Re Fuller, Michael John [1997] FCA 169

"In my judgment it is immaterial in basic substance whether the private examination is sought to be used by a liquidator to gather information in connection with proceedings he believes he might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought. There is no presently relevant distinction in substance between gathering information referable to commencing proceedings and gathering information referable to continuing proceedings. There may be more risk of or opportunity for the examination being vexatious or oppressive after proceedings have been commenced (cf. Re North Australian Territory Co. (1890) 45 Ch.D. 87 and Heiron's case (1880) 15 Ch.D. 139. Also an abuse of process may be more readily exposed once proceedings are already on foot. But this is surely not to the point, as vexation or oppression will not be tolerated no matter when the examination is held."

I observe that the term "proceedings" used by his Honour in that judgment was not used as a term of art, or as a term referring specifically to the particular definition of 'proceedings' in the Act or in any other legislation, but simply to describe the sort of action which an Official Receiver or trustee or liquidator might bring in the conduct of an administration or liquidation. It does not, I think, arise on the facts of that case, nor from the expressions used, that it applies necessarily to proceedings under the Act in the nature of an objection to discharge from bankruptcy. In my view, it is clear from the history of the Act, and from the powers and functions and duties of the Official Receiver or of a trustee under the Act, that the purpose of an examination under s81 is other than to procure information for the purposes of objecting to automatic discharge from bankruptcy. That may be a consequence of investigations carried out by the Official Receiver or a trustee. Indeed if one looks at the grounds which s149D provides to object to discharge, to a very large measure they focus on conduct of a bankrupt during the administration which may frustrate or not fulfil or may delay the primary purpose of bankruptcy. In Karounos v Official Trustee (1988) 19 FCR 330, to which I was referred, there are a number of principles relating to s81 referred to by the Court (Forster, Woodward and Spender JJ) which I adopt and follow. For present purposes, I refer in particular to principles 1 and 2 (at 335) as follows: "1. The power given by s 81 of the Act is an unusual and far-reaching one (Re North Australian Territory Company (1890) 45 Ch D 87 at 93; Ex parte Willey (1883) 23 Ch D 118 at 128) and its use could easily become oppressive and vexatious if it is not approached responsibly by applicants for summonses, and controlled carefully by the Registrar and the court: see Re Price (No 3) (1948) 14 ABC 137 at 139-140. 2. However the power is exercised in the interests of creditors, and those interests should not be defeated by an unduly technical or restrictive approach to the use of the power. The procedure is basically designed to establish what assets the bankrupt had, what has happened to those assets, and whether action should be begun (or continued) to recover them: see Re Price (No 4) (1948) 14 ABC 142 at 144; Re Andrews (1958) 18 ABC 181 at 184; Re Poulson [1976] 1 WLR 1023 at 1032; [1976] 2 All ER 1020 at 1029."

The procedure is basically designed to establish what assets the bankrupt had, what has happened to those assets and whether action should be begun or continued to recover them. Accordingly I do not accept that, if the purpose contended for by Mr Fuller is made out on the evidence before me, in any event the order sought should not be made. In my view the reverse would apply. The question then becomes what test should be applied to decide whether the examination sought to be carried out falls within the scope of s81, and generally within the scope of the Act. For that purpose also I have had regard to the principles in Karounos (above) in particular (at 335 and 336) principles 7, 8, 11 and 12 which provide: "7. If a person summoned believes that compliance with the summons would be oppressive or vexatious, he can apply to the court to have the summons set aside or adjourned to a more convenient time. Such an application to the court will usually be determined on a broad view of the issues in the particular case and a weighing of competing principles: see Re Castle New Homes Ltd [1979] 1 WLR 1075; 2 All ER 775 and cases there cited; Re John Arnold's Surf Shop (supra); Re Nalanda Pty Ltd [1983] 1 Qd R 269. 8. Discharge or adjournment of a summons may be appropriate where there is litigation pending or likely to be instituted and it is alleged that: (a) the summons is being improperly sought as an aid to that litigation (cf Re Northern Australian Territory Co (supra); Bletchley Boat Co Ltd [1974] 1 WLR 630 at 637; [1979]; 1 All ER 1225 at 1232), where ordinary procedures of discovery, interrogation or subpoena would be fairer and more appropriate; or (b) it would be more just and equitable to defer the examination under s 81 of the Act until the particular piece of litigation has been disposed of. . . . 11. 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: see, for example, Re Anderson; Ex parte Official Receiver (1937) 10 ABC 284 at 288-289; Re Andrews (supra) at 184-185; Re Roberts (supra) at 539, 542. 12. Both the Registrar and the court will give due weight to the fact that a summons is sought by the Official Trustee, who will not be presumed to have acted unfairly or for an improper purpose except on convincing evidence: Re Price (No 3) (supra) at 141. The same is true of an official liquidator: see Re Castle New Homes Ltd (supra) at 791; Re John Arnold's Surf Shop (supra) at 229-230. But an application by the Official Trustee will still be subject to proper scrutiny and will be refused if the Registrar or court is not satisfied that it should be granted."

The focus is that the summons is being improperly brought or that there is some improper motive behind the application. I am mindful of the observation of the Full Court in Karounos (at 336) that at least in the case of the Official Trustee, and I suspect the same can fairly be said of a trustee, that such a person would not be presumed to have acted unfairly or for an improper purpose except on convincing evidence. Mr Fuller's case on the question of fact is built on three related matters: firstly, the timing of the application; secondly, the absence of any explanation offered by the trustee as to why the application is made now and not at some earlier time; and, thirdly, the fact that the trustee could have made the application at an earlier time.

It is clear that, at least to some extent, the purpose of the application is to explore through Mr Fuller information concerning a trust known as the Vilnius Trust and its assets and also information concerning the proprietorship of the house property at 46 Katoomba Road, Beaumont. Those matters at least are matters which were identified by the trustee as matters requiring further investigation in the notice of objection to discharge filed on 11 June 1996. What is put is that there is no explanation for why it is appropriate to raise those matters now and not earlier. As I have said, after the examination completed on 17 September 1993, there has been no further examination until the current request made on 10 December 1996 leading to the summons the subject of this application. There is evidence adduced to show that, in May 1995 at least, the trustee sought funding to explore the two areas that I have referred to through Mr Fuller, and perhaps other areas, and by early 1996 some funding was available, although it was not clear whether that was either sufficient or appropriately directed towards such an examination. Indeed the document which is the letter dated 8 January 1996 from solicitors for the trustee to the trustee, which I received in evidence, suggests that the moneys then available be directed not to the examination contemplated but in other avenues of administration of the estate. I also have before me an affidavit of the trustee sworn on 21 March 1996 in other proceedings which asserts an application for funding to conduct further examinations on 8 November 1995, the approval of funding on 17 November 1995, and the intention to apply "within the next two weeks" to this court to conduct further examinations in the administration of Mr Fuller's estate. It does not then say whether those examinations were to be of Mr Fuller or other persons but I assume for the purposes of my reasons that it included at least Mr Fuller. Why then a wait of some twelve months or perhaps a little longer until action was taken? Should I infer from that delay, and from that sequence of timing, together with the evidence of an ability to carry out the examinations earlier that the purpose of the examinations now, at least to a significant extent, is for what I rule to be an improper purpose, namely, to advance the grounds of objection? Counsel for the trustee's response is to say that the material before me does not support the inference contended for and, as a complementary submission, on the evidence of chronology of events in the administration there is a possible explanation for the fact that the trustee has not, until relatively recently, sought to revive the examination obviously contemplated at least from early 1996. I note that counsel did not put that possible explanation as the explanation of the trustee on his instructions, nor is there material before me from the trustee positively asserting that or anything else to be the explanation for the particular timing. The sequence to which counsel for the trustee referred is the following. Very shortly after the completion of the first period of examination of Mr Fuller, on 23 September 1993, Mr Fuller applied to this Court to have the trustee removed. That application was determined on 4 May 1995, when it was dismissed. Mr Fuller then appealed to the Full Court on 6 June 1995 and it was not until 28 June 1996 that the Full Court dismissed the application. It was put that the status of Mr Wily during that period of time was at least in a relevant way under challenge. It appears despite that challenge, the trustee was taking some steps in the administration (as the evidence shows) and including, given his status, entirely appropriately - at least in a formal sense and I make no comment in respect of the merits of his decision - on 11 June 1996 the filing and subsequently the service of the notice of objection to discharge to which I have referred. I have carefully considered the material in the submissions before me. I have reached the view that it is not established that the trustee had an improper motive as a substantial reason for the present proposed examination contended for. I have noted in reaching that decision, apart from the matters that I have referred to, that the topic of further examination on at least the issues identified has been one which the trustee has had in mind, apparently at least since early 1996 if not earlier, and was identified by him as a matter upon which he was proposing to seek or needed to procure further information as part of the grounds expressed in the notice of objection to discharge from bankruptcy. Although the examination itself is rather later than one might have expected, the fact is that the examination was proposed and on the topics so far as I have identified them from the submissions proposed for that examination, and had been under contemplation, for a considerable period of time. It is not suggested that those topics are inappropriate topics for examination. I also note that there is no precise correspondence of timing between the proposed examination and the Administrative Appeals Tribunal proposed hearing. Having identified those topics for exploration before any application to the Administrative Appeals Tribunal was instituted, or indeed I suspect was contemplated by the trustee, the trustee could have issued or applied for the issue of a summons at any time from June 1996 if not earlier and his request in December 1996 was several months before the Administrative Appeals Tribunal proposes to conduct its hearing. If Mr Fuller's submission is right, it would be equally forceful at any time after the notice of objection to discharge was filed, and equally forceful immediately after the application to the Administrative Appeals Tribunal for review of that decision. The fact that his submission then spans a potentially lengthy period in its practical effect tends to negate the conclusion for which Mr Fuller contends. For those reasons, although I am left to speculate to some extent as to why the precise timing, I am not satisfied that the reason for the precise timing of the application for the issue of the summons or for the examination leads to the conclusion that it was for the sole or a substantial purpose on the part of the trustee of advancing his opposition to the Administrative Appeals Tribunal application to review his decision to object to the discharge of Mr Fuller. The subsidiary argument is one with which I can deal fairly shortly. Although the status of Mr Fuller is, in one sense, undetermined and will remain so until the Administrative Appeals Tribunal decision is given, he has applied for a stay of the decision to object to his discharge from bankruptcy to the Administrative Appeals Tribunal. If such a stay is granted it will be appropriate for the Registrar before whom the examination is conducted to have regard to s81(10A) of the Act in ruling on what questions are considered to be appropriate for the purposes of the examination. Having regard to now the relatively imminent hearing before the Administrative Appeals Tribunal and the nature of the issues which it will raise, in my view it would be proper for the Registrar before whom the examination is being conducted to have regard to that proceeding in deciding whether certain lines of questioning or certain questions are, or are not, appropriate. I note that in principle 11 of the principles expressed in Karounos (above, at 336) the final sentence is to the effect that 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. In my view it is appropriate to leave the handling of such practical problems to the Registrar before whom the examination is conducted. If he errs on the side of caution adversely to the trustee, so be it. Finally, I mention that the parties both contended that there were relevant discretionary considerations. I am not sure in the light of the conclusions I have reached that that be so but, in any event, in my view, discretionary considerations finally balance in favour of refusing the application. Those particular considerations include that the further delay in what is now a considerable time from the bankruptcy of Mr Fuller will be a further three to four months before such examination and investigation as the trustee considers appropriate can be carried out, and indeed possibly a little longer than that. During that period, the time within which any proceedings against third parties may be brought continues to run. That is not an insignificant issue. Counsel for the trustee referred to the fact, or to the risk, that the property at 46 Katoomba Road, Beaumont, may be sold in the meantime as illustrated by an advertisement for its sale in January of this year. I do not know whether it has in fact been sold, although the material before me from the Lands Title Office search indicates that as at 7 February 1996 it is still in the name of Laima Fuller. I have not had regard to that particular consideration in making the judgment as to the exercise of a discretion to which I have referred, because at present I do not see how the examination either now or delayed by a few months, or by several months, would lead to any different picture as to the ability of the trustee to control or not to control that sale, or if it does take place, the proceeds of that sale. Finally, I have had regard to the ability of the Registrar before whom the examination will be carried out to control its conduct under s81(10) of the Act and, as I have said, if in the conduct of that examination the Registrar adopts a cautious approach to what may be permitted as appropriate by him in the light of the proceedings before the Administrative Appeals Tribunal, so be it. For those reasons, in my view, the application should be dismissed. In my view there are not sufficient reasons to depart from the normal rule as to costs and I order that the applicant on this application do pay the costs of the trustee to be taxed. I certify that this and the preceding pages are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Mansfield.

Counsel for the trustee : Mr J Chippendall Solicitors for the trustee : M D Nikolaidis and Co