N DE T ) ) VI R I Ter ry ) No NG 421 of 1991 ) GENERAL DIVISION ) BETWEEN: MAX I PP LI a the Bankrupt estate of Geoffrey Walter Edelsten) (Applicant) AND: GEOFFREY WALTER EDELSTEN and Ors (Respondents ) Coram: Ryan J Date: 31 October 1991 Place: Melbourne T F NT Ryan _ J: By the substantive application in this matter, the applicant who sues as the trustee of the bankrupt estate of Geoffrey Walter Edelsten claims - Wks A declaration that at all material times the First Respondent was the controlling mind of and a director of the VIP Companies and each of them within the meaning of the Companies (New South Wales) Code and the Companies (Victoria) Code. A declaration that at all material times the VIP companies and each of them and their businesses were effectively operated by and on behalf of the First Respondent. (There being no paragraph (3);] A declaration that the Second Respondent at all material times held and holds his shares in the companies VIP Management Pty Ltd, VIP Health Care Pty Ltd, VIP Holdings Pty Ltd and VIP Health Corporation Pty Ltd on trust for the First Respondent. A declaration that the Third Respondent at all material times _ held and holds her shares. in the company VIP... Holdings Pty. Ltd - on trust for the First Respondent. A declaration that the Fourth Respondent at all material times held and holds her shares in the company Health Care Pty Ltd, VIP Holdings Pty Ltd and VIP Health Corporation Pty Ltd on trust for the First Respondent. A declaration that the Fifth Respondent at all material times held and holds his shares in the company VIP Health Corporation 2. Pty Ltd on trust for the First Respondent. 8. A declaration that by virtue of the First Respondent's bankruptcy on 21 September, 1987, and the provisions of the Bankruptcy Act, 1966 (Cth), the beneficial interests in each and all of the shares in the VIP Companies and each of them have vested in the Applicant. 9. A declaration that the First Respondent is in breach of his duties to the Applicant pursuant to Section 77(f) and Section 77(g) of the Bankruptcy Act, 1966 (Cth). 10. An order that the Applicant or some fit and proper person be appointed receiver and manager of the business and assets of the VIP Companies being Sixth, Seventh, Eighth and Nineth [sic] Respondents herein respectively without security." Ancillary orders are then sought for the delivery up to the receiver and manager of the assets and records of the VIP companies and for an order specifying the powers of that receiver and manager. By motion on notice dated 25 October, 1991, the applicant has moved for orders in terms of paragraphs 10, 11 and 12 of the application, they being the paragraphs seeking an appointment of a receiver and manager of what have been called the VIP companies and the ancillary orders to which I have referred. That application has been described in the course of today's proceedings as an application for the appointment of an interim receiver. The applicant has relied in part on an affidavit of Rodney Kenneth Richards sworn 29 October, 1991. That is a voluminous affidavit of some 28 pages in which Mr Richards recounts the history of activity which he claims to have undertaken in conjunction with Dr Edelsten from late 1988 until approximately July 1989. 3. It has been sought on behalf of Dr Edelsten, the first respondent, supported by counsel for the sixth to ninth respondents inclusive to have that affidavit struck out as scandalous. I have been invited to apply the principles enunciated by the Court of Appeal in Rossage v Rossage [1960] 1 WLR 249 where in the judgment of Hodson L.J. at page 252 it is said: "There has been some discussion as to what is meant by "scandalous." It is quite clear that we cannot strike out matters in a pleading or an affidavit simply because they are scandalous, because scandalous matter may be relevant, and may be the very matters which have to be investigated by the court. But if, as here, the matters are plainly irrelevant, it seems there is no doubt that the court can strike them out, either by virtue of its inherent power or by virtue of the power contained in, Order 38, r.11..." And his Lordship quotes from that rule to the following effect: "The court or judge may order to be struck out from any affidavit any matter which is scandalous, and may order the costs of any application to strike out such matter to be paid as between solicitor and client." The judgment then continues: "Within the meaning of those two rules, I am clearly of opinion that these matters are irrelevant and scandalous, and therefore they ought to be struck out. The court ought not to be embarrassed by their presence on the file; nor ought the party whom these statements tend to implicate to be embarrassed by having to deal with them." It is true that in the affidavit to which I have referred there is a good deal of matter which is capable of causing embarrassment but the test, as his Lordship indicates, is not confined to that consideration but rather directed to the extent to which the material is relevant to some matter at issue in the litigation. 4. It has been urged by Mr Caldwell QC who appears with Mr Harper for the applicant trustee that the whole of the affidavit or almost all of it is relevant as demonstrating a degree of control exercised by Dr Edelsten over businesses which, I gather, it is suggested have been conducted by or through the companies being the sixth to ninth respondents in respect of which the appointment of an interim receiver is sought. In my view, sufficient of the affidavit in question can be justified on that ground to persuade me not to strike out the whole of the affidavit. I have found the analysis of the question of relevance to be somewhat difficult in the absence, as Mr Beaumont QC has pointed out, of pleadings or any clearer indication of the way the case for the trustee is put than can be distilled from the substantive application itself. I therefore decline to strike out the whole of the affidavit. I reserve the question of whether specific parts of it should be struck out until the issues have been more appropriately defined. In the meantime, I shall order that the affidavit remain confidential and that there be no access to it by any person other than the parties or their legal advisers. {After further submissions by Counsel his Honour continued; ] I have been urged on behalf of the applicant to appoint an interim receiver of the businesses and assets of the sixth to ninth respondents to which I shall refer collectively as "the Bis VIP companies". It has been submitted that I should take that step because the evidence discloses prima facie that shares in the VIP companies have been owned beneficially by Dr Edelsten who is, or was - at least until March this year, a bankrupt. Even assuming that assertion about the ownership of the shares to be so, and I observe parenthetically that the relationship between the medical clinics to which the evidence is related and the sixth to ninth respondents is by no means clear, I am not persuaded that there is sufficient urgency by reason of imminent danger of loss or of diminution of the value of the businesses and assets involved to justify the appointment of an interim receiver without giving the respondents an opportunity to file affidavits. That is particularly so as the substantial part of the evidence relied on by the applicant trustee goes only to the conduct of the businesses and the management of the relevant assets up to mid 1989. Part of that conduct of the businesses and management of the assets apparently occurred before any of the VIP companies was incorporated. It is common ground that Dr Edelsten was committed to prison in Sydney to serve a sentence of 12 months imposed by Sharp J of the Supreme Court of New South Wales and was not released until the middle of this year. I am confirmed in the conclusion to which I have come by the fact that the initiating application herein ones filed in the New South Wales registry of this court on 1 August 1991 and there were proceedings in that registry to have it transferred to the Victoria registry. Further, two of the three principal 6. affidavits relied on in support of an application, which is now said to be urgent, were respectively sworn on 18 June 1991 and 8 July 1991. It seems that it was only when the third affidavit came to hand on 29 October that the matter came to be regarded as assuming a degree of urgency which justifies the strong step of appointing an interim receiver. For these reasons the motion for appointment of an interim receiver is refused. However, I consider that it is appropriate to give directions which would conduce to an early trial of the whole application or at least to permit. the question of whether or not a receiver should be appointed to be resolved on an interlocutory basis. I shall hear Counsel now on the directions which should be given to that end. {After further submissions by Counsel his Honour indicated that he would make the following orders: ] 1. That the affidavit of Rodney Kenneth Richards sworn 29 October 1991 remain confidential and that there be no access to it by any person other than the parties or their legal advisers. 2. That Rodney Kevin Edelsten, Christine Weinberg and Hymie Edelsten be joined as respondents to the application herein and that each such respondent be served within seven days of this day with a copy of the application herein and each of the affidavits filed herein and the several exhibits thereto, y other than the affidavit of Rodney Kenneth Richards sworn 29th day of October 1991. 3. That the applicant file and serve within seven days of this day a statement of claim including such allegations to charge the added respondents as he may be advised. 4. That each respondent file and serve a defence by 19 November 1991. 5. That all parties file and serve affidavits of documents on or before 26 November 1991 and there be mutual inspection of such documents by 29 November 1991. 6. That the directions hearing herein be adjourned to 2 December 1991. 7. That liberty be reserved to any party to apply on not less than 48 hours notice in writing to the other parties. 8. That the costs of all parties of this day be reserved. I certify that this and the preceding six (6) pages are - a true copy of the judgment of his Honour Mr Justice Ryan ~ Associate: Date: ra ober (94 | Counsel for the Applicant: Solicitor for the Applicant: Counsel for the First Respondent: Solicitor for First Respondent: Counsel for the Second and Fourth Respondents: Solicitor for the Second and Fourth Respondents: Counsel for the Fifth to Ninth Respondents: Solicitor for the Fifth to Ninth Respondents: Date of Hearing: Date of Judgment: Mr Caldwell QC and Mr R Harper Isenberg Spedding & Player Mr N H M Forsyth QC and H A Aizen Mowbray Erdynast Mr T Artemi Michael Webb and Arthur Solicitors Mr G Beaumont QC and Mr A K Panna Michael Webb and Arthur Solicitors 31 October 1991 31 October 1991 Bruce Bruce