Bankruptcy - summonses under s.81 of the Bankruptcy Act 1966 - compliance with R.129(1)(d) of the Bankruptcy Rules - requirement of trustee to provide reason for failing to request information or books - width of summons.

Bankruptcy Act 1966, s.81

Counsel for the applicants : Mr P.R. Dutney QC with Mr T. Matthews

The summonses dated 12 July 1991 to Margaret Huybrechts, Marcus James Kitchen, Amanda Maree Huybrechts and Michael James Mankey be set aside.

The respondent pay the applicants' costs of and incidental to the application.

NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

These are applications on behalf of four persons, Margaret Huybrechts, Marcus James Kitchen, Amanda Maree Huybrechts and Michael James Mankey, to review the decision of a Registrar to issue summonses under s.81 of the Bankruptcy Act 1966 and to set aside the summonses. So far as I can ascertain, this is the first case in which the new procedure introduced by Rule 129 of the Bankruptcy Rules (introduced in 1989) has required consideration.

2. Antontheo Dorus Huybrechts became bankrupt on his own petition on 21 August 1989 and died on 23 November last year. The trustee is Mr D.W. Knight who appears by counsel to resist the applications for review. The circumstances relating to each of the four applicants are of various kinds, but it is convenient to deal first with the case of the applicant Mankey.

3. The trustee has applied to a Deputy Registrar to summon Mankey for examination under s.81 of the Act and a summons has issued. It is unnecessary to set out the whole of that provision, which permits the issue of a summons to the bankrupt or an "examinable person" requiring attendance for examination on oath. Under s.81(2), the examination is to be held in public and the examinee must answer "all questions that the Court, the Registrar or the magistrate puts or allows to be put to him" - s.81(11). The obligation to answer in public may be an onerous one and may include meeting allegations of misconduct.

4. In support of the application made by the trustee to examine Mankey, an affidavit was filed alleging that Mankey was -

"... an associate of the bankrupt who was nominated as builder on

many of the building projects in which the bankrupt was involved".

5. The trustee went on to say, in effect, that building materials were delivered by trade creditors of the bankrupt to sites at which building projects were carried on by Mankey, that numerous payments for work done in relation to the bankrupt's more recent projects had not been traced into the bankrupt's known bank accounts, and that it was -

"necessary to examine Mr Mankey in order to establish whether

payments which have been made in respect of these projects have been

paid to Mr Mankey or at his direction".

6. The affidavit went on to explain that the trustee also sought other information related to the subject, thus identified.

7. Counsel for the applicants before me, Mr Dutney QC leading Mr T. Matthews, submitted that the affidavit relating to Mankey did not comply with Rule 129(1) of the Bankruptcy Rules, which, as I have said, came into force in 1989. That rule requires, among other things, that an application for a summons under s.81(1) shall:

"(d) be supported by an affidavit setting out:

(i) the enquiries that have been made concerning the

subject-matter of the proposed examination and, where

applicable, the reason for requiring the production of

any books or classes of books;

(ii) details of the request made to the person to provide

the required information and, where applicable, to

produce the books or classes of books for inspection,

and the result or, where no request has been made, the

reason; and

(iii) the circumstances of any refusal or failure of the person to

co-operate in complying with the request".

8. It will be noted that sub-paragraph (ii) uses the expression "details of the request made", but plainly cannot imply that in every instance an application for a summons must be preceded by a request to provide the information without an examination; the latter part of sub-paragraph (d)(ii) contemplates that no request may have been made.

9. It appears to me that there has been little or no attempt to comply with the requirements of sub-paragraph (d)(ii). It is not stated whether or not the trustee has asked Mankey to provide the information, but it may be taken to be implicit in paragraphs 5 and 6 of the trustee's affidavit that he has not done so. Paragraph 5 says, in effect, that the trustee finds it necessary to examine Mankey, including an examination of documents in his possession. Paragraph 6 says:

"I have not sought these documents previously as I have also formed

the view that any documentation which is provided by the said

Michael James Mankey will be of limited value unless I have the

opportunity to ask questions of Mr Mankey in respect of such

documents at the time of their inspection".

10. Assuming that this is to be taken to imply that there has been no request of Mankey to provide "the required information" within the meaning of Rule 129, then no reason has been given for that omission. It seems that paragraph 6 is intended to give a reason for an omission to seek documents (as opposed to an omission to make a request for information), but the reason given makes little sense.

11. Rule 129 does not imply, as I read it, that a s.81 summons should necessarily be refused if there has not been a request made to provide the information or produce the books sought, which request has been ignored or refused. But if no request for information has been made before a summons is sought and no reason is given for the failure to make a request, that is a circumstance which must be taken into account in determining whether a summons under s.81 should be issued. In my opinion, some special reason would have to be put forward to justify issue of a summons where, as here, there has been neither a request for information nor any reason given for the absence of such a request. The spirit of the rule is that persons who might otherwise have sought a summons under s.81(1) are encouraged to seek to obtain the information privately and to come to the Court only if that course does not produce satisfaction, or is impractical. Counsel for the trustee pointed out that, in some circumstances, the trustee might think it desirable to cause an examinee to come before the Court with no specific prior warning of the matters to be enquired into; but the rule covers that case and if there is a good reason for taking that course, it can be sworn to in the affidavit.

12. It appears to me that no good case is made by the trustee's material for an examination of Mankey under s.81(1). The Rules have not been complied with and the failure to comply with the Rules is in respect of matters which are by no means merely formal.

13. In Karounos v Official Trustee (1988) 80 ALR 626, the Full Court set out at p 633 some principles applicable to s.81 summonses and they included:

"(5) The Registrar should examine the application and form of summons

carefully to satisfy himself that the grounds of the application

are sufficiently clear and the form of the summons is not

oppressive or vexatious, by reason of being uncertain, too wide or

otherwise objectionable.

(6) If the application and summons are in proper form (in the sense

just indicated) the Registrar should issue the summons. He is

under no duty to inquire whether there may be some further

circumstance which would make compliance with the summons

oppressive for a particular person, or at a particular time, or

with regard to particular books or records".

14. It is important to notice that, in the Karounos case, the relevant Rules being dealt with were in a substantially different form. There was then no requirement that any affidavit be filed on behalf of the trustee seeking a summons under s.81(1). In their present form, the Rules require the filing of an affidavit and set out matters which plainly have to be considered by the Registrar in determining whether to issue a summons: see Rule 129(3). In my opinion, the principles set out in paragraphs 5 and 6 of the Karounos list are not a safe guide to the proper practice at present. In particular, it is clear that the Registrar's function under the present rule is not confined to determining whether the application and summons are in "proper form" - an expression which is used in a special sense in Karounos.

15. In my opinion, the summons against Mankey should be set aside for the reasons I have given.

16. I now turn to a consideration of the other three applicants' cases, from the point of view of compliance with Rule 129(1)(d).

17. As to Amanda Maree Huybrechts, the trustee's affidavit says that, shortly before bankruptcy, the bankrupt sold a boat to her at an under-value and that it had not been established whether the price had been paid. The affidavit said that an inquiry had been made about the matter of Miss Huybrechts without result and that the trustee regarded future requests of Amanda Maree Huybrechts as fruitless. In my opinion, this affidavit sufficiently complies with Rule 129(1)(d). It has another difficulty about it, however, which is discussed below.

18. The affidavit concerning Margaret Huybrechts sets out a number of matters in which the trustee is interested, namely establishing circumstances relating to money paid to Margaret Huybrechts (the amounts being specified in the affidavit) by the bankrupt, establishing the source of funds from which she bought certain motor vehicles and to "gain information generally regarding the conduct and examinable affairs of the bankrupt". The affidavit annexes two letters addressed to the bankrupt and Margaret Huybrechts which did not produce the information the letters asked for, but the letters did not inquire into the matters I have mentioned; nor was there any particular ground for thinking that Margaret Huybrechts rather than the bankrupt (her co-addressee) would have regarded it as her task to reply. There is no adequate reason given for failing to follow the course the Rules contemplate.

19. The last applicant, Kitchen, was the bankrupt's solicitor; it seems clear that no attempt has been made to comply with Rule 129(1)(d) in relation to him. Further, the affidavit of E.R. Leeuwendal, relied on in this Court by the trustee's counsel, tends to reinforce the inference that Kitchen was not asked for the desired information before application was made for a s.81 summons.

20. The result is that each of the applications for review other than that relating to Amanda Maree Huybrechts succeeds on the ground of the trustee's non-compliance with Rule 129. It should be added that there may be instances in which non-compliance with Rule 129 should be overlooked or excused, but it seems to me plain that the three matters I have discussed are not in that category. Considering the whole of the material before me, it seems clear that in each case there was neither such a request for information as Rule 129 contemplates, nor any good reason shown for failing to make such a request.

21. The remaining issue is whether or not the application by Amanda Maree Huybrechts should be allowed on any other ground. The summons issued to that applicant requires that she attend at the designated time, date and place:

"... to give evidence in connection with the bankrupt's examinable

affairs and to produce any of the following documents that are in your

custody or power and relate to the abovementioned bankrupt or his trade

dealings or affairs:

all bank statements, cheque butts, deposit books or slips, and any

other documents relating to your dealings with the bankrupt and in

particular, all documents evidencing the receipt of payments made

or property transferred, or title to property transferred, by the

bankrupt to you".

22. Mr Dutney submitted that one objection to the summons is that it goes beyond s.81 insofar as it requires the production of documents in the "custody or power" of the proposed examinee; s.81(1B) of the Act reads as follows:

"A summons to a person under subsection (1) may require the person to

produce at the examination books (including books of an associated

entity of the relevant person) that:

(a) are in the possession of the first-mentioned person; and

(b) relate to the relevant person or to any of the relevant person's

examinable affairs".

23. Mr Dutney's point is that there is a difference between books in one's possession and books in one's custody or power, and he relied upon Turner v Davies (1981) 2 NSWLR 324, as well as B. v B. (1979) 1 All ER 801 at 805. There appears to be no good answer to this point. Documents not in one's possession may be in one's power, because there is a right to obtain them. While not, I think, seriously disputing that there is such a distinction as Mr Dutney mentioned, Mr Hack suggested on behalf of the trustee that the proper course might be to amend the summons so as to make it conform with the language of the Act. I do not propose to do this.

24. The requirement that Amanda Maree Huybrechts produce documents is wide, general and unlimited as to time. It is not, strictly speaking, unlimited as to subject matter, because documents not relating to dealings with the bankrupt need not be produced, but it goes well beyond the matters in which the trustee's affidavit indicates he is interested. Although the intention of the Rules is that the person applying for a s.81 summons shall "specify the books or classes of books that the person is to produce at the examination" - see Rule 129(1)(c) - it is unnecessary to decide whether such a wide summons could ever be supported. What has happened is that, as to the summons to Amanda Maree Huybrechts (and all the others) the trustee has simply asked for and obtained a summons requiring production of all documents relating to dealings with the bankrupt, whether or not having anything to do with the matters the trustee wishes to investigate. I have not overlooked that, according to the evidence of Amanda Maree Huybrechts, she has no relevant books; that evidence could not, in my opinion, make it right to reissue in amended form a summons making an unnecessarily wide demand for production of documents.

25. Mr Dutney complained that the proposed examinees had been represented and expressed a desire to be heard before the Deputy Registrar against the issue of the summonses, but were not heard. I have not formed a concluded view as to the correctness of that course, but am inclined to the opinion that in this respect the Deputy Registrar's procedure was correct. Persons against whom summonses are issued may come to a Judge, as these applicants have, but it seems likely that the intention of the Rules was to confine their means of objection before the Registrar to those set out in Rule 129(2). One should, I think, be slow to read the Act or Rules in such a way as to create any additional obstacles to the trustee's obtaining an examination under s.81; it may be thought that the express provisions provide quite adequate protection to proposed examinees. Indeed, there is not much incentive for persons with knowledge of the bankrupt's affairs to assist the trustee other than in a public examination.

26. In summary, as to three of the four applicants, I hold that the trustee has not complied with Rule 129(1)(d) and that, in the circumstances, his non-compliance constitutes a good ground for setting aside those summonses. As to the other applicant, the summons is too wide. The summonses will be set aside, with costs.