Re Southern Equities Corporation Ltd (in liq); Bond v England

background facts 8 The following facts were not in dispute between the parties. 9 On 25 June 2013, upon acceptance of a debtor's petition, Mr Hanna was declared bankrupt. Ezio Marco Senatore was appointed as Mr Hanna's trustee. 10 On 20 July 2013 Mr Weston, along with Jason Lloyd Porter, was appointed as trustee of Mr Hanna's estate replacing Mr Senatore. 11 Whilst bankrupt Mr Hanna was directed by Mr Weston to provide documents relating to: (1) a property Mr Hanna had purchased at 142 Old Kent Road, Greenacre (Greenacre Property) in or about August 2001; (2) a property purchased by Mr Hanna at 49 Hoskins Ave, Bankstown (Bankstown Property) in or about September 2006; (3) Combined Civil Group Pty Ltd, a company in which Mr Hanna held shares; (4) his relationship with JPH Urban Pty Limited (JPH Urban); (5) his finances; (6) his cars; (7) his relationship with Mrs Hanna; (8) property dealings between Mr and Mrs Hanna, including a financial agreement executed by Mr and Mrs Hanna on 5 March 2009 (Financial Agreement); and (9) other matters concerning Mr Hanna's personal relationships, assets, liabilities and previous dealings. 12 Mrs Hanna was similarly directed by Mr Weston, whilst Mr Hanna was a bankrupt, to provide documents relating to: (1) the Greenacre Property; (2) the Bankstown Property; (3) a property purchased by Mrs Hanna at Oatley in September 2011; (4) a property purchased by Mrs Hanna at Strathfield in December 2012; (5) her relationship with JPH Urban; (6) Mr Hanna's relationship with JPH Urban; (7) her marriage to Mr Hanna; and (8) property dealings, including the Financial Agreement. 13 Mr and Mrs Hanna gave evidence that they complied with Mr Weston's directions to the best of their ability and that they each provided Mr Weston with all documents within their custody, control or possession. 14 On 24 May 2016, one month before Mr Hanna was to be discharged from bankruptcy, Mr Weston requested further information in relation to Mr Hanna's examinable affairs relating to the transfer of Mr Hanna's interest in the Greenacre Property to Mrs Hanna; Mr Hanna's financial information; and particulars relating to the ownership of his vehicles (May Letter). 15 On 21 June 2016 Mr Weston filed a notice of objection to Mr Hanna's discharge from bankruptcy pursuant to s 149B(1) of the Act (Notice of Objection). The Notice of Objection relevantly included the following as a ground for objection to Mr Hanna's discharge from bankruptcy: Ground 1 Section 149D(1)(d) of the Act: the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt's property, income or expected income, failed to comply with the request Evidence for Ground 1 On 24 May 2016, I wrote to the Bankrupt and directed him to provide the following information in relation to his examinable affairs: • Particulars regarding the transfer of his interest as sole proprietor of the real property located at 142 Old Kent Road Mount Lewis 2190 to his estranged spouse, Ms Nancy Hanna, for no consideration. • Completion of income questionnaires for Contribution Assessment Periods 25 June 2013 to 24 June 2014 (CAP1), 25 June 2014 to 24 June 2015 (CAP2); and 25 June 2015 to 24 June 2016 (CAP3). The Bankrupt has not provided evidence of his income to date. • Substantive particulars regarding current/previous ownership of motor vehicles. As at the date of this Objection, the Bankrupt has failed to provide any of the particulars requested. … Effect of Objection This objection has the effect of extending the Bankruptcy to 25 June 2022 being eight (8) years from the date on which the Bankrupt filed his Statement of Affairs. (emphasis in original.) 16 On 23 June 2016 Mr Hanna sent a letter to Mr Weston responding to the May Letter and attaching a copy of the Financial Agreement and completed income questionnaires for the relevant years. 17 On 26 August 2016 Mr Weston sent Mr Hanna a further letter (August Letter) in which he informed Mr Hanna that since the filing of the Notice of Objection he had "received some of the requested particulars" from Mr Hanna and third parties. Mr Weston then set out the information that he had received and the information he still required. The August Letter included the following: Take Note: Should you provide the requested information in points 2 and 4 above, I will consider withdrawing the Objection to Discharge. If the requested information is not provided or inadequate, the objection will remain and in my view your Court application is doomed to fail. Further take note that Regulation 7.01A of the Bankruptcy Regulations 1996 Grounds of Objection - failure to provide complete and accurate information states that "For paragraph 149D(l)(d) of the Act, a bankrupt is taken to have failed to comply with a request to provide information if the bankrupt has provided information that is incomplete or inaccurate". 18 By letter dated 6 September 2016 Mr Hanna responded to the August Letter enclosing a statutory declaration regarding the Financial Agreement and his involvement in JPH Urban, and his income tax return and notice of assessment for the year ended 30 June 2015. 19 On 8 September 2016, pursuant to s 149J(1) of the Act, Mr Weston provided a notice of withdrawal of objection to discharge dated 6 September 2016 to the Official Receiver. 20 It was not in dispute that shortly thereafter Mr Hanna was discharged from bankruptcy. 21 Mr and Mrs Hanna were given access to the affidavit sworn by Mr Weston on 19 September 2018 in support of the application for issue of the Examination Summonses and one other examination summons which is not the subject of the Application (Weston Affidavit). Accordingly, Mr Weston no longer claims confidentiality over the Weston Affidavit. 22 In light of the issues that arise for consideration, it is useful to set out, in summary, a description of the matters deposed to in the Weston Affidavit. They include: (1) the date on and process by which Mr Hanna became a bankrupt, the appointment of Mr Senatore as trustee and Mr Weston as his replacement; (2) the purpose of the affidavit and Mr Weston's belief that Mr and Mrs Hanna, among others, would be able to give evidence about possible claims pursuant to s 120 and s 121 of the Act in relation to a transfer of property that took place in 2009; (3) evidence in relation to the purchase of the Greenacre Property and its transfer pursuant to the Financial Agreement, the subsequent sale of the Greenacre Property by Mrs Hanna and the purchase by Mrs Hanna of other property; (4) that subsequent to the signing of the Financial Agreement, Mr and Mrs Hanna had a third child and have travelled overseas together; and (5) a summary of the issues that arise and the potential causes of action based on the facts known to Mr Weston.

statutory FRAMEWORK and legal principles 23 The Examination Summonses were issued pursuant to s 81(1) of the Act which provides: (1) Where a person (in this section called the relevant person) becomes a bankrupt, the Court or a 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. 24 The term "examinable person" is defined in s 5 of the Act to include: examinable person, in relation to a person (in this definition called the relevant person), means: (a) if the relevant person is a debtor and property of the debtor is known or suspected to be in the possession of a person - that person; (b) if the relevant person has become a bankrupt and any of the property of the bankrupt is known or suspected to be in the possession of a person - that person; (c) in any case - a person who is believed to be indebted to the relevant person; (d) if a person, including: (i) a person who is an associated entity of the relevant person; or (ii) a person with whom an associated entity of the relevant person is or has been associated; may be able to give information about the relevant person or any of the relevant person's examinable affairs - that person; or … 25 It was not in dispute that Mr and Mrs Hanna are respectively a "relevant person" and an "examinable person" for the purposes of s 81 of the Act. 26 Rules 6.06 and 6.12 of the Rules respectively concern the application for a summons for examination of a relevant person and the application for a summons for examination of an examinable person under s 81 of the Act. Both rules provide that the application under s 81 of the Act must be in accordance with Form B10: r 6.06(1) and r 6.12(1). Rule 6.06 then provides that: (2) The application must be accompanied by: (a) a draft of the summons applied for; and (b) an affidavit that complies with subrule (3). (3) The affidavit must: (a) state whether the applicant is: (i) a creditor who has a debt provable in the bankruptcy; or (ii) the trustee of the relevant person's estate; or (iii) the Official Receiver; and (b) if the summons is to require the relevant person to produce books at the examination: (i) identify the books that are to be produced; and (ii) give details of any inquiry by the applicant about the books to be produced and any refusal by the relevant person to cooperate with the inquiry. 27 Rules 6.12(2) and (3) are substantially in the same terms as rr 6.06(2) and (3) save that r 6.12(3) requires that the affidavit relied on by the applicant in support of the summons must additionally state the facts relied on to establish that the person to be summoned is an examinable person: see r 6.12(3)(b). 28 There was no dispute between the parties about the applicable principles. The parties relied on a number of authorities which considered the duty of disclosure on an application for the issue of summonses for examination pursuant to the Corporations Act 2001 (Cth) (Corporations Act) and its predecessor the Corporations Law. The principles established in those cases apply to the similar regime for the issue of summonses for examination and production of books in the Act. 29 Re Southern Equities Corporation Ltd (in liq); Bond v England (1997) 25 ACSR 394 (Southern Equities) concerned, among other things, an appeal from a decision of a single judge who had dismissed an appeal from a decision of a Master of the Supreme Court of South Australia refusing to set aside a summons for examination under s 596B of the Corporations Law. Relevantly, the appellant argued that the respondent, who was the liquidator of Southern Equities Corp Ltd (in liq), had failed to make full and frank disclosure in his application for issue of the relevant summonses. In relation to that issue Lander J (with whom Cox and Bleby JJ agreed) said at 422: An application for an examination summons is made ex parte. Consequently there is a heavy obligation upon the person applying for the examination summons to make full and frank disclosure of all matters which may impact upon the decision to summon a person for examination about a corporations examinable affairs. There can be no doubt, in my opinion, that a person who makes an application of this kind is under an obligation to bring all facts and material to the court's attention which might bear upon the order to be made. The applicant has no lesser obligation than that imposed upon a party seeking an injunction ex parte. Indeed, in my opinion, the obligation for frankness and candour is even greater in an application of this kind. That is because, unlike on the return of an interlocutory injunction obtained ex parte, on the return of an examination summons the material supporting the application is not ordinarily made available to the proposed examinee. Because the proposed examinee, ordinarily, is not privy to the information or material which was used to support the application for the examination summons, the person applying for the examination summons has the very highest obligation relating to frankness and candour and any breach of that obligation, in my opinion, ought to be viewed very seriously by the court. The obligation is to provide to the court all material which might impact upon the order sought, including all material which might lead the court to refuse the application. The applicant must act in the place of the proposed examinee and therefore draw to the attention of the court anything which might lead the court to refuse the application. If an applicant fails to provide all of the information bearing upon the order sought, in my opinion, that might be sufficient ground to set aside the order, because the order will have been obtained in circumstances where the court has not been apprised of a reason or reasons for the refusal of the order. … 30 Justice Lander did not accept a submission that where a material non-disclosure has been established the order must necessarily be set aside: at 423. At 424 his Honour said: It cannot be said that an order obtained in circumstances where there has been a failure to disclose material facts must necessarily be set aside. Whether or not the order ought to be set aside for failing to disclose material facts will depend upon the facts not disclosed and the circumstances in which the non disclosure came about. An error of judgment in failing to disclose a fact which later becomes material may not necessarily lead to the setting aside of the order previously obtained. So also an innocent non-disclosure may not necessarily require the setting aside of the order for the examination. On every occasion where there has been a non-disclosure and an order obtained it will be a matter of inquiry as to whether or not that non disclosure should lead to the setting aside of the order. 31 In Re Shepard (in his capacity as administrator of Hunter Bulk Materials Pty Ltd) (subject to a deed of company arrangement) (2011) 83 ACSR 436; [2011] NSWSC 467 Ward J (as her Honour then was) considered an application to set aside an order for production of documents and examination summonses issued pursuant to s 596B of the Corporations Act. In doing so Ward J considered the issue of non-disclosure. After referring to the decision in Southern Equities, at [53]-[55] her Honour said: 53 In Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955, Allsop J, as his Honour then was, adopted the relevant principles of ex parte disclosure as those discussed by Isaacs J in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at [681]-[682] and by Mahoney AP in Gerrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676-77 (and in the cases there referred to by his Honour) and emphasised the high standard of candour and the heavy responsibility on those who seek ex parte orders, especially where a discretion is involved. His Honour said that: In an ex parte hearing, it is the obligation of the party seeking orders, through its representatives, to take the place of the absent party to the extent of bringing forward all the material facts which that party would have brought forward in defence of the application: … squarely putting the other side's case, if there is one, by coherently expressing the known facts in a way such that the court can understand, in the urgent context in which the application is brought forward, what might be said against the making of the orders. 54 In Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540 at 543; 97 ALR 315 at 317, the rationale behind this principle was noted, namely that it is of the utmost importance in the due administration of law that the courts and the public are able to have confidence that an ex parte order has been made only after the party obtaining it has complied with its duty to disclose all relevant facts. 55 Mr Hicks further observed that the duty of disclosure in general terms was such that even if something had been forgotten (such as, perhaps here, the compliance with an earlier order for production) a failure to disclose it may be sufficient to lead to the order being set aside: see Clifton v Robinson (1853) 16 Beav 355; 51 ER 816. (emphasis in original.) 32 While acknowledging that there was a heavy duty on an applicant seeking ex parte orders, Ward J concluded, having reviewed the confidential affidavits relied on by the administrators, that she "was not satisfied that there was any material non-disclosure": at [56].

consideration 33 Mr and Mrs Hanna submitted that Mr Weston had failed to comply with his duty of disclosure in the following respects: (1) failure to disclose Mr Hanna's discharge from bankruptcy; (2) failure to adequately explain the circumstances surrounding Mr Hanna's discharge from bankruptcy; (3) no explanation for delay; and (4) failure to disclose earlier production of documents. They submitted that in each case this amounted to a material non-disclosure that would lead to an order for discharge of the Examination Summonses. 34 I consider each of these bases below.

Failure to disclose Mr Hanna's discharge from bankruptcy 35 It was not in dispute that Mr Hanna's discharge from bankruptcy in about September 2016 is not included in the Weston Affidavit. 36 Mr and Mrs Hanna accepted that s 81 of the Act permits an examination to take place at any time, including after discharge. However they contended that the characterisation of Mr Hanna as "the bankrupt" in the Weston Affidavit is potentially misleading given that the text of s 81 recognises a distinction between a bankrupt and a former or discharged bankrupt. 37 Mr and Mrs Hanna further submitted that the fact that s 81 permits examination of a bankrupt after discharge does not relieve the trustee of an obligation to inform the Court that the discharge has occurred. They said that was so because the issue of an examination summons involves the Court in an exercise of discretion on an ex parte basis and in those circumstances the Court ought to be properly apprised of the factual matters that have given rise to the requirement, on the trustee's case, for the issue of the summons. 38 In response, Mr Weston submitted that the mere fact of Mr Hanna's discharge from bankruptcy and its non-disclosure to the Registrar does not provide a basis for setting aside the Examination Summonses. I agree. 39 As the parties accept, a "relevant person" is liable to be examined pursuant to s 81 of the Act notwithstanding discharge from bankruptcy. Further, as Mr Weston submitted, a discharge from bankruptcy does not bring an end to a trustee's duty to distribute property that remains vested in the trustee, which may include choses in action, to creditors: see Norilya Minerals Pty Ltd, in the matter of Ireland v Ireland [2006] FCA 1235 at [32]. 40 That being so, while there has been a failure to disclose the fact of Mr Hanna's discharge in the Weston Affidavit, that non-disclosure is not material. It could not affect the Court's power to issue the Examination Summonses nor does it impact on Mr Weston's obligations as trustee as set out at [39] above. In that sense the fact of Mr Hanna's discharge was not, in my opinion, material to the Registrar's decision to issue the Examination Summonses.

Failure to adequately explain the circumstances surrounding Mr Hanna's discharge from bankruptcy 41 Mr and Mrs Hanna rely on the events set out at [14]-[19] above as constituting the circumstances surrounding Mr Hanna's discharge from bankruptcy. Again, Mr Weston accepts that those matters are not referred to in the Weston Affidavit. 42 Mr Weston submitted that this basis for discharge of the Examination Summonses appears to rely on the production of documents by Mr Hanna prior to his discharge from bankruptcy. Mr Weston submitted that because Mr and Mrs Hanna now only seek discharge of the Examination Summonses to the extent they require them to attend for examination, this basis for their discharge must fall away. He further submitted that the proposition that Mr and Mrs Hanna seemed to put, namely that a proposed examinee could not be examined where they had previously produced all documents in their possession, is unsustainable. Mr Weston contended that because Mr and Mrs Hanna only seek relief to the extent that the Examination Summonses require them to attend for examination, the fact that there was earlier production of documents by them cannot have been material to the exercise of the discretion to issue the Examination Summonses. 43 In my opinion the failure to disclose the circumstances surrounding Mr Hanna's discharge from bankruptcy was a material non-disclosure. Those circumstances include the lodging of the Notice of Objection and the ground for objection; the request for information both prior to and after the lodging of the Notice of Objection; the provision of information and documents by Mr Hanna and the withdrawal of the Notice of Objection. It was not in dispute that the person applying for an examination summons bears an obligation to make full and frank disclosure of all matters, both favourable and unfavourable, which might bear upon the order sought. The circumstances surrounding the Notice of Objection, summarised above, are of that nature. That is, they are matters which might bear upon the orders sought. That is so for the following reasons. First, the nature of the information sought in 2016, prior to the application for the issue of the Examination Summonses, went to the very issues about which Mr Weston now seeks to examine; secondly, as set out at [26]-[27] above, the Rules require, in the case where production of books is sought, that the affidavit in support give details of any inquiry made by the applicant about the books to be produced, thus recognising the import of such information on the exercise of the discretion; and thirdly, those matters were within Mr Weston's knowledge yet were not disclosed. 44 The next question that arises is whether, because of the non-disclosure, I should exercise my discretion to discharge the Examination Summonses. That depends upon the facts not disclosed and the circumstances in which the non-disclosure came about. I have addressed the former in the preceding paragraph but would add that these are matters which, had they been present, Mr and Mrs Hanna would likely have raised with the Registrar and which may well have impacted on the exercise of the discretion by the Registrar. As to the circumstances surrounding non-disclosure, Mr Weston has not provided any explanation of why these matters were not included in the Weston Affidavit. I am unable to make any assumption or draw any inference about the reason why these matters were left out of the Weston Affidavit. In my opinion, in all of the circumstances, this is a case where the non-disclosure justifies the discharge of the Examination Summonses insofar as they seek examination of Mr and Mrs Hanna. 45 It is no answer to say, as Mr Weston does, that because there has been production of the books called for by the Examination Summonses the non-disclosure of the circumstances surrounding Mr Hanna's discharge from bankruptcy does not justify the setting aside of the Examination Summonses. To reach that conclusion is to apply a degree of hindsight to the determination of materiality and the exercise of discretion that is not justified. The clear requirement is that, because of the ex parte nature of the application for issue of an examination summons, there must be full and frank disclosure. Whether that is so should be determined based on the facts known and the circumstances at the time of the application. It is not appropriate that a trustee should justify his or her actions and omissions by reference to events occurring after the issue of the summons. In any event the non-disclosure of the circumstances surrounding Mr Hanna's discharge from bankruptcy should not only be seen in the narrow way Mr Weston urges on the Court, as relevant only to the exercise of the Registrar's discretion insofar as the Examination Summonses sought production of books. 46 Finally I should address the submission made by counsel for Mr Weston that, in the exercise of my discretion, I would take into account the strength of the case which a trustee says he or she wishes to investigate by way of examination and the fact that the effect of an order discharging a summons for material non-disclosure would cause delay and additional expense because the trustee would be forced to return to the registrar and make a fresh application for issue of the summons in question. 47 Those factors may well be relevant in considering whether a summons should be discharged but they do not cause me in this case, in the exercise of my discretion, to refuse the relief sought by Mr and Mrs Hanna and to permit the Examination Summonses to remain on foot. The Weston Affidavit sets out the potential causes of action and issues that arise, the background as known to Mr Weston that gives rise to the identified issues, the matters that Mr Weston will need to establish in investigating the potential causes of action and Mr Weston's belief that there may be valid causes of action. There is no evidence beyond that of the strength of the case, of the funds available to Mr Weston and the potential cost and delay or, save for being informed by counsel for Mr Weston in response to a query that I raised of the expiration of a limitation period on 26 June 2019, of the impact of any delay.

No explanation for delay 48 Mr and Mrs Hanna allege that the failure in the Weston Affidavit to disclose the reason for the delay in applying for the Examination Summonses was a material non-disclosure justifying their setting aside. 49 The Weston affidavit disclosed that Mr Hanna had become a bankrupt on 25 June 2013 and that property transactions, commencing with the transfer of the Greenacre Property, were the subject of investigation. In those circumstances, as submitted by Mr Weston, the Registrar was aware of the time that had elapsed between the date of Mr Hanna's bankruptcy and the date of the application for issue of the Examination Summonses. However, the affidavit does not disclose the reasons for the delay, which is the matter about which Mr and Mrs Hanna complain. 50 Mr Weston accepted that the reasons for delay were not disclosed in the Weston Affidavit but submitted that I would infer that, given the passage of time, the absence of an explanation for a delay was a matter of which the Registrar was aware before making the orders. I accept that is so. However, despite the inference that can be drawn it is still the case that there was a failure to disclose the reason for the delay. On the other hand, in the circumstances and given the available inference, it cannot be said that the non-disclosure was material.

Failure to disclose earlier production of documents 51 The final basis upon which Mr and Mrs Hanna seek to have the Examination Summonses discharged is the failure to disclose the earlier production of documents (see [11]-[13] above) (First Document Production). In oral submissions counsel for Mr and Mrs Hanna clarified that they additionally relied on the failure to disclose the information contained in Mr Hanna's responses to the May Letter and the August Letter. 52 It is common ground that the Mr and Mrs Hanna have now produced the books called for by the Examination Summonses and that Mr Weston makes no complaint about that production. It is also common ground that the Weston Affidavit does not refer to the First Document Production. 53 Mr Weston submitted that Mr and Mrs Hanna did not object to the Examination Summonses on the basis that they were oppressive or vexatious but instead produced further documents in response to them. He contended that because of that production there is no utility in the complaint about the Examination Summonses to the extent they seek production of documents. 54 The extent of overlap between the First Document Production and production made pursuant to the Examination Summonses has not been established but I accept that there is some overlap in the nature of the documents sought at each time. Similarly, Mr Weston has not established that only additional documents, not documents already produced in the First Document Production, were produced in answer to the Examination Summonses. In any event, that is not the issue. 55 Mr and Mrs Hanna seek to discharge the Examination Summonses to the extent they require them to attend for examination on the basis of a material non-disclosure, being the failure to disclose the First Document Production. I accept that the First Document Production was not disclosed. In that regard my comments at [43]-[44] above apply equally to this omission in the Weston Affidavit and for the same reasons I find that the failure to disclose the earlier production was a material non-disclosure that, in the circumstances of this case, leads me to make the order for discharge of the Examination Summonses sought by Mr and Mrs Hanna. That production has been made does not change the fact that there was a material non-disclosure.

conclusion 56 It follows from the matters set out above that I will make orders discharging the Examination Summonses. As Mr and Mrs Hanna have been successful in their interim application Mr Weston should pay their costs of that application. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic j.