Lockwood v Vince
[2007] FMCA 1497
•5 September 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LOCKWOOD v VINCE | [2007] FMCA 1497 |
| BANKRUPTCY – Refusal by trustee to permit bankrupt to travel overseas – application under s.178 of the Bankruptcy Act 1966 – outstanding income contributions. |
| Bankruptcy Act 1966, ss.139ZG, 139ZH, 178, 272 |
| Dunwoody v Official Receiver [2005] FMCA 1634 Re Hicks; Ex parte Lam (1994) 217 ALR 195 Re Tyndall, Ex parte Official Receiver (1977) 30 FLR 6 |
| Applicant: | DAVID NEIL LOCKWOOD |
| Respondent: | PETER ROBERT VINCE |
| File number: | MLG 1181 of 2007 |
| Judgment of: | Riley FM |
| Hearing date: | 3 September 2007 |
| Date of last submission: | 3 September 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 5 September 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr M. Galvin |
| Solicitors for the Applicant: | Madgwicks |
| Counsel for the First Respondent: | Mr K. Baker |
| Solicitors for the First Respondent: | Serry White & Co |
ORDERS
The respondent’s refusal to consent in writing to the applicant travelling overseas between 8 September 2007 and 22 September 2007 is set aside.
On or before 7 September 2007, the respondent deliver to the applicant:
(a)
a consent in writing to the applicant travelling overseas between
8 September 2007 and 22 September 2007; and
(b)the applicant’s passport.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1181 of 2007
| DAVID NEIL LOCKWOOD |
Applicant
And
| PETER ROBERT VINCE |
Respondent
REASONS FOR JUDGMENT
The applicant bankrupt wishes to travel to Hawaii for his parents’ 50th wedding anniversary. The applicant was due to be discharged from bankruptcy on 5 June 2007 after an uneventful administration. Shortly before that date, the applicant arranged for the applicant and his wife and children to travel to Hawaii at his parents’ expense. It was also arranged that the applicant's brother and his wife and children who presently live in Vietnam would also travel to Hawaii for the celebration on 16 September 2007. However, on or about 25 May 2007, the trustee filed a notice of objection to discharge based on an alleged failure by the applicant to disclose particulars of his income. The trustee also issued a notice of income contribution seeking payment of $23,477.97. The applicant says that the notice is based on an extraordinary construction of the definition of income. He applied to the Inspector-General in Bankruptcy for review. On about
30 August 2007, the Inspector-General reduced the bankrupt’s contribution liability to $21,237.83. The applicant on or about
29 August 2007 issued a fast track list application in the Federal Court seeking review of the trustee’s decision to object to the applicant’s discharge from bankruptcy.
The applicant seeks orders from this court under s.178 of the Bankruptcy Act 1966 (“the Act”) allowing him to travel overseas for the wedding anniversary. Under s.272(1)(c) of the Act, the bankrupt may not travel overseas without the trustee's consent. Under s.272(2), the trustee may impose conditions on the consent. The trustee does not oppose the applicant travelling as planned provided that he pays into a trust account the $21,237.83 outstanding income contribution. Accordingly, the issue for determination is whether that condition should be imposed on the consent to travel.
It is well established that the court has the widest possible discretion in making a decision under s.178: Re Tyndall, Ex parte Official Receiver (1977) 30 FLR 6. Nevertheless, following Re Hicks; Ex parte Lam (1994) 217 ALR 195, certain issues are recognised as being of particular significance in relation to requests to travel overseas, namely:
a)is the proposed visit genuine?
b)is the bankrupt likely to return to Australia as promised?
c)will the visit hamper the administration of the estate?
Additionally, the applicant argues that the extreme weakness of the trustee’s claim is a matter properly to be taken into account. The trustee argues that the applicant’s failure to pay the outstanding income contribution is also a significant issue. There is also an issue about whether any sum paid into trust could be refunded to the applicant in the event that his appeal to the Federal Court succeeds.
Is the proposed visit genuine?
The trustee does not dispute that the proposed visit is genuine. I have no reason to doubt that the applicant genuinely intends to participate in his parents’ 50th wedding anniversary celebrations in Hawaii.
Is the bankrupt likely to return to Australia as promised?
The trustee does not dispute that the applicant is likely to return to Australia as promised. It appears from the material and from counsel's submissions that the applicant and his wife and children have ties to Australia that make it very likely that they would return. I have no reason to doubt that the applicant would return to Australia as promised.
Will visit hamper the administration of the estate?
The trustee notes that in Tyndall at page 15 it was held that, “a bankrupt’s legitimate desires to travel overseas 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.”
The applicant's itinerary indicates that he intends to leave Melbourne on 8 September 2007 and return on 21 September 2007, making a proposed absence of about two weeks. The trustee does not suggest that the applicant needs to be in Australia during that time for the purposes of the administration of the estate. For example, it is not suggested that there is a public examination scheduled during that time and it is not suggested that the applicant would need to furnish any particular documents or information during that time.
Accordingly, on the basis that the applicant is likely to return to Australia as promised, it cannot be said that the trip overseas will hamper the administration of the estate.
The weakness of the claim for income contribution
The applicant urges the court to accept that the trustee’s construction of the provisions relating to income contributions is extremely weak. The trustee notes that under s.139ZG of the Act, the liability to make an income contribution is not affected by an outstanding review in the Administrative Appeals Tribunal. By analogy, the trustee argues that the applicant's liability is not affected by the outstanding Federal Court challenge.
The trustee’s construction of the income contribution provisions may well have limited prospects of success. However, it seems to me that, for the purposes of determining this matter, it is appropriate to proceed on the basis that the income contribution as assessed is payable unless and until it is set aside by the court. Having said that, there can be no doubt that the income identified by the trustee would only be regarded as income by the application of some complex and fairly obscure legislative provisions. As the matter stands, I do not regard the applicant’s failure to disclose the alleged income as indicative of dishonesty.
Effect of the outstanding income contributions
Section 272(2) of the Act specifically states that:
If the bankrupt is liable to make a contribution under s139P or 139Q, the conditions [on travel] may include the payment of that contribution.
The trustee argues that there is a clear legislative intent that the payment of the income contribution as assessed be a condition of travel. The trustee referred to Dunwoody v Official Receiver [2005] FMCA 1634 at [37] where it was said that the fact that an applicant has not paid an income contribution is relevant and at [29] where it was said that:
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 other words, a condition requiring payment of income contributions prior to travel may be appropriate in the circumstances of a particular case. I do not read s.272(2) of the Act as reflecting a legislative intent that the trustee should, as a general rule, impose a condition on any consent to travel to the effect that any outstanding income contribution should be paid first. Rather, the legislature has simply stated that the trustee may impose such a condition. Whether that particular condition is appropriate is a matter to be determined in the light of all the circumstances of the particular case.
Consequences of payment into trust
The applicant indicated to the court that, if it came to it, he would be able to obtain the $21,237.83 outstanding income contribution from his parents and pay it into trust. However, he pointed out that under s.139ZH of the Act, if the Federal Court upholds his claim, he would not be entitled to a refund of any money that had been paid. The trustee said he would consent to any orders for the repayment of the money if the applicant succeeded before the Federal Court. Another option would be for the money to be paid into the applicant’s solicitor’s trust account with orders dealing with where the money would go depending on the outcome of the Federal Court proceeding.
Conclusion
I have no doubt that the applicant’s purpose in travelling is genuine and it is very likely that he will return to Australia. The trip will not hamper the administration of the estate. I proceed on the assumption that the trustee’s claim for income contributions will be sustained, although I also accept that the relevant legislation is complex and obscure. I do not, on the present evidence, consider that the applicant has been dishonest. I do not consider that there is any legislative presumption that there ought to be a condition on travel requiring payment of outstanding income contributions regardless of the circumstances of the case, though there is certainly power to impose such a condition where appropriate. It is not alleged that the applicant, except for the recent issue about the allegedly undisclosed income, has conducted himself less than properly at any stage in the bankruptcy.
In my view, while the matter is not without difficulty, the just and equitable resolution of the case is to permit the applicant to travel without condition. It would be possible to construct orders that would enable the moneys to be paid to the trustee in the event that he wins the Federal Court proceeding or be repaid to the applicant’s parents in the event that the applicant succeeds in the Federal Court proceeding. However, in all the circumstances of this case, that course would be unjustifiably opportunistic and oppressive. There will be orders accordingly.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate:
Date:
3
2
1