FEDERAL COURT OF AUSTRALIA
CK Nominees Australia Pty Ltd v Official Receiver (WA) [2006] FCA 967
BANKRUPTCY - whether notice invalidly issued – whether notice demonstrated that it was issued within power – whether notice was oppressive – whether the Official Receiver was entitled to require evidence on affidavit
Bankruptcy Act 1996 (Cth) ss 77C, 77C(1)(a), 77C(2)
Income Tax Assessment Act 1936 (Cth) ss 264, 267B(1), 267B(2)
Federal Court Rules O 15 r 2
Clarke v Deputy Commissioner of Taxation (1989) 89 ATC 4521
Re McKee; Ex parte Laroar Holdings v Ross (1996) 71 FCR 156
Re Jonson; Prentice v Jonson (unreported, Lockhart J, 1 September 1997)
Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301
Pyneboard Pty Ltd v Trade Practices Commission (1982) 39 ALR 565
Federal Commissioner of Taxation v The ANZ Banking Group Limited (1979) 143 CLR 499
Karas v Page (unreported, Tamberlin J, 10 November 1997)
CK Nominees Australia Pty Ltd (ACN 092 302 399) v The Official Receiver for the Bankruptcy District of the State of Western Australia and GEOFFREY FRANK TOTTERDELL in his capacity as Trustee of the bankrupt estate of Kevin Trevor Pollock
wad 250 OF 2005
SIOPIS J
31 JULY 2006
PERTH
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD 250 OF 2005 |
|
BETWEEN: |
CK NOMINEES AUSTRALIA PTY LTD (ACN 092 302 399) Applicant
|
|
AND: |
THE OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA First Respondent
GEOFFREY FRANK TOTTERDEL in his capacity as Trustee of the bankrupt estate of Kevin Trevor Pollock Second Respondent
|
|
JUDGE: |
SIOPIS J |
|
DATE OF ORDER: |
31 JULY 2006 |
|
WHERE MADE: |
PERTH |
THE COURT ORDERS THAT:
1 The following words be severed from the notices dated 12 August 2005 issued by the first respondent:
(a) all the words in para 2 after the words ‘this Notice’ in the second line of that paragraph; and
(b) all the words in para 3 after the words ‘or delivered’ in subpara 3(b) of the notice.
2 The applicant’s application filed on 8 September 2005 is otherwise dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD 250 OF 2005 |
|
BETWEEN: |
CK NOMINEES AUSTRALIA PTY LTD (ACN 092 302 399) Applicant
|
|
AND: |
THE OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA First Respondent
GEOFFREY FRANK TOTTERDELL in his capacity as Trustee of the bankrupt estate of Kevin Trevor Pollock Second Respondent
|
|
JUDGE: |
SIOPIS J |
|
DATE: |
31 JULY 2006 |
|
PLACE: |
PERTH |
REASONS FOR JUDGMENT
1 This is an application pursuant to which the applicant seeks an order that notices issued by the first respondent relying upon s 77C of the Bankruptcy Act 1996 (Cth) (‘the Act’) to produce documents and provide information, be set aside, and an order that the first respondent be enjoined from acting on the notices. The notices were issued by the first respondent on the application of the second respondent, the trustee in bankruptcy of Kevin Trevor Pollock (‘Mr Pollock’).
2 This application is brought by way of a representative action because there are several other parties who have also received notices in the same terms or substantially similar terms to that received by the applicant.
3 The applicant relies upon the affidavit of Carina Lee‑Anne Healey sworn on 2 September 2005. Ms Healey deposes that she is a director of the applicant and that she is the daughter of the bankrupt, and does not have any legal training. Further, she says that she does not keep and has never kept, a record of correspondence or other documents sent by her to other persons. Nor does she keep in the ordinary course copies of correspondence or other documents that she sends to other persons.
4 The notice which is sought to be impugned provides as follows:
‘Australian Government_____________
Insolvency and Trustee Service Australia Western Australia Branch
BANKRUPTCY ACT 1966
NOTICE TO PRODUCE BOOKS AND INFORMATION UNDER OATH
PURSUANT TO SECTION 77C
BANKRUPTCY DISTRICT OF THE NO: WA 1527 OF 2003
STATE OF WESTERN AUSTRALIA RE: KEVIN TREVOR POLLOCK
To: The Directors
CK Nominees Australia Pty Ltd
C/O 62-66 Mitchell Street
BENDIGO VIC 3550
WHEREAS: GEOFFREY FRANK TOTTERDELL, Registered Trustee in Bankruptcy, as trustee of the property of KEVIN TREVOR POLLOCK, a bankrupt, is presently performing the function of investigating pursuant to Section 19AA of the Bankruptcy Act 1966, so much of the bankrupt’s conduct and examinable affairs and the books, accounts and records kept by the bankrupt, as is relevant to the bankruptcy.
I, ANDREW ALAN HENDERSON, of 12th Floor Durack Centre, 263 Adelaide Terrace, Perth, Official Receiver for the Bankruptcy District of the State of Western Australia, in accordance with section 77C of the Bankruptcy Act 1966, require you to provide written information, and to produce and deliver to me the documents listed below, which relate to the examinable affairs of Kevin Trevor Pollock, and which are dated, or relate to matters arising, between 1 January 2000 and the date of this Notice.
Documents Required
1. The documents listed in Schedule 1 to this Notice which are in your possession, custody, or under your control, either:
a. in your personal capacity, and/or
b. as an officer of a Limited or Proprietary Limited Company, and/or
c. as a partner in a partnership, and/or
d. in any other capacity on behalf of any other natural person or legal entity.
2. A list of those documents within the categories specified in Schedule 1 to this Notice which you deliver to me pursuant to this Notice, together with an affidavit sworn or affirmed by you verifying that the said list is true and complete and contains all of the documents within the categories specified in Schedule 1 to this Notice which are within your possession, custody or under your control.
3. If you have previously had, but no longer have, in your possession, custody or control other documents within the categories specified in Schedule 1 to this Notice, you must also provide:
a. a detailed list of such documents; and
b. the full name and address of the natural person or legal entity to whom you sent or delivered, or caused to be sent or delivered, those documents, and the date upon which they were sent or delivered, or caused to be sent or delivered,
which list is to be verified in the same affidavit referred to in point 2 above as being true and complete and containing all of the documents within the categories specified in Schedule 1 which you had, but no longer have, within your possession, custody or control.
4. Originals of books and documents within the categories specified in Schedule 1 to this Notice are required to be produced where the original is in your possession, custody or control. Where you do not have the original then any copy of the relevant book or document in your possession, custody or control should be produced.
I require you to deliver the documents listed within 28 days from the date of service of this Notice to the office of the Insolvency and Trustee Service Australia at Level 12, 263 Adelaide Terrace, Perth. The contact person for this matter is Mr Jeremy White who can be contacted on telephone number (08) 9268 1208.
AND FURTHER TAKE NOTICE:
1. Failure by you, without reasonable excuse to comply with this notice may render you liable to imprisonment for 12 months pursuant to section 267B of the Bankruptcy Act 1966. Failure by a body corporate, without reasonable excuse, to comply with this notice may incur a maximum pecuniary penalty of $33,000.
2. The “examinable affairs” of the Bankrupt are defined by the Bankruptcy Act 1966 to mean:
(a) the person’s dealings, transactions, property and affairs; and
(b) the financial affairs of an associated entity of the person, in so far as they are, or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs;
3. Section 81G of the Bankruptcy Act 1966, provides that failure to comply with this notice, will render the information/documents/books, inadmissible in certain proceedings to recover income contributions or property disposed of by the bankrupt. This Section does not apply if it can be proved that the information or books are not in the possession of the person served with this notice, or the information or books could not be readily obtained by that person.
Extracts from S5, S77C and S267B of the Bankruptcy Act 1966 are attached.
DATED this 12th day of August 2005
OFFICIAL RECEIVER
[Imprinted with stamp of Official Receiver, Bankruptcy District, The State of Western Australia]
…
SCHEDULE 1 TO NOTICE DATED 12 AUGUST 2005
RECORDS REQUIRED TO BE PRODUCED
I. All original and/or copy documents signed by Kevin Trevor Pollock, whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity.
II. All original and/or copy documents received from Kevin Trevor Pollock, whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity.
III. All original and/or copy documents sent to Kevin Trevor Pollock, whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity.
IV. All records of meetings attended by Kevin Trevor Pollock.
V. All records of conversations with Kevin Trevor Pollock.
VI. All original and/or copy documents including, but not limited to, Agency Agreements and Powers of Attorney which purport to confer the ability or right for Kevin Trevor Pollock to act for or on behalf of another natural person or legal entity.
VII. All original and/or copy documents including, but not limited to, Agency Agreements and Powers of Attorney, which purport to confer the ability or right for another natural person or legal entity to act for or on behalf of Kevin Trevor Pollock.
VIII. All original and/or copy documents which evidence or purport to evidence that Kevin Trevor Pollock holds property (as defined in Section 5 of the Bankruptcy Act 1966) in trust for another person or legal entity.
IX. All original and/or copy documents which evidence or purport to evidence that another person or legal entity holds property (as defined in Section 5 of the Bankruptcy Act 1966) in trust for Kevin Trevor Pollock.
X. All original and/or copy documents which evidence or purport to evidence that any of the natural persons or legal entities listed in Schedule 2 to this Notice are controlled by Kevin Trevor Pollock or any person acting on his behalf or for his interest.
XI. All original and/or copy documents which evidence or purport to evidence any involvement of Kevin Trevor Pollock in making decisions for and on behalf of any of the natural persons or legal entities listed in Schedule 2 to this Notice.
XII. All original and/or copy documents which evidence or purport to evidence the provision of personal services by or on behalf of Kevin Trevor Pollock to or on behalf of any of the natural persons or legal entities listed in Schedule 2 to this Notice, and/or the provision of remuneration in respect of those services.
XIII. All original and/or copy documents which evidence or purport to evidence any payment by or on behalf of any of the natural persons or legal entities listed in Schedule 2 to this Notice to Kevin Trevor Pollock or any person or entity acting on his behalf or for his benefit.
XIV. All original and/or copy documents relating to the transfer(s) of property (as defined in Section 5 of the Bankruptcy Act 1966) to or from Kevin Trevor Pollock.
XV. All original and/or copy documents relating to the transfer(s) of property (as defined in Section 5 of the Bankruptcy Act 1966) to or from any of the natural persons or legal entities listed in Schedule 2 to this Notice as a result of dealings with Kevin Trevor Pollock whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity.
XVI. All other books (as defined in Section 5 of the Bankruptcy Act 1966) which relate to the Examinable Affairs (as defined in Section 5 of the Bankruptcy Act 1966) of Kevin Trevor Pollock.’
5 Section 77C of the Act provides as follows:
‘(1) The Official Receiver, by written notice given to any person, whether a bankrupt or not, including any person employed by or in connection with a Department, or an authority, of the Commonwealth, of a State or of a Territory, may require the person:
a. to give to the Official Receiver such information as the Official Receiver requires for the purposes of the performance of the functions of the Official Receiver or a trustee under this Act; and
b. to attend before the Official Receiver, or before an officer authorised in writing by the Official Receiver to exercise powers under this paragraph, and:
(i) give evidence; and
(ii) produce all books in the possession of the person;
relating to any matters connected with the performance of the functions of the Official Receiver or a trustee under this Act.
(2) The Official Receiver or authorised officer may require the information or evidence to be given on oath, and either orally or in writing, and for that purpose may administer an oath.’
6 The applicant seeks to impugn the notice on two main grounds, namely, that the notice does not disclose that the first respondent is authorised to request production of the documents sought, and secondly, that the notice is invalid because compliance therewith is oppressive.
Does the notice disclose that the first respondent is authorised by s 77C of the Bankruptcy Act to require production of the documents sought?
7 The applicant submitted that the notice was invalid because it did not demonstrate to the recipient that any document that the recipient was required to produce was one whose production the first respondent was entitled to require. The applicant also contended that the notice did not show that the documents required related to a matter connected with the performance by the trustee of his or her functions under the Act.
8 Senior counsel for the applicant submitted that the operative paragraph of the notice required the recipient to provide information ‘and to produce and deliver to [the first respondent] the documents listed below’. Senior counsel submitted that there was nothing in paras 1‑4 under the heading ‘Documents Required’ and in Sch 1 to the notice, to suggest to the recipient of the notice that the documents sought by the first respondent were limited to those whose production was authorised by the section.
9 Senior counsel for the applicant submitted that the notice was not saved by the words ‘which relate to the examinable affairs of Kevin Trevor Pollock’ which appear immediately after the words ‘…deliver to me the documents listed below…’, because the ordinary meaning of the notice is that the recipient is required to produce all of ‘the documents listed below’. Senior counsel submitted that it was unnatural to construe the notice as if it required production of ‘only those of the documents listed below which relate to the examinable affairs of Kevin Trevor Pollock…’ (emphasis added). The applicant relied upon the case of Clarke v Deputy Commissioner of Taxation (1989) 89 ATC 4521 (‘Clarke’) in support of this contention.
10 Senior counsel for the applicant also submitted that the Court did not have power to rewrite a notice issued under s 77C of the Act. Therefore, it was submitted it was not open to the Court to amend the notice by adding words which would clarify the scope of the documents sought and thereby validate the notice.
11 The principles to apply in considering whether notices under s 77C of the Act were valid were considered by Spender J in the case of Re McKee; Ex parte Laroar Holdings v Ross (1996) 71 FCR 156. At 165, Spender J observed:
‘To be a valid notice, the evidence sought, or the records sought, must be connected with the performance of the functions of a trustee under the Act…
What is comprehended by the term “function” is to be derived from the provisions of the Act, from the general common law duties and obligations of a trustee, and from the statutory duties imposed on a trustee under the Act.
The Full Court in Adsett v Berlouis (1992) 37 FCR 201 at 208 referred to:
“the trustee’s obligation to administer the estate in such a manner as to maximise the return from estate assets, and thereby to maximise satisfaction of the creditors’ claims and any possible surplus for the bankrupt.”
A trustee has the duties set out in ss 19 and 19AA of the Act, which relevantly include the duty to ascertain the assets and liabilities of the bankrupt (s 19(1) of the Act); and to investigate the bankrupt’s examinable affairs, and the books, accounts and records kept by the bankrupt, as is relevant to the bankruptcy (s 19AA(1)(c) of the Act). “Examinable affairs”, defined in s 5(1) of the Act has a wide meaning, and includes dealings, transactions, property, and affairs.
The power conferred by s 77C of the Act in the context of Pt V of the Act, like the power in s 81 of the Act for public examination, is to be exercised in the interests of creditors; and the procedure is designed to establish what assets the bankrupt had, what has happened to those assets, and whether action should be begun or continued to recover them. See Karounos v Official Trustee (1988) 19 FCR 330 at 335.’
12 In the case of Re Jonson; Prentice v Jonson (unreported, 1 September 1997), Lockhart J made the following observations in respect of the principles to apply in assessing whether to set aside s 77C notices:
‘The relevant principles are clear.
· The power given by s 77C of the Act is one of far reaching consequences and must be approached responsibly by applicants for summonses and controlled carefully by the Court.
· Because the power is exercised in the interests of creditors the Court should not take an unduly technical or restrictive approach to the use of the power. The power is basically designed to establish what assets the bankrupt has, what has happened to them and whether action should be begun or continued to recover them.’
13 Further, after referring to the approach taken by the Full Court in Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301, a case which dealt with summonses issued under s 596B of the Corporations Law, Lockhart J observed :
‘The Court said that s 596B should be given a broad and generous construction having regard to its statutory purpose provided that the result does not operate oppressively to the private interests of the person examined.’
14 Lockhart J went on to say:
‘In my view these observations of the Full Court are substantially applicable to questions which arise under s 77C.’
15 In my view, the words in the notice ‘which relate to the examinable affairs of Kevin Trevor Pollock’ operate to limit the scope of the documents which are referred to in Sch 1 of the notice. On a fair reading of the notice and Sch 1, and not applying an ‘unduly technical or restrictive approach’, it is apparent that the intention of the draftsperson was to apply a general limitation to the scope of the classes of documents set out in Sch 1. There were to be two limbs to the general limitation. Firstly, the documents to be produced were to relate to examinable affairs of the bankrupt, and secondly, the documents were to be ‘dated, or relate to matters between 1 January 2000 and the date of this notice’.
16 Further in my view, the notice considered in Clarke, which is the authority relied upon by the applicant, is distinguishable from the notice in this case.
17 In that case the notice which was issued by a delegate of the Deputy Commissioner of Taxation under s 264 of the Income Tax Assessment Act 1936 (Cth) (‘the Income Tax Assessment Act’) relevantly stated:
‘…I do further require you to produce at that said place and time all Trust Account Cash Books for Varro Clarke and Co for the period 1 January 1980 to 30 June 1987 in your custody or under your control until the duly authorised officers advise that further production is no longer required.
This information is sought in relation to the income or assessment of A.J. and S.A.J. Wilson of 115 Herston Road, Kelvin Grove and their related trust, company and partnership entities for the period 1 January 1980 to 30 June 1987.’
18 In that case, the Court held that the notice was invalid.
19 At 4526, Spender J said:
‘In my view, Mr Jorgensen [a representative of the Deputy Commissioner of Taxation] has consistently claimed to be entitled to require the production of all of the cash books and to inspect all of them. The notice was intended to give effect to that purpose, and on its face required the production of all of the cash books, without limitation. The final sentence did not limit the extent of the production required, but purported to give the justification for the width of the request.’
20 The Clarke case is distinguishable for two reasons. Firstly, the words in the notice issued to the applicant are differently juxtaposed, and in different terms, to those in the notice under consideration in Clarke. The words in the applicant’s notice, by reason of their juxtaposition and their terms, on a fair reading, are capable of qualifying the scope of the documents sought. The same cannot be said of the words in the Clarke notice. Spender J was correct in my respectful view in characterising those words as being no more than an attempt to justify the issue of the notice.
21 Secondly, in the Clarke case, there was extraneous evidence in the form of previous correspondence between the representatives of the Deputy Commissioner of Taxation and the recipient of the notice which demonstrated that the true purpose of the issue of the notice was in fact to obtain all the trust account cash books for Varro Clarke and Co for the period 1 January 1982 to 30 June 1987, and not just those parts of the trust account cash books which related to the income and assessment of AJ and SAJ Wilson. There was no similar evidence in this case.
22 The trustee is entitled to investigate the examinable affairs of the bankrupt. The scope of the notices is limited to requiring the production of documents which relate to that purpose. It follows that I do not accept the applicant’s contention that the issue of the notice was invalid because it did not show to the recipient that the documents of which production was sought were documents in respect of which the respondent was entitled to seek production, or because it did not relate to a matter connected with the performance of the trustee’s functions.
Oppression
23 The applicant also submitted that various parts of the notice were in any event invalid on the grounds of oppression.
Paragraphs I‑V and XVI
24 Senior counsel for the applicant submitted that the paras I‑V of Sch 1 of the notice are in such a wide form that the only reasonable inference is that the documents sought do not have any relation to Mr Pollock’s examinable affairs and that, therefore, in requiring the recipients of the notice to produce those documents, the first respondent acted beyond power.
25 Senior counsel for the applicant submitted, alternatively, that if those paragraphs of the notice were to be construed as requiring only the production of those documents described in paras I‑V which related to the examinable affairs of Mr Pollock, the notice was still to that extent invalid. This was because the notice would require the recipient to determine what was meant by the ‘examinable affairs’ of the bankrupt. That task, said senior counsel, was made more difficult by the imprecision of the word ‘affairs’ in the definition of ‘examinable affairs’ in the notice; and by the fact that the definition also refers to the financial affairs of an ‘associated entity’, without defining that term. It was submitted that the recipient would, therefore, have to embark upon a complicated factual and legal inquiry to identify those documents which needed to be produced. Senior counsel submitted that the same objection applied to the documents sought in para XVI of the notice. The applicant submitted that the notice was to that extent beyond power because it did not describe the documents required with reasonable clarity; and that the burden imposed on the recipient of the notices was so burdensome as to give rise to the conclusion that the first respondent acted in excess of power in imposing the requirements.
26 I do not accept that in requiring the production of the categories of documents mentioned in paras I‑V of Sch 1, the first respondent acted beyond power. I have already found that the description of the documents called for in those paragraphs of Sch 1 of the notice has to be read as being qualified by reference to the examinable affairs of the bankrupt and the prescribed time period.
27 As to the applicant’s alternative argument, it is the case that the recipient of the notice will be required to make a decision whether or not a document relates to the ‘examinable affairs’ of the bankrupt. It is also the case that there is no definition in the notice of an ‘associated entity’ of the bankrupt and that the word ‘affairs’ is a word of potentially wide ambit. However, these circumstances do not, in my view, render the definition of ‘examinable affairs’ in the notice, so confusing or devoid of meaning, as to render the notice invalid on the grounds that the recipient does not know with reasonable clarity the nature of the documents that must be produced. In determining this issue, the Court takes a broad common sense approach to the language used and not a hypercritical approach (Pyneboard Pty Ltd v Trade Practices Commission (1982) 39 ALR 565 at 570 (‘Pyneboard’)). On the application of that test, in my view, the meaning to be given to the word ‘affairs’ in this context is informed by the words which precede it in the definition, namely, ‘dealings’, ‘transactions’ and ‘property’. Further, the words ‘associated entity’ of the bankrupt are capable of bearing a common sense self evident meaning. It follows that, in my view, the requirement that the recipients provide certain documents that relate to the ‘examinable affairs’ of Mr Pollock does not fail on the ground that a recipient would not know with reasonable clarity which documents he or she would need to produce.
28 Further, it was accepted in Federal Commissioner of Taxation v The ANZ Banking Group Limited (1979) 143 CLR 499 (‘ANZ Banking’) that difficulty in the task of identifying the documents which are to be provided is not a sufficient basis upon which to conclude that the notice is invalid. In ANZ Banking, referring to a notice issued under s 264 of the Income Tax Assessment Act, Mason J said at 537:
‘What par. (1)(b) has in mind is that a notice may be given requiring the recipient to produce “all books, documents and other papers” in his custody or control “relating thereto”, that is, to the income or assessment of the person whose name is stated in the notice. It is then for the recipient to decide for himself, difficult though the task may be, which of the documents answer the description. If his decision is wrong he exposes himself to prosecution and penalty.
The existence of this hazard is not a sufficient basis for the conclusion that the section requires the Commissioner to give a notice in such terms as would enable the recipient on reading it and on examining the documents in his custody or control to determine whether they fall within the ambit of the Commissioner’s powers. To so hold would be to impose an impossible burden on the Commissioner. In many, if not most, cases he will be unaware of the contents of the documents of which he seeks production. And there will be cases in which a recipient who is not the taxpayer will lack the degree of knowledge of the taxpayer’s affairs and of the Commissioner’s approach to his assessment that is necessary to determine whether the documents relate to the taxpayer’s income or assessment. Not only would the suggested requirement frustrate the object of conferring the power, it would be inconsistent with the section as I have explained it.
It is not in dispute that a notice given under par. (1)(b) may validly require the production of something less than all the books, documents and other papers in the custody or control of the recipient relating to the income or assessment of the named person. It may, for example, specify particular documents. Such a notice, if correctly drawn, will make it clear that the requirement extends to the particular documents because they are included in the class of documents of which the Commissioner is authorized to require production.’
29 Accordingly, even if a recipient of the notice was to be confronted with some difficulty in determining whether a specific document related to the examinable affairs of Mr Pollock (and there was no such evidence), this would not result in the invalidity of the notice on the basis of oppression.
Paragraphs X, XI, XII and XIII
30 Senior counsel for the applicant submitted that the notices purport to require the production of documents covering a period of more than five and a half years concerning Mr Pollock’s dealings with 54 separate entities which are listed in Sch 2 of the notice. This, said the applicant, led to the conclusion that the first respondent acted beyond power because in imposing those requirements he could only have imposed those requirements without regard to the burden imposed upon the recipient to comply with the notice.
31 Senior counsel for the applicant relied upon the following observations of the Full Court in Pyneboard at 572‑573:
‘The mere fact that compliance with a requirement to furnish information or to produce documents would be burdensome will not invalidate that requirement in a s 155 notice: see, Melbourne Home of Ford v Trade Practices Commission (No 3), supra; Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129 at 136; 15 ALR 561 at 567. Nor will objective harshness, unreasonableness or oppressiveness of a requirement in such a notice constitute an independent ground of invalidity. If invalidity by reference to these qualities is to be established, it must be by reference to the implied general limitation upon the power conferred by s 155(1) of the Act to which reference has already been made, namely, that it is a condition of a valid exercise of the power that it be used in good faith for the purpose for which it was conferred and with regard to the effect that the exercise of the power will have upon those affected thereby. It is only if the harshness, oppressiveness or unreasonableness of a requirement in a s 155 notice is, in all the circumstances, such as to warrant the conclusion that the requirement could not have been imposed in good faith or could only have been imposed to achieve a collateral purpose or without regard to the burden which it would impose upon the recipient, that harshness, oppressiveness or unreasonable-ness will result in invalidity.’
32 There was no evidence of the extent of the burden imposed by the scope of the requirements in the notice on any of the recipients. The applicant submitted that evidence was not necessary. Senior counsel submitted that the fact that the notice called for documents relating to the bankrupt’s dealings with 54 entities since 30 January 2000 was sufficient in itself to found the inference that the first respondent could only have imposed those requirements by acting in excess of power without regard to the burden those requirements imposed on the recipients. In my view, the imposition by the first respondent of each of the two requirements is capable of explanation on the basis of the first respondent acting within power and for a proper purpose.
33 As to the requirement to provide documents in respect of the 54 entities named in Sch 2 of the notice, the imposition of that requirement is explicable as a reflection of the extent and complexity of the bankrupt’s examinable affairs. It is a function of the trustee to investigate the bankrupt’s examinable affairs. The number and extent of the documents that may be required to be produced will, therefore, depend on the scope of the bankrupt’s examinable affairs. The examinable affairs of the bankrupt includes the bankrupt’s dealings and the financial affairs of associated entities of the bankrupt. It is open, therefore, to conclude that the entities referred to in Sch 2 of the notice are entities associated with the bankrupt, or entities or persons with whom or with which, the bankrupt, or an associated entity of the bankrupt, has had dealings; and that, in exercising his powers to require the production of documents relating to those entities, the first respondent acted for the purpose of facilitating the performance of the trustee’s statutory investigatory function.
34 As to the requirement to produce documents going back five and half years, that requirement is explicable by the scope of the trustee’s investigation being directed towards a limitation period of six years. In Karas v Page (unreported, 10 November 1997), Tamberlin J rejected an argument that the fact that the notice called upon the recipient of the notice to produce documents that covered a five year period led to an inference that the notice had been issued unlawfully.
35 I do not, therefore, accept the applicant’s contention that the terms of the notice itself leads to the inference that the first respondent could only have imposed the impugned requirements if he acted in excess of power. In the absence of evidence of a significantly onerous burden that would be imposed upon the recipients of the notices by the requirements, there is, in my view, an insufficient basis upon which to conclude that the first respondent could only have imposed the impugned requirements in excess of the implied limitation as to oppression, on the first respondent’s power to issue the notices. As already mentioned, difficulty in complying with a notice is not a sufficient basis upon which to conclude that a notice is invalidly issued.
Paragraphs VI, VII, VIII, XI, X, XI, XII and XIII
36 As to the documents in para VI and para VII of Sch 1 of the notice, senior counsel for the applicant submitted that the recipient of the notice was required to determine what is meant by the phrase ‘purport to confer’. Senior counsel went on to submit that whilst the phrase might ordinarily be thought to have an ascertainable meaning, this must be assessed in light of the fact that the notice also contained in paras VIII, IX, X, XI, XII and XIII of Sch 1 a reference to documents which ‘purport to evidence’ certain matters. Senior counsel said that the issue which arises for the recipient is whether the term ‘purport to confer’ should be interpreted similarly to ‘purport to evidence’ and, if not, what meaning should be assumed to have been intended by each phrase. Senior counsel submitted that the word ‘purport’ was a lawyer’s word and was not part of the vocabulary of the layperson. Senior counsel argued that paras VI‑XIII of Sch 1 appear to require a recipient not only to form an opinion as to whether the document relates to an identified matter, but whether the document is or may be a sham. The requirements could only have been imposed without regard to the burden it would impose.
37 I do not accept these submissions. The fact that the expressions ‘purport to confer’ and ‘purport to evidence’ are used, in my view, renders the task of the recipient of the notice easier and not more burdensome, in that the recipient is relieved from having to make any assessment as to whether the document is a sham, or has been effective insofar as it has purported to bring about a particular legal result. Further, difficulty in determining whether a document is to be produced is not in itself sufficient to render a notice invalid.
Paragraph XV
38 Senior counsel for the applicant submitted further that para XV of Sch 1 of the notice required the recipient to determine whether a transfer of property from a third party had occurred ‘as a result of dealings with Mr Pollock whether in his own right, or on behalf, of some other person’. The applicant submitted that that was an obligation with which it is almost impossible for a recipient to comply, given that it may require determination to be made as to whether some other person entered into a transaction as a consequence of communicating with Mr Pollock.
39 I accept that it is possible that there may be in existence some documents which fall into this category and which do not contain, on their face, a reference to Mr Pollock. If there are such documents, it may be, but it is not inevitable, that the recipient of the notice would be required to make inquiries as to Mr Pollock’s involvement with any transfer of property. However, there was no evidence from any of the recipients of the notices, that there were, in fact, any such documents in existence. Nor was there evidence as to the number of any such documents that may be expected to fall within this category, nor of the nature and extent of the inquiries which may potentially have to be made in order to determine whether any such document answered the description of a document falling into this category. In the absence of evidence of this kind, I am unable to conclude that this requirement imposed a burdensome task on the recipients of the notices. It follows there is no basis on which any conclusion could be drawn that in imposing the requirement to produce the documents in para XV, the first respondent could only have imposed that requirement if he exceeded his powers, because of the extent of the burden imposed on the recipients of the notice.
The requirement to give affidavit evidence
40 The applicant also submits that parts of para 2 and para 3 under the heading ‘Documents Required’ in the notice are invalid.
41 Paragraph 2 of the notice requires the recipient to provide a list of all the documents which the recipient delivers to the first respondent in response to the notice, with an affidavit verifying that the ‘list is true and complete and contains all of the documents within the categories specified in Schedule 1 to the Notice’ which are within the recipient’s possession, custody or control.
42 Senior counsel for the applicant submitted that the obligation to provide an affidavit imposed by para 2 was unreasonable and oppressive because the recipient was required to depose in absolute terms, and not in terms limited to the best of the recipient’s knowledge, information and belief.
43 Counsel for the first respondent said the affidavit which was called for by the notice permitted the recipient to respond by deposing that the information that was provided was to the best of the recipient’s information and belief.
44 The first respondent has power under s 77C(1)(a) of the Act to require the recipient of the notice to provide the first respondent with such information as the first respondent requires for the performance of the first respondent’s or the trustee’s functions under the Act. Further, by s 77C(2) of the Act the first respondent may require that the information be provided on oath. Senior counsel for the applicant did not challenge the entitlement of the first respondent to require a recipient to produce a list of the documents that he or she was providing in response to the notice. It was the requirement to depose on affidavit that the list was true and complete and contained all the documents specified in Sch 1 that were in the recipient’s possession, custody or control, that was in issue. This requirement resembles the requirement imposed on the deponent to an affidavit of discovery to depose that the list of discovered documents comprises in effect all of the discoverable documents in the party’s possession custody or power. There are, however, two important differences between the position of the deponent to a discovery affidavit and the recipients of these notices. Firstly, s 267B(1) of the Act provides that it is an offence if the recipient fails to comply with the terms of the notice given under s 77C(1)(a) of the Act, whereas there is no similar statutory penal sanction in respect of the obligation to give discovery. Secondly, the deponent to a discovery affidavit is only required to depose to the best of the deponent’s information and belief (see Form 22, O 15 r 2, Federal Court Rules). In my view, it is not possible to read the requirement in para 2 of the notice as being a requirement to depose only to the best of the deponent’s information and belief. The notice does not contain those words of limitation which are to be found in the Rules of Court.
45 In my view, the imposition by the first respondent of the requirement to make the affidavit in the terms referred to, is invalid. Section 267B(1) of the Act imposes an obligation on the recipient of the notice to comply with its terms. Section 267B(2) of the Act recognises that the recipient will have a defence to any failure to comply with the notice which is based upon a reasonable excuse. The standard with which the recipient must comply is, therefore, to be found in the Act itself. By imposing on the recipient the obligation to depose to an absolute standard, the first respondent has imposed as a requirement a standard of compliance which exceeds the standard of compliance recognised by the Act itself. In so doing, the first respondent has, in my view, acted beyond power.
46 The applicant also impugned para 3 of the notice. In summary, para 3 of the notice required the recipient to provide a list of documents described in Sch 1 of the notice which the recipient once had, but no longer has, in his or her possession, custody or control, and the persons to whom those documents had been sent and when. There is also a requirement that the recipient verify by affidavit that the list is true and contains all of the documents falling within the categories in Sch 1 of the notice which the recipient had, but no longer has in his or her possession, custody or power.
47 Senior counsel for the applicant submitted that both the requirement to provide the list referred to therein, and the requirement that the list be verified by affidavit were invalid on the grounds that the imposition of these requirements were oppressive and unreasonable. Senior counsel submitted that, taking into account the length of time, and the number of entities in respect of which the documents are requested, the requirement to provide the list was oppressive. Further, said senior counsel, the requirement to provide the affidavit was subject to the same defect as applied to the requirement in relation to para 2 of the notice.
48 In my view, it is within the power of the first respondent under s 77C(1)(a) of the Act to seek information from the recipients as to the whereabouts of documents relating to the examinable affairs of the bankrupt which may once have been in the possession of the recipient of the notice. It is not, in my view, self evident that the requirement to provide this information would be so oppressive to the recipients of the notices as to lead to the conclusion that the first respondent could only have imposed the requirement without regard to the oppressive burden that it would impose on the recipient of the notice. Whether the requirement would impose such a burden would depend, amongst other things, on the number of relevant documents that would have been disposed of by a recipient during the time period in question and on the recipient’s record keeping system. Among the recipients are a number of corporations and professional firms. There is no evidence from, or in respect of, any of the recipients as to the number of documents that may potentially need to be listed, and the burden that would be imposed in complying with the requirement to disclose when and to whom relevant documents were sent. The only evidence which could be considered as being directed to this issue, is that of Ms Healey, who deposes that she does not keep a record of the documents which she has sent or copies of the documents that she has sent. I note that the notice is addressed to ‘The directors’ of the applicant and Ms Healey’s evidence does not address the systems used by the applicant for recording its correspondence and the despatch of documents, nor the number of potential documents that would need to be listed. In the absence of evidence of oppression, there is no foundation upon which to base a conclusion that the first respondent could only have imposed the requirement without regard to the oppressive burden imposed on the recipient. Further, I do not regard the imposition of the requirement to have been unreasonable. The obtaining of books and records which relate to the examinable affairs of the bankrupt is at the heart of the trustee’s investigatory function. It follows that I do not regard the imposition of the requirement to compile the list referred to in para 3 of the notice to have been invalidly imposed by the first respondent.
49 However, for the reasons I have given in relation to the requirement to provide the affidavit referred to in para 2 of the notice, I am of the view that the imposition on the recipient to provide the affidavit referred to in para 3 of the notice, is also beyond power.
Severance
50 The Court may sever parts of the notice that are invalid from parts of the notice that are valid (Re McKee at 170). I would, accordingly, sever from the notice all the words in para 2 after the words ‘this Notice’ in the second line of that paragraph; and all the words in para 3 after the words ‘or delivered’ in subpara 3(b) of the notice.
51 Subject to the severance of those words from the notice, I find that the notice is not invalid. I will hear the parties as to costs.
|
I certify that the preceding fifty‑one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. |
Associate:
Dated: 31 July 2006
|
Counsel for the Applicant: |
Mr M H Zilko SC |
|
Solicitor for the Applicant: |
Christensen Vaughan |
|
Counsel for the First Respondent: |
Ms L B Price |
|
Solicitor for the First Respondent: |
Carles Solicitors |
|
Counsel for the Second Respondent: |
Mr L M Wilk |
|
Solicitor for the Second Respondent: |
Blake Dawson Waldron |
|
Date of Hearing: |
3 November 2005 |
|
Date of Judgment: |
31 July 2006 |
