RAS CATCHWORDS Bankruptcy - Public Examination - Whether Bankrupt has a right or entitlement to put questions to a witness summoned under s.81 of the Bankruptcy Act. Bankruptcy Act, 1966 Re Beall; Ex parte Beall [18941 2 Q.B. 135. Re Cside1; Ex parte Andrew (1979) 39 F.L.R. 387 Twist v. Randwick Municipal Council (1976) 136 C.L.R. 106 IN THE MATTER of a reference by the Deputy Registrar in Bankruptcy to the Court under rule 119 of the Bankruptcy Rules in Re: Joy Naomi Jacka; Ex Parte Joy Naomi Jacka. No.781 of 1985 Spender J. 28 May 1986 Brisbane isi Uh 3° IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISTON BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND ESTATE NO.781 OF 1985 RE: JOY NAOMI JACKA EX PARTE THE ABOVE REFERENCE TO THE COURT UNDER RULE 119 SPENDER J. DATE JUDGMENT DELIVERED: 28 MAY, 1986 APPEARANCES : for the Official Trustee - Mr. F. Clair, instructed by Messrs. McLaughlin Gordon & Lennon . for the Bankrupt - Mr. J.A. Logan, instructed by Messrs. Primrose, Couper, Cronin & Rudkin. Peter Applegarth Associate to Spender J. IN THE FEDERAL COURT OF AUSTRALTA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND ESTATE NO.781 OF 1985 RE: JOY NAOMI JACKA EX PARTE THE ABOVE REFERENCE TO THE COURT UNDER RULE 119 MINUTES OF ORDER JUDGE MAKING ORDER: Spender J. DATE ORDER MADE: 28 May 1986 WHERE MADE: Brisbane Answer the question referred as follows: Question: Does the bankrupt have a right or entitlement to put questions to a witness summonsed to give evidence pursuant to the provisions of Section 81 of the Bankruptcy Act? Answer: No. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISTON BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND ESTATE NO.781 OF 1985 RE: JOY NAOMI JACKA EX PARTE THE ABOVE REFERENCE TO THE COURT UNDER RULE 119 SPENDER J. 28 MAY, 1986 REASONS FOR JUDGMENT Pursuant to r.119 of the Bankruptcy Rules, the Deputy Registrar in Bankruptcy has submitted the following question which he seeks to have determined by the Court: "Does the bankrupt have a right or entitlement to put questions to a witness summonsed to give evidence pursuant to the provisions of Section 81 of the Bankruptcy Act?" In my opinion, the answer is "No". It is necessary to set out s.81 of the Bankruptcy Act 1966, in full. "81(1) 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 Official Receiver or 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. (2) An examination under this section shall be held in public. (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 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. (7) A person summoned to attend before the Court, the Registrar or a magistrate for examination under this section is entitled to be represented, on his examination, by counsel or a solicitor, who may re-examine him after his examination. (B) The trustee or a creditor of the bankrupt may take part in the examination and, for that purpose, may be represented by counsel or a solicitor or by an agent authorized in writing for the purpose. (9) Without limiting the generality of sub-section (8), where the Official Trustee is the trustee, the Official Trustee may, for the purpose of taking part in the examination, be represented by the Official Receiver. (10) The Court, the Registrar or the magistrate may put to a person being examined under this section, or allow to be put toa person being examined under this section, such questions concerning the bankrupt or his trade dealings, property or affairs, as the Court, the Registrar or the magistrate, as the case may be, thinks proper. (11) A person being examined under this section shall answer all questions that the Court, the Registrar or the magistrate puts or allows to he put to him. (12) Where a person admits on examination under this section that he is indebted to the bankrupt, then, the Court, the Registrar or the magistrate, as the case may be, may, on the application of the trustee or a creditor who has proved his debt, 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 is indebted to the bankrupt. (13) Where the bankrupt or another person admits on examination under this section that he has in his possession or power any of the property of the bankrupt, then, the Court, the Registrar or the magistrate, as the case may be, may, on the application of the trustee or a creditor who has proved his debt, order the bankrupt or the other person, as the case may be, to deliver that property to the trustee at or by such time, in such manner and on such terms as the Court, the Registrar or the magistrate, as the case may be, thinks fit. (14) The Court, the Registrar or the magistrate, as the case may be, may direct that the costs of a person examined under this section shall he paid out of the estate of the bankrupt. 4. (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. (16) The power conferred on the Court, the Registrar or the magistrate, as the case may be, by sub-section (15) is in addition to the powers of the Court, the Registrar or the magistrate, as the case may be, under section 255. (17) Notes taken down and signed by a person in pursuance of sub-section (15), and the transcript of the evidence given at the examination of a person under this section (being a transcript certified, or certified, signed and sealed, in pursuance of section 255) - (a) may be used in evidence in any proceedings under this Act in which the person is a party; and (b) shall be open to inspection by the person, the bankrupt, the trustee or a person who states in writing that he 1s a creditor of the bankrupt without fee and by any other person on payment of the prescribed fee." In Re Beall; Ex parte Beall £1894] 2 Q.B. 135, a bankrupt had desired to be present at an examination of witnesses who had been summoned for examination under s.27 of the Bankruptcy Act 1883 (U.K.). The bankrupt had desired also to cross-examine the witnesses but the Registrar had refused to allow him to be present. The bankrupt argued in the Court of Appeal that, as he had no opportunity of cross-examining the persons examined in private, their evidence was one-sided. He sought therefore the removal from the file of proceedings in the bankruptcy of the depositions of these witnesses. Counsel for the Official Receiver was not called on. Lord Esher M.R. said at 136-7:- "Mr. Reed's first great complaint was that, when these witnesses were examined under s.27, the debtor was not allowed to be present to cross-examine them as to the truth of what they said, and as to their character. It was said that, this being contrary to natural justice, these depositions ought not to be put on the file. Ought, then, the debtor to be allowed to be present for that purpose at that stage? Every judge has decided that the debtor has no right to be present then. As to the notion that it is contrary to natural justice that the debtor should not be permitted to be present, there is no adjudication against him at that stage. There is only information being collected for the purpose of being laid before the Court of Bankruptcy when it has to consider whether it will or will not grant a discharge to the bankrupt, under ss.28 and 69 of the Act. The examination is in one sense a judicial proceeding, because it is a step in the course of judicial procedure, but it 1s not a judicial decision." Lopez L.J., at p.139 said:- "T also am of opinion that this application cannot be granted. It 1s an substance an application that these documents, containing the evidence of certain witnesses, should be taken off the file. It was said (and at first I was inclined to think that there was some force in this argument) that it was very unjust to the debtor that this evidence should be taken behind his. back. I thought at first that there was something in that; but, when one considers the purpose and result of this evidence, I think there 1s nothing unjust in its being so taken. The examination of these witnesses is taken by the official receiver simply for the purpose of instructing his mind and enabling him to make his report." And, later, he said on the same page:- "When, therefore, one considers what is the object of such an examination, I do not think it can be said that there is anything unjust to the debtor in not allowing him to be present. But there is ample authority to show that the debtor has no right to be present when such evidence is being taken." Notwithstanding the numerous changes in bankruptcy legislation since 1883, it seems that there is no more recent case touching on this question. Counsel for the bankrupt sought to distinguish Beall's Case. He relied in particular on the circumstance that the examination of witnesses under s.27 of the Bankruptcy Act 1883 (U.K.) was in private, a consideration to be contrasted with the provision of 81(2) and, more particularly, on the provisions of s.81(12) and 81(13) which, he submitted, amounted to a power for the Court, Registrar or magistrate to make orders in respect of property, in which it was submitted the requirements of natural justice would dictate that the bankrupt would be entitled to he heard. By s.81(8), provision is expressly made for the trustee and any creditor to take part in the examination of a person summoned under s.81(1). The absence of a similar provision in respect of the bankrupt is a very telling indication that the bankrupt has no similar entitlement. Notwithstanding such omission, it was submitted that the principles of natural justice require a bankrupt to be entitled to take part in such an examination. In the light of that submission, the nature and purpose of a s.81 examination must be looked at. 7. Section 81 is directed to the discovery of the property of the bankrupt and permits any of the persons referred to in (a) or (b) of s.81(1) to be summoned and give evidence concerning the bankrupt, his trade dealings, property or affairs. A s.81 examination relates to a single witness and, although there may be anumber of persons examined in respect of any particular bankrupt, each is a separate examination; there is not one enquiry with a number of witnesses. The nature of a 5.81 examination was discussed by Lockhart J. in Re Csidei; Ex parte Andrew (1979) 39 F.L.R. 387 at 391:- "The analogy between bankruptcy and the winding up of companies in this respect, and the nature of the inquisitional power conferred by s.96 of the Bankrutcy Act, 1869 (Imp.), a predecessor of s.81 of the Act, was expressed by Jessell M.R. in Ex parte Willey; Re Wright in these terms: 'Now that is a very grave power to entrust to any Court or any man, viz., power to summon any other man whom you suspect (for mere suspicion will do) to be capable of giving information, and to get any information from him, although that information may be extremely hostile to the interests of the man himself. It is a power which, so far as I know, is found nowhere except in bankruptcy and the winding-up of companies (which is a kind of bankruptcy); it is avery extraordinary power indeed, and it ought to be very carefully exercised' (1883) 23 Ch.D. 118, at p.128. See also Rees v. Kratzmann per Windeyer J. (1965) 114 C.L.R. 63, at p.79. The power conferred by s.81 to summon persons to attend to give evidence or produce documents is, like the power conferred by s.294 of the Uniform Companies Act, 'an extraordinary power of an inguisitorial nature': see Re North Australian Territory Company per Bowen L.J. (1890) 45 Ch.D. 87 at 93. The examinee is not a witness in the ordinary sense and the ordinary rules of procedure do not govern the examination. The application to examine is made ex parte and the person whom it is sought to examine is not heard on the application for the issue of a summons. " Of this "extraordinary power", it is to be noted that there are some significant differences between the provisions of 5.69, dealing with the public examination of a bankrupt, and s.81, dealing with the examination of a person, who may be the bankrupt, in respect of the bankrupt, his trade dealings, property or affairs. Section 69(12), in addition to terms similar to s.81(11), further provides:- ",..unless the Court, the Registrar or the magistrate, as the case may be, otherwise directs, {the bankrupt) is not excused from answering any such question by reason only of the fact that the answer to it may tend to incriminate him." No similar express exclusion of the privilege against self incrimination appears in s.81l. Until 1980, a bankrupt was not entitled to be represented on his public examination. Section 69(8), which was substituted by s.38 of the Bankruptcy Act Amendment Act 1980, permits a bankrupt on his examination under s.69 to be represented by counsel or solicitor, but not by an agent, which is a means which the trustee ora creditor has of being represented: s.69(9). Similarly, s.81(7) provides that a person summoned to a s.81 examination is entitled to be represented by counsel or solicitor, while s.81(8) provides that the trustee or a creditor may "take part in the examination and, for that purpose be represented by counsel or a solicitor or by an agent authorised in writing for that purpose." Very recently, para.81(17)(a) was amended, to enable the transcript or notes of the relevant examination to be used in proceedings "in which the person is a party"; previously the use was restricted to proceedings "against the person". A similar amendment was made to para. 69(20)(a). Thus in discharge proceedings, which are not proceedings "against the bankrupt", neither the transcript of the bankrupt's evidence in his public examination under s.69, nor an examination of him under s.81 previously could be used. However, it seems to me that the transcript or notes of the evidence of a person, other than the bankrupt, summoned under s.81, cannot be used ona discharge application by the bankrupt, because that person is not "a party" to those proceedings. This goes some way to addressing the "natural justice" basis of the reference. As to a consideration of s.81(12) and (13), close attention to those provisions shows that the power given to the Court, Registrar or magistrate is, on application by the trustee or a proved creditor, to give effect to an admission by the person being examined concerning the property of the bankrupt, and does not involve a judicial determination of competing rights as to property. If an admission is erroneously made that an amount is owed to the bankrupt, or that property of the bankrupt is held, the person properly entitled, which ex hypothesi is not 10. the bankrupt, is not precluded by an order under s.81(12) or (13) from enforcing his or its rights. I do not see any room, based on the principles of natural justice, for asserting that the bankrupt is entitled to be heard before such an order is made. These provisions may reflect a consciousness of the limitations on the judicial power of the Commonwealth. My main concern has been the precise point that initially troubled Lopez L.d. in Beall (supra). In that case, the depositions from witnesses who had been examined in the absence of the bankrupt, and therefore without cross-examination by him, formed part of the basis for the report of the official receiver, on which the registrar refused to grant the bankrupt a discharge. On whether "it was very unjust that this evidence should be taken behind his back", Lopez L.J. said at 139:- "When the debtor applies for his discharge, his application is brought before the tribunal which has to decide whether he shall be discharged or not, and then he has the fullest opportunity, 1f£ he thinks fit, of impeaching the evidence of these witnesses. I am inclined to think that he might, if he desired it, call the witnesses himself and cross-examine them, inasmuch as they would be in the nature of hostile witnesses, and might thus extract everything from them - everything which would go to impeach their testimony. When, therefore, one considers what is the object of such an examination, I do not think it can be said that there is anything unjust to the debtor in not allowing him to be present." Under s.149(3)(c),the Registrar, the Inspector-General or the trustee, or a creditor with leave, may enter an objection to the automatic discharge of a bankrupt by operation of law. Often the objection will be based, in part, on the evidence of 11. persons summoned under s.81. The effect of lodging the objection, in many cases, will be to require the bankrupt to apply to the Court under s.150 for discharge. On such an application, s.150(3) provides:- "On the hearing of an application under this section, the Court shall take into considertion a report in writing by the trustee concerning the bankrupt, his conduct, trade dealings, property and affairs both in respect of the period before and the period after the applicant became a bankrupt." And s.150(12) provides:- "A report referred to in sub-section (3) 1s, for the purposes of this section, prima facie evidence of the statements contained in it." It emerges that a bankrupt may be denied, on material he is not able to challenge by cross~-examination, automatic discharge by operation of law. Moreover, such material may lie at the heart of the trustee's report under s.150(3), with the evidentiary consequences of prima facie validity that s.150(12) confers. However, it is an error to confuse questions of onus with the quite different question of the right to be heard. On an application for discharge, the bankrupt has the right to challenge all that is asserted against him. In my opinion, the fact that he cannot undertake that challenge at an earlier stage, does not involve a denial of natural justice: Twist v. Randwick Municipal Council (1976) 136 C.L.R. 106. 12. This is the conclusion to which the Court of Appeal came in Beall. The principles of natural justice and the circumstances calling for their application have received a great deal of curial attention since that case was decided: I refer, merely by way of example, to Ridge v. Baldwin £1964] A.C. 40; Mahon v. Air New Zealand Ltd. (1983) 50 A.L.R. 193; Kioa v. Minister for Immigration and Ethnic Affairs (1986) 62 A.L.R. 321. In the light of the many changes in bankruptcy legislation since Beall was decided in 1894 and, more particularly, the significant changes in 1980 touching the right of a bankrupt to representation, the omission in s.81 of a reference to a right of a bankrupt "to take part in the examination" of a person summoned under that section manifests, 1m my opinion, a clear intention that a bankrupt has no such right. I answer the question referred as follows: "A bankrupt has no right or entitlement to put questions to a witness summonsed to give evidence pursuant to the provisions of Section 81 of the Bankruptcy Act." rudqaem herein of His Honour Associ