Travaglini v Raccuia
[2007] FMCA 777
•23 May 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TRAVAGLINI v RACCUIA | [2007] FMCA 777 |
| BANKRUPTCY – Summons for examination – production of books and documents – application to discharge summons – question over power to discharge – whether power of Court or Registrar. PRACTICE AND PROCEDURE – Summons for examination – production of books and documents – whether summons vexatious or oppressive – discharged in part. |
| Bankruptcy Act 1966 (Cth), ss.5, 35,35A,50, 81 Constitution, ss.71, 72, 75 Federal Magistrates Act, 1999 (Cth), ss.8, 102, 103, 104, Schedule Federal Magistrates Court (Bankruptcy) Rules, 2006 (Cth) rr.2.02, 6.02, 6.04, 6.06, 6.07, 6.09, 6.11, 6.12, 6.13, 6.15, 6.17, Schedule 2 |
| Cheesman & Ors v Waters & Anor (1997) 77 FCR 221 Clark v Wood (1997) 78 FCR 356 Hamilton v Oades (1989) 166 CLR 486 Karounos v Official Trustee (1988) 19 FCR 330 Lamb v Ariss & Anor [2006] FMCA 510 Re Abrahams; ex parte Thomas (1985) 9 FCR 232 Re Andrews (1958) 18 ABC 181 Re Aitken; ex parte Trans Tasman Timbers Pty Ltd (1987) 17 FCR 71 Re Huybrechts (1991) 31 FCR 394 Pattison v Hadjimouratis (2006) 155 FCR 226; [2006] FCA 153 |
| Applicant: | DINO TRAVAGLINI (RESPONDENT ON INTERIM APPLICATION) |
| Respondent: | ANTONIO GUISEPPE RACCUIA (APPLICANT ON INTERIM APPLICATION) |
| File number: | PEG 288 of 2006 |
| Judgment of: | Lucev FM |
| Hearing date: | 14 May 2007 |
| Date of last submission: | 14 May 2007 |
| Delivered at: | Perth |
| Delivered on: | 23 May 2007 |
REPRESENTATION
| Counsel for the Applicant (on Interim Application): | Mr S R Sirett |
| Solicitors for the Applicant (on Interim Application): | Murfett Legal |
| Counsel for the Respondent (on Interim Application): | Mr K L Christensen |
| Solicitors for the Respondent (on Interim Application) | Christensen Vaughan |
DECLARATION/ORDERS
The Court declares that a Registrar of this Court has power under s.81 of the Bankruptcy Act 1966 (Cth) and r.6.17 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) to discharge the Summons for Examination issued to the Respondent (Applicant on Interim Application) on 9 March 2007.
The Court orders that paragraph 3(2) and (3) of the Summons for Examination issued to the Respondent (Applicant on Interim Application) on 9 March 2007 be discharged.
The Applicant (Respondent on the Interim Application) pay the costs of the Respondent (Applicant on the Interim Application) of the Interim Application, to be agreed, and if not agreed, taxed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG288 of 2006
| DINO TRAVAGLINI |
Applicant
And
| ANTONIO GUISEPPE RACCUIA |
Respondent
REASONS FOR JUDGMENT
Interim application
The matter before the Court concerns an Interim Application (by the Respondent to the Application proper) made under r.6.17 of the Federal Magistrates Court (Bankruptcy Rules) 2006 (Cth) (“FMC Bankruptcy Rules”) on 9 May 2007 for discharge of a Summons for Examination (“Summons”) issued under r.6.15 of the FMC Bankruptcy Rules by a Registrar of this Court on 9 March 2007.
The Interim Application has been narrowed to seek discharge in part only of the Summons issued against the Respondent (the Applicant in the Interim Application).
As narrowed at the hearing of the Interim Application that portion of the Summons sought to be discharged is that in paragraph 3(2) and (3) which requires the Respondent to bring to and produce at the examination all books in his possession, custody or power in respect of or in connection with:
“(2) your income from all sources, including your position as a dance instructor at the Gatsby Court Ballroom and Function Centre; and
(3) Vasto (WA) Pty Ltd in its own right and as alleged trustee for the Respondent.”
The Interim Application to discharge the Summons in part is opposed by the Applicant (the Respondent to the Interim Application).
Power to discharge a summons for examination
The Interim Application was originally listed in the list of a Registrar of this Court on 10 May 2007.
Evidently, the Registrar expressed doubts about the power of a Registrar to discharge the Summons either in whole (which was being sough at that stage) or in part. Consequently, the matter was listed before the Court constituted by a Federal Magistrate on 14 May 2007.
Section 81 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) relevantly provides as follows:
“(1)Where a person (in this section called the relevant person) becomes a bankrupt, the Court or a Registrar may at any time (whether before or after the end of the bankruptcy), on the application of:
(a)a person (in this section called a creditor) who has or had a debt provable in the bankruptcy;
(b)the trustee of the relevant person’s estate; or
(c)the Official Receiver;
summon the relevant person, or an examinable person in relation to the relevant person, for examination in relation to the bankruptcy.
(1A)A summons to a person by the Court or the Registrar under subsection (1) shall require the person to attend:
(a)at a specified place and at a specified time on a specified day, being a place, time and day that are reasonable in the circumstances; and
(b)before the Court or the Registrar or, if the Court or the Registrar thinks fit, a magistrate;
to be examined on oath under this section about the relevant person and the relevant person’s examinable affairs.
(1B)A summons to a person under subsection (1) may require the person to produce at the examination books (including books of an associated entity of the relevant person) that:
(a)are in the possession of the first‑mentioned person; and
(b)relate to the relevant person or to any of the relevant person’s examinable affairs.
(1C)Before summoning a person on an application under subsection (1) by a creditor, the Court or the Registrar, as the case requires, may impose on the applicant such terms as to costs as it, or he or she, thinks fit.
…
(3)The Court, the Registrar or a magistrate may at any time adjourn the examination of a person under this section either to a fixed date or generally, or conclude the examination.
(4)The Registrar or a magistrate may at any time adjourn the examination of a person under this section for further hearing before the Court.
(5)Where the examination is adjourned by the Registrar or a magistrate for further hearing before the Court, the Registrar or the magistrate, as the case may be, may submit to the Court such report with respect to the examination as he or she thinks fit.
(6)Where the examination is adjourned for further hearing before the Court, the Court may:
(a)continue the examination;
(b)at any time direct that the examination be continued before the Registrar or a magistrate; or
(c)make such other order as it thinks proper in the circumstances.
…
(10)The Court, the Registrar or the magistrate may put, or allow to be put, to a person being examined under this section such questions about the relevant person or any of the relevant person’s examinable affairs as the Court, the Registrar or the magistrate, as the case may be, thinks appropriate.
(10A)Notwithstanding subsection (10), where a person is being examined under this section after the end of the bankruptcy, a question about a matter or thing arising or occurring after the end of the bankruptcy shall not be put, or allowed to be put, at the examination unless the question is about a matter or thing connected with the administration of the relevant person’s estate.
(11)A person being examined under this section shall answer all questions that the Court, the Registrar or the magistrate puts or allows to be put to him or her.
(11AA)Subject to any contrary direction by the Court, the Registrar or the magistrate, the relevant person is not excused from answering a question merely because to do so might tend to incriminate the relevant person.
(11A)The Court, the Registrar or the magistrate may direct a person who is being examined under this section to produce at the examination specified books, or specified classes of books, that are in the possession of the person and are relevant to matters about which the person is being, or is to be, examined.
(11B)Without limiting the generality of subsection (11A), a direction under that subsection may relate to books of an associated entity of the relevant person.
(12)Where a person admits on examination under this section that he or she is indebted to the relevant person, then, the Court, the Registrar or the magistrate, as the case may be, may, on the application of the trustee or a creditor, order the person to pay to the trustee, at or by such time and in such manner as the Court, the Registrar or the magistrate, as the case may be, thinks fit, the whole or a part of the amount in which the person admits he or she is indebted to the relevant person.
(13)Where a person admits on examination under this section that there is in the possession of the person property of the relevant person that is divisible among creditors, the Court, the Registrar or the magistrate, as the case requires, may, on the application of the trustee or a creditor, order the first‑mentioned person to deliver the property to the trustee within a specified period, in a specified manner and on specified terms.
(14)The Court, the Registrar or the magistrate, as the case may be, may direct that the costs of a person, other than the relevant person, examined under this section shall be paid out of the estate of the relevant person.
(15)The Court, the Registrar or the magistrate, as the case may be, may cause such notes of the examination of a person under this section to be taken down in writing as the Court, the Registrar or the magistrate, as the case may be, thinks proper, and the person examined shall sign the notes.”
The “Court” referred to in s.81 is either the Federal Court or this Court, depending on which Court the application is filed, those courts having concurrent jurisdiction in bankruptcy, that jurisdiction being exclusive of the jurisdiction of all courts, other than the High Court under s.75 of the Constitution and the Family Court under ss.35 or 35A of the Bankruptcy Act.
The “Registrar” referred to in s.81 means a Registrar, or Deputy Registrar, District Registrar or a Deputy District Registrar of the Federal Court or a Registrar of this Court: Bankruptcy Act s.5.
The “magistrate” referred to in s.81 is not a Federal Magistrate of this Court, but rather a Magistrate of a State, the Northern Territory, or a Territory of the Commonwealth (other than the Northern Territory): Bankruptcy Act s.5.
Section 81 provides a plethora of powers to a Registrar, but no express power to discharge a summons. If the Registrar has such a power under the Bankruptcy Act it must be implied as a necessary incident of the power to deal with a summons generally.
This Summons has been issued under r.6.15 of the FMC Bankruptcy Rules consequent upon an application under r.6.13 of the FMC Bankruptcy Rules. An application for discharge of the Summons is made under r.6.17 of the FMC Bankruptcy Rules. Rules 6.13, 6.15 and 6.17 of the FMC Bankruptcy Rules provide as follows:
“6.13 Application for summons (Bankruptcy Act s 81)
(1)An application to the Court or a Registrar for an examinable person to be summoned for examination in relation to the bankruptcy of a relevant person must be in accordance with Form 10.
…
(3) The application must be accompanied by:
(a) a draft of each summons applied for; and
(b) an affidavit that complies with subrule (4).
(4) The supporting affidavit must:
(a) state whether the applicant is:
(i)a creditor who has a debt provable in the bankruptcy; or
(ii)the trustee of the relevant person’s estate; or
(iii) the Official Receiver; and
(b) state the facts relied on by the applicant to establish that each person to be summoned is an examinable person; and
(c) if the summons is to require an examinable person to produce books at the examination:
(i) identify the books that are to be produced; and
(ii) give details of:
(A) any inquiry by the applicant about the books to be produced; and
(B) any refusal by the examinable person to cooperate with the inquiry.
Note An examinable person may be required to produce books at an examination that are in the possession of the person and relate to the relevant person or to any of the relevant person’s examinable affairs — see subsection 81 (1B) of the Bankruptcy Act.
…
6.15 Requirements for summons
(1) A summons must be in accordance with Form 9.
(2) A Registrar must:
(a) sign and affix the stamp of the Court to the summons; and
(b) send it to the applicant for service on each examinable person to be summoned for examination.
(3) If the summons requires an examinable person to produce books at the examination, the summons must identify the books that are to be produced.
…
6.17 Application for discharge of summons
(1) An examinable person who is served with a summons and wishes to apply for an order to discharge the summons may do so by filing:
(a) an interim application in accordance with Form 3 in the proceeding in which the summons was issued; and
(b) an affidavit setting out the grounds in support of the application.”
In relation to the examination of a relevant person (in this case the examination is of an examinable person) rr.6.07, 6.09 and 6.12 of the FMC Bankruptcy Rules contain materially identical provisions to rr.6.13, 6.15 and 6.17 of the FMC Bankruptcy Rules. Equivalent rules in relation to the application for a summons for the examination of a debtor or an examinable person in relation to the debtor are contained in rr.6.02, 6.04 and 6.06 of the FMC Bankruptcy Rules. Rule 6.02(1) contains a material difference to rr.6.07(1) and 6.13(1), namely, that the application for examination can only be made to the “Court”, not the “Court or a Registrar”. Applications for examination under r.6.02 relate to s.50 of the Bankruptcy Act. Section 50 relates to a trustee taking control of the debtor’s property before sequestration. Section 50 of the Bankruptcy Act vests the relevant powers of direction and the making of orders in the “Court”. In that regard it can be contrasted to s.81 of the Bankruptcy Act which provides for the “Court” or “Registrar” to carry out certain functions. That distinction is reflected in the terms of r.6.02 when compared to rr.6.07 and 6.13 of the FMC Bankruptcy Rules.
On a plain reading of s.81 of the Bankruptcy Act and rr.6.13, 6.15 and 6.17 of the FMC Bankruptcy Rules it is apparent that a Registrar has power to issue a summons. It therefore follows that a Registrar ought have power to discharge a summons, either in whole or in part, and this is what is provided for by r.6.17 of the FMC Bankruptcy Rules which contains no qualification or limitation on a Registrar’s power to discharge a summons in whole or in part.
Under s.81 of the Bankruptcy Act and rr.6.13, 6.15 and 6.17 of the FMC Bankruptcy Rules and particularly r.6.17 for these purposes, the Court finds that a Registrar has power to hear the present application to discharge the Summons.
The Court has the same view with respect to the operation of s.81 of the Bankruptcy Act and rr.6.07, 6.09 and 6.12 of the FMC Bankruptcy Rules, albeit that view is obiter. In relation to the immediately preceding rules, the Court notes that in respect of the non-attendance of a relevant person for examination, r.6.11 of the FMC Bankruptcy Rules expressly provides for both the Court and a Registrar to discharge a summons. That express provision is not inconsistent with a power of discharge existing under r.6.12 of the FMC Bankruptcy Rules or, for present purposes, r.6.17 of the FMC Bankruptcy Rules. Rather, it confirms the existence of the power in the Registrar. Rules 6.12 and 6.17 are merely silent as to the Registrar’s power, which must necessarily be implied.
The same result does not follow with respect to rr.6.02, 6.04 and 6.06 of the FMC Bankruptcy Rules because r.6.06 (read in conjunction with the ability to make the application to the Court only under r.6.02) provides the Court only (and not a Registrar) with the power to discharge a summons in relation to a debtor, or an examinable person in relation to the debtor. The Court’s view (again obiter) is reinforced by the fact that there is no provision in Schedule 2 of the FMC Bankruptcy Rules for the powers of the Court under s.50 of the Bankruptcy Act to be delegated by direction to a Registrar.
Even if the Court is wrong in relation to a Registrar’s power to discharge a summons under r.6.17 (and r.6.12) the power of the Court to discharge a summons may by direction of the Court be exercised by a Registrar in any case: Federal Magistrates Act 1999 (Cth), s.102(2)(i) (“FM Act”) and r.2.02 and Schedule 2, FMC Bankruptcy Rules.
The issuance of a summons is an administrative function when performed by a Registrar of this Court: Cheesman & Ors v Waters & Anor (1997) 77 FCR 221 at 229 per Hill, Heerey and Sundberg JJ (“Cheesman”); Clark v Wood (1997) 78 FCR 356 at 357 per Finkelstein J (“Clark”); Lamb v Ariss & Anor [2006] FMCA 510 at paras 10-11 per McInnis FM; likewise any discharge. The issuance of a summons and treatment of any subsequent application for discharge by a Registrar of this Court is administrative, in a manner not dissimilar to a Registrar going behind a judgment in an application for a sequestration order where the same Registrar had earlier decided that the bankruptcy notice and petition were in proper form: Cheesman at 229 per Hill, Heerey and Sundberg JJ.
Even if the power to discharge a summons is judicial, it is a judicial power which prior to the establishment of this Court was delegable where exercisable by a Justice of the Federal Court (a Chapter III Justice under the Constitution) to a Registrar of the Federal Court: Cheesman at 229 per Hill, Heerey and Sundberg JJ. Likewise, absent statutory prescription, a Federal Magistrate (also a Chapter III Justice: FM Act s. 8 and Schedule 1, cl.4(1); Constitution ss.71 and 72) might delegate this judicial power to a Registrar of this Court to exercise. Statutory prescription however confirms the power of a Federal Magistrate to delegate to a Registrar of this Court, or direct a Registrar of this Court to exercise, the power to discharge a summons: FM Act s.102(2)(i) and 103(1) and (2), and FMC Bankruptcy Rules r.2.02 and Schedule 2,as they relate to the Bankruptcy Act s. 81.
In Cheesman the distinction was drawn between more and less important judicial functions, with particular reference to the ability of a court to rehear de novo a matter in respect of which a Registrar has made an order: Cheesman at 229 per Hill, Heerey and Sundberg JJ. In the case of a summons discharged by a Registrar that is an exercise of power reviewable by this Court: FM Act ss.102(2), 103(1) and 104(2) (and for the not dissimilar non-statutory position prior to the establishment of this Court see Clark at 359 per Finkelstein J). That review is a review de novo: Pattison v Hadjimouratis (2006) 155 FCR 226; [2006] FCA 153.
There are also practical reasons why the Registrars must have a power to discharge a summons. What has happened in this matter is a good example of the delay and significant inconvenience that can be caused in relation to an examination under s.81 of the Bankruptcy Act if a Registrar does not have power to discharge a summons. Greater delay and more inconvenience might arise if the application to discharge were to arise in the course of the examination.
For the above reasons the Court finds and declares that a Registrar of this Court has power under s.81 of the Bankruptcy Act and r6.17 of the FMC Bankruptcy Rules to discharge the Summons, or part thereof.
It remains the case however that in any particular case a Registrar may still refer an application to discharge a summons for examination (under s.81 of the Bankruptcy Act and r.6.17 of the FMC Bankruptcy Rules) to the Court under s.104(4) of the FM Act.
The iterim aplication to discharge the summons
Under s.81 of the Bankruptcy Act a trustee is empowered to discover the bankrupt’s assets and gain evidence to assist recovery of those assets: Karounos v Official Trustee (1988) 19 FCR 330 at 335 per Forster, Woodward and Spender JJ (“Karounos”); and, to enable a trustee to determine if offences might have been committed, and to obtain evidence in support thereof: Hamilton v Oades (1989) 166 CLR 486.
Much has been said about the broad and inquisitorial nature of the power to examine, and the concern of courts that care be exercised in allowing examinations and in the course of examinations themselves, so that the power is not abused and examinees are not embarrassed or disadvantaged. As the Federal Court said in Re Abrahams; ex parte Thomas (1985) 9 FCR 232 at 237 per Lockhart J:
“They establish, amongst other things, that the power described by s.81 of the Act is an extraordinary power, that it must be carefully exercised, that the power given to the court or a Registrar to issue a summons under s.81 is a discretionary one, and that no rigid rules should be laid down for the proper exercise of the discretion by the court or the Registrar, but that it must be borne in mind at all times that in the exercise of that discretion the court or the Registrar must not lend aid to an unfair or an oppressive use of this compulsory process.”
See also Karounos at 335 per Forster, Woodward and Spender JJ.
There is a balance to be achieved between competing interests: namely, the public interest to ensure the efficient and open administration of the bankrupt estate as against the private interest of an examinee to confidentiality and privacy in respect to matters irrelevant to the bankruptcy. As the Federal Court said in Clark at 359 per Finklestein J:
“So, it is obvious that if an examination is not strictly controlled real harm may be suffered by an examinee and by other persons as well. Private, sensitive or confidential information might be disclosed when it should not have been. Incriminating answers may be given when the questions that led to them should not have been asked. Some unfair advantage might be obtained for other litigation.”
The examination power is restricted in two major instances. First, where there is an abuse of process, including, relevantly where a summons has been drafted too widely: Karounos at 335 per Forster, Woodward and Spender JJ; Re Aitken; ex parte Trans Tasman Timbers Pty Ltd (1987) 17 FCR 71 at 77 per Einfeld J; and, secondly, in the case of legal professional privilege for an examinee other than the bankrupt personally.
The Full Court of the Federal Court in Karounos at 335 per Forster, Woodward and Spender JJ, said:
“the summons itself should be expressed in terms which make intended areas of enquiry as clear as the circumstances of the case permit, and which specify as clearly as possible any books and records which the person summonsed has to produce: see Re Andrews (supra) at 186-187.”
In Re Andrews (1958) 18 ABC at 181, 186-187 per Clyne J, the former Federal Court of Bankruptcy said:
“It is, …, not sufficient to require the “witness to give evidence in the above matter” and it is obvious that the request to the witness to produce the documents specified in the summons is oppressive. In my opinion, the words of Jordan CJ in The Commissioner of Railways v Small (1938), 38 S.R. (N.S.W.) 564, at p.573, are particularly apposite: “A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party. If it be addressed to a stranger it must specify with reasonable particularity the documents which are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter … A stranger to the cause ought not be required to go to the trouble and perhaps expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant … and if a subpoena duces tecum is issued to such a person in an objectionable form, the witness may apply to the court to have it set aside.”
It is against that background that the Interim Application for discharge of part of the Summons must be determined.
Paragraph 3(2) of the summons
The requirement to produce books related to the Respondent’s “income from all sources” is oppressive because it is unlimited in time. The relevant events as they relate to the examinable affairs of the bankrupt and the Respondent’s involvement therein occurred within a specific time frame or time frames. It must therefore be possible to frame a request for production of books in relation to the Respondent’s income having regard to those time frames, rather than the present request which captures all the income ever earned by the Respondent for all time. If it is asserted that the Respondent’s income was somehow used to obtain funds to acquire an alleged beneficial interest in the property referred to in para 3(1) of the Summons, then that ought to be stated in the request. Otherwise, the request will capture information in respect to the Respondent’s income which might be private or completely irrelevant to the bankrupt’s examinable affairs. By way of example, given the content of paras 10-14 of the Affidavit of the Applicant dated 3 November 2006 – and the material otherwise in that Affidavit - it is not apparent what relevance or use the Applicant’s income as an accountant during 2007 might be.
The Court will therefore order that paragraph 3(2) of the Summons be discharged.
Paragraph 3(3) of the summons
If, as was alleged in argument by Counsel for the Applicant (Respondent to the Interim Application) that the Respondent (as beneficiary of the relevant property) had been making payments on the mortgage from his income (whatever its source) there is no reason why an appropriate time frame and subject matter can not be specified in the request rather than the current “catch-all” request.
Again, this is a request unlimited as to time, and therefore oppressive, but also oppressive because of its vagueness. The requirement to produce books concerning “Vasto (WA) Pty Ltd [(“Vasto”)]in its own right” is meaningless in the context of any involvement by the Respondent in the examinable affairs of the bankrupt. Even when combined with “and as alleged trustee for the respondent” the matter is advanced no further. There is a lack of relevance and specificity: “trustee for the respondent” for what? The Court does not know, nor does the Respondent to whom the request is directed, and neither can be expected to guess or assume. There must be some subject matter context which the Applicant can put around the requirement to produce the books of Vasto as an alleged trustee for the Respondent. In any event, the lack of a time frame again makes the requirement oppressive. As presently framed, the requirement is to produce Vasto’s books in the possession, etc of the Respondent for all time and unrelated in time to the subject matter of the examinable affairs of the bankrupt.
The Court will order that para 3(3) of the Summons be discharged.
The Court also notes generally that the Summons goes further than s.81B of the Bankruptcy Act prescribes. The Summons can only be for documents in “possession”, and not otherwise: Re Huybrechts (1991) 31 FCR 394 at 398.
Legal professional privilege
The issue of legal professional privilege was raised in the hearing of this matter. In the Court’s view it is a matter which will need to be addressed in relation to specific documents, and therefore it is appropriate that those documents be identified, and be the subject of argument before the Registrar (or this Court if the Registrar so determines) at a future time.
Conclusions
There will be a declaration in relation to the powers of the Registrar consistent with the findings in para 23 above and an order that paras 3(2) and 3(3) of the Summons be discharged.
The Applicant (Respondent on the Interim Application) is to pay the Respondent’s (Applicant on the Interim Application) costs, if not agreed, to be taxed.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 23 May 2007
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