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[2006] FCA 115
Federal Court of Australia
2006-02-15
Branson J, Lander J, Graham J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 On 10 February 2006 a notice of motion was filed by Wendy Mary Loiterton, the Respondent in proceedings NSD 2624 of 2005, in which she sought an order that an examination summons ("the summons") issued against her in those proceedings on 18 January 2006 be discharged. It may be that there is a typographical error in respect of the date 18 January 2006 as the Court file only contains a copy of an examination summons directed to Mrs Loiterton which was filed on 10 January 2006. 2 The summons requires Mrs Loiterton to appear for examination under s 81 of the Bankruptcy Act 1966 (Cth) ("the Act") on Monday 20 February 2006. The notice of motion was originally made returnable for 10.15 am on that same date. However, because that was the time at which the examination was to commence, an application was made to the Court to direct that the return date of the summons be brought forward, which it was, so that the motion has come before me at 2.15 pm today. 3 At the outset Mr Donnellan, counsel for the Applicant on the motion (that is to say Mrs Loiterton), sought leave to file in Court an amended notice of motion and that has occurred. It was indicated at the commencement of the hearing of the amended notice of motion, that relief was not sought in respect of prayer 2 in the amended notice of motion. 4 In the course of his submissions on the amended notice of motion, counsel for Mrs Loiterton drew my attention to a decision of Branson J in Donnelly v Davison (2000) 105 FCR 1 ("Donnelly") in which her Honour observed that ordinarily access would be granted to an affidavit upon which an examination summons was based if the Court would be unable to fairly determine the application to set aside the examination summons if access to it was withheld.
Prayer for RelieF: 3 5 In the circumstances, counsel for Mrs Loiterton asked the Court to deal with paragraph 3 of the amended notice of motion as a preliminary issue. That paragraph seeks access to the applicant's affidavits (referring to the trustee's affidavits) and any other materials filed in support of the application for the issue of the summons, before proceeding to consider whether or not the summons should be discharged. 6 In Donnelly, Branson J referred to a passage from the judgment of Lander J in Simionato v Macks (1996) 19 ACSR 34 at 63 where his Honour, then sitting in the Supreme Court of South Australia, said: "It is not in every case where a party makes an application to set aside an order for examination that the proposed examinee ought to be entitled to inspect the affidavit upon which the original order was made. Otherwise the very reason for sealing the affidavit would stand frustrated and the examination process would be likely to be frustrated. The proposed examinee must establish some qualification so as to be allowed access to the affidavit. The application to set aside the order itself is not sufficient." It would seem to me that there is much to be said for what Lander J said in that case. 7 The question then is whether or not Mrs Loiterton has established "some qualification", to use his Honour's words, to justify access to the affidavits in question. Counsel for Mrs Loiterton puts his case no higher than one founded upon the chronological sequence of events. He does not point to anything in the evidence which suggests that what is going on is of, as was referred to in argument, a "fishy character". 8 The chronological sequence would seem to be that on 12 July 2002 Mrs Loiterton's husband was made bankrupt ("the Bankrupt"). On 6 April 2005 the Trustee of his bankrupt estate instituted proceedings in the New South Wales Supreme Court against, amongst others, Mrs Loiterton. I do not know anything about the nature of those proceedings or the stage at which they have reached, or the outcome thereof if they have been disposed. 9 On 8 June 2005 a warrant was issued allowing a search of premises in which Mrs Loiterton resided. On 9 June 2005 a search warrant or warrants were executed and, as I understand it, certain goods were seized which are referred to in other proceedings to which I will refer in a moment as "Schedule A" and "Schedule B" items. Those items of personal property are, so I understand, still in the possession of the Trustee. 10 On 23 September 2005 proceedings were instituted by Mrs Loiterton in this Court against the Trustee, being proceedings NSD 1779 of 2005. Mrs Loiterton, in effect, seeks declarations that she is the owner of the "Schedule A" and "Schedule B" items, and also items which are referred to in "Schedule C" to the amended application in those proceedings. Mrs Loiterton's case is that if she is not entitled to ownership of the items in question, the Trustee of a family trust, of which she says she is a director, is entitled to ownership of them. It is not for me to pass judgment on her standing to seek relief on behalf of the company which is the trustee of the family trust, or which is said to be the trustee of the family trust. That is not an issue with which I need concern myself in this matter. 11 I am not sure what stage the proceedings NSD 1779 of 2005 have reached. It would appear that the pleadings have not yet closed, and that Mrs Loiterton has sought, and the trustee has agreed, to the amendment of her claims in those proceedings. The evidence, it would appear, has yet to be closed. 12 On 13 February 2006, that is on Monday of this week, the solicitors for the Trustee wrote to the solicitors for Mrs Loiterton and said, amongst other things: "On perusal of the Affidavit in Support, it appears that your Motion is predicated upon an opinion that the subject matter of the Examination is the Artwork litigation. Whilst there may be some overlap, this is not the primary objective of the Examination. We therefore invite you to withdraw your Notice of Motion." 13 In reply, the solicitors for Mrs Loiterton wrote yesterday stating, amongst other things: "… The Summons calls for production of the supporting documentation to our client's affidavits in the substantive proceedings and our concern is that during the course of the examination it will be almost impossible to avoid examining our client in relation to matters raised in those substantive proceedings. Your letter in as much acknowledges this by your comment regarding 'some overlap'. In such circumstances we consider it is appropriate for the examination to be put off pending the determination of the substantive proceedings." 14 In my opinion, no case has been made out by Mrs Loiterton for her to be afforded access to the affidavit material which is normally treated as confidential and which was relied upon to secure the issue of the summons directed to her, requiring her to attend for examination on Monday, 20 February 2006. In the circumstances paragraph 3 of the amended notice of motion fails.
Prayers for relief: 1, 4, 5 and 6 15 In his helpful submissions as to whether or not the examination summons should be discharged, counsel for Mrs Loiterton has drawn my attention to a number of authorities including Karounos v Official Trustee (1988) 19 FCR 330 ("Karounos"), a decision of Forster, Woodward and Spender JJ in this Court. In their reasons for judgment their Honours said at 336: "… Where litigation is pending or likely to be brought and the information sought under a summons could affect that litigation, there is no presumption that the summons will be set aside or adjourned. It would normally only be set aside if the application were defective in some way, or the court found some improper motive behind the application. It would be adjourned if the balance of justice and convenience in the particular case so required. In some cases it might be appropriate to defer examination on a particular topic. In all cases the Registrar or the court will be careful to see that injustice is not occasioned in the course of examination by the particular questions asked..." (emphasis added). 16 Counsel for Mrs Loiterton has also referred me to other authorities, including Hong Kong Bank of Australia v Murphy (1992) 8 ACSR 763, a case in which the bench comprised Gleeson CJ, then of the Supreme Court, and Mahoney and Priestley JJ of the New South Wales Court of Appeal. 17 At 742 in his reasons for judgment Gleeson CJ, with whose judgment the other two Judges agreed, said: "While the court will not permit a liquidator, or other eligible person, to abuse its process by using an examination solely for the purpose of obtaining a forensic advantage not available from other ordinary pre-trial procedures, such as discovery or inspection, on the other hand, the possibility that a forensic advantage will be gained does not mean that the making of an order will not advance a purpose intended to be secured by the legislation." (emphasis added) 18 In the light of the principles to which I have referred, it does not seem to me that a case has been made out warranting the discharge of the summons directed to Mrs Loiterton. It goes without saying that the Registrar conducting the examination can be expected, to use the words of the Court in Karounos, to be careful to see that injustice is not occasioned in the course of examination by the particular questions asked. 19 No doubt, Mrs Loiterton will be represented at the examination and she may probably be examined in respect of the Bankrupt's property. If some collateral benefit is enjoyed by the Trustee as a result of answers that are given, so be it. There is nothing to suggest that the summons has been taken out against her for a foreign purpose which could be said to be the predominant purpose. 20 The possibility that she will be asked questions which may be germane to proceedings NSD 1779 of 2005 does not mean that she should not deal with them appropriately if they relate to what constituted the property of the Bankrupt, and the circumstances in which she or any other party is said to have become the owner of those assets, if at some stage they were the property of the Bankrupt or were paid for by him. 21 However, if the Trustee uses the examination to try and secure evidence which will be used to cross-examine Mrs Loiterton in proceedings NSD 1779 of 2005, or to attack her credit in those proceedings, then one may assume that the Registrar will intervene if the proper use of s 81 of the Act is taken beyond the permissible limit. In the circumstances, I am not disposed to discharge the examination summons as sought in paragraph 1 of the amended notice of motion. 22 Paragraphs 4, 5 and 6 seek in the alternative orders that the examination be adjourned to a later date. In my opinion, it would be inappropriate for the examination to be adjourned by order of the Court. It is a matter for the Registrar as to when and how the examination should proceed. In the circumstances, I decline to make orders in accordance with paragraphs 1, 4, 5, and 6 of the amended notice of motion. 23 An application for costs has been made by the Trustee in respect of the costs of the notice of motion to date on an indemnity basis. It is conceded that there should be an order for costs made in the Trustee's favour against the Applicant in the notice of motion, Mrs Loiterton, but it is suggested by her counsel that it would be inappropriate for the Court to order that costs be paid on an indemnity basis. I am satisfied that in the exercise of my discretion, the proper order is simply that the costs of the notice of motion to date be paid by the Applicant in the notice of motion, Mrs Loiterton. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham .
Associate: Dated: 17 February 2006 Counsel for the Applicant: D J Durston
Solicitor for the Applicant: Searle & Associates Lawyers
Solicitor for the Respondent: Heard McEwan Lawyers
Pascoe
Loiterton
(2000) 105 FCR 1
(1988) 19 FCR 330