Re Osenton, C.K. Ex parte Osenton, C.K. v Worrell, I. & Anor [1995] FCA 90 - FCA 1995 case summary — Zoe

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Re Osenton, C.K. Ex parte Osenton, C.K. v Worrell, I. & Anor [1995] FCA 90

[1995] FCA 90

Federal Court of Australia|1995-07-01|Before: Re Hugh J, Cooper J

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Source facts

Court

Federal Court of Australia

Decision date

1995-07-01

Before

Re Hugh J, Cooper J

Catchwords

Ex parte Cheryl Kathleen Osenton v. Ivor Worrell and Alcan Australia Ltd. No. QB596 of 1990 Re: Osenton, Phillip Leslie
Ex parte Phillip Leslie Osenton v. Ivor Worrell and Alcan Australia Ltd. No. QB1131 of 1990 Cooper J., Brisbane, 3 March, 1995

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Catchwords

Ex parte Cheryl Kathleen Osenton v. Ivor Worrell and Alcan Australia Ltd. No. QB596 of 1990 Re: Osenton, Phillip LeslieEx parte Phillip Leslie Osenton v. Ivor Worrell and Alcan Australia Ltd. No. QB1131 of 1990 Cooper J., Brisbane, 3 March, 1995

Judgment (5 paragraphs)

[1]

CATCHWORDS Bankruptcy - Public examination of bankrupt - application to set aside summons to attend for public examination issued pursuant to s 81(1) of the Bankruptcy Act 1966 (Cth) - public examination sought after discharge from bankruptcy - whether compliance with summons would be oppressive or vexatious - whether summons for improper purposes of forcing settlement or aiding litigation - trustee in conflict of duty and duty or interest and interest - whether summons set out sufficiently the areas to be examined - improper purpose must be predominant purpose - power to order production of documents limited by terms of s 81(1B). Bankruptcy Act 1966 (Cth) s 81, s 81(1A), s 81(1B) Worthley v. England (1994) 12 ACLC 775 (FC) - Foll. Re Aitken Ex parte Trans Tasman Pty. Ltd. (1987) 17 FCR 71 - Appl. Federal Commissioner of Taxation v. Australia and New Zealand Banking Group Ltd. (1979) 143 CLR 499 - Appl. Dwyer v. Ross (1992) 34 FCR 463 - Appl. Karounos v. Official Trustee (1988) 19 FCR 330 (FC) - Appl. Australian Securities Commission v. Graco (1991) 29 FCR 491 - Cons. Huybrechts Ex parte Huybrechts v. Knight (1991) 31 FCR 394 - Cons. Re Club Superstores Aust. Pty. Ltd. (1993) 11 ACLC 751 - Dist. Official Receiver v. Todd (1986) 14 FCR 177 (FC) Grosvenor Hill (Qld.) Pty. Ltd. v. Barber (1994) 48 FCR 301 (FC) Re Hugh J. Roberts Pty. Ltd. (In Liq.) [1970] 2 NSWR 582 Re Andrews (1958) 18 ABC 181 Re: Osenton, Cheryl Kathleen; Ex parte Cheryl Kathleen Osenton v. Ivor Worrell and Alcan Australia Ltd. No. QB596 of 1990 Re: Osenton, Phillip Leslie; Ex parte Phillip Leslie Osenton v. Ivor Worrell and Alcan Australia Ltd. No. QB1131 of 1990 Cooper J., Brisbane, 3 March, 1995

[3]

(b) In paragraph 1 of the schedule, adding the words "in so far as they are, or appear to be relevant to CHERYL KATHLEEN OSENTON or to any of her conduct, dealings, transactions, property and affairs" after the words "Cherenton Nominees Pty. Ltd.". (c) In paragraph 2, adding the words "in so far as they are, or appear to be relevant to CHERYL KATHLEEN OSENTON or to any of her conduct, dealings, transactions, property and affairs" after the words "Re Osenton Family Trust". (d) In paragraph 3, adding the words "in so far as they are, or appear to be relevant to CHERYL KATHLEEN OSENTON or to any of her conduct, dealings, transactions, property and affairs" after the words "Stingray Boats Pty. Ltd. (in liquidation)". 2. Otherwise, the application is dismissed. 3. The applicant pay the respondents' costs of the application to be taxed if not agreed. THE COURT ORDERS IN NO. 1131 of 1990 THAT:

The summons of 10 September, 1993 be amended by the Registrar in Bankruptcy by :- (a) Inserting the words "documents and records in your possession" after the word "books" where it appears on the face of the summons; (b) In paragraph 1 of the schedule, adding the words "in so far as they are, or appear to be relevant to PHILLIP LESLIE OSENTON or to any of his conduct, dealings, transactions, property and affairs" after the words "Cherenton Nominees Pty. Ltd.". (c) In paragraph 2, adding the words "in so far as they are, or appear to be relevant to PHILLIP LESLIE OSENTON or to any of his conduct, dealings, transactions, property and affairs" after the words "Re Osenton Family Trust". (d) In paragraph 3, adding the words "in so far as they are, or appear to be relevant to PHILLIP LESLIE OSENTON or to any of his conduct, dealings, transactions, property and affairs" after the words "Stingray Boats Pty. Ltd. (in liquidation)".
Otherwise, the application is dismissed.
The applicant pay the respondents' costs of the application to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

[4]

IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND Estate No. 596 of 1990 RE: CHERYL KATHLEEN OSENTON EX PARTE: CHERYL KATHLEEN OSENTON Applicant AND: IVOR WORRELL Respondent ALCAN AUSTRALIA LTD Respondent IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND Estate No. 1131 of 1990 RE: PHILLIP LESLIE OSENTON EX PARTE: PHILLIP LESLIE OSENTON Applicant AND: IVOR WORRELL Respondent ALCAN AUSTRALIA LTD Respondent CORAM: Cooper J. PLACE: Brisbane DATE: 3 March, 1995 REASONS FOR JUDGMENT The Application The applicant in bankruptcy 596 of 1990 is Cheryl Kathleen Osenton. The applicant in bankruptcy 1131 of 1990 is Phillip Leslie Osenton. In each bankruptcy administration a summons has issued pursuant to s.81(1) of the Bankruptcy Act 1966 ("the Act") requiring each applicant to attend and be examined and to bring certain documentation referred to in the schedule to each summons. Each of the applicants has applied to have the respective summons set aside or adjourned to a more convenient time. The basis of each application is :- (a) compliance with the summonses to attend would be oppressive or vexatious; (b) the summonses are being improperly used as an aid to litigation; (c) the summonses are being used for an improper purpose; (d) the trustee of each bankrupt estate, Mr. Worrell, is in a position of a conflict of duty and duty or in the alternative a conflict of interest and interest; (e) each summons does not set out sufficiently the areas to be examined and is too wide. The Background On 21 May, 1990 Mrs. Osenton presented her own debtor's petition. Mr. Ivor Worrell, an accountant of the firm Worrell Whitehill, became trustee of her estate. On 3 September, 1990 Mr. Osenton presented his own debtor's petition. Mr. Worrell also became trustee of his estate. Mr. and Mrs. Osenton were associated with the two companies referred to in the summonses issued under s.81 of the Act: Cherenton Nominees Pty. Ltd. ("Cherenton") and Stingray Boats Pty. Ltd. ("Stingray Boats"). Cherenton was incorporated on 8 June, 1978 and Mr. and Mrs. Osenton were directors of the company from that time until their resignation on 17 October, 1988. Upon their resignation Mr. Osenton's brother, Grant Osenton, and a Margaret Todd became directors of Cherenton. On 25 January, 1979 Cherenton became trustee of the Osenton Family Trust which was settled on that day. On 23 November, 1986 Cherenton as trustee of the family trust acquired a property at Conondale, Queensland. Cherenton, to settle the purchase, used $400,000.00 which had been deposited with Tricontinental Corporation in the name of Mr. and Mrs. Osenton. The money, it is alleged, represented the purchase money paid to acquire the interests of Mr. and Mrs. Osenton and Mrs. Osenton's mother in a real estate development at Milton, Brisbane. The purchase price was appropriated as $300,000.00 to Mr. and Mrs. Osenton and $100,000.00 to the mother. Mr. and Mrs. Osenton have held an interest in Stingray Boats from 28 November, 1984. Stingray Boats was placed into liquidation on 6 September, 1988. Stingray Boats was indebted to Alcan Australia Ltd. ("Alcan") for goods supplied in the sum of approximately $150,000.00. This indebtedness was guaranteed by Mr. and Mrs. Osenton and the guarantee was called upon by Alcan with the default of Stingray Boats. Neither Mr. nor Mrs. Osenton had paid the sum demanded by Alcan at the time each of the applicants presented a debtor's petition. Alcan is the only major creditor of either Mr. or Mrs. Osenton.

[5]

Each bankrupt in a statement of affairs claimed an investment by way of loan account with Cherenton, the value of which was to be ascertained, and further claimed that Cherenton owed the bankrupts money for loans made in the period 1979 to 1985 for an amount to be ascertained. On 18 June, 1992 Alcan filed an application seeking the removal of Mr. Worrell as trustee or alternatively that the trustee deliver a report of his investigations and administration of the estates of the bankrupts. The application appears not to have been proceeded with and the trustee reported to the creditors by a report dated 19 June, 1992. In his report to creditors the trustee said :- "5. FINANCIAL RECORDS I have been unable to obtain complete records of the Osentons' financial dealings or the transactions concerning the trust. Accordingly, substantial time has been spent in trying to establish the loan account situation between the Osentons individually and Cherenton Nominees Pty Ltd in its capacity as trustee. Attached to this Report are details of information that I have been able to obtain from the records of the trust and creditors will note in respect of the June, 1989 year details of receipts and payments that have not been able to be identified as either being loan monies or some other transaction in which the trust was involved. Creditors should note that in terms of the reconciliation prior to any adjustment for suspense items that the trust owes the Osentons approximately $321,000.00. Creditors should also note that on page 5 of this Report, referring to amounts paid to discharge guarantees in relation to Stingray Boats Pty Ltd, that sums totalling some $540,000.00 appear to have been paid from accumulated assets within the trust. This of course would result in a debt due by the Osentons to the trust for a debt of $220,000.00. This is based on an assumption that the trust had not guaranteed the bank borrowings and no evidence of any such guarantee has resulted from my investigations. In summary, the position in respect of the balance of indebtedness to or by the Osentons to the trust I point out the following. (a) No accounts have been written up by either the trust, the company or the bankrupts for at least five years prior to the debtors' bankruptcy. (b) The Osentons (on my recommendation) included on the Statement of Affairs that they could be owed funds by Cherenton Nominees Pty Ltd however, that figure could not be determined. (c) We have been attempting for some time to reconcile the accounts to establish an amount due by the trust to the Osentons but have experienced severe difficulty in view of both the age of the transactions and lack of evidence (in the form of receipt and payment details) and information provided by the Osentons. In respect of the attempts to reconstruct the accounts and to establish whether there is a divisible asset available to creditors in the administration I have incurred time cost in excess of $14,000.00. (d) Mr and Mrs Osenton now say that nothing is owing by them to Cherenton Nominees and in fact that the reverse is the case. (e) I have to date been unable to prove that any debt exists because although I can identify some monies going to the trust it can also be seen that the trust has paid out substantial monies on behalf of the Osentons. ...... 7. FURTHER INVESTIGATIONS As detailed above, my investigations have proven to be inconclusive in as much as I have been unable to establish a debtor/creditor relationship between the bankrupts and the trust. It may be that further investigation may be able to establish such a relationship and I would be happy to discuss with any creditor any further investigation they felt may be warranted. ...... 8. DIVIDEND PROSPECTS As indicated throughout this Report, at this stage it seems unlikely that any dividend will be payable in this administration for the only likely asset appears to be Mr and Mrs Osenton's entitlement from the trust by way of trust funds. It may be that legal action would enable a directive that the trust is beneficially owned by the Osentons and therefore they have some entitlement to any surplus assets or accumulated capital the trust may have." On 10 May, 1993 the trustee wrote to the solicitors for Alcan as follows :- "I refer to previous correspondences and discussions in respect of the above administrations and advise that negotiations with the bankrupts pertaining to a settlement of funds in respect of monies owing to [sic] by the Osenton Family Trust to the bankrupts have broken down. The Osentons have offered a full and final settlement sum of $50,000.00 on behalf of the Trust, which I consider to be totally inadequate bearing in mind the circumstances and the transactions entered into between the Trust and the Osentons, and accordingly now propose the following course of action:-

I propose to examine both the bankrupts, together with Margaret Todd (a director and friend of the Osentons), Grant Lindsay Osenton (a brother and director of the Trustee company) in respect of all unexplained transactions located in the Trust's and debtors' records. Details of these unexplained transactions have been included in previous reports to you. The examination of the persons involved will either be under Section 77C or Section 81 of the Bankruptcy Act, 1966, and in order to minimise costs, in the absence of any funding, I propose to personally conduct the examinations.
Upon analysis of the information obtained from the examinations, I would then propose, if possible, to sue the Osentons for hopefully the gross amount of $300,000.00, initially advanced by them to the Trust.
In conjunction with the examination, I would hope to gain substantive evidence that the bankrupts have in fact been managing the corporation `Cherenton Nominees Pty Ltd' and I would then seek to lodge an objection to their discharge from bankruptcy as a result thereof.
As previously advised and reported to you, there is considerable doubt as to the likelihood of success in respect of any legal action, sought to recover a debt owing by the Trust to the bankrupts, as a result of the complicated transactions and payments made by the Trust on behalf of the Osentons in respect of their involvement in the company Stingray Boats Pty Ltd (In Liquidation)'. Extensive inquiries have been made of various lending institutions in order to ascertain whether Cherenton Nominees Pty Ltd, in its capacity as Trustee, guaranteed the performance of Stingray Boats Pty Ltd (In Liquidation) as well as providing collateral mortgage securities. Results have been inconclusive. Perhaps the most satisfactory resolution of the matter will be a negotiated settlement, and the figure previously discussed with your Ms Kim Fortescue was in the region of a settlement resulting in a dividend in the vicinity of $50,000.00 to your client. This of course is why I have refused the offer of $50,000.00 in total settlement made by the Osentons, for after the payment of the costs of the administration it would result in a substantially lower dividend figure. I am however, of the opinion that with sufficient pressure being brought to bear by the conduct of the examinations that a more realistic settlement figure will be achieved. Could you please indicate to me your client's response in the foregoing courses of action and proceedings in the administration." On 22 May, 1993 Mrs. Osenton was discharged from bankruptcy by force of the then s.149 of the Act. An offer of settlement of $70,000.00 to compromise any claim against the trust was made. However it was rejected on 17 June, 1993 by a letter from the trustee to the applicants which included the following :- "I refer to previous discussions with you in relation to a proposed settlement in lieu of legal actions being undertaken against Cherenton Nominees Pty Ltd as Trustee of the Osenton Family Trust and advise that Alcan Australia Limited (Alcan'), as the major creditor in your bankrupt estates, have rejected the offer of settlement in the sum of $70,000.00. Alcan has further advised that they the applicant'), a creditor of the bankrupt and, having carriage of this action, I am duly authorized to swear this affidavit on the applicant's behalf......" Mr. Jenkins deposed to similar effect in Estate 1131 of 1990. On 4 September, 1993 Mr. Osenton was also discharged from bankruptcy by force of s.149 of the Act. On 10 September, 1993 summonses were issued by a deputy registrar in bankruptcy under s.81(1) of the Act. The summons to Mrs. Osenton stated in part :- "TO: CHERYL KATHLEEN OSENTON The Registrar hereby summons you under section 81(1) of the Bankruptcy Act 1966 to attend before the Registrar at ...... on a date to be fixed upon 7 days notice served upon you personally, to give evidence in connection with your affairs and/or the affairs of Phillip Leslie Osenton. You are also required to produce to the Court the books specified in the attached schedule." The Schedule was in the following terms :- "1. All books, documents and records in anyway [sic] relevant to the financial affairs of Cherenton Nominees Pty Ltd;

are determined to push on in the matter' and wish to have you examined pursuant to the provisions of Section 81 of the Bankruptcy Act in relation to your dealings with the Trust and the transactions surrounding the payout of secured creditors following the demise of Stingray Boats Pty Ltd." On the same day the trustee wrote to Alcan's solicitors a letter which included :- "Whilst your client has the right to reject the offer, I am somewhat concerned that the Osentons may in fact withdraw any offer, and accordingly it will become necessary to embark upon expensive legal litigation with dubious prospects of success, particularly in view of the complexity of the transactions involved. It is understood from previous conversations and correspondence with you, that your client will indemnify me and meet the costs of the proposed examinations. I would suggest that following either the acknowledgment of the Osentons, or the service of the Summonses upon them, that a conference be organised between yourself, myself and the bankrupts with a view to resolving the issue, for I believe that following the examination any settlement may well be impossible." Alcan's solicitors on 17 June, 1993 in fact had instructions from Alcan to proceed with the examinations. On 22 June, 1993 the solicitors wrote to the trustee a letter which included the following :- "We refer to your letter of 17 June 1993. We confirm that we are preparing applications for summonses for the examination of the bankrupts under section 81 of the Bankruptcy Act. We will contact you when we have these ready for service. We confirm that our client will indemnify your firm in relation to costs arising from the examinations. Our instructions are that the examinations should proceed only under our strict control. On this basis, please do not take any steps in the process without referring to us first. In addition, our client specifically reserves the right to terminate the indemnity on 2 days notice in writing to the trustee." On 15 July, 1993 Messrs. Feez Ruthning who were the solicitors for Alcan filed an application in Estate 596 of 1990 which stated :- "APPLICATION is made to the Court on behalf of IVOR WORRELL, the trustee in bankruptcy in the above Estate for a summons requiring the attendance of ...... " and concluded :- "This application is filed by Messrs Feez Ruthning on behalf of the Official Trustee in Bankruptcy, whose address for service is Level 32, Riverside Centre, 123 Eagle Street, Brisbane, Queensland." On the same day an application to similar effect was filed in Estate 1131 of 1990. In support of each application an affidavit of David Gareth Jenkins was filed wherein Mr. Jenkins deposed in Estate 596 of 1990 :- "1. I am a solicitor in the employ of Messrs Feez Ruthning, the solicitors for ALCAN AUSTRALIA LTD (

All books, documents and records relevant to an interest held by Cheryl Kathleen Osenton in a business name

Gibbons' carried on in Brisbane." The summons issued to Mr. Osenton stated in part :- "TO: PHILLIP LESLIE OSENTON The Registrar hereby summons you under section 81(1) of the Bankruptcy Act 1966 to attend before the Registrar at ... on a date to be fixed upon 7 days notice served upon you personally, to give evidence in connection with your affairs and/or the affairs of Cheryl Kathleen Osenton and/or the affairs of Cherenton Nominees Pty Ltd and/or the affairs of the Osenton Family Trust. You are also required to produce to the Court the books specified in the attached schedule." The schedule was identical to that set out in the summons to Mrs. Osenton. On or about 17 September, 1993 the trustee discovered that Mrs. Osenton was the holder of a parcel of shares in a company Gwynn Gibbon Pty. Ltd. which shareholding had not been disclosed in her statement of affairs. From about this time Alcan's solicitors commenced corresponding with the applicants and their solicitors seeking delivery up of the documents referred to in the schedule to the summonses, including documents relating to the shareholding in Gwynn Gibbon Pty. Ltd. in order that the solicitors might prepare material for the examination. The documents had not been produced to the solicitors nor to the court by December, 1993. It would appear that between January, 1994 and early October, 1994 the examinations were not pressed while the trustee obtained a valuation of the shares in Gwynn Gibbon Pty. Ltd. and attempted to obtain an offer from Mr. and Mrs. Osenton to purchase the shares which were valued at $87,250.00 or to obtain another purchaser. In the absence of a successful sale steps were taken to bring on the examinations. The applicants in consequence filed applications on 17 October, 1994 seeking that the summonses be set aside or adjourned. The Applicants' First Ground for Relief The applicants submit that, although the application may be made after discharge (Official Receiver v. Todd (1986) 14 FCR 177 (FC); see now s.81 of the Act as amended by Act 119 of 1987, s.38), it is made in the present case after discharge because the trustee failed or neglected to carry out the investigation in a timely way during the administration. In the absence of some satisfactory explanation, it was submitted, the issuing of the summons returnable in October, 1994 was vexatious or oppressive against the applicants. Conclusion as to the First Ground I do not accept that the delay of the trustee in seeking and bringing the summons on for hearing is unexplained. Exhibits "KMF 3" to "KMF 14" to the affidavit of Ms. Fortescue filed on 18 June, 1992 in support of the application for removal of the trustee form the correspondence between the trustee, Alcan and its solicitors for the period 22 November, 1990 to 23 April, 1992. The letter from the trustee to Alcan's solicitors of 22 November, 1990 outlined the problem which confronted the trustee. The letter stated :- "I refer to previous correspondence in relation to these matters. I confirm that it appears that the bankrupts are not the legal owners of any real or personal property which can be realised for the benefit of creditors. However, it is clear that the financial affairs of the bankrupts are interwoven with the financial affairs of Chereton [sic] Nominees Pty. Ltd. which company acts as Trustee of a family trust. The accounts for Chereton [sic] Nominees Pty. Ltd. and for the family trust have not been written up for a period of in excess of five years and it has therefore become necessary for me to obtain from the bankrupts all of the available books and records of the trust in order that proper accounts might be prepared which accounts should establish whether or not there is a debt due by the trust to the bankrupts. Considerable effort has been expended in obtaining the books and records and in attempting to prepare financial statements, however, quite some difficulty has been met as not all records are available and there is presently some uncertainty as to the correct manner in which certain transaction [sic] should be recorded in the financial statements. Every effort is being made to complete the writing up of the books and records as I do think it likely that on completion they will show a substantial debt being due to the bankrupts by Chereton [sic] Nominees Pty. Ltd. On the basis of information to hand it does appear also that Chereton [sic] Nominees Pty. Ltd. has considerable equity in the real property registered in its name. The foregoing information is provided so that your client, Alcan Australia Limited might be made aware of the current position and assured that every effort is being made to finalise matters as soon as possible." On 14 January, 1992 the trustee wrote a letter to Alcan's solicitor which included the following statement :- "The only assets listed in the Statements of Affairs are unknown amounts owing by Cherenton Nominees Pty Ltd which I understand is a Trustee company of the Osenton's Family Trust. A recent search of the company reveals that strike-off action is in progress which I believe results from non-lodgment of annual returns. The major contributing factor pertaining to the delay in obtaining information in regard to the bankrupts' and the trust's dealings has resulted from a failure of the bankrupts to prepare accounts both in respect of themselves and the Trust for the last six or seven years. The reconstruction of these accounts is being attended to by our accounting division who have run into

brick walls' in respect of certain information. One piece of information which we have been awaiting arrived on the 19th December, 1991 and relates to the acquisition of a property in the sum of $400,000.00 in the name of the Trust situated in Colondale [sic]. This property was acquired for cash on or about the 29th January, 1985. Searches have been undertaken by me in respect of this property and any other properties in which the bankrupts or trust hold or held interests in the last 5 years and I anticipate the search results will be known later this week." The problems referred to in these two letters are repeated and expanded upon in the trustee's report of 19 June, 1992 under the headings "Financial Records", "Further Investigations" and "Dividend Prospects" set out earlier in these reasons. In his affidavit filed 31 October, 1994, the trustee deposes :- "6. From the outset, this administration has been unusual for the small number of books and documents available to me. Such investigations as I have been able to carry out indicate that Mr and Mrs Osenton's business affairs were comparatively complicated and involved comparatively large sums of money. They conducted their affairs through the Trust and at least two companies (Cherenton Nominees Pty Ltd and another company called Stingray Boats (Aust) Pty Ltd). Although the liquidators appointed to Stingray Boats (Aust) Pty Ltd have delivered to my solicitors approximately nine boxes of documents, the documents available relevant to Mr and Mrs Osenton's own affairs and those of the Osenton Family Trust are almost non-existent. The possibility of public examinations of Mr and Mrs Osenton were first seriously considered on 10 May 1993 and at that time, I saw the examinations of Mr and Mrs Osenton as a means of obtaining evidence in relation to the transactions described in my report to creditors of 19 June 1992. In about June 1993, I instructed solicitors, Messrs Feez Ruthning to seek the issue of summonses pursuant to Section 81(1) of the Bankruptcy Act and, as stated in paragraph 5 above, this was done 10 September, 1993." Even if, as submitted by counsel for the applicants, they have been available and co-operated with the trustee, the root cause of the delay on the material before me was the manner in which the applicants conducted their business affairs and the failure to keep proper business records, including when they were directors of Cherenton and Stingray Boats, books of account of those companies. The trustee has been attempting to reconstruct the financial dealings between the applicants, the family trust, Cherenton and Stingray Boats from the documents provided by the applicants and from the trustee's own investigations. However, the trustee has said under cross-examination that he has been unable to fully complete the reconstruction because he has not had full information supplied. It was further submitted by the applicants that the trustee's firm had acted throughout including during the applicants' bankruptcies, as the accountants and financial advisers to the applicants, the companies and the trust. Thus it was submitted the trustee through his firm Worrell Whitehill & Co. always had and now has all relevant information as to the applicants, the companies and the trust's financial affairs. In support of the submissions that the trustee's firm had acted for the applicants and the companies throughout, the applicants relied upon the following paragraphs of Mr. Osenton's affidavit filed 16 November, 1994 :- "3. I refer to the Affidavit of Ivor Worrell filed herein the 31st day of October 1994 and in respect of paragraph 8, page 7 I state that soon after filing my Petition for Bankruptcy on the advice of Ivor Worrell, whose firm was at that time the accountant for the following entities:- (a) Cherenton Nominees Pty Ltd as Trustee for the Osenton Family Trust; (b) C & H W Gibbon Pty. Ltd; (c) Myself; (d) Cheryl Osenton;

A list of queries concerning the company was then forwarded to Mr Osenton to which he has not responded. As at 10 November, 1994, our client has incurred costs and outlays on your client's behalf totalling $7,341.25 for work done by the firm. Our client is not prepared to refund the $10,000.00 paid as it has performed the work to the extent it was able to and as requested by your client. We are instructed to advise you that our client is prepared to refund the balance of the $10,000.00 paid by your client after the deduction of our client's costs and outlays above...." Mr. Worrell gave evidence that the approach in January, 1994 was made to his partner in the accounting section of the practice without Mr. Worrell's knowledge. Mr. May in cross-examination denied any knowledge of the matter. Finally, Mr. Bradbury, the applicants' solicitor deposed that the registered office of Cherenton was from 22 February, 1985 until 26 March, 1993 recorded as Level 15, 127 Creek Street, Brisbane. This was the address of Worrell Whitehill until the accountants left the premises in 1990. That the registered address remained at 127 Creek Street for approximately three years after the accountants vacated the premises is as consistent with nobody acting in the administration of the company's affairs as with the accountants acting for the company in 1990. The de-listing action being taken by the Australian Securities Commission for default in filing annual returns and necessary documentation weighs in favour of the conclusion that nothing was being done by the applicants as directors, when they resigned in 1988, or by their successors thereafter, to properly administer the company or to keep proper books and accounts or to maintain statutory records. That the male applicant on behalf of Cherenton paid $10,000.00 in January, 1994 to have the task of completing tax returns, books of account and statutory records undertaken by Worrell Whitehill is only consistent with the parlous state of record keeping referred to by the Trustee in his report to creditors in 1992 and thereafter in correspondence and material filed in these proceedings. I do not accept the assertion of Mr. Osenton in his affidavit that the trustee's firm acted throughout as the accountants and financial advisers to the applicants, the companies and trust including during the applicants' bankruptcies and after their discharge. I accept the evidence of Mr. Worrell that his firm ceased to act some five years or more prior to the bankruptcies and was next retained after the applicants were discharged from bankruptcy to complete the work of writing up the financial books and records of the trust and Cherenton. After the report to creditors and in the period up to 10 May, 1993 there appears to have been negotiations aimed at settling a possible claim against Cherenton by the trustee by securing for the benefit of the estate monies with which to pay for the administration of each estate and to pay a dividend to creditors. These negotiations failed and the applications for the issue of summonses were filed on 15 July, 1993. The summonses requiring attendance for public examination issued on 10 September, 1993. It was not until 17 September, 1993 that the trustee became aware of the shareholding of Mrs. Osenton in Gwynn Gibbon Pty. Ltd. Thereafter, proceeding with the public examinations has been delayed in order to obtain a valuation of those shares and to attempt to realise the value of them for the benefit of Mrs. Osenton's estate. The applicants and their solicitors have been part of that process. The negotiations between the parties relating to these shares collapsed in October, 1994. When asked to identify in what way it would be harsh or oppressive to allow the examination to proceed, counsel for the applicants submitted that the examinations, if they were to occur, should have been undertaken before the applicants were discharged from bankruptcy. He submitted that it is an objective of the bankruptcy legislation that upon discharge the bankrupts were entitled to a fresh start and that the bankruptcy administration ought to be regarded as behind them. He acknowledged that it was also a policy of bankruptcy legislation to make available the property of the bankrupt to satisfy in whole or in part the debts of the bankrupt. I see nothing harsh or oppressive in allowing an examination to occur, if otherwise for a proper purpose, simply because the applicants have been discharged from bankruptcy by the effluxion of time in circumstances such as the present. The delay is in large part explicable by the applicants, and the companies and trust in which they were interested, failing to keep proper books and financial records and where Cherenton has been negotiating with the trustee in its own interests seeking to avoid litigation and payment of $300,000.00 or some such sum to the trustee as a debt due by Cherenton to the applicants. Nor can the applicants rely on their failure to disclose the shareholding of Mrs. Osenton in Gwynn Gibbon Pty. Ltd. and the delay which that has caused as a circumstance in their favour. Counsel for the applicants submitted that if not harsh or oppressive in itself, the above circumstances together with the other matters of complaint rendered the holding of the examinations harsh or oppressive. It is therefore necessary to turn to the other matters of complaint. The Applicants Second Ground for Relief It was submitted that litigation between the trustee and Cherenton as trustee of the family trust was in contemplation and that the proposed examinations were :- (a) to obtain a transcript for use in subsequent proceedings; (b) to dress rehearse any cross-examination of Mr. and Mrs. Osenton who would be witnesses for Cherenton in any action against it; (c) to have the transcript for use at a trial to destroy the credit of Mr. and Mrs. Osenton as witnesses on that trial; Such an intention, it was submitted, was demonstrable from the correspondence between the solicitors for Alcan and the solicitors for the applicants wherein Alcan asserted its confidence of success in the trustee establishing a right to the Conondale property as constructive trustee or to recover a money sum as a debt, and from a statement by the solicitor for Alcan in a telephone conversation with the applicants' solicitor that the examinations were for the purpose of tidying up a lot of loose ends and obtaining a transcript for use later in court. It was submitted that because of the statements and conduct of Alcan's solicitors the court ought to reject the trustee's sworn reasons as to why he wished to have the examinations carried out. He deposed in his affidavit filed 31 October, 1994 :- "7. From at least as early as 22 June 1992, I have been considering various legal proceedings against Mr and Mrs Osenton including proceedings in respect of the following :- (a) the possibility of exercising my rights as majority shareholder of Cherenton Nominees Pty Ltd to apply assets vested in the trust for the benefit of Mr and Mrs Osenton's creditors; (b) action to recover from the trust amounts representing remuneration for services provided for the benefit of the trust; (c) action against Cherenton Nominees Pty Ltd in respect of loans apparently made by Mr and Mrs Osenton to that company; (d) the possible existence of a constructive trust in relation to the Connondale [sic] property on the basis that the funds used to acquire that property were provided by Mr and Mrs Osenton themselves and not by the trust.

On the basis of the documents relating to the affairs of Cherenton Nominees Pty Ltd and Mr and Mrs Osenton, made available to me, it is not possible or me to make a properly informed decision as to whether causes of action arise in relation to the matters referred to in sub-paragraphs 7(a)-(d) above or for me to properly instruct my legal advisers to provide me with advice in relation to the prospects of success in any such claims, or to enable me to effectively report to creditors in this regard. In my opinion, on the basis of the documents and other evidence made available to me during the course of the administration, it was impossible for me to lodge any objection to the discharge from bankruptcy of Mr and Mrs Osenton. Such evidence as has been made available to me raise in my mind suspicions that causes of action may exist in relation to the matters described in sub-paragraphs 7(a)-(d) above but that evidence is not sufficient of itself to enable me to make a meaningful assessment as to whether or not proceedings should be instituted or the prospects of success if they were. In addition, on the basis of the material presently available to me, it is not possible for me to effectively report to creditors nor instruct legal advisers to provide me with advice in relation to these matters. The purposes for which I sought and obtained the summonses for examination of Mr and Mrs Osenton pursuant to Section 81(1) of the Bankruptcy Act were :- (a) to enable me to administer the estates more effectively for the benefit of all creditors; and (b) to obtain information on the basis of which to make an informed decision as to whether or not the matters referred to in sub-paragraphs 7(a)-(d) constituted good causes of action or the prospects of success in such action. The summonses were issued on 10 September 1993 with the examinations to be held on a date to be fixed with seven days notice. I deferred the examinations initially, to enable Mr and Mrs Osenton to furnish further documents and subsequently (at Mr and Mrs Osenton's request), to enable `without prejudice' negotiations to proceed in respect of the Gwynn Gibbon shares referred to in paragraph 5 above. When it became apparent that the negotiations would come to nothing, I instructed my solicitors to obtain dates for the examinations from the Deputy Registrar in Bankruptcy. I respectfully request that Mr and Mrs Osenton's application for an order that the summonses be set aside or adjourned, be dismissed.

If the examinations proceed, when they are completed, it is my intention to review the evidence and instruct my legal advisers to provide an assessment as to whether proceedings in relation to one or more of the matters referred to in sub-paragraphs 7(a)-(d) above should be initiated and to report to creditors when I have such advice." Conclusion as to the Second Ground Irrespective of the confidence expressed by Alcan's solicitors to the applicants solicitors, the correspondence passing between the trustee and Alcan's solicitors in the period May-June, 1993 set out earlier in these reasons indicates that the trustee has always had some concern as to the likelihood of success. This is particularly so, if the payments made by Cherenton on behalf of Stingray Boats can be set-off or cross-claimed against any indebtedness of the company or trust to the applicants on the basis that such payments in fact were made for or for the benefit of the applicants, notwithstanding that the immediate effect of such payments was to benefit Stingray Boats. I am not persuaded that the trustee ought to be disbelieved when he swears on oath that he needs to carry out the examinations for the purpose of determining whether he has a cause of action against the company or trust and whether that cause of action ought to be pursued. Such a purpose is an entirely proper purpose for a trustee to pursue (Karounos v. Official Trustee (1988) 19 FCR 330 (FC) at 335; as to the similar position of a liquidator see Grosvenor Hill (Qld.) Pty. Ltd. v. Barber (1994) 48 FCR 301 (FC) at 306-307; Worthley v. England (1994) 12 ACLC 775 (FC) at 789 ff.). There is no basis to conclude that the trustee wishes to conduct the examinations for the limited purposes contended for by the applicants. The applicants do not therefore bring themselves within the observations of Street J. in Re Hugh J. Roberts Pty. Ltd. (In Liq.) [1970] 2 NSWR 582 at 585 that such limited purposes would be an abuse of the power to examine (see also Worthley v. England at 790). The Applicants Third Ground for Relief The applicants next argue that at the time the applications for summonses were made it was the purpose of the liquidator to put pressure on the applicants to achieve a collateral purpose, namely to procure Cherenton to settle any potential claim against it or the family trust by making a payment to the trustee. It was further submitted that the trustee intended to use the examination to improperly deal with the family trust. This submission was based on paragraph 7(a) of the trustee's affidavit where he deposed :- "7. From at least as early as 22 June 1992, I have been considering various legal proceedings against Mr and Mrs Osenton including proceedings in respect of the following:- (a) the possibility of exercising my rights as majority shareholder of Cherenton Nominees Pty Ltd to apply assets vested in the trust for the benefit of Mr and Mrs Osenton's creditors; ...." Conclusions as to the Third Ground In Worthley v. England the court said at 788 :- "Before considering the state of authorities on whether a particular application to the Court for an examination summons will constitute an abuse of process, it is useful to recall the underlying basis of that doctrine as expounded by the High Court of Australia in Dowling v. Colonial Mutual Life Assurance Society Limited (1915) 20 CLR 509. It will be recalled that that case concerned an allegation made in the context of bankruptcy legislation that a creditor's petition in bankruptcy was an abuse of the process of the Court because the motive of the creditor was to ascertain, by examination, the identity of persons who had instigated the debtor to publish, or had provided him with means of publishing, defamatory matter concerning the creditor. Isaacs J, in that case, drew a distinction from the case law between the use of a process, which his Honour defined as (at 524):

... to attain by its means the very object for which it is designed by law ... notwithstanding there is a desire to use the sequestration afterwards for a certain purpose' and the abuse of the process, a distinction based upon what had been said in the Privy Council in King v. Henderson [1898] AC 720. An abuse of process would have occurred in that case, his Honour suggested, if it had been shown that the Society had simply threatened Mr Dowling that unless he did what they had no right to demand from him, namely the giving up of certain names, they would proceed to sequestration and they had done so. An abuse of process would not exist unless the remedy sought was unsuitable and would enable the person obtaining it fraudulently to defeat the rights of others. It is clear from subsequent cases, for example, Williams v. Spautz (1991-1992) 174 CLR 509 at 525, that it is not now necessary that fraud be shown. It is apparent that the question whether there is, in a particular case an abuse of process will be a question which will depend upon the purpose of the applicant seeking the order of the court and the circumstances of the case. For an abuse to be found it will be necessary that the offensive purpose be, at the least, the predominant purpose: see Burns Philp & Co Ltd v Murphy (1993) 11 ACLC 303 at 310; (1993) 29 NSWLR 723 at 732 and Williams v Spautz at 529." That a purpose of the threatened application for summons under s.81 of the Act was to attempt to procure from Cherenton a satisfactory settlement offer for the benefit of the estates of the bankrupts is apparent from the correspondence of May to July, 1993. The trustee admitted this under cross-examination. But in my view that was not the predominant purpose. The trustee had determined in May, 1993 to seek summonses for examination provided he could obtain the indemnity of Alcan. The attempt to settle the matter had failed by the time the applications were filed in July, 1993 and heard in September, 1993. Although the trustee may have continued to have as a purpose the hope that the existence of the summonses would elicit a satisfactory settlement offer, he determined to proceed with the examination in any event and in the expectation that carrying out the examinations would be likely to close off any further settlement offers. I accept his evidence that the principal purpose of seeking the examinations was for the purpose of determining whether to proceed with any claim against Cherenton and to seek to identify any recoverable assets of either of the bankrupts' estates. In adopting such a course he had as an ancillary purpose to attempt to achieve a settlement to the benefit of the estate which would avoid the cost, expense and delay of an examination and possible later litigation. The presence of such an ancillary purpose did not render the seeking and obtaining of summonses for public examination in the present case an abuse of process. Further, it is for the court to consider afresh on the material before it whether the summonses should be set aside and not merely to determine whether on the material before the deputy registrar he correctly exercised his discretion (Karounos v. Official Trustee at 336). I am satisfied on the material before me that the trustee is not presently seeking to examine the applicants for any purpose which can properly be categorised as an abuse of process or for some collateral impermissible purpose. As to the concern expressed about paragraph 7(a) of the trustee's affidavit, it is difficult to see that the examinations, beyond identifying trust assets, would be relevant to the exercise of a discretion under the terms of the family trust. Whether or not it would be proper to purport to exercise any rights as shareholder in Cherenton to obtain the benefit of trust assets for the creditors of the applicants is another question. Trust property remains subject to the terms of the trust attaching to the property. A trustee in bankruptcy cannot deal with trust property or exercise any discretion which comes to the trustee in bankruptcy by virtue of the bankruptcy in disregard of the terms of a trust attaching to the property (Dwyer v. Ross (1992) 34 FCR 463 at 466-468). One would expect that the trustee in the instant case would be so advised when seeking legal advice on the whole of the matters raised in paragraph 7 of his affidavit at the conclusion of the public examinations. Accordingly, paragraph 7(a) does not stand in the way of the examinations proceeding. The Applicants Fourth Ground for Relief The applicants next submitted that the trustee was in a position of conflict because the firm of which he is a member had obtained confidential information as the applicants' accountants and as the accountant for Cherenton. It was said that the accountants had had access to the applicants' financial records and documents and provided advices in respect of tax, company structures and general accounting. Additionally, Cherenton had supplied information when it retained Worrell Whitehill in January, 1994 to complete the books of account, tax returns etc. for that company. In these circumstances it was submitted that the trustee could not be seen to be independent. Additionally, as there would be the possibility of an actual conflict between the trustee's duty to the applicants and the company qua accountant and the duty to the creditors of the bankrupt estate to vigorously pursue the possibility of recovery of assets, it would be improper or vexatious for the trustee to pursue either by himself or through a creditor the public examinations. In support of these submissions the applicants relied upon the decision of Thomas J. in Re Club Superstores Aust. Pty. Ltd. (1993) 11 ACLC 751. Conclusion as to the Fourth Ground The decision in Club Superstores Aust. Pty. Ltd. concerned an application to remove a liquidator. The circumstances surrounding the relationship between the liquidator and the members and directors of the company in liquidation were different from the present case. The circumstances which moved Thomas J. to remove the liquidator were (11 ACLC 751 at 756) :- "Arrangements will vary from case to case, but under the Queensland system in which a nomination of liquidator may be made by the applicant creditor or the applicant company (as the case may be) it seems plain that one of the purposes of a

pre-appointment conference' is to engender the expectation or promise of a nomination in the event that the company goes into liquidation. I am advised that such conferences occur in more than 90 per cent of liquidations. I have no desire unduly to restrict the ability of prospective liquidators to keep their place in what is undoubtedly a competitive and lucrative industry. However it seems to me that where there is a prospect that a liquidator may be required to investigate possible impropriety on the part of directors or pursue the directors for debt preference or breach of duty, or rule upon proofs of debt submitted by directors, or otherwise take action potentially inimical to their interests, they must avoid giving the impression in pre-appointment conferences that they are giving personal advice to such persons. The correspondence in the present matter shows that the line was clearly crossed. The fact that no charge was made for the advice and that it was given with the best of motives is not really to the point. The main problems that may arise if Mr. Worrell continues with this particular liquidation are - (a) Substantial details and books were supplied to Mr. Worrell by and on behalf of Mr. and Mrs. Shannon as well as on behalf of the company concerning trusts and affairs of those parties. It cannot be said that such information was or is immaterial or that Mr. and Mrs. Shannon might not be disadvantaged if it were recollected or used. (b) Despite the submission that the promise of confidentiality was intended to apply only until the time when a winding-up order was made, this was not told to Mr. Shannon, and the letter contains no such limitation. It is an unlimited promise of confidentiality with respect to any information given to him. Such a promise having been given, there is cause for concern on Mr. Shannon's part that it might be breached. Of equal concern is the fact that there is room for concern on the part of creditors that it might be honoured. (c) The letters are sufficient to create an expectation on Mr. Shannon's part of some professional protection from Mr. Worrell in relation to the information supplied and the advice given. Against that history a special bitterness is likely to be engendered on Mr. Shannon's part if Mr. Worrell now rigorously pursues remedies against him. (d) There is equally likely to be a concern, on the part of at least some creditors, that the liquidator, by reason of prior dealings with Mr. Shannon, is not pursuing them and their companies with the rigour that they would think appropriate. (e) Although I regard as unrealistic the submission on behalf of Mr. Shannon that in the event of applications re relief based on insolvent trading under s. 592 Mr. Worrell would be joined as a third party, it is by no means inconceivable that in view of his association with Mr. Shannon at material times he might be a potential witness against Mr. Shannon and might be in a position to give objective evidence of inability to pay debts at material times if such evidence were needed. An allegation of trading with knowledge of insolvency could well be relevant in some proceedings. (f) Sensitive decisions will have to be made by the liquidator including decisions on who should be publicly examined, how the creditors should be advised and what action if any should be taken against the directors. These factors lead me to the view that whilst Mr. Worrell acted in good faith and whilst it is to be expected that he would in fact conduct the liquidation with complete propriety, the perception by interested parties that he might not do so has to be recognised. It is undesirable that the present appointment should continue." There is no application for removal of the trustee in the present case. Rather, it was submitted that the trustee, because of the background circumstances, was disentitled from obtaining summonses for examination under s.81 of the Act or to conduct any such examination. The basis of the submission was that information obtained by the accountants or advice given by them as to the setting up of the trust and the conduct of its affairs may or may not be confidential, depending upon the circumstances in which it was given or received, and may be used to the detriment of the applicants. There is no suggestion that any improper use of information obtained in the capacity of accountant has occurred by the trustee bringing the applications under s.81 of the Act. The applicants do not point to any particular piece of information or advice as having been given on an occasion of identifiable confidence. Rather, the complaint is that the relationship of accountant/client is sufficient to give rise to the possibility that confidentiality may at some time have attached to information. Where on the material before the court it is apparent that the case is a proper one for a public examination, the fact of a previous relationship which might give rise to a conflict of duty and duty or duty and interest in the manner of the carrying out of the examinations will not of itself be a sufficient reason to set aside the summons. The possibility of conflict of interest or duty where no application is brought to remove the trustee merely requires that the court and the registrar exercise a vigilance as to the manner and method of the examination to ensure that the possibility of conflict does not become a reality. It is impossible to second guess the question which may be asked on an examination. All that can be said is that if on the examination it is objected that any particular question is oppressive or vexatious or any line of inquiry is based upon a breach of confidence, that objection will have to be dealt with at that time. If necessary Alcan, as creditor, or by its solicitors or counsel (s.81(8) of the Act) can conduct the examination in lieu of the trustee if a breach of confidence or conflict of duty is made out. Whether or not the relationship between the trustee's firm and the applicants, the companies and the trust would be sufficient to justify the removal of the trustee is not a matter I have to determine. The administration of the estate is at a different stage to that which Thomas J. dealt with. Likewise, the circumstances of the relationship in Club Superstores Australia Pty. Ltd. were different. In this case the applicants have stood by and taken no objection to the trustee acting which also distinguishes this case from Club Superstores Australia Pty. Ltd.. It is sufficient to hold that the past relationship does not of itself make the issuing of the summonses or the public examinations vexatious or oppressive. The Applicants Fifth Ground for Relief Finally, the applicants submitted that the summonses issued did not set out sufficiently the areas to be examined and are too wide. Thus, it was submitted, each summons should be set aside. The applicants submitted that the summonses did not specify in relation to Cherenton, the Osenton Family Trust and Stingray Boats a brief statement of the matters to be examined. It was further submitted that the summonses were bad because neither summons specified a period in relation to which the examination was to be conducted. This, it was submitted, meant that each summons was too wide as it covered a ten year period from the incorporation of Cherenton in 1978 until the applicants ceased to be directors in 1988, a period in excess of ten years in relation to the trust which was settled in 1979 and a period of approximately four years in relation to Stingray Boats from the time the applicants became associated with the company in 1984 until its liquidation in 1988. In support of these submissions counsel for the applicants relied upon the following statement from the judgment of the Full Court in Karounos v. Official Trustee at 335 :- "4. The summons itself should be expressed in terms which makes the intended areas of inquiry as clear as the circumstances of the case permit, and which specify as clearly as possible any books and records which the person summonsed has to produce: see Re Andrews (supra) at 186-187." Counsel also relied upon the decision of Clyne J. in Re Andrews (1958) 18 ABC 181 at 186-187 cited by the Full Court in the passage from Karounos, where his Honour said :- "Notwithstanding the form (Form No. 157), it is, I think, not sufficient to require the witness

to give evidence in the above matter' and it is obvious that the request to the witness to produce the documents specified in the summons is oppressive. In my opinion, the words of Jordan C.J. in The Commissioner of Railways v. Small (1938), 38 S.R. (N.S.W.) 564, at p. 573, are particularly apposite:

A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party. If it be addressed to a stranger it must specify with reasonable particularity the documents which are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter ... A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant ... And if a subpoena duces tecum is issued to such a person in an objectionable form, the witness may apply to the court to have it set aside." Counsel also referred to Re Aitken Ex parte Trans Tasman Pty. Ltd. (1987) 17 FCR 71 at 76-77, Australian Securities Commission v. Graco (1991) 29 FCR 491, and Huybrechts Ex parte Huybrechts v. Knight (1991) 31 FCR 394. Conclusion as to the Fifth Ground The decision of Pincus J. in Huybrechts at 398 is no more than an illustration of a case where the summons was expressed in terms wider than the statutory power and for that reason bad. However, the decision does not support the proposition that the summons must contain a statement as to the basis of the examination and the nature of the matters to be examined. The decision of Jenkinson J. in Australian Securities Commission v. Graco concerned the power of the Australian Securities Commission by written notice under s.19(2) of the Australian Securities Commission Act 1989 (Cth) to require persons to attend and answer questions. Section 19 provided :- "(1) This section applies where the Commission, on reasonable grounds, suspects or believes that a person can give information relevant to a matter that it is investigating, or is to investigate, under Division 1. (2) The Commission may, by written notice in the prescribed form given to the person, require the person: (a) to give to the Commission all reasonable assistance in connection with the investigation; and (b) to appear before a specified member or staff member for examination on oath and to answer questions. (3) A notice given under subsection (2) shall: (a) state the general nature of the matter referred to in subsection (1); and (b) set out the effect of subsection 23(1) and section 68." That there was a statutory requirement that the notice contain a statement of the general nature of the matter (s.19(3) as set out above) operates as a fundamental point of distinction between that case and the present. The observations of Jenkinson J. in Australian Securities Commission v. Graco are limited to the statutory context with which his Honour was dealing and are not applicable to the requirements of s.81(1A) of the Act or rule 129 of the Bankruptcy Rules. In Re Aitken, Einfeld J. said at 76 :- "I have already dealt with the question of the inter-relationship of the terms of the application and the summons and there is no reason to do so again. The Act and the rules do not require that the application and the summons be in identical or even similar terms. The application must have the qualities that I have previously spoken of and must comply with r 129(1). The summons must comply with the requirements of s81 and accord with form 49. In Csidei (supra) Lockhart J said (at 390):

The purpose of the section is to elicit information that may be relevant for the proper conduct of the bankruptcy and that may aid the process of finding and recovering assets available for distribution.' So long as the wording of the summons, as here, complies with the statutory and the regulatory requirements, I see nothing which would prevent the spouse of a bankrupt being required to give evidence concerning details of her business and property dealings with the bankrupt. This is precisely what Lockhart J said was the purpose of the section and therefore of the summons." Although the judgment in Re Aitken was delivered prior to the Full Court decision in Karounos, I do not consider that the statement of Einfeld J. is in any way inconsistent with the statement of the Full Court set out above. There is one further matter with respect to the Full Court decision in Karounos and the decision in Andrews. The observations of the Full Court in Karounos were made in respect of s.81 prior to its amendment and the insertion of s.81(1A) by Act 119 of 1987, s.38 and thus the guidelines expounded by the Full Court must be read with the subsequent statutory amendments in mind (see to similar effect Pincus J. in Huybrechts at 397). The starting point from which to consider the adequacy of the form of summons is s.81 of the Act. So far as is relevant provides :- "81(1) Where a person (in this section called the

relevant person') becomes a bankrupt, the Court or the Registrar may at any time (whether before or after the end of the bankruptcy), on the application of: (a) a person (in this section called a

creditor') who has or had a debt provable in the bankruptcy; (b) the trustee of the relevant person's estate; or (c) the Official Receiver; summon the relevant person, or an examinable person in relation to the relevant person, for examination in relation to the bankruptcy. (1A) A summons to a person by the Court or the Registrar under subsection (1) shall require the person to attend: (a) at a specified place and at a specified time on a specified day, being a place, time and day that are reasonable in the circumstances; and (b) before the Court or the Registrar or, if the Court or the Registrar thinks fit, a magistrate; to be examined on oath under this section about the relevant person and the relevant person's examinable affairs. (1B) 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." By s.5(1) of the Act "examinable affairs" are defined as :- "

examinable affairs', in relation to a person, means: (a) the person's dealings, transactions, property and affairs; and (b) the financial affairs of an associated entity of the person, in so far as they are, or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs;" Each applicant as the spouse of the other is and was an associated entity of the other (s.5C of the Act). Cherenton, Stingray Boats and the Trust are associated entities of the applicants for the purpose of the definition of "examinable affairs" (see ss.5B and 5E of the Act). The "financial affairs" of a company, a natural person and a trust are defined in a broad inclusionary manner in, respectively s.5G and s.5H of the Act. Accordingly, each applicant was subject to possible examination of his or her dealings, transactions, property or affairs and the financial affairs of his or her spouse, Cherenton, Stingray Boats and the trust as associated entities in so far as those financial affairs are, or appear to be, relevant to the applicant or to any of his or her conduct, dealings, transactions, property and affairs. The summons in the present case is in accordance with Form 49 which it is to be noted makes no provision for any detailed statement as to what is to be examined. Rather, the form provides that the person is to attend "to give evidence in connection with your affairs/the affairs of (name of debtor)" with instructions that the unnecessary alternative is to be deleted. The form in substance picks up the language of s.81(1A). In my opinion the statement as to the nature of the examination as stated in Form 49 and in the summonses in issue is sufficient notice of the intended area of the inquiry having regard to the terms of s.81(1A) of the Act. There remains the question as to the direction to produce documents. The power to order production is limited by the terms of s.81(1B) of the Act. The books must be :- (a) the books of the relevant person (or those of an associated entity); (b) in the possession of the relevant person; and (c) relate to the relevant person or to any of the relevant person's examinable affairs (as defined). There is no power to demand the production of books which do not satisfy the three criteria. The fact that the power is limited requires that the limitation appear on the face of the summons (Federal Commissioner of Taxation v. Australia and New Zealand Banking Group Ltd. (1979) 143 CLR 499 at 525, 538. The summonses in issue are bad because they purport to impose an absolute obligation to produce the books specified in the schedule attached to the summons where neither the command nor the schedule limits the books to those in the possession of the recipient of the summons. Further, although Cherenton is an associated entity of each applicant, the power to require the production of books of Cherenton does not extend to cover all of the financial affairs of Cherenton. The power is limited to the books of Cherenton which relate to the applicants or either of them, or that applicant's dealing, transactions, property or affairs or the financial affairs of Cherenton insofar as they are, or appear to be, relevant to the applicant or to any of his or her conduct, dealings, transactions, property and affairs (s.81(1B) and s.5(1)). Paragraph 1 of the schedule to each of the summonses in issue is not so limited. The same vice is apparent in paragraphs 2 (the family trust) and 3 (dealings between Cherenton and Stingray Boats) of the Schedule. It was submitted that the period for which documents were required to be produced was open ended and thus onerous because it would necessarily extend back to 1979 with the incorporation of Cherenton and the establishment of the trust. However, the applicants in their respective statement of affairs each claimed that Cherenton was indebted to him or her in an unknown amount on account of loans to Cherenton between 1979 and 1985. In order to determine what sum, if any, is owing by Cherenton to each applicant's estate, it will be necessary to establish what loans were made to Cherenton, by whom and in what amount and whether the same have been fully or partly repaid by Cherenton by payments to the applicants or either of them or by payments made for the benefit of them or either of them. Accordingly, subject to the limitations as to the books being in the possession of the applicants, or either of them, no complaint can be sustained against the form of paragraph 4. Paragraph 5 relates to an interest of Mrs. Osenton in a business named "Gibbons". There is nothing to suggest that the request is harsh or oppressive when limited to documents in the possession of either of the applicants. Result of Applications There is power in the court to amend the form of the summons to make it comply with the limits of the power if the court is of the view that the issue of the summons, if limited to power, is justified (Re Aitken at 78). The summons ought to be amended on its face to insert the words "documents and records in your possession" after the word "books" where it appears on the face of the summons. Paragraph 1 of the schedule should be amended by adding the words "in so far as they are, or appear to be relevant to [insert the name of the relevant applicant] or to any of [his/her] conduct, dealings, transactions, property and affairs" after the words "Cherenton Nominees Pty. Ltd.". Paragraph 2 should be amended by adding the same words after 'Re Osenton Family Trust". Paragraph 3 should be amended by adding the same words after "Stingray Boats Pty. Ltd. (in liquidation)". No submission was addressed to the court as to why or for what period the public examinations ought to be adjourned. Save for ordering amendment of the summonses, the applications ought to be dismissed. The applicants have substantially failed on the applications and should bear the costs of them. THE COURT ORDERS IN NO. 596 of 1990 THAT:

Re Osenton, C.K. Ex parte Osenton, C.K. v Worrell, I. & Anor [1995] FCA 90

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