wa * JUDGMENT No. 523/31. CATCHWORDS BANKRUPTCY - Application to review the acts of the Registrar in the issue of a summons - meaning of "application by the trustee" - duty of Registrar on receiving application - nature and purpose of section 81 power to issue summons to produce documents - specific information to be elicited for the proper conduct of the bankruptcy rather than _ engaging in a fishing expedition - jurisdiction to amend summons. Bankruptcy Act 1966 - sections 14(5), 81(1), rule 129 Re: Lindsay Robert Aitken Ex parte Trans Tasman Timbers Pty. Limited Ex parte Margaret Noreen Aitken Ex Parte The Registrar in Bankruptcy and John William O'Brien as Trustee of the Property of Lindsay Robert Aitken W935 of 1985 Einfeld J Sydney 30 October 1987 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE No. W 935 of 1985 OF NEW SOUTH WALES AND wee w we wwww THE AUSTRALIAN CAPITAL TERRITORY Re: LINDSAY ROBERT AITKEN Ex parte TRANS TASMAN TIMBERS PTY. LIMITED Ex parte MARGARET NOREEN AITKEN Ex parte THE REGISTRAR IN BANKRUPTCY AND JOHN WILLIAM O'BRIEN AS TRUSTEE OF THE PROPERTY OF LINDSAY ROBERT AITKEN Coram: Einfeld J. Place: Sydney Date: 30 October 1987 MINUTE OF ORDERS 1. Summons dated 9 February 1987 addressed to Margaret Noreen Aitken by the trustee be amended by deleting reference to 1 January 1970 and substituting therefor 1 January 1976 in numbered paragraphs 1 and 2 of the summons. 2. No order as to costs. NOTE: Settlement and entry of these orders is dealt with 1n accordance with rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE No. W 935 of 1985 OF NEW SOUTH WALES AND ee ee ee ee ee THE AUSTRALIAN CAPITAL TERRITORY Re: LINDSAY ROBERT AITKEN Ex parte TRANS TASMAN TIMBERS PTY. LIMITED Ex parte MARGARET NOREEN AITKEN Ex parte THE REGISTRAR IN BANKRUPTCY AND JOHN WILLIAM O'BRIEN AS TRUSTEE OF THE PROPERTY OF LINDSAY ROBERT AITKEN Coram: Einfeld J. Place: Sydney Date: 30 October 1987 REASONS FOR JUDGMENT This its an application under section 14(5) of the Bankruptcy Act ("the Act") for review of a Registrar's decision to issue a summons requiring Margaret Noreen Aitken ("the applicant"), the wife of Lindsay Robert Aitken ("the bankrupt"), to attend for an examination before the Registrar under section 81 of the Act. The application seeks the setting aside of the summons in question dated 9 February 1987 and in substance the quashing of the acts of the Registrar in issuing the summons. I can see little practical or legal difference between these two applications. The applicant advances four arguments: I shall that the application for the issue of the summons. was not properly before the Registrar; that the terms of the application for the summons do not justify the summons issued; that the ambit of the summons is so wide as to amount to a fishing expedition; that the summons is harsh, oppressive and vexatious. deal with each of these grounds. Application not properly before Registrar The basis of this ground is that the application was signed by the solicitor for the trustee and not by the trustee himself. Section 81(1)(a) of the Act provides that Mrs. Aitken as_ the spouse of the bankrupt is a person who may be summoned for an examination on the application of a trustee. The applicant points to rule 129 of the Bankruptcy Rules which provides: "(1) An application to the Court or to the Registrar for a summons under sub-section 50(2) or 81(1) of the Act shall set out the grounds on which the application is made and, except where' the application is made by the trustee of the bankrupt to whom the application relates, shall be accompanied by an affidavit setting out the facts relied on by the applicant in support of his application. (2) A summons under sub-section 50(2) or 81(1) of the Act shall be in accordance with Form 49 (3) The Registrar shall - (a) in the case of a summons issued in accordance with an order of the Federal Court of Bankruptcy - sign and seal the summons ; (b) in the case of a summons issued in the exercise of a jurisdiction in bankruptcy by a court having that jurisdiction - cause the summons to be signed and sealed on behalf of that court; and (c) in the case of a summons issued by the Registrar - sign and stamp the summons " The applicant also draws attention to forms 5 and 8 in the Bankruptcy Rules which have nothing to do with a_ section 81 application but which the applicant suggests provide support by way of analogy to the requirement that the trustee, being a person registered under the Act, ts required to sign personally an application for a section 81 summons. He says that by reason of rule 129, if a person other than the trustee signs the application, it is necessary for an affidavit to be filed in support of the application. As this was not done in this case, it is said that the application for the section 81 summons was in substance invalid and not a document on which the Registrar could have acted legally. I reject this argument. Neither the Act nor the Rules make provision that a trustee must personally sign the application for a section 81 examination. Nor does it require that if the application is not so signed, an affidavit 1s required by the person who does sign it on behalf of the trustee. It is true that the form of the application in this case, as in many other cases, is in the first person of the trustee himself. It commences: "I, John William O'Brien, Registered Trustee for the Bankruptcy District of New South Wales in the Australian Capital Territory, hereby apply to the Registrar .. " Such a document might ordinarily be expected to be signed by the person who was making the statements contained in it, but I find it difficult to imagine that section 81 must be construed in such a technical light when its obvious purpose is to convey to the Registrar in the name of the trustee what the trustee is seeking and the grounds upon which the application is made. So long as the Registrar is satisfied that the application is bona fide, that it is made by, in the sense of authorised by and comes from, the trustee of the bankrupt's estate, and that it seeks what, on its face, is an appropriate order or action on the Registrar's part, I think the document complies with the requirements of the Act and the Rules. In my opinion, this is clearly an application "by the trustee" within the meaning of rule 129. Application's terms do not justify the summons As I understand it, this argument has two parts. The first is that the application fails to identify or specify the matters upon which the applicant is to be examined; the second is that the summons calls for the production of documents, whereas the application does not seek the production of any documents. As rule 129(1) does not require the specification suggested, it follows from the first of these objections that the Registrar would be required to make some form of independent inquiry of the trustee's intentions or previous actions before issuing any summons in response to an application otherwise complying with rule 129. Registrars would have to ask questions of the trustee to ascertain what was being sought and satisfy themselves about their relevance to section 81. The second limb of the argument means that if the trustee wishes the summons to carry with it a requirement that the applicant produce documents, the application should first so provide. It is not disputed that this application sets out grounds as required. Rule 129(2) then provides that the summons must be in accordance with form 49. It is not disputed that this summons complies with that requirement. But this form mandates that a summons require its recipients to attend to "give evidence and produce documents". A Registrar receiving an application fora section 81 summons purporting to set out grounds to found it, 1s thus charged by rule 129 with determining whether the matters necessary for the issue of a form 49 summons have been sufficiently established to his/her satisfaction. In other words, it is the duty of Registrars to satisfy themselves that applications comply with rule 129(1) as a first step. If so satisfied, then it is their duty to issue summonses in accordance with form 49. That is precisely what the Registrar has done in this case. It is true that Gibbs J, as he then was, sitting as a Judge in Bankruptcy, criticised form 49 (see Re_ Wyatt 15 FLR 374 at 375). However, the form remains today as it was when those remarks were made and in any event they would not affect the matter raised here. I was informed at the hearing that in practice the form of the summons is submitted in draft or even in an engrossed form ready for signature when the application is presented. But that would not in any way prevent a Registrar either from rejecting the summons document presented or making alterations to the document before signing it. The very fact that the summons, as here, is prepared and presented by the trustee may be taken as an additional indication to the Registrar as to what precisely the trustee intends in the examination. That means that the Registrar was in a very good position, at the time of considering this application, to determine whether what the trustee had in mind was properly and validly embraced within the confines of the proposed section 81 examination. The power conferred by section 81 to summon persons to attend to give evidence or produce documents, like the power conferred by section 249 of Uniform Companies Act, has been described as "an extraordinary power of an inquisitorial nature": Re North Australian Territory Company (1890) 45 Ch D 87 at 93 per Bowen L.J. 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 the summons. The order is not made as of course or as of right (see Re Metropolitan Bank (1880) 15 Ch D139; Re Rolls Razor Ltd. (No. 2) (1970) 1 Ch 576; Ex parte Willey; Re Wright (1883) 23 Ch D 118). One of the finer expressions of this power is contained in the remarks of Mr. Justice Lockhart in Re Csidei ex parte Andrew (1980) 39 FLR 387 at 391: "Considerable weight must be given to the views of the trustee as it is he who is most conversant with the problems that exist in relation to the affairs of the bankrupt and the information that 1s necessary. The very fact that the order for examination 1s made ex parte; that the examination is a compulsory process with penal consequences for failing to attend, or to properly answer questions or to produce documents; and that the transcript of evidence or notes of examination may be used against the witness in proceedings under the Act, all point to the conclusion that the court or the Registrar has a discretion to issue the summons and that in the exercise of that discretion the court or the Registrar must "be astute to prevent any oppressive, vexatious or unfair use of this extraordinary process ... It is going too far to say that a trustee should not apply for the issue of a summons under section 81 unless he has previously applied to the proposed examinees themselves who have declined or refused to give the information sought or otherwise acted unsatisfactorily, although this was said by Connolly J. of the Supreme Court of New Zealand in Re Nqungury Coal Co. (Ltd.) (1899) 18 NZIR 256 in relation to the section in the New Zealand Companies Act (s. 177) equivalent to section 249 of the Uniform Companies Act. In Re Rolls Razor Ltd. (No. 2) ... it was argued in relation to section 268 of the Companies Act, 1948 (UK), that in order to avoid oppression "and to focus the view of the examinee on the matter in issue, this is the course which ought usually to be adopted", ie the course of first submitting written questions to the proposed examinee for answer. Megarry J rejected the submission and said: "In my judgment the exercise of the court's discretion ought not to be fettered in any such way There may well be some cases in which it would plainly be oppressive or unreasonable not to submit written questions first. There will also be other cases in which there plainly ought to be an oral examination without the prior submission of any written questions. Between these two categories there may be many cases in which the court must determine which course is best suited to discover the relevant facts without being oppressive, vexatious or unfair. In order to do this, the court must, I think, look at the facts of the case as a whole, without yielding to preconceptions; and in doing this, the court should give all proper weight to the views of the liquidator without, of course, abandoning the proper exercise of its discretion, or treating the liquidator's views as being in any way decisive of the matter. The prior submission of written questions will sometimes aid and speed the ascertainment of the relevant facts; but sometimes it may hamper or delay the process. There may be a marked difference between the information obtained from unsworn written answers which may have been drafted by lawyers and that obtained from viva voce answers on oath In all the circumstances of this case, in the exercise of my discretion, I hold that there ought to be an oral examination without any prior submission of written questions being made requisite. I would have reached the same conclusion even if (contrary to my opinion) there were any rule, whether of law or of practice, that prima facie there should be no oral examination unless written questions had first been submitted": (1970) 1 Ch at 595- In my opinion these observations of his Lordship are applicable generally to the exercise by the court or the Registrar of the power conferred by section 81 .. Proper Material must be adduced to enable the court or the Registrar to decide whether it is an appropriate case for the exercise of the power. The court and the Registrar are not mere rubber stamps for the trustee, although proper weight should be given to his views " I agree with respect with what fell from his Honour in that case. However, contrary to the applicant's submission, it seems to me that, except in the most general terms, those observations have little to do with the argument being advanced here. There is nothing in Csidei which reads down or qualifies the availability of section 81 procedures. Contrary to the quoted views of Lockhart J and Megarry J, the applicant argues that the Registrar was either under some duty or ought, as a matter of discretion, to have inquired as to what steps had previously been taken by the trustee to obtain information from the applicant. This was put on some basis that such a _ voluntary, almost whimsical, procedure would have permitted the issues, whatever they might he, to be discussed "in a proper fashion". In addition to the views of Lockhart J, I can see no statutory or other obligation on a Registrar to require information of the trustee, before issuing the summons under section 81, as to what steps he has taken to obtain the information which the section 81 examination is designed to obtain. Nor can I accept that a permitted statutory procedure can be described as otherwise then a ""proper™ mechanism to obtain information about a bankrupt's affairs and property. In my opinion, this argument fails because the Act and Rules merely require an application in the form used in this case, setting out the grounds for the application on the one hand, and a summons in accordance with form 49 on the other. Of course the Registrar must be satisfied that the application is bona fide, has been made by an appropriate applicant and that it contains grounds which in fact justify the issue of the summons. He must, of course, also be satisfied that the summons properly embraces the terms and purposes of a section 81 examination. The documents supplied to, and the actions of, the Registrar in this case are not deficient in any of these respects. The summons is too wide and amounts to a fishing expedition The summons is harsh, oppressive and vexatious It is convenient to deal with these submissions together. There appear to be two attacks on the summons under these headings. Firstly, it is said that it is so confused and broad in one part as to be far beyond the confines of the application and beyond what could reasonably have to do with the bankruptcy of the bankrupt. The applicant points to the following words of the summons in this respect: "... to give evidence in connection with the bankruptcy of lindsay Robert Aitken and particularly details of all business partnerships or ventures with or 1n association with the bankrupt, including all dealings with real property bought by yourself jointly with the bankrupt or by yourself with funds provided by the bankrupt, together with particulars of all loans provided by the bankrupt to yourself ..." -10- The second argument is that in seeking thereafter the production of a large number of documents, the summons 1. goes outside the ambit and request of the application; 2. is harsh and oppressive in that it extends to documents dated from 1 January 1970, thus imposing on a third party to the bankruptcy a very great, even impossible, burden of collection. I have already dealt with the question of the inter-relationship of the terms of the application and the summons and there is no reason to do so again. The Act and the Rules do not require that the application and the summons be in identical or even similar terms. The application must have the qualities that I have previously spoken of and must comply with rule 129(1). The summons must comply with the requirements of section 81 and accord with form 49. In Csidei (supra) Lockhart J said at 390: "The purpose of the section is to elicit information that may be relevant for the proper conduct of the bankruptcy and that may aid the process of finding and recovering assets available for distribution." So long as the wording of the summons, as here, complies with the statutory and the regulatory requirements, I see nothing which would prevent the spouse of a bankrupt being required to give evidence concerning details of her business and property dealings with the bankrupt. This is precisely what Lockhart J said was the purpose of the section and therefore of the summons. However, the problem concerning documents going back to 1 January 1970 is of a different order of magnitude and of principle. In this case there is no evidence that there are any documents of that vintage in existence and still less that there are any such documents presently in the applicant's "custody or power" as required by the summons. The observations of Sir Frederick Jordan CJ in Commissioner for Railways v Small (1938) SR (NSW) 564 at 573 concerning subpoenas are in point here: "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 " This view was quoted with approval by Lockhart J in Csidei, and although not quite the words used here, I think 17 years' accumulation of documents for a person of Mrs. Aitken's age is virtually equivalent to the formulation regarded as unsatisfactory by these eminent judicial figures. Clyne J made reference to this principle in Re Robert Henry Andrews (1958) 18 ABC 181. The documents to be produced in that case were, as set out on page 182 of the report: "... to have and produce all ledgers and books of account, invoices, statements of account, letters, books, papers and documents of every kind, in any manner relating to your dealings and transactions with Alfred Daniel Walsh, A.D. Walsh Sawnilling Pty Limited, Robert Henry Andrews and F.S. West, in so far as they relate to the Bankrupt Robert Henry Andrews." -12- What was then a section 80 summons was challenged as being too wide and oppressive, and Clyne J pointed out that no description of any detailed factual evidence had been put before him other than the transcript of the Registrar's examination. Nonetheless, at 186-187 Clyne J said: "... it is obvious that the request to the witness to produce the documents specified in the summons is oppressive " The respondent points out that the 1970 date stems from the fact that in that year a property was bought as co-owners by the applicant and the bankrupt. They were still co-owners when it was sold in 1976, and another property was then bought in the game joint ownership. The respondent says that in 1983, with that joint ownership background, a property was suddenly bought in the sole name of the applicant, the arrangements for which the bankrupt was unable to recall precisely in his own examination. Thus the respondent wishes to go back to 1970 to demonstrate a course of conduct of joint ownership which changed to sole ownership in circumstances that require explaining. The suggested inference is that there was some alienation of the bankrupt's property or assets to the applicant at some time between the end of the joint property dealings and the beginning of the applicant's sole property ownership. The applicant, who swore three affidavits and was subjected to cross examination, does not deny the respondent's assertions on these property dealings. The critical question for the trustee appears therefore to be whether assets or property of the bankrupt were alienated at some time between 1976 and 1983. He would seem to me to have no true basis for an interest in documents that go back to the commencement of dealings between the applicant and the bankrupt in 1970. In Re Poulson (JGL), a bankrupt ex parte Granada Television Limited and Maudling Television Limited (1976) 2 All ER 1020 at 1029D, Justice Walton said: "... the whole object of such an examination is to enable the trustee to obtain information which will enable him to discover and recover assets for the distribution to creditors in the bankruptcy In other words, although doubtless the procedure can be used in an accusatorial manner if that is what will best serve the trustee's overriding purpose, it is also capable of being used, and frequently is used most fruitfully, in an inqutsitorial manner." Those observations, together with the others to which I have earlier referred, lead me to the view that this summons is too wide and either amounts to a fishing expedition or is harsh and oppressive when it seeks documents back to 1 January 1970. The question that then arises is what powers I may exercise in an application under section 14(5) of the Act. Re Leslie (1960) 19 ABC 19, a decision of Clyne J, acknowledges that the court is given power to review an act of the Registrar or Deputy Registrar done under a delegated authority. His Honour referred to section 12A (now section 14(3)) which empowers a Registrar or Deputy Registrar to exercise powers and functions of an administrative nature exercisable by the Court as the Court directs or authorises him to exercise. Clyne J. continued at 25 that "an order or direction made or given or an act done by a registrar or deputy registrar under the Act is subject to review on summary application to the court." In addition, Neaves J in Re Dobrosov ex parte Pesic and Anor and the Official Trustee in Bankruptcy No. 573 of 1981, unreported, 25 February 1987, appears to have assumed, if not held, that this type of proceeding gives a judge jurisdiction to amend summonses found to be defective according to law. Although not without doubt about the matter, I am prepared to apply these approaches to this case and delete the reference to 1 January 1970 and substitute therefor 1 January 1976 in numbered paragraphs 1 and 2 of the summons. The application also asks for costs. Substantial matters sought in the application have failed, and the majority of the argument advanced at the hearing of this matter related to these matters. On the other hand, the summons appears to me _ to have been a bold presentation by the trustee to the Registrar to gather in anything and everything that might conceivably be addressed to and sought from the bankrupt's wife. Reasons may exist, as was suggested in argument, for being suspicious about answers and doubts given by the bankrupt himself in his own examination and in other proceedings taken in the Supreme Court of New South Wales which were placed in evidence before me. However, I do not think that that justifies a use of the section 81 procedure, with all the categorisations and warnings given about its significance by the learned Judges to whose observations I have made earlier reference, Merely on the grounds that the applicant is the wife of a bankrupt suspected of being less than frank. Mrs. Aitken is a separate person, a separate litigant and a person with at least some different or potentially different interests to those of her husband. It seems to me that she is entitled to attempt to resist a very broad-based section 81 summons. She has been successful in removing the harshness or oppressiveness of the summons and reducing the scope of the documents for which which she has to make search and produce if available. For these reasons, I think that the proper approach to the costs question 1s that there should be no order as to costs. Solicitor for the applicant Mr. J. Johnson of Messrs. Johnson & Co., Solicitors Counsel and solicitors Mr. M. Aldridge for the Trustee instructed by Messrs. Manion McCosker Solicitors Date of Hearing 7 April 1987 Date of Judgment 30 October 1987