Re Peter Leopold Clyne Ex Parte: John William O'Brien [1986] FCA 15 (5 February 1986)

FEDERAL COURT OF AUSTRALIA

Re: PETER LEOPOLD CLYNE
Ex Parte: JOHN WILLIAM O'BRIEN
No. P929 of 1983
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Wilcox J.

CATCHWORDS

Bankruptcy - Public examination of bankrupt - Objection to question regarding overseas bank accounts - Whether question is relevant to purpose of examination - Relevance of circumstance that answer to question may cause someone to take criminal proceedings against bankrupt - Relevance of poor health of bankrupt - Possible effect of answer upon pending Application in respect of administration of estate.

Bankruptcy Act 1966 s. 69

Re Paget (1927) 2 Ch. 85, Re Atherton (1912) 2 KB 251, Re Harding (1981) 57 FLR 320 applied.

HEARING

SYDNEY
5:2:1986

ORDER

The question as to whether or not a telex bearing date 9 March 1983 was sent by the debtor, Peter Leopold Clyne, to which question an objection was made on behalf of the said debtor and overruled by a Deputy Registrar of the Federal Court of Australia, is a proper question.
THE COURT DIRECTS THAT:

1. The bankrupt, Peter Leopold Clyne, answer the said

question.

2. The matter be referred back to the said Deputy Registrar
for a continuation of the public examination of the
bankrupt under s. 69 of the Bankruptcy Act 1966.

NOTE: Settlement and entry of orders is dealt with by
Bankruptcy Rule 124.

DECISION

There is currently proceeding before a Deputy Registrar of this Court the public examination under s. 69 of the Bankruptcy Act 1966 of Peter Leopold Clyne. The public examination went for some days during 1985 and was then adjourned. A period of six days, the first of which is to-day, was allocated by the Deputy Registrar for the completion of the public examination.

2. Between the date upon which the public examination was adjourned last year and the present date the trustee in bankruptcy and his solicitor journeyed to Austria and there obtained certain information in relation to bank accounts and assets said to be owned by, or under the control of, the bankrupt, Peter Leopold Clyne. Certain assets were brought back to Australia and Mr Clyne has filed an Application in this Court in which he claims that the assets are not assets of his estate and seeks appropriate relief. That application has been listed before the Chief Judge for directions on 14 April next.

3. During the period of the adjournment of the public examination an application was made to Beaumont J. in respect of the provision of money to enable the bankrupt to be represented by senior and junior counsel at the resumption of the public examination. In the view taken by his Honour it was not necessary to provide funds for senior counsel to be briefed on the hearing of the public examination but his Honour did make an order to enable consultation by junior counsel, for whose fees provision was made, with senior counsel in regard to the public examination. In conjunction with that application counsel for the trustee was requested to provide to those representing the bankrupt a list of the topics about which he would be questioned upon the resumption of the public examination. The topics, which were listed in a letter from counsel for the trustee dated 19 December 1985, included the subject matter of the bankrupt's assets overseas, overseas bank accounts, overseas passbooks -- and in particular a passbook having the code name "Slezak" -- and matters relating to an entity which -- I am informed -- was created under the law of Liechtenstein, and was previously known as Kobenzl Holdings Anstalt and is now known as Warlock Investments Anstalt.

4. In preparation for the resumption of the public examination to-day counsel for the trustee prepared a bundle of documents which were identified as MF184. These documents appear to be communications between a bank in Vienna known as the Creditanstalt Bankverein and Mr Clyne. Senior counsel for the trustee to-day referred Mr Clyne to this bundle of documents and, in the first instance, took him to the various individual documents for the purpose of having him confirm the apparent nature of the particular documents. The third document in the bundle appeared to be a telex sent by Mr Clyne. The question whether or not that in fact was a telex sent by the bankrupt was put and answered. Counsel then showed Mr Clyne the fourth document, which also purported to be a telex but bearing date 9 March 1983, and put the same question. At that point counsel on behalf of Mr Clyne objected to the question. The Deputy Registrar heard argument upon the validity of the objection, overruled it and required Mr Clyne to answer the question. Mr Clyne through his counsel indicated a desire to have that matter resolved by a judge and the Deputy Registrar thereupon referred the matter to the Court pursuant to s.69(5) of the Act. As I understand the position from counsel, there are likely to be a considerable number of questions similar to that to which objection has been taken. Counsel on behalf of Mr Clyne has indicated that his client objects to answering any questions dealing with the Viennese bank account, or accounts, or relating to Kobenzl Holdings Anstalt. In effect I am being asked to consider those subject matters and to give a ruling which, hopefully, will be of assistance to the Deputy Registrar in dealing with any objection which may be made to any like question as the public examination progresses.

5. On behalf of the bankrupt four separate matters have been argued as going to the question of whether or not the objection ought to be upheld. I will deal with them in an order differing from that put by counsel because it seems to me that the logical first question arises out of the last matter argued: whether or not the question is extraneous to the purpose of the examination. Section 69(1) of the Act provides:

"69(1) The trustee of the estate of a
bankrupt may, at any time, make an
application, in writing, to the Registrar for
the examination of the bankrupt, on oath, as
to the conduct, trade dealings, property and
affairs of the bankrupt."

It is that examination which is presently in progress.

6. It will be noted that the subject matter of the examination includes not only the question of what property the bankrupt might have, and which is obviously a matter of concern to the trustee pursuant to his duty to get in for the benefit of the creditors whatever property may be available for distribution amongst them, but also includes the conduct of the bankrupt. The authorities make it clear that this subject matter is to be construed in a wide sense pursuant to the Court's obligation to make inquiry as to the conduct of the bankrupt for the purposes of reporting to and protecting the public. See re Paget (1927) 2 Ch 85. In that case it was pointed out that the administration of the bankruptcy law is a function which extends beyond the mere collecting of debts on behalf of creditors, important though that matter is. In re Atherton (1912) 2 KB 251, Phillimore J. pointed out that the consideration of the conduct of the bankrupt is relevant in relation to any application for discharge which he might in the future make. This is simply a particular application of the principle that the court is concerned to protect the public.

7. The principles underlying these cases were applied to our Act by Lockhart J. in re Harding (1981) 57 FLR 320 and I apply them for the purpose of considering whether or not the questions relate to matters extraneous to the proper subject matter of a public examination.

8. As I understand the purpose of the questions, both from what has been said in submissions and from the letter of counsel in which the topics were specified, the trustee has become aware of specific matters relating to Austrian bank accounts since the date of the adjournment of the public examination in 1985. Counsel for the bankrupt indicated that during the 1985 public examinations there were questions put to the bankrupt in relation to any overseas bank accounts he might have. I gather from what has been said to me that Mr Clyne at that time denied the existence of any overseas bank accounts in which he had an interest. Those questions necessarily had to be put in a fairly general way because the detailed information which has since come to hand was not then available. That information has come to hand in the form of documents which on their face -- and I emphasize that the apparent position may turn out to be incorrect when further information is to hand -- indicate an association between Mr Clyne and various bank accounts, that is an association in which he has some control over the operations of the bank accounts. Under such circumstances it seems to me that questions relating to those bank accounts are clearly within the purview of s.69(1). It may be that those questions will reveal the existence of hitherto undisclosed property; it may be that they will indicate matters relevant to the conduct of the bankrupt in relation to the operation of his financial affairs. The documents appear to be relatively recent and it is the obligation of the trustee to find out what is the position in relation to the various bank accounts which are referred to therein.

9. I am of the view that the matters sought to be investigated by the trustee fall squarely within s.69(1) and that the objection on the ground that the questions are extraneous to a proper public examination must be rejected.

10. The second matter is that it is said that answers to the questions may expose the bankrupt to criminal proceedings and may tend to incriminate him. Section 69(12) of the Act provides:

"69(12) The bankrupt shall answer all
questions that the Court, the Registrar or the
magistrate puts or allows to be put to him
and, unless the Court, the Registrar or the
magistrate, as the case may be, otherwise
directs, is not excused from answering any
such question by reason only of the fact that
the answer to it may tend to incriminate him."

Counsel for the bankrupt refers to the possibility of a criminal prosecution as, for example, for some breach of the Banking (Foreign Exchange) Regulations, or for perjury in relation to evidence previously given. He adds that there has been one previous prosecution of his client, apparently at the instance of an officer of the Australian Taxation Office; a prosecution which resulted in a conviction of his client for a breach of the Banking (Foreign Exchange) Regulations. It is said that, if answers are given which indicate that a criminal offence may have occurred, it is likely, having regard to the relationship between the bankrupt and the Deputy Commissioner of Taxation, that a further prosecution will be launched.

11. I think that it is clear that the policy of the Act as set out in s.69(12) is that questions are to be answered notwithstanding that the answer may tend to incriminate the bankrupt. It must follow that the fact that the answer may cause some person, whether a normal prosecution authority or some other person, to realize the possibility of a successful criminal prosecution and to launch that prosecution is not a reason for permitting a bankrupt to decline to answer. In the normal course the giving of an answer indicating the commission of a criminal offence must give rise to the possibility, if not the expectation, that somebody would commence a criminal prosecution. If it matters, there is nothing before the Court or, indeed, in the history of the litigation between the parties to cause me to believe that any decision to prosecute the bankrupt for a criminal offence would be made vexatiously or without a proper foundation.

12. The third matter to which reference has been made is the health of the bankrupt. In an affidavit which was put before the Deputy Registrar, and which was read over the objection in certain respects, I gather, of the trustee, it is said by Mr Clyne that he suffers from angina pectoris and is under medical care. For the purposes of this application I accept that this is so but I do not think that the state of health of the bankrupt furnishes a reason for his refusing to answer questions. No doubt in the conduct of an examination a Court or a Registrar will have cognizance of any health problem which a bankrupt may suffer and will make allowance for that problem in terms of sitting hours and the necessity for medical treatment, etc. . But I do not think that the fact that a person suffers ill health furnishes a reason why questions should not be required to be answered. It may be thought that a person who is stressed to the point of detriment to health by having to undergo a public examination would be best advantaged by giving as much information as possible and so reducing the length of the examination hearing.

13. The final matter to which reference is made is the pending Application of Mr Clyne in respect of the assets which were brought back by the trustee from Vienna. It is said that answers furnished by Mr Clyne, if he is compelled to answer the questions sought to be put to him, might prejudice his case in that Application. I admit to some difficulty in seeing the consistency between that claim and the claim that the present questions are irrelevant and extraneous to the s.69 inquiry. It seems to me implicit in this final submission that the questions may, or are likely to, go to matters which are relevant in determining the ownership of assets said to be the property of the bankrupt. Be that as it may, the fact that the bankrupt might find himself embarrassed in other litigation is not a reason for declining to answer questions under s.69 of the Bankruptcy Act. It is not without importance that sub-s.(12) opens with the words:

"The bankrupt shall answer all questions
that the Court . . . puts or allows to be put to
him . . ."

That is the overriding principle. If the answers to these questions tend to make it more difficult for the bankrupt to succeed in other litigation, and in particular litigation relating to the administration of the bankruptcy, then that is an event which is not considered by the statute to be a reason for excusing answers. Indeed it might be thought that the administration of the bankruptcy, and the resolution of other litigation in connection with the bankruptcy, would be facilitated rather than impeded by information being obtained by the trustee at the public examination stage.

14. The conclusion I have reached is that the question which was objected to is a proper question. I direct that the bankrupt answer the question which was put to him before the Deputy Registrar and I refer the matter back to the Deputy Registrar for a continuation of the public examination.