FEDERAL COURT OF AUSTRALIA Damjanovic v Spehar [1999] FCA 392 MOJMIR DAMJANOVIC v IVAN SPEHAR NG 772 of 1998 FINN J SYDNEY 23 MARCH 1999 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 772 OF 1998 BETWEEN: MOJMIR DAMJANOVIC Applicant AND: IVAN SPEHAR Respondent JUDGE: FINN DATE OF ORDER: 23 MARCH 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. the summons to attend an examination served on Christopher Maley on 30 November 1998 by the applicant be discharged. 2. the applicant pay Christopher Maley's costs of the notice of motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 772 OF 1998 BETWEEN: MOJMIR DAMJANOVIC Applicant AND: IVAN SPEHAR Respondent JUDGE: FINN DATE: 23 MARCH 1999 PLACE: SYDNEY EX TEMPORE REASONS FOR JUDGMENT 1 The present motion is brought by Christopher Paul Maley under O 77, r 38 of the Federal Court Rules, to have discharged a summons served on him to attend an examination under s 81 of the Bankruptcy Act 1966 (Cth). The summons is being issued on the application of Mojmir Damjanovic. Mr Damjanovic is a creditor in the bankruptcy of one Ivan Spehar to whom I will refer as the debtor. On the hearing of the motion I was informed that the trustee in bankruptcy did not wish to be heard. I also gave leave to Mr Damjanovic to be represented for today's purposes by Ms Vukic who has acted on his behalf in this matter, so I understand. 2 The summons in question is in the following terms: "1. You are required to attend at the time, date and place stated below to be examined on oath under section 81 of the Bankruptcy Act 1966 and to give evidence in relation to the examinable affairs of Ivan Spehar. 2. You are also required to bring the following documents with you and produce them at the examination: (a) documents pertaining to your registration as Public Notary, current and historical; (b) all records and documents bearing your signature as Public Notary in July 1996 and in particular those relating to affairs of Ivan Spehar; (c) all records of your dealings with Ivan Spehar." 3 The accompanying affidavit of Mr Damjanovic, filed in supposed compliance with the requirements of O 77, r 34(2b) of the Federal Court Rules states insofar as presently relevant: "That the facts I rely upon in establishing that Christopher Maley, of c/- Maclarens solicitors, 232 Marrylands Rd, Merrylands, NSW 2160 to be summoned is an examinable person are in that he should be able to give information about the bankrupt's business and financial dealings during times material to bankruptcy pertaining to loans provided by the applicant to the bankrupt during times material to the bankruptcy; that he may able to provide records and information about associated entities created and/or maintained around the time of bankruptcy of the respondent; that he may able to provide information about financial dealings and affairs of the bankrupt and associated entities referred to in the Applicant's Affidavit dated 2nd July 1998; that he participated as Public Notary with the bankrupt in fraudulent exercise, in July 1996, purporting to assign a significant debt owed to the applicant by the bankrupt to an associated entity, 'Uralla Holdings Pty Ltd'." 4 Mr Maley does not complain of non-compliance with the rule I have mentioned as such, though he does assert that the affidavit lacks any factual foundation that establishes that Mr Maley is an examinable person as defined in s 5 of the Bankruptcy Act, and hence is examinable under s 81. The evidence filed in support of the applicant is the affidavit of a Mr Couston who is Mr Maley's solicitor. Mr Damjanovic gave brief oral evidence. 5 It is clear on the uncontested evidence before me that Mr Maley was, at all relevant times, Mr Damjanovic's solicitor: first, in relation to a loan agreement and associated security arrangements with the debtor, his wife and their company and I note in passing the loan was in the sum of $1,450,000; secondly, in relation to Mr Damjanovic's entry into possession of the company business on a later default; thirdly, in conducting a mortgagee's sale; fourthly, in dealings with the official trustee on the debtor's bankruptcy; and fifthly, in relation to the assignment by Mr Damjanovic for $100,000 of his rights under the loan agreement to third parties insofar as those rights related to the corporate debtor. I note that under that agreement the debtors were jointly and severally liable. I further note that Mr Damjanovic disputes the authenticity of the assignment, notwithstanding that it purports to bear his signature and was witnessed by Mr Maley. 6 The grounds for Mr Maley's motion are twofold. The first is simply that he is not an examinable person for the purposes of the definition in s 5 of the Bankruptcy Act. That definition is in the following terms: "s 5 … 'examinable person', in relation to a person (in this definition called the 'relevant person'), means: (a) if the relevant person is a debtor and property of the debtor is known or suspected to be in the possession of a person – that person; (b) if the relevant person has become a bankrupt and any of the property of the bankrupt is known or suspected to be in the possession of a person – that person; (c) in any case – a person who is believed to be indebted to the relevant person; (d) if a person, including: (i) a person who is an associated entity of the relevant person; or (ii) a person with whom an associated entity of the relevant person is or has been associated; may be able to give information about the relevant person or any of the relevant person's examinable affairs – that person; or (e) if the books (including books of an associated entity of the relevant person): (i) are in possession of a person, including a person of a kind referred to in subparagraph (d)(i) or (ii); and (ii) may relate to the relevant person or any of the relevant person's examinable affairs; that person;" It would seem that Mr Damjanovic purports to rely upon paras (d) and (e) of that definition. I would have to say there is simply no evidence before me that would provide any basis for the application of paragraph (e). Such information as the para (e) contemplates may be contained in Mr Maley's files in the form of details obtained by him as Mr Damjanovic's solicitor. It has not been suggested that Mr Damjanovic is unable to inspect Mr Maley's files. 7 Insofar as para (d) is concerned, I likewise cannot see on the evidence that Mr Maley acquired information of the debtor or of his examinable affairs otherwise than as Mr Damjanovic's solicitor. What Mr Damjanovic appears to rely upon to support the summons are: (1) the evidence, undisputed, that Mr Maley participated in dealings with the debtor, a fact conceded by Mr Maley; (2) the assertion that the deed of assignment to which I referred was in some unspecified fashion part of a process engaged in by the debtor to dispose of his property prior to impending bankrupt: see para (f) of the affidavit supporting the summons; and (3) general allegations, though without any evidentiary foundation, of what I would call a conspiracy to defraud by Mr Maley, the debtor and others. 8 The first of these matters does not on the evidence go beyond showing that in his dealings with the debtor, Mr Maley acted on Mr Damjanovic's behalf. The second simply misconceives the nature and purpose of the deed and its legal effect. Whether valid or not, and I express no view on that matter, the deed has no bearing on the affairs of the debtor. As to the third matter, there is simply no sufficient sub-stratum of evidence to support the assertion of fraudulent conspiracy such as could warrant Mr Maley being held to be an examinable person under paragraph (d) of the definition. I am left with no more than unsubstantiated assertion in that regard. In the circumstances then, I accept Mr Maley's contention that he is not an examinable person for the purposes of s 81. I will discharge the summons on that ground. 9 The second ground relied upon is that the summons has been served for an improper purpose. Mr Damjanovic clearly has a strong sense of grievance at the losses he has sustained. He clearly considers that the fault in this lies in some degree with Mr Maley. To that end he has instituted proceedings in the District Court of New South Wales, claiming damages for professional negligence and fraud against Mr Maley. In his affidavit in proceedings in seeking to have a strike out motion dismissed, Mr Damjanovic stated inter alia that: "the defendant, [ie Mr Maley], will be examined in Federal Court of Australia in relation to matters pleaded in my Statement of Claim." 10 On the material before me, I am not prepared to infer from this statement that Mr Damjanovic had an improper purpose, ie the collection of evidence for the District Court proceedings in mind, when applying for the summons. Rather I consider the statement simply reflects a misconception on his part as to the proper scope of a s 81 examination. 11 I would, however, have been prepared to consider the discharge of the summons on the ground that it was oppressive given the nature of the proceedings brought in the District Court and the ordinary pre-trial procedures allowed to Mr Damjanovic to obtain information in those proceedings. I refrain from expressing a concluded view on this matter. In the event then I will order that the summons to attend an examination served on Mr Maley on 30 November 1998 by the applicant in these proceedings be discharged. 12 I will order that Mr Damjanovic pay Mr Maley's costs of the notice of motion. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. Associate: Dated: 23 March 1999 Applicant appeared in person Solicitor for Mr C Maley: Middletons Moore & Bevins Date of Hearing: 23 March 1999 Date of Judgment: 23 March 1999