FEDERAL COURT OF AUSTRALIA

In the matter of Davison,  Donnelly v Davison [2000] FCA 1396

BANKRUPTCY – subpeona to taxation officer to produce documents– whether production of documents sought by subpoena necessary for the purposes of carrying into effect the provisions of the Income Tax Assessment Act 1936 (Cth) (“the ITA Act”) – whether performance of duties by taxation officers wider than the purpose of carrying into effect the provisions of the ITA Act – whether exception in s 16(3) ITA Act can be relied on in cases in which the Commissioner of Taxation is not a party

BANKRUPTCY – Bankruptcy Act 1966 (Cth) – application for review of decision of Registrar to issue s 81 summons – notice to produce issued by bankrupt – whether the justice of the case requires the production of documents to bankrupt which may relate to the subject matter of his bankruptcy examination – relevance of strength of grounds of review – whether notice to produce a “fishing expedition” – distinction between notice to produce and discovery

Bankruptcy Act 1966 (Cth)

Income Tax Assessment Act 1936 (Cth) s 16

Canadian Pacific Tobacco Company Limited v Stapleton (1952) 86 CLR 1,  considered

Federal Commissioner of Taxation v Nestlé Australia Ltd (1986) 69 ALR 445,  followed

Deputy Federal Commissioner of Taxation v Clout (1998) 99 ATC 4101,  considered

Simionato Holdings Pty Ltd v Federal Commissioner of Taxation (No 2) (1995) 95 ATC 4720,  considered

Purnell Bros Pty Ltd v Transport Engineers Pty Ltd (1984) 73 FLR 160,  followed

Deputy Commissioner of Taxation v Nika Management Service Pty Ltd (Supreme Court of New South Wales, Cohen J, 6 December 1995, unreported),  considered

Re Csidei; ex parte Andrew (1979) 39 FLR 387,  cited

Re Abrahams; ex parte Thomas (1985) 9 FCR 232,  cited

Australian Securities Commission v Somerville (FC) (1994) 51 FCR 38,  cited

Simionato v Macks (1996) 19 ACSR 34,  cited

Caltex Refining Co Pty Limited v The Amalgamated Metal Workers’ Union (Federal Court of Australia, Lockhart, Burchett and Gummow JJ, 6 December 1990, unreported), cited

Treasurer of the Commonwealth of Australia v Canwest Global Communications Corp (Federal Court of Australia, Beaumont, Burchett and Emmett JJ, 30 June 1977, unreported),  cited

The Commissioner for Railways v Small (1938) 38 SR(NSW) 564,  cited

Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686,  cited

WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175,  cited

IN THE MATTER OF WILLIAM ROY DAVISON;  MAX DONNELLY, TRUSTEE v WILLIAM ROY DAVISON

N 7185 of 2000

JUDGE:          BRANSON J

DATE:            6 OCTOBER 2000

PLACE:          SYDNEY

REASONS FOR DECISION

INTRODUCTION

1                     Two motions in this matter were heard together.  Pursuant to a notice of motion dated 13 June 2000, the Commissioner of Taxation (“the Commissioner”), the only creditor in the bankrupt estate of William Roy Davison (“Mr Davison”), seeks an order that a subpoena to produce documents directed to the proper officer of the Australian Taxation Office be set aside.  Pursuant to a notice of motion dated 20 June 2000, Max Christopher Donnelly (“Mr Donnelly”), the trustee of the bankrupt estate of Mr Davison, seeks an order that a notice to produce served on him be set aside.

2                     Mr Davison became bankrupt on his own petition which was filed on 7 April 1999 and accepted on 16 June 1999.  On 2 March 2000 Mr Donnelly requested the Registrar to issue a summons under s 81 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) to Mr Davison.  On 3 March 2000 a summons to attend an examination bearing the seal of the Court and the signature of a Deputy District Registrar (“the Registrar”) issued to Mr Davison.  By a further amended application dated 30 June 2000, Mr Davison has applied for review of the decision or act of the Registrar to issue the summons and an extension of time within which to make the application.  The grounds on which review of the decision of the Registrar is sought include that the application for the issue of the summons was an abuse of process in that it was made for an improper purpose and that, in making the application, Mr Donnelly was acting at the direction or behest of the Deputy Commissioner of Taxation or officers of the Australian Taxation Office.  A further ground that challenged the constitutional validity of s 81 of the Bankruptcy Act resulted in the referral of a question to the Full Court by way of a special case.  The Full Court confirmed the validity of s 81 of the Bankruptcy Act and of the summons issued to Mr Davison.  It concluded that the proposed examination of Mr Davison before a Registrar would not involve the Registrar exercising the judicial power of the Commonwealth in contravention of Chapter III of the Constitution.

THE SUBPOENA

3                     The subpoena relevantly seeks production of the following documents:

“All documents, including documents held in electronic form (such as email), being communications between the Australian Taxation Office and Mr Max Donnelly, Ferrier Hodgson, Sally Nash & Co or any other party, person or entity or between any of them or internally within the Australian Taxation Office, recording any decision, act, recommendation, request or opinion:

1.                  for the examination of William Roy Davison pursuant to section 81 of the Bankruptcy Act 1966;

2.                  …

3.                  …

4.                  …

5.                  as to the act by William Roy Davison in presenting his debtor’s petition on 7 April 1999;

6.                  as to the appointment of Mr Max Donnelly of Ferrier Hodgson as trustee in substitution for Mr W Pantzer of Lawler Davidson.”

4                     In seeking to set aside the subpoena, the Commissioner places reliance on s 16 of the Income Tax Assessment Act 1936 (Cth) (“the ITA Act”), and in particular subsection (3).  Section 16 of the ITA Act relevantly provides:

“16.     (1)        In this section, unless the contrary intention appears:

            ‘officer’ means a person who is or has been appointed or employed by the Commonwealth or by a State, and who by reason of that appointment or employment, or in the course of that employment, may acquire or has acquired information respecting the affairs of any other person, disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to income tax; …

(2)               Subject to this section, an officer shall not either directly or indirectly, except in the performance of any duty as an officer, and either while he is, or after he ceases to be an officer, make a record of, or divulge or communicate to any person any information respecting the affairs of another person acquired by the officer as mentioned in the definition of ‘officer’ in subsection (1).

(3)               An officer shall not be required to produce in Court any return, assessment or notice of assessment, or to divulge or communicate to any Court any matter or thing coming under his notice in the performance of his duties as an officer, except when it is necessary to do so for the purpose of carrying into effect the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax.”

5                     It is thus necessary to determine whether “it is necessary … for the purpose of carrying into effect the provisions of [the ITA Act]” for the documents sought by the subpoena to be produced to the Court.

6                     Before giving consideration to the authorities concerning s 16(3) of the ITA Act, it is appropriate to notice the different purposes served by s 16(2) and s 16(3).  Section 16(2) imposes a prohibition on the disclosure of information by an officer “except in the performance of any duty as an officer”.  Its principal purpose is to protect the confidentiality of information provided to officers by taxpayers.  Section 16(3) does not prohibit disclosure of information which an officer is prepared to give under instructions from the officer’s superiors (Canadian Pacific Tobacco Company Limited v Stapleton (1952) 86 CLR 1).  It is thus not the case that s 16(3) is principally concerned to protect confidential information in the interests of taxpayers.  While s 16(3) assists in the protection of confidential information provided to officers by taxpayers, its principal purpose appears to be to protect officers from compulsion to disclose.

7                     The Full Court of this Court (Bowen CJ, Lockhart and Sheppard JJ) gave consideration to the ambit of the exception contained in s 16(3) of the ITA Act in Federal Commissioner of Taxation v Nestlé Australia Ltd (1986) 69 ALR 445 at 451.  Their Honours observed:

“This exception covers the production of documents by an officer to courts or his giving evidence in proceedings before them for recovery of tax …; appeals to Supreme Courts against the disallowance of objections to assessments …; appeals under the Taxation (Unpaid Company Tax) Assessment Act 1982 …; appeals to this Court from judgments of Supreme Courts on taxation appeals both at first instance and from decisions of boards of review; appeals to this court from decisions of the Administrative Appeals Tribunal in tax matters which has recently subsumed the jurisdiction formerly exercised by boards of review; and proceedings pursuant to s 39B of the Judiciary Act and the Judicial Review Act involving challenges to decisions of officers of the Taxation Office of the kind mentioned earlier.  Other proceedings in addition to these may be within the scope of the exception, but the principal ones appear to be those just mentioned.”  (citations omitted)

It may be noted that the types of proceedings which their Honours expressly identified all concern the recovery of income tax or the determination of liability to pay income tax.

8                     It might be thought that the class of relevant proceedings was somewhat broadened by the decision of Williams J of the Supreme Court of Queensland in Deputy Federal Commissioner of Taxation v Clout (1998) 99 ATC 4101.  In that case his Honour declined to set aside summonses requiring the Deputy Commissioner of Taxation and a taxation officer employed by the Commonwealth of Australia to attend and be examined on oath about the examinable affairs of a company in the process of being wound up.  His Honour noted that in Simionato Holdings Pty Ltd v Federal Commissioner of Taxation (No 2) (1995) 95 ATC 4720 von Doussa J of this Court, in giving consideration to s 16(2) of the ITA Act, had concluded that steps taken by a taxation officer to maximise the return to creditors, including the Commonwealth, were steps taken in the performance of his duty as an officer, namely the duty of maximising the return to creditors in a liquidation in which the Commonwealth was an unsecured creditor in respect of unpaid income tax.  Williams J concluded that the Commissioner and his taxation officers would clearly be carrying into effect the provisions of the ITA Act if they took steps to defend a proceeding by which the liquidator of the company sought to recover moneys paid by the company to the Commissioner.  He then reasoned at paras 17-19 as follows:

“If that is so then it is difficult to see why the position should be different at the examination stage.  The examination is being conducted because the retention of the money in question is under threat; if the Commissioner then established that the payment received was lawful (for example, was not a preference) the revenue benefits because the money can be retained in the hands of the Commissioner.  Clarification of the legal position at that stage could well result in significant savings to the revenue because additional legal costs would not be incurred.

I have therefore come to the conclusion that the divulging of information by either applicant in the course of being examined by the liquidator in the Magistrates Court would not constitute a breach of s 16(3) where it could be said that what they were doing was ‘necessary … for the purpose of carrying into effect the provisions of’ the Income Tax Assessment Act.

I do not know, nor is there any need for me to know, what precise questions the liquidator proposes to ask each of the applicants, nor what particular documents may be encompassed by the general description referred to in the summons.  It may well be that divulging information in response to a particular question or divulging information by producing a particular document might fall outside the scope of the exception in s 16(3) and amount to a breach thereof.  Nothing that I have said should be taken to preclude either applicant from refusing to divulge particular information or produce a particular document if there is good reason for concluding that to do so would not be covered by the exception as I have defined it.”

9                     A narrower view of the exception to s 16(3) of the ITA Act had been taken by Powell J in Purnell Bros Pty Ltd v Transport Engineers Pty Ltd (1984) 73 FLR 160.  In that case a subpoena had issued to the Deputy Commissioner of Taxation in circumstances somewhat similar to the present.  The Commissioner was a creditor of Transport Engineers Pty Ltd (in liquidation).  The liquidator had sought orders for the examination of certain directors of  Transport Engineers Pty Ltd (in liquidation) and others involved in the affairs of the company.  Those orders were made by a Registrar of the Supreme Court of New South Wales.  The directors filed a notice of motion seeking orders that the orders made by the Registrar be set aside on the ground, in effect, that the liquidator was not acting independently but at the behest of the Commissioner.  Powell J at 178-179 said:

“Whatever may be one’s view as to the position in relation to taxation appeals … or cases in which the Commissioner, as a plaintiff, is actively seeking to recover a debt for taxation …, I am quite unable to see how it can be said that ‘it is necessary … for the purpose of carrying into effect the provisions of the Act’ that the documents sought to be produced in fact be produced for the purposes of an application to which the Commissioner is a stranger.”  (citations omitted)

10                  In Deputy Commissioner of Taxation v Nika Management Services Pty Ltd (Supreme Court of New South Wales, 6 December 1995, unreported) Cohen J set aside a subpoena addressed to the Deputy Commissioner of Taxation which had been issued by persons who were required to be present for examination by the liquidator of Nika Management Services Pty Ltd.  His Honour said:

“it seems to me … that, although the Deputy Commissioner clearly has an interest in the outcome of the examinations and, it would seem, may well be responsible for the funding of those examinations, that is ancillary to his carrying into effect the provisions of the Act.  If I were dealing with this without any precedent, I would perhaps have some uncertainty as to whether the financing of an examination the results of which may be of some final assistance to the Deputy Commissioner in collecting tax is an act which is necessary for the purpose of carrying into effect the provisions of the Act.  However, it seems to me that I should follow a previous decision of a judge of this Division, namely that of Powell J in Purnell Bros Pty Ltd v Transport Engineers Pty Ltd ….”

11                  The authorities appear to me to reflect a view that the duties of a taxation officer within the meaning of s 16(2) of the ITA Act may extend beyond that which “it is necessary to do … for the purpose of carrying into effect the provisions of [the ITA Act]” within the meaning of s 16(3).  In Canadian Pacific Tobacco Company Ltd v Stapleton at 6 Dixon CJ said:

“… I think that the words ‘except in the performance of any duty as an officer’ ought to receive a very wide interpretation.  The word ‘duty’ there is not, I think, used in a sense that is confined to a legal obligation, but really would be better represented by the word ‘function’.  The exception governs all that is incidental to the carrying out of what is commonly called ‘the duties of an officer’s employment’; that is to say, the functions and proper actions which his employment authorizes.”

The decision of von Doussa J in Simionato appears to reflect the same approach to the construction of s 16(2) of the ITA Act as that adopted by Dixon CJ in Canadian Pacific Tobacco Company Ltd v Stapleton.

12                  The terms of s 16(3) of the ITA Act themselves suggest that information and documents can come to the notice of an officer “in the performance of his duties as an officer” which it will not be necessary for him or her to disclose “for the purposes of carrying into effect the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax”.  In my view, the language of s 16(3), seen in the context of Part II of the ITA Act, discloses an intention that the circumstances in which an officer may be compelled in Court to disclose information or to produce documents should be limited to purposes directly arising out of the provisions of the ITA Act or earlier income tax legislation.  This seems to me to be the approach to the subsection which the Full Court adopted in Federal Commissioner of Taxation v Nestlé Australia Limited.  It is also the approach to the subsection adopted by Powell J in Purnell Bros Pty Limited v Transport Engineers Pty Limited.

13                  The Commissioner is not a party to the present proceeding.  Although the Commissioner is the only creditor of Mr Davison’s bankrupt estate, and may be assumed to be funding the proposed examinations, the examinations are proposed for the purpose of carrying into effect the provisions of the Bankruptcy Act.  The proposed examinations do not directly arise out of the provisions of the ITA Act.  This, in my view, is the position even though steps taken by taxation officers to maximise the return to the Commissioner from Mr Davison’s estate, including the provision of funding to Mr Donnelly as trustee of the estate, may be seen as steps taken in the performance of their duties as officers. 

14                  I conclude that the subpoena seeks the production of documents in circumstances which would result in an officer divulging or communicating to the Court matters or things coming under the officer’s notice in the performance of his or her duties as an officer, otherwise than when it is necessary to do so for the purpose of carrying into effect the provisions of the ITA Act or any earlier Act relating to income tax.

15                  The subpoena addressed to the Proper Officer of the Australian Taxation Office will be set aside. It is unnecessary for me to give consideration to the submissions of the Commissioner that the subpoena is otherwise an abuse of process as it is too broadly expressed and therefore oppressive, as it involves “fishing”, or because it seeks the production of documents that are irrelevant to the proceeding.

NOTICE TO PRODUCE

16                  The notice to produce relevantly seeks production of the following documents:

“1.       The original and/or copies of all correspondence, file notes, internal memoranda, email and any other documents in whatsoever form, including but not limited to correspondence or other documents between the Respondent or his solicitor and an officer of the Australian Taxation Office or if more than one any of them, recording any decision, act, recommendation or request for the:-

(a)               examination of William Roy Davison pursuant to section 81 of the Bankruptcy Act 1966;

…

2.                  The original and/or copies of all correspondence, file notes, internal memoranda, email and any other documents in whatsoever form prepared by the Respondent or on his behalf in relation to and/or in response to the following correspondence regarding the estate of Mr W Davison:-

(a)               Letter from Stapleton Partners to Mr M Donnelly dated 2 May 2000;

(b)               Letter from Stapleton Partners to Mrs V Donnelly dated 14 March 2000 in response to notice pursuant to section 77 of the Bankruptcy Act served on Mr W Davison;

(c)                Letter from Stapleton Partners to Mr M Donnelly dated 2 May 2000 [sic];

(d)               Letter from Stapleton Partners to Mr M Donnelly dated 2 March 2000;

(e)                Letter from Stapleton Partners to Mr M Donnelly dated 29 February 2000;

(f)                 Letter [sic] from Stapleton Partners to Mr W Pantzer dated 1, 7 and 13  December 2000 [sic];

3.         The original and/or copies of timesheets, work records, accounts of costs and other records recording and/or describing the work performed by the Respondent and his agents in respect of the administration of the estate of the Applicant up to and including 27 April 2000.”

17                  It is contended by Mr Donnelly that paragraph 1 of the notice to produce seeks to interfere with his right as trustee to examine Mr Davison and is impermissible as a matter of public policy.  Mr Davison contends that paragraph 1 properly construed does not seek material on which it is proposed to examine the trustee, but rather seeks information as to the person or persons responsible for making the decision to examine the bankrupt under s 81 of the Bankruptcy Act and the result sought to be achieved by the decision to issue the summons.

18                  The purpose of an examination under s 81 of the Bankruptcy Act 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 (Re Csidei; ex parte Andrew (1980) 39 FLR 387 at 390).  As Lockhart J observed in Re Abrahams; ex parte Thomas (1985) 9 FCR 232 at 238:

“In an estate where there is a very large deficiency, it is in the public interest as well as the interests of the creditors that persons are examined under the Act to ascertain available funds, whether settlements are void or voidable, whether preferences have been given, why such a large deficiency exists, and whether any offences have been committed.”

19                  The present case involves a very large deficiency in the bankrupt estate.  Moreover, the bankruptcy is the second bankruptcy of Mr Davison, who, while not an expert in the law of bankruptcy, may by reason of his profession be presumed to understand the nature of his obligations with respect to the payment of income tax.  In Mr Davison’s previous bankruptcy the Commissioner was the principal creditor.  As is mentioned above, in the present bankruptcy the Commissioner is the only creditor.

20                  It is well recognised that the purpose sought to be achieved by an examination may be undermined if the examinee is forewarned of the issues which the examiner wishes to pursue.  This recognition is reflected both in the Corporations Law Rules 2000 (Cth) and in Order 77 of the Federal Court Rules which is concerned with bankruptcy proceedings.  Rule 11.3(4) of the Corporations Law Rules 2000 (Cth) provides that the originating process, or interlocutory process, and the supporting affidavit by which an application for an order for the examination of a person under s 411, s 423 or s 536(3) of the Corporations Law is made, must be filed in an appropriately marked sealed envelope.  Order 77 of the Federal Court Rules only requires an application for a person who becomes a bankrupt (“the relevant person”) to be summoned for examination in respect of his or her bankruptcy to be supported by an affidavit which identifies the person to be summoned as the relevant person (O 77 r 28).  An application for an “examinable person” to be summoned for examination in relation to the bankruptcy of a relevant person must be accompanied by a supporting affidavit (O 77 r 34).  Where such an application is made, the Rules allow the supporting affidavit to be filed in an appropriately marked sealed envelope.

21                  However, Mr Davison has sought review of the decision of the Registrar to issue the summons requiring him to attend for examination.  By the notice to produce he has sought production of documents which he believes may support his application for review.  In any proceeding, the Court has power to order a party to give discovery of documents (Australian Securities Commission v Somerville (FC) (1994) 51 FCR 38 at 52).  No point has been taken here that an order for discovery ought to have been sought rather than a notice to produce served.  Mr Donnelly must comply with the notice to produce unless the Court sets it aside or by order relieves Mr Donnelly from the obligation to produce the documents in accordance with the notice (O 33 r 12 of the Federal Court Rules). 

22                  The proper approach to the resolution of the conflict between the desirability of preserving the confidentiality of material relevant to the proposed examination of Mr Davison and Mr Davison’s interest in the production of documents relevant to his application for review is, in my view, that adopted by Lander J of the Supreme Court of South Australia in Simionato v Macks (1996) 19 ACSR 34 at 63.  In that case his Honour was required to give consideration to whether individuals who had made applications to set aside orders for their examination under s 596A and s 596B of the Corporations Law were entitled to inspect the affidavits filed in support of the applications for the examinations.  Lander J said:

“… ordinarily the court would exercise its discretion to order disclosure where the justice of the case so required it.  In Re British & Commonwealth Holdings Plc (Nos 1 & 2) [1992] 1 Ch 342, Nourse LJ said at 355:

‘In my judgment inspection of the statement should prima facie be allowed where the court is of the opinion that it will or may be unable fairly and properly to dispose of the application if part of the evidence is withheld from the person against whom the order is sought.  It will then be for the officeholder to satisfy the court that confidentiality in whole or in part is nevertheless appropriate.’

It is not in every case where a party makes an application to set aside an order for examination that the proposed examinee ought to be entitled to inspect the affidavit upon which the original order was made.  Otherwise the very reason for sealing the affidavit would stand frustrated and the examination process would be likely to be frustrated.  The proposed examinee must establish some qualification so as to be allowed access to the affidavit.  The application to set aside the order itself is not sufficient.”

23                  I therefore turn to consider whether the justice of the case here requires that Mr Donnelly produce to Mr Davison documents which may alert Mr Davison to the subject matters on which Mr Donnelly wishes to examine him.  The fact that an application has been made for review of the decision of the Registrar to issue the summons will not of itself be sufficient to justify the production of the documents.  The issue for determination is whether it may not be possible fairly and properly to hear and determine the application if the documents are not produced to Mr Davison.  In my view, the apparent strength of Mr Davison’s case for review is an important consideration in this regard.  Ultimately, the court is evaluating competing policy considerations.  A strong case may compel the conclusion that the public interest in the integrity of the examination process should give way to Mr Davison’s interest in the production of the documents.  Conversely, a weak case may result in a conclusion that the public interest in preserving the confidentiality of the documents should prevail as there is little reason to think that it may not be possible fairly and properly to hear and determine the application without the production of the documents.

24                  The first ground upon which review of the decision of the Registrar is sought is that the application for the issue of the summons was an abuse of process in that it was made for an improper purpose.  The evidence in support of the allegation of an improper purpose is, as I understand it, first, Mr Davison’s evidence that, so far as he has been able to, he has complied with all requests for assistance and information received from Mr Donnelly and the previous trustee of his estate.  Secondly, evidence which suggests that the Australian Taxation office has a confidential policy which might be relevant to the examination of Mr Davison.  It is contended that this policy might favour publicity attending the bankruptcy of a person in Mr Davison’s position.  Thirdly, that Mr Donnelly has submitted questions in writing to Mr Davison which might be regarded as vexatious or at least inappropriate.

25                  The second ground upon which review of the decision of the Registrar is sought is that, in seeking the examination of Mr Davison, Mr Donnelly was acting at the direction or behest of the Deputy Commissioner of Taxation or officers of the Australian Taxation Office.  The evidence in support of this ground is first that the Commissioner is the only creditor in the bankrupt estate of Mr Davison.  Secondly, that as it appears, the Commissioner is funding the proposed examination of Mr Davison.  Thirdly, that at a meeting of the creditors of Mr Davison held on 31 May 2000, Mr Donnelly said that he was going to ask creditors whether they wished him to conduct the examination, that it was going to be their decision, and that if the creditors wanted him to conduct the examination then that’s what would happen.  In this context, “creditor” is to be understood as the Commissioner of Taxation.

26                  The two grounds of review are not independent.  There is a degree of overlap between them.  There is, of course, nothing unusual in a creditor providing funding to a trustee to allow examinations to take place for the purpose of identifying and tracing assets (Re Abrahams; ex parte Thomas at 238).  Nor is a trustee to be criticised for consulting with, or giving weight to the views of, a creditor.  Indeed, the Bankruptcy Act recognises the significant role that creditors are entitled to play in respect of the administration of a bankrupt estate (see particularly Divisions 5 and 5A of Part IV of the Bankruptcy Act – Meetings of Creditors, and Committee of Inspection).  The significance of the statements made by Mr Donnelly at the meeting of creditors held on 31 May 2000 is to be determined in the light of the fact that the application to the Registrar for the issue of a summons under s 81 of the Bankruptcy Act to Mr Davison was signed by Mr Donnelly on 2 March 2000.  This suggests that his remarks on 31 May 2000 related to the funding of the examinations.  That is, that the examinations would be conducted if, and only if, the Commissioner provided the necessary funding.  Without more, the remarks do not show that Mr Donnelly has improperly abdicated his responsibilities as trustee to the Commissioner or any officer of the Australian Taxation Office.  Nor do I consider that, on the evidence presently before me, much can be shown to turn on the apparent existence of a confidential policy within the Australian Taxation Office which might be relevant to the decision of the Commissioner to provide funding to Mr Donnelly in connection with Mr Davison’s examination.  While there will often be cases in which a trustee will consider that there is no call to examine a bankrupt who is apparently co-operative in responding to requests for information, there is no principle that it is an abuse of process to seek to examine an apparently co-operative bankrupt (Re Csidei; ex parte Andrew at 392-393; Re Abrahams; ex parte Thomas at 239).  The views of the trustee in this regard are to be given proper weight (Re Csidei; ex parte Andrew at 393).  The perhaps regrettable nature of a small number of the written questions submitted to Mr Davison seems to me to be of limited significance for present purposes.

27                  The evidence before me is, in my view, insufficient to show that the justice of the case requires that Mr Davison be given access to documents which reveal the subject matters upon which Mr Donnelly wishes to examine him.  The evidence presently before me, which may, of course, be supplemented by the time of the final hearing, suggests that Mr Davison’s case in respect of each of the grounds of review is slight.  I am not presently of the opinion that the Court will or may be unable fairly or properly to dispose of the application for review if Mr Davison is not given access to documents which reveal the subject matter upon which Mr Donnelly wishes to examine him.  To the extent that the notice to produce seeks production of such documents it should be set aside.  Should further evidence become available, whether during the court of the hearing of at an earlier time, such that it does appear that the justice of the case requires that Mr Davison be given access to any such documents, an appropriate application can be made at that time.

28                  It is further contended by Mr Donnelly that paragraph 1 of the notice to produce should be set aside on the ground that it amounts to a “fishing expedition”.  It seems to me that on the current state of the authorities a notice to produce or a subpoena will more readily be set aside as “fishing” than will an order for discovery.  Decisions of the Full Court of this Court in Caltex Refining Co Pty Limited v The Amalgamated Metal Workers’ Union (Lockhart, Burchett and Gummow JJ, 6 December 1990, unreported) and in Treasurer of the Commonwealth of Australia v Canwest Global Communications Corp (Beaumont, Burchett and Emmett JJ, 30 June 1977, unreported) demonstrate that the Court has a wide discretion in ordering discovery of documents relevant to a pleading in any case properly before the Court which cannot be dismissed as an abuse of process.  However, the circumstances in which a subpoena or notice to produce calling for the production of documents may properly issue are more circumscribed.  So far as a subpoena is concerned, this is, at least in part, by reason of the fact that a subpoena may be addressed to a stranger to the litigation.  As Jordan CJ observed in The Commissioner for Railways v Small (1938) 38 SR(NSW) 564 at 573:

“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.  It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery.”

29                  By contrast with a subpoena, a notice to produce may only be served on a party to a proceeding (O 33 r 12(1) of the Federal Court Rules).  However, the serving of a notice to produce is not intended to act as a substitute method of obtaining discovery.  As O 33 r 12(2) reveals, a notice to produce is intended to call for the production of specified documents – in most cases, it may be assumed, discovered documents.  The powers of the Court to control discovery, including the extent (if any) of discovery and the time at which it is to be given, are not to be circumvented by the issue of a subpoena to a party or the serving of a notice to produce (Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686 at 694-696).  In the circumstances of this case I do not consider that Mr Davison should be denied discovery of documents falling within the description given by paragraph 1 of the notice to produce merely because of the limited nature of the evidence presently before the Court to support the grounds of review in the Further Amended Application.  Although the case may be a borderline one, I am not willing at this stage to say this is not a case in which –

“sufficient [evidence] is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery” (see WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 at 181 per Brennan J with whom Bowen CJ agreed).

30                  However, for the reasons given above, I do not consider that Mr Donnelly should be required to discover or produce any documents which would identify, or tend to identify, the subject matter upon which Mr Donnelly wishes to examine Mr Davison.  If there are any documents which fall within paragraph 1 of the notice to produce which are not of this character, then, subject to any issue of privilege, I consider that they should be produced.

31                  Paragraph 2 of the notice to produce seeks documents prepared by, or on behalf of, Mr Donnelly in relation to or in response to correspondence from Mr Davison’s accountants concerning Mr Davison’s estate.  It seems to me that such documents will almost certainly touch on the subject matters upon which Mr Donnelly wishes to examine Mr Davison.  For the reasons given above, I do not consider that the justice of this case calls for the production of such documents by Mr Donnelly.  To the extent that paragraph 2 of the notice to produce does call for the production of such documents, it will be set aside.

32                  Paragraph 3 of the notice to produce seeks documents detailing the work done by Mr Donnelly in the administration of Mr Davison’s estate.  Mr Davison by his written submission said of paragraph 3 –

“It goes to the work undertaken by the trustee (if any) in response to the information provided by the bankrupt, which purportedly led to the trustee to make [sic] a decision to issue a summons under section 81 to obtain further information.”

33                  Again, to the extent that the production of such documents would reveal, or tend to reveal, the subject matters upon which Mr Donnelly wishes to examine Mr Davison, I do not consider that the justice of the case calls for the production of such documents by Mr Donnelly.  As to some, if not most, of the remainder of the documents described by paragraph 3 of the notice to produce, it seems likely that they would not only fail to assist in identifying the work (if any) undertaken by the trustee in response to information provided by the bankrupt, they would also be irrelevant to any issue in this proceeding.  I consider it appropriate to relieve Mr Donnelly from the obligation to produce the documents referred to in paragraph 3 of the notice to produce.  If discovery of a narrower category of documents of this general class is sought, I am willing to give consideration to the making of a limited order for discovery.

34                  I indicated at the close of argument in this matter that I would not make any formal orders on the motions before me without hearing further from counsel.  I will hear from counsel as to the appropriate orders to be made in the light of these reasons for decision.

Associate:

Dated:              6 October 2000