Re Anthony James Schofield & Anor (Debtors); Ex Parte: William Balfour Rangott (Applicant) v P & B Barron Pty Ltd (Respondent) [1997] FCA 39 (5 February 1997)

CATCHWORDS

BANKRUPTCY - Evidence - admissibility of transcript taken under s81 inquiry into bankrupt's affairs - whether Evidence Act 1966 allows transcript to be tendered as the evidence of each witness - Bankruptcy Act limits admissibility to any witness who subsequently becomes a party - company named as respondent in principal application - whether company can be orally examined on transcript - whether director of company can give evidence as the company - no evidence that company was properly an associated entity under the Bankruptcy Act.

Bankruptcy Act: s81(17); s255

Air Pacific Ltd v TWV [1993] FCA 6; (1993) 40 FCR 1

Beach Petroleum NL v Johnson [1993] FCA 283; (1993) 43 FCR 1

Buck v Comcare (1996) 137 ALR 335

Environment Protection Authority v Caltex Refining Co Pty Ltd [1993] HCA 74; (1993) 178 CLR 477

Re BPTC Ltd (in liq) (1992) 8 ACSR 533

Re Csidei; Ex parte Andrew [1979] FCA 87; (1980) 39 FLR 387

Re Mannella; Ex parte Official Trustee in Bankruptcy v Giorgio (1989) 21 FCR 50

Smorgon v ANZ [1976] HCA 53; (1976) 134 CLR 475

Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153

TPC v Abbco Iceworks Pty Ltd [1994] FCA 1279; (1994) 52 FCR 96

Pearce and Geddes, Statutory Interpretation in Australia, (Butterworths, Sydney, 4th Ed, 1996)

Report of the Committee Appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth (1962) Commonwealth Government Printer

EVIDENCE ACT - Transcript of proceedings - admissibility of transcripts taken under inquiry provisions of the Bankruptcy Act 1995 - whether exceptions to rule of hearsay provided under Evidence Act affect the specific provisions governing admissibility of transcript under the Bankruptcy Act.

Evidence Act (Cth): s8(1); s64; s67 and s190

RE ANTHONY JAMES SCHOFIELD and CECILIA ANNE SCHOFIELD (Debtors); Ex Parte WILLIAM BALFOUR RANGOTT (Applicant) P & B BARRON PTY LTD (Respondent)

No AX13 of 1992

FINN J

CANBERRA

5 FEBRUARY 1997

IN THE FEDERAL COURT OF AUSTRALIA )

)

GENERAL DIVISION )

) No AX13 of 1992

BANKRUPTCY DISTRICT OF THE )

)

AUSTRALIAN CAPITAL TERRITORY )

RE: ANTHONY JAMES SCHOFIELD and CECILIA ANNE SCHOFIELD

Debtors

EX PARTE: WILLIAM BALFOUR RANGOTT

Applicant

P & B BARRON PTY LT

ANC 000 607 143

Respondent

COURT: FINN J

PLACE: CANBERRA

DATE: 5 FEBRUARY 1997

MINUTES OF RULING

THE RULING OF THE COURT IS THAT:

none of the transcripts the trustee seeks to use in evidence in the principal proceedings are admissible under s81(17) of the Bankruptcy Act 1966 or by virtue of s64 and s67 or 190(3) of the Evidence Act.

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

IN THE FEDERAL COURT OF AUSTRALIA )

)

GENERAL DIVISION )

) No AX13 of 1992

BANKRUPTCY DISTRICT OF THE )

)

AUSTRALIAN CAPITAL TERRITORY )

RE: ANTHONY JAMES SCHOFIELD and CECILIA ANNE SCHOFIELD

Debtors

EX PARTE: WILLIAM BALFOUR RANGOTT

Applicant

P & B BARRON PTY LTD

ACN 000 607 143

Respondent

COURT: FINN J

PLACE: CANBERRA

DATE: 5 FEBRUARY 1997

REASONS FOR RULING

I have been asked to rule on a quite narrow issue involving the admissibility in proceedings under the Bankruptcy Act ("the Act") of transcripts of evidence given at an examination conducted under s81 of the Act ("s81 transcripts"). To put that issue in context it is appropriate first to refer briefly to the factual background of the matter.

On 24 July 1992 Anthony James Schofield and Cecilia Anne Schofield executed a deed of assignment under Part X of the Act. The successor trustee (as of 15 December 1992) under the deed is William Rangott ("the trustee"). He is the applicant in this proceeding.

The trustee has taken proceedings under s120 and s121 of the Act to have declared void as against him a mortgage given by the Schofields to P & B Barron Pty Ltd ("the company"). I will refer to those proceedings as the "principal proceedings". The present matter arises in it.

On 4 and 5 May 1995 the trustee conducted an examination under s81 of the Act of (inter alia) (a) Patrick Michael Barron ("Mr Barron"); (b) Beryl Mary Barron ("Mrs Barron"); (c) the "Proper Officer" of the company; and (d) persons who, I was informed from the bar table, were variously the solicitors for either or both the Schofields and the Barrons (and the company), the former bank manager of the Schofield's and directors of a company that leased the property the subject of the mortgage in the principal proceedings.

The trustee now wishes to have parts of the transcripts of the examination of these witnesses admitted in evidence in the principal proceedings. To that end he served on the company three notices under the Evidence Act 1995 (Cth) ss64, 67 and 190, notifying his intention (i) to prove (by means of the transcripts) representations made by specified witnesses at the examination; and, in the alternative, (ii) to seek an order under s190(3) that the provisions of the Evidence Act 1996 do not apply to the relevant representations contained in the transcripts.

The company for its part gave notice under s68 of the Evidence Act of its objection to this use of this evidence and on a variety of grounds I need not enlarge upon here.

I agreed to rule upon this particular evidentiary issue before the hearing of the principal proceedings. At the preliminary hearing a further notice was served by the trustee under ss64, 67 and 190 of the Evidence Act, its object being to meet at least those objections raised by the company involving defects in form. Whether or not it was successful in so doing is not a matter I need determine.

At the preliminary hearing counsel for the trustee sought for the first time to have at least Mr Barron's transcript admitted under s81(17) of the Act to the extent that it was given as evidence of the company. Again I was informed from the bar table that Mr and Mrs Barron were the directors of the company though Mrs Barron was a passive director. Given this particular development, I invited both parties to make written submissions on this matter.

After the preliminary hearing and the receipt of the written submissions noted above, the Bankruptcy Legislation Amendment Act ("the Amending Act") was both passed and came into force. It made changes to s81(17) of the Act as also to s255, the latter provision having a relevance to which I will later refer.

Again it was necessary to receive written submissions on the bearing, if any, that the Amending Act had on the issue of admissibility of the transcript(s) in the principal proceeding.

In the event the admissibility of the transcripts (or of parts of them) is advanced on two bases - the one, under the Evidence Act 1924 ; the other (at least in relation to Mr Barron) under the Bankruptcy Act.

Counsel for the company by way of preliminary objection has submitted that the Evidence Act provisions can have no bearing upon the question of the admissibility of the transcripts as such. The provisions of the Bankruptcy Act alone, it is said, govern this particular matter.

It is appropriate to deal with this objection at the outset. It is, in my view, fatal to the notices served by the trustee under the Evidence Act.

The Preliminary Objection

Because the objection taken by the company involves in part a consideration of several provisions affected by the Amending Act, it is necessary to refer to those provisions in both their unamended and amended forms.

Prior to the Amending Act, s81(17) of the Act provided, insofar as is relevant, that:

"the transcript of the evidence given at the examination of a person under this section (being a transcript certified, or certified, signed and sealed, in pursuance of section 255):

(a) may be used in evidence in any proceedings under this Act in which the person is a party;" (emphasis added.)

For its part, the Amending Act repealed the words in parenthesis which I have emphasised.

Section 255 of the Act in its unamended form provided (relevantly) that:

"(9) Where evidence given by a person before the Court, the Registrar or a magistrate is admissible in proceedings under this Act, the evidence may be proved by the production of a transcript of the evidence, being a transcript certified, or certified, signed and sealed, as prescribed."

Rule 131 of the Bankruptcy Rules, I would note, prescribed how certification was to be effected.

The Amending Act repealed the whole of such of s255 as was then in force (including the subsection set out above) and enacted in its stead a new s255 that provides (inter alia) that:

"(1) A transcript or electronic or magnetic recording that purports to be a record of proceedings under section 77C or 81, or of proceedings before a court, is to be taken to be a record of that kind, unless the contrary is proved.

(2) The transcript or recording is admissible as evidence of the matters described by a person whose words are recorded in the transcript or recording, unless the Court, or a court in which the transcript is sought to be introduced, makes an order to the contrary."

I would also note at this stage for the sake of completeness that s8(1) of the Evidence Act, insofar as presently relevant, provides that:

"This Act does not affect the operation of the provisions of any other Act ..."

Telescoping the various written submissions made by the company, its objection to the trustee's reliance on the provisions of the Evidence Act involves the following propositions:

(i) the Bankruptcy Act creates its own scheme governing the admissibility of s81 transcripts in proceedings under that Act;

(ii) neither before nor after the Amending Act would that scheme allow for the admission of any of the transcripts the trustee wishes to have put in evidence; and

(iii) that scheme is an exclusive one in relation to the use of transcripts in proceedings under the Act, leaving no scope for the Evidence Act to regulate the admissibility of transcripts whether under s64 (a hearsay evidence exception) or under s190(3) (the Court's limited power to dispense with particular provisions of the Evidence Act) in Bankruptcy Act proceedings.

The trustee, while not conceding this exclusive role to the Bankruptcy Act, nonetheless has submitted that the amended s255 now makes admissible all of the transcripts which he seeks to have put in evidence - a situation which may not have obtained prior to the 1996 amendment.

The first question, then, is whether the Bankruptcy Act itself would allow for these s81 transcripts to be used in evidence in the principal proceedings.

It is uncontroversial that, notwithstanding its various mutations since 1966, the object of the s81 examination is, to use the language of Lockhart J in relation to an earlier version of the section:

"to elicit information that may be relevant for the proper conduct of the bankruptcy and that may aid the process of finding and recovering assets available for distribution."

Re Csidei; Ex parte Andrew [1979] FCA 87; (1980) 39 FLR 387 at 390; see also Report of the Committee Appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth, para 111 (1962) Commonwealth Government Printer ("the Clyne Report").

While there has been an evolution (a) in the forms in which evidence given at examinations under s81 and its predecessors could be used in evidence in Bankruptcy Act proceedings; and (b) in the certification requirements, thereof prior to such use - the legislative history of s81 and of its 1924 Act predecessor (s80) makes plain that Parliament has long intended that the circumstances in which a person's transcript of evidence could be used in later proceedings under the Act should be quite circumscribed. Initially a person's evidence at an examination could only later be used in evidence in any proceeding "against him" under the Act: see eg Bankruptcy Act, s80(7). Now, as a result of the 1985 amendment to s81(17) it can be used in any proceeding under the Act "in which the person is a party": see Bankruptcy Amendment Act 1985 , s22; cf also Re Mannella; Ex parte Official Trustee in Bankruptcy v Giorgio (1989) 21 FCR 50 at 52-53. It is noteworthy that when the 1996 amendment deleted the certification requirement from s81(17), it left untouched the "person is a party" limitation.

Turning now to s255, it is clear that, prior to the 1996 amendment, sub-section (9) of the section (which alone is of present relevance) was not concerned with the admissibility in later proceedings of evidence given at a s81 examination, but, rather, with the proof of that evidence by means of a certified transcript. In other words, if a transcript of an examination was to be admissible into evidence under s255(9) it was so admissible because the evidence it reproduced was itself admissible in consequence of s81(17).

However, it has been submitted by the trustee that the effect of the 1996 amendment has been to transform totally the relationship of the two sections such that it renders all transcripts admissible in evidence unless the Court orders to the contrary.

The terms of s255(2) - set out above - may, at first flush, be thought to provide (a) for the use in evidence of a transcript/recording and (b) for the purpose for which that evidence can be used (ie as proof of the matters described therein). It clearly is designed to serve the latter purpose. Its express terms leave no doubt as to this. Neither does the Explanatory Memorandum to the amendment which indicates that s255(2):

"is designed to overcome the common law rules excluding hearsay evidence, and to enable evidence given at examinations and recorded interviews to be put on the record in proceedings in a court without the need for witnesses to repeat their account of events."

For my own part I am unable, though, to discern in the language of the sub-section any indication that the legislature intended in it to provide as well a rule providing for the admission into evidence of any and all transcripts/recordings of (inter alia) s81 examinations. The Explanatory Memorandum provides no indication of such an intention. And, when one has regard to s81(17) and its predecessors, the deliberate decision to retain the "person as a party" limitation in the sub-section is quite inconsistent with such an intention. Accordingly, I reject the submission made by the trustee.

The consequence of this, as I will later indicate, is that none of the transcripts the trustee seeks to put in evidence are admissible under the Bankruptcy Act. If they are admissible at all and whether in whole or in part, it can only be by virtue of the provisions of the Evidence Act.

The Applicability of the Evidence Act 1987

It is the company's submission that while s64 of the Evidence Act provides for the admission of "first-hand" hearsay evidence in civil proceedings generally, that provision - and, for that matter, s190 of the Evidence Act - has no application in relation to the use of s81 transcripts in proceedings under the Bankruptcy Act.

The essence of the submission is that s8 of the Evidence Act expressly provides that that Act does not affect the operation of the provisions of any other Act and that, if the Evidence Act could be used as proposed, it would render superfluous the limitation contained in s81(17) - a limitation, moreover, left untouched when that sub-section was amended in 1996 after the coming into force of the Evidence Act. Relatedly it is submitted that (1) as the s81 power to examine persons is an extraordinary power of an inquisitorial nature (see Re Csidei, above, at 391) and involves a compulsory process with penal consequences (ibid 392), and (ii) as the section has in consequence long contained a strict limitation (in s81(17)) on the use of the transcript of a person's evidence, it is highly unlikely that Parliament would have intended to have cast aside this limitation through the side-wind of the Evidence Act.

There is no doubt that while coercive powers to examine of the type found in s81 are an evolving feature in modern legislation, they are, nonetheless properly described as involving an "extraordinary jurisdiction": see Re Csidei, above at 392. The continued retention in s81(17) of a strict limitation on the admissibility of transcripts notwithstanding the periodic reviews of, and minor amendments to, s81 since the Clyne Report in 1962, should properly be taken (a) as involving a legislative recognition of the distinctive and coercive character of the "jurisdiction"; and (b) as bespeaking a specific and deliberate intent of the legislature to provide in consequence a specific regime governing the admissibility of s81 transcripts. A statute of general application should not, in my view, be construed as displacing, or providing a potentially more expansive alternative to, that specific regime: see generally Pearce and Geddes, Statutory Interpretation in Australia, para 7.18ff (Butterworths, Sydney, 4th Ed, 1996).

Furthermore, such in my view is the nature of the s81 power that, if Parliament in the Evidence Act intended to remove or weaken the limitation imposed on the admissibility of s81 transcripts, it properly could have been expected to have done so expressly and unequivocally: cf Buck v Comcare (1996) 137 ALR 335 at 340.

My conclusion, then, is that sections 64, 67 and 190 of the Evidence Act do not provide bases which could result in the use in evidence in proceedings under the Bankruptcy Act of s81 transcripts.

The sole remaining question is whether any of the transcripts are, nonetheless, admissible under s81(17).

The Transcripts and s81(17)

Given the "person is a party" limitation on the use of transcripts contained in s81(17), it is only if any of the transcripts can properly be said to be that of the company, that that transcript may be used in evidence in the principal proceedings. The company is the only respondent in those proceedings.

One of the summons issued by the Registrar under s81 was to "The Proper Officer" of the company. Though no evidence was put before me to indicate that Mr Barron appeared in response to this summons (as well as in response to that issued to him in his personal capacity), I am prepared to assume for present purposes that he did so appear. I am also prepared to assume, again in the absence of evidence - though not of observations in submissions - that Mr and Mrs Barron were the directors of the company.

The trustee has submitted that the company can properly be said to have given evidence at the s81 examination either because evidence was given by the "proper officer" of the company or because it was given by Mr Barron who, as the directing mind and will of the company, gave evidence as the company. I presume in this that the submission was intended to be limited to evidence given at the examination by Mr Barron which related to the company and its affairs. I should add that the transcripts were not in evidence before me. I was, however, informed that there is not a separate transcript of evidence given by Mr Barron in his capacity as proper officer of the company.

The short answer to the submission is that a company could only be an "examinable person" for the purposes of s81 if it was an "associated entity" of the bankrupt: on "examinable person" and "associated entity" see s5(1). It has not been suggested that R & B Barron Pty Ltd falls within any of the criteria of s5B of the Act such as would make it "associated with" the Schofields.

The reference in the s5(1) definition to an "examinable person", while including in this context associated entities of the Schofields (including associated companies), does not in express terms otherwise exclude corporations. Nonetheless, given the ordinary rules (a) that a corporation cannot give oral evidence: Smorgon v Australia and New Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR 475; Trade Practices Commission v Abbco Iceworks Pty Ltd [1994] FCA 1279; (1994) 52 FCR 96 at 136; and (b) that "[o]ral evidence given by an officer of a corporation is that of the witness, not that of the corporation": Environment Protection Authority v Caltex Refining Co Pty Ltd [1993] HCA 74; (1993) 178 CLR 477 at 504; I am unprepared to conclude that the extension of the definition of "examinable person" for s81 purposes to include "associated" companies, should be taken as impliedly extending to any and all companies whether or not associated. I should add that the Explanatory Memorandum to the Bankruptcy Amendment Bill (which introduced the "associated entity" concept into the Act) provides no support for such an extension: see paras 8 and 9. On the contrary.

The conception that an associated company can, seemingly, be examined under s81 is anomalous enough. I see no reason to further extend that anomaly beyond associated companies - the more so when the information gathering purposes of s81, to the extent that these require oral examination of natural purposes, can as well be achieved by the examination of corporate officers: see Smorgon's case, above.

I conclude in consequence that even in relation to the summons served on the proper officer of the company, if evidence was given by a corporate officer in response to that summons, it could not be said for present purposes to have been the evidence of the company. And, if there is a transcript of that evidence, neither can it be said to be the transcript of the company's evidence. P & B Barron Pty Ltd was, simply, not the "person" examined at the s81 examination.

No point has been taken by the company as to whether, in any event, the summons issued by the Registrar was one to the company at all as distinct from one to "the proper officer" of the company (whoever that person might be): cf Re BPTC Ltd (in liq) (1992) 8 ACSR 533 at 539; Air Pacific Ltd v Transport Workers Union of Australia [1993] FCA 6; (1993) 40 FCR 1 at 4. I merely draw attention to this matter.

In the event none of the s81 transcripts can be used in evidence in the principal proceedings. This is not to say that particular statements made at the examination may not otherwise be admissible on other grounds. But that is a separate matter altogether.

At the preliminary hearing I raised with the parties the question whether any of the case law on the "organic theory" of corporations might assist the trustee in having the transcript of Mr Barron's evidence admitted under s81(17) as the evidence of the company: on the organic theory see eg Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153. Submissions were later made on this.

Here I need merely say that, even if the equation could properly be made of Mr Barron and the company for the purpose of proving the state of mind of the company - and I express no opinion on this: cf Beach Petroleum NL v Johnson [1993] FCA 283; (1993) 43 FCR 1 at 27ff - this would not assist the trustee in overcoming the difficulty I adverted to earlier: for s81 purposes, the company has not been shown to be an examinable person. My ruling is, then, that none of the transcripts the trustee seeks to use in evidence in the principal proceedings are admissible under s81(17) of the Bankruptcy Act or by virtue of s64 and s67 or s190(3) of the Evidence Act.

I certify that this and the preceding 19 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate

Dated: 4 February 1997

Counsel for the trustee : P Sheils QC

Solicitors for the trustee : Scott Sheils & Glover

Counsel for the respondent : S Burchett

Solicitors for the respondent : Eakin McCaffery Cox

Date of hearing : 22 November 1996

Date of judgment : 5 February 1997