FEDERAL COURT OF AUSTRALIA

Fewin Pty Ltd v Burke [2016] FCA 503

ORDERS

THE COURT ORDERS THAT:

1.    The second respondent’s application for summary judgment filed on 18 November 2015 be dismissed.

2.    The second respondent pay the applicants’ costs of the second respondent’s application for summary judgment filed on 18 November 2015.

3.    The applicants’ application for joinder of the Inspector-General in Bankruptcy filed on 26 November 2015 be dismissed.

4.    The applicants pay the Inspector-General in Bankruptcy’s costs of their application to join her filed on 26 November 2015.

5.    The subpoena to produce documents issued on 18 December 2015 at the request of the applicants to the Inspector-General in Bankruptcy in bankruptcy be set aside.

6.    The applicants pay the Inspector-General in Bankruptcy’s costs of the interlocutory application filed on 26 January 2016 to set aside the subpoena to produce documents issued on 18 December 2015 at the request of the applicants.

7.    The proceedings be listed for a directions hearing on 19 May 2016 at 9.30 am at which time a hearing date will be allocated and orders made for the preparation of the matter for hearing. The applicants are to notify the second and third respondents in writing of the listing and of the terms of this order by 4 pm on 13 May 2016.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC J:

introduction

1    These proceedings arise out of the bankruptcy of the fourth applicant, Mr Robert Gilbert Coshott (Mr Coshott). The first applicant, Fewin Pty Ltd (Fewin), is a company of which the second applicant, Mr Ronald Coshott, is a director. Mr Ronald Coshott is also Mr Coshott’s brother. The third applicant, Mrs Ljiljana Coshott, is Mr Coshott’s wife. Each of the first, second and third applicants claim to be creditors for debts admitted in the bankrupt estate of Mr Coshott (the Estate).

2    The respondents have each been trustees of the Estate at various times:

(1)    pursuant to s 160 of the Bankruptcy Act 1966 (Cth) (the Act) the second respondent, the Official Trustee, was the trustee from 7 November 2008, when the sequestration order was made, to 18 December 2008 and from 25 February 2013 to 21 March 2013;

(2)    the first respondent, Mr Christopher Burke, was trustee from 18 December 2008 to 25 February 2013. Mr Burke voluntarily terminated his registration as a registered trustee in bankruptcy pursuant to s 155G of the Act on 27 February 2013; and

(3)    the third respondent, Mr Maxwell Prentice, was trustee from 21 March 2013.

3    In their originating application, the applicants seek orders pursuant to s 179 of the Act for an inquiry into the conduct of:

(1)    Mr Burke in relation to the bankruptcy of Mr Coshott;

(2)    the Official Trustee in appointing Mr Burke as the trustee of the Estate; and

(3)    Mr Prentice in relation to the bankruptcy of Mr Coshott.

4    The applicants also seek orders that the respondents make good any loss to the Estate by reason of their alleged breaches of duty and that they compensate Mrs Coshott and Mr Coshott for, among other things, loss and damage and seek orders that Messrs Burke and Prentice not be entitled to remuneration or an indemnity in respect of their costs and expenses out of the Estate.

5    Three interlocutory applications have been filed in the proceedings:

(1)    the Official Trustee seeks summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) and r 26.01 of the Federal Court Rules 2011 (the Rules) because the applicants have no reasonable prospect of successfully prosecuting the proceeding or, in the alternative, the Official Trustee seeks an order for an expedited hearing with respect to order 2 of the originating application;

(2)    the applicants seek an order that the Inspector-General in Bankruptcy (the Inspector-General) be joined as fourth respondent to the proceedings and that leave be granted to the applicants to file and serve an amended application and amended statement of claim in the form annexed to their interlocutory application; and

(3)    the Inspector-General seeks an order setting aside the subpoena issued to her at the request of the applicants on 18 December 2015 (the Subpoena) pursuant to r 24.15(1) of the Rules.

the Official Trustee’s application for summary judgment or an expedited hearing

Legal principles – summary judgment

6    Section 31A(2) of the FCA Act empowers the Court to give judgment for one party against another in relation to the whole or part of a proceeding where the first party is defending the proceedings or that part of the proceeding and the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part of the proceeding. Section 31A(3) of the FCA Act provides that a proceeding or a part of a proceeding need not be hopeless or bound to fail for it to have no reasonable prospects of success.

7    It is accepted that the power to dismiss an action summarily ought not be exercised lightly. Full weight must be given to the phrase “no reasonable prospects of success”. It must be applied according to its ordinary meaning. It is not to be equated to a requirement that the proceedings be “frivolous”, “untenable”, “groundless” or “faulty”: Spencer v The Commonwealth (2010) 241 CLR 118 (Spencer) at [58] to [60] per Hayne, Crennan, Kiefel and Bell JJ.

8    In Oliver v Commonwealth Bank of Australia (No 1) [2011] FCA 1440 at [23] Perram J noted that an examination beyond the pleadings is permitted when considering an application pursuant to s 31A of the FCA Act but observed that “there will be cases where the absence of reasonable prospects may be apparent merely from what is alleged; that is to say, the nature of the allegations made will dictate, without the possibility of a different view being taken, that there are reasonable prospects of only one outcome”. In Spencer, French CJ and Gummow J noted that s 31A will apply to a case where “the pleadings disclose no reasonable cause of action and their deficiency is incurable”: at [22].

9    Rule 26.01(1)(a) of the Rules provides that a party may apply to the Court for an order that judgment be given against another party because the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding.

10    In Keenan v Bundaberg Port Authority [2016] FCA 134 Reeves J considered, among other things, an application pursuant to s 31A of the FCA Act and r 26.01(1) of the Rules. At [44] he referred to the principles applicable to such an application having recently been outlined by him in a number of decisions such as: Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256; Krajniw v Newman (No 2) [2015] FCA 673 and Crocker v Toys ‘R’ Us (Australia) Pty Ltd (No 3) [2015] FCA 728. Reeves J applied those principles to the case before him but noted that it was appropriate to add that in reaching his conclusion he had also taken into account a number of “diverse and countervailing” factors which relevantly included (at [45]):

(a)    the caution one should employ before summarily determining a proceeding: see Spencer v Commonwealth (2010) 241 CLR 118; [2010] HCA 28 at [24] and [60] and Cassimatis at [50];

(b)    the need to distinguish between whether the true concern is one of form or one of substance – by this I mean whether Mr Keenan has a cause of action that is not properly pleaded, or whether he has no cause of action at all: see Spencer at [23], White Industries Aust Ltd v Commissioner of Taxation (2007) 160 FCR 298; [2007] FCA 511 at [50] and Cassimatis at [46];

(c)    in addition to the circumstances outlined in Cassimatis at [47]–[49], summary judgment under s 31A of the Federal Court Act is justified where a party completely fails to identify any valid claim or cause of action or fails to provide any factual materials that could amount to such: see Mulhern v Bank of Queensland [2015] FCA 44 at [60]–[61] per Gleeson J and Dowling v Commonwealth Bank of Australia [2008] FCA 59 at [30] per Reeves J;

    …

The pleading of the claim against the Official Trustee

11    The claim against the Official Trustee is pleaded at [8] to [11], [16], [18], [19] and [33] to [39] of the statement of claim. It is alleged against the Official Trustee that:

(1)    he was, by force of s 160 of the Act, the trustee of the Estate on and from 7 November 2008;

(2)    on or about 4 December 2008, the Official Trustee nominated Mr Burke as the new trustee of the Estate;

(3)    on 18 December 2008, pursuant to s 181A of the Act, Mr Burke replaced the Official Trustee as trustee of the Estate;

(4)    Mr Burke was nominated by the Official Trustee to be the trustee of the Estate in circumstances where the Official Trustee knew or ought to have known that Mr Burke was not fit or competent to act diligently and to prudently administer the Estate;

(5)    the nomination of Mr Burke as trustee of the Estate was an act done by the Official Trustee as trustee of the Estate;

(6)    when acting as trustee of the Estate the Official Trustee owed duties to Mr Coshott, the creditors of the Estate and others who could be affected by the nomination, to act diligently and prudently in relation to the Estate and to save the Estate unnecessary expense;

(7)    in breach of its duty as trustee, the Official Trustee nominated Mr Burke to replace it as trustee when it knew or ought to have known that Mr Burke was not fit or competent to act diligently and to prudently administer the estate. Particulars are provided of how it is said that the Official Trustee knew or ought to have known that Mr Burke was not fit or competent to act as trustee;

(8)    because of the breaches of duty Mr Burke was appointed as trustee of the Estate when he was not fit or competent to run the Estate;

(9)    as a result of Mr Burke’s administration of the Estate Mr Coshott’s bankruptcy was unnecessarily extended, the effect of which is that, if Mr Burke is entitled to claim his remuneration and expenses since 23 July 2010 from the Estate, there will be no funds available for distribution to the creditors of the Estate;

(10)    the Official Trustee should make good the losses to the Estate caused by his breach of duty and caused by Mr Burke’s breaches of duty.

12    By letter dated 3 February 2016 the Official Trustee sought particulars of the duty it was alleged he owed the applicants in the nomination of Mr Burke. In response the applicants said that the duty was imposed on the Official Trustee by statute and general law. Insofar as the duty was imposed by statute, the applicants rely on ss 18, 18A, 19, 181A and “Schedule 4A of the Bankruptcy Regulations 1966”. Insofar as the duty was imposed at general law the applicants referred to the principle in Adsett v Berlouis and Others (1992) 37 FCR 201 (Adsett v Berlouis).

Statutory framework – Bankruptcy Act 1966 (Cth)

13    As noted, the relief sought by the applicants against the Official Trustee is initially for an inquiry into the conduct of the Official Trustee in appointing Mr Burke as trustee pursuant to s 179 which relevantly provides:

Control of trustees by the Court

(1)    The Court may, on the application of the Inspector‑General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:

(a)    remove the trustee from office; and

(b)    make such order as it thinks proper.

…

14    Section 160 of the Act provides that if at any time there is no registered trustee who is trustee of a bankrupt’s estate, the Official Trustee shall be the trustee of the estate.

15    Mr Burke replaced the Official Trustee as trustee of the Estate by the method in s 181A which provides:

Streamlined method for replacing trustee

(1)    The current trustee of a bankrupt’s estate may, with the written consent of another trustee (either a registered trustee or the Official Trustee), nominate the other trustee as the new trustee of the estate.

(2)    The current trustee must give notice of the nomination to all the creditors who would be entitled under section 64A to receive notice of a meeting of creditors.

(3)    The notice must:

(a)    specify a date (at least 10 days after the notice is given) from which it is proposed that the new trustee will become the trustee of the estate; and

(b)    state that any creditor may, by written notice to the trustee at least 2 days before the specified date, object to the nomination taking effect without there being a meeting of creditors.

(4)    If no creditor lodges a written notice of objection with the current trustee at least 2 days before the specified date, then the new trustee replaces the current trustee as trustee of the estate, on the date specified in the notice.

(5)    For the purposes of this Act, the new trustee is treated as having been appointed by the creditors.

(6)    A certificate signed by the new trustee stating any matter relating to the replacement of the former trustee under this section is prima facie evidence of the matter.

16    Section 18A concerns the liability of the Official Trustee and relevantly provides:

(1)    The Official Trustee is subject to the same personal liability in respect of an act done, or omitted to be done, by it as:

(a)    the trustee of the estate of a bankrupt; or

…

as an individual would be subject if the individual had done, or omitted to do, that act as such a trustee.

(2)    The Commonwealth is by force of this subsection liable to indemnify the Official Trustee against any personal liability, including any personal liability as to costs, incurred by it:

(a)    by reason of subsection (1); or

…

17    Section 19(1) of the Act sets out the duties of the trustee of the estate of a bankrupt:

Duties etc. of trustee

(1)    The duties of the trustee of the estate of a bankrupt include the following:

(a)    notifying the bankrupt’s creditors of the bankruptcy;

(b)    determining whether the estate includes property that can be realised to pay a dividend to creditors;

(c)    reporting to creditors within 3 months of the date of the bankruptcy on the likelihood of creditors receiving a dividend before the end of the bankruptcy;

(d)    giving information about the administration of the estate to a creditor who reasonably requests it;

(e)    determining whether the bankrupt has made a transfer of property that is void against the trustee;

(f)    taking appropriate steps to recover property for the benefit of the estate;

(g)    taking whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under this Act;

(h)    considering whether the bankrupt has committed an offence against this Act;

(i)    referring to the Inspector‑General or to relevant law enforcement authorities any evidence of an offence by the bankrupt against this Act;

(j)    administering the estate as efficiently as possible by avoiding unnecessary expense;

(k)    exercising powers and performing functions in a commercially sound way.

Parties’ submissions

18    The Official Trustee submits that whether an order is made for an inquiry pursuant to s 179 of the Act requires the Court to engage in a two stage process. First, there is a preliminary question as to whether there should be an inquiry and secondly, if an inquiry is ordered, what order, if any, should be made as a result of the inquiry for example, should the Official Trustee be ordered to “make good” the alleged losses as sought. The Official Trustee submits that the applicants cannot, as a matter of law, pass the first stage and that the Court could not be satisfied that an inquiry under s 179 ought to be ordered. Accordingly the Official Trustee contends that the proceedings against him should be summarily dismissed.

19    The Official Trustee makes the following submissions in support of the outcome for which he contends:

(1)    the power in s 179 of the Act is to “inquire into the conduct of a trustee in relation to a bankruptcy”. The order sought by the applicants at [2] of the originating application is for an inquiry “into the conduct of the Official Trustee in Bankruptcy in appointing John Christopher Burke as the trustee in bankruptcy of the estate of the Fourth Applicant”. On a proper construction of s 179 there cannot be an inquiry into the “appointment” of Mr Burke;

(2)    a nomination pursuant to s 181A of the Act is not an act in relation to a bankruptcy. It is not conduct in the administration of a bankrupt estate to which any duty can attach. Thus the duties under s 19 of the Act have no place. In making a nomination under s 181A, the Official Trustee is doing no more than nominating a new trustee for an estate and, in the absence of any objection from the creditors, pursuant to s 181A(5) of the Act, the new trustee is taken to have been appointed by the creditors and not the Official Trustee. The Official Trustee does not make an appointment;

(3)    the Official Trustee was not administering the Estate in making the nomination. Section 179 is concerned with the trustee who is administering the estate of the bankrupt. That conclusion can be drawn from the language of s 179. The Official Trustee also contends that conclusion is supported by s 157 of the Act which provides that, where a debtor becomes a bankrupt, the creditors may, if the Official Trustee is the trustee of the estate, by resolution at a meeting of creditors appoint a registered trustee to the office of trustee of the estate in place of the Official Trustee. That is they can appoint someone to take over the administration of the estate;

(4)    the construction of s 179 contended for by the Official Trustee is supported by Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68 (Ferella) at [45] where Yates J observed that s 179 “is a broad provision …. reflecting the position that trustees are subject to the general control of the Court”;

(5)    it is difficult to see how the duties set out in response to the Official Trustee’s request for particulars can be said to arise. Section 18 sets out various powers and official matters relating to the office of the Official Trustee, s 18A deals with the liability of the Official Trustee, s 19 sets out the duties of a trustee administering an estate (which is not what the Official Trustee was doing when making the nomination) and s 181A is the nomination provision and the duty imposed by that section is to nominate. The judgment in Adsett v Berlouis does not assist. It concerns duties of trustees generally but does not involve the nomination process under s 181A of the Act;

(6)    section 181A provides for a power to nominate a new trustee. There can only be two duties imposed in exercising that statutory power. They are the obligations on any statutory officer exercising a power: a duty to exercise the power in good faith and a duty to exercise the power for a proper purpose. There is no suggestion that the Official Trustee did not carry out the nomination process for a proper purpose or in good faith;

(7)    Coshott v Coshott (2010) 184 FCR 495 (Coshott v Coshott) demonstrates that there are no other duties encompassed by the notion of nomination other than the duties to act in good faith and for a proper purpose. The Official Trustee relies on the findings at [33] of Coshott v Coshott to submit that the applicants are attempting to graft something onto s 181A that is not there. That is, a duty to inquire whether a particular trustee is a fit and proper person to be a trustee.

20    The applicants submit that from 7 November 2008 the Official Trustee was, by force of s 160 of the Act, a trustee of the Estate. In that capacity he owed the duties of a trustee which they contend include the ordinary duties of a trustee at law such as acting with reasonable care and skill, the duties of a trustee under the Trustee Act and the duties owed under s 19(1) of the Act which are not exhaustive, given the opening words of the subsection, and which do not include the broader duties owed at common law.

21    The applicants submit that the power conferred by s 181A is given to all trustees appointed under the Act, not just the Official Trustee. It is a power, exercised in the trustee’s role as current trustee, pursuant to which a trustee may nominate another trustee as a new trustee. It is not obliged to do so. The Official Trustee could have continued as trustee of the Estate but chose to make a nomination. In exercising the power under s 181A, the duty owed under s 19(1)(k) of the Act is relevant and, as it is an exercise of a power as a trustee, in exercising the power, a trustee owes the duties of an ordinary trustee to exercise the power with reasonable care and skill in the best interests of the estate. There is no justification for confining the duties that arise under s 181A in the way the Official Trustee sought to do to an exercise of the power for a proper purpose and in good faith.

22    The applicants contend that s 18A reinforces that anything the Official Trustee does in his capacity as a trustee is subject to ordinary principles, duties and liabilities of a trustee and s 179 entitles the Court to inquire into the conduct of a trustee. In the applicants’ submission the Official Trustee was acting as a trustee of the Estate in making the nomination and was so acting in relation to a bankruptcy. The words “in relation to” in s 179 should not be construed narrowly and should not be confined so as to exclude a nomination which can only be made by a trustee during the pendency of that person’s position as trustee.

23    Finally the applicants submit that there is an alternate way in which they put their case. That is by the ordinary remedies against a trustee where a trustee has acted other than in the best interests of the estate.

Consideration

24    As the Official Trustee submitted, the Court invokes a two stage process when considering an application under s 179 of the Act. This was recognised in Boensch v Pascoe [2007] FCA 1977 (Boensch) by Buchanan J at [5]–[7] where he observed that the Court’s power to supervise the conduct of a trustee under s 179 is broad and that, when s 179 is invoked, it is usual to first consider whether an inquiry should be held into a trustee’s conduct.

25    In Boensch, Buchanan J considered the “quality of the case” necessary to order an inquiry under s 179, referring to the need for a clear case to be made out to warrant an inquiry. At [11]–[12] and [15] his Honour said:

11    In this Court, when s 179 of the Act is invoked, the question is usually posed whether a trustee has erred in the administration of the estate or failed to act as required by the Act or the general law. Sometimes the issue is focussed or decided by reference to whether ‘misconduct’ has occurred.

12    In Re Gault; Gault v Law (1981) 57 FLR 165 Ellicott J said (at 173):

‘the court should be loath to order an inquiry unless it considers that on the evidence before it there are substantial grounds for believing that the trustee erred in his administration. If the court considers that an inquiry is unlikely to reveal misconduct it should not make an order and put the respondent and possibly the creditors to the expense and trouble involved.’

…

15    A matter of central importance is to assess, therefore, whether there is any real likelihood that the administration of the estate has miscarried so that creditors, and eventually perhaps Mr Boensch, have been denied the opportunity of an adequate return (or surplus) from the bankrupt estate after the necessary and reasonable costs of administration have been met.

26    The question before me on the current application is whether the applicants have reasonable prospects of successfully prosecuting the proceedings against the Official Trustee. The Official Trustee submits that this question should be answered in the negative because the applicants could not satisfy the Court that an inquiry should be ordered.

27    The particular relief sought in the originating application is for an inquiry pursuant to s 179 of the Act into the Official Trustee’s conduct in appointing Mr Burke as trustee of the Estate. It is the case that the Official Trustee did not appoint Mr Burke. By operation of s 181A(5), Mr Burke was appointed by the creditors. However, the process of nomination was a step leading to the appointment and is the step on which the applicants, in their statement of claim and by their submissions, are focussed.

28    For the Official Trustee to succeed on this application I need to be satisfied that the argument that the Official Trustee was acting in the capacity of a trustee administering the Estate in making the nomination under s 181A and owed certain duties in that capacity has no reasonable prospects of success. I cannot be so satisfied.

29    From 7 November 2008 the Official Trustee was the trustee of the Estate by force of s 160 of the Act and acted in that capacity until he was replaced. In doing so, it can be inferred that he administered the Estate.

30    Section 179 is wide in its terms. It permits the Court to inquire into the conduct of a trustee “in relation to a bankruptcy”. The question of whether the act of nomination pursuant to s 181A is “in relation to a bankruptcy”, is not, in my opinion, one to be determined on this application. Nor is the related question of what duties arise, if any, in making a nomination.

31    The appointment power in s 181A was considered in Coshott v Coshott. That matter concerned the validity of the appointment of Mr Burke as trustee of the Estate. The Court in considering the issues before it did not consider what duties might arise in the context of the exercise of that power. The finding about grafting something on to the section that is not there was a reference to an argument made by the bankrupt that certain steps needed to be taken as a prerequisite to the exercise of the power in s 181A, beyond those specified in the section itself. Whether the applicants here are trying to do the same by inferring into s 181A a duty to inquire whether a particular trustee is a fit and proper person to be a trustee is an issue that will need to be determined.

32    There are in my opinion a number of issues which arise in the proceedings as between the applicants. They include: the meaning of “in relation to a bankruptcy” in s 179; whether the act of nomination in s 181A is an act done “in relation to a bankruptcy” for the purposes of s 179; whether the Official Trustee was acting as trustee of the Estate in making the nomination under s 181A; and what duties, if any, arise in making a nomination under s 181A. These issues will need to be considered in the context of the application pursuant to s 179 for an inquiry into the appointment by the Official Trustee of Mr Burke. Whether the applicants will be able to satisfy the Court that the Official Trustee has failed to act as required by the Act or the general law or has erred in his administration of the estate in making the nomination thus necessitating an inquiry is a matter for another day to be determined by reference to all of the issues and the relevant facts.

33    In the circumstances and given the issues that are raised I do not think it can be said that the applicants have no reasonable prospect of successfully prosecuting the proceedings.

34    The Official Trustee has sought, in the alternative, an order for an expedited hearing with respect to order 2 in the originating application namely the order pursuant to s 179 of the Act for an inquiry into his conduct in appointing Mr Burke as trustee of the Estate. No submissions were made in support of that application. However, given that the administration of the Estate has been ongoing for many years, in my opinion it is in the interest of all parties that the matter as against all respondents be heard at the earliest possible opportunity. Accordingly, I will make an order listing the matter for a directions hearing in the week following the handing down of this judgment. At that directions hearing the matter will be allocated a hearing date and the parties should attend prepared to agree to a timetable for the completion of all necessary pre-hearing steps.

Disposition

35    In light of the matters set out above, I will make orders that the Official Trustee’s application for summary judgement be dismissed and that the Official Trustee pay the applicants’ costs of that application and an order in relation to the further conduct of the proceedings in the terms described above.

the applicants’ application to join the Inspector-General

36    By their interlocutory application filed on 26 November 2015 the applicants seek orders that the Inspector-General be joined as the fourth respondent to the proceedings and that the applicants have leave to file and serve the amended originating application and the amended statement of claim annexed to the interlocutory application.

The draft amended originating application and amended statement of claim

37    In the draft amended originating application the applicants seek orders that the Inspector-General make good any loss to the Estate because of her breach of duty, that she compensate Mr Coshott for the inconvenience, restriction of liberty, loss of dignity and loss and damage suffered by him caused by the unnecessary and unreasonable extension of his bankruptcy and that the Inspector-General compensate Mrs Coshott for the loss and damage caused by her breaches of duty.

38    The claim against the Inspector-General included in the draft amended statement of claim at [46] and [47] is that:

46.    The Inspector-General in Bankruptcy had duties under the Bankruptcy Act 1966 to:

a.    ensure that Burke was at all relevant times fit to be a registered trustee in bankruptcy

b.    ensure Burke was competent to administer the estate of the Fourth Applicant

c.    ensure the Official Trustee in Bankruptcy was aware of the matters particularised in paragraph 35 hereof

d.    having formed the opinion that Burke was not fit to remain a registered trustee in bankruptcy,, (sic) to take steps to de-register Burke as a registered trustee in bankruptcy

e.    having formed the opinion that Burke was not competent to administer bankrupt estates, to remove him as the trustee of all bankrupt estates he was administering

f.    having formed the opinions in d and e above, to ensure Burke was not appointed as trustee of any further bankrupt estates, and, in particular, the estate of the Fourth Applicant

47.    In the premises, it is just and equitable that:

a    Prentice should make good the loss to the estate caused by his breaches of duty

b.    Prentice should make good the loss and damage to the Applicants caused by its breaches of duty

39    While [47] refers to “Prentice” the parties agree that is a typographical error and that it is intended to be a reference to the Inspector-General.

Legal principles

40    Rule 9.05(1) of the Rules permits a party to apply to the Court for an order that a person be joined as a party to the proceedings if the person:

(a)    ought to have been joined as a party to the proceeding; or

(b)    is a person:

(i)    whose cooperation might be required to enforce a judgment; or

(ii)    whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or

(iii)    who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.

41    In Comcare v John Holland Rail Pty Ltd (2009) 185 IR 191 (Comcare v John Holland) Jessup J considered an application to join John Holland Pty Ltd as a party to the proceeding under O 6 r 8(1)(b) of the Federal Court Rules 1979 (the 1979 Rules), the predecessor to r 9.05 of the Rules. Order 6 r 8(1) provided that:

(1)    Where a person who is not a party:

(a)    ought to have been joined as a party; or

(b)    is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon;

the Court may order that the person be added as a party and make orders for the further conduct of the proceeding.

42    In considering whether to make the order joining John Holland Pty Ltd Jessup J, at [9] to [11] of his judgment, considered three judgments which had previously determined applications pursuant to O 6 r 8(1) of the 1979 Rules:

(1)    Tytel Pty Ltd v Australian Telecommunications Commission (1988) 11 IPR 223 (Tytel), in which Sheppard J rejected an application under O 6 r 8 because the case against the party sought to be joined, if allowed to proceed, would have no prospect of success in accordance with the principle for which General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (General Steel) is authority;

(2)    Review Australia Pty Ltd v Redberry Enterprise Pty Ltd (2003) 58 IPR 366 (Review), in which Heerey J, relying on Tytel, said that the applicant had to show that there was an arguable case against the proposed respondents and made an order joining those proposed respondents in relation to whom that could be shown. Jessup J observed that in Review there did not seem to be any suggestion that the proceeding as constituted could not proceed to judgment without the joinder of the additional parties. However, it also seemed to be the case that the facts underlying the case against the existing and the proposed respondents were either the same or substantially the same; and

(3)    Universal Music Australia Pty Ltd v Cooper [2004] FCA 78, in which Tamberlin J, relying on Tytel and Review, said that an applicant for joinder must show an arguable case sufficient to resist the entry of summary judgment against the party sought to be joined. Tamberlin J allowed the joinder of the proposed respondents. It did not appear to be in issue before Tamberlin J that, if the applicant could show it had a sufficiently arguable case against the proposed respondents, the circumstances were otherwise than to activate the operation of O 6 r 8, assuming the discretionary considerations were favourable to the applicant. That is, there was no suggestion by Tamberlin J that the application for joinder should be rejected on the ground that the proceeding in its existing form was sufficient to allow the determination of the applicant’s claim against the existing respondents, without the addition of the proposed additional parties.

43    At [12], Jessup J then considered the judgment in Warner Music Australia Pty Ltd v Swiftel Communications Pty Ltd (2005) 67 IPR 27 (Warner Music) in which Branson J considered an application for joinder under O 6 r 8 of the 1979 Rules. Branson J rejected a submission by the applicant in that case that all that needed to be established to be entitled to such an order was that there were causes of action against the proposed respondents that could not be manifestly groundless. In doing so, Branson J observed at [13] that the relevant rule was concerned with proceedings that were improperly constituted because of a failure to join a person as a party. She went on to find that a “person does not become a person who ‘ought to have been joined as a party’ or whose joinder as a party is ‘necessary to ensure that all matters in dispute in the proceeding may be … completely determined and adjudicated upon’ simply because a cause of action against that party may legitimately be prosecuted in the proceeding”.

44    Having referred to those passages from Warner Music, Jessup J said at [13]:

I agree, with respect, that O 6 r 8(1)(b) is not brought into operation merely by the circumstance that a cause of action may be legitimately prosecuted against the proposed respondent in the existing proceeding. I also agree that it will not be sufficient for an applicant seeking joinder merely to show that he or she has claims against the proposed respondent which could not be dismissed as unarguable in the General Steel sense. However, with respect to Branson J, neither do I accept that O 6 r 8 is concerned only with existing proceedings which are “improperly constituted by reason of the failure to join a person as a party”. I consider that such a view takes too narrow an approach to the concept of ensuring that all matters in dispute in the proceeding are effectually and completely determined and adjudicated upon. It is sufficient for present purposes to say that I consider that the expression “all matters in dispute in the proceeding” extends at least to matters which are placed in dispute by an existing party and which, if determined in a particular way, would result in a finding that another person, rather than the existing party, should be called to account for the transgression presently alleged by the applicant.

45    In the result, Jessup J allowed the application to join John Holland Pty Ltd because the issues raised by the existing respondent in its defence meant that it was a necessary party as required by O 6 r 8(1)(b), there was no basis to conclude that the applicant had no reasonable prospects against either the existing respondent or John Holland Pty Ltd and all discretionary factors favoured the joinder.

46    In Crocker v Toys ‘R’ Us (Australia) Pty Ltd [2015] FCA 588 (Crocker) Reeves J considered an application for joinder under r 9.05 of the Rules. In doing so he observed at [31] that the pre-2011 equivalent to r 9.05 was O 6 r 8 of the 1979 Rules which replicated subrule (a) of r 9.05(1) but differed to subrule (b). Despite the differences, Reeves J was of the view that the words “… ‘effectually and completely determined and adjudicated upon’ in O 6 r 8 cover most, if not all, of the broad concepts of completeness, finality and avoidance of multiplicity that are conveyed by subrules 9.05(b)(ii) and (iii)”. On that basis Reeves J considered that the decisions on the operation of O 6 r 8 of the 1979 Rules would continue to provide some guidance on the operation of r 9.05 of the Rules: at [32]. I agree.

47    In Crocker, Reeves J referred to the judgment of Jessup J in Comcare v John Holland and to the judgment in Brisbane Slipways Operations Pty Ltd v Pantaloni [2010] FCA 654, in which Greenwood J agreed with and adopted a similar approach to that taken by Jessup J in Comcare v John Holland, and determined that he should adopt the same approach in the application before him.

48    In Reeve J’s view the applicant for joinder had to demonstrate:

(1)    in terms of r 9.05(1)(b)(ii), whether the joinder of the proposed respondents was necessary to ensure that each issue in the dispute was able to be heard and finally determined. This required a focus on the issues in the proceedings and answering the question whether the proposed respondents’ presence as parties is necessary to ensure that those issues are able to be heard and finally determined. It did not require an examination of the issues the applicant proposed to pursue against the proposed respondents and whether they were unarguable in the General Steel sense: Crocker at [36];

(2)    in terms of r 9.05(1)(b)(iii), the applicant for joinder has to demonstrate that the joinder of the proposed respondents should occur in order to enable the determination of a related dispute and thus avoid a multiplicity of proceedings. This requires at least two factors to be considered: whether the other dispute is in fact related to the dispute in the existing proceedings and whether the other dispute exists in relation to which it may be appropriate to assess whether the other dispute is unarguable in the General Steel sense: Crocker at [37] to [38].

Consideration

49    The applicants submit in their written submissions that the joinder of the Inspector-General is not only permitted by r 9.05(1) of the Rules but is required in order to comply with them. In order to determine whether the order sought joining the Inspector-General should be made it is necessary to consider whether the requirements of r 9.05(1) are met, in light of the principles set out above, and whether, as a matter of discretion, an order ought to be made. It is not the case that r 9.05(1) of itself requires the joinder.

50    The applicants do not specify on which subrule of r 9.05(1) they rely. However, given the nature of the application and the submissions made it seems that they rely on r 9.05(1)(b)(ii) or (iii). There is no suggestion that the Inspector-General ought to have been joined as a party (r 9.05(1)(a)), indeed the applicants’ submissions suggest the contrary, or that the joinder of the Inspector-General is required because she is a person whose cooperation might be required to enforce a judgment (r 9.05(1)(b)(i)).

51    The applicants’ submissions can be summarised as follows:

(1)    in oral submissions, senior counsel for the applicants candidly informed the Court that the draft amended statement of claim was deficient as it fails to plead a breach of any alleged duty but that, on any view, [46] of the draft amended statement of claim raises issues that go towards the case that would be put and the Court ought to grant leave to the applicants to amend the draft amended statement of claim;

(2)    in terms of the claim that the applicants wish to put, the applicants submit that the starting point is the Inspector-General’s duty. While the Inspector-General is not a trustee and thus does not owe the duties of a trustee, s 18(8B) of the Act provides that the Inspector-General may exercise any of the powers and perform any of the functions of the Official Trustee not related to the particular matters specified therein;

(3)    the applicants submit that if the Inspector-General is not happy with the conduct of a trustee he or she may put in train a process that may lead to his or her deregistration. Although the process in the Act is permissive it does, in the applicants’ submission, have mandatory consequences that must follow in certain circumstances if certain things happen as part of the process. In that regard the applicants refer to ss 155D and s 155H the Act and note that the Inspector-General is one of the parties who may apply under s 179 of the Act for an inquiry;

(4)    s 19A of the Act provides for an indemnity by the Commonwealth to a person to whom the section applies, which includes the Inspector-General, against any liability incurred by him or her for any act done negligently or negligently omitted to be done in the course of the performance of their duties under the Act and for any act done by him or her in good faith in purported performance of his or her duties under the Act. In the applicants’ submission that section contemplates that when the Inspector-General acts negligently or negligently omits to do something she may have a liability. The applicants submit that the duty owed by the Inspector-General is not a duty under the Act but a duty of care. They contend that the inclusion of s 19A of the Act supports the position that the Inspector-General owes a duty of care;

(5)    in looking at whether a proposed cause of action against the Inspector-General is hopeless, the Court is obliged to look at it as a matter of substance not form. Thus whether the allegations pleaded in [46] of the amended statement of claim are the same as the nature of the case outlined by senior counsel for the applicants is not the point. Rather, they contend that there is a case which pleads the powers of the Inspector-General under the Act and which alleges that by virtue of those powers the Inspector-General owed a duty of care, she breached that duty because of the matters that are currently included in [46] of the draft amended statement of claim and, as a result, the applicants have suffered loss and damage.

52    The Inspector-General opposes the joinder for two reasons. The first is that the applicants do not have a reasonable basis for successfully prosecuting the proceeding against the Inspector-General as set out in the draft amended originating application and the draft amended statement of claim. The Inspector-General relies on r 26.01(1)(a) of the Rules and submits that the joinder is futile. The second is that the Court as a matter of discretion should refuse the joinder.

53    As set out above, I will proceed on the basis that the application for joinder is made pursuant to r 9.05(1)(b)(ii) and (iii). In relation to r 9.05(1)(b)(ii) the question to be considered is whether the joinder of the Inspector-General is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined. Answering this question requires a consideration of the issues in the proceeding and whether the Inspector-General’s presence as a party is necessary for those issues to be heard and finally determined.

54    In the proceeding as framed the applicants seek orders for an inquiry pursuant to s 179 of the Act into the conduct of Mr Burke and Mr Prentice in relation to the bankruptcy of Mr Coshott and into the conduct of the Official Trustee in relation to his role in appointing Mr Burke as trustee. The applicants allege that each of Mr Burke and Mr Prentice in their roles as trustees of the Estate over different periods breached their duties owed to the Estate. The applicants allege that the Official Trustee breached his duty in appointing Mr Burke as trustee of the Estate. As a result of the alleged breaches relief is sought against each of Mr Burke, Mr Prentice and the Official Trustee including damages.

55    In my view the Inspector-General is not a necessary party to the proceeding as framed and her joinder is not required to ensure that each issue in dispute in the proceeding is able to be heard and finally determined. The issues in the proceeding as framed can be heard and finally determined without the Inspector-General being joined as a party. They are discrete claims against each of the respondents to the present proceeding. The proposed claim against the Inspector-General, as framed in the amended statement of claim and as differently framed by senior counsel for the applicants in oral submissions, is a further discrete claim against her alleging different duties and a breach of those duties. Although not established on the evidence before me, it may be that the alleged claim relies on some facts common to the present proceeding but, even if that is so, it does not follow that the Inspector-General is a necessary party to ensure that each issue in the proceeding as currently framed is able to be heard and finally determined.

56    In relation to r 9.05(1)(b)(iii) the applicants need to demonstrate that the Inspector-General should be joined as a party in order to enable determination of a related dispute and to thus avoid a multiplicity of proceedings. This requires a consideration of whether the proposed claim against the Inspector-General is a related dispute and, if so, whether it exists in the sense of whether it is sufficiently arguable.

57    The proposed claim against the Inspector-General relates to the appointment of Mr Burke as trustee of the Estate. In the draft amended statement of claim the applicants allege that the Inspector-General owed them duties under the Act. In oral submissions and, without prior notice to the Inspector-General, counsel for the applicants put a different claim alleging that the Inspector-General owed a duty of care to the applicants and that the Inspector-General breached that duty by failing to take steps to deregister him or by allowing his registration to continue. I will address this issue based on the proposed claim as set out in the draft amended statement of claim. In the absence of giving leave to amend that is what is before the Court.

58    The proposed claim against the Inspector-General could be seen to be related to the existing proceeding. Firstly, the proposed claim seems to arise out of the same events that is, Mr Burke’s role as trustee of the Estate. Secondly, as previously observed by me, while there is no evidence before me to suggest it is the case, the applicants may seek to rely on some of the same evidence that they will seek to rely on in proving their claims in the existing proceeding. On the other hand, the proposed proceeding alleges a breach of duties said to arise under the Act relating broadly to Mr Burke’s registration as a trustee. In the existing proceedings the applicants allege different breaches of duty against each of the existing respondents. In those circumstances in my view the proposed and existing proceedings are not truly related. They require different issues to be determined against different respondents.

59    Even if I am wrong in that conclusion, in my opinion the proposed proceeding as set out in [46] and [47] of the draft statement of claim is unarguable such that the joinder should not be permitted. Those paragraphs do not properly plead a cause of action against the Inspector-General. As submitted by the Inspector-General, even if the duties alleged in [46] of the draft amended statement of claim exist, there is no pleading that any of those duties were breached. Further, [46] and [47] of the draft amended statement of claim do not set out how or why or on what basis the applicants are entitled to the relief sought in the draft amended originating application.

60    As to the Inspector-General’s duties, s 12 of the Act sets out the Inspector-General’s functions. They are to make such inquiries and investigations as the Minister directs and to make such inquiries and investigations as the Inspector-General thinks fit with respect to certain specified matters including the administration of or the conduct of a trustee in relation to a bankruptcy. There is no suggestion or any pleaded case that there is a duty that is said to arise as a result of those functions and no allegation of breach of those functions.

61    The Inspector-General has no power to deregister a registered trustee on the basis of her opinion as to competency, nor does she have the power to remove a registered trustee from a bankrupt estate or a duty to inform the Official Trustee of the results of any inquiry. Division 1 of Pt VIII of the Act deals with the appointment and official name of trustees. There are certain things which the Inspector-General must do as part of that process:

(1)    pursuant to s 154A(1) an individual may apply to the Inspector-General to be registered as a trustee as prescribed by that section;

(2)    section 155 requires that, after receiving a properly made application, the Inspector-General must convene a committee to consider it. That committee must consist of the Inspector-General, an APS employee and a registered trustee chosen by the Insolvency Practitioner’s Association of Australia;

(3)    section 155A sets out what the committee must do in making a decision on an application and section 155B requires the Inspector-General to give effect to all of the committee’s decisions subject to subs 155C(1)(b);

(4)    section 155C requires the Inspector-General to register the applicant as a trustee if the committee has decided that the applicant should be registered and the applicant has paid the prescribed fee. The Inspector-General registers an applicant by entering the details relating to the applicant that are prescribed in the Regulations in the National Personal Insolvency Index and, after registering the person as a trustee, the Inspector-General must give the person a certificate of registration. The registration then has effect for three years;

(5)    section 155D(1) requires the Inspector-General to extend the registration of a person as trustee for three years from the expiry of that person’s registration if the person applies in writing to the Inspector-General for the extension before his or her registration expires and the person has paid the fee determined by the Minister. Subsection (2) prohibits the Inspector-General from extending the registration of a person as a trustee in circumstances where that person owes a total of more than $50 for a charge under Bankruptcy (Estate Charges) Act 1997 and penalty under s 281 of the Act in respect of that charge and has been notified by the Inspector-General as required by the section;

(6)    section 155E(1) provides that if a committee has decided that conditions should apply to a person’s practice as a registered trustee the person may apply to the Inspector-General for the conditions to be changed or removed and s 155E(4) provides that, after receiving a properly made application, the Inspector-General must convene a committee to consider the application;

(7)    section 155F sets out what a committee must do on an application for change of conditions. Pursuant to subs (2) the committee must give the applicant and the Inspector-General a report of its decision relating to the application and the reasons for the decision and pursuant to subs (4) the Inspector-General must give effect to the committee’s decision;

(8)    section 155G entitles a person who is a registered trustee to give the Inspector-General a written request that he or she cease to be registered as a trustee and provides that a person ceases to be so registered when the Inspector-General accepts the request;

(9)    section 155H(1) provides that the Inspector-General may ask a registered trustee to give her a written explanation why the trustee should continue to be registered if she believes that one of the matters set out in (a) to (g) exists. Pursuant to subs (2) if the Inspector-General does not receive an explanation within a reasonable time or is not satisfied by the explanation she must convene a committee to consider whether the trustee should continue to be registered. Subsection (3) prescribes the composition of the committee which includes the Inspector-General;

(10)    section 155I sets out what the committee must do in making a decision on an involuntary termination of registration. The committee is, pursuant to subs (1), required to make a decision as to whether the trustee should continue to be registered or should cease to be registered. Pursuant to subs (4) the committee must give the trustee and the Inspector-General a report of its decision relating to the application and the reasons for the decision and pursuant to subs (6) the Inspector-General must give effect to the committee’s decision; and

(11)    section 155J(1) requires a person who ceases to be registered as a trustee for any reason to give his or her certificate of registration to the Inspector-General before the end of the period of seven days beginning on the day the person ceased to be registered.

62    Thus the alleged duties said to arise under the Act do not exist. Even if they did, there is no pleading of breach of any of the duties in the draft amended statement of claim. In my opinion, the claim included in the draft amended statement of claim against the Inspector-General is unarguable or would not have a sufficient prospect of success. It follows that an order to join the Inspector-General would not be made pursuant to r 9.05(1)(b)(iii).

63    In those circumstances, I do not need to consider discretionary factors relevant to the making of an order. However, if I did they would not assist the applicants. Firstly, the administration of the Estate has been ongoing for many years. The Inspector-General submitted that its finalisation is being delayed and that this type of application ought not to form part of that delay. In the circumstances of this matter I agree. Secondly, as is evident from the applicants’ written submissions, there was a deliberate strategic choice not to include the Inspector-General in the proceedings at the outset. When the proceedings were filed counsel who prepared the application was of the opinion that the Inspector-General was not a necessary party. That deliberate choice coupled with the fact of the delay in the administration of the Estate and the opinion I have formed as to whether the requirements of r 9.05(1)(b)(ii) or (iii) are met, dictate that, as a matter of discretion, the application to join the Inspector-General must be refused.

64     As noted, counsel for the applicants in oral submissions admitted that, while the pleading gave an indication of the nature of the issues that were raised, it was deficient. When pressed, he further admitted that the claim put by him in oral submissions was quite different to the one that was pleaded. It was only at the hearing of the interlocutory application that the Inspector-General first became aware of the claim that is now alleged to be put against her as opposed to the claim that is included at [46] and [47] of the draft amended statement of claim. Counsel for the applicants submitted that the issue is one of form over substance and that leave should be given to the applicants to replead the claim in the nature outlined by him at the hearing of the interlocutory application.

65    The applicants filed their application to join the Inspector-General and the associated draft pleadings on 26 November 2015. The application came on for hearing on 10 March 2016. That was sufficient time for the applicants to consider their proposed claim and to make any amendment they wished with notice prior to the hearing. The matter was listed for directions on 16 February 2016. No application was made or order sought to amend the proposed claim against the Inspector-General on which the joinder application was based at that time. It is not an answer or a practice to be adopted to attempt to make a case by putting a completely different one at hearing without notice. In the circumstances of this matter I will not grant leave to replead.

66    In her written submissions the Inspector-General submits that if the application to join her is refused, an order should be made that the applicant should pay her costs on an indemnity basis. No further submissions were made as to why that should be so. While the application has not succeeded, there is no special reason or unusual feature that would cause the Court to depart from the usual practice in awarding costs. The Inspector-General is entitled to her costs of the application but that order will be made on the usual party and party basis.

Disposition

67    In light of my findings, I will make orders dismissing the applicants’ application for joinder of the Inspector-General filed on 26 November 2015 and that the applicants pay the Inspector-General’s costs.

the Inspector-General’s application to set aside the subpoena

68    The Inspector-General seeks to set aside the Subpoena pursuant to r 24.15(1) of the Rules on the basis that it is an abuse of process because:

(1)    it seeks documents that have already been produced to another court and thus, pursuant to r 24.12(2)(b), the Subpoena should not have been issued by the Court and the procedure to be followed is set out in r 24.24 of the Rules; and

(2)    the documents which have been produced by the Inspector-General in answer to the Supreme Court Subpoena are subject to the implied undertaking that requires application to be made to the Supreme Court of NSW to use those documents in these proceedings.

Relevant legal principles

69    Subpoenas are dealt with in Pt 24 of the Rules. Rule 24.01 provides that a subpoena may only be issued with the leave of the Court and that a party may apply to the Court for leave to issue a subpoena without notice to any other parties. Rule 24.15(1) of the Rules provides that the Court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part or grant relief in relation to it.

70    Also of relevance in the context of the current application are:

(1)    rule 24.16 which requires that a subpoena must be personally served on the addressee and that the issuing party must serve a copy of the subpoena to produce on each other party as soon as practicable after the subpoena has been served on the addressee;

(2)    rule 24.17(3) which provides that, despite r 24.16(1) requiring personal service of a subpoena on the addressee, an addressee must comply with the requirements of a subpoena even if it has not been served personally if the addressee has, by the last date for service of the subpoena, actual knowledge of the subpoena and of its requirements;

(3)    rule 24.12(2)(b) which provides that an issuing officer must not issue a subpoena requiring the production of a document or thing in the custody of the Court or another court. A related rule is r 24.24 which provides an alternative procedure to the issuing of a subpoena where the relevant documents are already in the custody of the Court or another court. Rule 24.24(1) provides that a party who seeks production of a document or thing in the custody of the Court or another court may inform the Registrar in writing, identifying the document or thing. Rule 24.24(3) provides that if the document or thing is in the custody of another court the Registrar must ask the other court to send the document or thing to him or her and after receiving it must produce the document or thing in Court or to any person authorised to take evidence in the proceedings as required by the party or as the Court directs.

Facts

71    The Subpoena was filed on 18 December 2015 and was initially returnable on 20 January 2016 at 9.30 am. It came to the attention of the Inspector-General when, on 21 December 2015, Mr Dean, the AGS lawyer with carriage of the matter, on reviewing the Commonwealth Courts Portal observed that it had been issued at the request of the applicants. The Subpoena has not been personally served on the Inspector-General and, at least as at 28 January 2016, no conduct money had been handed or tendered to the Inspector-General.

72    The Subpoena seeks documents in 15 categories as follows:

1.     all Consents to Act lodged with the Official Trustee by John Christopher Burke between 1st January, 2005 and 31st December, 2013

2.    all Inspection Reports by or on behalf of the Inspector-General in Bankruptcy relating to John Christopher Burke

3.    all correspondence between the Inspector-General in Bankruptcy and John Christopher Burke in the period 1st January, 2005 and 26th November, 2014

4.    all correspondence between the Official Trustee and John Christopher Burke in the period 1st January, 2005 and 26th November, 2014

5.    all correspondence between the Official Receiver and John Christopher Burke in the period 1st January, 2005 and 26th November, 2014

6.    the annual returns listing all administrations for which John Christopher Burke was the trustee for the years 2005 to 2013 inclusive

7.     all Finalisation Notices lodged with the Official Receiver by John Christopher Burke in the period 1st January, 2005 and 31st December, 2013

8.    all Form 2 Distribution Notices lodged by John Christopher Burke in the period 1st January, 2005 and 31st December, 2013

9.    all notifications of appointment of John Christopher Burke as trustee received in the period 1st January , 2005 and 31st December, 2013

10.    all notifications of appointment of Allan Richard Nicholls and/or Mark Damian Charles Roufeil in administrations in which John Christopher Burke was trustee

11.    all notices given by the Official Trustee in the period 1st January, 2005 to 31st December , 2013 to creditors nominating John Christopher Burke as the new trustee of bankrupt estates

12.    all Annual Estate Returns lodged by John Christopher Burke for the years 2005 to 2013

13.    all records of complaints lodged with the Inspector-General against John Christopher Burke and the Inspector-General's responses thereto

14.    all records of charges under the Bankruptcy (Estate Charges) Act 1997 owed by John Christopher Burke and of the payment of such charges by John Christopher Burke

15.    list of creditors in each estate administered by John Christopher Burke in the period 1 January , 2005 to 31 December, 2013

73    Two subpoenas have previously been issued to the Inspector-General in other proceedings involving some of the applicants to these proceedings. Those subpoenas were issued in:

(1)    proceeding no. NSD1208/2009 Robert Gilbert Coshott v Burke and the Official Trustee in Bankruptcy on 9 May 2013 seeking:

All documents and/or records in your power, custody, or possession relating to the deregistration of John Christopher Burke as a registered trustee under the Bankruptcy Act 1966.

(2)    in Supreme Court of NSW proceeding no. 2014/238068 Fewin Pty Limited v Burke on 23 March 2015 which sought documents in 18 categories (the Supreme Court Subpoena).

74    Of the 18 categories included in the Supreme Court Subpoena, 15 of those categories are replicated in the Subpoena. The Inspector-General did not have possession, custody or control over any document falling within the three categories of documents which are included in the Supreme Court Subpoena but not included in the Subpoena. However, the Inspector-General did have possession, custody or control over documents falling within all other categories described in the Supreme Court Subpoena.

75    The Inspector-General says that some of the documents described in the Subpoena, namely documents which would fall within categories 6 and 12 of the Subpoena, were previously in the possession, custody and control of the Inspector-General. However, the original versions of those documents were produced to the Supreme Court of NSW on 12 May 2015 in response to the Supreme Court Subpoena. The documents that were produced to the Supreme Court of NSW in response to the Supreme Court Subpoena have not been returned to the Inspector-General.

76    As at 28 January 2016, Mr Dean says that, based on an inquiry made by him of the Registry of this Court, he believes that the applicants have not written to the Registrar of this Court to request that the Registrar ask the Supreme Court of NSW to send the documents that were produced in answer to the Supreme Court Subpoena to the Registrar pursuant to r 24.24 of the Rules. Mr Dean also believes that the applicants have not applied to the Supreme Court of NSW for leave to use or otherwise rely upon the documents produced to the Supreme Court of NSW in response to the Supreme Court Subpoena in these proceedings.

77    For completeness, Mr Dean also says that the Inspector-General does not have possession, custody or control of documents described in categories 1, 3, 4, 5, 7, 8, 9, 10 and 11 of the Subpoena and that the first applicant, Fewin, has not yet paid the costs of the Inspector-General responding to the Supreme Court Subpoena which were agreed at $2,500.

Consideration

78    The Subpoena is, but for three categories not sought, identical to the Supreme Court Subpoena. The evidence in relation to the status of the documents sought in the Subpoena is not entirely clear but I accept that:

(1)    the Inspector-General has produced documents in answer to the Supreme Court Subpoena;

(2)    the original documents called for by categories 6 and 12 of the Subpoena are no longer in the custody, control or possession of the Inspector-General as they were produced to the Supreme Court of NSW in answer to the Supreme Court Subpoena;

(3)    the Inspector-General does not have possession, custody or control of the documents described in categories 1, 3, 4, 5, 7, 8, 9, 10 and 11 of the Subpoena; and

(4)    the documents produced by the Inspector-General in answer to the Supreme Court Subpoena have not been returned to her and so I infer remain in the possession of the Supreme Court of NSW.

79    There is no issue between the parties about the Inspector-General’s standing to bring the application to set aside the Subpoena. Should there be any doubt about that, she is in my opinion, as the addressee of the Subpoena, a person who has sufficient interest to apply to set aside the Subpoena pursuant to r 24.15(1).

80    In Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 4) (2010) 269 ALR 76 Yates J said at [37] to [38]:

A subpoena will be set aside to prevent an abuse of the court’s process. The power to control and supervise the court’s process is directed to preventing injustice. In this context, injustice is not simply a question of the true purpose for which the issue of the subpoena was procured, but also the effect or impact of the subpoena on the person to whom it was issued: Trade Practices Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90 at 102; Hamilton v Oades (1989) 166 CLR 486 at 502. …

As the grounds on which this part of the motion is advanced recognise, the examination of the purpose for which the issue of a subpoena is procured may involve an examination of different facets of the notion of “purpose”, involving a spectrum of considerations ranging from essentially objective factors to essentially subjective factors. … In either case, the onus of satisfying the court that there is an abuse of process lies on the person asserting the existence of the abuse: Williams v Spautz (1992) 174 CLR 509 at 529.

81    The Inspector-General submits that the Subpoena ought not to have been issued because the documents of which it requires production are in the possession of another court, the Supreme Court of NSW, by virtue of the Supreme Court Subpoena. Further the Inspector-General submits that there is a process provided in the Rules, which the applicants have not accessed, to obtain documents which are in the possession of another court.

82    The Supreme Court Subpoena required the Inspector-General to produce the Supreme Court Subpoena or a copy of it and “the documents or things specified in the Schedule” to the court. It follows that once the Inspector-General produced the documents or things specified in the schedule to the Supreme Court Subpoena, those documents or things were in the possession of the Supreme Court of NSW. Those documents or things remain in the possession of the Supreme Court of NSW.

83    The applicants submit that the prohibition in r 24.12(2)(b) against issuing a subpoena requiring the production of a document or thing in the custody of a court is a prohibition against issuing a subpoena to a court rather than a prohibition against issuing a subpoena to a third party where the particular document or thing specified in the schedule to that subpoena is in the custody of a court. I do not think that follows. The words of the rule are wider than contended for by the applicants. They do not impose a prohibition on an issuing officer from issuing a subpoena directed to the Court or another court. They impose a prohibition on an issuing officer from issuing a subpoena requiring the production of a document or thing in the custody of the Court or another court. The Rules, in r 24.24, provide a process by which documents or things which are in the custody of another court can be requested from that other court, brought to this Court and produced.

84    For completeness I note that r 24.24 has been considered on two previous occasions by this Court but not in relation to the issue now before me. In each of those matters a request had been made by one of the parties pursuant to r 24.24 for this Court to obtain a file from the Family Court of Australia. Once the file in each case had been provided the requesting party sought leave to inspect the files produced. It was the issue of whether inspection should be allowed which was before the Court in both instances: see Graham v Colonial Mutual Life Assurance Society Ltd (2013) 216 FCR 458; International Litigation Partners Pte Ltd v Commissioner of Taxation [2014] FCA 671.

85    The applicants were aware of the Supreme Court Subpoena, which was issued in proceedings in which the first, second and third applicants were plaintiffs. They were also aware of production by the Inspector-General in response to that Subpoena. In my opinion, the Subpoena ought not to have been issued and the process afforded by the Rules, where a document or thing is in possession of another Court, ought to have been followed by the applicants in relation to the documents that were produced in answer to the Supreme Court Subpoena. On that basis and having regard to the effect of the Subpoena on the person to whom it was issued, requiring the Inspector-General to devote resources where those same documents had been produced to another court, the Subpoena ought to be set aside.

86    The Inspector-General also relies on the fact that the documents which were produced in answer to the Supreme Court Subpoena are subject to the implied undertaking that requires application to be made to the Supreme Court of NSW to use those documents in the present proceeding. The implied undertaking, sometimes formulated as an “obligation”, is an undertaking that the parties in a proceeding who obtain discovery are taken to undertake to the Court that the documents so obtained will not be used for any purpose other than the proceedings in which they are produced: see Hearne v Street (2008) 235 CLR 125 (Hearne v Street) at [106] (Hayne, Heydon and Crennan JJ). In Hearne v Street at [107] the majority referred to Harman v Secretary of State for Home Department [1983] 1 AC 280 at [308] where Lord Diplock said:

The use of discovery involves an inroad, in the interests of achieving justice, upon the right of the individual to keep his own documents to himself; it is an inroad that calls for safeguards against abuse, and these the English legal system provides … through its rules about abuse of process and contempt of court.

87    Given the basis upon which I have found that the Subpoena should be set aside, it is not necessary for me to determine whether the Subpoena is an abuse of process because the documents which it seeks are subject to the implied undertaking from which the applicants need to seek release. However, I note that while the documents that were produced in answer to the Supreme Court Subpoena are subject to the implied undertaking, a potential breach of the implied undertaking not to make collateral use of documents produced in one set of proceedings outside of those proceedings becomes an issue when the parties attempt to use those documents in the present proceedings. It is a matter for the applicants to consider whether and, if so when, they need to make application to the Supreme Court of NSW to be released from their implied undertaking in respect of any of those documents.

Disposition

88    In light of my findings, I will make an order pursuant to r 24.15(1) of the Rules that the Subpoena be set aside and will order the applicants to pay the Inspector-General’s costs of her interlocutory application filed 29 January 2016.

Associate:

Dated:    12 May 2016

SCHEDULE OF PARTIES