Re Weiss, Zdenek Ex Parte The Official Trustee Clyne, Peter v The Official Trustee

[1983] FCA 400

Re: ZDENEK WEISS
Ex parte: THE OFFICIAL TRUSTEE
Between: PETER CLYNE
And: THE OFFICIAL TRUSTEE (1983) 74 FLR 259
No. W293 of 1983
Constitutional Law (Cwlth) - Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Neaves J.(1)

CATCHWORDS

Constitutional Law (Cwlth) - Judicial power of the Commonwealth - Bankruptcy - Registrar's summons to attend to give evidence - Whether judicial power - The Constitution (63 & 64 Vict. c. 12), Chapter III - Bankruptcy Act 1956, s. 81.

Bankruptcy - Registrar's summons to attend to give evidence - Whether an exercise of the judicial power of the Commonwealth - Whether the principles of natural justice apply - Sufficiency of material before Registrar to justify the issue of the summons - Bankruptcy Act 1966, s. 81 - Bankruptcy Rules, rule 129.

Re Robert Henry Andrews (1958) 18 ABC 181

The Queen v. Davison (1954) 90 CLR 353

James v. Deputy Commissioner of Taxation (1957) 97 CLR 23

James v. Deputy Commissioner of Taxation (1958) 32 ALJR 339

The Queen v. Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty. Ltd. (1970) 123 CLR 361

The Queen v. Quinn; Ex parte Consolidated Food Corporation (1977) 138 CLR 1

Re Stirling Henry Ltd. (In Liq.) and the Companies Act (1972) 1 NSWLR 497

Shapowloff v. Stirling Henry Ltd. (In Liq.) (1972) 2 NSWLR 691

Re Csidei; Ex parte Andrew (1980) 39 FLR 387

Constitutional Law - Judicial power of the Commonwealth - Bankruptcy - Registrar's summons to attend to give evidence - Whether Registrar's power judicial or administrative in nature.

Bankruptcy - Registrar's summons to attend to give evidence - Whether Registrar's power an exercise of the judicial power of the Commonwealth - Natural justice - Summons issued ex parte - Whether the applicant has a right to be heard before the issue of the summons - Sufficiency of material before Registrar to justify the issue of the summons - The Constitution (63 & 64 Vict. c.12), Ch. III, Bankruptcy Act 1966 (Cth), s. 81 - Bankruptcy Rules, r. 129 - Judiciary Act 1903 (Cth), s. 78B.

HEADNOTE

The Deputy Registrar in Bankruptcy, in reliance upon s. 81 of the Bankruptcy Act 1966 (Cth) issued two summonses directed to the applicant requiring him to attend to give evidence in connection with the administration of a bankrupt's estate. The applicant applied to the court to set aside each summons.

Held: (1) The power to issue a summons when exercised by a Registrar is in its nature administrative and does not lose that character by reason of the circumstances that the Registrar must satisfy himself that the person to whom the summons is to be addressed falls within the purview of s. 81(1) of the Bankruptcy Act 1966 (Cth) or that in exercising the power he must act judicially.

James v. Deputy Commissioner of Taxation (1957) 97 CLR 23; R. v. The Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361; R. v. Quinn; Ex parte Consolidated Food Corp. (1977) 138 CLR 1, referred to.

(2) Having regard to the nature of the power to issue a summons and the provisions of s. 14(5) of the Bankruptcy Act 1966 (Cth), under which the Registrar's decision is reviewable, there is no warrant for implying into the legislative provisions requirements that the applicant be given an opportunity to be heard before the issue of a summons.

Re Stirling Henry Ltd (In Liq.) (1972) 1 NSWLR 497; Shapowloff v. Stirling Henry Ltd (In Liq.) (1972) 2 NSWLR 691; Re Csidei; Ex parte Andrew (1980) 39 FLR 387, referred to.

(3) The application to the Registrar for a summons under s. 81(1) of the Bankruptcy Act 1966 (Cth) did not, in terms, set out the grounds on which the application is made as required by r. 129 of the Bankruptcy Rules and, accordingly, there was not sufficient material before the Deputy Registrar to justify the issue of the summonses.

Re Wyatt (1969) 15 FLR 374; Re Andrews (1958) 18 ABC 181; Re Csidei; Ex parte Andrew (1979) 39 FLR 387, referred to.

(4) The summonses issued on 25 and 30 November 1983, would be set aside.

HEARING

Sydney, 1983, December 15, 22. #DATE 22:12:1983

APPLICATION.

The applicant in person.

P. Urquhart for the Official Trustee.

Cur. adv. vult.

Solicitors for the Official Trustee: B.J. O'Donovan, Commonwealth Crown Solicitor.

J.J.I.

ORDER

The summonses issued under sub-section 81(1) of the Bankruptcy Act 1966 and dated 25 and 30 November 1983 addressed to Peter Leopold Clyne requiring him to give evidence before the Registrar be set aside. Order accordingly.

JUDGE1

This matter arises in consequence of the issue by a Deputy Registrar in Bankruptcy, purporting to act under section 81 of the Bankruptcy Act 1966 ("the Act"), of two summonses directed to Peter Clyne ("the applicant") requiring him to attend and give evidence in connection with the bankrupt estate of Zdenek Weiss ("the bankrupt") and to produce certain documents in his custody or power. The two summonses, which were issued on the application of the Official Trustee in Bankruptcy as trustee of the estate of the bankrupt, are in identical terms except as to the date of issue, the return date and the references therein by number to an account with the N.S.W. Permanent Building Society. It will be sufficient for present purposes to refer to only one of those summonses, that which issued on 30 November 1983.

That summons required the applicant to attend before the Registrar at the Federal Court of Australia, Law Courts Building, Queen's Square, Sydney on 6 December 1983 to give evidence in connection with his dealing with the bankrupt and in particular as to four specified matters. These were -

"1. The payment of fees to the bankrupt for work performed by the bankrupt in relation to a Mrs Yvonne Roche (also known as LaRoche) and/or companies associated with her.

2. The transfer of a home unit known as 8/157 Victoria Road, Bellevue Hill from Metropolitan Mortgage Investment Corporation Pty Limited to Bohumila Weissova, the bankrupt's mother, and the extent of the bankrupt's beneficial ownership of such unit.

3. The extent of the bankrupt's beneficial ownership of monies deposited to N.S.W. Permanent Building Society account No. 688481 which account was opened in the name of "Peter Clyne" and upon which account the bankrupt had authority to operate.

4. The amount of fees paid and/or payable by Peter Leopold Clyne to the bankrupt for the bankrupt's services and the mode of payment and/or the release of those fees."

The summons also required the applicant to produce any of the following documents in his custody or power relating to the bankrupt or his trade dealings or affairs -

"(i) all cheques or other bills of exchange, receipts, letters, memoranda, bills of costs, invoices, books of account, statements of account and other documents evidencing or relating to the -

a. payment of fees to the bankrupt for work performed by the bankrupt in relation to a Mrs Yvonne Roche (also known as LaRoche) and/or companies associated with her.

b. amount of fees paid and/or payable by Peter Leopold Clyne to the bankrupt for the bankrupt's services and the mode of payment and/or the release of those fees.

(ii) any passbook, statements of account, copy deposit vouchers, copy withdrawal slips, copy cheque issue requests and correspondence relevant to N.S.W. Permanent Building Society account no. 688481."

The applicant has applied to the Court to set aside each summons. Three grounds were argued in support of the application -

(a) that the issue of a summons pursuant to section 81 of the Act involves the exercise of the judicial power of the Commonwealth and the section, in so far as it purports to authorise a Registrar in Bankruptcy to issue such a summons, is beyond the legislative power of the Commonwealth Parliament and is invalid;

(b) that, even if it be within the power of a Registrar in Bankruptcy to issue a summons under section 81 of the Act, the person to whom the summons is directed must be given an opportunity to be heard before the summons is issued; and

(c) that there was no material or evidence before the Deputy Registrar to justify the issue of either of the summonses directed to the applicant.

As the first ground involved a question arising under the Constitution or involving its interpretation, notice under paragraph 78B of the Judiciary Act 1903 was given to the Attorneys-General of the Commonwealth and the State of New South Wales. Neither wished to take part in the proceedings.

Section 81 of the Act provides in sub-section (1) as follows -

"The Court or the Registrar may, on the application of a creditor who has proved his debt and on such terms as to costs as the Court or the Registrar thinks fit to impose, or on the application of the trustee, at any time summon -

(a) the bankrupt or the spouse of the bankrupt; or

(b) a person who is known or suspected to have in 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 affairs,

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 or the Registrar thinks fit, before a magistrate, to give evidence concerning, and produce any books (whether or not in existence at the time the bankrupt became a bankrupt) in his custody or power relating to, the bankrupt or his trade dealings, property or affairs."

The expression "books" is defined in sub-section 5(1) of the Act to include any account, deed, writing or document and any other record of information however compiled, recorded or stored, whether in writing, on microfilm, by electronic process or otherwise.

A Deputy Registrar in Bankruptcy has such powers and functions as are conferred or imposed on a Registrar by the Act (sub-section 14(2)). By virtue of sub-section 14(2A), a power or function conferred or imposed on a Registrar by the Act, when exercised or performed by a Deputy Registrar, is, for all purposes, to be deemed to have been exercised or performed by the Registrar. An order or direction made or given, or an act done by a Registrar or a Deputy Registrar under the Act is subject to review on summary application to the Court (sub-section 14(5)).

The applicant conceded that the constitutional ground had been decided adversely to him by Clyne J. in Re Robert Henry Andrews (1958) 18 A.B.C. 181 at pp. 185-6. He submitted, however, that the point had not been fully argued in that case and that what Clyne J. had said on the matter was obiter. To support the partial invalidity of section 81 the applicant relied on various indicia which, in his submission, pointed to the conclusion that a Registrar in issuing a summons under that section is exercising the judicial power of the Commonwealth. The matters relied upon may be summarised as follows -

(a) The power is discretionary and, having regard to its extraordinary nature and the care with which it must be used, the discretion must be exercised judicially.

(b) Before the discretion is exercised in respect of a person other than the bankrupt or the bankrupt's spouse, the Registrar must be satisfied of the matters mentioned in paragraph 81(1)(b).

(c) The Registrar is required to determine whether the examination is to be conducted before the Court, the Registrar or a magistrate.

(d) The consequences of a decision to issue a summons are that the person concerned is examined in public, his evidence may be used in proceedings under the Act and probably elsewhere and he will commit an offence if he fails to attend (section 264A). A Registrar also has power to issue a warrant of arrest, to release the person from custody and to order the payment by the person of the costs of his apprehension (section 264B).

(e) The statute treats the power as exercisable by the Court and by a Registrar. The function has been traditionally regarded as one for the courts.

It was also submitted that the power to issue a summons should not be considered in isolation from the other powers conferred upon the Registrar by section 81. It was said that a Registrar in conducting an examination under section 81 is exercising the judicial power of the Commonwealth. Attention was directed particularly to sub-sections (10), (12), (13) and (14) of section 81. Sub-section (10) empowers the Registrar conducting an examination to determine what questions are proper to be put to the person being examined. Sub-sections (12) and (13) give power to the Registrar to order the person being examined to pay to the trustee of the bankrupt estate the whole or part of any amount in which the person admits he is indebted to the bankrupt or to deliver to the trustee any property of the bankrupt which he admits he has in his possession or power. The Registrar may also direct that the costs of a person examined under section 81 be paid out of the estate of the bankrupt (sub-section (14)).

In making those submissions the applicant referred to The Queen v. Davison (1954) 90 C.L.R. 353, James v. Deputy Commissioner of Taxation (1957) 97 C.L.R. 23, James v. Deputy Commissioner of Taxation (1958) 32 A.L.J.R. 339, Re Moss; Ex parte Tour Finance Ltd. (1968) 13 F.L.R. 101, Clyne v. Deputy Commissioner of Taxation (1982) 45 A.L.R. 323 at pp. 329-330 and Re Maddox; Ex parte The Debtor (1978) 36 F.L.R. 392.

In those cases the validity of various provisions of the bankruptcy legislation under which a Registrar or Deputy Registrar in Bankruptcy had purported to exercise certain powers was impugned on the basis that in doing so the Registrar or Deputy Registrar was exercising part of the judicial power of the Commonwealth. In The Queen v. Davison the High Court held invalid the provisions of the Bankruptcy Act 1924-1950 purporting to confer upon a Registrar power to make, as an order operating as an order of the Federal Court of Bankruptcy, a sequestration order on a debtor's petition. James v. Deputy Commissioner of Taxation (1957) held that the power conferred on the court by paragraph 27(2)(c) of the Bankruptcy Act 1924-1955 to extend the time limited by that Act for doing any act or thing was a power conferred as and for judicial power exercisable as part of the judicial power of the Commonwealth and could not validly be exercised by a Registrar. The other cases upheld the validity of provisions empowering a Registrar to fix the time for compliance with a bankruptcy notice, to issue such a notice, to extend the time for compliance and to fix a date for hearing of an application to set aside a bankruptcy notice.

In my opinion there is nothing in those cases that supports the view that, in exercising the power conferred by sub-section 81(1) of the Act to summon a person falling within the classes of person therein described to attend and give evidence and produce documents, the Registrar is exercising judicial power. The power to issue a summons when exercised by a Registrar is in its nature administrative and it does not lose that character by reason of the circumstance that the Registrar must satisfy himself that the person to whom the summons is to be addressed falls within the purview of the section or that in exercising the power he must act judicially: see The Queen v. Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty. Ltd. (1970) 123 C.L.R. 361 per Kitto J. at pp. 373-7.

Whatever may have been the difficulties in supporting power in a Registrar to order a person to attend to give evidence under the provisions of section 80 of the Bankruptcy Act 1924-1950 as in force prior to the amendments made by the Bankruptcy Act 1954 consequent upon the decision of the High Court in The Queen v. Davison, supra, those difficulties do not arise under the provisions of the Bankruptcy Act 1966. The legislature has conferred the power to issue a summons for examination upon a Registrar by express enactment and the fact that a similar power is conferred on the courts which under the Act have jurisdiction in bankruptcy does not, of itself, require the conclusion that the power when exercised by a Registrar is an exercise of part of the judicial power: The Queen v. Quinn; Ex parte Consolidated Food Corporation (1977) 138 C.L.R. 1. As Gibbs J. (as he then was) said at p. 6 -

"The fact that the grant of power is contained in one compendious section does not mean that the nature of the power must remain the same although the character of the functionary called on to exercise it is different."

There are, I think, two factors which are decisive of the question. There is nothing in the statute to suggest that the act of a Registrar in issuing a summons under sub-section 81(1) is intended to be regarded as the act of a court exercising jurisdiction in bankruptcy. Secondly, the provisions do not confer on a Registrar power to make a determination of legal rights. The act of a Registrar in issuing the summons is, as has been mentioned above, subject to review on summary application to a court exercising bankruptcy jurisdiction (sub-section 14(5)). On such a review the Court will, where appropriate, substitute its own discretionary decision for that of the Registrar.

It is unnecessary to express a view on the question whether a Registrar is, in conducting an examination pursuant to a summons issued under sub-section 81(1), exercising part of the judicial power of the Commonwealth but the argument presented by the applicant has not convinced me that his function is properly so described. Again, the power is not one determinative of legal rights. The Registrar's role is to preside at the examination and to ensure that it is not conducted in an oppressive way and that only questions are permitted that can be seen to be directed to the due administration of the bankrupt's estate. The true nature of the function is not affected by the powers conferred on a Registrar by sub-sections (12), (13) and (14) of section 81. Should it be thought that those powers may only be exercised as part of an exercise of judicial power, the provisions conferring them on a Registrar are, in my opinion, clearly severable.

In my opinion the constitutional argument should be rejected.

The second ground on which it was argued that the summonses should be set aside turned on the circumstance that the applications for their issue were made ex parte and the applicant was given no opportunity to be heard thereon. This argument should also, in my view, be rejected. Having regard to the nature of the power to issue a summons and the provisions of sub-section 14(5) of the Act, under which the Registrar's decision is reviewable, there is no warrant for implying into the legislative provisions requirements of the kind contended for by the applicant. Support for this view is to be found in the reasons given by Street J. and the Court of Appeal for holding that the rules of natural justice had no place in the exercise of the power to issue a summons under the analogous provisions in section 249 of the Companies Act 1961 (N.S.W.): Re Stirling Henry Ltd. (In Liq.) and the Companies Act (1972) 1 N.S.W.L.R. 497 and on appeal sub nom Shapowloff v. Stirling Henry Ltd. (In Liq.) (1972) 2 N.S.W.L.R. 691. It may also be noted that Lockhart J. in Re Csidei; Ex parte Andrew (1980) 39 F.L.R. 387 at pp. 391, 392 referred without comment to the practice of issuing summonses under sub-section 81(1) on ex parte applications.

I turn now to the third ground, that there was no material or evidence before the Deputy Registrar to justify the issue of either of the summonses directed to the applicant.

In relation to this ground it is necessary to refer to the provisions of rule 129 of the Bankruptcy Rules. That rule provides, inter alia, that an application to the Registrar for a summons under sub-section 81(1) shall set out the grounds on which the application is made and, except where the application is made by the trustee of the bankrupt to whom the application relates, shall be accompanied by an affidavit setting out the facts relied on by the applicant in support of his application.

The only material that was before the Deputy Registrar when each summons was issued was an application made on behalf of the Official Trustee in Bankruptcy and signed by the Official Receiver. The applications were, so far as material for present purposes, in identical terms and I shall refer only to that upon which the summons dated 30 November 1983 was issued. That application was in the following terms -

"Application is made to the Registrar by Daniel Joseph Noel Bluett, Official Receiver for the Bankruptcy District of the State of New South Wales and the Australian Capital Territory, on behalf of the Official Trustee in Bankruptcy for the issue of a summons under Section 81 of the Bankruptcy Act, 1966 directed to:-

Peter Leopold Clyne, Sebel Town House, 23 Elizabeth Bay Road, SYDNEY NSW

I desire to examine Peter Leopold Clyne with respect to his dealings with the bankrupt and, in particular, as to:-

1. the payment of fees to the bankrupt for work performed by the bankrupt in relation to a Mrs Yvonne Roche (also known as LaRoche) and/or companies associated with her.

2. the transfer of a home unit known as 8/157 Victoria Road, Bellevue Hill from Metropolitan Mortgage Investment Corporation Pty Limited to Bohumila Weissova, the bankrupt's mother, and the extent of the bankrupt's beneficial ownership of such home unit.

3. The extent of the bankrupt's beneficial ownership of monies deposited in N.S.W. Permanent Building Society Account No. 688481 which account was opened in the name of "Peter Clyne" and upon which account the bankrupt had authority to operate.

4. The amount of fees paid and/or payable by Peter Leopold Clyne to the bankrupt for the bankrupt's services and the mode of payment and/or the release of those fees."

The application does not, in terms, set out the grounds on which it is made as required by rule 129. What are set out are four matters upon which the Official Receiver desired to examine the person to whom the summons was to be directed. It should be noted, however, that the application is in broader terms - it expresses a desire to examine that person "with respect to his dealings with the bankrupt and in particular as to" the four specified matters. The summons issued on that application follows the same format and in so doing departs from the form prescribed (see Form 49 in Schedule 1 to the Bankruptcy Rules) and attracts a similar comment to that voiced by Gibbs J. (as he then was) in Re Wyatt (1969) 15 F.L.R. 374 at p. 375. It is also to be noted that the application does not seek the production of documents yet the summons does.

In Re Robert Henry Andrews (1958) 18 A.B.C. 181 Clyne J., in holding that the application made by the trustee of the bankrupt's estate was not sufficient to support the issue of a summons under section 80 of the Bankruptcy Act 1924-1955, said at p. 186:

"It is difficult to say what grounds are necessary to obtain the issue of a summons under s. 80(1)(b) upon the application of a trustee or official receiver. Where a creditor makes such an application he should show a prima facie probability that some benefit will result to the creditors of the bankrupt. This requirement, I think, is not imposed upon a trustee or official receiver.

"The grounds for the application in this case are not sufficient. The applicant apparently received information that the bankrupt received a sum of 6,426 pounds 13s. 3d. from a company which had not been accounted for, but the applicant did not state how it came about that Patterson could give information about the receipt of this money by the bankrupt.

"I do not think it can be said upon the grounds stated that Patterson answers the description of a person supposed to be able to give information respecting the bankrupt, his dealings or property. (See In re A Debtor (No. 3 of 1909); Ex parte Goldstein, (1917) 1 K.B. 558, at p. 564.)"

The question was also adverted to by Lockhart J. in Re Csidei; Ex parte Andrew (1979) 39 F.L.R. 387. At pp. 393-4 his Honour said:

"No rigid or inflexible rules can be laid down as to the exercise of this power. Proper material must be adduced to enable the court or the Registrar to decide whether it is an appropriate case for the exercise of the power. The court and the Registrar are not mere rubber stamps for the trustee, although proper weight should be given to his views.

"There should be no pre-conception that because the application is made by the trustee, as it generally is, this in itself is a good reason for exercising the power. The power belongs to the court or the Registrar, not the trustee.

"I do not suggest that the court necessarily should require voluminous material or elaborate statements or reasons to be placed before it by the trustee before issuing the summons. The path of a trustee in performing his duties under the Act is difficult enough and must not be impeded; but the very nature and breadth of the inquisitorial power conferred by s. 81 requires the exercise by the court or Registrar of considerable care before it is invoked. Each case must be determined on its merits."

Although his Honour made these statements in considering an argument that the summons in that case should not have been issued because the trustee had not shown that he could not obtain the information by less formal means, what his Honour said has, I think, a wider application.

Counsel for the Official Trustee submitted that, although the only information relevant to the exercise by the Deputy Registrar of the discretion whether to issue the summonses was that contained in the applications and was in the form of particulars of the subject matters upon which it was desired to examine the person to whom the summons was to be directed, the applications should be read as if they contained assertions by the Official Receiver of facts which must have been implicit in the applications. For example, it was submitted that the matter stated in the fourth particular should be read as if it contained a specific statement that the applicant did avail himself of the bankrupt's services and that fees were paid or were payable in respect thereof. Similarly with the matter stated in the third particular.

But even if one accepts this approach, the matters stated in the first and second particulars provide no basis at all upon which the Deputy Registrar could properly suppose that the applicant might be able to give information concerning the bankrupt's dealings with Mrs. Roche or the transfer of the home unit from Metropolitan Mortgage Investment Corporation Pty. Ltd. to the bankrupt's mother or as to the bankrupt's beneficial interest in that unit.

The applicant has not put before the Court any evidence disclaiming or disputing that he is a person capable of giving information concerning the matters particularised in the summonses. Indeed the applicant has sworn in an affidavit filed in the proceedings that he has "at all material times been willing to assist the Respondent (the Official Trustee) as regards supplying information in relation to the various matters raised" in the summonses. That affidavit also provides a basis for concluding that the applicant has been involved in matters concerning Mr. Roche and the bankrupt. However, while these matters are of significance, they do not overcome the difficulty which the Official Trustee faces in convincing the Court that there was sufficient material before the Deputy Registrar to justify the issue of the summonses.

The applicant's assertion that he was at all times willing to assist the Official Trustee by providing information if specific questions were addressed to him in writing was also relied upon as providing a basis for setting aside the summonses. On the information before the Court I see no reason to call in question the Official Trustee's desire to proceed by way of oral examination before the Registrar rather than by written interrogatories.

For the reasons I have given I am of opinion that the summonses issued on 25 and 30 November 1983 should be set aside and I so order. I make no order as to costs.