Burness v Nathan - [2010] FMCA 495

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BURNESS & ANOR v NATHAN

[2010] FMCA 495

BANKRUPTCY – Refusal by bankrupt to comply with requirements of s.264C of the Bankruptcy Act – bankrupt refusing to comply with direction of Court to comply before Registrar with s.264C – bankrupt imprisoned for one month.

Bankruptcy Act 1966, s.264C

Re; Athanasas (bankrupt) (No 2) [2008] FCA 1016

Applicant:

PAUL ANDREW BURNESS AND MORGAN GERARD JAMES LANE
AS TRUSTEES OF THE BANKRUPT ESTATE OF KALAI NATHAN

Respondent:

KALAI NATHAN

File Number:

MLG 1305 of 2009

Judgment of:

Burchardt FM

Hearing date:

17 June 2010

Date of Last Submission:

17 June 2010

Delivered at:

Melbourne

Delivered on:

17 June 2010

REPRESENTATION

Counsel for the Applicant:

Mr N. Mazzeo

Solicitors for the Applicant:

Lennon Mazzeo

The Respondent:

In person

ORDERS

Mr Nathan is found guilty of the commission of a contempt of this Court in that he refused to obey a direction of the Court to attend before Registrar Allaway and to comply with section 264C of the Bankruptcy Act 1966 (“the Act”).
Mr Nathan is sentenced to imprisonment for one month commencing forthwith.

AND THE COURT DIRECTS THAT

The matter be referred back to Registrar Allaway for further hearing and disposition.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1305 of 2009

PAUL ANDREW BURNESS AND MORGAN GERARD JAMES LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF KALAI NATHAN

Applicant

And

KALAI NATHAN

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

This matter was referred to the Court today by Registrar Allaway.This was done because Mr Nathan was refusing to comply with his obligations pursuant to s.264C of the Bankruptcy Act 1966 (“the Act”). Registrar Allaway’s assertion to me that this was so is plainly correct because Mr Nathan has made that plain before me also. I have dealt with Mr Nathan before. I heard and determined another matter some time ago involving him.
No application that I should disqualify myself has been made, but I have turned my mind to the issue. I bear in mind that I made adverse credit findings, so far as I can recall, against Mr Nathan. But this is an unusual case. There are no questions of credit; the facts are wholly clear and uncontested. No reasonable basis exists in my view for me to transfer this matter to another Federal Magistrate. The real problem that the case provides is that Mr Nathan has refused to be sworn or give evidence, and I infer, to provide such documentation as the Court might require him to provide.
The summons was issued for his examination on 10 December last year by Registrar Allaway’s orders to that effect, and it has obviously come before the Court today. To date Mr Nathan has simply refused to comply. This is problematic because of the terms of s.264C of the Act. I will read them out:
“(1) A person appearing before the Court, the Registrar or a Magistrate for the purpose of being examined under this Act, or appearing as a witness before the Court, shall not:
(a) refuse or fail to be sworn or to make an affirmation;
(b) refuse or fail to answer a question which he or she is required to answer by the Court, the Registrar or the magistrate, as the case may be; or
(c) refuse or fail to produce any books that he or she is required by the Court, the Registrar or the magistrate, as the case may be, or by a summons under this Act, to produce.
Penalty: $1000 or imprisonment for six months, or both.
(1A) Subsection (1) does not apply if a person has a reasonable excuse.
(2) Nothing in this section limits the power of the Court to punish persons for contempt of court, but a person shall not be punished under this section and for contempt of court in respect of the same act or omission.”
When the matter was referred to me, Mr Nathan really in effect said two things about the sequestration order: First, he said there was no sequestration order sealed and signed by the Federal Magistrate against him and that he was not bankrupt; second, he complained that it was improper for the creditor to have pursued an application to bankrupt him in Sydney after failing in a similar proceeding in Melbourne. The difficulty with both those propositions is that the decision of Barnes FM given on 7 October 2008 clearly canvassed Mr Nathan’s arguments about res judicata and issue estoppel and the like. It is clear that he failed totally in those arguments before her Honour.
It is also clear from the orders that form part of the judgment that a sequestration order was indeed made and indeed the last paragraph of Barnes FM’s judgment relevantly reads:
“Accordingly I make a sequestration order against the estate of Kalai Nathan”.
It is quite clear from exhibit A1 that in due course administratively that order was taken out by a Registrar. There is no reasonable excuse advanced by Mr Nathan for not complying with his obligations pursuant to s.264C. I adjourned this morning once the problem had become clear and once I had indicated to Mr Nathan the likely serious, very serious consequences of non-compliance. I adjourned the matter so that Mr Nathan could see a duty lawyer. I am indebted to the duty lawyer for seeing Mr Nathan on short notice.
When the matter returned to Court, the only matter raised by

Mr Nathan was a reiteration of his complaint about the issuing of the second proceeding in Sydney. I have given Mr Nathan every chance to comply, and I have told him that gaol was inevitable should he fail to do so. It is clear that a fine would have no coercive effect upon

Mr Nathan because he is bankrupt and would not be able to pay it.
Under s.264C(2) of the Act, I have in a sense a choice of dealing with Mr Nathan either under the terms of the penalty provisions of the legislation or for contempt of court. Here and before me it is

Mr Nathan’s refusal to comply with my direction to him to comply with his obligations under s.264C that constitutes the misconduct. The actual failure to answer questions and the like took place before Registrar Allaway. In the circumstances it seems to me proper to deal with this matter as a matter of contempt. That is what it plainly is. I have directed Mr Nathan to comply with an imperative obligation under s.264C and he has refused to do so.
It is well established that ordinarily contempt committed in the face of the Court should not be dealt with immediately and should in fact be the subject of a charge and a referral to another judicial officer. In this case, however, because of the very unusual circumstances, I have not done so. First, from everything Mr Nathan has said and indicated, there is no suggestion that any further time for contemplation would in fact assist him to a more realistic appreciation of his obligations.
Second, the nature of the contempt is clear and unambiguous. It prevents the proper conduct of Mr Nathan’s estate and it breaches a duty set out by the statute in imperative terms. The statute simply does not contemplate that people can refuse to do what s.264C requires them to do. To permit any kind of obfuscation in relation to those obligations would be to bring the administration of the scheme of bankruptcy into disrepute. In my view it calls in these unusual circumstances for a summary disposition. It is also a point, although it is less significant, that further delay in the disposition of Court time and the like would scarcely be appropriate in these circumstances.
There are few cases referred to in the commentary in the standard bankruptcy work and that is doubtless because only very rarely fortunately do these sorts of very regrettable circumstances arise. I have, however, been able to consult the decision of the Federal Court of Australia constituted by Lander J in the matter of Ambrose (Trustee), in the matter of Re; Athanasas (bankrupt) (No 2) [2008] FCA 1016. That case involved a bankrupt who kept saying he would comply with the obligations with which we are concerned, but ultimately failed to do so.
I refer to his Honour’s judgment generally. But I would quote paragraphs [63], [64] and [66]. At [63] his Honour said:
“63. It is accepted that a sentence of imprisonment is a punishment of last resort. However, it is a punishment which must be imposed if it is necessary for the purpose of vindicating the Court’s authority.
64. In this case, Mr Athanasas is a bankrupt and it would seem to me that a fine would be inappropriate. Notwithstanding that imprisonment is a sentence of last resort, it seems to me, having regard to the conduct of Mr Athanasas over a very long period since the matter first came before the Registrar and since he first informed the Registrar he would comply with the summons, a sentence of imprisonment is necessary.
…
66. It is necessary, in my opinion, to reassert the Court’s authority and, in those circumstances, I am not prepared to suspend the sentence of imprisonment.
67. I sentence Mr Athanasas to three months’ imprisonment.”
Contempt of Court is not about being rude to the Court of itself. The contempt power exists to enable the Court to function. The Court cannot function and cannot discharge its statutory obligations pursuant to s.264C if persons are permitted simply to refuse to do so. This is, as I say, an extremely regrettable circumstance and it gives me absolutely no pleasure to have to deal with it, but in the circumstances I will order that Mr Nathan be imprisoned for one month commencing forthwith. Orders have been signed and sealed. Copies will be made available by my associate to Mr Nathan, to the relevant police officers, and to

Mr Mazzeo.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate:

Date: 17 June 2010