Official Trustee in Bankruptcy v Povey, Ronald Charles

[1998] FCA 1760

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8129 OF 1998
BETWEEN:	OFFICIAL TRUSTEE IN BANKRUPTCY Applicant
AND:	RONALD CHARLES POVEY Respondent

JUDGE:	LINDGREN J
DATE:	21 DECEMBER 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT
(ex tempore)

By notice of motion filed on 3 November 1998, Mr Povey moves for an order discharging a summons under s 81 of the Bankruptcy Act 1966 requiring him to attend for examination at the Court in Sydney.  I do not propose to give lengthy, detailed reasons.  In my view the examination should proceed.  The case in favour of a discharge of the order is founded in substance upon psychiatric evidence by Dr John Litt of Adelaide, a treating psychiatrist who has provided reports suggesting that in his opinion, if Mr Povey, who lives in Mildura, Victoria is required to attend in Sydney and be examined here, for various reasons this will have a deleterious effect upon the depression from which Mr Povey suffers and generally on his mental health.  In fact, in a report Dr Litt has expressed the opinion that if required to be examined in Sydney, Mr Povey would become increasingly depressed and possibly suicidal.

It was submitted on behalf of the trustee in bankruptcy that Dr Litt had proceeded on a wrong assumption, namely, that the procedure under s 81 is adversarial, whereas in truth that procedure is inquisitorial. While this is technically correct, I think that Dr Litt’s report should be understood as extending to say that if Mr Povey were required to be questioned at length and in some detail in the formal context of a court-room about his past financial affairs, this would be deleterious for his health as mentioned. There remains some, but limited, force, nonetheless, in the fact that the procedure under s 81 is not of a full adversarial mode.

What Dr Litt is not, of course, called upon to do is to weigh against the interests of his patient the public interest in a proper investigation by the trustee in bankruptcy into the financial affairs of Mr Povey.

I will make some observations about the background to the matter in support of the conclusion which I have reached and to which I have referred.

Back on 15 March 1990 the Povey Family Trust (“the Trust”) was constituted.  It was a discretionary trust.  The original trustee was a company called Bay Investment Group Pty Limited of which Mr Povey was a director.  The “primary beneficiaries” of the Trust were Mr Povey’s children and then wife.  The “appointor” was Mr Povey’s father, William Charles Povey.  Not much turns on the discretionary trust.  I mention it to indicate that from 1990, Mr Povey and his family had sufficiently sophisticated advice available to them to establish an arrangement which was thought sensible to regulate the family’s financial affairs.

A key feature of the background facts is a policy which was issued by Tyndall Life Insurance Company (“Tyndall”).  It issued a policy number 01-21002144 called an “Income Reserve Plan” policy by which it undertook to pay $120,000 per year as a monthly benefit of $10,000 to Mr Povey if he should suffer total disability.  He claimed to suffer total disability, apparently as a result of a nervous breakdown consequential upon the collapse of his business.  On 7 July 1992, he was referred by Tyndall to Dr Litt.  Thus, Dr Litt’s involvement initially arose in the context of Mr Povey’s claim to be entitled, by virtue of his total disability, to the monthly payments under the policy with Tyndall.

On 23 December 1992, a company called “Lasershot Pty Limited” was incorporated and replaced Bay Investment Group Pty Limited as trustee of the Trust. 

On 2 May 1996, a sequestration order was made in respect of Mr Povey.  In connection with Mr Povey’s provision of a statement of his affairs, on 17 May 1996 he wrote to Mr P Olsen of the Insolvency & Trustee Service, Australia (“ITSA”) a rather lengthy letter.  In it he referred to the fact that he had been “suffering a major psychiatric illness for several years triggered by the events which [he] experienced” and he informed Mr Olsen that his condition required a “high daily drug dosage”, that he travelled to Adelaide for treatment every few weeks, and that he had lost the skills which had allowed him to pursue a career.  As I said, the letter was a lengthy one.  It included this paragraph of present relevance:

“Whilst the services provided by the business group [with which Mr Povey was associated] were diverse, a substantial part of the income related to superannuation and life insurance.  There were agents all over Australia placing business with a number of companies through us.  Due to the high volume we maximized the bonus earned.  The agents received their full commissions and we rebated most of the bonus to then [sic] keeping a margin which was then shared with those who ran the operations in each state and out of which they paid their overheads.”

The letter went on to explain that the business had diverted into the provision of on-line computer services to professionals in a large number of related fields “predicated on the cash flow of the core business”.  I mention these various matters to indicate that Mr Povey had occupied a significant position in the financial world in which he earned a living.

On 15 April 1996, Dr Litt provided a report at the request of Mr Povey.  He referred to the collapse of Mr Povey’s business and said this:

“He had been depressed for several months before his first visit [to the doctor].  He would weep easily and had suicidal ideation; he felt demoralised and irritable; he had an early waking insomnia; he lacked energy, and he was eating excessively and had put on weight.  As a result of this, I started him on an antidepressant, Prothiaden and he has been taking this ever since - he is currently on 225 mgs a day.

I have seen him at monthly intervals and furnished reports to Tyndall Life when requested. 

He has had a very difficult 3 years.  In this time his wife has divorced him and he has had to move out into a flat on his own ...

As a result of these various life events, his depression has fluctuated, but his constant complaints are that he is slowed up, that he has a markedly impaired concentration, and finds it difficult to deal with telephone calls.  He has been very depressed and still weeps.”

Mr Povey’s statement of affairs was dated 4 June 1996 and was filed on 6 June 1996.  Again, I need not say much about the detail of it.  However, a matter which has attracted the trustee’s attention is the fact that as at that time, the monthly payment by Tyndall to Mr Povey was, according to the statement of affairs, $11,702.74 per month.  How was the receipt of this income to be accounted for in view of Mr Povey’s lack of assets?  Mr Povey stated that he had not disposed of assets worth more than $1,000 in the preceding two years and that no persons held any asset to which he had contributed money or which he had otherwise helped to buy or improve in the last five years.  There were lengthy notes by Mr Povey elaborating on his statement of affairs.  He stated that the core entity in his business had been “The Service Network Pty Ltd”, and other companies which incorporated in their names the words “The Service Network”.  The point here is that according to Mr Povey himself, he had been a director of “what seems now a bewildering number of companies”.  Included in the notes to the statement of affairs was a statement by Mr Povey that he spent a good deal of time at the Adelaide Casino and other establishments in Adelaide.  The implication was that he had spent a considerable amount of money there and that this explained, at least partly, why he did not have more to show for the money that he had received. 

On 12 June 1996, Tyndall wrote to ITSA confirming that Mr Povey was in receipt of a benefit of $11,702.74 per month (indexed quarterly).  On 17 June 1996, Mr Povey wrote another lengthy letter to Mr Olsen.  He elaborated a little on the position regarding companies with which he had been associated although the picture given in the letter is not entirely clear.  Apparently a company called “The Real Estate Title Exchange Pty Ltd” featured.  Mr Povey said:

“The Real Estate Title Exchange certainly was the source of a problems [sic] for me.  I was one of a number of parties who purchased shares in this company from the founder....”

On 3 July 1996, Tyndall wrote to ITSA advising that benefits totalling $523,659.95 had been paid by it to Mr Povey from 31 May 1992 to 31 May 1996 in respect of his claim to be entitled to the disability payments under Income Reserve Plan policy.  On 21 August 1996, Mr Povey wrote another of his lengthy letters to Mr Olsen.  Again I need not deal with the detail of the letter but it suffices to say that it does raise certain matters about which the trustee apparently wishes to question Mr Povey.

On 24 September 1996, Abbott Tout solicitors wrote to ITSA referring to discussions which they had been having with Dianne June Povey, the ex-wife of Mr Povey.  The letter contains the following sentence:

“We explained to her that, where the bankrupt had been directing $9500 per month to an unidentified source for approximately four years, it seemed to us that she was a likely source of where that money was hidden.”

On 25 November 1996, Dianne Povey wrote a letter to ITSA providing certain information relating to the financial position of Mr Povey. I need not discuss the detail of that letter. Again, it suffices to say that it raises matters which the trustee would wish to pursue with Mr Povey in an examination under s 81. On 4 February 1998, Mr W C Povey senior, as company secretary of Lasershot Pty Limited, the trustee of the Trust, wrote to ITSA providing some information. Again, the trustee wishes to question Mr Povey about the trust and wishes to explore the relationship between the matters (or some of them) contained in this letter and the other financial information to which I have referred.

I turn now to Dr Litt’s reports.  In a report dated 18 November 1998, the doctor, after setting out his qualifications (which are not in question), states that Mr Povey has two conditions:  an obsessive compulsive personality, that is according to Dr Litt, he is a perfectionist who is conscientious, hard working and meticulous; and “a major depression as a result of the collapse of his insurance business of which he was CEO”.  This is the condition for which Dr Litt has been treating Mr Povey.  The report contains the following passage:

“He is indecisive and has difficulty in remembering dates.  He has a marked impairment of his concentration and is easily side-tracked.  This is not only a feature of depression, but also may be due to the sedatory effects of Prothiaden.  Because of his basic personality, he has very high standards and has succeeded in business until, through no apparent fault of his own, his business collapsed.”

Dr Litt expresses the opinion that Mr Povey is physically capable of attending court in Sydney, but goes on to say this:

“However, I do not think he would be able to deal with the stresses involved in such an examination.  In my opinion, if he is given unlimited time, he does eventually remember most things, but he still tends to get muddled and to be distracted, and it is likely that he would not be able to remember in detail, things that happened in his life when he first saw me, ie with reference to his business.  Medication may affect his answers by slowing him up.”

In a second report dated 23 November 1998, the one to which I referred earlier, Dr Litt refers to the impact of the “adversary system” on a person in Mr Povey’s position and adds this:

“Sydney is an upsetting place for Mr Povey, because of his past memories.

(a)      The failure of his business and the loss of his job. 
(b)      The break-down of his first marriage. 

(c)The presence in Sydney of his two sons, one of whom is a manic depressive and has frequent admissions to hospital for attempted suicide, and he is also a chronic alcoholic.

ie, Sydney reminds him of his failures.

The doctor concludes, as I mentioned earlier, that he believes that if Mr Povey were required to be examined in Sydney he would become increasingly depressed and could be suicidal.  Of course Dr Litt cannot and does not to say what would certainly happen if Mr Povey were to be examined. 

I think that there is a strong case for the examination to proceed.  Mr Povey was involved in financial dealings that were anything but straightforward.  Even the brief account that I have given shows that it is perfectly understandable that in the public interest the trustee would wish to question Mr Povey.  However, what I propose to do at the moment is to direct that the parties speak to the Registrar with a view to exploring fully the possibility of the examination’s taking place otherwise than in court in Sydney.  Some possibilities are as follows: before the Registrar in the South Australia District Registry in Adelaide; by video-link at Mildura or Adelaide or Canberra; before a Registrar of the Court in Canberra.

I will stand over the motion for mention on 1 February 1999 at 9.30 am.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated:             21 December 1998

Counsel for the Applicant:	Mr J Smith
Solicitor for the Applicant:	Helliars City Solicitors
Counsel for the Respondent:	Mr J Johnson
Solicitor for the Respondent:	Sally Nash & Co.
Date of Hearing:	3,16 December 1998
Date of Judgment:	21 December 1998