w NO! FOK DISTRIBU 110 ° o] LS IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION No. 573 of 1981 BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY wee ee ew Re: DOBROSOV_ PESTC A Discharged Bankrupt Ex Parte: DOBROSOV_ PESTC and BORKA PESTIC Applicants THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent MINUTE OF ORDER JUDGE MAKING ORDER : Neaves J. DATE OF ORDER : 25 February 1987 WHERE MADE : Canberra THE COURT ORDERS THAT: 1. The summons herein directed to Dobrosov Pesic be amended - (a) by deleting the words and figures "All documents including the files of your solicitor relating to the purchase and sale of 5 Gillies Street, Curtin by you and your wife"; and (bD) by substituting for the words "both Curtin and Mawson properties" the words "the Mawson property". 2. The summons herein directed to Borka Pesic be amended - (a) by deleting the words and figures "All documents including the files of your solicitor relating to the purchase and sale of 5 Gillies Street, Curtin by you and your husband"; and (b) by substituting for the words "the Curtin and Mawson and Torrens properties" the words "the Mawson property". 3. Otherwise the applications be dismissed. 4, There be no order as to costs. Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISTON BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND ) ) ) ) No. 573 of 1981 ) ) THE AUSTRALIAN CAPITAL TERRITORY ) Re: DOBROSOV_ PESIC A Discharged Bankrupt Ex Parte: DOBROSOV PESIC and BORKA PESIC Applicants THE OFFICIAL TRUSTEE IN BANKRUPTCY Respondent CORAM: Neaves J. DATE: 25 February 1987 REASONS FOR JUDGMENT Before the Court are two applications. The first is an application by Dobrosov Pesic to set aside a summons requiring him to attend for public examination pursuant to sub-s.81(1) of the Bankruptcy Act 1966 (Cth) ("the Act"). The second is a similar application by his wife, Borka Pesic, in respect of a summons directed to her pursuant to that sub-section. The applications are brought pursuant to sub-s.14(5) of the Act. Mr Pesic became a bankrupt on 3 July 1981 upon the acceptance and endorsement by the Registrar in Bankruptcy of a debtor's petition presented on the preceding day (s.55 of 2. the Act). The Official Trustee in Bankruptcy ("the trustee") became the trustee of his estate. He was, by force of s.149 of the Act, discharged from bankruptcy as from 4 July 1984. Mrs Pesic, so far as appears, 1s not and has never been a bankrupt. The summons directed to Mr Pesic was issued by a Deputy Registrar in Bankruptcy on 26 November 1985 on the application of the trustee. The summons required Mr Pesic to attend before a Deputy Registrar "to give evidence in connection with the question of your equity in Block 17 Section 23 Mawson at the time of its sale on 26 May 1981 and to give evidence and to produce any of the documents in your custody or power relating to yourself or to your trade dealings, property or affairs and, in particular, the following documents:- All documents including the files of your solicitor relating to the purchase and sale of Block 17 Section 23 Mawson by you and your wife. All documents including the files of your solicitor relating to the purchase and sale of 5 Gillies Street, Curtin by you and your wife. A copy of Income Tax Returns for the years ending 30 June 1975 to 30 June 1982. A copy of the Bank Statements, Pass Books, Finance Company Statements and Pass Books, cheque butts, deposit slips and other financial documents relating to the years ending 30 dune 1975 to 30 June 1982. All records evidencing payments of mortgage Payments in respect of both Curtin and Mawson properties." 3. The summons directed to Mrs Pesic was issued on 27 November 1985. She was required to attend - "to give evidence in connection with the question of your equity in Block 17 Section 23 Mawson at the time of its sale on 26 May 1981 and to give evidence and to produce any of the documents in your custody or power concerning the bankrupt Dobrosov Pesic or his dealings, property or affairs, and in particular, the following documents:- All documents including the files of your solicitor relating to the purchase and sale of Block 17 Section 23 Mawson by you and your husband. All documents including the files of your solicitor relating to the purchase and sale of 5 Gillies Street, Curtin by you and your husband. A copy of Income Tax Returns for the years ending 30 June 1975 to 30 June 1982. A copy of the Bank Statements and Pass Books, Finance Company Statements and Pass Books, cheque butts, deposit slips and any other financial documents relating to the years ending 30 June 1975 to 30 June 1982. All records evidencing payments of mortgage payments in respect of the Curtin and Mawson and Torrens properties." The justification for the public examination of Mr and Mrs Pesic is said by the trustee to lie in the following circumstances. Mr and Mrs Pesic were prior to 26 May 1981 registered jointly as proprietors of a Crown lease of Block 17, Section 23, Mawson in the Australian Capital Territory. On 23 March 1981 and 20 April 1981 respectively Mr Pesic obtained personal loans from Capital Finance Co. Pty. Limited ($4,000) and Mercantile Credits Limited ($1,500). According to Mr Pesic the moneys so obtained were used ta renovate the kitchen and landscape the garden of the property at Mawson "to put the home in order for sale". On 26 May 1981 the property was sold for a consideration of $51,000, the net amount available from the sale (after the discharge of a mortgage and the payment of legal costs and agent's fees) being said by Mr Pesic to be $23,518.93. That amount was used by Mrs Pesic to purchase the Crown lease of a property being Block 7, Section 21, Torrens in the Australian Capital Territory and she became the sole registered proprietor of that lease on or about 3 June 1981. In his statement of affairs sworn on 30 June 1981 Mr Pesic disclosed no beneficial interest in any real property but did disclose Capital Finance Co. Pty. Limited and Mercantile Credits Limited as creditors in the sums of $4,000 and $1,500 respectively. The trustee wishes to conduct' the public examinations to ascertain whether, having regard to the above circumstances, Mr Pesic was, prior to his discharge, entitled to property which formed part of his bankrupt estate. No issue has been raised as to the locus standi of the applicants to bring the present applications before the Court. Two grounds are relied upon in support of the applications. First, it ais submitted that the power conferred on the Court or the Registrar by sub-s.81(1) of the Act does not survive the discharge of a bankrupt from his bankruptcy. The second ground, which is relied upon in 5. the event of the first ground being determined adversely to the applicants, 1s that the Court should, in the particular circumstances to which 1t will be necessary to refer, set aside the summonses in the exercise of its discretion. A further submission was put, though not developed, that the summonses were, at least in part, expressed in such wide terms as to be oppressive. Sub-section 81(1) of the Act provides: "(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 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 andat atime 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." In the course of preparing a judgment that the power conferred by sub-s.81({(1) survives the discharge of a bankrupt, 1t came to my attention that that question had been decided to the contrary effect by a single judge of this Court and that the judgment was the subject of appeal 6. to a Full Court. I, therefore, delayed further consideration of this matter pending the resolution of that appeal. Judgment in the appeal, Official Receiver in Bankruptcy v. Todd, was delivered by a Full Court constituted by Fisher, Lockhart and Spender JJ. on 24 December 1986, the Court holding, by majority, that the power conferred by sub-s.81(1) survives the discharge of a bankrupt. In the light of the decision of the Full Court, the first of the grounds relied upon in support of the present applications cannot succeed. I turn now to the ground that the Court should, in the exercise of its discretion, set aside the summonses. Essentially, the applicants rely on the delay of over three years which occurred between the time when the trustee became aware of the matters identified in the summonses as the matters in relation to which he now seeks to have them examined and more than 16 months after Mr Pesic was discharged from bankruptcy by virtue of s.149 of the Act. The delay is such, so it is submitted, that to proceed with the examinations would be harsh and oppressive. The purchase of the Crown lease of the property Block 7, Section 21, Torrens took place in or about May 1981. Evidence was tendered on behalf of the applicants of certain correspondence between Mr Pesic and the trustee in November 1981 and April and May 1982. The evidence was tendered not to prove the truth of the matters stated therein but only to prove the extent of the trustee's knowledge at that time of the matters in relation to which he now seeks to examine the applicants. The evidence was objected to and was admitted subject to objection. Having further considered the matter I am satisfied that the evidence should be admitted on the basis on which it was tendered. The earliest letter, that of 26 November 1981, addressed to the trustee by Mr Pesic refers to an enquiry made by the trustee. The terms of that inquiry are not in evidence though its general nature can be inferred. The letter reads: "In answer to your enquiry, the loans were obtained from the two finance companies for renovation of the kitchen of the Mawson house and for landscaping of the gardens to put the house un order for sale. The nett amount available from the sale of Mawson was $23,518.93 and my wife used this amount to buy a home for our family and herself at Torrens. My wife had been working for seven years and had put all her money into our home while I put my money into the business. My wife used the proceeds of the sale of the home to acquire the family home at Torrens. The remainder of the money from the sale of the Mawson house was used to pay off the mortgage, legal costs and agent's fees. I did not receive any money from the sale of the house." 8. The trustee wrote to Mr Pesic on 8 April 1982 in the following terms: "It 1s noted that you obtained the following personal loans prior to your bankrupt [Csicj on 2nd July, 1981. 1. Loan of $4,000.00 from Capital Finance Co. Pty. Ltd. on 23 March, 1981, 2. Loan of $1,500.00 from Mercantile Credits Ltd. on 20th April, 1981. You are required to advise the purpose for which the above loans were obtained. It is also noted that on 26th May, 1981 you and your wife sold a house property at Mawson Act CsicjJ to Ralph Kingsley & Yvonne Gladys Kell for a consideration of $51,000.00. You are required to advise the amount held by you and your wife on settlement of the sale and how the proceeds of sale were dispursed Esicl. You are required to provide the above information by return mail." The trustee again wrote to Mr Pesic on 24 May as follows: "I refer to your letter of the 26th November, 1981 received at my office on the 29th April, 1982, the contents of which have been noted. You are required to advise by return mail why the property at Torrens was registered in the name of your wife only, as it would appear that the funds used for its purchase had their source in the sale of the Mawson property, which was registered 1n joint names of your wife and yourself. You are also required to advise: 1. whether you consider you have any equity in the Torrens property; and 2. the name and address of the firm of solicitors who acted for your wife on the purchase." Mr Pesic replied by letter dated 31 May 1982 as follows: "With reference to your letter of the 24th instant, I would advise that the property at Torrens was purchased and registered in the name of my wife for the reasons set out in the third last paragraph of my letter to you of the 26th November 1981. I donot consider I have any interest in the Torrens property. The solicitors who acted for my wife on the purchase were Messrs. Allan R. Nelson & Co., Prudential Building, Darwin Place, Canberra City." The evidence does not disclose that any further action was taken inthe matter by the trustee until the filing on 26 November 1985 of the applications for the issue of the summonses directed to the applicants. In particular, no public examination of Mr Pesic took place prior to his discharge from bankruptcy on 4 July 1984. On behalf of Mr Pesic reliance was also placed on the hardship he is said to have suffered in the business of a licensed builder which he is currently carrying on in the sense that questions are being asked concerning his financial standing. He attributes those questions to the notifications which have appeared in "The Canberra Times" newspaper that he was to be examined before the Deputy Registrar in Bankruptcy. He claims that the notifications have adversely affected his business. 10. There is no doubt that the power conferred by sub-s.81(1) is to be very carefully exercised and the Court must be astute to prevent any oppressive, vexatious or unfair use of the power: Re Cside1; Ex parte Andrew (1979) 39 F.L.R. 387 and the cases cited therein. Considerable weight must, however, be given to the views of the trustee "as 16 dis he who 1s most conversant with the problems that exist in relation to the affairs of the bankrupt and the information that is necessary" ibid., at p.392. Apart from the question of dilatoriness on the part of the trustee and subject to a qualification to be mentioned, there is no doubt that the matters identified in the summonses are matters upon which it is proper that the applicants be examined. The material before the Court clearly establishes a case for such examinations to take Place. Were it appropriate to have regard only to the interests of the trustee, I would have no hesitation in setting aside the summonses as no explanation has been offered for what is clearly a long period of delay between the time when the trustee had knowledge of the subject matter into which he now wishes to enquire further. However, 1t is not the interests of the trustee but the unterests of the creditors as a whole that must be taken ll. into account. Their interests must be considered in the context of a bankrupt estate in which, according to the bankrupt's statement of affairs, his estate had assets of $15 and creditors with debts totalling in excess of $32,000. Having considered the whole of the circumstances I am not satisfied that the exercise of the power in this case 1S oppressive, vexatious or unfair. The qualification to which I previously referred is this. Each of the summonses requires the production of documents relating to the purchase and sale of a property known as 5 Gillies Street, Curtin in the Australian Capital Territory. I have, with the concurrence of the parties, examined the material which was placed before the Deputy Registrar as the basis for the issue of the summonses. That material contains no information relating that property to the bankrupt and provides no basis for the inclusion in the summonses of the requirement to which I have referred. The summonses should, therefore, be amended by deleting that requirement and I so order. The summons directed to Mrs Pesic should also be amended by deleting the requirement that she produce all records evidencing mortgage payments in respect of the Torrens property. That property is not otherwise identified in the body of the summons and the connection, if any, between it and the matter in relation to which Mrs Pesic is to be examined does not appear on the 12. face of the summons. Nor does it appear from the material which was placed before the Deputy Registrar. I should also advert to another aspect of the summons directed to Mrs Pesic. Sub-section 81(1) permits a summons to be issued requiring her to attend to give evidence concerning, and produce any books in her custody or power relating to, the bankrupt or his trade dealings, property or affairs. The language used in the summons 1s somewhat ambiguous in that in requiring Mrs Pesic to give evidence in relation to the property at Mawson, the summons refers to her equity therein. It is only with knowledge that Mr Pesic was registered as proprietor of that property jointly with Mrs Pesic that the connection between the summons and the affairs of the bankrupt becomes apparent. It would have been preferable for the summons to show clearly on its face the connection with the bankrupt but the defect is not such as to warrant the summons being set aside. For the reasons I have given each of the summonses should be amended by deleting the requirement to produce documents relating to the purchase and sale of 5 Gillies Street, Curtin in the Australian Capital Territory. The summons directed to Mrs Pesic should also be amended by deleting the reference to the Torrens property. Orders 13. accordingly. Otherwise the applications are dismissed. In all the circumstances, I think 1t 1s appropriate to make no order as to costs. Counsel for the applicants Solicitor for the applicants Counsel for the respondent Solicitor for the respondent Date of hearing oe 40 I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Neaves. Associate Dated: 25 February 1987 Mr B.J. Salmon, Q.C. and Mr B. Batchelor Allan R. Nelson & Co. Mr I.A. Curlewis Australian Government Solicitor 7 April 1986