FEDERAL COURT OF AUSTRALIA Official Trustee in Bankruptcy v Arundell [2005] FCA 1286 OFFICIAL TRUSTEE IN BANKRUPTCY v WILLIAM NORMAN ARUNDELL NSD1142 of 2005 EMMETT J 5 SEPTEMBER 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD1142 of 2005 BETWEEN: OFFICIAL TRUSTEE IN BANKRUPTCY APPLICANT AND: WILLIAM NORMAN ARUNDELL RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 5 SEPTEMBER 2005 WHERE MADE: SYDNEY THE COURT: 1. Notes the undertaking given to the Court by Mr Ben Macausley in the form initialled by Emmett J. 2. Orders that the application of 2 September 2005 be dismissed. 3. Orders that Order 2 be stayed up to and including 4:15pm on 6 September 2005 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 NSD1142 of 2005 BETWEEN: OFFICIAL TRUSTEE IN BANKRUPTCY APPLICANT AND: WILLIAM NORMAN ARUNDELL RESPONDENT JUDGE: EMMETT J DATE: 5 SEPTEMBER 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 11 July 2005, the Official Trustee in Bankruptcy applied to a Registrar of this Court for the issue of summons under s 81 of the Bankruptcy Act 1974 (Cth) ('the Act') for the examination of the bankrupt. The solicitors for the Official Trustee were Swaab Attorneys. The application was lodged in circumstances where the question of discharge of the bankrupt from bankruptcy was in dispute. In the ordinary course, the bankrupt would have been discharged automatically from bankruptcy after 20 February 2005, a sequestration order having been made on 20 February 2002, when a debtor's petition was presented. However, because of a failure on the part of the debtor to respond to a request made by the bankrupt's Trustee in Bankruptcy, on 1 February 2005, for further information, the Official Trustee objected to discharge. The objection had the effect of extending the term of the bankruptcy to 20 February 2010. 2 The three grounds of objection were as follows: 1. The bankrupt, when requested in writing by the Trustee to provide written information about the bankrupt's property, income or expected income, failed to comply with the request. 2. The bankrupt intentionally failed to disclose to the Trustee a liability of the bankrupt that existed at the date of the bankruptcy. 3. The bankrupt has failed, whether intentionally or not, to disclose to the Trustee a liability to the bankrupt that existed at the date of the bankruptcy. The liability referred to in Grounds 2 and 3 was a liability to Mr Kevin Smith. The information sought by the Trustee in Bankruptcy included information concerning dealings between the bankrupt and Mr Smith. 3 Pursuant to the provisions of the Act, the bankrupt sought internal review of the objection by the Official Trustee. On 20 June 2005, a delegate of the Inspector General in Bankruptcy confirmed the objection to discharge with respect to Grounds 1 and 2. Ground 3, however, was cancelled. 4 On 14 July 2005, the bankrupt commenced a proceeding in the Administrative Appeals Tribunal ('the Tribunal') for review of the decision of the Inspector General. That proceeding was commenced three days after the application for the issue of an examination summons under s 81 of the Act. However, the evidence indicates that the application to the Tribunal was in time and was made without the knowledge of the application for the issue of an examination summons. 5 The examination summons was returnable on 10 August 2005 before a Deputy Registrar. After some examination and the production of documents, the examination was adjourned to 6 September 2005. The bankrupt took exception to the fact that the solicitors acting for the Official Trustee are retained in two separate proceedings in the Supreme Court of New South Wales, in which the bankrupt is also involved as a party. The two proceedings are 5830 of 2004, between Kevin Smith and the bankrupt, and 3815 of 2005 between KES Group Pty Limited and VIA Investments Pty Limited. Mr Smith is the only director and shareholder of KES Group Pty Limited and the bankrupt is a director of VIA Investments Pty Limited. 6 On 16 August 2005, the bankrupt's solicitors wrote to the Official Trustee, taking exception to the fact that the Official Trustee was represented by Swaab Attorneys in the examination summons. A response came from Swaab Attorneys on 24 August 2005. Exchanges took place between Swaab Attorneys and the bankrupt's solicitors, resulting in a letter of 30 August 2005 from the bankrupt's solicitors to Swaab Attorneys, whereby it was said that the bankrupt was prepared to submit to examination on two conditions: (1) That Swaab Attorneys undertake to cease to act on behalf of the Official Trustee for the examination summons. (2) The Official Trustee undertake not to direct questioning of the bankrupt in three areas as follows: (i) Proceeding N2005/892 in the Administrative Appeals Tribunal. (ii) Proceeding 5830 of 2004 in the Supreme Court of New South Wales. (iii) Proceeding 3815 of 2005 in the Supreme Court of New South Wales. 7 There was no response to that letter until the afternoon of 2 September 2005. In the meantime, an application was made to Allsop J as Duty Judge for abridgment of time for service of an application for orders setting aside the examination summons or, alternatively, restraining the Official Trustee from employing Swaab Attorneys to act on its behalf. 8 Allsop J abridged time for service and made that application returnable before the Duty Judge at 2.15pm today, when the Official Trustee was represented by counsel instructed by Swaab Attorneys. The bankrupt was also represented by counsel. After some argument, and to some extent at the instigation of the Court, the bankrupt agreed to accept an undertaking from the Official Trustee not to instruct counsel for the Official Trustee to ask any questions which are directed to Ground 1 or Ground 2 of the objection to the discharge from bankruptcy. I had intimated in the course of argument that, if an undertaking along those lines were proffered, I would be disposed to refuse any further relief. 9 After the application for relief was served on Swaab Attorneys, a letter was written to the bankrupt's solicitors disputing the bankrupt's entitlement to any relief, but proffering the following: 'However, in order to allay any concerns you may have we advise that we will not ask any questions relating to the Lexus or VIA Investments and nor press for the production of any documents relating to those matters. We note no documents have been produced which deal with those matters yet. Accordingly, in those circumstances, we believe that the conflict that you say has to date existed no longer exists.' It is common ground that the reference to 'the Lexus' and to 'VIA Investments' is, to some extent, a reference to the subject matter of the two proceedings in the Supreme Court of New South Wales. 10 The only question left for me, in the circumstances that I have briefly outlined, is the question of who should bear the costs of this application. It is unfortunate that the matter has come to the stage that it has. It appears to me that, although it may be that nobody is really at fault, considerable costs could have been avoided by a more conciliatory approach on both sides. 11 The bankrupt has obtained some measure of success, but certainly has not succeeded in having Swaab Attorneys restrained from acting for the Official Trustee. On the other hand, there was some intimation on the part of Swaab Attorneys, on behalf of the Official Trustee, that appropriate assurances could be given. That would have obviated any concern that the examination may be used for the improper purpose of eliciting information to assist Mr Smith and his company in the proceedings in the Supreme Court. With a little more time it may well be that the offer contained in the letter of 2 September 2005, to which I have referred, may have led to some accommodation. However, with the examination imminent tomorrow, one can perhaps understand how the matter was not taken up and dealt with immediately. 12 As I have said, it is unfortunate the matter got to the stage that it did, but in the circumstances I consider that it is appropriate that there be no order as to the costs of the application. Counsel for the bankrupt has indicated that nothing further is required in the light of the undertaking now proffered by the Official Trustee. The appropriate course therefore is to order that the application filed on 2 September 2005 be dismissed, upon the Official Trustee proffering the undertaking to which I have referred. However, I will stay the dismissal until 4.15 pm tomorrow to enable either party, if so advised, to make any further application to me as Duty Judge during the course of tomorrow. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 24 November 2005 Counsel for the Applicant: Mr J M White Solicitors for the Applicant: Swaab Attorneys Counsel for the Respondent: Mr B Skinner Solicitors for the Respondent: Picone & Co Date of Hearing: 5 September 2005 Date of Judgment: 5 September 2005