FEDERAL COURT OF AUSTRALIA

Griffin v Pantzer [2003] FCA 793

BANKRUPTCY – production of documents to trustee – where documents subject to claim for privilege against self-incrimination – whether privilege abrogated by provisions of the Bankruptcy Act 1966 (Cth) – extent of abrogation – obligations of trustee

BANKRUPTCY – proposed examination of bankrupt by trustee – privilege against self-incrimination – whether Evidence Act 1995 (Cth) s 128 applies to examination under Bankruptcy Act 1966 (Cth) s 81

PRACTICE & PROCEDURE – privilege against self-incrimination – whether production of documents to trustee in bankruptcy abrogates privilege

PRACTICE & PROCEDURE – privilege against self-incrimination – proposed examination of bankrupt by trustee – whether Evidence Act 1995 (Cth) s 128 applies to examination under Bankruptcy Act 1966 (Cth) s 81

WORDS & PHRASES – ‘other sufficient cause’

Bankruptcy Act 1966 (Cth) ss 19, 31, 77, 81, 129, 130, 178

Evidence Act 1995 (Cth) ss 4, 128

Bond, Re; Ex parte Ramsay (1994) 54 FCR 394 followed

Corporate Affairs Commission (NSW) v Youill (1991) 172 CLR 319 cited

F v National Crime Authority (1998) 154 ALR 471 cited

Griffin v Sogelease Australia Ltd [2003] NSWCA 158 cited

Sorby v Commonwealth (1983) 152 CLR 281 cited

DAVID JAMES GRIFFIN v WARREN PANTZER

N 7191 OF 2003

EMMETT J

26 JUNE 2003

SYDNEY

THE COURT:

1.         stands the proceeding over, part-heard, to 27 June 2003 at 9.30 am.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 15 May 2003, I made a sequestration order in respect of the estate of David James Griffin (‘the Bankrupt’).  The Bankrupt has now commenced a proceeding seeking declarations and injunctions relating to his obligations to produce documents and to answer questions posed by Warren Pantzer, his trustee in bankruptcy (‘the Trustee’).  The basis upon which the Bankrupt contends that he is not obliged to produce documents to the Trustee and to answer questions foreshadowed by the Trustee in a proposed examination is that the documents and the answers to questions might tend, or perhaps would tend, to incriminate him.

2                     The petitioning creditors in the petition to which the sequestration order was made were Sogelease Australia Ltd and S G Australia Ltd (together ‘the Plaintiffs’).  They are the Plaintiffs in proceeding number 2105 of 2002 brought in the Equity Division of the Supreme Court of New South Wales.  In that proceeding, the Plaintiffs seek relief against the Bankrupt and various other persons.  The relief sought against the Bankrupt includes:

·        damages;

·        equitable compensation;

·        an order that the Bankrupt account to the Plaintiffs for the proceeds of certain cheques described in the statement of claim;

·        an order that an account be taken and an inquiry be held as to certain dealings and transactions of the Bankrupt in relation to the proceeds of those cheques and the assets of the Bankrupt;

·        orders under the Fair Trading Act 1987 (NSW); and

·        a declaration that all moneys held by the Bankrupt representing the proceeds of the cheques are held on trust for the Plaintiffs.

3                     In the statement of claim, the Plaintiffs allege that the Bankrupt made false representations to officers or employees of the Plaintiffs concerning the cheques, altered or forged endorsements on the cheques without the knowledge or authority of the Plaintiffs and applied the cheques for the personal advantage of himself and his wife.  It is reasonable to conclude that those allegations, if established, would constitute criminal offences by the Bankrupt. 

4                     On 16 May 2003, the Trustee in Bankruptcy wrote to the Bankrupt enclosing a copy of the sequestration order and a copy of a notice from the Insolvency and Trustee Service of Australia concerning the Trustee’s consent.  The letter requested completion of a statement of affairs pursuant to the provisions of the Bankruptcy Act 1966 (Cth) (‘the Act’) and enclosed copies of a notice entitled ‘Warning Bulletin’ setting out the responsibilities of a bankrupt under the Act.  On 21 May 2003, the Bankrupt’s solicitors wrote to the Trustee saying that the Bankrupt would fully comply with his statutory duties but did not wish to abandon his right to privilege against self-incrimination in relation to records and documents that he would otherwise be required to produce to the Trustee pursuant to ss 77, 81, 129 and 130 of the Act.

5                     At that stage, there was on foot before the Court of Appeal of New South Wales an appeal by the Bankrupt from orders made by Palmer J in the Equity Division of the Supreme Court relating to certain documents that were the subject of discovery, subpoenas and notices to produce in the proceedings in the Equity Division.  The Bankrupt had declined to produce those documents in reliance upon his claim to privilege against self-incrimination in relation to the documents.  Palmer J made orders that would have required the production of the documents to the Bankrupt’s wife who was then directed to produce them to the Plaintiffs. 

6                     On 19 June 2003, the Trustee’s solicitors wrote to the Bankrupt’s solicitors saying, inter alia, that ss 77, 81, 129 and 130 of the Act evinced an intention on the part of the Parliament to abrogate the privilege against self-incrimination.  The letter therefore demanded that the Bankrupt deliver up to the Trustee the books, accounts and records requested in the letter of 16 May 2003.

7                     On 20 June 2003, the Court of Appeal made orders setting aside the relevant order made by Palmer J on 20 March 2003: see Griffin v Sogelease Australia Ltd [2003] NSWCA 158.  In their reasons for making that order, the members of the Court of Appeal confirmed that the privilege against self-incrimination precluded the order made by Palmer J that was set aside.  The Court of Appeal proceeded on the basis that certain documents that would otherwise have been required by the Bankrupt to be produced to the Trustee were protected by that privilege.

8                     In the present proceeding, it is common ground that a number of documents which have been marked for identification but not tendered, namely the documents marked 3.1A, 3.2A, 3.3A and 3.4A, attract the privilege against self-incrimination that applies and arises under the common law.   The Trustee however, contends that, notwithstanding such a privilege, the Bankrupt is obliged to produce the documents to the Trustee pursuant to s 77 of the Act.  Further, it is common ground that unless restrained, the Trustee will seek production of the documents pursuant to s 81(1B) of the Act.

9                     It is also common ground that, unless restrained, the Trustee proposes to examine the Bankrupt pursuant to s 81 of the Act in August 2003 and to ask questions along the following lines:

(a)        whether the bankrupt stole $10 million from his employer;

(b)        if so, what happened to the proceeds of that theft;

(c)        questions concerning the documents marked for identification;

(d)        questions concerning the transactions that are the subject of allegations in the proceedings in the Equity Division of the Supreme Court.

10                  The Trustee contends that while, the privilege against self-incrimination, as properly understood, exists at common law in relation to the documents, on the proper construction of ss 77, 81, 129 and 130, that privilege has been abrogated to the extent that compliance with those provisions would be inconsistent with the privilege. 

11                  The Bankrupt, on the other hand, first contends that none of those provisions has the effect of abrogating, to any extent, the common law privilege against self-incrimination.  Secondly, the Bankrupt contends that, in so far as the Trustee has refused or omitted to excuse production of the documents in question, that refusal or omission, or the decision to refuse or omit to do so, should be the subject of an order of the Court under s 178 prohibiting the trustee from requiring productions of the documents in question.  Finally, the Bankrupt contends that s 128 of the Evidence Act 1995 (Cth) applies in relation to any examination of the Bankrupt pursuant to s 81 of the Act; the Trustee contends to the contrary.

12                  The relevant provisions of the Act are as follows:

‘77       A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause:

            (a)        forthwith after becoming a bankrupt, give to the trustee:

(i)                 all books … that are in the possession of the bankrupt and relate to any of his or her examinable affairs …;

…

81        (1)        Where a person (in this section called the “relevant person”) becomes a bankrupt, the Court or a Registrar may at any time … 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 for examination in relation to the bankruptcy.

            …

            (1B)     A summons to a person under [section 81(1)] may require the person to produce at the examination books … 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. 

            …

(11)      A person being examined under [section 81] must answer all questions that the Court, the Registrar or the magistrate puts or allows to be put to him or her.

            (11AA)Subject to any contrary direction by the Court, the Registrar or the magistrate, the relevant person is not excused from answering a question merely because to do so might tend to incriminate the relevant person.

…

129      (1)        The trustee shall forthwith take possession of all the property of the bankrupt capable of manual delivery, including all deeds, books and documents of the bankrupt.

(2)        The Court may on the application of the trustee enforce possession accordingly.

…

130      (1)        The trustee of a bankrupt’s estate may apply …  for the issue of a warrant under [section 130(2)] if the trustee has reasonable grounds for suspecting that there is on or in any premises property (in this section called “relevant property”), being:

(a)               any of the property of the bankrupt;

(b)                property that may be connected with, or related to, the bankrupt’s examinable affairs; or

(c)                books … relevant to any of the bankrupt’s examinable affairs.’

13                  No person can be compelled to incriminate him or herself.  A person may refuse to answer any question or to produce any document or thing if to do so may tend to bring him or her into the peril and possibility of being convicted as a criminal.  However, the mere fact that a witness swears that he or she believes that an answer will incriminate him or her is not sufficient.  A court must see from the circumstances of the case and the nature of the evidence which the witness is called to give that there are reasonable grounds to apprehend danger to the witness where he or she is being compelled to answer: see Sorby v Commonwealth (1983) 152 CLR 281 at 288-289.

14                  In the present case it is accepted that the documents are such that there is a reasonable ground to apprehend danger to the Bankrupt if he is compelled to produce them in circumstances where they would be available as evidence in a prosecution in relation to the conduct alleged in the statement of claim in the Equity Division.  It is not common ground, however, for reasons which follow that mere production of the documents to the Trustee would involve the Bankrupt in such a danger.

15                  The Parliament can take away the privilege that is recognised by the common law and may enact that a party may be bound to accuse him or herself.  While the Parliament may so abrogate the privilege, however, there is a presumption that it does not intend to alter such an important principle of the common law except by express provision or necessary implication.  The intention to exclude the privilege may appear even though no express words of exclusion are enacted.  The character and purpose of a statute may indicate that it should not be construed so as to preserve the common law privilege.  Nevertheless, a statute will not be construed as excluding so valuable a privilege unless an intention to do so clearly appears: see Sorby (at 289).

16                  Several arguments have been advanced on behalf of the Bankrupt as to why s 77 should not be construed as abrogating the privilege.  Section 19 of the Act provides for the duties of the trustee of a bankrupt estate.  None of those duties concerns looking after the interests or rights of a bankrupt personally.  They are concerned with the administration of the estate in the interests of the unsecured creditors.

17                  It was suggested on behalf of the Bankrupt that, if the privilege were abrogated, creditors would be entitled or, at least, enabled to obtain access to incriminating documents.  That, however, simply does not follow.  The duties and obligations of the trustee are in relation to the administration of the estate.  There is no reason to think that a trustee, in possession of documents obtained pursuant to ss 77, 81, 129 or 130 of the Act, would be free to do what he or she likes with the documents.  He or she would be obliged to deal with the documents only for the purposes of the discharge of the duties that he or she has as trustee. That would extend to the retention of confidentiality in relation to the documents.

18                  The mere production of the documents to the Trustee would not, in my opinion, eliminate the privilege against self-incrimination that might exist in relation to those documents.   To the extent that s 77 abrogates the privilege, it does so only to the extent necessary to ensure compliance with s 77 to enable the Trustee to discharge his duties.  The Trustee would not be entitled to make any use of the documents other than a use calculated to assist in the discharge of his duties.  The Trustee would be acting improperly, for example, if he made documents produced to him under compulsion available to unsecured creditors in circumstances where he was told that the documents were the subject of a claim for privilege against self-incrimination.  More specifically, the Trustee would be acting quite improperly if he made available to the Plaintiffs, or to any prosecuting authority, documents that were produced to him under compulsion and in respect of which he was informed unequivocally there was a claim for privilege against self-incrimination.

19                  Next, it was argued that, as a matter of construction, s 77 does not abrogate the privilege because of the qualification in the preamble to s 77, namely, that the Bankrupt is required to give documents to the trustee unless prevented by ‘illness or other sufficient cause’. 

20                  I consider that ‘other sufficient cause’ in the context of ‘illness’ refers to physical or practical difficulties in complying with the requirements of s 77.  I do not consider that it embraces a privilege such as the privilege against self-incrimination.  There is nothing to prevent a bankrupt from producing documents that are the subject of the privilege against self-incrimination any more than there is an obligation imposed upon a person not to produce documents the subject of legal professional privilege.  It may well be that a bankrupt has a right not to produce documents in some circumstances but that right does not prevent the bankrupt from producing them: see Corporate Affairs Commission (NSW) v Youill (1991) 172 CLR 319 at 336. 

21                  While the Bankrupt would not be in breach of s 77 if prevented by illness or some other physical impediment from giving the documents to the Trustee, the fact that he has a right in relation to the documents that would excuse him from producing the documents in some circumstances to other persons does not prevent him from giving them to the Trustee.

22                  Next, it is said that, in the absence of some statutory regime to protect the consequences of production of the documents, s 77 should be construed as being subject to the application of the privilege.  Section 128 of the Evidence Act is one such regime.  Similar regimes exist in relation to other provisions such as those relating to royal commissions.  However, I do not consider that the mere absence of a protective regime is a reason for construing s 77 as being subject to a right that is not expressed.  Coupled with that argument is the contention that there is no sufficiently clear intention to be gleaned from the words of s 77. 

23                  However, s 77 is unequivocal.  There is no reason, in my view, to read into s 77 a qualification that it does not apply if compliance would in some way interfere with the privilege.  More accurately, in my view, it is fair to say that s 77 impinges on the privilege only to the extent that it requires that documents be given to the trustee.  That of itself, however, does not involve a bankrupt in bringing him or herself into the peril and possibility of being convicted as a criminal.  The mere production of documents to the trustee, having regard to the duties and obligations of a trustee to which I have referred, does not expose a bankrupt to any risk.  Having regard to the purpose of the appointment of a trustee in connection with the administration of a bankrupt’s estate, the existence of a right to refuse to comply with s 77 would certainly tend to stultify the operation of s 77 and could affect seriously the due course of the administration of the bankrupt’s estate. 

24                  Next, as a matter of the construction of s 77, attention was drawn to the provisions of s 81(11AA).  It was contended that the existence of that provision indicates the extent, and the only extent, to which the legislature intended to abrogate the privilege against self-incrimination.  The express abrogation in relation to answering questions indicates, so it was said, that there was not intended to be any abrogation of the privilege in relation to s 81(1B). 

25                  Again, however, that contention assumes that the production of documents to the trustee results in the complete loss of the privilege.  The mere showing of documents in confidence to a third party where there is some reason for doing so, putting aside the question of legal professional privilege, would not of itself, in my view, extinguish the privilege against self-incrimination in relation to such documents.   The mere production to a trustee in bankruptcy to enable the trustee to administer the bankrupt estate, being a production compelled by law, does not, in my view, result in a loss of the privilege.  In those circumstances, there is no reason to construe s 77 in a way that would excuse production simply because the privilege exists in relation to the documents in question.

26                  The same arguments were advanced on behalf of the Bankrupt in relation to ss 81(1B), 129 and 130.  For similar reasons to those that I have already expressed in relation to the construction of s 77, I do not consider that the existence of the privilege should be construed as cutting down the obligations imposed by those provisions.  That is to say, to the extent, if at all, that compliance with those provisions would abrogate the privilege, the provisions should be construed as abrogating the privilege to that extent.  However, as I have said, the extent of abrogation is not significant because of the duties and obligations that would arise on the part of the trustee not to make any use of the documents for a purpose other than the due administration of the estate.  That use would not extend to the production of the documents in public, nor to their disclosure to any person including any prosecuting authority.  I do not consider that the existence of the privilege precludes the duty on the part of the Bankrupt to give the documents or produce the documents, as the case may be, to the Trustee.

27                  That conclusion is the conclusion reached by Sheppard J in Re Bond; Ex parte Ramsay (1994) 54 FCR 394 at 400.  It may be that some of the arguments advanced in the hearing of the proceedings before me were not advanced before Sheppard J.  Be that as it may, for the reasons I have indicated, I would be disposed to reach the same conclusion as Sheppard J.  I am certainly not persuaded that the decision of Sheppard J is clearly wrong.  I am therefore comforted in the conclusion that I have reached by the knowledge that that conclusion is, in effect, compelled by the decision of Sheppard J in Re Bond. 

28                  Next, it is contended that s 81(11) would not compel the answering of a question that would tend to incriminate a person notwithstanding the provisions of s 81(11AA).  A distinction was drawn on behalf of the Bankrupt between a question that might tend to incriminate and a question that would tend to incriminate.  It was said that s 81(11AA) indicated an intention to abrogate the privilege against self-incrimination only in respect of questions that might tend to incriminate a person and not in respect of questions that would tend to incriminate a person. 

29                  It is difficult to see why such a distinction would be drawn by the legislature.  It was based upon observations made by O’Loughlin J in F v National Crime Authority (1998) 154 ALR 471 at 479 where his Honour said the use of the word ‘might’ in the relevant provision of the National Crime Authority Act 1984 (Cth) pointed to a lower threshold than would be the case if the word ‘would’ had been used.   The distinction, however, was drawn in the context of a submission, apparently made on behalf of the applicants, that the common law test concerning the privilege against self-incrimination had more of the ‘will or would tend to incriminate’ component rather than the ‘might tend to incriminate’ component.  It was suggested, therefore, that many of the leading authorities on the issue of self-incrimination must be read down.  His Honour did not accept that submission. 

30                  I consider that s 81(11AA) should be read as referring to the  common law privilege against self-incrimination and that s 81(11AA) has the effect that, whatever that common law privilege might be, it is not to be regarded as an excuse from answering a question assuming that is the only excuse relied upon.  

31                  Section 178 of the Act provides that if the bankrupt is affected by any act, omission, or decision of the Trustee he or she may apply to the Court and the Court may make such order in the matter as it thinks just and equitable.  The Bankrupt seeks the intervention of the Court in so far as the refusing or omitting to excuse compliance of s 77 is an act, omission, or decision of the Trustee.

32                  It is contended that the Trustee should have regard to the consequences of compliance with s 77, as against the benefit to the Bankrupt of non-compliance.  The Bankrupt says that the Trustee failed to engage in an appropriate balancing exercise.  That exercise would have involved weighing the consequences to the Bankrupt of the loss of the privilege against the benefit to the estate. 

33                  For the reasons that I have indicated, I do not consider that the mere giving of the documents to the Trustee pursuant to s 77 involves any significant detriment to the Bankrupt having regard to the duties and obligations that the Trustee is bound by in relation to the documents.  As I have said, it would be improper for the Trustee to make the documents available to the Plaintiffs to enable them to prosecute their proceeding in the Supreme Court.  It would also be improper for the Trustee to produce the documents to a prosecuting authority to enable the prosecution of the Bankrupt.  If the Trustee were compelled to produce the documents under subpoena, the Bankrupt would be entitled to be heard and to maintain his right consisting of the privilege against self-incrimination.

34                  I do not consider, as I have said, that the giving of the documents to the Trustee for production under either s 77 or s 81 would extinguish the Bankrupt’s privilege.  On the other hand, I would draw the inference that the documents in question are, or at least could be, of considerable importance to the Trustee in the administration of the estate.  Not having seen the documents and knowing nothing of their nature or content, I can form no view about that but, in the ordinary course, I would draw the inference that they would be of benefit to the administration of the estate.  I do not consider that there has been any act, omission or decision of the trustee that should be the subject of review by the Court in the way claimed by the Bankrupt. 

35                  The final questions concerns the operation of s 128 of the Evidence Act in relation to an examination under s 81.  In his amended application, the Bankrupt seeks a declaration that the applicant is entitled to the application and protection of s 128 of the Evidence Act in any examination under s 81 of the Act.  In the course of submissions, senior counsel for the Bankrupt indicated that the declaration he seeks is a declaration that s 128 of the Evidence Act is capable of application in any examination under s 81 of the Act. 

36                  Section 128(1) provides that s 128 applies if a witness objects to giving particular evidence on the ground that the evidence may tend to prove that the witness has committed an offence or is liable to a civil penalty.  Section 4 of the Evidence Act provides that the Evidence Act ‘applies in relation to all proceedings in a federal court’.

37                  The Bankrupt contends that an examination under s 81 of the Act is a proceeding in a federal court.  Section 31(1) of the Act, for example, provides that, in exercising jurisdiction under the Act, the Court must hear and determine certain matters in open Court, including examinations under the Act.

38                  This matter has been brought on with some considerable urgency.  The matter was commenced before the duty judge last Friday.  The duty judge stood it over before me as duty judge this week.  I have embarked upon the hearing of the matter as a claim for final relief.  The reason for the urgency was the fact that the Trustee has an appointment for examination of the Bankrupt before a Deputy Registrar of the Court in early August.  If the documents in question are to be available for the Trustee in order for him to carry out his examination, it is necessary for the documents to be given or produced, as the case may be, in the near future.

39                  However, no question has yet arisen concerning the operation of s 128 of the Evidence Act.  I have indicated (at [9] above) that the Trustee proposes at the examination of the Bankrupt to ask questions in respect of which s 128, if it were applicable, would have application.  There are questions of considerable difficulty involved in the short time that I have had to consider the possible application of s 128 of the Evidence Act to an examination under s 81 of the Act.  There may well be a real question as to whether or not an examination under s 81, which can be commenced by a summons issued by a Registrar and can be conducted by a Registrar, is a proceeding within the meaning of the Evidence Act.  

40                  That, of itself, could, although I have formed no firm view, raise a question under the Constitution in the sense that an issue may arise as to whether such an examination involves the exercise of federal jurisdiction and whether s 4 of the Evidence Act, by referring to a proceeding in a federal court, is concerned with a proceeding involving the exercise of federal jurisdiction.  As I have said, I express no view about these matters, other than to say that they are questions that could arise.  Because of those questions, I do not consider that it is appropriate that I reach a conclusion one way or the other on those matters at this stage. 

41                  In the circumstances, I consider it appropriate, if the parties so require, that I make declarations in relation to the matters about which I have reached a firm conclusion concerning the construction of ss 77, 81, 129 and 130 and the operation of s 178 of the Act.  If the parties wish to take the matter further, I am prepared to grant leave to appeal from those determinations prior to the proposed examination under s 81.  However, I propose, if the parties so desire, to defer the question of the application of s 128 of the Evidence Act to an examination of the s 81 for further argument in early August.    Alternatively, I could simply not decide that question and leave it to the parties to raise that matter at an appropriate time in the future.

Associate:

Dated:              30 July 2003