Hill v Piscopo - [2007] FMCA 814

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HILL v PISCOPO

[2007] FMCA 814

BANKRUPTCY – Review of trustee’s decision – refusal to return passport – short travel proposed – probability of return to Australia – past delay in responding to trustee’s requests – administration of estate would be assisted by refusing travel – application dismissed.

Bankruptcy Act 1966 (Cth), s.178

Dunwoody v Official Receiver [2005] FMCA 1634
Gu v Pascoe [2006] FMCA 367
Re Hicks; Ex parte Lamb (1994) 217 ALR 195
Re Tyndall; Ex parte Official Receiver (1997) 17 ALR 182

Applicant:

TERRY DONALD HILL

Respondent:

SAMUEL PISCOPO

File Number:

SYG1532 of 2007

Judgment of:

Smith FM

Hearing date:

18 May 2007

Delivered at:

Sydney

Delivered on:

18 May 2007

REPRESENTATION

Counsel for the Applicant:

Mr C Carter

Solicitors for the Applicant:

N.O.T. Lawyers

Counsel for the First Respondent:

Mr M Sneddon

Solicitors for the Respondent:

Bartier Perry

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.
Liberty to the respondent to apply for further or alternative orders in relation to costs no later than 31 May 2007.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG1532 of 2007

TERRY DONALD HILL

Applicant

And

SAMUEL PISCOPO

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an urgent application for a review under s.178 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) of a refusal, whether by omission or actual determination, of the trustee of the applicant’s bankrupt estate to return his passport to him to allow him to travel overseas. The application was filed in this Court on 15 May 2007, three days ago, and was made returnable today at 3.00 pm. The hearing in relation to final relief commenced at that time, and a sensible approach by both counsel to the presentation of evidence and submissions has allowed it to conclude at 4.40 pm. I must now give my immediate judgment.
The urgency arises because the travel which is being proposed has an itinerary whereby the applicant wishes to leave Sydney tomorrow, which is a Saturday, or on Sunday, to fly to London for a wine fair where his wife wishes to do business for a company in which the applicant disclaims an interest of any sort. The couple also wish to visit friends in the United Kingdom, to fly to New York to further pursue his wife’s business interests, to fly to Chicago “to visit personal family friends”, to have further business meetings in Los Angeles and Vancouver, and to return to Sydney on 12 or 13 June 2007. Plainly, it was impossible to adjourn the proceedings to allow evidence to be presented and tested in a full and complete fashion. As both counsel appeared to accept, I have therefore approached the matter on a somewhat impressionistic understanding of a substantial body of evidence tendered before me, and of the issues which faced the trustee when answering the request.
There is a significant body of authority which provides guidance to the Court when requested to review a trustee’s decision about the return of a passport. As I explained in Gu v Pascoe [2006] FMCA 367:
9.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”.
10.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.
…
13.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.
Counsel for the trustee accepted the above principles, and also submitted that I should take into account considerations referred to by Riethmuller FM in Dunwoody v Official Receiver [2005] FMCA 1634 at [29]:
29.I do not accept that the travel must be for a purpose that assists in the administration of the estate. If the travel may hinder the administration, either by hindering contact with the bankrupt by the trustee, or allowing the bankrupt an opportunity to deal with assets that are held overseas and have not been recovered by the trustee, these would be relevant considerations against allowing travel. If the travel would allow the bankrupt to earn a greater income, and thus satisfy all or part of the debts this would be a relevant consideration in favour of allowing the travel. To deny travel simply because it is only being undertaken for compassionate reasons would be an improper exercise of the discretion as it results in a punitive application of the provisions. However, denial of permission to travel where a bankrupt is in default of his or her other obligations may be an appropriate method by which a trustee can encourage compliance by a bankrupt.
In the present case, considering the first consideration suggested by Heerey J in Re Hicks, I am not confident that I can conclude that the proposed visit is genuine, if “genuine” includes a satisfaction that the travel proposal has been presented to the trustee in a fully candid and truthful fashion. I am not entirely confident that this is so.
Evidence was presented to the Court by the applicant, which was more extensive than was presented to the trustee, suggesting that Ms Rose, the applicant’s wife, has a medical condition for which she has been treated this year by a consultant psychiatrist, requiring the taking of medication. There is evidence that on 23 April 2007 she underwent breast surgery for health reasons, involving a one‑night stay in hospital. She has been advised to avoid strenuous exercise involving the lifting of heavy objects. She has deposed in her affidavit that, if her husband is not given permission to travel with her, she would cancel the trip, because she needs his personal support in the travel. I am prepared to assess the matter on the basis that this evidence is probably true.
What I am not entirely persuaded about, is that the travel is in the business interests only of the wife, and that the applicant himself does not have an undisclosed financial interest in the travel. This is only a suspicion on my part, and has not been tested in the hearing before me. However, the evidence indicates that it is a suspicion held by the trustee, and in my opinion the evidence raises sufficient substance for it to be given some weight by me. The trustee wishes to investigate a possible interest of the applicant in his wife’s business, in the course of administrating the estate. This is a point which goes both to “genuineness” considerations in relation to the proposed travel, and also considerations about the desirability of the applicant being required to remain in Australia in the interests of the administration of his estate, which I shall address further below.
In relation to the second consideration suggested by Heerey J, it appears to be accepted by the trustee that there is no ground for doubting that the proposed travel itinerary suggested by the applicant will be adhered to, with such minor or essential variations as are due to the contingencies of travel. In particular, it was not submitted that there is reason to doubt that the applicant would return to Australia in mid‑June.
However, I am not confident that this assumption should be accepted blindly, and I would not make a finding that there is no risk that he would not return at the time promised. Some possible concerns arise from some features of the bankruptcy shown in the evidence before me.
The applicant was made bankrupt on 4 July 2006. His statement of affairs revealed virtually no assets, apart from unverified claims on debtors for $450,000, and a superannuation entitlement of $500,000 in a self‑managed fund. It admitted unsecured creditors for amounts totalling about $5.5 million. The trustee’s report to creditors dated 14 August 2006 summarised these claims, and noted that the superannuation is not a divisible asset in bankruptcy. It accepted unsecured creditors totalling $5,490,582, and said there were no secured creditors, no promises of any income contribution, and “no prospect of a dividend based on the information provided by the bankrupt. I will notify creditors should the position change after I conduct my investigation”. It notes that the applicant has “is / has been associated with” a number of companies including some which appear to be involved in the wine industry.
The evidence before me indicates that the trustee has been attempting since late last year to investigate an assignment by the applicant in June 2002 of substantial assets to his wife, and also to investigate the business now being conducted by the applicant’s wife. It does appear to be a business based in Australia. However, the other features of the bankruptcy which I have sketched above, do not allow me to be totally confident that Mr Hill and his wife might not find it more comfortable to stay overseas than to remain in or return to Australia so as to assist his trustee to investigate his financial affairs.
Notwithstanding this concern, on the balance of probabilities on the evidence such as it is before me, I am prepared to find that he is likely to return to Australia at the time promised.
In relation to the third consideration suggested by Heerey J, whether the visit “will hamper the administration of the estate”, the applicant’s counsel submits that the applicant intends only a short visit overseas. He has promised to return, and has made promises on oath to cooperate with his estate. Counsel submits that, once I am satisfied that he is likely to return, there can be little inconvenience to the administration of his estate by allowing him to travel, and that his human right to travel with his wife, in the compassionate circumstances indicated in the evidence, should cause the Court to allow that travel.
I have given careful consideration to these arguments, but I am not confident that allowing the travel at this point in the administration of the estate in bankruptcy will have no adverse effect on its future administration. Indeed, I am left with a concern that it will.
The concern arises from circumstances attending travel by the applicant which was permitted in September 2006. At that time there were outstanding requests by the trustee for information, to which an unsatisfactory response was given in the lead‑up to permission being given for travel. There were requests going to significant matters which were outstanding, and which were raised after his return. They concerned the applicant’s involvement in New Zealand companies with which he was associated, and in his wife’s business and other matters. The applicant employed a solicitor, paid for by his wife, to correspond with the trustee, and to assist him to answer these requests. In February 2007 they represented that a full report was completed and “it’ll be with you as soon as I can get it there”. However, this was only delivered on 3 May 2007, in the lead‑up to the present request for travel. The trustee has identified further significant issues requiring further information arising out of this response.
In my opinion, the trustee now has cause to be concerned at the delay with which information has in the past been forthcoming. The period of delay was significant, and it was open to the trustee to regard it as an impediment to the expeditious administration of this estate. There is a properly based concern now held by the trustee that, if the applicant is permitted again to travel this year, he will be similarly uncooperative when he returns. I consider that it is important that the applicant should remain in Australia, at least in the immediate future, so that the he can personally supervise and ensure that all outstanding requests of the trustee are expeditiously addressed. The concern that the applicant is only interested in giving the trustee his attention at times when he is seeking permission to travel, and not after he travels, is a matter which has caused me to decide that the discretion should not be exercised today to allow the travel which has been proposed to the trustee.
For the above reasons, I am not persuaded that the trustee’s refusal to grant travel permission and to allow the return of the passport should be overturned. Whether at a future time travel should be permitted will have to be assessed in the light of the administration of the estate at that time, and I would not venture to make any recommendations to the trustee as to how his powers should then be exercised.

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

Associate: Lilian Khaw

Date: 31 May 2007