Admissibility of the Transcript: s 255
Both Mr Weber and Mr Lever asked the Court, if it formed the view that the primary Judge had erred in law, not to send the matter back for a retrial, but to resolve any outstanding issues. In the interests of achieving finality in the litigation and of minimising costs, this is the appropriate course. Accordingly, we have considered afresh whether the transcript of the bankrupt's s 81 examination should have been admitted into evidence against CML. In our view, s 255 of the Bankruptcy Act, but not s 81(17) of that Act, empowers the Court to admit the transcript into evidence against CML, as evidence of the matters stated therein. We will state our reasons for this conclusion and for holding that the transcript should have been admitted.
In our opinion, the primary Judge was correct in holding that s 81(17) was not intended to provide for the admissibility of a transcript of an examination in subsequent proceedings as evidence of the matters stated therein. The sub-section was merely intended to remove a barrier that otherwise might have prevented a transcript of a s 81 examination being received in evidence, if otherwise admissible, for example, as an admission. As the primary Judge pointed out, a s 81 examination is inquisitorial in nature and is conducted under powers of compulsion. But for a provision such as s 81(17), these circumstances might have led to restrictions on the use that could have been made of the transcript in other proceedings under the Bankruptcy Act. Like s 597(14) of the Corporations Law, considered in Douglas-Brown v Furzer, s 81(17) does not explicitly address the question of admissibility of a s 81 transcript in subsequent proceedings. The admissibility of such a transcript must be determined by reference to the law of evidence, including any statutory provisions bearing on the question.
In addition to removing a barrier to the admissibility of a s 81 transcript in subsequent proceedings, s 81(17) imposes an important restriction on the use of such a transcript. Section 81(17) provides that a transcript may be used in proceedings under the Bankruptcy Act in which the examinee is a party. Although not framed negatively, the evident intention of s 81(17) is to restrict the use of transcripts, if otherwise admissible, to the proceedings identified in the sub section. As Finn J remarked in Re Schofield, at 189, s 81(17) reflects a longstanding Parliamentary intention that the use of a transcript of an examination in later proceedings should be "quite circumscribed". Section 81(17), in its current form, is less restrictive than its predecessor, since the transcript is not now limited to use against the examinee. Nonetheless, it continues to reflect the longstanding Parliamentary intention to which Finn J referred.
Until the new s 255 was inserted into the Bankruptcy Act in 1996, the legislation simply did not provide for the admissibility into evidence of the transcript of a s 81 examination. In its earlier form, s 255(9) merely provided for the means by which a transcript of evidence, if otherwise admissible, could be proved. It follows that the admissibility of such a transcript fell to be determined by the general law of evidence, including the rules governing the admissibility of hearsay evidence. However, s 255(2) now provides that the transcript of an examination under s 81 "is admissible as evidence of the matters described by a person whose words are recorded in the transcript", unless the court makes an order to the contrary.
In our view, this provision was intended to make the transcript of evidence admissible as evidence not merely of the words spoken by the examinee, but of the matters described by the examinee in his or her evidence. If there were any doubts that this was the intended effect of the sub-section, they are resolved by the Explanatory Memorandum accompanying the 1996 Bill. The Memorandum (par 182.2) states that the
"provision is designed to overcome the common law rules excluding hearsay evidence, and to enable evidence given at examinations and recorded interviews to be put on the record in proceedings in a court without the need for witnesses to repeat their account of events."
This does not mean that the contents of a transcript of a s 81 examination are automatically admissible in subsequent proceedings. First, s 255(2) itself provides that the court in which the transcript is sought to be introduced may make an order to the contrary. Secondly, s 255(2) must be read together with s 81(17). As we have said, s 81(17) is intended, in part, to impose a restriction on the use to which a s 81 transcript can be put in subsequent proceedings. Thus the apparently broad terms of s 255(2) must be qualified so as to make a s 81 transcript admissible (subject to the power of the court to make an order to the contrary) only in proceedings under the Bankruptcy Act to which the examinee is a party.
Applicability of s 255 to the Present Proceedings
Section 255 in its current form came into force after the trustee commenced the present proceedings, but before the trial. It is clear that s 255(2) applied to the tender of the transcript of the bankrupt's s 81 examination in the present proceedings. The amendment brought about by the enactment of s 255(2) concerned the practice and procedure of courts and was not within the presumption against retrospectivity: Rodway v The Queen (1990) 169 CLR 515, at 521, per curiam. As the Court said in Rodway, no-one has a vested right in any form of procedure, including the rules governing admissibility of evidence and the effect to be given to evidence.
We should add that there was no dispute, either at the trial or on appeal, that the proceedings brought by the trustee were "proceedings under [the Bankruptcy Act]", for the purposes of s 81(17) of the Bankruptcy Act: see Bankruptcy Act, s 31(1)(f). Thus the admissibility of the transcript of the bankrupt's s 81 examination falls to be determined under s 255(2) of the Bankruptcy Act.
Should the Transcript Have Been Admitted Against CML?
Section 255(2) of the Bankruptcy Act, as has been seen, provides that the transcript of the bankrupt's s 81 examination is admissible in the present proceedings unless the Court makes an order to the contrary. Section 255(2) does not specify the matters that are to be taken into account in determining whether the Court should make "an order to the contrary". Nor does the sub-section address, in terms, the relationship between the Court's power to make a contrary order and the provisions of the Evidence Act. These questions were not the subject of argument.
CML submitted that the probative value of transcript of the s 81 examination, as against it, was substantially outweighed by the danger that the evidence might be unfairly prejudicial to it. In those circumstances, Mr Weber contended that the Court should exercise its discretion under s 135 of the Evidence Act to refuse to admit the evidence. Alternatively, he submitted that the Court should limit the use to be made of the evidence, by allowing it to be used only against the bankrupt, pursuant to s 136 of the Evidence Act (which permits the Court to limit the use to be made of evidence if there is a danger that a particular use might be unfairly prejudicial).
In the absence of argument concerning the relationship between s 255(2) of the Bankruptcy Act and the provisions of the Evidence Act, we are content to assume that circumstances warranting the exclusion of evidence under ss 135 and 136 of the Evidence Act justify (if not require) the Court to exclude evidence otherwise admissible under s 255(2). Making that assumption, which accords with the submissions made by CML, we think that the transcript of the bankrupt's evidence nonetheless should have been admitted into evidence against CML.
The unfair prejudice relied on by CML in the present case is based on the failure of the trustee to call the bankrupt, while seeking to rely on the bankrupt's evidence in the examination under s 81 of the Bankruptcy Act. The critical evidence given by the bankrupt in the course of his examination was that he obtained all three bank cheques in return for cash. The trustee did not need that evidence in relation to the ANZ cheque, because Ms Johnson was able to give a firsthand account of the particular transaction. She was able to do so because, as it happened, she filed a contemporaneous report concerning the transaction, a fact that became known when the ANZ produced documents in response to a subpoena issued by the trustee. No similar documentary evidence was produced on subpoena by the State Bank.
While much of the evidence given by the bankrupt in the course of his examination appears to have been self-serving and improbable, there is little reason to doubt the probative value of his evidence that he had purchased all three bank cheques for cash. On the contrary, the bankrupt's striking reluctance to make the admissions strongly suggests that his evidence on this issue was reliable. As the primary Judge remarked when ruling that the transcript of the bankrupt's evidence could be admitted against him, the trustee was virtually entirely dependent on others for the information and evidence necessary to establish his case. It is true, as we have pointed out, that the trustee would have encountered fewer forensic hazards than he apparently expected, had he called the bankrupt to give direct evidence of the purchase of the cheques. But CML adduced no evidence on this or any other issue. It was open to CML to call the bankrupt or members of his family if it wished to adduce direct evidence of the source of funds used to acquire the bank cheques. Just as the trustee could have taken advantage of s 38 of the Evidence Act in appropriate circumstances, so could CML. While there is no particular reason to think that the bankrupt or, for that matter, members of his family would have been sympathetic to CML's cause, they are unlikely to have been more sympathetic to the trustee.
In these circumstances, we do not think that CML has made out a case for the exercise of the Court's discretion under either s 135 or s 136 of the Evidence Act. Some of the evidence sought to be adduced through the transcript was of considerable probative value and was not readily available from other sources. Much of the remaining evidence, such as the bankrupt's account of the sources of the cash, was, to say the least, of dubious probative value. But that evidence, if accepted, was unfavourable to the trustee and favourable to CML. Accordingly, the appropriate course was to admit the whole of the transcript against CML pursuant to s 255(2) of the Bankruptcy Act.
FURTHER SUBMISSIONS
Mr Weber made a number of further submissions on behalf of CML. In our opinion, each is without substance and can be dealt with briefly. We will also deal briefly with a submission on costs made by the trustee.
The "Logical Flaw"
Mr Weber submitted that the primary Judge's reasoning contained a "logical flaw". This was said to be that his Honour, having rejected the bankrupt's evidence that the source of the cash was his daughter and sister, had impermissibly assumed that the bankrupt himself had supplied the cash from his own resources. As Mr Weber pointed out, the fact that a witness is not accepted on an issue does not necessarily establish that the opposite of what the witness says is correct: cf Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640, at 694, per Gibbs J.
The primary Judge's conclusion about the source of the cash for the purchase of the bank cheques did not rest on a logical flaw of the kind identified by Mr Weber. His Honour drew an inference from all the circumstances disclosed in the evidence. Those circumstances included that the bankrupt had personally purchased the three bank cheques and had paid cash for them; that he had controlled the financial affairs of his family and the various entities comprising his "empire"; that the bankrupt had an interest in (whether or not he controlled) at least one of the companies named as a purchaser in the first contract of sale, and that there was no evidence of any claims having been made by the bankrupt's daughter or sister to the portion of the deposit not forfeited by CML. (In relation to the last point, the bankrupt's daughter and sister were joined as parties to the proceedings, yet filed no cross-claims asserting an entitlement to the money.) In our opinion, in the absence of any other evidence, the primary Judge was entitled to infer that the bankrupt had supplied the cash for the bank cheques from his own funds. His Honour was entitled to reject the account as to the source of the funds, given by the bankrupt in his s 81 examination, as inherently improbable, notwithstanding that the evidence was not directly contradicted by witnesses called by the trustee: see Cole v The Commonwealth [1962] SR (NSW) 700 (NSW S Ct/FC), at 704, per Else-Mitchell J; Re Gear (Dec'd) [1964] Qd R 528 (S Ct Qd/FC), at 534-535, per Hart J.
Mr Weber criticised the primary Judge for making a finding that the "probable source of the funds was [the bankrupt's] share of the Parramatta property". That finding was not necessary to the conclusion that the bankrupt provided the cash for the purchase of the bank shares. The significance of the Parramatta transaction was that it demonstrated that the bankrupt had substantial cash available to him, from which the payment for the bank cheques could have been made had he so desired. This, in turn, added further support to the inference drawn by the primary Judge. It is not necessary to consider whether the specific finding made by the primary Judge, that the money came from the sale of the Parramatta property, was warranted. Even if it was not, it made no difference to the ultimate finding.
Parties
CML sought leave to file an amended notice of appeal, specifying as a ground of appeal that the primary Judge had erred in refusing to strike out the proceedings against all parties other than CML. No written submissions were filed in support of this ground. However, Mr Weber submitted that the trustee's joinder of the bankrupt, Ms Morris (his daughter) and Ms Anastopoulos (his sister) was an abuse of process, designed only to provide a mechanism for securing the admission of the transcript of their s 81 examinations into evidence pursuant to s 81(17) and s 255 of the Bankruptcy Act.
Mr Weber did not direct the Court to any evidence which lent support to the abuse of process argument. Nor did he refer to authorities which provide guidance as to the circumstances in which a person should be joined as a party, or in which a person joined should remain a party. These were canvassed by a Full Court of this Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 (FCA/FC), at 523-525.
In our opinion, nothing has been shown to suggest that his Honour erred in declining to remove the bankrupt, Ms Morris and Ms Anastopoulos as parties to the proceedings. On the basis of the s 81 transcripts, it was clear that claims were being made by the bankrupt and by Ms Morris and Ms Anastopoulos that the funds for the bank cheques were provided by Ms Morris and Ms Anastopoulos. The declaration sought by the trustee plainly affected their rights, in the sense that it was inconsistent with the claims they put forward or which the bankrupt put forward on their behalf. So far as the bankrupt is concerned, the trustee's case rested on serious allegations against the bankrupt which, if established in criminal proceedings, would expose him to a penalty of imprisonment: see: Bankruptcy Act, s 265(1). Indeed, one of CML's written submissions was to the effect that the primary Judge had failed to require clear and cogent proof of the trustee's allegations, having regard to the fact that, if the allegations were true, then "[the bankrupt], his daughter and his sister had committed offences under the Bankruptcy Act". In these circumstances, it was not an incorrect exercise of the Judge's discretion to permit the bankrupt, Ms Morris and Ms Anastopoulos to continue as parties to the proceedings.
Standard of Proof
Mr Weber submitted that the primary Judge had erred in failing to apply the correct standard of proof. In written submissions, he contended that, in the circumstances of the present case, the civil standard of proof required "cogency of proof without doubt". The well-known authorities, which are conveniently referred to in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 (H Ct), do not support any such proposition. The primary Judge clearly bore the correct principles in mind, as shown by his citation of passages from the joint judgment in Neat Holdings. We, too, have borne those principles in mind in considering whether his Honour erred in finding that the bankrupt had supplied the funds for the bank cheques from his own moneys.