Ex parte; Aley, Naushad Rahmat v Sweeney, Paul Desmond

[1996] FCA 96

CATCHWORDS

BANKRUPTCY - Application for removal of trustee in bankruptcy - previous application dismissed in default of appearance by applicant - abuse of process - remaining allegations against and conduct of trustee in bankruptcy not sufficient to warrant removal.

CONTEMPT OF COURT - Application to have trustee in bankruptcy committed for contempt of court - allegation that affidavit knowingly sworn falsely - affidavit not false.

R v Weisz;  Ex parte Hector MacDonald Ltd [1951] 2 KB 611 - Cited
R v B (1971) 20 FLR 368 - Cited.

Naushad Rahmat Aley also known as Neil Ali;  Ex parte Naushad Rahmat Aley v. Paul Desmond Sweeney
No. QB2020 of 1994
Cooper J, Brisbane, 12 February 1996

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
  QB No. 2020 of 1994

RE:  NAUSHAD RAHMAT ALEY also known as

NEIL ALI

Bankrupt

EX PARTE:               NAUSHAD RAHMAT ALEY

Applicant

AND:  PAUL DESMOND SWEENEY

Respondent

JUDGE MAKING ORDER:           Cooper J

WHERE MADE:  Brisbane

DATE OF ORDER:             12 February 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The application filed 4 September 1995 be dismissed.

1. One-third only of the trustee's costs of and incidental to the application be recoverable by the trustee as costs in the administration of the bankrupt estate.

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

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND

QB No. 2020 of 1994

RE:  NAUSHAD RAHMAT ALEY also known as

NEIL ALI

Bankrupt

EX PARTE:               NAUSHAD RAHMAT ALEY

Applicant

AND:  PAUL DESMOND SWEENEY

Respondent

CORAM:  Cooper J

PLACE:  Brisbane

DATE:  12 February 1996

REASONS FOR JUDGMENT

The applicant, Naushad Rahmat Aley, was made bankrupt on 19 October 1994.  On 20 December 1994 he applied to this court for the removal of Paul Desmond Sweeney as his trustee in bankruptcy.  The grounds upon which removal was sought were contained in an affidavit filed by the applicant on 20 December 1994.  Those grounds were in essence that the trustee, by his employee Ian Van der Woude and by his then solicitor Mark Fisher, had misled the applicant into attending at the Federal Court at Brisbane on 23 November 1994 without prior notice and there served him with process requiring his immediate appearance for public examination.  He complained as to the lack of an opportunity to obtain proper legal advice and a failure to provide proper facilities to enable him to prepare himself in accordance with the rites of his Islamic religion to take an oath upon the Koran.  Additionally the applicant complained that on 25 and 26 November 1994 Mr Van der Woude and Mr Fisher had attempted to exert pressure upon
the applicant to agree a repayment schedule of the petitioning creditor's debt and to provide to the trustee a mortgage over a house property occupied by his former wife and children at 3 Koola Street, Wishart in order to obtain from the trustee the return of his passport to enable the applicant to return to Fiji to be with his second wife.  He further complained that Mr Van der Woude on 26 November 1994 directed the applicant to provide $2000 in cash to cover the cost of the documentation for a possible arrangement with his creditors and made racist statements about the applicant and his ability to provide such sum of money.  Finally, the applicant complained that the trustee had prevented his former wife from dealing with the house property at Wishart as her own property by the lodgment of a caveat against the title to the property and that the trustee had failed to pursue a counterclaim which the applicant contended he had against the petitioning creditor in his estate, Wadkin Public (Australia) Limited ("Wadkin Public").

These allegations were denied by the respondent trustee.  The trustee's version of the dealings between the applicant and Messrs Van der Woude and Fisher was set out in affidavits of Mr Van der Woude and the trustee filed on 19 December 1994.  The affidavits were filed in opposition to an earlier application of the applicant filed 8 December 1994 for permission to leave Australia to travel to Fiji to be with his second wife at the birth of their child and for the return of his airline ticket for that travel which had been seized by the Australian Federal Police.

On 5 January 1995 Spender J made orders on the applicant's adjourned application for permission to travel to  Fiji which included an order for the handing over to the applicant of his passport on condition, inter alia, that he return to Australia on or
before 1 May 1995 and that he surrender his passport to the trustee by 4 May 1995.  Performance of the conditions was supported by a bank guarantee.

On 10 February 1995 the applicant's application for removal of the trustee came on for hearing before me.  When the matter was called on there was no appearance by the applicant.  The application was dismissed in default of appearance. 

On 15 February 1995 proceedings were commenced in the High Court of Fiji by writ of summons in the name of Wadkin Public Limited as first plaintiff, Paul Desmond Sweeney as trustee as second plaintiff and the applicant as defendant.  The plaintiffs sought an injunction restraining the applicant from removing or dealing with machinery, plant and equipment at a designated site in Ba, Fiji or any other property or bank account in Fiji.  The trustee contended that these proceedings were instituted by   G P Shankar & Co, solicitors of Fiji, without any instructions from the trustee.

On 15 February 1995  the plaintiffs in the Fiji proceedings obtained an ex parte interim injunction. 

On 16 February 1995 the trustee sent to the applicant a letter and a schedule of seventy-nine drawings on a cheque account with the Bank of Baroda in the name of "Kauri Pacific Timber".  The trustee sought an explanation of each dealing together with supporting documentation within fourteen days of receipt of the letter.

On 17 February 1995 the plaintiffs obtained a further ex parte order that
the plaintiffs' agents and the bailiff take possession of the plant and equipment in issue pending final order of the High Court of Fiji.

On 24 February 1995 the plaintiffs sought leave to move the High Court of Fiji for an order for committal and sequestration on the ground that the applicant had breached the terms of the order of 17 February 1995.  Leave was obtained on 14 March 1995 and on 16 March 1995 the plaintiffs moved for the committal of the applicant to prison for contempt of court.  The motion for committal for contempt was returnable at 10.15 a.m. on 31 March 1995.

On 27 February 1995 the applicant faxed the trustee advising receipt of the letter of 16 February and advising that because of the extent of the information sought it would take time to respond but that he should be in a position to do so by 20 March 1995.

On 20 March 1995 the applicant faxed to the trustee the schedule with comments against the dealings on the account.  Written on the schedule was the following :-

"Dear Paul Desmond Sweeney, in your previous letter dated 16 Feb I have ask for extension until 20th of March to provide details you have asked for.  I am providing most of the information unfortunately canot provide you with supporting dockmentations such as invoices, statements and receipts, reason being your solicitors in Fiji G.P. Shankar has confiscated all my dockments the one you require.  [P.T.O.]  He wrongly confiscated machinery, trucks, forklift, and oter tools and accessories etc which belongs to other people.  Ex-parte application dated 16th Feb and the other made their and also ex-parte [P.T.O.] application dated 17th Feb 1995 when order made ex parte did not disclose important and material facts.  If thouse material facts would have been disclosed this Honourable would not have entertained the plaintiff wich is you and Wadkins Aust.  I hold you responsible for
damages.  You know it very well this matter regarding Wadkin machinery was dismissed on 13th day Jannuary 1994 by Honour Gudge Morley.  Why dint you disclosed this important facts.  [P.T.O.]  Ex parte application also says I am residence of Fiji.  You know very well I am an Australian citizen, and was allowed by Federal Court of Australia to travel to Fiji for four moths in order to look after my sick wife.  You have caused lot of problem to me and my sick wife.  I also disclosed to you other machines such as fork lift, saw mill etc etc was sold in August.  Knowing all this facts very well you have caused a big problem to everyone here.  The first plaintiff is Wadkin second plaintiff is Paul Desmond Sweeney. I would like to ask you that section 58(3) of the Bankruptcy Act 1966 which deals with unsecured creditors rights and since I had no property at all in my own rights on the 13th day of October 1994, that why did you bring this action again in Fiji Court. Please reply to my letter soon.

Naushad R Ali

c/- P.O. Box 406
  Ba

Fiji"

(Emphasis supplied)

On 22 March 1995 the plaintiffs in the proceedings in Fiji filed a further motion seeking injunctive relief against the defendant in respect of the plant and equipment.  This motion was returnable on 29 March 1995.  On 19 April 1995 in a letter prepared by Mr Van der Woude and signed by a partner of the trustee, the trustee said :-

"I refer to your facsimile dated 20 March 1995.

You have not provided me with sufficient detail regarding the expenditure - in particular the cash items which you term `personal expenditure'. 

I need to know, and you have an obligation to provide me with details of the `personal expenditure' as noted on the schedule i.e. if it was spent on buying personal articles of clothing then you should put that;  or if it was spent buying assets;  or for a lunch or a dinner then you should put that down etc.  You must assess each expenditure item and provide me with specific details as to what the expenditure was for. (Original emphasis)

With the other matters you raise in the letter it is not appropriate for me to respond to you as it is a matter before the Court. (Emphasis supplied)

If you require any further information please do not hesitate to contact me.

Yours faithfully"

On 2 May 1995 the applicant faxed to the trustee as follows :-

"Dear Paul Sweeney,

I was rather surprised to receive your letter dated 20th March came in my hand yesterday.  I have provided you with sufficient information regarding expenditure.  However I should be in Brisbane by Friday 5th.  I will get in touch with you.  Further more myself and my wife moved to a new place we no longer at our previous address.  We are residing at my Inlaws place at Wailaici Ba.  By the way my wife gave birth to a baby boy.  How come it took you 4 weeks to reply my letter.  As soon as I get to Brisbane I will surrender my passport.

Regards Naushad Ali R Ali"

On 4 May 1995 the applicant arrived in Australia and on 11 May 1995 attended at the office of the trustee.  The trustee made a file note of the meeting which included the following :-

"Mr Aley then went on to say that there was a matter before the Court on 3 June 1995 with regard to contempt which I am bringing.

I said to him I was not aware of the action.  He indicated that Mr Shankar was running it and he wanted to know if he could have his passport to go back.  I said that at this stage I would not agree to the return of the passport for two reasons:

1.that I did not have any knowledge of the court action;  and

2.that there were outstanding matters in relation to the administration including a proper explanation with regard to the substantial funds withdrawn.

Mr Aley said his only desire was to go back and live with his wife in Fiji where he wanted to stay.  He said that on occasions he would want to travel back to Australia for business.

...

Mr Aley has given to me a copy of court material relating to the action
where I am named as second plaintiff."

On 14 May 1995 the applicant wrote to the trustee requesting the return of his passport to return to Fiji to defend the proceedings pending against him in the name of the petitioning creditor and the trustee.

On 23 May 1995 the applicant bankrupt applied for orders that the trustee return his passport and that he be granted "permission to leave Australia for the purpose of defending legal proceedings in Fiji brought by the said Trustee".

On 24 May 1995 the trustee wrote to the applicant agreeing to return the passport conditional upon, amongst other things, a bank guarantee in an amount of $25,000 that the applicant would return to Australia by 31 August 1995 and that he would return his passport by 3 September 1995.  On 29 May 1995 the trustee gave notice of intention to appear and oppose the application on various grounds.  To support his opposition the trustee filed an affidavit on 29 May 1995 which included the following :-

"11.                 I refer to paragraph 3 of the Bankrupt's affidavit sworn on 23 May 1995 and say that I have not instructed any solicitors to act on my behalf in Fiji or in anyway consented to the commencement of the proceedings to which he refers (`Fiji proceedings').

12.                  Since being served with this Application, I have been attempting to ascertain from the solicitors in Fiji who are purporting to act on my behalf, the nature and status of the Fiji proceedings."

On 29 May 1995 Drummond J ordered the return of the applicant's passport on various conditions including that he return to Australia by 26 December 1995 and that he return his passport by 28 December 1995.
  On 26 July 1995 in the High Court of Fiji G P Shankar & Co, the solicitors in Fiji, applied to be granted leave to withdraw from the action brought in the name of the petitioning creditor and the trustee against the applicant as defendant.  On 27 July 1995 an application was brought by the trustee to have his name removed as a plaintiff in the Fiji litigation.  The trustee's application was resisted by the applicant and was unsuccessful.

On 2 August 1995 the trustee applied for orders leading to the sale of the house property at Wishart and the recovery as against the applicant's first wife of the value of her interest in the property on the basis that the settlement of the property on her by the applicant was void.

The application was listed for hearing before the court on 25 August 1995.  The respondents to the application were the applicant's first wife and the applicant.

On 4 September 1995 the applicant filed an application seeking the following orders :-

"1.That the bankrupt's trustee in bankruptcy Paul Desmond Sweeney be removed.

2.That the bankrupt's said trustee in bankruptcy be dealt with for comtempt [sic] of court.

3.Such further or other order as to this Honourable Court seems meet."

and in support of the application filed on that day an affidavit on its face sworn on 31 August 1995.

The basis upon which the applicant sought the relief claimed was that :-

(a)the trustee had "in the past dealt with me in a rude, disrespectful and dismissive manner".  In support of this allegation the applicant referred to the affidavit filed on 20 December 1994 in support of his earlier application which was dismissed in default of appearance by the applicant;

(b)the trustee had commenced proceedings against him in Fiji in respect of plant and equipment which the applicant had previously told the trustee he had no beneficial interest in;

(c)the trustee had failed to respond to the applicant's inquiry in the letter of 20 March 1995 concerning the institution of proceedings against him in the name of the trustee in Fiji;

(d)the trustee failed to respond to the applicant's request for permission on 14 May 1995 to return to Fiji and opposed his application to the court in that behalf;

(e)the trustee falsely swore the following in an affidavit filed 29 May 1995 :-

"11.I refer to paragraph 3 of the Bankrupt's affidavit sworn on 23 May 1995 and say that I have not instructed any solicitors to act on my behalf in Fiji or in anyway [sic] consented to the commencement of the proceedings to which he refers (`Fiji proceedings').

12.Since being served with this Application, I have been attempting to ascertain from the solicitors in Fiji who are purporting to act on my behalf, the nature and status of the Fiji proceedings."

when in fact the trustee had instructed G P Shankar & Co to act on his behalf and to institute and prosecute proceedings in Fiji against the applicant.

I have examined in some detail the material filed by the applicant in support of the various applications made by him during the period of his bankruptcy.  I have observed the applicant in the witness box.  It is clear that the applicant is an emotional man and is prone to outbursts and losses of perspective in difficult or testing situations.  I am satisfied, having regard to these matters and to the whole of the evidence of the course of dealings between the applicant and the trustee, that the present application was filed as a direct response to the institution of proceedings by the trustee on 2 August 1995 against the applicant's former wife to recover, amongst other things, the Wishart property as property of the applicant.  Nonetheless, the application is a serious one and the substance of it must be dealt with.

Contempt of Court Allegation
  To establish contempt against the trustee in the circumstances alleged by the applicant he must establish that :-

(a)the facts alleged in paragraphs 11 and 12 of the affidavit are false;

(b)the paragraphs were deliberately sworn with the intention of suppressing the truth to mislead the court in its determination of the applicant's application filed 23 May 1995 for permission to leave Australia for the purpose of defending legal proceedings in Fiji brought by the said trustee.  (See R v. Weisz;  Ex parte Hector MacDonald Ltd [1951] 2 KB 611 at 620; R v B (1971) 20 FLR 368 at 370, 377; Borrie and Lowe's Law of Contempt, 2nd Ed, at pp 311-312).

The material relied upon by the applicant consists of copy fax material
from the trustee to the solicitors in Fiji providing information requested and copy affidavits filed in the Fiji proceedings which assert that G P Shankar & Co were authorised to act and were acting as solicitors for the trustee in initiating and prosecuting proceedings in which he was named as plaintiff.  This material, without explanation, would objectively lead a person to the conclusion that the solicitor was acting on the instructions of the trustee.  However, in these proceedings, the trustee has filed material which demonstrates that after the first contact between the trustee and Mr Shankar on 14 February 1995, what occurred in the initiation and prosecution of the Fiji proceedings was without the authority of the trustee.

Although the solicitor in Fiji may have thought that the granting of instructions to proceed on behalf of the trustee was a mere formality, the correspondence makes clear that no formal decision to proceed would be made by the trustee until he had received an inventory of the plant and equipment held at the Fiji solicitor's client's premises in Fiji and an estimate of the costs of the intended proceedings.  Requests for the information was made by the trustee on 16 February 1995, 28 February 1995 and 7 March 1995.  On 9 March 1995 G P Shankar & Co provided the information which included an estimate of costs of $20,000 of which, it was claimed, $3,750 bailiff and security fees and $3,000 out of pocket expenses and incidentals had already been incurred.  The solicitors sought payment of this sum on account.  The fax on 9 March 1995 moved the trustee to respond on that date as follows :-

"I refer to your letter dated 9 march 1995.

Because of the limited assets and the extraordinary costs of pursuing the recovery action, I will not be issuing you with any instructions to proceed.

I note that no instructions had been given to you previously and accordingly I will not be responsible for fees incurred to date.

If you require any further information please contact Mr Ian Van der Woude of this office on [phone]."

In the correspondence that followed the Fiji solicitors referred to no document or conduct on the part of the trustee which would constitute an authority or instruction to join the trustee in proceedings brought by Wadkin Public as first plaintiff against the applicant.

In those circumstances the contents of paragraphs 11 and 12 so far as they concern the trustee Paul Desmond Sweeney personally are not false.  Nor did anyone acting on behalf of the trustee instruct that the Fiji proceedings be initiated and prosecuted in the name of the trustee.  The application to have the trustee committed for contempt therefore fails.  This does not however mean that I am satisfied that no one in the trustee's office was aware of the existence and nature of the proceedings in Fiji or that the trustee was named as a party.  On the contrary, I am satisfied that Mr Van der Woude knew from at least 20 March 1995 of the Fiji proceedings.  However, having regard to the trustee's fax of 9 March 1995, the Fiji solicitors can have been under no illusions that from that date they had no authority to further progress the litigation in Fiji in the name of the trustee.

The contempt application therefore fails at the threshold.

The Application for Removal
  The complaints made by the applicant in his affidavit filed 20 December 1994 give rise for concern because of the manner and circumstances of his being brought before the court and examined.  It is unnecessary to form any concluded view as to what occurred for two reasons;  the applicant did not seek to prosecute his application when it came before the court on 10 February 1995 and thereafter the events of December 1994 did not, so far as the correspondence shows, intrude into the relationship of trustee/bankrupt to such an extent as to make unworkable the proper administration of his estate.  In my view, it would be an abuse of the process of the court, particularly in light of my earlier finding as to the circumstance giving rise to this application, to allow the applicant to raise these issues again. 

To the extent that the material at that time claimed that the applicant had a valuable claim against Wadkin Public which the trustee was unreasonably refusing to prosecute, that allegation was answered by the trustee in an affidavit filed in court on 10 February 1995.  Having regard to the contents of that affidavit, which I accept, the allegation is without foundation.  That disposes of grounds (a), (b) and (e) set out above and relied upon by the applicant in support of his application.

The propriety of the trustee refusing to agree to the applicant's return to Fiji in May 1995 and his opposition to the applicant's application in that behalf was the subject of consideration and determination by Drummond J.  There is nothing arising out of those proceedings which would justify the removal of the trustee.  This disposes of ground (d) of the grounds relied on.

The remaining matter relied on, ground (c),  is the failure to respond to the applicant's inquiry of 20 March 1990.  The response of the trustee, prepared by Mr Van der Woude that, "it is not appropriate for me to respond to you as it is a matter before the court" satisfies me that Mr Van der Woude was both conscious of the proceedings in Fiji and the allegations and queries raised by the applicant in his facsimile and that he consciously determined not to respond at all.  No credible or sensible explanation as to why no proper response was made was given by either the trustee or Mr Van der Woude in the witness box.  The trustee did not sign the letter of 19 April, 1995;  it was signed by a partner.  His explanation of failing to respond to the fax of 20 March 1995 was that the contents did not "register".  I am left with an uneasy feeling that the facsimile was not responded to promptly, or investigated and the proceedings in the name of the trustee terminated, because it was hoped to obtain a vicarious benefit from the proceedings if they were prosecuted in the name of Wadkin Public.  The need to take some step to repudiate the proceedings only arose in May 1995 when the existence of the proceedings became a relevant issue on the applicant's application before Drummond J for permission to return to Fiji.  However, the matter was not explored in cross-examination of either the trustee or Mr Van der Woude before me and in the absence of such cross-examination, I am not prepared to find as a fact that that was what occurred.

If the trustee and his staff had investigated the allegation and responded honestly and appropriately to the applicant in March 1995 and taken steps to terminate the Fiji proceedings so far as the trustee was concerned, the applicant would have had little, if anything, to complain about on this account.  However, the failure to respond appropriately, the nature of the response in fact made, and the material available to the applicant obtained in Fiji not unreasonably led him to the conclusion that the trustee was a willing party to the proceedings in Fiji.  In those circumstances the applicant's reaction to the trustee's affidavit of 29 May 1995 is not unexpected.  Although the conduct of the trustee in response to the applicant's facsimile of 20 March 1995 was high-handed and unjustified, it is not of itself sufficient to warrant the removal of the trustee.  In the absence of the trustee's application of 2 August 1995 against the applicant and the applicant's first wife, I am satisfied that the issues arising out of the Fiji proceedings would have been determined in those proceedings as between the trustee, the Fiji solicitors and the applicant without recourse to this court.

Conclusion:
  Ultimately the application fails.  The conduct of the trustee in his response to the applicant's facsimile of 20 March 1995 in relation to the Fiji proceedings allowed the applicant to mount an application for contempt and removal of the trustee which required an explanation to be given by the trustee.  A proper response in March 1995 would have denied to the applicant any basis to come again before the court seeking the removal of the trustee having regard to his failure to prosecute his earlier application for such relief.  Accordingly, the trustee should not be entitled to his full costs out of the estate on the application and will be limited to one-third of his costs and expenses of and incidental to the application.

THE COURT ORDERS THAT:

1. The application filed 4 September 1995 be dismissed.

1. One-third only of the trustee's costs of and incidental to the application be recoverable by the trustee as costs in the administration of the bankrupt estate.

I certify that this and the preceding fifteen (15) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.

Date:12 February 1996

Associate

Applicant in Person:  Mr N Aley

Counsel for the Respondent

Trustee:Mr S Doyle SC

Solicitors for the Respondent

Trustee:Deacons Graham James

Date of Hearing:  20 December 1995

Place of Hearing:  Brisbane

Date of Judgment:  12 February 1996