Damjanovic v Spehar

EX TEMPORE REASONS FOR JUDGMENT 1 I have before me two applications brought under Order 77 Rule 38 of the Federal Court Rules. Rule 38 provides that: "An examinable person who is served with a summons and who wishes to apply for an order to discharge the summons may do so by filing: (a) a notice of motion in the proceeding in which the summons was issued; and (b) an affidavit setting out the grounds in support of the notice of motion." 2 Under Rule 33, an application may be made for an examinable person to be summoned for examination in relation to the bankruptcy of a relevant person. An application was made by Mojmir Damjanovic for summonses to be issued to a number of people including Jeffrey James Meads and Frank Bronco Zobec. In accordance with Rule 34, each application was supported by an affidavit by Mr Damjanovic. Paragraph 4 of the affidavits are in the same terms and provide as follows: "The facts that I rely upon in establishing that [the proposed witness] to be summoned is an examinable person are in that he should be able to give information about the bankrupt's business, financial and property affairs during times material to bankruptcy; that he is able to provide records and information about associated entities created and/or maintained around the time of bankruptcy of the respondent; that he participated 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: that he may be able to provide information about financial dealings and affairs of the bankrupt and associated entities referred to in the applicant's affidavit dated 2 July 1998." 3 On 8 December 1998, the applications came before me, when I stood them over for hearing today. On that day, Mr Damjanovic was in Court. He was assisted by a Ms Vukic and it was intimated that Mr Damjanovic proposed to seek the leave of the Court for Ms Vukic to assist him in the hearing of the motions when they were heard today. I directed that the applicants deliver to Mr Damjanovic an outline of contentions in support of the orders sought under Rule 38. 4 Each of Messrs Meads and Zobec has filed an affidavit. Those affidavits are in similar terms. There are some differences, however, between the affidavits because of the different terms of the summonses issued pursuant to Mr Damjanovic's application. Each summons requires production of all records of dealings with named companies as well as the bankrupt. The companies named in the summons addressed to Mr Zobec are Uralla Holdings Pty Ltd; York Agencies Pty Ltd; Sharp, Hume and Co Services Pty Ltd and Kisoro Pty Ltd. The companies named in the summons to Mr Meads are Uralla Holdings Pty Ltd; Kisoro Pty Ltd and York Consultants (NSW) Pty Ltd. 5 Mr Zobec says that he has been advised (although he does not say by whom or in what circumstances) that none of the companies mentioned in the summons directed to him are associated entities of the bankrupt and he says that the bankrupt has not ever, in respect of those companies, been within the categories described in section 5B of the Bankruptcy Act 1966. Section 5B sets out the circumstances in which a company is associated with a person for the purposes of the Bankruptcy Act. 6 Mr Zobec also says the material which the summons requires him to produce in relation to the companies is voluminous and would take many hours, if not days, to recover. He also asserts that the material does not form any part of the examinable affairs of the bankrupt. Mr Zobec also says that Kisoro Pty Ltd is not an associated entity of the bankrupt. An administrator has been appointed to that company. 7 Mr Zobec says that, at all relevant times, he was an accountant working in the offices of Sharp, Hume and Co and was introduced to the bankrupt in about July 1995 in the course of acting for Mr Damjanovic. Mr Damjanovic had lent money to the bankrupt and was seeking to recover it. Mr Zobec says that after September 1996, he subsequently came to do work for the bankrupt, but up to the time of his bankruptcy the work he was undertaking in relation to the bankrupt's affairs was on behalf of Mr Damjanovic. 8 That statement is somewhat confusing and it is not totally clear just what capacity Mr Zobec had in relation to the affairs of the bankrupt. It does seem to indicate however that he had some connection with the affairs and may well be able to give some information concerning the affairs of the bankrupt. Mr Zobec also deposed to the fact that Mr Damjanovic had commenced proceedings against him and Mr Meads in the District Court at Parramatta. 9 In the statement of claim filed in those proceedings, allegations are made that the defendants, who include Messrs Meads and Zobec, had caused a deed of assignment to be drawn up purporting to assign a debt of $1,450,000 owed to Mr Damjanovic by Kisoro Pty Ltd and Ivan and Zelka Spehar, the bankrupt and his wife. The assignee is Uralla Holdings Pty Ltd, which is a company owned by business associates and partners of Messrs Meads and Zobec. 10 That appears to be the deed referred to in Mr Damjanovic's affidavit in support of the application for the issue of the summonses. The statement of claim alleges that the deed of assignment was a forgery insofar as it purports to bear the signature of Mr Damjanovic. However, in his affidavit Mr Zobec says that he was present and saw Mr Damjanovic sign the deed of assignment. 11 The basis upon which Messrs Meads and Zobec seek to have the summonses discharged is as follows. First it was contended that, because of the deed of assignment, Mr Damjanovic is no longer a creditor of the bankrupt and therefore has no standing to make the application for issue of summonses. However, it is now conceded that while there may be some doubt as to the full effect of the deed of assignment, Mr Damjanovic is in fact a creditor of the bankrupt. 12 Next it was said that because the assignment purported to be an assignment only of the indebtedness due by one of joint debtors, there was, in some way, a fraud on the power. I have some difficulty in understanding that submission. 13 Next it was said that an inference should be drawn that the summons has been issued for an improper purpose. It was said that the reference in the affidavit to the deed of assignment indicates that Mr Damjanovic was endeavouring to obtain information in support of the allegations made in the District Court proceedings. The District Court proceedings are not presently current because the statement of claim was struck out for want of appearance by the plaintiff at some earlier stage. I am not, on the material presently before me, prepared to draw the inference that the summonses were issued for the purposes of furthering Mr Damjanovic's proceedings in the District Court. 14 The final bases upon which the application is brought really merge into one. It was said that the summonses are vexatious and oppressive because the documents required to be produced are from companies which do not have any connection with the bankrupt and that the evidence which Messrs Meads and Zobec would be able to give is of only marginal relevance, if of any relevance at all, to the affairs of the bankrupt. 15 The bankrupt's trustee has been represented on the hearing of the application by his solicitor, Ms Nash. Ms Nash has indicated that the trustee does not wish to participate in the examination and does not oppose the setting aside of the summonses. I consider that I am entitled to take into account the prior involvement of Mr Damjanovic in the affairs of the bankrupt insofar as they have been before me. 16 At one stage Mr Damjanovic made an application for the annulment of the bankruptcy, believing that that would be in the best interests of the creditors. That application was misconceived and I struck the application out during the course of last year. The circumstances of that application are contained in the trustee's report which is before me. In the course of giving my reasons for dismissing that application, I indicated to Mr Damjanovic that if there were reasons for believing that witnesses may be able to give information concerning the bankrupt estate, the proper course would be for summonses for examination of the witnesses to be issued. I draw the inference that it is because of that observation that these summonses were subsequently issued. 17 However, in the light of the evidence from Mr Zobec and Mr Meads, it appears to me that there is very little information that they are likely to be able to give upon examination. The fact that the trustee has said that he does not wish to participate in the examination if it were to proceed and does not himself desire to have an examination, indicates that Mr Damjanovic may have again misconceived the function of the process which he has adopted. 18 Mr Damjanovic was notified of this hearing on the last occasion before me. The contentions of the applicants were sent to Mr Damjanovic pursuant to my direction. Notwithstanding that, he has not appeared today. In the circumstances, I am satisfied that the pursuit of the examination would be vexatious and oppressive and, accordingly, I consider that it is appropriate to discharge the summonses issued to the present applicants. I order Mojmir Damjanovic to pay the applicants' costs of the motions. 19 The trustee is not a party to the applications. However, as I have indicated, the trustee has been represented by his solicitor and I have derived assistance from the presence of the trustee's solicitor in terms of indicating the attitude of the trustee to the proposed examination. More significantly, the trustee's solicitor has made clear the position of the trustee in relation to the question of whether Mr Damjanovic was a creditor. The question of whether Mr Damjanovic was still a creditor, having regard to the deed of assignment, was a matter of contention and in my view justified the presence of the trustee. Accordingly, I order that Mojmir Damjanovic pay the costs of the trustee's attendance today and on 8 December 1998.