Hill v Piscopo
[2008] FMCA 574
•28 March 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HILL v PISCOPO | [2008] FMCA 574 |
| BANKRUPTCY – Review of trustee’s decision not to return the bankrupt’s passport to him to permit overseas travel – consideration of factors relevant to the review – short trip to New Zealand proposed by the bankrupt for a genuine purpose – minimal risk that the bankrupt would fail to return – no significant interference with the administration of the bankrupt estate – public examination of the bankrupt the appropriate means of dealing with unresolved issues in the administration. |
| Bankruptcy Act 1966 (Cth), s.178 |
| Casella v Prentice [2002] FMCA 48 Ha v White [2003] FMCA 64 Mayger v Prentice; Re Mayger [2000] FCA 99 Re Hicks; Ex parte Lam (unreported, 4 March 1994, VB1473 of 1993) Re Molina; Ex parte Wily (unreported, 15 December 1995, Tamberlin J) Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 Re Zdenek Weiss v Official Trustee in Bankruptcy (1984) 1 FCR 40; [1984] FCA 2 Roche v Rangott, unreported, 23 December 2003 |
| Applicant: | TERRY DONALD HILL |
| Respondent: | SAMUEL PISCOPO |
| File Number: | SYG 668 of 2008 |
| Judgment of: | Driver FM |
| Hearing date: | 28 March 2008 |
| Delivered at: | Sydney |
| Delivered on: | 28 March 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Marshall |
| Solicitors for the Applicant: | NOT Lawyers |
| Counsel for the Respondent: | Mr R Newlinds |
| Solicitors for the Respondent: | Catalyst Legal Pty Ltd |
ORDERS
The trustee is to return the bankrupt’s passport to him prior to 2 April 2008 for the purposes of the proposed travel, and the bankrupt is to return the passport to the trustee on 8 April 2008.
The Court notes the bankrupt’s undertakings not to depart from the travel itinerary set out in Exhibit A1 and not to participate in any business activities, including share dealings, whilst in New Zealand
There be no order as to costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 668 of 2008
| TERRY DONALD HILL |
Applicant
And
| SAMUEL PISCOPO |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me an application filed on 19 March 2008 seeking review pursuant to s.178 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) of a decision of the applicant's trustee in bankruptcy refusing to return to the applicant his passport to permit travel to New Zealand during the period 2 April 2008 to 7 April 2008 inclusive. The application is supported by an affidavit by the applicant, Mr Hill, and two exhibits, exhibit A1 being a travel itinerary arranged through American Express travel and exhibit A2 being an email verifying social activities proposed to be engaged on during the proposed trip.
The application is opposed by the applicant's trustee Samuel Piscopo. I have before me an affidavit by Mr Piscopo to which there are exhibited a substantial bundle of documents detailing Mr Piscopo's dealings with the bankrupt during the course of the administration of his bankrupt estate.
The relevant legal principles are conveniently set out in Butterworth's Bankruptcy Law and Practice Service at paragraph 43.0020. In contrast to the discretion previously given to the Court under the now repealed s.139ZU, there are no specific constraints on the trustee in relation to the discretion to return the bankrupt's passport and give written permission to the bankrupt to leave Australia. The authority for that proposition given by the learned authors is Mayger v Prentice; Re Mayger [2000] FCA 99. Some general guidance is found in the decision of Deane J in Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 at 190-191, also reported at 30 FLR 6. In that case his Honour noted the following:
Once the matter is properly before the court, the court is empowered - and obliged - to make such order in the matter "as it thinks just and equitable".
His Honour emphasised the power of the Court under s.178 is very broad. He went on at [13]:
… I do not regard a decision by the trustee on an application by a bankrupt for permission to travel overseas as coming within the category of decision which should be treated as being within the ordinary day-to-day administration of a bankrupt estate. Even though applications for such leave are not uncommon, they must always be treated as being of fundamental importance requiring careful consideration of all relevant circumstances for the reason that they are ordinarily related to the freedom of a subject, who is neither a criminal nor under criminal restraint, to travel to pursue his legitimate commercial or personal desires.
Later his Honour said at [25]:
Bankruptcy does not, of itself, involve any criminal offence. A citizen should be free to travel if and when his commercial activities or personal desires prompt him to do so. Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at insuring the proper administration of the bankruptcy laws and of bankrupt estates under such laws and not as a penalty imposed upon a citizen as a consequence of inability to pay debts leading to the making of a sequestration order.
The learned authors of the Butteworths service also note that in Re Hicks; Ex parte Lam (unreported, 4 March 1994, VB1473 of 1993) his Honour Heerey J said that the following issues, while not necessarily conclusive, were at the forefront of the matters to be considered in the exercise of the Court’s discretion:
· Is the proposed trip genuine?
· Is the bankrupt likely to return to Australia as promised?
· Will the visit hamper the administration of the estate?
These issues were discussed further in Mayger v Prentice; Re Mayger by Gyles J. There is further reference to the issues in Re Molina; Ex parte Wily (unreported, Tamberlin J, 15 December 1995) and also in Re Zdenek Weiss v Official Trustee in Bankruptcy (1984) 1 FCR 40; [1984] FCA 2. There Bowen CJ said at [7]:
It is a basic principle that a resident of Australia is entitled to expect that he may travel freely notwithstanding the fact that he is a bankrupt provided it will not lead to his staying overseas in order to defeat or delay his creditors and provided it will not interfere with the due administration of his bankrupt estate…
His Honour referred to Tyndall’s case and continued:
It is to secure the proper administration of bankrupt estates that bankrupts are required by the Bankruptcy Act to give their passports to the Trustee … and to obtain the permission of the Trustee before travelling overseas …. This interference with the travel of bankrupts is not for the purpose of punishing or expressing disapproval of them for offences or alleged offences against the Bankruptcy Act.
The issue has been further considered in Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 by Lee J. In that case his Honour considered the scope of the Court's power under s.178 and said at [9]:
It may be concluded that s.178 is the means by which the bankrupt, a creditor or person affected by the trustee's conduct in administering the estate may challenge the trustee's exercise of his powers.
He went on later at [10]:
The Court can only exercise the judicial power of the Commonwealth and powers incidental thereto. The Court cannot be asked by application to perform the administrative functions of a trustee administering an estate in bankruptcy. The Court, by a grant of jurisdiction exercisable as original jurisdiction, may hear an application, sometimes described as an "appeal", from non-judicial or administrative bodies. The exercise of that jurisdiction may entail orders of a supervisory character in so far as the determination of questions of law raised by the application require those orders to be made but the Court cannot be asked, by mere application, to stand in the shoes of an administrative body or administrator and exercise the powers of that body in its stead. The Court may only exercise such a power ancillary to the exercise of judicial power.
Nevertheless, his Honour, referring to Tyndall, noted that the powers of the Court are not restricted to a consideration of whether the trustee acted unreasonably or in bad faith. In Tyndall Deane J stated at 9-10:
Once the matter is properly before the court, the court is empowered - and obliged - to make such order in this matter 'as it thinks just and equitable'.
His Honour went on:
In my view, the wording of s. 178 of the Act is such as to confer upon the court the widest possible discretion as to the appropriate order which should be made in the particular case and is quite
inconsistent with the approach that, upon an application made pursuant to the section by a bankrupt, creditor or other person affected by an act, omission or decision of the trustee, the court
is only empowered to interfere with the trustee's act omission or decision if it is of the view that the trustee has acted absurdly or unreasonably or in bad faith.
Ordinarily, if the Court found that the trustee erred in the exercise of power being reviewed under s.178 on the authority of the Federal Court in Re Wheeler; Ex parte Wheeler v Halse, the appropriate course would be to refer the matter back to the trustee for re-determination according to law. The Court should exercise appropriate judicial restraint in addition before interfering with the exercise of power or discretion by the trustee. That was noted by this Court in Casella v Prentice [2002] FMCA 48 at [18]-[19]. In addition, in Ha v White [2003] FMCA 64, Hartnett FM noted that the applicant bears the onus of satisfying the Court that intervention is necessary. In that case it was not.
Having regard to the evidence I have before me I make the following findings. First, the applicant's proposed purpose in travelling to New Zealand is genuine. The purpose is to attend a wedding to which the bankrupt and his wife have been invited. To all intents and purposes that is the only purpose of the proposed travel, although the trustee has a suspicion that some commercial activity may be engaged in which has been concealed from him.
There is a background to this matter in which the trustee has been dissatisfied with the cooperation he has received from the bankrupt. The trustee has sought access to various documents and has been dissatisfied with responses he has received. That said, the bankrupt has been responsive, including through legal advisers, and documents have been provided.
Secondly, I find that the applicant does not present a serious risk of flight. The travel is to New Zealand, a country from which the applicant could if necessary be readily returned. He has submitted to the Court an itinerary of travel through a travel agency and has given an undertaking to the Court that that itinerary will not be departed from. I accept that that undertaking has been given in good faith.
Thirdly, I find that the proposed travel will not in any significant way hamper the administration of the bankrupt estate. I accept that the trustee has concerns that the bankrupt and/or his wife may be surreptitiously carrying on business activity. The trustee has reasonably in the circumstances made application for the bankrupt to be publicly examined. At this stage no final date for that examination has been fixed. The short period of travel to New Zealand proposed will not interfere with that examination which is the appropriate forum for the trustee to explore his concerns about the bankrupt's activities and those of his wife and to explore the trustee's dissatisfaction with the responses he has received from the bankrupt to his inquiries.
I conclude that the trustee should in the circumstances have agreed to return the bankrupt's passport to him for the purposes of the proposed travel. Given the proximity of the proposed travel commencing on 2 April 2008 I have decided that there would be no point in requiring the trustee to re-exercise his discretion. Rather, I will order the trustee to return the bankrupt's passport to him prior to 2 April 2008 for the purposes of the proposed travel, subject to the proviso that the passport is to be returned to the trustee immediately upon the bankrupt's return to Australia on 7 April 2008.
The parties are also in dispute on the issue of costs. The bankrupt contends that costs should follow the event and that, having succeeded on the application the trustee should be liable for those costs. The application for costs is opposed by the trustee on the basis that this is an example of circumstances where the Court has taken a different view as to the exercise of discretionary power than did the trustee and that there is no finding of personal fault or misconduct on the part of the trustee. If a costs order is made the trustee is personally liable for those costs subject to being indemnified for them from the bankrupt estate if there are funds in the estate.
There may be circumstances where a trustee acts capriciously or peremptorily in the exercise of power meriting an expression of disapproval by the Court leading to personal liability for costs. In many circumstances, however, as was submitted by counsel for the trustee, the Court simply reaches on the material before it a different view to that of the trustee. That was the circumstance in Roche v Rangott, unreported, 23 December 2003 where I declined to make an order for costs while making orders permitting the bankrupt to travel to Vanuatu. I reach the same view here.
I will order that there be no order as to costs.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 7 May 2008
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