Ebner v Official Trustee in Bankruptcy, in the matter of Ebner

REASONS FOR JUDGMENT 1 I have before me an application for an order for the production of certain discovered documents for inspection under O 15 r 11 of the Federal Court Rules. It is necessary to say something about the proceeding to understand the issues that arise. 2 The applicant is the wife of Maxwell William Ebner, a former bankrupt. The respondent is the Official Trustee in Bankruptcy, a body corporate, and is sued in its capacity as trustee of the estate of the former bankrupt. Section 130 of the Bankruptcy Act 1966 (Cth) permits the trustee of a bankrupt estate to apply to an eligible judge for the issue of a warrant authorising a constable of police to enter onto premises, search those premises for "relevant property", take possession of any "relevant property" that is found on those premises and deliver that property to the trustee. "Relevant property" is defined to include any property of the bankrupt: s 130(1)(a). The trustee may apply for a warrant if the trustee has reasonable grounds for suspecting that there is on any premises "relevant property": s 130(1). An eligible judge is not to issue a warrant unless an affidavit has been filed setting out the grounds upon which the warrant is sought and the judge is satisfied that there are reasonable grounds for issuing the warrant: s 130(3). 3 The trustee applied to a judge of the Federal Court, who was an eligible judge, for the issue of a warrant to be executed at the home of the applicant and her husband. Mr Byrden, an officer employed by the trustee, swore an affidavit in support of that application. A number of documents were exhibited to the affidavit including a transcript of evidence given to the trustee pursuant to a notice under s 77C of the Bankruptcy Act. That section empowers the Official Receiver (which expression is defined to include the Official Trustee) to obtain information and evidence from any person for the purpose of performance of the functions of the Official Receiver under the Bankruptcy Act. 4 An order to issue the warrant was made. When the warrant was executed a large quantity of chattels, some very valuable, were seized. Those chattels are now in the possession of the trustee. The trustee proposes to deal with those chattels as part of the estate of the former bankrupt. They are to be sold and the proceeds distributed between his creditors. 5 After the execution of the warrant the applicant commenced these proceedings. She puts forward two claims. First the applicant says that she is the owner, or alternatively the co-owner with her husband, of the seized chattels and she asks for a declaration to that effect. The second claim, which is a little difficult to follow, is based on s 178 of the Bankruptcy Act. That section provides: "If the bankrupt, a creditor or any other person is affected by any act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable." The applicant says that the decision by the trustee to apply for the warrant is a "decision" within the meaning of s 178, the application for the warrant is an "act" within the meaning of s 178 and the failure by the trustee, before the issue of the warrant, to request that the seized chattels be handed over is an "omission" within the meaning of s 178. The applicant alleges that she has suffered loss and damage as a result of the "decision", "act" and "omission" and she seeks an order for compensation. 6 In its defence and cross-claim, the trustee denies the applicant's claim to ownership of the seized chattels. It asserts that, pursuant to s 116(1)(a) of the Bankruptcy Act, which provides that all property that belongs to or has vested in the bankrupt at the commencement of his or her bankruptcy devolves on his or her trustee in bankruptcy and pursuant to s 58(1)(b) of the Bankruptcy Act, which provides that all after acquired property of the bankrupt vests in his trustee in bankruptcy, the seized chattels which were the property of the bankrupt have vested in the trustee and it seeks a declaration to that effect. 7 On this application the applicant is seeking production for inspection of the affidavit of Mr Byrden and the exhibits to which I have referred. Production is opposed on two grounds. It was said, first, that the documents were not relevant and, second, that they were covered by public interest immunity. 8 As far as relevance is concerned, the point can be disposed of quickly. The documents were described in the trustee's list of documents which, of course, constitutes an acceptance that they are relevant. The test for relevance is laid down in the The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company (1882) 11 QBD 55 in very wide terms. As Brett LJ said (at 63) it includes every document that: "…relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - notwhich must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. [It will do so] …if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences:". 9 I have examined the documents in contention. Although it might be said that certain parts are not relevant or only marginally relevant, in the Peruvian Guano sense, they might shed light upon the action and the strength of the case against the trustee and that is sufficient to make them relevant. 10 I return then to the claim for immunity. The basis for the claim is explained in an affidavit by Mr Thomas, an officer of the Australian Federal Police, who describes himself as a liaison officer with the trustee. Mr Thomas said that since 1997 he has been involved in an investigation "in relation to the Bankrupt's Property, the Seized Property, the administration of the estate of the Bankrupt, and certain criminal and civil matters arising from the execution of the Warrant." Reading between the lines, it seems that Mr Thomas is conducting an investigation into whether the bankrupt had failed to disclose to his trustee in bankruptcy property that he owned at the date of his bankruptcy and property that may have been acquired by him after that date. 11 Mr Thomas also refers to an allegation made by the bankrupt that personal property to the value of $658,195 was stolen from his house. Mr Thomas says that this theft "allegedly occurred" on 12 May 1998 and is "the subject of ongoing investigations by the Victoria Police". 12 Mr Thomas says that both the Official Trustee and the Australian Federal Police object to the production of the disputed documents on the grounds that, and here I quote from his affidavit: "(i) disclosure of the text in the material sought would reveal particulars of, or details concerning, police methodology, including details of the manner in which information relating to this investigation came to the notice of the AFP [Australian Federal Police] and/or the Official Trustee. This disclosure of confidential information would reduce the effectiveness of lawful methods used by the AFP and/or the Official Trustee in the investigation and detection of crime. Accordingly, such disclosure would be against the public interest. (ii) disclosure of the material sought would reveal the names and private information relating to other persons who are not subject of [sic] the proceedings before this Court, who for one reason or another came within the ambit of this investigation and who may be unknown to the applicant or his legal advisers. Such disclosure would be against the public interest. (iii) disclosure of the material sought would be prejudicial to ongoing investigations in relation to the applicant and other persons involved in similar offences. Such disclosure would be against the public interest." 13 When it applies, public interest immunity will prevent a court from ordering production of a document or the giving of evidence if the disclosure of the document or the evidence will be injurious to the public interest. The immunity was once known as Crown privilege. However, the trend of recent cases is to allow the privilege to be raised by a party other than the Crown. It has been said that the privilege can be claimed by any public authority (Lord v Commissioner of Australian Federal Police (1997) 74 FCR 61 at 92), by persons exercising statutory powers and authorities such as law enforcement agencies (Somerville v Australian Securities Commission (1995) 60 FCR 319 at 331) and by other organisations such as the respondent in D v National Society for the Prevention of Cruelty to Children [1978] AC 171 ('NSPCC'). On this view continued reference to Crown privilege was apt to mislead and a better description was called for: see, however, Science Research Council v Nasse [1980] AC 1028 at 1087 where Lord Scarman regretted the passing of the term. 14 I mention these matters because an argument was advanced by the applicant that public interest immunity cannot apply to documents in the possession of the Official Trustee. The assumption that lies behind the argument is that the immunity is limited to protecting the function of departments of government or governmental authorities, the performance of statutory duties, the public service and the interests of the state. The cases just mentioned do not support confining the immunity in this way. They suggest a broader proposition, namely that the public interest may require protection in other areas (see eg the speech of Lord Diplock in NSPCC at 218-220), although even those who favour the broader view accept that one must be cautious in extending the immunity too far. 15 A case closely analogous to the present is In re Barlow Clowes Gilt Managers Ltd [1992] Ch 208. The company had been wound up in insolvency. Its joint liquidators conducted a series of interviews with persons who had been closely involved with the company. The witnesses attended on a voluntary basis and a record of interview was transcribed and retained. In every case the interview was conducted in circumstances of confidentiality. The liquidators applied to the court for liberty to disclose the transcripts defendants in criminal proceedings. 16 The question that the court was required to consider was whether it should authorise the liquidators, who were its own officers, to disclose the transcripts voluntarily. Millett J held that since the information was obtained in confidence the court should not authorise the voluntary disclosure of the transcripts. As to compulsory disclosure, Millett J observed that that issue would be dealt with on the return of a witness summons in the criminal proceeding where any question of public interest immunity would be considered. Nevertheless Millett J made certain observations with regard to immunity, presumably to assist the judge presiding over the criminal trial. The following passages are taken from his Lordship's judgment ([1992] Ch at 220-223): "I shall state my opinion that there is an important public interest against disclosure of the transcripts. Under our legal system, the compulsory winding up of an insolvent company is entrusted to the judiciary. It is carried out by the Companies Court through the medium of its own officers, who are registered insolvency practitioners. The court's function is not limited to deciding issues between litigants." … "The liquidation of an insolvent company can affect many thousands, even tens of thousands, of innocent people. In the case of a company like [Barlow Clowes Ltd] it can affect people's life savings. In the case of a major trading company it can affect its customers and suppliers and the livelihood of many thousands of persons employed by other companies whose viability is threatened by the collapse of the company in liquidation." … "In order to enable liquidators to discharge their functions, they need to have access to information about the company, its assets, liabilities, dealings and affairs from those capable of giving such information to them. These will include not merely the former directors, but others such as auditors, solicitors and bankers." … "The process [of compulsorily obtaining information] is an extraordinary and secret mode of obtaining information required for the proper conduct of the winding up. The section - earlier versions of which stretch back into the middle of last century - has been described as conferring an extraordinary power of an inquisitorial nature and even compared - not, I think, favourably - to the Star Chamber." … "Given the liquidators' powers to obtain information by compulsion, it has become the widespread practice for responsible persons to whom requests for information are addressed by liquidators to co-operate with the liquidators and to provide them with copy documents and other information and to submit to being questioned on an informal basis and without a formal order of the court. … If there comes to be a generally perceived risk that the records of such informal interviews may be disclosed to third parties, there is an obvious danger that professional men will no longer co-operate with liquidators on a voluntary basis, but will insist on liquidators having recourse to the court's compulsory powers so that they may enjoy the protection of rule 9 [which provides that a written record of a private examination is not to be filed on the court's records and cannot be inspected without an order of the court]." … "I am satisfied that these are real risks, and that the proper and efficient functioning of the process of compulsory liquidation would be jeopardised if transcripts of the informal interviews of witnesses carried out by liquidators were to be made generally available to defendants to criminal proceedings." I have referred to these passages to show the emphasis that is placed on the need for confidentiality to attach to an investigation conducted by a liquidator. The principles would be no different in the case of the Official Trustee. 17 There is, however, a narrower view of the ambit of public interest immunity. In R v Young (1999) 46 NSWLR 681 Spigelman CJ, presiding over the New South Wales Court of Criminal Appeal, said that the public interest to which "public interest immunity" applies requires a dimension that is governmental in character. While his Honour accepted that the categories of public interest are not closed, he confined those categories to "documents important to the working of government" in reliance upon what was said by Mason J in Australian National Airlines Commission v Commonwealth (1975) 132 CLR 582 at 591 and by Stephen J in Sankey v Whitlam (1978) 142 CLR 1 at 56. See also Commonwealth v Northern Land Council (1993) 176 CLR 604 at 619. On this view it would not be possible to support the trustee's claim to immunity although it would not deny to certain public bodies - for example the Law Institute of Victoria (Law Institute of Victoria v Irving [1990] VR 429) and legal aid bodies (Legal Services Commission v Trotter (1990) 54 SASR 74) - the ability to do so, because of the governmental and statutory functions those institutions perform. 18 It is not necessary for me to resolve whether the common law should be extended in the manner contended for by the trustee in reliance upon the English cases. I need not do so for I am satisfied that even if the privilege could be extended to the activities of the Official Trustee, the claim in this case cannot succeed. I will explain why. 19 Although confidentiality is important, often it must give way to the general public interest that, in the administration of justice, truth will come out: NSPCC [1978] AC at 218 per Lord Diplock. Whatever public interest exists to keep confidential the inquiries undertaken by the Official Trustee must yield to the curial process in this case. Let me explain why I have reached this conclusion. 20 It is not clear whether the claim for immunity in this case is a class claim, that is where the trustee alleges that the disputed documents belong to a class which by their very nature ought to be withheld from production regardless of whether there is anything in the contents the disclosure of which would be against the public interest. On one view this is what Mr Thomas is saying. If it is, it is a view that must be rejected. In Zarro v Australian Securities Commission (1992) 36 FCR 40 Lockhart J considered whether documents within the possession of the Australian Securities Commission, an investigative and law enforcement agency, which recorded information received by the agency concerning possible offences or irregularities and also contained information relating to evidence in proceedings to which the Commission was a party, fell within the immunity. He held that they could, but his Honour said (at 46) that he could not conceive of a case where they would fall within the class doctrine and be immune from disclosure irrespective of the contents of any particular document. See also National Australia Bank Ltd v Saunders (1988) 12 NSWLR 623 where a similar class claim was made and rejected in relation to a report by a liquidator under s 418 of the Companies (NSW) Code; see now s 533 of the Corporations Law. 21 I propose to approach this application on the basis that it is a "contents" claim, where the disclosure of particular information found in the documents is or might be injurious to the public interest. I should say, however, that in the case of both a "class" claim and a "contents" claim, the court is required to undertake the well known balancing exercise between the public interest in the availability of relevant documents for a trial against the prejudice to the public interest that would be occasioned by the disclosure of the confidential information. 22 In Sankey v Whitlam Gibbs ACJ laid down the rule to be applied. His Honour said (142 CLR at 38-39): "The general rule is that the court will not order the production of a document, although relevant and otherwise admissible, if it would be injurious to the public interest to disclose it. However the public interest has two aspects which may conflict. These were described by Lord Reid in Conway v Rimmer [1968] AC 910 at 940, as follows: 'There is the public interest that harm that shall not be done to the nation or the public service by disclosure of certain documents, and there is the public interest that the administration of justice shall not be frustrated by the withholding of documents which must be produced if justice is to be done.' It is in all cases the duty of the court, and not the privilege of the executive government, to decide whether a document will be produced or may be withheld. The court must decide which aspect of the public interest predominates, or in other words whether the public interest which requires that the document should not be produced outweighs the public interest that a court of justice in performing its functions should not be denied access to relevant evidence. In some cases, therefore, the court must weigh the one competing aspect of the public interest against the other, and decide where the balance lies. In other cases, however, as Lord Reid said in Conway v Rimmer, 'the nature of the injury which would or might be done to the nation or the public service is of so grave a character that no other interest, public or private, can be allowed to prevail over it'. In such cases once the court ha decided that 'to order production of the document in evidence would put the interest of the state in jeopardy', it must decline to order production." 23 In Alister v The Queen (1984) 154 CLR 404 Gibbs CJ referred to what he said in Sankey v Whitlam. His Honour explained (at 412): "Sankey v Whitlam establishes that when one party to litigation seeks the production of documents, and objection is taken that it would be against the public interest to produce them, the court is required to consider two conflicting aspects of the public interest, namely whether harm would be done by the production of the documents, and whether the administration of justice would be frustrated or impaired if the documents were withheld, and to decide which of those aspects predominates. The final step in this process - the balancing exercise - can only be taken when it appears that both aspects of the public interest do require consideration - ie, when it appears, on the one hand, that damage would be done to the public interest by producing the documents sought or documents of that class, and, on the other hand, that there are or are likely to be documents which contain material evidence. The court can then consider the nature of the injury which the nation or the public service would be likely to suffer, and the evidentiary value and importance of the documents in the particular litigation." 24 What is the result of the application of these principles to the trustee's claim? First, I cannot see that the powers of investigation of the trustee will be inhibited if information that it has obtained is made public. There is no evidence to suggest that it will be more difficult for the trustee to obtain information in relation to a bankrupt's estate and it is not self evident that this will be the case. 25 Second, it is unlikely that a person who provides information to the trustee by compulsion does so on the basis that the information will remain confidential. There is no evidence in this case that this was the belief of the person who provided the information. To the contrary, it will more often be assumed that the information will be put to use by the trustee either in bringing or defending proceedings, or for the prosecution of offences under the Bankruptcy Act. Thus an appeal to confidentiality cannot support the immunity when the broad purposes of an investigation are kept in mind. 26 Third, from my inspection of the documents I am satisfied that their disclosure will not cause any harm to the public interest. As regards the investigation and prosecution of offences mentioned, I would make the following observations. Although the particular offences are not identified they do relate to the possible concealment of assets by the former bankrupt. But on this score, the documents provide very little information about the manner in which the trustee, or the Australian Federal Police who provided assistance to the trustee, have gone about their investigations. True it is that some aspects of that investigation are revealed. For example, the documents show that close examination has been made of the former bankrupt's statement of affairs. This is no more than what would be expected in any investigation. Other sources of information are mentioned, such as newspaper articles and the like. These are of no moment and their disclosure will not in any way inhibit the trustee in this case, or in any other case. 27 The documents do reveal the identity of the police officer involved in investigating the alleged robbery. The officer is the person who attended at the premises after the robbery had been reported and interviewed the applicant and her husband. Accordingly, his identity is already known to them. The affidavit sets out what the applicant and her husband disclosed to the police officer. That information will come as no surprise to them. The transcript is of evidence from the police officer at his compulsory examination. It is a repetition of what was said when he interviewed the applicant and her husband. There is also a reference to statements made by the former bankrupt to the effect that the stolen property was jointly owned by himself and the applicant. 28 There is nothing in the point that disclosure would reveal the names and private information relating to other persons who are not the subject of the proceeding and who may be unknown to the applicant or her advisers. Apart from a reference to the police officer who conducted the investigation into the burglary, there is passing reference to other persons the disclosure of which will not cause the slightest embarrassment. 29 As I have said, I am of the clear view that there is nothing in any of the documents the disclosure of which would inhibit an investigation into the possible commission of offences by the former bankrupt or anyone else for that matter. On the other hand, what is contained in the documents does have some bearing on the proceeding, although it will not be of assistance to the applicant's case. It may disclose some of the weaknesses of her case. 30 For the same reasons, I reject the contention that disclosure of the material will prejudice investigations in relation to other persons involved in similar offences. Although Mr Thomas has expressed this view it is not, I think, one derived from the contents of the documents themselves, but rather represents an opinion held by many members of the police force that there is always such a risk whenever methods of conducting an investigation are disclosed. It is not a view that I share. And it is certainly not a view that is supported by evidence. 31 For the foregoing reasons the claim of public interest immunity, if it is available to the trustee, is not made out. I will order that the respondent make available for inspection the documents referred to in items 3 and 4 of Part 2 of the respondent's list of documents verified on 26 May 1999. The applicant should have her costs of the application. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.