that the
warrant was faulty in one respect in that it. purported to seek access to an area of a building which included persons conducting buslnesses quite separate to Mr Pollack. Although commonsense would have indicated that people conducting quite separate buslnesses in that area would not have been within the intended purvlew of a warrant addressed to Mr Pollack and his firm, apparently the police executing the warrant, according to the evidence, thought otherwise and wanted to have access to books and records of these quite separate buslnesses as well. In the end the matter seems to have been dealt with reasonably satisfactorily although it did require an application to and a "pep talk" from the Court to stop the police from doing what they said they were going to do otherwise. Although the hearing that took place on 3 March also dealt wlth other matters, I think it would have had to take place in any event to stop the police from
think that the application to the Court was unreasonable and it going ahead with their intentions. In the circumstances I do not
1s therefore not reasonable to order Mr Pollack to pay the trustee's costs of that pccasion.
Much of the rest of the trustee's costs were incurred in relation to Mr Pollack's claim for the legal professional privilege of all the documents in his possession. There was a degree of unreality
about Mr Pollack's claims not to be required to produce the documents and records involved here on what I regard as a very questionable basis. The evidence was not quite enough to label it as humbug, but the privilege claim here was extremely peripheral and very doubtful. The situation simply is that the provisions of the Bankruptcy Act permit the trustee in the appropriate circumstances to have access to the books and records of a bankrupt and of entities associated with the bankrupt which include companies previously run by the bankrupt or people associated with the bankrupt. If every time a trustee needed to get such records from a solicitor, the issue of legal professional privilege could avoid the disclosure of all documents in all circumstances, the Act and its procedures would become unworkable and the warrants would be useless. Many, perhaps all, documents in the solicitor's possession would be covered, at least arguably, and there would have to be an inquiry about legal professional privilege on each document in every case.

Indeed, although I have not examined the matter at all, I very

much doubt that there could be such a thing as the legal	professional privilege of a bankrupt as agalnst his trustee. If
there is, then it must be of a very limited kind indeed. The Bankruptcy Act requires that documents of bankrupts and associated entities be supplied to their trustees promptly and without any restrictions such as that they are for example in the
possession of their solicitors. It is the bankrupt's documents
that are sought, not the solicitor's documents. It is also the bankrupt's privilege not the solicitor's privilege. I should be
surprised to learn that the Act must be read down so that only those documents that are not covered by legal professional privilege are to be supplied. If there were some select documents not apparently covered by the Bankruptcy Act, or to which legal professional privilege could attach, they could be placed in a sealed envelope or container and the matter could be referred to the Court. The Commissioner of Taxation and the legal profession have established some such protocol in relation to documents seized for taxation purposes. But it is untenable to suggest that all the documents in the solicitor's possession could so qualify.
In these and other regards, there was not the slightest sign of
good falth shown by the solicitor involved here. According to the evidence, attempts were being made to access the documents of the bankrupt in the solicitor's possession at least as early as 12 November 1993. Before that date it is not clear from the evidence what efforts were made without a section 77A notice but certainly a section 77A notice was issued at that time. There
notice. It was on its face addressed to Mr Pollack's document seems to have been a problem in relation to the service of the
exchange number, as to which the only evidence I have is of a letter in December, althqugh there seems to be a suggestion that there was an earlier notification. Mr Pollack says in his affidavit that he has not been a member of the document exchange since about August 1993 but does not disavow that at the time the specific number shown was his. I thus assume that until then his box number was as shown in the notice. The trustee gave no evidence of the material having been returned so that only one of two things could seemingly have happened: eitherthe document exchange destroyed, lost or otherwise misplaced the material, or they passed it on to Mr Pollack as the former owner of the box. Wlthout any evidence of inquiries having been made, I find it very difficult to believe that the document exchange destroyed or lost the material addressed to Mr Pollack's former box.
Pollack does not say anything in his affidavit about whether he did receive the notice by indirect means except that he does not recollect having received the notice of 12 November prior to its expiry. He does not say whether he had any prior knowledge of the trustee's appointment and desire to obtain material concerning Mr Tooth from him. Certainly Mr Pollack did know in December 1993 that the trustee was anxious to see the material in his possession, but except for some futile point-taking correspondence or discussions with the previous solicitor forthe trustee, nothing was provided. Steps were not even taken to obtain the agreement of the bankrupt and the present directors
was issued. of his companies to supply the material until after the warrant
That is one of the reasons why I apprehend a significant degree of insincerity about the whole question of legal professional privilege. If it were a serious claim, it would surely have been the first or one of the first things to be addressed when the existence of a section 77A notice first came to Mr Pollack's attention. If it had been addressed at that time, the consents
of the bankrupt and the relevant company directors which have now been forthcoming after some delay would have been available at a much earlier stage and would have averted the need for a warrant at all.
m Pollack now suggests that the notice was lost somewhere in or
by his office. It is quite unacceptable that a solicitor or any other professional can receive a section 77A notice and then, knowing that it had been recelved but misplaced in the office, not inform the trustee that it had been misplaced and request a copy. If because the notice had been lost, the trustee's name could not be recalled, it was the solicitor's duty to telephone the client or the Court to ask for the name of the trustee. NO evidence of this kind having been presented, it is quite reprehensible that refuge should have been taken in such disdain for proper professional responsibility.
Notices under the Bankruptcy Act simply cannot be treated in a dismissive way. They are serious matters done in the public and
be ignored or treated as if they had not occurred or in some creditors' interests and it is not acceptable that they can just
casual way by discussions or letters. A solicitor should need no reminding of their importance. Yet it was that type of wholly unacceptable behaviour that forced the trustee to seek the issue of the warrant. No one should bear the costs of this event other than M r Pollack and I order that he pay the trustee's costs of and associated with the issue of the warrant and of the conduct

!

of these proceedings, except the hearing on 3 March. If	b
indemnity costs had been sought, they would have been difficult	,
f
to resist.	, .
1 .

I certify that this and the

preced~ng pages are a true copy of the	S\'f.
Reasons tor

Justlce Elnfeld

Assoclate

Dated:

i