De Sousa v Minister for Immigration, Local Government and Ethnic Affairs

Re: IAN JAMES MEREDITH
Ex parte: COMMONWEALTH BANK OF AUSTRALIA
No. Q P2302 of 1992
FED No. 146
Number of pages - 18
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
Cooper J.(1)

CATCHWORDS

Bankruptcy - petition seeking sequestration order - act of bankruptcy - jurisdiction of the Court to make sequestration orders - "ordinarily resident in Australia or had a dwelling house in Australia" - relevant date.

Bankruptcy Act section 188, section 43(1)

Vassis Ex parte: Lung (1986) 9 FCR 581

Re Taylor Ex parte Natwest Australia Bank Limited (Unreported: P2568 of 1991, 24 June, 1992)

On appeal to Full Court Wilcox, Burchett and Foster JJ. (G474 of 1992 Sydney 16 October, (1992))

Re Brauch (A Debtor) Ex parte Britannic Securities and Investments Limited (1978) 1 Ch 316

In Re Nordenfelt, Ex parte Maxim-Nordenfelt Guns and Ammunition Company (1895) 1 QB 151

HEARING

BRISBANE, 29 January, 9 March 1993

#DATE 19:3:1993

Counsel for the Applicant: Mrs D. Mullins

Solicitors for the Applicant: Ms D. Osborne of David J. Frank, Solicitors

Solicitors for the Respondent: Mr C.A. Wilkins of Clayton Utz

ORDER

THE COURT ORDERS:

1. The Bankruptcy Petition is dismissed.

2. The Petitioning Creditor pay the costs of Ian James Meredith

of and incidental to the Petition including reserved costs, if any.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

COOPER J. On 1 October, 1992 the Commonwealth Bank of Australia presented a petition seeking the sequestration of the estate of Ian James Meredith ("the debtor"). The act of bankruptcy relied upon was that within six months before the presentation of the petition the debtor signed an authority pursuant to section 188 of the Bankruptcy Act on 14 September, 1992 and/or a meeting of his creditors was called in pursuance of such an authority.

In paragraph 1 of the petition it was alleged that the debtor was at the date of the commission of the act of bankruptcy specified in the petition, personally present in Australia. It is common ground that the authority was signed by the debtor in the United States of America and he was not present in Australia as alleged in paragraph 1 of the petition. The petition was amended to delete the words in paragraph 1 "personally present in Australia" and to insert in lieu thereof the words "ordinarily resident in Australia or had a dwelling house in Australia".
On 3 November, 1992 the debtor filed a Notice of Intention to appear on the hearing of the petition and to oppose the making of any order on the grounds that :-

(a) The court had no jurisdiction to make a sequestration order against the judgment debtor.

(b) That the judgment debtor disputed the allegations contained in paragraph 1 of the Amended Creditor's Petition.

The jurisdiction of the court to make sequestration orders is contained in section 43(1) of the Bankruptcy Act 1966. Section 43:-

"43(1) Subject to this Act, where:

(a) a debtor has committed an act of bankruptcy; and

(b) at the time when the act of bankruptcy was committed, the debtor:

(i) was personally present or ordinarily resident in Australia;

(ii) had a dwelling-house or place of business in Australia;

(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or

(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor".

The only matter in issue between the parties on the contested hearing of the bankruptcy petition was the question of whether or not the debtor was on 14 September, 1992 ordinarily resident in Australia or had a dwelling house in Australia.
The approach to be taken by the Court in determining where a person is ordinarily resident for the purposes of the Bankruptcy Act is set out in the judgment of Mr. Justice Burchett in Vassis Ex parte: Lung (1986) 9 FCR 518. His Honour said (at 524-525) :-

"The question where a person is ordinarily resident is a question of fact: Levene v. Commissioners of Inland Revenue (1928) AC 217. It is obviously not to be answered, in respect of any particular time, by asking where that person was then resident. Otherwise, the word "ordinarily" would have no meaning. But even the unqualified concept of residence is not tied to the accidents of a day; for, as Viscount Sumner said in Commissioners of Inland Revenue v. Lysaght (19828) AC 234 at 234: 'One thinks of a man's settled and usual place of abode as his residence'. At the same time, his Lordship pointed out that 'in many cases in ordinary speech one residence at a time is the underlying assumption and, though a man may be the occupier of two houses, he is thought of as only resident in the one he lives in at the time in question'. In s43 of the Bankruptcy Act, the phrase is not 'resident in Australia', but 'ordinarily resident in Australia', and it expresses an alternative to 'personally present...in Australia'. In such a context, it must convey the former of the meanings which I have quoted from Viscount Sumner's speech rather than the latter. If a man's home is in Australia, a merely temporary absence will not prevent his being 'ordinarily resident in Australia'. It is a question of fact and degree at what point a temporary absence might, if sufficiently prolonged, prevent its being proper to continue to regard him as ordinarily resident in Australia. In Akbarali v. Brent London Borough Council (1983) 2 AC 309 at 344, Lord Scarman said: 'For if there be proved a regular, habitual mode of life in a particular place, the continuity of which has persisted despite temporary absences, ordinary residence is established provided only it is adopted voluntarily and for a settled purpose."

A similar approach was adopted by Mr. Justice Lockhart in Re Taylor Ex parte Natwest Australia Bank Limited (Unreported: P2568 of 1991, 24 June, 1992). His Honour at page 9 of his reasons said :-

"To say that a person is ordinarily resident in Australia must mean something more than that he is resident in Australia. The word 'ordinarily' connotes a comparison, a measure of degree. A person may have more than one residence, but he is not necessarily ordinarily resident in each of them. The question must be determined for the purposes of s.43 of the Act at a particular time. One must ask the question whether at that time the person was ordinarily resident in Australia. The concept of 'ordinary residence' for the purposes of the Act, in my opinion, connotes a place where in the ordinary course of a person's life he regularly or customarily lives. There must be some element of permanence, to be contrasted with a place where he stays only casually or intermittently. The expression 'ordinarily resident in' connotes some habit of life, and is to be contrasted with temporary or occasional residence: see Levene and Lysaght. As Lord Warrington said in Levene at 232: "'Ordinarily resident' means according to the way a man's life is actually ordered". The concept of ordinarily resident cannot be stated in definite terms; each case must be determined on its facts and after taking into account all relevant matters: see the Canadian case of Thomson v. Minister of National Revenue

(1946) SCR 209 per Estey J. at 231".

On appeal the Full Court (Wilcox, Burchett and Foster JJ. (G474 of 1992 Sydney 16 October, 1992)) approved of the analysis of the relevant law undertaken by Lockhart J. and cited with approval the judgment of Burchett J. in Re Vassis, on this issue.
The debtor was born in Australia on 27 November, 1948. He is married and has three sons. The oldest of the sons, David, was born in 1971; the second son, Anthony, was born in 1973; and the third son Christopher was, in 1992, a secondary school student at The Southport School.
From approximately 1981 onwards the debtor was engaged in the business of property development on a substantial scale within Australia and resided with his family on the Gold Coast. His business activities were carried on through a myriad of companies and trusts and in relation to the business, he and his wife gave personal guarantees. In the statement of affairs prepared by the debtor, he cites the collapse of the property market and the inability of his companies to sell property or borrow to service debt as the circumstances giving rise to the calling up of the personal guarantees. He states that the loans were called up in February, 1991.
The debtor and his wife left Australia on 20 February, 1992 to take up employment with Care System Corporation, an American company carrying on business in Dallas, Texas. The debtor contends that since that time he has been ordinarily resident in the United States of America, and not Australia.
The debtor filed an affidavit setting out the circumstances of his taking up employment in America and of his intention to become a permanent American resident. He was cross-examined on that affidavit.
The petitioner submits that notwithstanding that the debtor resided in Dallas on 14 September, 1992, objectively, the debtor maintained sufficient links with Australia for the Court to be satisfied that the debtor was ordinarily resident in Australia. The petitioner further submits that the debtor had not abandoned Australia as his place of ordinary residence, but rather had departed on a temporary basis for the purpose of undertaking employment, initially until December, 1992 and possibly up to December, 1993.
There is no doubt that prior to his departure to America the debtor was ordinarily resident in Australia.
I accept the debtor's evidence that he ceased employment with a company Portfolio Pty. Ltd. in May, 1991 and some time thereafter approached a Mr. Don Johnson of Perth, for whom he had worked for approximately eight years on property development, to see whether or not Mr. Johnson could give him a job. I find that in or about August, 1991 the debtor was approached by Mr. Paul Rogers, who acted on behalf of Mr. Johnson, to see if the debtor would accept employment in Dallas with Care Systems Corporation, a software company in which Mr. Johnson had invested. The debtor went to America in August, 1991 for approximately three weeks to examine the offer of employment in Dallas, and in late 1991 accepted a consulting position with that corporation. The engagement, I find, was initially for a period of one year, although the debtor gave to Mr. Johnson an undertaking that for so long as Mr. Johnson had investments in America and would give the debtor the opportunity to work, the debtor would remain in America.
At the time he agreed to undertake the employment in America, the debtor and his family lived in a residence at 98 Admiralty Drive, Paradise Waters, Queensland. The residence was mortgaged to the petitioner, the Commonwealth Bank of Australia. In February, 1992 the debtor's two eldest sons were students at Bond University. The youngest son was a student at The Southport School. When the debtor and his wife departed Australia the sons remained in the house at 98 Admiralty Drive and resided there while continuing their studies.
On 20 February, 1992 the debtor signed a Department of Immigration Local Government and Ethnic Affairs Outgoing Passenger Card. In the column headed "Resident Departing Permanently", question 1 reads "Country of Future Residence". The debtor inserted "USA". In the second box headed "In Australia I Lived In", the debtor inserted "Qld.".
On 26 February, 1992 the debtor wrote to a Mr. Reichhelt of Reichhelt and Henderson. The letter was referenced re: "98 Admiralty Drive-Tom Norman". The letter commences :-

"As you are aware I am in the United States on business and I took the opportunity on Wednesday 26 February to visit Tom Norman in Houston Texas in regard to the purchase of 98 Admiralty Drive."

It was submitted by Counsel for the petitioner that the words "I am in the United States on business" shows that the intention of the debtor was to remain on a temporary basis in the United States for the purpose of business only. In isolation the letter may have that flavour. However, in my view, it is equivocal having regard to the agreement in place between the debtor and Mr. Johnson. What is more important about the letter is that it shows that the debtor had contracted to sell the family home at 98 Admiralty Drive to Mr. Norman, who was an American who intended to migrate to Australia provided he proceeded with the purchase of the debtor's development at Cairns. The letter also reveals that the Commonwealth Bank was pressuring the debtor to sell the house property.
In the result the petitioner entered into possession of the house property as mortgagee in possession, causing the debtor's sons to be displaced from their home. It was the pressing necessity to find alternative accommodation for the sons which, I find, caused the debtor and his wife to return to Australia on 8 March, 1992. Prior to his return to Australia the debtor had applied for and received a US Social Security card.
When he entered Australian on 8 March, 1992 the debtor completed an incoming passenger card. The card makes provision for three different declarations. One is for a person migrating to Australia; the other is headed "Visitor or Temporary Entrant"; and the third is headed "Resident Returning to Australia". The debtor filled in the questions in the panel headed "Resident Returning to Australia". He declared that he had spent twenty-one days in the USA. He completed on the card that his usual occupation was that of property development and that his intended address in Australia was 98 Admiralty Drive, Paradise Waters, Queensland.
On 14 March, 1992 the debtor and his wife entered into a written agreement for tenancy of residential premises at 33 Admiralty Drive, Paradise Waters, Queensland. The tenancy was for a period of six months commencing on 16 March, 1992 and expiring on 16 September, 1992. On the tenancy agreement the debtor and his wife gave their address as 98 Admiralty Drive, Paradise Waters. The rental was payable monthly in advance and a security bond of $1,500.00 was also to be paid. The agreement provided that the number of persons permitted was "IAN AND KAREN MEREDITH AND THEIR THREE CHILDREN". I find that the first month's rent and bond were paid by the debtor. I find that the debtor and his wife entered into the tenancy solely for the purpose of securing residential accommodation for their children while they continued with their studies in Australia. I find that the debtor assisted the children to set up house in 33 Admiralty Drive and stayed in the house for two nights.
The debtor departed from Australia on 29 March, 1992. He again filled out an outgoing passenger card. In the column entitled "Resident Departing Permanently" he filled in the box entitled "Country of Future Residence" - "America", and the box headed "In Australia I Lived In" - "Queensland", and ticked the "Yes" box in answer to the question, "Do you intend to settle permanently?"
The debtor was granted a working visa for the United States by the US immigration authorities for a period of three years from 15 May, 1992. In evidence he said that the visa was of such a type that he was entitled to an automatic extension of three years beyond 15 May, 1995.
In the United States the debtor and his wife lived firstly at the Kempinski Hotel in Dallas, and then at Room 219 Crestpark Hotel, Alto Lomo, Dallas, before taking, in or about June, 1992, a six months lease on an apartment at 3701 Turtle Creek Boulevard, Dallas, Texas. It was a term of his employment that the debtor and his wife would receive annually tickets for a return flight to Australia. I accept the evidence of the debtor that the purpose of the ticket was to enable him and his wife to stay in contact with his children. Although there is not detailed evidence as to the family ties in Australia, it is clear that the debtor has a brother and until his death in late 1992, the debtor's father-in-law also resided here.
I am satisfied on the evidence that after the initial payments by the debtor, the rent on the property at 33 Admiralty Drive was paid by the two sons, David and Anthony Meredith, from funds in a joint bank account operated by them in their name at the Blundall Branch of the Westpac Banking Corporation. The funds in that account were contributed from a number of sources. One of the boys worked part-time while attending university. The debtor's brother and father-in-law contributed funds for the maintenance of the children. The debtor and his wife contributed money from America for the maintenance of the children.
The debtor returned to Australia on 20 June, 1992. The debtor again completed an incoming passenger card. In the section of the card headed "Visitor or Temporary Entrant", the debtor indicated the intended length of his stay was ten days; the purpose of his visit, to visit relatives; and his country of residence as "U.S.A.". He gave his intended address in Australia as 33 Admiralty Drive, Paradise Waters.
I find that he spent a few days with his children at the Admiralty Drive residence, but otherwise spent the time with his solicitors and accountants seeking advice as to the possibility of entering into a Part X arrangement under the Bankruptcy Act, and to deal with the affairs of one of his companies which he believed to be solvent.
The debtor departed Australia on 1 July, 1992 and again completed an outgoing passenger card. He again completed the panel headed "Resident Departing Permanently" and indicated his country of future residence as the USA, and indicating that in Australia he had lived in Queensland.
In August, 1992 Anthony Meredith transferred his studies from Bond University to the Western State College in Gunnarson, Colerado, in the United States and arrived in America to take up residence as a student on 22 August, 1992. David Meredith ceased to reside at the residence at 33 Admiralty Drive, Paradise Water at the end of August, 1992 and took up residence and employment in Sydney in September, 1992. Both sons in affidavits filed in the proceedings stated that it was their intention after completing studies to seek to obtain permanent employment with Care Systems Corporation, the corporation which employs their father. Neither deponent was required to attend for cross-examination on the affidavit. I accept that it was the intention of the boys to join their father if they could in the United States at an early time. The third son, Christopher, appears to have gone to The Southport School as a boarder.
On 14 September, 1992 the debtor executed an authority pursuant to section 188 of the Bankruptcy Act. I accept the evidence of the debtor that he did so in order to avoid being declared bankrupt as he had been advised in America that being declared bankrupt in Australia could have adverse effects on his employment in America and his ability to obtain a Green Card to enable him to reside permanently in the United States.

The debtor returned to Australia on 28 September, 1992 and again completed an incoming passenger card. In the section entitled "Visitor or Temporary Entrant", he indicated that he intended to stay in Australia for a period of nine days, that the purpose of his visit was business and that his country residence was the USA. He gave his intended address in Australia as Princeton Apartments, Gold Coast, Queensland.
The purpose of the visit was to attend the meeting of creditors and also to travel to North Queensland to attempt to introduce a buyer to the Commonwealth Bank of Australia for the Cairns development.
In his statement of affairs there is annexed a schedule of a number of companies and trusts in which the debtor had an interest either as shareholder or director. I accept the evidence of the debtor that since in or about June or July, 1992 Ms. Vivian Hannam, an accountant, in consultation with the Australian Securities Commission, has been taking steps to put the affairs of the various companies in such an order that they could be struck off the register or otherwise placed into liquidation. I find that the reason that this course is being adopted is that the companies have not traded for some considerable period of time and that the debtor wished to have the companies disposed of in order to avoid paying considerable fees to the Australian Securities Commission when the companies were merely lying idle. I also accept the evidence of the debtor that to the extent that any of the companies mentioned in the list have any property, that property or income flow was in September, 1992 in the hands of the secured creditors or being administered in accordance with the directions of the secured creditors. Any dealings which the debtor had in relation to any of the properties either in the Hunter Valley or in Cairns in 1992 when he was in Australia were for the purpose of assisting the secured creditors in attempts to realise the assets to best advantage and to finalise, so far as he could, his affairs in Australia.
On 6 October, 1992 the debtor left Australia to return to the United States. He again signed an outgoing passenger card. On this occasion under the heading "Visitor or Temporary Entrant Departing", he indicated that he had spent eight days in Australia, mostly on the Gold Coast, and that his country of residence was "Dallas".
Counsel for the petitioning creditor raised a number of matters which she submitted showed that the debtor had links with Australia such that I ought to be satisfied that he was ordinarily resident in Australia. A number of matters related to the debtor's long-term ties with Australia. The fact that he was born in Australia, lived in Australia, had an Australian passport and did not intend to give up his Australian citizenship. There is no doubt that the debtor is a proud Australian and if work had been available in Australia would have preferred to work here. The fact that he travels on an Australian passport at the present time simply flows from his nationality, there being no evidence that he is entitled to an American passport as he is not an American citizen. The links which the debtor had with his family when he departed Australia in February, 1992 were close. I have no doubt that the family ties between the parents and the children were, and are, strong. However, by 14 September, 1992, one of the sons had gone to reside in America and undertake further studies, another had gone to Sydney to obtain work experience with a view to going to America to work, and the third boy had taken up residence as a boarder to finish his studies at The Southport School. In my view, by September, 1992 the family had taken steps to re-establish itself as a family in the United States of America.
There is in the renting of the property at 33 Admiralty Drive nothing to detract from the evidence of the debtor that when he departed Australia in February, 1992 it was to establish a permanent residence in America. When he departed Australia steps were in place to dispose of the family home at 98 Admiralty Drive. It was the conduct of the petitioning creditor entering into possession of that property which forced the debtor to obtain alternative premises so that his children had a place of residence from which they could continue their studies. The original tenancy was only for a period of six months and would expire before the time the debtor had undertaken to Mr. Johnson to spend in the United States expired. There was nothing in the acquisition of the tenancy to suggest that it was to be available as a residence of the parents as opposed to a home for the sons.
The debtor's involvement in the companies of which he was a director, in my view, cannot be characterised as a business involvement indicative of the retention of Australia as the place where the debtor was ordinarily resident. Upon analysis his involvement was limited and was more in the nature of attempting to finalise outstanding affairs in Australia; he now being ordinarily a resident of the United States.
At a time when the debtor had no particular interest in stating on the migration documentation that he had permanently left Australia to take up permanent residence in America, he did so not knowing that the documentation would later be produced in Court. His statements on the cards are consistent with his conduct at the time.
I am satisfied that as at 14 September, 1992 when he signed the authority under Part X of the Bankruptcy Act the debtor was not ordinarily resident in Australia and was at that time ordinarily resident in the United States of America. His residence there was not a mere temporary residence for a period of up to two years. His work and his acquiring a residence in the United States had a sense of permanence about them, particularly when other members of the family had taken steps to move to America and seek their future there. The continued presence of the youngest child in Australia is explicable on the basis of it being in his best interest to complete his education at The Southport School. I am also satisfied that when he sought to take proceedings under Part X of the Bankruptcy Act the debtor was unaware that such a course was not open to him if that be the case, and took proceedings for the purpose of securing his position in the United States and to bring to an end what he described as harassment by creditors towards himself when he visited Australia and the family members who remained here. The debtor's presence in Australia after he departed with his wife on 20 February, 1992 on the occasions when he returned was purely transitory in character and was for the purpose of dealing with some exigency which had arisen in Australia which required his attendance.
To establish jurisdiction by reason of the debtor having a dwelling house in Australia, the petitioning creditor must show on the balance of probabilities that the debtor had a place so described on 14 September, 1992. It is not sufficient that the petitioning creditor demonstrate that the debtor at some time prior to that date had what could be described as a dwelling house. Counsel for the petitioning creditor referred to the decision of the Court of Appeal in Re Brauch (A Debtor) Ex parte Britannic Securities and Investments Limited (1978) 1 Ch 316 at 335 in support of a proposition that it is possible to conclude that a person had a dwelling house, although he was not in fact in occupation of it. The English bankruptcy provision is different to the Australian provision and provides for the having of a dwelling house at any time within one year prior to the presentation of the petition. Lord Justice Goff (as he then was) said at page 335 :-

"I think it may be possible to find that the debtor had a dwelling house in England although he was not in fact in occupation of it at any time during the year. If it be established that he had a dwelling house to start with but he happened to be away throughout the year for a temporary purpose but with intent to return, it may be that on the facts of a particular case one could find he had a dwelling house, but the more there is actual occupation, the easier it is to reach the conclusion that there was a dwelling house, and the shorter the actual occupation, the more difficult it becomes".

His Lordship continued further down the page :-

"In my judgment, here again one has to look at all the facts and see whether or not they do lead to the conclusion that within the relevant year the debtor had a dwelling house in England. In the present case it is pointed out that whilst the debtor was not in fact in residence at 51, Connaught Street for any part of the year, he had installed the mother of his son there, and it appears from the evidence that he did at least go to see her there and may well have stayed nights, although whether he ought to be regarded as her guest or she as his might be a somewhat difficult question. I do not think, however, that we really can reach a conclusion from these matters. The registrar said the petitioning creditors fail because they know so little. In my judgment, that is a correct appraisal of the situation in this case. In my view, there is insufficient evidence upon which to form a conclusion whether or not the debtor had a dwelling house within the meaning of the section, and, in my judgment, therefore the respondents' notice fails".

In the present case the debtor does not fall within the facts postulated by Goff LJ. in Re Brauch, namely, that the dwelling house was maintained, the debtor being temporarily absent for a temporary purpose with the intent to return to the house at the expiration of the year. The house at 33 Admiralty Drive was not acquired until after the debtor had taken up residence in America. It was acquired for the purpose of providing accommodation for the children. The term of the tenancy was to expire on 16 September. Such limited time as the debtor resided in the house was of a temporary nature. On the evidence two of the children had given up residence in the house prior to 14 September. There is nothing to suggest that the youngest child Christopher remained in residence after the others left. There is no evidence to suggest that anybody was in occupation of the house on 14 September or that it remained in the possession of the debtor or any member of the family. The evidence is consistent with possession of the premises having been yielded up to the landlord by 14 September, because the landlord wished to sell the premises, and, the term of the tenancy had but two days to run.
It is not sufficient that the debtor had an interest as tenant in a residential property in Australia. The debtor must have dwelt in the house or maintain it as his dwelling at the relevant date. If it is abandoned as the debtor's dwelling place, the requirements of the section are not made out (In Re Nordenfelt, Ex parte Maxim-Nordenfelt Guns and Ammunition Company (1895) 1 QB 151 at 153, 154).
The petitioner has failed to establish the necessary jurisdictional facts to enliven the jurisdiction of the Court to make the orders sought.

[1993] FCA 146

19 MARCH 1993