Radich v Bank of New Zealand

No judgment structure available for this case.

NICHOLAS CHARLES LUKE RADICH v. BANK OF NEW ZEALAND
No. QG107 of 1992
FED No. 627
Number of pages - 14
Bankruptcy - Private International Law
(1993) 116 ALR 676

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
EINFELD(1), FOSTER(2) AND DRUMMOND(3) JJ

CATCHWORDS

Bankruptcy - New Zealand sequestration order - bankrupt later domiciled in Queensland - creditor who proved in New Zealand bankruptcy successfully sought sequestration order in Australia based on same debt - debtor has no present assets in Australia that are not accountable in the New Zealand bankruptcy - sequestration order opposed on ground of futility - whether sequestration order ought to have been made - whether after-acquired property in Australia vests in New Zealand trustee - possibility of early discharge from second bankruptcy when second bankruptcy based on same debt as first bankruptcy

Private International Law - domicile - fate of assets or property in country of new domicile

Bankruptcy Act (Cth) 1966 ss 5(1), 24(2)(a), 29(2)(a), 29(3), 29(5)(a), 52(1), 52(2)(b), 149X(b), 149Z, 149ZA, 149ZB, 149ZC

Bankruptcy Act (Imp) 1883 ss 117, 118

Bankruptcy Act (UK) 1869 s 4

Insolvency Act (UK) 1986 ss 279, 280

Insolvency Act (NZ) 1967 ss 42(2)(a), 45, 69, 135

Domicile Act (Cth) 1982 s 7

Ah Yin v Christie (1907) 4 CLR 1428

Australian Mutual Provident Society v Arthur James Gregory (1908) 5 CLR 615

Hall v Woolf (1908) 7 CLR 207

Bayne v Blake (1909) 9 CLR 360

Rozenbes v Kronhill (1956) 95 CLR 407

Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1

Re Mitchell (1967) ALR 418

Clunies-Ross v Totterdell (1988) 98 ALR 245

Re Ayres Ex parte Evans (1981) 51 FLR 395 at 406

Ayres v Evans (1981) 56 FLR 235

Re Bendall and Bendall ex parte Langley and Vipond Pty Ltd (1929) 1 ABC 167

Re C and C Sweetnam ex parte Australian Timber Co Ltd (1931) 3 ABC 120

Re Dunn and Edwards (1935) 8 ABC 168

Re Livesey (1946) 14 ABC 59

Re Turnbull (1886) 2 QLJ 131

Re Nall (1899) 20 NSWR 25

Re Fogarty (1904) QWN 67

Re Greenway (1910) 27 WN(NSW) 112

Re Waters; Ex parte Waters (1922) 22 SR(NSW) 269

In re Davidson's Settlement Trusts (1873) 15 Eq 383

Freke v Lord Carbery (1873) 16 Eq 461

Ex parte McCulloch (1880) 14 Ch D 716

Ex parte Robinson (1883) 22 Ch D 816

In re Levy's Trusts (1885) 30 Ch D 119

Re Lawson's Trusts (1896) 1 Ch 175

In Re Craig (1917) Ch 62

In re Field (1978) Ch 371

In Re A Debtor, Ex parte Viscount of the Royal Court of Jersey (1981) Ch 384

In re Leonard ex parte Leonard (1896) 1 QB 473

In Re Betts (1897) 1 QB 50

Bank voor Handel en Scheepvaart NV v Slatford (1953) 1 QB 248

Cockerell v Dickens (1840) 3 Moore 99

Galbraith v Grimshaw (1910) AC 508

Re Anderson (1911) 1 KB 896

Re Osborn Ex parte Trustee (1932) 15 B and CR 189

Ex parte Bettle (1895) 14 NZLR 129

Patrick Michael Darcey v The Pre-term Foundation Full Court of the Federal Court (Fox, Wilcox and French JJ) unreported, 23 May 1988

Australian Law Reform Commission: General Insolvency Inquiry (1988) vol 1 para 555

Dicey and Morris: The Conflict of Laws (11th ed, 1987) vol 2 #1116, 1119

Fletcher: The Law of Insolvency 574

Halsbury's Laws of England (4th ed) vol 8 para 701

Nygh: Conflict of Laws in Australia (5th ed, 1991)

Sykes and Pryles: Australian Private International Law (3rd ed)

Williams' Law and Practice in Bankruptcy (12 ed) 242

HEARING

BRISBANE, 19 November 1992

#DATE 10:9:1993

Counsel and solicitor for the applicants: Mr L Bowden instructed

by Broadbents

Counsel and solicitor for the respondents: Mr J McKenna instructed by

Coopers Grace and Ward

ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The sequestration order pronounced on 25 June, 1992 be set aside.

3. The creditor's petition be dismissed.

4. The respondent is to pay the appellant's costs of the first instance hearing and the appeal.

Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.

JUDGE1

INTRODUCTION

EINFELD J This in an appeal from a sequestration order pronounced by Justice Cooper against the estate of the appellant (Radich) in June 1992 on the application of the respondent (BNZ). Radich lived in New Zealand until April 1988 when he moved to Queensland. On 8 June 1990, the High Court of New Zealand gave judgment in favour of BNZ for a debt which Radich claims he was unable to repay due to falling values of real estate and high interest rates in New Zealand. On 12 December 1990 this judgment was registered in the Supreme Court of Queensland in an amount of $A128,474.32. On 4 February 1991, Radich was made bankrupt by an order of the New Zealand High Court. He will remain an undischarged bankrupt in New Zealand until 4 February 1994 unless he obtains an early discharge. He made an application for discharge before a master of the New Zealand High Court on 10 April 1992 but the master was not satisfied that discharge was appropriate.

On 11 May 1991, a bankruptcy notice issued out of this Court was served on Radich. It was based on the same debt and commercial circumstances. On 22 November 1991, BNZ filed a creditor's petition and two months later, Radich filed a notice of intention to appear and oppose the making of a sequestration order. The grounds of opposition included that a further sequestration order would be unreasonable, unnecessary and unjust. There were said to be other procedures available for the administration of any estate and assets situated in Australia, although Radich actually said that he has no assets here.
The argument mounted by Radich, at first instance and on appeal, was that if he is now made a bankrupt in Australia, the term of his bankruptcy will extend beyond the date on which he will be discharged from the New Zealand bankruptcy, thus prejudicing his income and capacity to work as a solicitor. He practises on the Gold Coast, but as a consequence of his bankruptcy in New Zealand, is only permitted to practise on a restricted basis; the most significant restriction being his inability to operate as a sole practitioner. His partner wishes to retire from the partnership at an early date, and Radich is anxious to limit the term of his bankruptcy so that he is able to take over the practice entirely.

EARLY DISCHARGE FROM A SECOND BANKRUPTCY
4. Section 149X(b) of the Australian Bankruptcy Act 1966 (Cth) (the Australian Act) represents a bar to an early discharge from an Australian bankruptcy notwithstanding a discharge from the New Zealand bankruptcy. It states:

A bankrupt is disqualified from early discharge if:

(a) ...

(b) he or she is or has been a bankrupt or insolvent ... under the law of an external territory or of a foreign country;

and the bankruptcy ... occurred within the period of 10 years immediately preceding the bankruptcy from which the bankrupt is applying for discharge.

An inability to obtain an early discharge would lead to Radich remaining bankrupt in Australia until June 1995, well after his partner wishes to retire from the practice. Presumably the practice would then fall into other hands or be dismantled, with resulting loss to Radich and perhaps his partner.
Section 149X was inserted by section 27 of Act No 9 of 1992, as an element in a number of changes to the law governing applications for early discharge. While such applications were previously heard by this Court, they are now determined by a bankrupt's trustee. The explanatory memorandum to the Bankruptcy Amendment Bill 1991 said at p 131:

The Bill will introduce an administrative early discharge system to make early discharge open to those who have insufficient financial resources to mount a court application for early discharge, and will introduce comprehensive eligibility and disqualification criteria which will ensure that those whose bankruptcy is brought about by misfortune rather than misdeed have access to early discharge, whereas those whose bankruptcies have occurred as a result of commercially reprehensible behaviour will not be entitled to early discharge.

In contrast to the previous system where the Court had to balance a number of factors, the present system involves the trustee granting early discharge unless the bankrupt fails to fall within the criteria for eligibility or is disqualified from applying. Section 149X(b) provides only one of a number of disqualifying factors. The other factors involve, or are likely to involve, a degree of fault, such as failing to disclose certain information to the trustee (ss 149Z, ZA, ZB, ZC).
Australia is not alone in treating second-time bankrupts more harshly than first-time bankrupts. In England, automatic discharge is generally available after 2 or 3 years, but is not available where a person was made bankrupt as a result of a criminal bankruptcy order or where the bankrupt experienced an earlier bankruptcy within the 15 years prior to the commencement of the second bankruptcy. In such cases, discharge requires a court order, and application to the court cannot be made within 5 years from the commencement of the second bankruptcy: Insolvency Act 1986 (UK) ss 279, 280.
The rationale for such provisions appears to be that while one act of bankruptcy may be more easily understood as resulting from a lack of business experience, or perhaps as plain bad luck, a second act of bankruptcy suggests a greater degree of culpability. This reasoning is crude and would not be appropriate in many cases. As the Australian Law Reform Commission noted in its report number 45, General Insolvency Inquiry (1988) vol 1 para 555, a second bankruptcy may be due to circumstances just as unfortunate as the first.
Yet with the present Australian Act, unlike the former legislation and the English statute, a prior bankruptcy appears to operate as an absolute bar to early discharge from a later bankruptcy, as opposed to merely making discharge a more onerous procedure. Parliament seems to have decided that the costs and uncertainty associated with judicial consideration of the circumstances of the second bankruptcy were not justified, and that the crude rationale for treating second bankruptcies so harshly does not cause injustice outweighing the advantages of the new regime.
The implicit assumption in the argument must be that the second bankruptcy is based on debts accrued after the first bankruptcy. Where this is not the case, the legislative change is completely inexplicable. The application of section 149X to a second bankruptcy where it is based on the same debt as the first bankruptcy is so harsh and unreasonable that it is difficult to imagine that Parliament intended the total bar to early discharge it legislates. This raises the question whether the Court should impose a narrow interpretation on section 149X by not applying it where the second bankruptcy is based on the same debt as the first bankruptcy. This possibility was not subject to any real argument in this appeal presumably because it would only arise if an application to the trustee for discharge was refused on the grounds that it was statute barred. Given that this has not occurred and having regard to my ultimate conclusions, there is no need to decide the question here.

WHETHER AFTER-ACQUIRED PROPERTY VESTS IN FOREIGN TRUSTEE
12. Radich's principal argument is that any Australian after-acquired property would vest in the New Zealand trustee. Section 42(2)(a) of the New Zealand Insolvency Act 1967 (the New Zealand Act) states, subject to qualifications not relevant here, that:

... the property and powers of the bankrupt to vest in the Assignee and be divisible amongst his creditors shall comprise the following:

(a) All property whatsoever and wheresoever situated belonging to or vested in the bankrupt at the commencement of the bankruptcy, or acquired by or devolving upon him before his discharge; .......

Radich submitted that this includes property in Australia. He contended that the futility of further or additional sequestration flows from the fact that discovery and administration of assets that the debtor possesses in Australia can be achieved without further sequestration. If Radich's statement of the effect of section 42(2)(a) is correct, this would be a clear instance where the Court should refuse sequestration, assuming there was no question of property recoverable in Australia other than in aid of the New Zealand bankruptcy. In this connection, section 29(2) of the Australian Act provides:
In all matters of bankruptcy, the Court -

(a) shall act in aid of and be auxiliary to the courts of the external Territories, and of prescribed countries, that have jurisdiction in bankruptcy; and

(b) may act in aid of and be auxiliary to the courts of other countries that have jurisdiction in bankruptcy.

New Zealand is a prescribed country: s 29(5)(a). As Justice Lockhart noted in Re Ayres Ex parte Evans (1981) 51 FLR 395 at 406, affirmed by a Full Court in Ayres v Evans (1981) 56 FLR 235, the prescribed countries have similar bankruptcy legislation to Australia. While subsection (a) uses mandatory as opposed to the discretionary language of subsection (b), section 29(3) says:

Where a letter of request from a court of an external Territory, or of a country other than Australia, requesting aid in a matter of bankruptcy is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction.

Courts have a discretion as to the assistance they give and may impose such conditions or require such undertakings as they think proper: Re Osborn Ex parte Trustee (1932) 15 B and CR 189 at 194. Justice Lockhart said in Re Ayres at 406 that the Court should give its aid unless there is an existing Australian bankruptcy or there are other discretionary reasons for denying assistance, such as public policy.
Section 29 does not create new rights, but only creates new remedies for enforcing existing rights: Hall v Woolf (1908) 7 CLR 207 at 212, Re Ayres at 405. Radich argued that BNZ should have used this procedure to ascertain if, contrary to his evidence, there are assets which belong to the trustee, and if there are, to realise them.
Unlike other orders of foreign courts requiring consideration of such common law notions as domicile and submission to jurisdiction to resolve questions of their recognition by Australian courts, section 29(2)(a) mandates this Court to recognise the New Zealand sequestration order. Thus the only practical question to be considered is what effect will be given by this Court to such orders. There is no dispute that movables in Australia belonging to Radich at the time of the New Zealand order vest in the New Zealand trustee. Nor can it be doubted that property obtainable under an Australian bankruptcy under such rules as relation back, the avoidance of settlements and the invalidity of certain executions, vest in the New Zealand trustee: see Sykes and Pryles, Australian Private International Law (3rd ed) at pp 792-3.
However, BNZ argued that it needs a sequestration order to reach any other property in Australia acquired by Radich after he became bankrupt in New Zealand. This supports Justice Cooper's finding that:

Irrespective of what rights the Official Assignee may have had in relation to after acquired property wherever situated while the respondent was domiciled in New Zealand, the Official Assignee cannot assert any title to property not locally situated there, which was acquired after the respondent's domicile in New Zealand came to an end (Hall v Woolf at 211 - 212).

Hall v Woolf
20. This was a case decided in 1908 by three judges of the High Court when each state had its own Act dealing with bankruptcy, based on the English Acts. The appellant was a trustee under a liquidation arranged in Queensland in 1890 by a debtor named Horowitz under the Insolvency Act of Queensland. The respondent was the trustee by a deed of assignment executed by Horowitz in 1908 under the bankruptcy law of Western Australia. The appellant sought an order requiring the respondent to deliver up to him all the property of the debtor in his hands. Horowitz was domiciled in Queensland, but left in 1890, and became domiciled in Western Australia in 1902. He never returned to Queensland, and never obtained a certificate of discharge from the liquidation.

This fact situation contrasts sharply with the present case, where the bankruptcy occurred recently, not eighteen years earlier, and there are no known Australian creditors who could compete with foreign creditors from an earlier foreign bankruptcy. Moreover, Radich's change in domicile occurred before the New Zealand sequestration order, not as in Hall after the first bankruptcy.
Delivering the judgment of the Court, Griffith CJ said at 211-2:

The foundation of the rule relied upon is the wider rule mobilia sequuntur personam (lit. goods follow the person), of the application of which it is a familiar instance. If the local law as to after-acquired property ought to be recognized elsewhere, the reason must be that the law of the domicile of the bankrupt operates as a statutory assignment of his movables, wherever situated, to the assignee in the bankruptcy, the assignment taking effect automatically as soon as they are acquired by the bankrupt. If such a rule were to be accepted by other countries, we are disposed to think that they would accept and apply it subject to a due regard for the rights of their own citizens, and that it might well be held that a rule analogous to that laid down by the Court of Appeal in Cohen v Mitchell (1890) 25 QBD 262 would be adopted as a qualification of it. But, whatever may be thought of such a case, it is, in our opinion, quite clear that as soon as the debtor ceases to be domiciled in the country of adjudication the law of that country ceases to have any application to his after acquired movables situated elsewhere. The same rule, mobilia sequuntur personam, still applies, but it excludes the operation of that law. We think, therefore, that, whatever might be the rule as to movables acquired by the debtor after the commencement of the liquidation, and while he was still domiciled in Queensland, the Queensland trustee cannot assert any title to movables not locally situated there which were acquired by the debtor after his domicile in that Colony came to an end.

The ratio of Cohen v Mitchell is stated in its headnote:

Where a bankrupt, who has not obtained his discharge, enters into transactions in respect of property acquired after the bankruptcy, then, until the trustee intervenes, all such transactions, with any person dealing with the bankrupt bona fide and for value, and whether with or without knowledge of the bankruptcy, are valid against the trustee.

Radich referred to the argument of the respondent in Hall v Woolf (reported at 209) that to apply Queensland law would have the effect of working an injustice on the Western Australian creditors. Radich suggested that this injustice explains the Court's decision. Radich thus argued that Griffith CJ's principle should be confined to the facts of the case.

The question of whether Hall v Woolf applies in this case is certainly complex. BNZ argued that it was not necessary to determine the question here but that it was sufficient to accept that its application to the present case was arguable. BNZ said that sequestration orders are made on the possibility not the probability of property existing. The argument was that as Hall v Woolf might apply, the possibility of present or future property was sufficient to ground a sequestration order.
There is a difficulty with the argument that the Court should grant a sequestration order in the case of mere possibilities of the existence of property, in that a sequestration order places the creditors in a better position to investigate the property and control the activities of the debtor. No argument can be made for permitting such a power in a case of legal uncertainty. On an application for a sequestration order, the Court should determine any legal questions rather than leave the parties uncertain of their position until a later proceeding such as when a trustee applies to the Court for directions as to what steps he should take in the circumstances then existing.

Mobilia sequuntur personam
27. In Hall v Woolf, the High Court referred to the maxim, mobilia sequuntur personam - i.e. chattels, wherever situated, follow the law of the owner's domicile. Thus where the domicile of the person is New Zealand at the time of the acquisition or possession of property, a New Zealand order purporting to transfer movables to a trustee in bankruptcy will have its full effect. However, if there has been a change of domicile, New Zealand law no longer governs the validity of a purported transfer because Griffith CJ said the rule mobilia sequuntur personam excludes the operation of the foreign law.

This is perhaps a rather confusing way of expressing the effect of the maxim. It does not in fact exclude the operation of foreign laws, but merely determines whether the validity of transfers from the bankrupt to the foreign trustee is to be governed by the foreign law or the law of the new domicile. Mobilia sequuntur personam says nothing as to the validity of a particular assignment: it is merely a rule determining which law governs this question.
Dicey and Morris: The Conflict of Laws (11th ed, 1987) vol 2 page 943 (#119) say that it may have been true in earlier times that articles of personal estate were few and were usually situated in the owner's domicile. However, it is entirely untrue in modern times and accordingly all modern writers and most modern judges have discarded the test of domicile. Justice Nygh in Conflict of Laws in Australia (5th ed, 1991) supports Dicey and Morris at page 454. His Honour agrees with Lord Devlin's statement in Bank voor Handel en Scheepvaart NV v Slatford (1953) 1 QB 248 at 257 that:

There is little doubt that it is the lex situs which as a general rule governs the transfer of movables when effected contractually. The maxim mobilia sequuntur personam is the exception rather than the rule and is probably to be confined to certain special classes of general assignments such as marriage settlements and devolutions on death and bankruptcy.

Sykes and Pryles (op cit p 666) view any rule applied rigidly as unsatisfactory. They admit at page 668 that "the traditional preference of textbook writers is for the lex situs". However, they suggest that this should not be applied rigidly, because in some circumstances, the situation of the movables may be temporary and fleeting. On the other hand, they state at page 667 that the lex domicilii has so many objections that no discussion of it seems worthwhile.
Nonetheless, to a greater or lesser extent, Hall v Woolf appears to support the maxim. Even if it seems likely that the present High Court would overturn it, this Court is bound to apply Hall v Woolf if it is not distinguishable or has not been ousted by legislation. The High Court approach involves two steps. Firstly, there is the choice of law question: the applicable law is to be determined, using the maxim. Secondly, there is the domestic rule which states the consequences arising from the choice of law question: if the applicable law is the law of the country of adjudication, Australian courts should give effect to the order made there. Otherwise, they will not.
It is useful to consider this approach further. Domicile is determined by physical and lawful presence in a country: Ah Yin v Christie (1907) 4 CLR 1428 at 1431-2, and an intention to make a home indefinitely in that country: Domicile Act 1982 (Cth) s. 10. Of course, with the ease of modern transport, the internationalisation of commerce and the integration of the world economy, there are many people who do not easily fit within this definition in any single country. Nevertheless, the law requires or assumes that every person has a domicile, and one domicile only. If a person leaves a country with no intention of returning, under the common law the existing domicile is abandoned and until a new one is acquired, domicile reverts to the country of origin. However, if a person's domicile has to be determined at a date subsequent to 1 July 1982, section 7 of the Domicile Act applies, with the result that a person retains the existing domicile until acquiring a new domicile.
Applying the principle in Hall v Woolf, if Radich had moved to Queensland with the intention of only staying for a period of time before returning to New Zealand, the after-acquired property in Australia would vest in the New Zealand trustee. However, if Radich was in fact born in England, his domicile changed to England while he was in Queensland and only his pre-1982 property acquired after the New Zealand bankruptcy vested in the New Zealand trustee.
This virtual nonsense indicates the unsatisfactory nature of Hall v Woolf as a mechanism to protect domestic creditors where there are concurrent bankruptcies and a competition between creditors in a foreign country and the domestic country. Domicile is in these circumstances a completely ineffective criterion for resolution of the conflict, especially after the Domicile Act introduced its distinction between domicile before and after 1 July 1982. This arbitrariness, not present in the law in 1908, may in itself be a sufficient ground to suggest that the High Court's decision has been displaced by legislation.
The principle found by the High Court also seems to sit uncomfortably with section 29 of the Australian Bankruptcy Act, a section which has existed in similar form for more than a century. Section 29(2)(a) is based on comity between the courts of Australia and prescribed countries which are encouraged to aid each other in recovering property of bankrupts. This support mechanism is reflected in section 135 of the New Zealand Act. It would appear to go against this regime of mutuality and co-operation if our courts were to deny property to a New Zealand trustee for arbitrary reasons.
Of course, the rule stated by Griffith CJ does not provide a unique limitation upon the authority of foreign courts. For example, a foreign bankruptcy has by itself no effect on the bankrupt's title to immovable property situated in the forum: Australian Mutual Provident Society v Arthur James Gregory (1908) 5 CLR 615 at 623. This rule is replicated in the jurisdiction of prescribed countries: for England, see In re Levy's Trusts (1885) 30 Ch D 119 at 123; for New Zealand, see Ex parte Bettle (1895) 14 NZLR 129 at 134.

English cases and Hall v Woolf
37. There appear to be other difficulties with this rule. It was stated without explanation, and no authority was quoted to support it either in the judgment itself or by counsel for BNZ here. There is at least one English case which seems to be inconsistent with Hall v Woolf. Although cited in argument to the High Court, it was not referred to in the judgment: In re Davidson's Settlement Trusts (1873) 15 Eq 383. Walter Davidson's parents had executed a settlement upon their marriage. The settlement involved a sum of money being vested in trustees upon trusts for the children of the marriage as the father should appoint, and in default of appointment, for the children equally. The father made no appointment. Walter, who had first lived in England, later settled in Queensland where he became bankrupt in December 1866. In 1867 he visited England and died there in July 1868. At the time of his death, his domicile was England. In 1869, his estate received a distribution of money from his father's settlement. The question before the Court was whether the official assignee in the insolvency was entitled to the money obtained from the father's settlement.

James LJ said at 385 that "(w)hether the domicile of the insolvent was English or colonial, for the purposes of trading or otherwise, is immaterial". Holding that the creditors who have proved are entitled to be paid and the fund must be paid to the trustee for distribution, he said at 386:

I may add that it would be impossible to carry on the business of the world if Courts refused to act upon what have been done by other Courts of competent jurisdiction; and the proceedings in the Court at Brisbane conclusively show that the insolvent was largely indebted beyond the amount of the sum in question.

While there is a somewhat confusing statement at 384 that on 12 March 1868 an order was made "allowing the certificate", it is clear that the judgment proceeded on the footing that Walter Davidson was an undischarged bankrupt.
Radich relied upon this decision as authority that after-acquired property in England vested in the Queensland trustee, even though the bankrupt's domicile had changed back to England. However, BNZ argued that the distribution of the settlement did not involve after-acquired property, because it was property which the bankrupt had always had as a contingent interest in the family trust. Under section 5(1) of the Australian Act, a contingent interest is "property". This was also the position under section 4 of the Bankruptcy Act (1869) 32 and 33 Vic c 71.
I reject BNZ's submission. In my opinion, the fulfilment of the contingency changes the nature of the property from a contingent interest to possession of title to the goods, a greater and more valuable interest in property. The difference in value between the two types of property represents the additional interest acquired after the contingency is met. This interest was acquired after the bankruptcy and is, I think, after-acquired property. The case is authority for the principle that after-acquired property vests in the foreign trustee, regardless of domicile.
In Hall v Woolf, the High Court did refer to In re Lawson's Trusts (1896) 1 Ch 175 where the judge regarded Davidson's Settlement as on point and followed it. However, in Lawson's Trusts, the bankrupt did not change his domicile from the one possessed when he presented a debtor's petition. Because there was no change in domicile, Griffith CJ could reconcile this case with the rule he stated.
In Ex parte Robinson (1883) 22 Ch D 816 the Court refused to make a second sequestration order because it would be futile, the main basis being that Robinson was an undischarged bankrupt resulting from a Scottish sequestration, and had no assets in England. The Court did not consider the possibility of after-acquired property but this does not seem to me to be indicative of a view by the Court that it did not need to be considered because it would obviously vest in the foreign trustee. It is because the possibility of after-acquired property does not seem to have been raised by the petitioning creditor. It is apparent from the outline of his argument at 818 that his concerns encompassed different matters.
While the principle of Hall v Woolf raises difficulties, the actual result seems to have been just. The case rested on unusual facts, in particular, the 18 year time delay. The Queensland creditors had all those years to adjust to their losses, while for the Western Australian creditors, an inability to recover money was more likely to have serious present consequences. Of course, with today's federal legislation involving prescribed countries and automatic discharge, it is highly unlikely that the fact situation in Hall v Woolf will be repeated. Furthermore, in general circumstances, there seems no significant injustice in allowing after-acquired property to vest in a foreign trustee, even where there are domestic creditors, and there appear to be good reasons of comity for the courts to allow this result. There is certainly no injustice where, as in this case, there are no domestic creditors. But to use the existence of domestic creditors as a basis for distinguishing cases would mean that the bankrupt could force a foreign trustee to the additional expense of pursuing sequestration merely by creating a domestic creditor who notifies the foreign trustee of a debt.
On the possibility that Hall v Woolf can be distinguished because Radich's change in domicile occurred before the New Zealand sequestration order, in contrast to Hall v Woolf itself where the change in domicile occurred after the first bankruptcy, BNZ argued that the relevant time for considering domicile is when the property is acquired. This view is supported by the earlier quoted passage from the judgment of Griffith CJ at 212:

... the Queensland trustee cannot assert any title to movables not locally situated there which were acquired by the debtor after his domicile in that Colony came to an end.

I agree. In fact none of the factual circumstances furnish a satisfactory ground for distinguishing Hall v Woolf. Griffith CJ did not limit or qualify his judgment by reference to any factual matrix such as a change of domicile or injustice to domestic creditors by denial of access to the assets. The enunciated principle was stated in broad terms as if it flowed directly from the maxim mobilia sequuntur personam.
Thus the law is concerned with whether the property vests in a foreign trustee. Where there are concurrent bankruptcies as in Hall v Woolf, the property must vest immediately in one of the two trustees, and domicile determines which one. Once the property has vested in a particular trustee, it would be strange if it revested merely because of a change of domicile. The critical time for considering domicile must be when the property is acquired.
I said earlier, and it is obvious, that any general principle arising from the ratio in Hall v Woolf is binding on this Court notwithstanding that it seems in need of change. However, along with Justice Drummond, whose judgment in this matter I have had the benefit of reading, I am of opinion that at most only a very small area of general principle is derivable from the decision. It is that regardless of the fact that the foreign law permits it, a foreign trustee in bankruptcy cannot invoke Australian law to gain title to a bankrupt's after-acquired movables in Australia when the bankrupt has abandoned the foreign domicile for Australia.

SEQUESTRATION ORDERS AND FUTILITY
The law
49. Radich's next ground of appeal, founded in section 52(2)(b) of the Bankruptcy Act, is that the learned primary judge failed to find that there could be no property in Australia which would be caught by an Australian sequestration order and to apply that finding to the discretion provided for in that enactment. The relevant part of the section provides:

If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor -

(a) ...

(b) that for other sufficient cause a sequestration order ought not to be made,

it may dismiss the petition.

"Those matters" refers to matters stipulated in section 52(1) of which the Court requires proof before making a sequestration order. In relation to sub-paragraph (b), a Full Court of this Court said in Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5:

The circumstances which may constitute "other sufficient cause" for dismissing a bankruptcy petition are extremely variable. It is not appropriate to attempt to catalogue or circumscribe them: see Cain v Whyte (1933) 48 CLR 639 at 645.

One such circumstance is if the making of a sequestration order is an exercise in futility. In Re Betts (1897) 1 QB 50, Lord Esher MR said at 52:

If the Court is clearly convinced, not merely by the statement of the debtor, but from all the circumstances of the case, that there cannot be any assets or any prospect of any coming into existence, and that, if a receiving order is made, the only effect will be a mere waste of money in costs, then in such a case the Court has a discretion in the matter, and will be justified in exercising that discretion by refusing to make the order.

Part of the reason why courts are reluctant to refuse a sequestration order on discretionary grounds is that it may only be after sequestration, with a full investigation by a trustee in bankruptcy including a possible public examination of the bankrupt and other persons, that assets come to light: In re Leonard ex parte Leonard (1896) 1 QB 473 at 475 approved in Bayne v Blake (1909) 9 CLR 360 at 364. However, in Betts, the debtor was an undischarged bankrupt and the petitioning creditor was a creditor in that bankruptcy. Any assets the debtor might have would go to the trustee. As Lord Esher said, if the petitioning creditor thought there were any assets, he could have put the trustee in funds to obtain the benefit of them.
A number of authorities in this area are cited in Patrick Michael Darcey v The Pre-term Foundation (unreported, 23 May 1988), a decision of a Full Court of this Court (Fox, Wilcox, French JJ). A sequestration order was opposed on the ground that the debtor had joined a religious order the members of which made a vow of poverty requiring that they have and continue to have no personal income or assets. The debtor's only occupation was his religious life and he in fact had no assets. Speaking for the Court, Justice French said that the acceptance that the debtor did not have personal assets does not dispose of the question whether there might be property available for distribution to his creditors. Moreover, the fact that assets which have or might yet come his way have been or would be disclaimed or assigned pursuant to his vows did not provide a complete answer. His Honour cited In re Field (1978) Ch 371 where Megarry VC stated that there is considerable support for the doctrine that a court should dismiss a petition where a debtor had no assets and no prospects of acquiring any. However, Megarry VC said at 375 that the doctrine is hedged about by important precautions:

...if it were open to a debtor to avoid having a receiving order made against him simply by alleging utter destitution, both present and future, such pleas of destitution might become popular; and prospective bankrupts might hasten to rid themselves of any assets or prospects which might hamper them in making such a plea.

This policy rationale suggests that the futility doctrine must be so circumscribed that it only applies to situations which people cannot deliberately contrive to avoid bankruptcy. Perhaps self-denying religious orders would become swamped with people seeking to avoid bankruptcy.
Apart from policy considerations, there were other reasons for ordering sequestration in Darcey. While the vows of poverty taken by the debtor were evidence of a present lack of and no reasonable future prospect of obtaining assets, it would have been possible for the bankrupt to renounce his vows of poverty within the term of the bankruptcy, and return to paid employment. Justice French noted that the evidenced belief of the Brother General of the Order that the bankrupt had no assets probably sprang from an acceptance of the bankrupt's integrity, rather than followed upon any investigation or inquiry into his affairs.

In the present case, the evidence of no present assets and no reasonable prospect of future assets is not nearly as strong as it was in Darcey. Radich has taken no vow of poverty, and is in fact working and presumably earning an appreciable if truncated living as a senior solicitor. He has previously had business dealings in New Zealand. The learned primary Judge concluded:

Although I am satisfied that the evidence of the respondent, his wife, his partner and the investigations of the Official Assignee in New Zealand (notwithstanding any difficulties arising from the respondent's presence in Australia) supports a conclusion that he presently does not have property in Australia beyond some minimal household effects, that does not conclude the matter. Like French J in Darcey, I suspect that in the end any sequestration in Australia will prove to be a fruitless and time wasting exercise. However, the general principles established by the authorities are certain and it cannot be said that it is clear beyond question that an Australian sequestration will produce no property divisible amongst creditors prior to the discharge of the respondent from bankruptcy in Australia in the ordinary course.

Indeed, according to BNZ it is not impossible that he may earn sufficient money to pay off part of the judgment debt.
Radich suggested that three decisions support his case: Re Bendall and Bendall ex parte Langley and Vipond Pty Ltd (1929) 1 ABC 167, Re C and C Sweetnam ex parte Australian Timber Co Ltd (1931) 3 ABC 120, and Re Mitchell (1967) ALR 418. The facts and outcome of Re Bendall are conveniently summarised in Re Mitchell at 418-9:

The debtors had assigned their estates by a deed of arrangement under Part XII in August 1929. The trustee under the deed had realized most of the assigned assets, but the notice of the deed which he had given to the petitioning creditor was not in the prescribed form. That company had not assented to the deed and in September 1929 lodged its petition for sequestration. Moule J considered that as the administration under the deed was regular and was likely to result in as much benefit to the creditors as an administration under a sequestration order which was likely to add to the expense, he was justified in refusing an order under the petition...

Quoting from Moule J's decision at 171:

...the fact that nothing has been suggested as to the dealings of the debtors or that there was any suspicion that further assets might be discovered; the fact that the present trustee has gone so far into the collection of the book debts that he would be the best man to finish the collection; and considering also that the trustee is of opinion that the dividend will be 10s in the, and that probably no further order for payment would be made, I think, taking everything into consideration, I should dismiss the petition, and I so order.

It was thus quite clearly futile to order sequestration. This is quite different to the present case where an Australian trustee would be able to recover property apparently unavailable to the New Zealand trustee, if and when the Australian trusteeship and any property comes into existence.
Re Mitchell dealt with an issue of costs and is not analogous to the present case. Re Sweetnam involved a creditor who assented to and executed a deed of assignment with two debtors. However, the assets assigned turned out to be far less valuable than originally estimated, through no fault of the debtors. Six years later sequestration orders were sought. Lukin J held that the creditor had every opportunity of ascertaining whether the debtors had any other assets. He found support for the suggestion that the creditor was seeking sequestration to force the relatives of the debtors to come to their assistance. It appeared unlikely from the evidence that the debtors would acquire any property in the future. The motive of the petitioning creditor seems a significant point of distinction from the present case. See also Rozenbes v Kronhill (1956) 95 CLR 407), a case of extortion.
It is not open to doubt that the Court has jurisdiction to make an order of sequestration even though there is an earlier foreign bankruptcy: Ex parte McCulloch (1880) 14 Ch D 716. Although the learned primary Judge justifiably considered it unlikely, his Honour was clearly correct in concluding that there is certainly a possibility of Radich obtaining property in the future. I see no error in the exercise of his Honour's discretion to make the order here on the basis of a factual possibility of assets.
However, the maximum principle derivable from Hall v Woolf, that the New Zealand trustee cannot by action in Australia recover Radich's after-acquired movables here because of the change of domicile, is only one aspect of the matters that fall for consideration as to whether the requirement of "other sufficient cause" is made out under section 52(2)(b) of the Bankruptcy Act. It thus does not finally dispose of the point or points raised in this case. In my opinion, Hall v Woolf does not support the pronouncement of a second bankruptcy, contemporaneously with the first, where there is no evidence of any additional debts, and there is a reasonable basis for concluding that the first bankruptcy can access any assets acquired in the place of new domicile after the first (foreign) bankruptcy. In this regard I respectfully adopt and agree with Justice Drummond's reasons for concluding that notwithstanding Hall v Woolf the New Zealand trustee can in fact secure any such property and apply it to the benefit of creditors in the New Zealand bankruptcy. In that respect, I conclude along with his Honour, with due deference, that the learned primary Judge's discretion miscarried.
It is therefore open to this Court to exercise the broad discretion in section 52(2)(b) anew. The provision certainly requires consideration of the possibility of future assets and any difficulties that a foreign trustee may have in gaining access to them. But there are few if any such aspects in this case where the second bankruptcy is sought by the same petitioner on the same debt, and its making will be for the benefit of the same creditors as in the first bankruptcy. In this regard I again agree with Justice Drummond's analysis of the particular facts and circumstances of this case, including the effects of Divisions 4A and 4B of Part IV of the Act, as might affect the exercise of the discretion. Like his Honour, they impel me to conclude that a "sufficient cause" is established by the oppression that a second bankruptcy would constitute on the facts of this case.
I would allow the appeal, set aside the sequestration order, and dismiss the petition. The respondent should pay the appellant's costs of the first instance hearing and the appeal.

JUDGE2

FOSTER J I have had the advantage of reading in draft form the reasons for judgment of Einfeld and Drummond JJ. I agree with them that the decision in Hall v Woolf (1908) 7 CLR 207 is not, as held by the learned primary judge, a bar to this Court's granting aid to the New Zealand Official Assignee in realising the debtor's moveable property in Queensland, even where such property is acquired after the commencement of the New Zealand bankruptcy and after the acquisition by the debtor of a domicile in Queensland.

There are, in this case, no competing claims from Australian creditors or an Australian trustee. No question of conflicting assertions as to title to the debtor's after-acquired property is involved. I consider, with respect, that the learned primary judge erred in holding that Hall v Woolf necessarily prevented him from exercising his discretion in favour of refusing the sequestration order. The exercise of discretion, accordingly, miscarried.
I agree that this Court is in a position to and should exercise the discretion afresh. I am satisfied, for the reasons expressed by Drummond J, that the discretion should be exercised against the granting of the sequestration order sought by the respondent. I agree with the orders proposed.

JUDGE3

DRUMMOND J The facts are set out in the judgment of Einfeld J which I have had the benefit of reading in draft.

Cooper J held that the requirements of s. 52(1) the Bankruptcy Act were satisfied and that the Bank of New Zealand thus had a prima facie right to a sequestration order. None of this is challenged. His Honour then considered how the discretion conferred on him by s. 52(2)(b) should be exercised. Here, he found against the debtor on two bases: firstly, although there was nothing to suggest that the debtor had any relevant Australian property now, a possibility that he might acquire property in Australia at some time in future and before discharge from his New Zealand bankruptcy, on 4 February, 1994, must be assumed to exist. Secondly, his Honour held that since the debtor was now domiciled in Australia, the New Zealand Official Assignee could not, on the authority of Hall v Woolf (1908) 7 CLR 207, claim any such after-acquired Australian movables of the debtor.
If his Honour was in error in reaching either conclusion, the discretion under s. 52(2)(b) the Bankruptcy Act 1966 would have miscarried and it would be for this Court to exercise the discretion anew, if all necessary materials are before us.
The position in Hall v Woolf was this: Hall was appointed the debtor's trustee in his Queensland insolvency in 1890 while the debtor was resident there. Soon after, the debtor left Queensland and by 1891, had settled in Western Australia. In 1908, while the Queensland administration was still on foot, the debtor became insolvent in Western Australia. The Queensland trustee applied to the Western Australian court for possession of the debtor's property situate in Western Australia, all of which was property acquired by the debtor after the commencement of his Queensland insolvency. Although the matter came before the Western Australian court following a letter of request from the Queensland court pursuant to s. 118 the Bankruptcy Act 1883 (Imperial) that the Western Australian court assist the Queensland trustee to obtain possession of the debtor's West Australian property, the High Court regarded s. 118 as largely irrelevant to the matter on the ground that it did not create any new rights (p 212). The decision is limited to consideration of the Queensland trustee's entitlement to the debtor's movables in Western Australia: there is no reference in the report to any realty, although the Queensland adjudication operated as a universal vesting of all the debtor's property in that trustee. The Court said that it was plain that if the debtor had ever had a Queensland domicile, he was not domiciled there at any time after 1890 (p 210). Griffith CJ, delivering the judgment of the Court, said, at pp 211-212:
"We think, therefore, that, whatever might be the rule as to
movables acquired by the debtor after the commencement of the
liquidation, and while he was still domiciled in Queensland,
the Queensland trustee cannot assert any title to movables not
locally situated there which were acquired by the debtor after
his domicil in that Colony came to an end." (emphasis added)
The High Court thus decided the case on the basis that, in order to make good his claim to possession of the debtor's West Australian movable property, the Queensland trustee had to show that the Western Australian Court was required to recognise his title to that property which Queensland law conferred on him.
I share Einfeld J's dissatisfaction with this decision as an acceptable statement of the modern law.
Once, the English and Australian courts would recognise a foreign bankruptcy adjudication as an assignment to the foreign trustee of the bankrupt's local movables only if the debtor was domiciled in the foreign country when the adjudication was made (and provided, of course, that the foreign decree extended to goods situate in the local jurisdiction). Dicey and Morris, on The Conflict of Laws, 11th Ed., 1116. This old rule was an instance of the application of the maxim, mobilia sequuntur personam: see Freke v Lord Carbery (1873) LR 16 Eq. 461, 466 and Cockerell v Dickens (1840) 3 Moore 99, 132. In Conflict of Laws in Australia, 5th Ed., Nygh, refers to this application of the maxim at p 490 as involving "a theory, now exploded". It has long been accepted that recognition will be given by English and Australian courts to the foreign trustee's title to locally situate movables, as a title arising under a foreign decree, if the bankrupt submitted to the jurisdiction of the foreign court, even though he was never domiciled there (although the extent beyond that, to which a foreign trustee's title to local movables will be accorded local recognition, remains uncertain). Dicey and Morris, p 1116; Halsbury's Laws of England, 4th Ed., Vol. 8, para. 701; The Law of Insolvency, Fletcher, p 574 and Australian Private International Law, 3rd Ed., Sykes and Pryles, p 791. The cases cited include In Re Davidson's Settlement Trusts (1873) LR 15 Eq. 383, In Re Lawson's Trusts (1896) 1 Ch 175, In Re Anderson (1911) 1 KB 896 and In Re Craig (1917) 86 L J Ch. While Phillimore J in Re Anderson said he would not decide the case on the ground of the debtor's submission to the jurisdiction of the foreign court (p 900) it is difficult to identify any other reason that would have justified his Honour recognising the New Zealand trustee's title to the English movables of a bankrupt domiciled in England, particularly in view of what he said at p 902.
In Hall v Woolf the High Court was prepared to assume that if a debtor not domiciled in the foreign country nevertheless submitted to the jurisdiction of the foreign bankruptcy court, the foreign decree would be recognised as passing to the foreign trustee all the movables, wherever situate, which the debtor owned at that time. See pp 210-211. However, it held that this was not sufficient to establish the Queensland trustee's title to the debtor's West Australian movables, saying, at 211:

"If the local law as to after-acquired property ought to be recognised elsewhere, the reason must be that the law of the domicil of the bankrupt operates as a statutory assignment of his movables, wherever situated, to the assignee in the bankruptcy, the assignment taking effect automatically as soon as they are acquired by the bankrupt. ... (I)t is, in our opinion, quite clear that as soon as the debtor ceases to be domiciled in the country of adjudication the law of that country ceases to have any application to his after-acquired movables situated elsewhere. The same rule, mobilia sequuntur personam, still applies, but it excludes the operation of that law."

It is here asserted that the only basis upon which the foreign adjudication can have a claim to recognition in Australia insofar as it applies to local movables is, firstly, that it is the law of the debtor's domicile and, secondly, that it operates in its terms to assign the debtor's movables, wherever situate, to the foreign trustee in bankruptcy. But it is not only where the foreign law happens to be the law of the debtor's domicile that the foreign adjudication can claim recognition in Australia: that law will give the foreign adjudication exactly the same claim to recognition in Australia as an assignment of all the debtor's then existing movables to the foreign assignee if it is the law of the jurisdiction to which the debtor has submitted, even though he has never been domiciled there.
Given that the maxim mobilia sequuntur personam will be ignored and recognition extended to a foreign trustee's title to local movables owned by the bankrupt at the date of the foreign order even though he is not then domiciled in the foreign country provided only that he submitted to that court's jurisdiction, it is difficult to see why that maxim should suddenly become of determinative importance in relation to the bankrupt's after-acquired goods and govern whether the foreign trustee's title will be recognised as extending to such goods. In my view, there is an inconsistency in Hall v Woolf insofar as the decision would grant recognition to a foreign trustee's title to local movables owned by the debtor at the date of adjudication even though he was not then domiciled in the foreign country but would deny recognition to the trustee's same title to after-acquired goods unless he was then domiciled there. Once it is accepted that a foreign sequestration order is entitled to local recognition as an assignment to the trustee of the bankrupt's movables owned by him at the date of that order, wherever they are situate, even though the bankrupt is not domiciled in the foreign country at that time, there seems to me no justification for saying that the foreign order should not be accorded full local recognition as applying also to after-acquired property, irrespective of any question as to the bankrupt's then domicile.
There is no trace in the English cases or textbooks of the distinction drawn in Hall v Woolf between locally situate movables acquired by the bankrupt when domiciled in the country of adjudication and local movables acquired only after the bankrupt has ceased to be so domiciled. The failure to notice this distinction is, I think, deliberate. A typical statement of the rule as to when a foreign sequestration order will be recognised as an assignment to the foreign trustee of local movables is found in Dicey and Morris, supra, at 1119:

"Rule 166 - An assignment of a bankrupt's property to the representative of his creditors under the bankruptcy law of any other foreign country (i.e., other than Scotland and Northern Ireland) whose courts have jurisdiction over him in accordance with Rule 164(2) is, or operates as, an assignment of the movables of the bankrupt situate in England."

Rule 164(2) states that English courts will recognise that the courts of any foreign country, other than those of Scotland and Northern Ireland, have jurisdiction over a debtor if he was domiciled in that country at the time of the presentation of the petition or he submitted to the jurisdiction of its courts, whether by himself presenting the petition or by appearing in the proceedings. The rule, so stated, is apt to require the English court to recognise the foreign trustee's title to after-acquired movables in England even though the bankrupt was never domiciled in the foreign country: it is enough for full recognition of the foreign trustee's title that the foreign order is entitled to recognition on some basis other than domicile, such as the bankrupt's submission to the jurisdiction of the foreign court.
In Ayres v Evans (1981) 56 FLR 235, the Full Court of this Court followed Re Osborn, (1931-32) B and CR 189 at 194, and held that the mandatory language of s. 29(2)(a) the Bankruptcy Act 1966 conferred upon the Federal Court as an Australian bankruptcy court a jurisdiction which it was bound to exercise when the two requirements referred to were satisfied, viz., when there was a request for assistance from a court of a prescribed country and that court had jurisdiction in bankruptcy in the ordinary sense of that word; it was held, however, that the nature, extent and terms of the aid that the Australian court provides remained a matter for the Australian court's discretion. See pp 240-241, 246-247 and 254. The dicta in these cases might be thought to support the proposition that s. 29(2)(a) of its own force requires unquestioning recognition to be given by the Australian bankruptcy court to orders of bankruptcy courts of the external Territories and of prescribed countries, while nevertheless reserving to itself a discretion as to the extent to which it will provide its aid under s. 29(3). But the decision in Hall v Woolf is inconsistent with that notion. See also In Re A Debtor; Ex parte Viscount of the Royal Court of Jersey (1981) Ch 384 at 401.

Notwithstanding what I think are unsatisfactory aspects of the reasoning in Hall v Woolf, I think it must be accepted as authority, binding on this Court, for the proposition that even though the foreign law gives it that effect, a foreign sequestration order will still not be recognised by an Australian court as vesting title in the foreign trustee to movables in Australia acquired by the bankrupt after the commencement of the foreign bankruptcy if the debtor ceased to be domiciled in the foreign country before acquiring those goods. But in my view, Hall v Woolf does not go beyond denying to the foreign trustee recognition of his title under the foreign bankruptcy laws to the bankrupt's movables in Australia acquired after the bankruptcy and after the bankrupt has ceased to be domiciled in the foreign country.
Hall v Woolf, so understood, is not in any way determinative of the question whether there is sufficient cause within s. 52(2)(b) the Bankruptcy Act 1966 to refuse to make a sequestration order in Australia against a debtor already subject to a New Zealand bankruptcy, merely because the New Zealand trustee's title will not be recognised here, i.e., merely because he cannot sue in his own name in Australia to recover movables acquired here, and despite s. 42(2)(a) the Insolvency Act 1967 (New Zealand), on the ground that the debtor had ceased to be domiciled in New Zealand when he acquired that property. If, as I think is the case, the New Zealand trustee can nevertheless obtain full control of all such after-acquired Australian movables and can apply them in the New Zealand administration for the benefit of the bankrupt's creditors, that will be a powerful reason to refuse to order a second bankruptcy.
It is well established that the assignment of all the bankrupt's property, real and personal and wherever situate, to the representative of his creditors which is effected by the foreign law upon the making of an adjudication by a foreign court having jurisdiction over the bankrupt's person will never be recognised in Australia as operating as an assignment of the bankrupt's Australian lands. AMP Society v Gregory (1908) 5 CLR 615 at 623 and 625 and 628 and 630; Dicey and Morris, supra, 1121. Notwithstanding this, English and Australian bankruptcy courts, while not recognising the foreign trustee's title to recover in his own name the bankrupt's lands locally situate, have long acted under provisions such as s. 29 the Bankruptcy Act 1966 to make available those lands to the foreign trustee, so that they can be realised for the benefit of the creditors in the foreign bankruptcy (always provided, of course, that the foreign sequestration order claims to reach the local lands).
In Re Greenaway (1910) 27 WN (N.S.W.) 112 and Re Fogarty (1904) QWN 67, this was done by declaring the absent bankrupt a trustee of his local lands for his foreign assignee in bankruptcy (presumably on the basis that after bankruptcy the bankrupt holds his property as trustee for his creditors: Galbraith v Grimshaw (1910) AC 508, 512) and by then making an order under the local Trustee Act vesting the lands in question in the foreign assignee. In neither case was the foreign decree, despite its terms, recognised as vesting title to the bankrupt's local lands in the foreign assignee. Nevertheless, this same result was achieved by the local court acting in aid of the foreign bankruptcy court under s. 118 the Bankruptcy Act 1883 (Imperial). A different approach has been taken in other cases that achieves the same result of making local realty available to a foreign trustee for realisation and distribution in the foreign bankruptcy, even though the local court will not recognise the foreign trustee's title to the land. In Re Osborn, supra, Osborn was declared bankrupt by the Manx court. The Manx trustee obtained a letter of request from that court pursuant to s. 122 the Bankruptcy Act 1914, equivalent to s. 29 the Bankruptcy Act 1966, seeking the aid of the English court in obtaining the bankrupt's English property; he then applied to the English court for a declaration vesting in him all the bankrupt's English realty and personalty and, in the alternative, for his own appointment as receiver of all this English property, with power to sell the same and make the proceeds available for distribution in the Manx bankruptcy. Farwell J did not consider it necessary to determine the domicile of the bankrupt: see p 193. His Honour refused to recognise the title conferred by the Manx sequestration order on the trustee to the bankrupt's English property, including the English land: see 194-5. But, in the exercise of jurisdiction under s. 122 of the 1914 Act, he still gave the Manx trustee full control of the debtor's English land and goods, saying at 195-196:
"That being so, is there any other alternative? ... That I
have jurisdiction to appoint a receiver in bankruptcy there can
be no doubt, and, fortified by the course which has been
adopted by my predecessor, (Astbury J in Re Kooperman (1928)
WN 101) I think I am justified in adopting the same course."
Farwell J appointed the applicant trustee to be receiver of the rents and profits of the bankrupt's interest in all real property in England with liberty to sell the same and to deal with all such proceeds as trustee in the Manx bankruptcy as well as receiver of the bankrupt's English personalty with power to sell the same, but subject to conditions, including a condition that he undertake that all money or other property which he received in England would be applied in the due course of administration in the Manx bankruptcy. Re Dunn and Edwards (1935) 8 ABC 168 and Re Livesey (1946) 14 ABC 59 reflect the same view of the law. In Ayres v Evans at 240 Fox J I think acknowledged that there was one class of case in which the foreign trustee's title would be recognised by an Australian court and another class of case in which, while that title would not be accorded recognition, the Australian court would still assist the foreign trustee to get effective control of the bankrupt's property in Australia.
If the Australian court, while not recognising the title to Australian immovables which the foreign trustee has under the foreign law, will nevertheless act in aid of the foreign bankruptcy court under s. 29 the Bankruptcy Act 1966 to effectively put the foreign trustee in control of those immovables, there can be no reason why the Australian court should not adopt the same approach when its aid is called upon by the foreign bankruptcy court to put the foreign trustee in effective control of after-acquired movables in Australia, even though that trustee's title under the foreign sequestration order to those goods will not be recognised by the Australian court.
The primary judge acknowledged a submission on behalf of the appellant that the New Zealand Official Assignee could use s. 29 to get control of any property the appellant might acquire here by having a receiver of that property appointed. But he rejected the submission on the ground that s. 29 does not create new rights, citing Hall v Woolf at 212 and Re Ayres; Ex parte Evans (1981) 51 FLR 395 at 405. It is true that s. 29 the Bankruptcy Act 1966 does not create any new rights in the foreign trustee who enlists, through his own bankruptcy court, the assistance of the Australian court; it creates only new remedies for the enforcement of the rights which that trustee already has. But for an Australian bankruptcy court to act under s. 29 to give the foreign trustee effective control of the bankrupt's Australian immovables and after-acquired movables, while all the time refusing to recognise the foreign trustee's title to any of that Australian property, does not involve the creation by the Australian Court of new rights in the foreign trustee with respect to the bankrupt's property: he already has those rights under the foreign decree when the foreign law operates as a universal assignment to him of all the bankrupt's property, wherever situate (as does the New Zealand bankruptcy law here relevant). All the section gives the foreign trustee is a remedy, which he would not have apart from the section, for enforcing those rights in Australia. If the statement in Hall v Woolf at 212 is understood, as I think it should be, as one made in the context of a case in which the Queensland trustee was asserting a right that was dependent upon recognition by the Western Australian court of his title to the bankrupt's local movables, the foreign trustee was asserting a right that Western Australian law did not accept he had. The precursor of s. 29 did not create such a right. The numerous Australian and English cases in which foreign trustees have received local assistance under s. 29 and equivalent provisions to obtain control of local property, even though the title of those trustees is not accorded local recognition, are not therefore in conflict with the decision in Hall v Woolf.
The jurisdiction the Australian court has under s. 29(3) is a wide one. "Plainly one of the main uses of sections such as s. 29 (and s. 135 of the New Zealand Insolvency Act 1967) is to enable recourse to be had to a bankrupt's property in the country to the courts of which the request for aid is made.": Re Ayres, supra, at 407-8. The Australian court is not limited in providing assistance to a foreign court to cases in which the Australian and the foreign court have powers that mirror each other. If there is a "matter of bankruptcy" within s. 29(3) before the foreign court, the Australian court, in response to a request for aid, can exercise any of the powers it has under the Bankruptcy Act 1966 if that same matter had arisen in Australia, being powers the exercise of which will provide assistance to the foreign court in the circumstances of the particular case: "... the legislative scheme contemplates co-operation by Australian courts, and courts of external Territories (and of prescribed countries), in bankruptcy matters. There are obvious advantages in such a provision. The scheme envisages that, in the ordinary course of events, requests for aid will be made and honoured, subject to the need to modify these administrative arrangements to meet the circumstances of a particular case by imposing appropriate conditions or the like": Clunies-Ross v Totterdell (1988) 98 ALR 245, 247-8. The extent to which provisions like s. 29 enable the Australian court to go in assisting a foreign bankruptcy court is demonstrated by Re Waters; Ex parte Waters (1922) 22 SR at 273, where Street CJ considered that the NSW court could assist a foreign court, where the bankrupt was in contempt of an order of the foreign court requiring him to transfer his NSW land to the foreign trustee, by making an order vesting that NSW land in the foreign trustee. Galbraith v Grimshaw (1910) AC 498 does not I think assist the respondent. It is not authority against s. 29 being available to the appellant's New Zealand assignee as an aid to gathering in his Australian property: the Court there held that the Scottish trustee took that English property subject to prior claims that had arisen locally, in accordance with the rule of English law of general application to all assignments, that the assignee acquires his title subject to equities existing at the moment of acquisition. Section 117 the Bankruptcy Act 1883 (Imp.), which has no equivalent in the Bankruptcy Act 1966, was said at 511 by Lord Loreburn to affect procedure and not to enlarge this rule of English law. Lord MacNaghten referred at 511-2 to s. 118 of the 1883 Act, to which s. 29 of the 1966 Act is equivalent, saying that "the English Court, no doubt, is bound to carry out the orders of the Scottish Court" but that the Scottish Court could only claim the "free assets" of the bankrupt, i.e., the assets in England with all the liabilities to which they were subject at the date of the Scottish sequestration. Under s. 29 the Australian court will, I think, assist a foreign trustee to gather in the "free assets of the bankrupt", even though it may not be prepared to recognise the trustee's title to those assets.
The primary judge rejected the debtor's principal argument for resisting the order, viz. that he had no assets in Australia and no probability of acquiring any, concluding:

"... I suspect that in the end any sequestration in Australia will prove to be a fruitless and time wasting exercise. However, the general principles established by the authorities are certain and it cannot be said that it is clear beyond question that an Australian sequestration will produce no property divisible amongst creditors prior to the discharge of the respondent from bankruptcy in Australia in the ordinary course. The respondent therefore fails to make out his main ground of objection."

I think his Honour reached this conclusion in the following way. He said:

"For the respondent to bring himself within the factual circumstances which moved the Court to dismiss the petition in Betts, he must show not only that he has no assets within the jurisdiction but that any after acquired property in Australia would not become available for an Australian bankruptcy because it would be taken for the existing New Zealand bankruptcy (See Field at 376). That is, the respondent must show that the making of an order is a futility because there is presently no property and will be no property available in a second bankruptcy (see Bayne v. Blake (No. 2) at 365)."

His Honour then noted that the appellant relied on the universal effect of the New Zealand sequestration order and the availability of s. 29 the Bankruptcy Act 1966 as a means by which the New Zealand Official Assignee could gather in all of the appellant's Australian assets to discharge this onus. He rejected this argument, saying:

"Section 29 of the Bankruptcy Act 1966 does not create new rights, but only creates new remedies for enforcing existing rights (Re Ayres Ex parte Evans (1981) 51 FLR 395 at 405; Hall v. Woolf (1908) CLR 207 at 212). Thus the Official Assignee in New Zealand may not by recourse to the acting in aid provisions of either the New Zealand or Australian bankruptcy legislation acquire or enforce rights in relation to property of the respondent which he does not have in law or equity. ...

... If the respondent has acquired a domicile of choice in Queensland, and the material suggests that he has done so, that circumstance operates to limit the rights of the Official Assignee in respect of property acquired after the respondent abandoned his New Zealand domicile. Irrespective of what rights the Official Assignee may have had in relation to after acquired property wherever situated while the respondent was domiciled in New Zealand, the Official Assignee cannot assert any title to property not locally situated there, which was acquired after the respondents domicile in New Zealand came to an end (Hall v. Woolf at 211 - 212). In consequence, as a matter of probability, any after acquired property of the respondent coming into his hands after settling in Australia, would not pass to the New Zealand Official Assignee and become available for the purpose of the New Zealand administration. Such property, should it come into existence would be available for an Australian administration if the sequestration order is made. It is not possible at this point in time for the Court to say whether as a matter of probability such property will or will not come into existence."

There is authority that where the debtor has no assets, that may justify a refusal to make a sequestration order. But the consistent trend of the modern cases has been to make it increasingly difficult, as a matter of practicality, for a debtor to avoid bankruptcy on this ground. In Re Field (1978) Ch 371, Megarry VC said: "A man may indeed be too poor to be made bankrupt: but the burden of proof is heavy." This court, in Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1 at 6: "(T)his course has been regarded as appropriate only in cases where the lack of assets is clear beyond question so that the presentation of the petition amounts to oppression". See also In Re M.P. Darcy; Ex parte The Pre-term Foundation (Full Federal Court, Fox, Wilcox and French JJ, unreported 23 May, 1988) and Bayne v Blake (No. 2) (1909) 9 CLR 360 at 364. The reason for this approach is obvious: when a petition is presented, it will not normally be possible for the court to know whether there will prove to be assets or not if the bankruptcy goes ahead. Clyne at 6-7.
But Hall v Woolf is, for the reasons given, no impediment to the New Zealand assignee taking all the property the appellant may acquire in Australia before discharge from his bankruptcy in New Zealand. The justification for the reluctance of the courts to accept the "no assets" defence to a petition, by a debtor who is not already in bankruptcy has, in my opinion, less significance where the Court is asked to make a sequestration order when the debtor is already in bankruptcy than it has where the Court is asked to put a debtor into bankruptcy for the first time. Here, there is no suggestion that the appellant has any Australian creditors who might benefit from his bankruptcy in Australia; it is only his New Zealand creditors who will so benefit. In such circumstances, if the trustee under a foreign bankruptcy that is already on foot when the Australian court is asked to make another sequestration order against the same debtor, is himself well placed to ascertain what property the debtor has here and is well able to take control of any such property, together with any property the debtor may acquire here in the future, there is in my view little justification for adopting the approach taken in cases in which the plea of "no assets" is raised in answer to the only petition that has ever been presented against the particular debtor.
In Re Betts; Ex parte Betts (1897) 1 QB 51, upon which his Honour also relied, was a case in which the court was asked to make a sequestration order against a debtor who was already in bankruptcy in England. Although the position under s. 59 the Bankruptcy Act 1966 is quite different, the law at that time was that, where a debtor was subject to two concurrent English bankruptcies, property acquired by the bankrupt after the first sequestration order vested in the trustee of the first bankruptcy and it was only if there was a surplus in the first bankruptcy that the second trustee took anything for distribution in the subsequent bankruptcy: see Williams' Law and Practice in Bankruptcy, 12th Ed., pp 242-244. A second sequestration order would thus only serve a purpose if there were sufficient assets, including assets acquired after the first sequestration order, to produce a surplus in the first bankruptcy. But Lord Esher's judgment does support what his Lordship did in equating the claim of the appellant that he had no assets to a similar claim by a debtor who is facing bankruptcy for the first time, although the appellant is still subject to the New Zealand sequestration. It is difficult to see why Lord Esher MR adopted that test when, as he noted at p 53, the petitioning creditor would obtain the benefit in the first still-continuing bankruptcy of any property the bankrupt might acquire in the future, without the need for a second sequestration simply by proving in the first-mentioned bankruptcy. In any event, I do not think In Re Betts can be regarded as laying down a rule that the discretion to refuse to make a sequestration order against a debtor who is already in bankruptcy should only be exercised in favour of the debtor if he proves he has no assets and no likelihood of obtaining any that will be available in a second bankruptcy. As Megarry VC noted in Re Field at 375, the judgments emphasise the special circumstances of the case and that it should not be regarded as a precedent for any other case unless the circumstances are the same: see (1897) 1 QB at 53 and 54.

I think that the exercise by the primary judge of his discretion under s. 52(2)(b) the Bankruptcy Act 1966 miscarried because he treated the decision in Hall v Woolf as barring access by the appellant's New Zealand assignee to any property the appellant may acquire in Australia before the New Zealand bankruptcy comes to an end and because of his view as to the limited effect of s. 29. These conclusions were central to his Honour's decision to make the sequestration order. I also think the discretion miscarried because his Honour wrongly regarded the appellant's defence of "no assets" as requiring proof of the same matters that must be established where a "no assets" answer is made to a petition by a debtor who is not already in bankruptcy, before such an answer can justify a refusal to make a sequestration order. If, as is the case here, there is no suggestion that a person under administration in a foreign country has incurred debts in Australia in circumstances which would justify sequestration here and if there are good grounds for thinking that any existing and future assets the debtor may have here can be effectively gathered in, in the existing foreign bankruptcy, a proper exercise of the discretion conferred by s. 52(2)(b) the Bankruptcy Act 1966 will require the Australian court to weigh carefully these and all the other circumstances of the case before it will be able to conclude that a second bankruptcy administration of the debtor's estate, which will be solely for the benefit of the same creditors who have proved in the on-going foreign administration, should be established.
Since the discretion reposed in his Honour by s. 52(2)(b) the Bankruptcy Act miscarried, it is open to this Court to exercise that discretion anew, provided the necessary materials are before us. There being no suggestion to the contrary, I think this Court should dispose of the matter.
I therefore proceed to a consideration of what I regard as the matters relevant to the exercise of the discretion under s. 52(2)(b) the Bankruptcy Act 1966.
I have already referred to the existence of the New Zealand bankruptcy, to the absence of any evidence that there are Australian creditors who would benefit from an Australian bankruptcy and the fact that any Australian bankruptcy would therefore benefit only the same New Zealand creditors who are interested in the existing New Zealand administration. I have referred to the wide powers of the New Zealand assignee to gather in, in reliance upon s. 29 the Bankruptcy Act 1966, all the appellant's existing and after-acquired movables and immovables in Australia for distribution in his administration.
The New Zealand Deputy Official Assignee, in supporting the petitioning creditor, rather overstated the difficulties he says he is experiencing in conducting the New Zealand administration. He says he cannot examine the appellant. But in view of s. 81 the Bankruptcy Act 1966 and s. 69 the Insolvency Act 1967 (New Zealand), there is no reason to doubt that he could have the appellant examined here if he made application to the Australian court under s. 29. Cf. Re Turnbull (1886) 2 QLJ 131; Re Nall (1899) 20 NSWR 25 (B. and P.) and Dunn v Edwards (1935) 8 ABC 168. I also note that the appellant, without contradiction, has sworn to a willingness to return to New Zealand for examination if he were asked, something that has not occurred. The Deputy Official Assignee said that, because there are no assets in the New Zealand administration, he has not been able to apply to have the Official Receiver for Queensland appointed receiver of the appellant's property in Australia. There is no explanation, either from him or from the petitioning creditor, why the latter is prepared to incur the expense of instituting bankruptcy proceedings against the appellant here, but apparently is not prepared to make funds available to the New Zealand assignee for the purpose indicated.
The evidence showed that the appellant was in receipt of a modest income only as a solicitor in practice on the Gold Coast and that there was no reason to think that there would be any substantial increase in his earnings so long at least as current economic conditions continued. No doubt was cast on what the appellant had to say about his limited prospects. But that the appellant may obtain a substantial income prior to his discharge from the New Zealand bankruptcy from his work as a solicitor was understandably a matter of significant concern to the petitioning creditor. The Deputy Official Assignee also says that he has still to ascertain what contributions the appellant can make to his New Zealand creditors from his Australian earnings as a solicitor: however, it appears that 13 months before the Assignee filed the affidavit in which he said this, the appellant, at the assignee's request, gave him information as to his Australian earnings and he has not had any further request for information in that regard. None of this is contradicted. In any event, the Official Assignee can, in my opinion, invoke the Australian court's aid to gather in for the appellant's New Zealand creditors any surplus income that the appellant may acquire up to the time of discharge from his New Zealand bankruptcy. The solicitor for the petitioning creditor, a New Zealand practitioner, gave evidence as to the reach of New Zealand bankruptcy law in this regard. He said:
"6. ... Property, including income, acquired by the

abovenamed debtor after his adjudication in bankruptcy and before his discharge from bankruptcy vests in the Official Assignee.

7. To secure payment of the after acquired income, pursuant

to Section 45 of the Insolvency Act, the High Court may order a bankrupt to pay a sum of money to the Official Assignee or to make periodic payments, when the court is satisfied that the various criteria set out in Section 45(1) are established. While the High Court may have jurisdiction to hear such an application when a debtor is outside New Zealand, the Court is unlikely to make an order under Section 45(1) unless the Court can be satisfied that the order will be effective. The Court's powers to enforce orders under Section 45 are in its inherent jurisdiction to commit for contempt of court for disobedience of an order of the court. Such a power would be ineffective against a person living overseas. Accordingly, Section 45 is unlikely to be available to require the debtor to pay any money for his debtors."

On this evidence, after-acquired income of a bankrupt is, by New Zealand law, property divisible among his creditors in the New Zealand administration, save to the extent that the Court makes a reasonable allowance for the maintenance of himself and his family out of such income. It does not I think matter that s. 131 the Bankruptcy Act 1966, a provision similar to s. 45 of the New Zealand Act, was replaced in 1992 by a scheme that transferred power over a bankrupt's after-acquired income from the Court to the trustee in bankruptcy. The Australian court has full power to ensure that after-acquired property of an Australian bankrupt that vests in the Australian trustee can be recovered by that trustee. Section 29 would therefore provide ample power to the Australian court to assist the New Zealand Official Assignee, on a suitable request from a New Zealand court, to obtain for the benefit of the New Zealand administration such part of the appellant's after-acquired property made up of his Australian income as the New Zealand court might require to be paid to the Official Assignee pursuant to s. 45 the Insolvency Act 1967 (New Zealand). I do not accept that (as the respondent's solicitor asserts) if the New Zealand court were to order the appellant to pay portion of his income to his New Zealand assignee, that order could not be carried into effect by application under s. 29 for control of the relevant part of the appellant's income: see Re Waters, supra, at 273.
It is true that the 1992 changes to Australian bankruptcy law arm an Australian trustee with wider powers than a New Zealand trustee appears to have to gather in property which third parties have accumulated with the assistance of the bankrupt: see Division 4A of Part VI the Bankruptcy Act 1966. The Australian trustee now also has, as I have mentioned, wider powers than a New Zealand trustee to take surplus income of a bankrupt: see Division 4B of Part VI. But I do not think that such matters are by themselves such as to compel the Australian court, when confronted with a petition by a creditor, who has proved in an existing New Zealand bankruptcy, to exercise the discretion under s. 52(2)(b) against the debtor. They are but two of the considerations that the court must take into account in performing that exercise. Where, as here, there is no evidence to suggest that there will be any scope for either Division 4A or 4B of Part VI the Bankruptcy Act 1966 to operate and where, so far as Division 4B is concerned, the evidence points positively to there being no such scope, that deprives the fact that an Australian trustee would have wider powers in these two areas than the New Zealand Official Assignee of a good deal of its significance.
The question whether the appellant has concealed assets from the New Zealand Official Assignee, either in New Zealand or Australia, was litigated before the New Zealand Master and determined unequivocally in the appellant's favour. His Honour noted that the appellant was cross-examined as to his assets and affairs in the proceedings before the Master and said, in this regard:
"It is not suggested that I am bound by or should necessarily
accept the conclusions drawn by the Master on the evidence
before him. The important feature of the New Zealand
proceedings before the Master is that, notwithstanding the
proceedings and cross-examination of the (appellant), there is
no suggestion that the (appellant) in fact has any assets in
New Zealand or Australia of which the Official Assignee is
unaware or that the (appellant) is being other than truthful
when he deposes in these proceedings to having no assets."
It was suggested to his Honour, by the petitioning creditor, that earnings were wrongfully diverted from the New Zealand Official Assignee by the appellant and that there was a want of frankness on his part in his dealings with that official which, when coupled with the respondent's professional employment and the need to protect the Australian financial community, justify the making of a sequestration order. Cooper J rejected these suggestions and found that the appellant "presently does not have any property in Australia beyond some minimal household effects"; that his interests in a number of Australian companies, not disclosed to the New Zealand Official Assignee, were acquired as an incident of his practice as a solicitor on the Gold Coast and were not held beneficially but for others; that the entitlement of the appellant's wife as trustee of the family trust to an interest in a New Zealand property from which the appellant and his former New Zealand law partners carried on their practice was assigned by her to those partners without any payment being made and probably as a set-off against an alleged indebtedness of the appellant to that partnership. Of the rejection by the New Zealand Supreme Court Master of the appellant's application for early discharge, his Honour observed that it was refused not because any adverse finding was made with respect to the appellant or his affairs or because of any misconduct on his part prior to or after his bankruptcy, but only because the Master was not satisfied that the appellant had shown substantial reasons why a discharge was appropriate earlier than the automatic discharge provided for by New Zealand law. His Honour also found that there was nothing in the appellant's conduct as a solicitor in Queensland demonstrated on the material which would suggest that he is placing his clients' interests or the Australian financial community at risk. There is no suggestion that the appellant's New Zealand insolvency was brought about by commercial misconduct or profligacy, rather is the evidence to the contrary.
None of these findings is challenged. I think the appellant has shown sufficient cause why a sequestration order should not be made.
I would allow the appeal, set aside the sequestration order and dismiss the petition.

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Citations

Radich, N.C.L. v. Bank of New Zealand [1993] FCA 627 ((1993) 116 ALR 676)

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10 SEPTEMBER 1993