e— b& BANKRUPTCY ACT 1966 IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY No. 151 of 1976 ww GENERAL DIVISION Re: GORDON DOUGLAS BANFIELD Applicant Ex Parte: THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent CORAM: Fox J 25 August 1981 REASONS FOR JUDGMENT This is an application to review the decision of the Registrar on the admissibility of questions directed to the bankrupt by counsel for the trustee in an examination under s.69 of the Bankruptcy Act. The trustee has sought review before the Court, and that application has been opposed by the bankrupt. The matter arises in a simple way. The bank- rupt was the guarantor of a number of mortgages, the mortgagors being in some or all cases incorporated. There apparently was default under one or more of the mortgages and the mortgagees have proved in this bankruptcy for an amount of approximately $1,700,000 against the bankrupt under the guarantees thus given. There are proceedings pending in the Supreme Court, of Victoria by one of the indebted companies, known as Downtown Car Parks Pty. Limited, against the mortgagee, namely the Australian and New Zealand Banking Group Limited, it being alleged apperently that a sale by the Rank was at an under value. There may be other allegations as well: that is the one to which attention has been turned for present purposes. The bankrupt in the course of the examination to which I have referred was being asked about his liability under the guarantees or at least one of then, and in that connection was being asked as to his knowledge concerning any sales at an under value or any other collusive arrangements that might have been made, or about to be made, between the Company to which I have referred and the Bank to which I have referred. Several questions alnng these lines were asked and answered and then obiection was taken on behalf of the bankrupt by his solicitor, broadly on the grounds that the examination was travelling outside the power given by s.69(1). It was in substance pointed out that the questions related to a situation which primarily arose between the company and the mortgasee, and that any interest of the bankrupt was secondary. Two or three lines of reasoning then seemed to have converged. It was thought that the matter should await the resolution of the Supreme Court proceedings, which I understand have been on foot for some time. Tt was also thought that if any questions were to be asked ahout these matters it was really a matter for the liquidator of the Company or the liquidators of the Companies and that, as I have already mentioned, the matter so far as the bankrupt is concerned was at one stage remove. It is always difficult to determine in advance how far any line of questioning should extend, but it does seem to me that the questions were stopped at a premature stage. Put more directly, I think that questions which affected the liability of the bankrupt under the mortgages or any of them or which might effect the amount ultimately provable by the mortgagees in the bankrupt estate were admissible. I doubt whether this is disputed. What does need to be emphasised is that the bankrupt estate and the trustee as its administrator had a direct interest in the state of account between the mortgagor and the mortgagee. If there had been a sale at an under value this would in one way or another affect the amount that could properly be proved by the mortgagee in the bankruptcy and collusive conduct might have the same effect. The pendency of the proceedings in the Supreme Court does not of itself provide a reason for stopping the line of questioning, but a particular situation may arise, or may appear, as a result of which it would be prudent, if not legally necessary, to postpone that part of the examination. There is another aspect. If it be the fact that only one Company has taken proceedings and the matter is now a number of years old, it may be that as a result of something now said by the bankrupt some action should be taken by the trustee to activate or at least to resolve matters. This would only be done with due caution and with regard to the interests of the creditors as a whole. It does not at all follow that because the liquidators of the companies were not taking action that it would be correct for the trustee passively to accept that situation without himself becoming as well informed as he could and taking any consequential action which seemed appropriate. I do not think in the circumstances it is necessary for me to add anything more. The order sought is one declaring that the Registrar should allow questions along the lines outlined in paragraph one of the application. I think I will certainly return the matter to the Registrar with this indication of my reasons, so that he may proceed with the examination in accordance therewith. TTF I certify that this and the 3 preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Fer. Associate uted: 25.3 Gl. Alrnandra Wedutonte. oe Secrra