Re Hack, A.S. v. Ex parte The Official Trustee in Bankruptcy [1987] FCA 402

a bankrupt and your trade dealings, property and affairs, in particular:-

Your alleged use of the names 'Alan Haynes', 'Alan Hayes', 'E.%.Sales', 'K.T.

Sales', 'C. & I. Sales', 'Direction 2000' and 'Cost Less Sales'.

Your alleged incurring of liabilities to People Magazine, West Australia Mail, 'The Age', 3KZ, Telecom Australia, The State Electricity Commission of Victoria and the National Australia Bank.

Your alleged operation of a business or business' under the names of 'Randy Rhonda's', 'Lust Line', 'Sexy Sally', 'Fanny's' and 'Fantasy Land'.

AND to produce any of the following documents that are in your custody or power and relate to

Any deed, contract, note or memorandum of a contract or other written document as may relate to evidence you are hereby summoned to give in connection with any of the matters hereinbefore mentioned.

Any journals, receipt books, cheque butts, bank statements, ledgers or other books of account as May record any receipt, payment, disbursement, appropriation or other transaction by you or on your behalf with any debtors or creditors of yourself; and any items of correspondence, journals, receipt books, cheque butts, bank statements, ledgers or other books of account as may relate to evidence you are hereby summoned to give in connection with any of the matters hereinbefore mentioned.

Any copies of any of the documents referred to in paragraphs 1 and 2 hereof

where the originals are not in your custody or power."

The summons was issued on the application of the Official

Trustee who relied in support of his application on matters

disclosed by affidavits by the Official Receiver and two of

his officers which had been sworn in support of an application for an order pursuant to s.149(8) of the

Bankruptcy Act ("the Act") for an extension of the time at

which an objection under s.149(3)(c) of the Act would lapse. That order was made by Jenkinson J. on 13 April 1987 when his Honour ordered that the period at which the objection of the Official Trustee under s.149(3){c) will lapse be the period of five years and eight months commencing on 27 April 1982 (the date of the bankruptcy). The matters contained in those affidavits included references to a telephone call to each of the officers of the Official Receiver on 10 and 11 March 1987 respectively, one from an anonymous female and the other from a female who identified herself only as "Lisa". The substance of the allegations contained in those telephone calls was that the bankrupt had carried on business under, or otherwise used, the names referred to in the summons of 15 May 1987, and had incurred liabilities to the businesses or

entities referred to in paragraph (b) of that summons.

Application has now been made on behalf of the bankrupt for an order pursuant to s.14(5) of the Act that the Deputy Registrar's summons be set aside on the ground that it is too wide and oppressive. Alternatively, an order is sought rescinding the order for examination by the Registrar in

Bankruptcy pursuant to which the summons of 15 May 1987 was

SaeennaamneEeSRARREREAtEnL eumamneeneerarseaiater mmmnammanmnenntesmmertalie taeiadeanamemamdemeateade aed te . a 7 ,, . ci 7 NI e . ary ae

in the Act of s.81 were canvassed by a Full Court of

Court in Official Receiver v. Todd (1986) 70 ALR 119

"Section 81 forms part of Pt V of the Act headed 'Control over Persons and Property of Debtors and Bankrupts'. Section 77 imposes an obligation on a bankrupt to 'discover' his property to his trustee and s.81 is headed 'Discovery of Bankrupt's Property'. In this regard it is apparent that its thrust is to ascertain the nature, extent and whereabouts of the property of the bankrupt, 1n the interests of creditors. Its emphasis on property and its reference to the 'trade dealings, property or affairs' of the bankrupt coincides with the power of the court under s.50 to direct a trustee to take control of the property of a debtor subsequent to presentation of a petition but prior to the making of a sequestration order. Sub-section (2) of this section is virtually in pari materia with s.81 and expressly refers to an examination under that latter section.

Each of these two sections, 81 and 50, is available to be used in the administration of the estate in bankruptcy, an administration which may not be completed prior to discharge. They contrast with the public examination of a bankrupt under s.69, the completion of which is in some circumstances a pre-condition to discharge, and the purpose of which is the examination of the bankrupt not only in relation to his 'trade dealings, property and affairs' as in s.81 but also in relation to his 'conduct'. The scope of a public examination under s.69 is therefore wider than an examination under 5.81. In so far as the word 'conduct' is included in 5.69, Re Smith (1960) 19 ABC 13 refers to it as contemplating the ascertainment of information 'which could or might have something to do with bringing about the bankruptcy of the debtor'. In this way it contrasts with the ascertainment of his assets as part of the administration of his estate. It is significant that, in circumstances where a s.8] examination could ex hypothesi take Place subsequent to discharge, the matter of a bankrupt's conduct which would have been reviewed

in a public examination and taken into account on his discharge was not stated as a matter upon which further evidence could be required to be given."

Mr. Barton for the bankrupt has drawn my attention to

does, to give evidence in connection with "your conduct as bankrupt" is, on its face, too

legitimate purposes for which such a summons may be issued.

which is conferred by s.81 is in aid getting in of a bankrupt's property. To use an

under s.81 for what Cave J. in Re Easton (1891) 8 Morr.

nature, extent or whereabouts of the property of the bankrupt

is impermissible. See Re Alafaci (1976) 9 ALR 262 at 270

where Riley J. cited with approval R_v. West (1971) 18 FER

However, in my view, the issue of a summons pursuant to

a power to require "evidence concerning the bankrupt or his trade dealings, property or affairs"

because, on its face, it commands a witness to give evidence

of the discovery and examination at 171 called an "indirect purpose" and not to ascertain the

Nn connexion with the bankrupt's "conduct as a bankrupt".

bankrupt himself, concerning whom s.81 expressly contemplates that evidence may be required.

Attention was also drawn to the fact that the summons here in requiring production of documents does not follow

129(2) of those Rules prescribes that a summons under sub-s.50(2) or S31(1) of

"In pursuance of the power conferred on the Court (or the Registrar) by section 81 of the Bankruptcy Act 1966, the Court (or the Registrar) hereby summons you to attend before the Court (or the Registrar or a magistrate) at the day of 7,19 , at the hour of

o'clock in the noon to give evidence in connexion with (give short particulars of the matters concerning which the person is to he examined) and to produce any of the following

documents that are in your custody or power and relate to the abovementioned bankrupt or his

' is directed to the bankrupt, to give evidence and

to produce any documents in your custody or power relating to yourself or to your trade dealings, property or affairs,

copies of any documents in two general classes that relate to

his trade dealings, property and affairs. That objection may

well have much force if taken to a summons" requiring production of documents by somebody other than the bankrupt. However, Form 49 expressly contemplates that the Registrar may require a bankrupt to "produce any documents in your custody or power relating to yourself or to your trade dealings, property or affairs". The fact that the Registrar has chosen to confine the requirement made of the bankrupt himself to a more limited class of documents than the extremely general one indicated in Form 49, cannot, in my

opinion, invalidate the summons or provide evidence that its

issue has been procured for an ulterior or indirect purpose.

It may be easier to discern an indirect or ulterior purpose in asking a particular question onan examination under s.81. If that can be done, the officer conducting the examination can, and should, disallow the question. If that course is not followed it is always open to the court before

which evidence obtained in response to such an improper

question is sought to be adduced, to refuse to admit that

evidence. The Queen v. West and Re Alafaci (supra) were both cases in Which that power was exercised. It has been conceded by Mr. Bigmore for the Official Trustee that questions going to "conduct" of the bankrupt unrelated to his trade dealings, property or affairs would be impermissible as irrelevant or as directed to an indirect or ulterior purpose. Mr. Bigmore also accepted that it is open to the bankrupt

himself or any other witness, in the course of an examination

under s.Bl to object to answer a particular question

as tending to incriminate him; (contrast s.69(8) which expressly excludes any absolute privilege against

self-incrimination in the public examination of a bankrupt).

For example, objection could properly be taken tao a question

whether the liability to one of the businesses or entities

referred to in paragraph (6) of the present Summons, was

incurred by the bankrupt without informing the relevant

person that he was an undischarged bankrupt. (An omission of

that kind would contravene 5.269 of the Act) Such an objection could be based on the ground that the question is extraneous to the purposes which s.81 1s framed to serve, or on the privilege against self-incrimination. It is

undesirable to multiply examples of that kind without the

benefit, which the Registrar will have, of full argument in

the context of each specific question to which objection may

However, to acknowledge that certain questions in an examination under s.81 may be impermissible for one or other of the reasons I have just indicated, does not entail that the issue of a summons to a bankrupt to attend

examination under that section has been procured solely for an illegitimate purpose. Some guidance on the question of whak circumstances may permit a purpose of that kind to be inferred is provided by the following observations of

Lockhart J. in Official Receiver v. Todd (Supra) at 127:

purpose or as an instrument of oppression will be a matter to

be inferred from the surrounding circumstances including the

identity of the witness to whom the summons is directed.

"Section 55(8) properly construed provides no barrier to the exercise of the power conferred by s.81(1) after the bankrupt is discharged from bankruptcy. It may be said that this produces harsh consequences. A person may be discharged from bankruptcy and many years later brought before the court pursuant to s.81 to provide information relating to events long past. There is no substance in this argument. A discharged bankrupt is expressly required by s.152 to give assistance to the trustee in the realisation and distribution of such of his property as vested in the trustee upon pain of contempt of court. Since the undistributed property of the bankrupt remains vested in the trustee after discharge there are sound reasons of policy why the machinery of the law and the administration of bankruptcy should continue to be available to the trustee and the creditors to assist the trustee in the performance of his continuing duties of collection, realisation and distribution of such of the bankrupt's assets as are vested in him before the discharge. Section 81 is an important weapon in the trustee's armoury. Also, the person to be examined 1s protected against any Misuse of the power. It is necessary for the trustee or a creditor who seeks to examine the bankrupt to satisfy the court or the Registrar that the circumstances are appropriate for the issue of summons under s.81(1). Where a summons is issued by the Registrar it is subject to review by the court: s.14(5). It is well established that the power conferred by s.81 must be exercised for legitimate purposes to aid the process of finding, recovering, realising and distributing assets of the bankrupt and not as an instrument of oppression: Re Csidei; Ex parte

Andrew (1979) 28 ALR 381; 39 FLR 387 and cases there cited by me."

' Almost always the use of a summons under s.81 for an indirect

inference may more readily be available where the summons

that by 3.116 of the Act property acquired by a bankrupt

before discharge is divisible amongst his creditors, and that

of the income of a bankrupt be made available for the benefit

of his creditors. In the light of those considerations,

the present applicant has failed to discharge the onus which, in my opinion, he bears, of establishing circumstances that on balance raise

under s.81 has been procured solely for some indirect purpose or as an

T certify that this and the preceding nine (9) pages are a