Gu v Pascoe - [2006] FMCA 367

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GU v PASCOE

[2006] FMCA 367

BANKRUPTCY – Review of decisions of trustee – permission to travel – freezing of bank accounts – application dismissed.

Bankruptcy Act 1966 (Cth), s.178
Federal Court (Bankruptcy) Rules 2005 (Cth)

Luna v Pattison [2004] FMCA 237
Re Hicks; Ex parte Lamb (1994) 217 ALR 195
Re Tyndall; Ex parte Official Receiver (1997) 17 ALR 182

Applicant:

DAVID GU

Respondent:

SCOTT DARREN PASCOE

File Number:

SYG494 of 2006

Judgment of:

Smith FM

Hearing date:

7 March 2006

Delivered at:

Sydney

Delivered on:

7 March 2006

REPRESENTATION

Counsel for the Applicant:

Applicant in person

Counsel for the Respondent:

Ms Britton

Solicitors for the Respondent:

Sally Nash & Co, Solicitors

ORDERS

The application is dismissed.
The applicant must pay the respondent’s costs as agreed or taxed in accordance with Order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG494 of 2006

DAVID GU

Applicant

And

SCOTT DARREN PASCOE

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an application by a bankrupt person seeking review by the Court under s.178 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) of three decisions by the trustee of his bankrupt estate. The three decisions are:
i)not to return the bankrupt’s passport nor permit him to travel out of Australia;
ii)to freeze a Westpac Bank account number 032-005 456003, and not to release that money to the applicant or his sister; and
iii)similarly to freeze an ANZ Bank account number 5770‑22079.
I was informed by the parties that there is an amount of between $7,000 and $10,000 in the Westpac account and of between $900 to $1,000 in the ANZ account. Those funds appear to represent a significant part of the possible estate of the bankrupt available to his trustee for the payment of the expenses of the bankruptcy and, perhaps, payment to his creditors.
The applicant and the trustee have filed affidavits in relation to the matter which I shall not recite in detail. The trustee filed a substantial affidavit before the applicant filed his. Within his affidavit, the trustee refers to a number of concerns.
First, there is a concern that the applicant’s involvement in an unincorporated eBay business known as “DGU Digital Services” was not fully revealed in the applicant’s statement of affairs, and has not been clarified to the trustee’s satisfaction in subsequent correspondence and interviews of the applicant. In particular, the applicant has claimed that he transferred the business to his sister before he became bankrupt, and that he has no interest in its assets, including the above two bank accounts, notwithstanding that the bank accounts were operated by the business in his name and he is still the sole proprietor of the registered business name. This is a matter which, on the material before me, requires further investigation by the trustee if that is thought to be expedient or productive.
A second concern is that the bankrupt was travelling outside Australia at around the time of his bankruptcy. There is a dispute between the bankrupt and his trustee as to whether he travelled outside Australia subsequent to his bankruptcy which occurred on 24 August 2005. The applicant’s passport in evidence before me indicates that travel did not occur, but the applicant told the trustee at one stage that he had travelled in October 2005 to visit his sister in China. This is a matter which has not been fully investigated in the evidence, and is a lesser concern than the others.
A third concern of the trustee is that the applicant has few ties to Australia, and the trustee is concerned that the applicant may decide that his life would now be more comfortable outside Australia. In relation to this, the applicant has pointed to a number of factors which he suggests should give the trustee confidence that he would return. He points out his previous period of permanent residence and the taking of citizenship in Australia, and he claims to have no rights of residence beyond 12 months in China. That is a matter which is not fully explored in the evidence before me. He also claims to be taking steps to obtain the migration of his parents to Australia, where they own property at Hornsby. These are all factors which might point towards the applicant having a connection to Australia and a desire to see through his bankruptcy here. It is, however, unclear whether his bankruptcy may now prevent his bringing his family members to Australia.
I conclude, on the material before me that there is substance in the trustee’s concerns about giving permission to travel at this point in the administration of the applicant’s estate. My concerns in that respect have not been assisted by the lack of detail about the proposal made by the applicant for his travel overseas. His itinerary, period of absence and intended place of residence are all left obscure. Nor has he explained to the trustee how the cost of his travel and subsistence will be met. I can understand that he cannot make definite arrangements until he knows whether travel will be permitted, but even his stated reasons for travel have varied. At present he says that he wishes:
i)to travel to investigate obtaining a job in China; and
ii)to visit a fiancée whom he claims to have visited in the past.
In relation to his wish to visit a fiancée, the applicant claims he has been unable to obtain visitor’s permits to bring her to Australia. However, his claims concerning his relationship with this person are vague and largely uncorroborated.
In relation to his wish to investigate an offer of possible employment in China, the applicant has not presented a proposal indicating what possible income would derive from that employment, and how he would propose to make payments for the benefits of his creditors, if these were possible.
The Court’s power under s.178 of the Bankruptcy Act to review a trustee’s decision has been described as being “the widest possible discretion” (see Re Tyndall; Ex parte Official Receiver (1997) 17 ALR 182 (“Re Tyndall”)). The statutory power allows the Court “to make such order in the matter as it thinks just and equitable”.
There are a number of decisions where the Court has been asked to review trustee decisions about travel. The law in this respect was helpfully collected by Bryant CFM in Luna v Pattison [2004] FMCA 237. I shall not repeat all the discussion from cases which she extracts in her judgment. As did she, I find assistance in Re Hicks; Ex parte Lamb (1994) 217 ALR 195, where Heerey J suggested three considerations which were not conclusive, but could be put at the forefront of consideration. These were whether:
i)the proposed visit is genuine;
ii)the bankrupt is likely to return to Australia as promised;
iii)the visit will hamper the administration of the estate.
On my assessment of those considerations on the material before me, I am left in some doubt and cannot be satisfied as to i) and ii). My doubts are sufficiently substantial for me to give them real weight as reasons, at this stage, for supporting the trustee’s decision.
In relation to the third consideration, on the evidence before me I consider that allowing the applicant to travel from Australia for an indefinite period is likely to hamper the administration of the estate at its present stage, since it will deprive the trustee of the opportunity to question the applicant in a public examination or informally, and to obtain his cooperation so as to clarify areas of uncertainty about his property and dealings.
In Re Tyndall (supra) at 187, Deane J referred to the significant consideration that needs to be given to the human rights of the bankrupt person to enjoy travel in circumstances where, although a person has suffered a business collapse, he has not been found to have offended any laws. However, in a passage at 191, also extracted by Bryant CFM, Deane J said that the provisions of the Act in relation to the delivery of passport and the need for a trustee’s consent to travel:
… recognize that a bankrupt’s legitimate desires to travel oversees must, in an appropriate case, be subordinated to what is necessary for the proper and efficient administration of his estate in bankruptcy and the administration of the bankruptcy law.
In the present case, I consider that the applicant’s present desires to travel must be so subordinated. As I have pointed out to him, he may in the future, depending on how the administration of his bankrupt estate proceeds, be able to put further plans for travel to the trustee and have them fully considered again on the merits of the matter.
I would therefore not grant any relief to the applicant in relation to the trustee’s refusal to release the applicant’s passport and to permit travel out of Australia.
In relation to the applicant’s application for the unfreezing of the two bank accounts, I am not satisfied at all that the trustee’s decision was wrong. Indeed, it appears on the material before me that the trustee properly regarded these bank accounts as potentially being property of the bankrupt which fell into his bankrupt estate. I consider that it is appropriate to freeze them at least to allow the trustee further opportunity to investigate the ownership of that money.
For the above reasons I have decided that I should dismiss the application before me. The Trustee should be awarded costs.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate: Lilian Khaw

Date: 20 March 2006