Kerrison, J.J. v Official Trustee in Bankruptcy

[1990] FCA 698

B A ~ K R W X Y - contempt of court - alleged refueal to deliver to Official Truetee sum to which not entitled - time at which entitlement muet exist - standard and onue of proof relevant to contempt8 - whether money divieible amongst creditors -

whether eufficient evidence to eetablieh appellant not entitled by law to retain sum as againet bankrupt wife - whether demand for repayment required

m ~ t c v A c t 1966

lovees' v

Statipn Ptv m. (1986) 161 CLR 98

v B-E (1938) 60 CLR 336

-Adelaide

Morling, Pincus and French JJ
29 November 1990

5) 1

1	)	No. SG 51 of 1990
1
-

On appeal from a decision of a judge of the

Federal Court of Australia

BETWEEN:

Appellant

AND:

Respondent

-	I	Morling, Pincus and French JJ
-	I	29 November 1990
kamEAhM	I	Sydney
1	-

1.    Appeal allowed.

2 .    Orders made by O'Loughlin J set aside.

3 .    Respondent to pay appellant's costs.

-1 Settlement and entry of orders is dealt with
in Order 36 of the Federal Court Rules.

1

1 ) No. SG 51 of 1990

On appeal from a decision of a judge of the

Federal Court of Australia

BETWEEN:

Appellant

AND:

Respondent

CORAM:	Morling, Pincus and French JJ
DATED	8 29 Nwembar 1990

MORLING and PINCUS JJ: In proceedings before O'Loughlin J, the Official Trustee in Bankruptcy, in his capacity as trustee of the bankrupt estate of Krs Baiba Kerrison, sought an order that the appellant, who is a retired medical practitioner and the husband of Krs Kerrison, be found guilty of contempt of court. The application was based upon an allegation that the appellant had refused to pay or deliver to the Official

Trustee the sum of $9,000 which was alleged to be money that	the appellant had in hie possession or power which he was not,
by law, entitled to retain as against Mre Kerrison or the Official Trustee.
The proceedings were brought pursuant to sub- eections (4) and (5) of 8.129 of the v 1966 (the
Actm) which are in the following terms:

R 129 (4 ) . I f a pernon ban i n hin pssennion or power

any moneys or necurity tha t he i n not by l a w entitled to retain a s againnt the bankrupt or the trulrtee, he 6 h l l pay or deliver the monep or security to the trulrtee. ...

129 ( 5 ) A pernon who doe6 not pay or deliver to the	tmlrtee any money8 or security tha t he i s required by
subsection ( 4 ) or (4A) no to pay or deliver i s guilty o f contempt o f court. "

W s Kerrison was declared bankrupt on her own petition on 29 May 1987. At the date of her bankruptcy she wae engaged in full time employment as a registered nuree. On 22 February 1989, W s Kerrison filed an application in her bankruptcy in which she, in effect, sought a declaration that a sum of $9,000 paid on 3 January 1989 to Annesley College for school fees for her and the appellant's two daughters had come from her aavinga subsequent to her bankruptcy and hence did not form part of her property that wae divieible amongst her creditors. Thie application was heard by von Dousea J, who diemissed it. The diemissal of the application left unreeolved, however, the whereaboute of t $9,000 and the identity of the party who had poeseasion of it or power over it. Nor did von Douesa J find positively that the $9,000 was

belief that the money had come into the poeeeasion or power of	property divisible among W e Kerrieon's creditors. In the
the appellant, the Official Trustee instituted proceedings under sub-aections 129(4) and (5) of the Act naming the appellant as respondent.
The facts in support of the application before O'Loughlin J are set out in considerable detail in his
Honour's judgment. They led him to conclude that $9,000, the property of s Kerrison, was paid to Annesley College in early January 1989, that the appellant did not have any entitlement to that money, that the appellant rang the Business Administrator of Annesley College and requested the College to refund the $9,000, that the College agreed to do so, and that it made out a cheque which was originally drawn in favour of "J. Kerrison*. He also found that Mts Kerrison attended the College on l February 1989 and took delivery of a cheque for $9,000 and that at her request the identity of the payee was changed to "B. Kerrison* because, as she said, her husband did not have a bank account. His Honour also accepted evidence that the same cheque was cashed on
1 February 1989 at the Glenside Branch of Westpac Bank and
that Mra Kerrieon was present at the bank and endorsed the cheque before it was cashed. He also found that whilst Mrs Kerriaon was in the bank (after completion of ordinary trading hours) a male person was also present and that this person collected the proceeds of the cheque after Mra Kerrison left the bank. The bank officer who cashed the cheque gave
evidence that he took this man to be the appellant. The bank
manager, who was also present, gave similar evidence. nts Kerrison gave evidence that she had no memory of events that occurred in the bank, but his Honour disbelieved her evidence.
The appellant, who appeared for himself, did not suggest to the bank officers in cross examination that he was not the person whom they saw in the bank and who collected the proceeds of the cheque.
O*Loughlin J was of the opinion that the proceedings before him were quasi-criminal in character and that the etandard of proof which applied, though ehort of the criminal onus, was nevertheless coneietent with the principle laid down
in&WauUuvBriainllhaw (1938) 60 CLR 336. Applying that
standard of proof, his Honour concluded that he ehould infer that the appellant was the man who received the $9,000.
Hie Honour was of the opinion that there being no evidence to suggest that the appellant wae by law entitled to retain the $9,000 as against hie wife or the Official Trustee, the appellant was required, by virtue of s.129(4) of the Act to pay the money to the Official Trustee. He was aleo of the opinion that the Official Truetee had made a sufficient demand for payment and that the appellant had seen fit to refuse the demand. He therefore found that the appellant wae guilty of
contempt of court. It ie from that finding that the
appellant has appealed.
The appellant appeared in person on the hearing of the appeal. He submitted that 08Loughlin J was in error in
finding that it was his wife who cashed the cheque on 1 February 1989 at the bank and that it was he who was handed the proceed6 in cash by the bank officer. We are quite satisfied that this submission has no substance. The submission was founded eaeentially upon the proposition that,

- taken on ite own, the evidence of the bank officers who identified the appellant as having been present when the

cheque was cashed was not teliable enough to constitute proof in accordance with the properly applicable standard of proof. That standard was said to be the standard applicable in criminal cases, that is to say, proof beyond reasonable doubt.

O'Loughlin J was careful to state in his reasons that he did not arrive at hie findings of fact by reference only to the evidence of the bank officers. Ae he said, their evidence was to be assessed in the light of all the other evidence, including evidence from MS Kerrison which he disbelieved, and also in the light of the appellant's failure to challenge the bank officers that they were mistaken in their evidence that he was present in the bank at the relevant time. Indeed, in his somewhat confused submissions to the Court, the appellant said on more than one occasion that he did not seek to challenge OPLoughlin J's finding that it was his wife who cashed the cheque.

In our opinion, O'Loughlin J was plainly correct to

find that it was proved that Mrs Kerrison cashed the cheque

proof of those facts was required in accordance with the	and that the appellant received the proceeds of it, assuming
m standard. His Honour did not state what his findings would have been had he been required to be satisfied beyond reasonable doubt. We heard brief argument as to whether the atandard of proof in a case such as the present is in accordance with what is said in Brioinsha*, or is proof beyond reasonable doubt. The ansuler to that question is not free from difficulty.
The distinction between what has been described as "civil contemptn and "criminal contemptm was discussed in

vees* v Wuaainberti

Station Ptv (1986) 161 CLR 98. The great difficulty in maintaining the distinction is referred to by Gibbs CJ, Mason, Wilson and Deane JJ. in their joint judgment. Their Honours said (p.109) that there is much to be said for the view that all contempts should be punished as if they are quasi-criminal in character, notwithstanding the adoption of the contrary view by some members of the High Court in earlier decisions. Not having had the benefit of proper argument on the question, we do not think we should decide whether the criminal standard of proof was applicable in the present case unless it is necessary to decide the question. We do not think it is because we are of the opinion that it was proved beyond reasonable doubt in the present caee that Mrs Kerrison cashed the cheque and that the appellant received the proceeds

of it. Both the appellant and counsel for the respondent

joined in asking us to decide whether those matters had been proved beyond reasonable doubt, assuming it was necessary for such proof to have been given. Accordingly, even if w e had found that 08Loughlin J had erred in applying the

standard (and we do not so find), we would have dismissed the
appeal if that had been the only error in hie judgment.

Dr Kerrison further submitted that the proceed. of the cheque represented income of his wife's which, by virtue of s.131(1) of the Act, she was entitled to retain for her own benefit and that accordingly s.129(1) of the Act could have no application to it. It wan fundamental to this submission that s.129(4) has no application to, inter alia, money which does not form part of the property of a bankrupt which is divisible amongst his or her creditors.

We do not agree with this submission. The words of s.129(4) are quite general and refer to, inter alia, any moneys that a person is not by law entitled to retain against the bankrupt. No doubt most money and other property owned

by a bankrupt will be divisible amongst his creditors - vide

S. 116 of the Act. But it will sometimes be the case that whether property is or is not divisible amongst a bankrupt's creditors is uncertain and requires a decision to be made by the trustee. An obvious case would be property of the kind referred to in s.l16(2)(ca), e.g. a motor vehicle not having a value in excess of the prescribed amount and used by the

bankrupt primarily as a means of transport. A person having

possession of such property which he is not, by law, entitled to retain against the bankrupt is obliged by s.129(4) to deliver it to the trustee, notwithstanding that it may not form part of the property of the bankrupt divisible amongst his creditors. Of course, if such property is delivered to the trustee in accordance with the requirements of the sub- section, it does not follow that he is entitled to retain it as against the bankrupt. But at least he is afforded the opportunity of deciding whether or not it is divisible amongst the bankrupt's creditors. Further, we could not find on the evidence that the $9,000 was in fact derived from Mrs Iterrison's earnings after bankruptcy. We are therefore of the opinion that this submission fails.

During the course of argument it appeared to the Court that there was a weakness in the Official Trustee's case at the trial which was not identified by the appellant and which does not appear to have been brought to O'Loughlin J's attention. Ordinarily, we would not have been disposed to allow the matter, to be raised on appeal. However, since the appellant was without counsel both at the trial and on the hearing of the appeal, and since the consequence of failure in the appeal would be that he would be obliged to serve a term of imprisonment, we think that we should allow the question to be argued. The question is whether, on the facts proved at the trial, it was established that at the date when the proceedings of contempt were commenced against the appellant

wife. he was not entitled by law to retain the $9,000 as against his The proceedings were commenced some five months after the appellant received the $9,000 from the bank at the direction of his wife. It was undoubtedly proved at the trial that the money belonged to Mrs Kerrison before it was handed to the appellant. But there was no evidence as to the

reason why Mrs Kerrison directed the bank to pay the money to her husband. She may have intended to give it to him, or she may have intended to lend it to him on terms that it would not be repayable until a date later than the date when the

proceedings were conmenced . In either case, the bankrupt

would have been entitled to retain the money as against his wife as at the date when the proceedings were commenced. Indeed, he would have been entitled to mtain it as against her as at the date when the Official Trustee first made a demand upon him, which was some nine weeks after he received the money. Although no demand is made necessary by either of sub-sections (4) and (5) of s.129 of the Act, counsel for the respondent informed us that he did not wish to rely upon any case of contempt on the part of the appellant prior to the making of the demand.

We appreciate that where the person who is alleged to have possession of a bankrupt's property is the spouse of the bankrupt, the Official Trustee is likely to encounter serious difficulty in establishing that the spouse is not

entitled as against his wife to possession of the property.	But the necessity remains of proving as against a person
charged under 8.129(5) of the Act with contempt of court that he had, at the date of the alleged contempt, possession of property which he was not by law entitled to retain as against the bankrupt. In the present case, no steps appear to have been taken to examine the appellant under s.81 to ascertain why his wife paid him the money or what he had done with it.
If that evidence had been obtained and tendered at the trial
it may well have been sufficient to fill the gap which we perceive existed in the Official Trustee's case.
We accept that there are strong ground8 for ouspecting that the $9,000 is still in the possession or power of the appellant and that he in not entitled by law to retain it as against his wife. But suspicion, even strong suspicion, is no substitute for the evidence that was required to make out the Official Trustee's case.
Although the appellant was unrepresented on the hearing at first instance and on the hearing of the appeal he may have.incurred some small amount of costs. For that
reason he is entitled to an order for costs. The appeal is
therefore allowed with costs.

I c u t i f y t h a t this and the procoding n ine (9 ) paw u o

a t ~ e copy of t h e Ro~sons for J u d ~ l n n t heroin o f t h

Hon. X r Jus t ice norl ing a d the Hon. Hr Jus t icr Pincua.

Associate:  fib&--

Appearance for Appmllant:	In p r s o n
Counsel for ruspondent :	s.n. Adams

in#tructmd by Adams and Oilbertson

Da te o f hau inq:  13 il0vemb.r 1990

Date J u d g ~ . n t delimrmd: 29 MoWovunkr 1990

IN THE FEDERAL COURT	)
OF AUUISl!RALIA	\

- - - -- - - - -- -- -

SOUTH AUSTRALIA	j
DISTRICT REGISTRY	1
GENERAL DIVISION	i No. SG 51 of 1990

ON APPEAL FROM A DECISION OF A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

JOHN JAMES KERRISON

Appellant

and

OFFICIAL TRUSTEE IN

BANKRUPTCY

Respondent

CORl4X8 MORLING, PINCUS AND FRENCH JJ.
29 November 1990

-

FRENCH J.

The joint judgment of Worling and Pincus JJ. which I have had the advantage of reading in draft form sets out the facts and, subject to the remarks that follow, I agree with their Honours' reasons and the orders proposed.

The application by which these proceeding8 were

instituted before his Honour the trial judge, sought relief in
the following terms:

"That the respondent be emitted to prison for contempt of this Honourable Court in that the respondent has refused to pay or deliver to the applicant the sum of $9,000 being moneys that the respondent has in his possession or power that he is not by law entitled to retain an against the bankrupt or the applicant."

The affidavit sworn by the Acting Official Receiver and filed in support of the application referred to a letter sent on 11 April 1989 by his solicitors to Dr. Kerrilron demanding payment of the sum of $9,000. By a letter dated 24 April Dr. Kerrison replied in the following terms:

"Re your correepondence of 11.4.89 which
was received on 20.4.89.

Prom notification, both orally and written, you are aware that all correepondence addressed to me and my wife is seized by the Official receiver.

It is thus, impossible for me to respond to your demand in that letter."

This was rightly treated as a refusal to pay the money over. The terms of the application suggest that it was that refusal which was regarded as the relevant contempt under S. 129. But the text of sub-ss.l29(4) and ( S ) , which is set out in the joint judgment, doee not refer to any demand. The contempt is constituted by the failure to "pay or deliverm the relevant

must be demonstrated. Subject to that requirement a contempt	moneys or security to the trustee, although no doubt mens rea	would be committed if, within a reasonable time of acquiring possession of moneys or securities covered by the section, their holder fails to take steps to pay or deliver them to the trustee or puts it beyond his power to do so, e.g. by some disposition to a third party. Refusal to comply with a demand is not a necessary element of the contempt established by sub- s.(5) although it may be evidence of the failure to deliver and, if a mental element be necessary, of that element. What is clear is that at the time the alleged contempt is committed it must be shown that the defendant "was not by law entitled to retain as against the bankrupt or the trusteea the moneys or security in question. In this case the time at which the entitlement was said to exist was not expressly addressed. It was not adequately defined in the application or supporting affidavit. In that respect there was arguably a failure in the originating application to "specify the contemptm alleged
as required by r.176 of the m ~ t c v U.

The learned trial judge said in his judgment:

"Holding, as I have, that the $9,000 originated from Mrs Kerrison (without expressing a view as to when she acquired it) there is, at the least, an obligation on the part of Dr. Kerrison, to lead evidence on the subject of hie alleged entitlement to that money as against his wife. This he has wholly failed to do and in the absence of such evidence (which I interpolate is nothing more than an evidentiary onus) there is nothing before me that remotely suggests that Dr. Kerrison has any form of entitlement to the $9,000."

And in his conclusion:

"I am satisfied to the required degree that the sum of $9,000, the property of Mrs Kerrison, was paid to Annesley College in early January 1989. I am not concerned, for reasons which I have endeavoured to explain, to ascertain whether it came from her pre - or post - bankruptcy savings. I find that there is no evidence to suggest that her husband, Dr. Kerrison, had any entitlement to that money."

The concept of the evidential onus of proof in this context falls to be considered in the light of principles developed

for the proof of guilt in criminal cases. m on

13th Edition at para.4.10 points out that the prosecution in a criminal case have the "evidential burdenn of raising a prima facie case and the persuasive burden, in the absence of evidence from the defence, of proving guilt beyond reasonable doubt. Given the prospect that a prima facie case, if unanswered, will succeed, "the accused may be said to be under an evidential burden". The term as there used however doe6 not refer to some rule of law that if unanswered the prosecution's prima facie case must succeed. A prima facie case being one on which a finding of guilt may be made does not require that it must be made. The usage addresses the practical forensic reality that the silence of an accused in the face of a prima facie case will probably result in his conviction. The term "evidential burden" is used in another

way by the learned author to refer to those cases in which the	accused's defence will involve introducing new issues, e.g.
automatism, provocation, self defence or duress. Where there is some evidence to support such explanations, the ultimate onus of proof remains on the prosecution. The third
Australian edition of m s s on Evi-, also at para.4.10,
makes a similar comment and refers to cases involving like issues. The general observation is made at para.4.11 that:

"Even when there are no words dealing expressly with the burden of proof, a statute will frequently be construed so as to place an evidential, if not a legal, burden on a particular issue on the accused. Although there is little direct English authority on the point it seem that where the accused bear8 an evidential, but not a legal burden, he may discharge it by adducing evidence of a reasonable possibility of the existence of the defence."

In my opinion, it is central to the offence created, or perhaps more accurately the sanction imposed, by 8.129(5) that it be demonstrated that the respondent to an application of this kind wan "not by law entitled to retain the moneys or security" in question as against the bankrupt or the trustee. Although framed in negative terms, the application of the provision involves the positive finding of a right in the bankrupt or trustee to recover the moneys or security from their holder. As a matter of statutory interpretation there can be no question of an evidential burden on a respondent to raise the issue of his entitlement. That is not to say that a

prima facie case established by the trustee, upon which it is

open to find absence of any entitlement, will not in the

practical sense mentioned in -, give rise to such a

burden. But this was not such a case. The evidence did not support a finding one way or the other on Dr. Kerrisones entitlement or lack of it. The $9,000 could have been handed over as a gift or a loan not repayable before a certain date. Dr. Kerrison8a failure to give or call evidence would justify a more confident inference of lack of entitlement if there were evidence on that point. It cannot however be relied upon to support a deficiency in the trustee's case.

Accepting the difficulties confronting both the trustee and his Honour in this case, it is my opinion that the time of the relevant contempt was not adequately defined and the absence of relevant entitlement at any material time was not proven.

In my opinion the appeal should be allowed.

I certify that this and the preceding

five (5) pages are a true copy of the Reasons for

Judgment of his Honour Justice French.

Associate :

r 1 4 v-

Date:  Nuvz-.ber \ 9 9 C

Dr. J.J. Kerrieon appeared on his own behalf.

Counsel for the Respondent: Mr S. Adams

Solicitors for the Respondent: Adams h Gilbertson

Date of Hearing:	13 November 1990
Date of Judgment:	29 November 1990