Luna v Pattison
[2004] FMCA 237
•19 April 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LUNA v PATTISON | [2004] FMCA 237 |
| BANKRUPCTY – Application pursuant to section 178 of the Bankruptcy Act 1966 to set aside the Trustee’s rejection to return to the bankrupt his passport and to give his written consent to leave Australia – whether the bankrupt’s departure overseas would hamper the administration of the estate – whether the bankrupt’s travel purposes were genuine – application dismissed. |
Bankruptcy Act 1966 (Cth), ss.77, 77a(ii), 178, 272
Federal Court Rules
Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182
Re Hicks; Ex parte Lamb (Heerey J, 4 March 1994 VB 1473 of 1993)
Casella v Prentice [2002] FMCA 48
Mayger v Prentice (Gyles, unreported) BC200000252 (2000) FCA 99
Healey v Prentice (No 2) (2000) FCA 1598
Re Wheeler; Ex parte Wheeler v House (1994) 54 FCR 166
| Applicant: | PASQUALE LUNA |
| Respondent: | PAUL ANTHONY PATTISON |
| File No: | MZ 383 of 2004 |
| Delivered on: | 19 April 2004 |
| Delivered at: | Melbourne |
| Hearing Date: | 19 April 2004 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr P Fary |
| Solicitors for the Applicant: | Serry White & Co Solicitors |
| Counsel for the Respondent: | Mr E Fice |
| Solicitors for the Respondent: | Christopher Wray Lawyer |
ORDERS
That the application be dismissed.
That the applicant pay the respondent's costs of this application to be taxed, if not agreed, pursuant to the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 383 of 2004
| PASQUALE LUNA |
Applicant
and
| PAUL ANTHONY PATTISON |
Respondent
REASONS FOR JUDGMENT
I have before me an application by the bankrupt pursuant to s.178 of the Bankruptcy Act 1966 (Cth) (the Act) to set aside the Trustee's refusal to return to him his passport and to give his written consent to him to leave Australia.
The legislative basis for the Trustee's refusal and the matter coming before the Court is that upon becoming bankrupt a person is obliged to surrender his or her passport to the Trustee in bankruptcy pursuant to s.77a(ii) of the Act.
Section 272 of the Act provides that after a person has become a bankrupt and before being discharged from bankruptcy without the consent in writing of the Trustee of his or her estate leaves Australia or does an act preparatory to leaving Australia is guilty of an offence and is punishable, on conviction, by imprisonment for a period not exceeding three years.
It is clear, therefore, that the applicant needs to seek the permission of the Trustee to depart from Australia and for the return of his passport for that purpose.
The bankrupt became a bankrupt on 13 February 2003 by virtue of a sequestration order made on that day upon a petition of the National Australia Bank Ltd. A Statement of Affairs was filed on 20 March 2003. The applicant in an affidavit sworn 16 April 2004 swears that he is employed by a company called Mikasa Pty Ltd as its international retail buyer on an annual salary of $35,000 per annum. He swears that he has been employed in that role since June 1999. He further says that a significant part of the role involves travelling overseas to meet with suppliers in order to obtain and arrange the importation of the best and most up to date homewares and housewares for Mikasa.
He further says that Mikasa since 1997 has carried on the business of manufacturing, importing and wholesale distribution of homeware and gift products and that it is a family company and is owned and operated by his daughter Vincenza Luna who is 28 years of age. He says that he is the only employee of Mikasa who is employed as an international buyer and that he has extensive experience in importing, particularly in sourcing and buying products particularly in new merchandise in China, Hong Kong, Malaysia, Indonesia and Italy.
He made a request of the Trustee to travel overseas in his capacity as an international retail buyer on 19 March 2003. The following day he attended a meeting at the offices of the Trustee convened at his request and was asked various questions in relation to his bankruptcy and income. He says that he answered all questions put at the meeting to the best of his knowledge. In April he attended a further meeting and again requested that he be given permission to travel overseas and his passport be returned to him.
On 10 April he received the letter dated the previous day from the Trustee advising his request for overseas travel had been denied. That letter says relevantly:
I refer to your request of 19 March 2003 and advise that I am not prepared to accede to your request for overseas travel. In reaching my decision I have taken into consideration that you failed to provide me with the books and records requested in my letter dated 25 March 2003 and discussed at the meeting on 2 April 2003.
The bankrupt annexes a copy of the letter of 25 March 2003 from the Trustee and the letter dated 9 April 2003 from the Trustee to him. He says that he advised the Trustee during the April conference that he did not have any documents in relation to the category set out in the letter of 25 March and therefore has complied with the Trustee's request as far as he is able.
In relation to the present application, on 4 April 2004 he wrote to the Trustee requesting he be given permission to travel overseas from 20 April 2004 to 12 May 2004 in order to attend gift fairs in Hong Kong, China and Italy as part of his employment with Mikasa and advising the Trustee that if he was unable to participate in the trade fairs his employer would require him to seek other employment. He has made travel plans and attaches to his affidavit a travel itinerary with some details of travel events that he will be required to attend. He says that it is important that he attend overseas trade fairs and that the company will be seriously disadvantaged if he is unable to attend the trade fairs on its behalf.
He seeks to travel within the next few days enabling him to attend the first gift fair in Hong Kong which commences on 21 April 2004. He has informed the Court through his counsel today that he will be accompanied on the proposed trip by his daughter who he has previously described as owning and operating the family company.
On the day that the affidavit was sworn and presumably served, namely, 16 April, the Trustee wrote to the bankrupt in relation to his request of 4 April, the delay having been occasioned by the Trustee's absence from his office. The letter itself indicates that the request is rejected on the basis that the bankrupt has shown a disregard of his obligations as a bankrupt. This, it appears, is in part because he has booked flights prior to receiving a response in relation to his travel applications.
I accept, as Counsel for the bankrupt has pointed out, it is difficult for a bankrupt to supply detailed information of his travel plans and itinerary in circumstances where he is unable to make bookings and that in addition the Court should accept that given the arrangements must be made in a reasonably timely matter if he is permitted to travel, then it is not unreasonable, nor could it be alone shown to have been a disregard of his obligations simply to have made some arrangements whilst at the same time seeking the consent of the Trustee to travel.
The Trustee has set out a number of reasons in the letter why it is that the request was refused. In general terms, that refusal is based upon what the Trustee says is lack of cooperation by failure to provide him with the books and records requested in his letter of 25 March 2003 discussed at the meeting on 2 April and apparently again requested in the letter dated 18 August 2003. The letter from the Trustee details information which has been requested and not received. It includes details relating to discharge of mortgages on two properties that were sold, evidence of how repayments were made and information in relation to Luna Developments Pty Ltd during the period in which the bankrupt was a director.
It also includes details of a trust deed in relation to a property which is said to be held by a family trust, and a list of assets and liabilities of the company at the time he ceased to be a director. It also asks for personal bank accounts and bank statements, details of a caveat and the contract of sale in relation to two properties.
Whilst the bankrupt acknowledges that information has been requested and not provided, his assertion is that he has informed the Trustee that the information is not within his capacity to provide; that is, he does not have it or it is not within his power to obtain. As there is nothing further that he can do, his response provides an answer to any suggestion that he has not cooperated with the Trustee.
Counsel for the bankrupt contends that this should in essence be a satisfactory response for the purposes of this application for a number of reasons, one of which is that in order to ascertain the reasonableness of each and every request the Court would have to hear evidence in detail about each and every request and the responses of the bankrupt in relation to each and every request. Further, he relies upon the fact that, at least it would appear since August 2003, the Trustee has not been pressing the bankrupt for this information and therefore it could not be said that the administration of the bankrupt estate would in any way be disadvantaged by the proposed trip which is of a few weeks duration.
The matter was stood down this morning to enable the Trustee to prepare or have prepared an affidavit on his behalf which I now have before me. The affidavit in effect raises a number of matters which are of concern to the Trustee in relation to the administration of the estate. For example, the Trustee raises the concerns that:
a)the bankrupt says he is employed as an international retail buyer on an annual salary of $35,000 per annum and that it seems unlikely that if that is the position he holds there is a disparity between the nature of the income and the apparently important position;
b)the fact that he now says he is the only employee employed as an international buyer, whereas at a conference on 20 March last year he said that his daughter and another employee were also buyers;
c)that the nature of his responses to the production of documents was vague and, I infer, unsatisfactory.
d)that in relation to sale of properties at Elizabeth Street, Rosebud and Dovehurst Road, Ballan no documents requested by the Trustee have been provided, again the inference being that the documents requested were reasonable documents which the bankrupt might reasonably have been expected to have or to be able to provide.
The Trustee says that because of his failure to provide the documents originally the first request in 2003 to travel overseas was denied. The Trustee also says that there are matters of concern to the Trustee, including the transferral of shareholding in the company Luna Developments Pty Ltd to the bankrupt's daughter and to the bankrupt's interest in the property in Dovehurst Road. There is also the transfer to Luna Developments Pty Ltd in 2000 of two-thirds of the share of the property in Rosebud. The Trustee observes that the property in which the bankrupt now resides in Templestowe is owned by Luna Developments Pty Ltd and holds it as Trustee for a trust. The trust deed has not been provided notwithstanding it has been sought.
Both parties have referred me to authorities in relation to such an application. In general terms, both parties have relied upon the same authorities, although both parties cite them in support of their own position. In Re Tyndall; Ex parte Official Receiver (1997) 17 ALR 182 Deane J, as he then was, set out the object of the travel restrictions under the Act.
The bankrupt cites the decision in support of his application, in particular at page 190 where Deane J says as follows:
Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at ensuring the proper administration of the bankruptcy laws and of the bankrupt's estate 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.
Further:
An application by a bankrupt for permission to travel overseas requires careful consideration of all relevant circumstances for the reasons as ordinarily relate to the freedom of the subject who is neither criminal nor under criminal restraint to travel to pursue his legitimate commercial or personal desires.
In Re Tyndall Deane J also says at page 186:
I have reached the conclusion this submission cannot be accepted. In my view, the wording of section 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. It 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. Once the matter is properly before the Court, the Court is by the express words of section 178 empowered and, as I have said, obliged to make such order in the matter as it thinks just and equitable.
However, His Honour goes on to say:
This is not of course to say that the Court should either disregard the relevant decision of the Trustee or ignore the well-established policy under bankruptcy legislation that the Court should not unduly interfere with the day-to-day administration of a bankrupt's estate by a Trustee. The Trustee is made responsible for the administration of the bankrupt estate under the general provisions of the Act. He must in the course of that administration make a variety of decisions aimed at enabling the administration to be carried out with promptness and efficiency. Some of these decisions will be business or commercial decisions in which the business or commercial experience of the Trustee will itself provide a basis for arguing that. Unless it was shown the Trustee's decision was perverse or wrong, it will be inappropriate and unjust for the Court to interfere.
It is interesting to note that the decision of Deane J in Re Tyndall was to refuse the bankrupt's application notwithstanding his comments on the law. At page 190 he said:
I am not persuaded that as matters at present stand the creditors and the bankrupt estate of the applicant could expect to benefit from such financial advantages accruing to the applicant in excess of $40 per month the applicant has at present undertaken to pay the Official Receiver.
He goes on to say further at page 190:
Notwithstanding the considerations weighing against the applicant to which reference has been made above, the question whether in all the circumstances the applicant should be given permission to leave Australia, whether the performance of his functions with Olympic Finance and Insurance Corporation requires him to do so is not free of difficulty.
At page 191 he concludes:
Taking into account all the circumstances in the present matter, I have reached the conclusion that the present state of administration of the applicant's bankrupt estate I shall not grant the leave that he seeks. The provisions of section 77A and 272 of the Act recognise 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 in the administration of the bankruptcy law. In all the circumstances of the present case is such as to make that subordination necessary. The question, therefore, that really has to be considered, in my view, is whether the legitimate desires to travel overseas should be subordinated to what is necessary for the proper and efficient administration of his estate in bankruptcy.
I was also referred to the decision of McInnis FM in Casella v Prentice [2002] FMCA 48. At paragraphs 18 and 19 McInnis FM said as follows:
It was submitted on behalf of the respondent that I should not accept this as a bona fide employment trip and the proposed trip does not improve the prospects of earning income. I have been referred to Re Wheeler; Ex parte Wheeler v House (1994) 54 FCR 166 at 170. I have further been referred to other authorities in relation to the general power of review which I must undertake in a case of this kind and that they are consistent with the principles set out in the outline provided by the respondent; namely, that the Court should interfere with the Trustee's exercise of discretion only if it be shown by the applicant the impugned conduct of the Trustee was incorrect or that other conduct was or would be preferable and that justice and equity required the Court's intervention (Healey v Prentice (No 2) (2000) FCA 1598 at 21). Compare observations Re Wheeler; Ex parte Wheeler v House (1994) 54 FCR 166.
At paragraph 19 of his Reasons for Judgment, McInnis FM said:
I accept that the Court should only interfere with the Trustee's exercise of discretion if it is shown, as indicated by the applicant, that the impugned conduct of the Trustee was incorrect or that other conduct was or would be preferable and that justice and equity require the Court's intervention.
Counsel for the applicant referred me to the decision of Heerey J in Re Hicks; Ex parte Lamb 4 March 1994 VB 1473 of 1993 where His Honour said:
I suggested to counsel for the Trustee in argument that the following issues were, while not necessarily conclusive, nevertheless at the forefront of the matters to be considered in exercising my discretion is:
(i) The proposals are genuine.
(ii) Is the bankrupt likely to return to Australia as promised?
(iii) Will the visit hamper the administration of the estate?
The applicant effectively contends that the assertions of the bankrupt as to the need for the trip and the circumstances of the bankruptcy to date mean that I should find that the proposed visit is genuine, that the bankrupt is likely to return to Australia as promised and that the visit will not hamper the administration of the estate.
The Trustee, however, says that I should, in addition to the authorities referred to, have regard to the decision of Gyles J in Mayger v Prentice (unreported) BC200000252 (2000) FCA 99, and in particular to paragraph 11 which says as follows:
When the Trustee comes to consider the position he would not, it seems to me, be restricted to the reasons which he outlines, namely business and compassionate reasons, although they are clearly very relevant. I do not propose to indicate a limit to the matters which a Trustee can take into account in exercising this discretion. Certainly foremost amongst them would be any legitimate claims it would have to the attention of the applicant during the period he would be away. In other words, if there is no pressing reason for the bankrupt to be in touch with the Trustee over this period, then that would be a cogent factor for the Trustee to take into account.
The bankrupt relies heavily on what he says is the genuineness of his application and the fact that it will not interfere with the administration of the estate which he in essence contends is because he has responded to the requests of the Trustee for information and that he is simply unable to provide it further.
The Trustee contends, however, that this is in effect not a satisfactory answer to the question of whether the administration of the estate will be hampered. The Trustee contends, first of all, that the basis for the trip is attended by sufficient doubt about its genuineness for reasons that I have referred to to suggest that it is not a genuine visit as suggested by Heerey J in Re Hicks; Ex parte Lamb. But perhaps more importantly the Trustee relies upon the fact that the position is not as clear-cut as the bankrupt suggests; that is, that although the bankrupt has indicated that he has responded to the Trustee's requests for documents and information in an appropriate manner by saying that he just does not have anything further, this is not an answer to the request for information made by the Trustee in circumstances in which on its face it appears that there are a number of questions requiring answers by the bankrupt in relation to the administration of his estate.
He contends that far from the administration not proceeding, the matters of concern to the Trustee are in effect being pursued, although without the cooperation of the bankrupt in providing the documents sought. In particular, the Trustee requires funds for the administration of the estate and is particularly interested in the matters relating to the property at Dovehurst Road. He contends that the fact that the bankrupt's assertion that it is essential for him to make this trip uncorroborated by evidence from the company of his need to go is a relevant factor in the circumstances of the administration of this estate. He points to the apparent inconsistency between the income received by the bankrupt and the position as international buyer that he seeks to rely upon, the ongoing nature of the administration, the failure to provide documents as all being relevant matters to the exercise of his discretion.
Having regard to all of those matters, I do not consider this is a case in which the Court should interfere with the Trustee's exercise of discretion or that in the circumstances of this case it could be said that the conduct of the Trustee was incorrect or that justice and equity requires the Court's intervention. Accordingly, I propose to dismiss the application.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Peter Smith
Date: 21 April 2004
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