IN THE FEDERAL COURT OF AUSTRALTA (For Limited Distribution Only) BANKRUPTCY DISTRICT OF THE STATE ) ) ) No. 404 of 1982 ) ) OF VICTORTA Coram: Date: Re: ALEXANDER SCOTT HACK (A Bankrupt) Ex Parte: ALEXANDER SCOTT HACK (The Applicant) THE OFFICIAL TRUSTEE IN BANKRUPTCY (as Trustee of the property of Alexander Scott Hack, a bankrupt) (The Respondent) Ryan J. 29 July 1987 REASONS FOR JUDGMENT On 15 May 1987, a Deputy Registrar in Bankruptcy issued to Alexander Scott Hack ("the bankrupt") a summons in following form: "IN PURSUANCE of the powers conferred on the Registrar by Section 81 of the Bankruptcy Act 1966, the Registrar hereby summons you to attend before the Registrar at Federal Court Building, 451 Little Bourke Street, Melbourne on Thursday 18 June 1987 at 10.15 o'clock in the forenoon to a the ge Seer "1 cees 2 t - = pa . AD ee et a give evidence in connection with your conduck as a bankrupt and your trade dealings, property and affairs, in particular:- (a) (b) (c) Your alleged use of the names 'Alan Haynes', 'Alan Hayes', 'E.%.Sales', 'K.T. Sales', 'C. & I. Sales', 'Direction 2000' and 'Cost Less Sales'. Your alleged incurring of liabilities to People Magazine, West Australia Mail, 'The Age', 3KZ, Telecom Australia, The State Electricity Commission of Victoria and the National Australia Bank. Your alleged operation of a business or business' under the names of 'Randy Rhonda's', 'Lust Line', 'Sexy Sally', 'Fanny's' and 'Fantasy Land'. AND to produce any of the following documents that are in your custody or power and relate to your 1. trade dealings, property and affairs:- Any deed, contract, note or memorandum of a contract or other written document as may relate to evidence you are hereby summoned to give in connection with any of the matters hereinbefore mentioned. Any journals, receipt books, cheque butts, bank statements, ledgers or other books of account as May record any receipt, payment, disbursement, appropriation or other transaction by you or on your behalf with any debtors or creditors of yourself; and any items of correspondence, journals, receipt books, cheque butts, bank statements, ledgers or other books of account as may relate to evidence you are hereby summoned to give in connection with any of the matters hereinbefore mentioned. Any copies of any of the documents referred to in paragraphs 1 and 2 hereof where the originals are not in your custody or power." were ee at Rane ns ae The summons was issued on the application of the Official Trustee who relied in support of his application on matters disclosed by affidavits by the Official Receiver and two of his officers which had been sworn in support of an application for an order pursuant to s.149(8) of the Bankruptcy Act ("the Act") for an extension of the time at which an objection under s.149(3)(c) of the Act would lapse. That order was made by Jenkinson J. on 13 April 1987 when his Honour ordered that the period at which the objection of the Official Trustee under s.149(3){c) will lapse be the period of five years and eight months commencing on 27 April 1982 (the date of the bankruptcy). The matters contained in those affidavits included references to a telephone call to each of the officers of the Official Receiver on 10 and 11 March 1987 respectively, one from an anonymous female and the other from a female who identified herself only as "Lisa". The substance of the allegations contained in those telephone calls was that the bankrupt had carried on business under, or otherwise used, the names referred to in the summons of 15 May 1987, and had incurred liabilities to the businesses or entities referred to in paragraph (b) of that summons. Application has now been made on behalf of the bankrupt for an order pursuant to s.14(5) of the Act that the Deputy Registrar's summons be set aside on the ground that it is too wide and oppressive. Alternatively, an order is sought rescinding the order for examination by the Registrar in Bankruptcy pursuant to which the summons of 15 May 1987 was issued. SaeennaamneEeSRARREREAtEnL eumamneeneerarseaiater mmmnammanmnenntesmmertalie taeiadeanamemamdemeateade aed te . a 7 ,, . ci 7 NI e . ary ae are wee oe a Ae eet . 1 r PPR ape ee ye om, T T wer Xv ord The policy considerations which underlie the pre in the Act of s.81 were canvassed by a Full Court of Court in Official Receiver v. Todd (1986) 70 ALR 119 Fisher J. observed at 121: "Section 81 forms part of Pt V of the Act headed 'Control over Persons and Property of Debtors and Bankrupts'. Section 77 imposes an obligation on a bankrupt to 'discover' his property to his trustee and s.81 is headed 'Discovery of Bankrupt's Property'. In this regard it is apparent that its thrust is to ascertain the nature, extent and whereabouts of the property of the bankrupt, 1n the interests of creditors. Its emphasis on property and its reference to the 'trade dealings, property or affairs' of the bankrupt coincides with the power of the court under s.50 to direct a trustee to take control of the property of a debtor subsequent to presentation of a petition but prior to the making of a sequestration order. Sub-section (2) of this section is virtually in pari materia with s.81 and expressly refers to an examination under that latter section. Each of these two sections, 81 and 50, is available to be used in the administration of the estate in bankruptcy, an administration which may not be completed prior to discharge. They contrast with the public examination of a bankrupt under s.69, the completion of which is in some circumstances a pre-condition to discharge, and the purpose of which is the examination of the bankrupt not only in relation to his 'trade dealings, property and affairs' as in s.81 but also in relation to his 'conduct'. The scope of a public examination under s.69 is therefore wider than an examination under 5.81. In so far as the word 'conduct' is included in 5.69, Re Smith (1960) 19 ABC 13 refers to it as contemplating the ascertainment of information 'which could or might have something to do with bringing about the bankruptcy of the debtor'. In this way it contrasts with the ascertainment of his assets as part of the administration of his estate. It is significant that, in circumstances where a s.8] examination could ex hypothesi take Place subsequent to discharge, the matter of a bankrupt's conduct which would have been reviewed sence this where pore coer oa cee ae er e- wee ne ee ee ee eer et, mee? in a public examination and taken into account on his discharge was not stated as a matter upon which further evidence could be required to be given." Mr. Barton for the bankrupt has drawn my attention to Honour's indication in that passage of concept of "conduct" and has argued that a summons to a bankrupt which requires him, as does, to give evidence in connection with "your conduct as bankrupt" is, on its face, too legitimate purposes for which such a summons may be issued. It is clear that the power to conduct an which is conferred by s.81 is in aid getting in of a bankrupt's property. To use an under s.81 for what Cave J. in Re Easton (1891) 8 Morr. nature, extent or whereabouts of the property of the bankrupt is impermissible. See Re Alafaci (1976) 9 ALR 262 at 270 where Riley J. cited with approval R_v. West (1971) 18 FER 333 where several of the leading authorities are comprehensively reviewed. However, in my view, the issue of a summons pursuant to a power to require "evidence concerning the bankrupt or his trade dealings, property or affairs" cannot be said to have been procured for an indirect or ulterior purpose merely because, on its face, it commands a witness to give evidence his the width of the addressed the present summons wide and travels beyond the examination of the discovery and examination at 171 called an "indirect purpose" and not to ascertain the Nn connexion with the bankrupt's "conduct as a bankrupt". an aspect of the A bankrupt's conduct is bankrupt himself, concerning whom s.81 expressly contemplates that evidence may be required. Attention was also drawn to the fact that the summons here in requiring production of documents does not follow precisely the terms of Form 49 of the forms contained in Schedule 1 to the Bankruptcy Rules. Rule 129(2) of those Rules prescribes that a summons under sub-s.50(2) or S31(1) of the Act shall be in accordance with Form 49. The body of that form is in the following terms: "In pursuance of the power conferred on the Court (or the Registrar) by section 81 of the Bankruptcy Act 1966, the Court (or the Registrar) hereby summons you to attend before the Court (or the Registrar or a magistrate) at the day of 7,19 , at the hour of o'clock in the noon to give evidence in connexion with (give short particulars of the matters concerning which the person is to he examined) and to produce any of the following documents that are in your custody or power and relate to the abovementioned bankrupt or his trade dealings or affairs: - (or, if the summons ' is directed to the bankrupt, to give evidence and to produce any documents in your custody or power relating to yourself or to your trade dealings, property or affairs, and, in particular, the following documents:- " Here, it is said, the summons does not specify particular documents but requires the bankrupt to produce originals or copies of any documents in two general classes that relate to his trade dealings, property and affairs. That objection may a teat a ' re aye ere well have much force if taken to a summons" requiring production of documents by somebody other than the bankrupt. However, Form 49 expressly contemplates that the Registrar may require a bankrupt to "produce any documents in your custody or power relating to yourself or to your trade dealings, property or affairs". The fact that the Registrar has chosen to confine the requirement made of the bankrupt himself to a more limited class of documents than the extremely general one indicated in Form 49, cannot, in my opinion, invalidate the summons or provide evidence that its issue has been procured for an ulterior or indirect purpose. It may be easier to discern an indirect or ulterior purpose in asking a particular question onan examination under s.81. If that can be done, the officer conducting the examination can, and should, disallow the question. If that course is not followed it is always open to the court before which evidence obtained in response to such an improper question is sought to be adduced, to refuse to admit that evidence. The Queen v. West and Re Alafaci (supra) were both cases in Which that power was exercised. It has been conceded by Mr. Bigmore for the Official Trustee that questions going to "conduct" of the bankrupt unrelated to his trade dealings, property or affairs would be impermissible as irrelevant or as directed to an indirect or ulterior purpose. Mr. Bigmore also accepted that it is open to the bankrupt himself or any other witness, in the course of an examination ———— ss ee ee errr wo pe — we nee ee 7 Coe Pe amin' ao =r under s.Bl to object to answer a particular question as tending to incriminate him; (contrast s.69(8) which expressly excludes any absolute privilege against self-incrimination in the public examination of a bankrupt). For example, objection could properly be taken tao a question whether the liability to one of the businesses or entities referred to in paragraph (6) of the present Summons, was incurred by the bankrupt without informing the relevant person that he was an undischarged bankrupt. (An omission of that kind would contravene 5.269 of the Act) Such an objection could be based on the ground that the question is extraneous to the purposes which s.81 1s framed to serve, or on the privilege against self-incrimination. It is undesirable to multiply examples of that kind without the benefit, which the Registrar will have, of full argument in the context of each specific question to which objection may be taken. However, to acknowledge that certain questions in an examination under s.81 may be impermissible for one or other of the reasons I have just indicated, does not entail that the issue of a summons to a bankrupt to attend for examination under that section has been procured solely for an illegitimate purpose. Some guidance on the question of whak circumstances may permit a purpose of that kind to be inferred is provided by the following observations of Lockhart J. in Official Receiver v. Todd (Supra) at 127: purpose or as an instrument of oppression will be a matter to be inferred from the surrounding circumstances including the identity of the witness to whom the summons is directed. "Section 55(8) properly construed provides no barrier to the exercise of the power conferred by s.81(1) after the bankrupt is discharged from bankruptcy. It may be said that this produces harsh consequences. A person may be discharged from bankruptcy and many years later brought before the court pursuant to s.81 to provide information relating to events long past. There is no substance in this argument. A discharged bankrupt is expressly required by s.152 to give assistance to the trustee in the realisation and distribution of such of his property as vested in the trustee upon pain of contempt of court. Since the undistributed property of the bankrupt remains vested in the trustee after discharge there are sound reasons of policy why the machinery of the law and the administration of bankruptcy should continue to be available to the trustee and the creditors to assist the trustee in the performance of his continuing duties of collection, realisation and distribution of such of the bankrupt's assets as are vested in him before the discharge. Section 81 is an important weapon in the trustee's armoury. Also, the person to be examined 1s protected against any Misuse of the power. It is necessary for the trustee or a creditor who seeks to examine the bankrupt to satisfy the court or the Registrar that the circumstances are appropriate for the issue of summons under s.81(1). Where a summons is issued by the Registrar it is subject to review by the court: s.14(5). It is well established that the power conferred by s.81 must be exercised for legitimate purposes to aid the process of finding, recovering, realising and distributing assets of the bankrupt and not as an instrument of oppression: Re Csidei; Ex parte Andrew (1979) 28 ALR 381; 39 FLR 387 and cases there cited by me." ' Almost always the use of a summons under s.81 for an indirect inference may more readily be available where the summons to a person other than the bankrupt. The It must be remembered oe eet 10. that by 3.116 of the Act property acquired by a bankrupt before discharge is divisible amongst his creditors, and that under s.131(2) a trustee may seek an order that all or part of the income of a bankrupt be made available for the benefit of his creditors. In the light of those considerations, the present applicant has failed to discharge the onus which, in my opinion, he bears, of establishing circumstances that on balance raise the inference that the issue of the summons under s.81 has been procured solely for some indirect purpose or as an instrument of oppression. Accordingly, the application must be dismissed. T certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment of the Honourable Mr. dustice Ryan. Dated: 29 July 1987 . ELE JS Associate were it eee nee =~) wet mm ee aot