Re Balhorn; Ex parte Balhorn and Official Trustee

[1981] FCA 176

Re: SYDNEY GORDON BALHORN
Ex Parte: SYDNEY GORDON BALHORN, and THE OFFICIAL TRUSTEE IN BANKRUPTCY
(1981) 55 FLR 433
No. 326 of 1973
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
Lockhart J.(1)

CATCHWORDS

Bankruptcy - discharged bankrupt retains title deeds to part of property now vested in Official Trustee - on application of Official Trustee title deeds produced to Registrar in Bankruptcy by discharged bankrupt in response to s. 81 summons - Official Trustee seeks delivery up of deeds - discharged bankrupt opposes delivery up and seeks damages from various parties connected with administration of his estate - effect of discharge from bankruptcy on rights and obligations of discharged bankrupt and Official Trustee.

Ss. 30, 77, 81, 129, 152 Bankruptcy Act, 1966 (Cth.)

Bankruptcy - Discharged bankrupt retains title documents for land vested in official trustee - Whether official trustee entitled to documents - Effect of discharge - Bankruptcy Act 1966 (Cth), ss. 30, 77, 81, 129, 152.

HEADNOTE

The estate of the first applicant, Balhorn, was sequestrated in 1973. Certain general law land owned by the first applicant was then vested in the official receiver, who did not obtain the complete title documents for the land. The first applicant was discharged from bankruptcy in 1978. The second applicant, the official trustee, in whom the land was vested pursuant to Act No. 12 of 1980, sold the land in 1980, and requested the first applicant to deliver all the title documents to him. The first applicant refused. Pursuant to a summons under s. 81 of the Bankruptcy Act 1966, the first applicant delivered the title documents to the Registrar in Bankruptcy. The first applicant and the official trustee then applied to the court respectively opposing and seeking an order that the Registrar in Bankruptcy deliver the title documents to the official trustee.

Held, application of second applicant granted, that the title documents should be delivered to the official trustee. Even though a bankrupt is discharged, he remains obliged to perform the duties prescribed by the Bankruptcy Act during his period of bankruptcy. Re Walker (1952), 16 ABC 69, referred to. The official receiver, and subsequently the official trustee, were obliged and continued to be obliged to take possession of the title documents. The court should enforce this obligation.

HEARING

Sydney, 1981, October 12, 21. #DATE 21:10:1981

APPLICATION.

L. S. Ostrowski, for the Official Trustee.

K. W. Wiltshire, for the Registrar in Bankruptcy.

Cur. adv. vult.

Solicitors for the Official Trustee: Strongman & Crouch.

J. H. TELFER

ORDER

1. Mr. Balhorn's application of 19 June 1981 be dismissed.

2. The Registrar in Bankruptcy deliver up to the Official Trustee in Bankruptcy the documents marked for identification as "MFI 2" referred to in the order of the Deputy Registrar in Bankruptcy made on 1 June 1981.

3. Mr. Balhorn pay the costs of the Official Trustee of Mr. Balhorn's application of 19 June 1981 including the costs reserved by McGregor J. on 14 July 1981 and the costs reserved by Deane J. on 14 August 1981. Otherwise no order as to costs.

4. The Official Trustee serve Mr. Balhorn personally with a sealed copy of these orders and a copy of my reasons for judgment; and that an affidavit of service thereof be filed.

5. Orders 1, 2 and 3 shall not operate until the expiration of 21 days from the date of filing the said affidavit of service, and if, in the meantime Mr. Balhorn files an application in the Victorian District Registry of this Court to rescind or set aside orders 1, 2 and 3 or any of them, the order which he seeks to set aside shall not operate until further order of the Court.

6. Liberty to apply be reserved to all parties on two days' notice.

JUDGE1

On 5 December 1973 a sequestration order was made against the estate of Sydney Gordon Balhorn. He was discharged from bankruptcy on 5 December 1978 by force of s. 149 of the Bankruptcy Act 1966. At the date of the commencement of his bankruptcy, Mr. Balhorn was the owner of land at Port Albert in the State of Victoria ("the land") on which he conducted a poultry farming business. The title to the land is partly subject to the provisions of the Transfer of Land Act 1958 (Vic.) and partly subject to the general law. That part of the land which is subject to the general law is described in memorial 192 book 690, memorial 193 book 690 and memorial 916 book 698. The land vested in the Official Receiver as trustee of the estate of Mr. Balhorn pursuant to s. 58 of the Act.

The Official Receiver has not been able to obtain the documents comprising the chain of title to that part of the land which is subject to the general law ("the title deeds"), in particular, the three instruments to which I have referred. He has obtained possession of the muniments of title to the rest of the land.

By contract of sale dated 6 March 1980 the Official Receiver sold the land to Anna Erna Britta Balhorn.

The title deeds were in Mr. Balhorn's possession until recently. He was requested many times to deliver the title deeds to the Official Receiver; but he declined to do so.

The Official Receiver wishes to gain possession of the title deeds so that the contract of sale may be completed.

The Official Receiver applied to the Registrar in Bankruptcy for the issue of a summons under s. 81 of the Act. A summons under s. 81 was issued by the Registrar on 7 August 1980 requiring Mr. Balhorn to attend to give evidence in connection with his "bankrupt estate" and, in particular, to give evidence as to the present whereabouts of the title deeds, to produce books or records relating to the whereabouts of the title deeds and to produce and deliver up the title deeds. Mr. Balhorn applied to the Court to set aside the summons. The application was heard by another Judge of this Court on 27 April 1981. Mr. Balhorn was represented by a solicitor and the Court, by consent, set aside the summons to the extent that it required Mr. Balhorn to deliver up the title deeds. By consent the application was otherwise dismissed with no order as to costs.

On 1 June 1981 the examination of Mr. Balhorn under s. 81 took place before a Deputy Registrar in Bankruptcy. Mr. Balhorn was examined about various matters; but in particular as to the whereabouts of the title deeds. The title deeds were then produced by Mr. Balhorn to the Deputy Registrar in Bankruptcy who ordered that they be marked for identification as "MFI 2", that they remain in the custody of the Registrar in Bankruptcy for 21 days and that if in the meantime no application was made to the Court for the title deeds to be otherwise dealt with, they should be delivered up to the Official Trustee in Bankruptcy (the Official Trustee in Bankruptcy having become the trustee of Mr. Balhorn's estate following the commencement on 1 February 1981 of Act No. 12 of 1980). The examination of Mr. Balhorn was adjourned to a date to be fixed. Mr. Balhorn was then unrepresented.

On 19 June 1981 Mr. Balhorn filed an application in this Court seeking:-

1. An order restraining the Registrar in Bankruptcy from delivering the title deeds to the Official Trustee; and

"(2) ORDER for RELIEF, DAMAGES, and COMPENSATION from the persons named above in the nominal sum of $2,000,000 over their MISFEASANCE, NEGLIGENCE, WILFUL DEFAULT, and CRIMINAL CONSPIRACY TO DEFRAUD THE PLAINTIFF with P. VODICKA, P. RYAN, solicitors, and A.E.B. BALHORN, occupier of the Plaintiff's stolen home and farming business at Port Albert. The Plaintiff intends to rely on Sections 176 (2), 178, 179, 133 and 134 (h) and (j) of the BANKRUPTCY ACT."

On 13 July 1981 the Official Trustee filed an application in this Court naming the Registrar in Bankruptcy as respondent (but not Mr. Balhorn) in which he sought an order that the Registrar in Bankruptcy deliver up to the Official Trustee the title deeds referred to as "MFI 2" in the order of the Deputy Registrar in Bankruptcy of 1 June 1981.

After some adjournments, the two applications came on for hearing before me on 12 October 1981. The Official Trustee was represented by counsel; and a Deputy Registrar in Bankruptcy appeared. There was no appearance by or on behalf of Mr. Balhorn. I proceeded to hear the two applications in the absence of Mr. Balhorn after satisfying myself on the evidence adduced by the Official Trustee, including evidence from the Registrar in Bankruptcy himself of a telephone conversation with Mr. Balhorn, that Mr. Balhorn knew that the applications were to be heard on 12 October and that this date was acceptable to him.

I shall deal first with so much of Mr. Balhorn's application as seeks to restrain the Registrar in Bankruptcy from delivering the title deeds to the Official Trustee and with the application by the Official Trustee that the Registrar in Bankruptcy deliver up the title deeds to him.

The title deeds came into the custody of the Registrar in Bankruptcy following their production by Mr. Balhorn in response to the s. 81 summons. They have since remained in the Registrar's custody pursuant to an order of this Court pending any further order

It was held by the English Court of Appeal In re Coulson. Ex parte Official Receiver (Trustee) 1934 Ch. 45 (the Court comprising Lord Hanworth M.R., Lawrence and Romer L.JJ.) that s. 25 of the Bankruptcy Act 1914 (Eng.) - the section comparable to s. 81 of the Act - survived the discharge of a debtor from his bankruptcy. In re Coulson was approved by Stamp and Goff JJ. in Re A Debtor (No. 12 of 1958). Ex parte The Trustee Of The Property Of The Debtor v. Clegg and Others 1968 2 All.E.R. 425. It was also referred to with apparent approval by Clyne J. in Re Walker (1952) 16 A.B.C. 69.

I must confess to having reservations about the correctness of In re Coulson; but I do not find it necessary to decide whether an order may be made under s. 81 of the Act after the discharge of a bankrupt.

Notwithstanding that the bankrupt applied to the Court to set aside the s. 81 summons he consented to an order setting the summons aside to a limited extent only namely, insofar as it required him to deliver up the title deeds. The summons remained alive otherwise and, with his consent, his application to set it aside was otherwise dismissed. He was in due course examined under s. 81 and produced the title deeds to a Deputy Registrar in Bankruptcy. The Deputy Registrar adjourned his examination generally.

So far as the proceedings before me are concerned, the s. 81 summons is spent. The Official Trustee does not rely on s. 81 as a source of power to direct the Registrar in Bankruptcy to deliver up the title deeds to him. He contends that the Court has power to make such an order from other sources.

The effect of a discharge from bankruptcy is to release a bankrupt from all debts provable in the bankruptcy except the debts mentioned in s. 153 (2). The discharge "does not put an end to the bankruptcy regarded as a series of judicial and administrative acts and rights and powers": Re A Debtor (No. 946 of 1926), The Debtor v. Official Receiver 1939 1 All E.R. 735 per Sir Wilfrid Greene M.R., at p. 742; followed in Re A Debtor (No. 12 of 1958). Ex parte The Trustee Of The Property Of The Debtor v. Clegg & Others (supra).

The property of a bankrupt divisible amongst his creditors (property of the bankrupt at the commencement of the bankruptcy and property acquired thereafter but before discharge: s. 116) remains vested in the Trustee of his estate. A bankrupt is entitled to any surplus remaining after payment in full of the costs, charges and expenses of the administration of the bankruptcy; all debts that have been proved in the bankruptcy; and interest on interest bearing debts that have been proved in the bankruptcy: s. 148.

The Trustee of a bankrupt's estate is still bound to collect, realise and distribute such of the bankrupt's property as was vested before discharge in the Trustee.

A discharged bankrupt continues "to be liable to certain obligations which flow from what I may describe as his state of bankruptcy" per Clyne J. in Re Walker (supra) at p. 72. A bankrupt remains obliged to perform the duties prescribed by the Act during his bankruptcy.

Indeed, it was held in Ex parte Waters. In re Waters 1874 18 L.R. Eq. Cas. 701 by Sir James Bacon C.J. that the duty of a bankrupt during his bankruptcy to aid the trustee in the realisation of his property and the distribution of the proceeds amongst his creditors (s. 19 of the Bankruptcy Act 1869 (Eng.) ) survives the discharge. There is no precise equivalent of s. 19 in the Act; but s. 77 is similar. I do not decide whether s. 77 survives a discharge; but I mention Re Waters because it is one of a long line of cases which manifest a tendency of the Courts to approach questions as to the continuation of duties imposed by Bankruptcy Acts on a bankrupt during his bankruptcy on the footing that they continue thereafter. This is so notwithstanding that some of the particular sections of the Bankruptcy Acts considered by the Courts in terms appear to postulate the currency of the bankruptcy of the bankrupt, and that in some of the cases the Bankruptcy Acts under consideration contained sections akin to s. 152 of the Act. Section 152 requires a discharged bankrupt, notwithstanding his discharge, to give such assistance as the Trustee reasonably requires in the realisation and distribution of such of his property as is vested in the Trustee. Failure to comply with the section is contempt of Court. Indeed, In Re Coulson the Court of appeal relied on the existence of s. 26 (9) of the English Bankruptcy Act of 1914 comparable to s. 152 of the Act, as supporting the conclusion that s. 25 of the English Act (see s. 81 of the Act) survives the discharge.

The land vested in the Official Receiver upon his becoming a bankrupt. The title deeds were also the property of the bankrupt and likewise vested in the Official Receiver. The Official Receiver was, and the Official Trustee continues to be, obliged to take possession of the title deeds; and the Court may, on the application of the Official Trustee, enforce possession accordingly: s. 129 (1) and (2).

Mr. Balhorn was obliged during his bankruptcy to deliver the title deeds to the Official Receiver. The Official Receiver could have required Mr. Balhorn to surrender them to him by various means including orders pursuant to s. 129 or s. 30 (1) or perhaps pursuant to the two sections together. The discharge of Mr. Balhorn from his bankruptcy did not alter this position.

The Official Trustee chose to follow a different course namely, by causing a summons to be issued under s. 81. That resulted in the title deeds being delivered by Mr. Balhorn into the custody of the Registrar in Bankruptcy; but the Official Trustee is entitled to possession of them. They are his property; and the Court should lend its aid to enforce his right, indeed his duty, to take control of them. The powers conferred by ss. 129 and 30 (1) are sufficient for this purpose.

Prima facie, the Official Trustee succeeds in his application. Whether an order should be made requiring the Registrar to deliver possession of the title deeds to the Official Trustee is a matter for the Court in the exercise of its discretion. The Registrar of course adopts a neutral stance and abides the order of the Court.

Counsel for the Official Trustee read to the Court affidavits filed by Mr. Balhorn in these matters. I have considered their contents and see nothing in them to lead me to refuse to make the order sought by the Official Trustee in his application.

As to Mr. Balhorn's request in his application of 19 June 1981 for an order for compensation from various persons for alleged misfeasance, negligence, wilful default, criminal conspiracy and other matters, I see nothing whatever in the evidence to support the making of such an order.

It follows that Mr. Balhorn's application will be dismissed and that the Official Trustee's application will succeed.

As Mr. Balhorn did not appear at the hearing before me, notwithstanding that I am satisfied he knew of the date of hearing, in all the circumstances I think the fair course for me to take is to give him a chance to come back to the Court if he wishes, within a short time, to rescind or set aside the orders I propose to make.

The Court orders:-

1. That Mr. Balhorn's application of 19 June 1981 be dismissed;

2. That the Registrar in Bankruptcy deliver up to the Official Trustee in Bankruptcy the documents marked for identification as "MFI 2" referred to in the order of the Deputy Registrar in Bankruptcy made on 1 June 1981;

3. That Mr. Balhorn pay the costs of the Official Trustee of Mr. Balhorn's application of 19 June 1981 including the costs reserved by McGregor J. on 14 July 1981 and the costs reserved by Deane J. on 14 August 1981; otherwise no order as to costs.

4. That the Official Trustee serve Mr. Balhorn personally with a sealed copy of these orders and a copy of my reasons for judgment; and that an affidavit of service thereof be filed;

5. That orders 1, 2 and 3 shall not operate until the expiration of 21 days from the date of filing the said affidavit of service; and if, in the meantime Mr. Balhorn files an application in the Victorian District Registry of this Court to rescind or set aside orders 1, 2 and 3 or any of them, the order which he seeks to set aside shall not operate until further order of the Court;

6. Liberty to apply is reserved to all parties on two days' notice.