Re Becker, M.W.

[1992] FCA 342

Re: MICHAEL WILLIAM BECKER
Ex Parte: NATHAN FINANCE LIMITED
No. Q P755 of 1992
FED No. 342
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
Drummond J.(1)

CATCHWORDS

Bankruptcy - application by petitioning creditor for sequestration order - debtor an undischarged New Zealand bankrupt - relevant considerations in court exercising discretion against applicant - general discussion of court's jurisdiction to act in aid of a foreign bankruptcy court.

Bankruptcy Act 1966 (Cth) - ss. 29, 30, 52 and 131

Insolvency Act 1967 (N.Z.) - ss. 42, 53 and 69

In re Artola Hermanos; Ex parte Andre Chale (1890) 24 QB 640

Cain v Whyte (1933) 48 CLR 639

In re Robinson; Ex parte Robinson (1883) 22 QB 816

HEARING

BRISBANE

#DATE 29:5:1992

Solicitors for the applicant: Walsh Halligan Douglas

as town agents for Macdonnells (Cairns)

Counsel for the respondent: D.A. Mullins

Solicitors for the respondent: Phillips Fox

ORDER

THE COURT ORDERS THAT:

1. The petitioning creditor's application for a sequestration order is dismissed.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

The applicant, Nathan Finance Limited, seeks a sequestration order against the respondent, Michael William Becker. The petition is based upon Becker's non-compliance with a bankruptcy notice demanding payment of the sum of AUD85,064.56.

1. Since at least the date of service on him of the bankruptcy notice at the end of 1991, the respondent has resided in Cairns, North Queensland.

2. The applicant is a New Zealand corporation. The debt I have referred to is the Australian dollar equivalent of a judgment given against the respondent in New Zealand. This judgment was for NZD110,287.25; it was registered in the Queensland Supreme Court pursuant to the Reciprocal Enforcement of Judgments Act 1959 (Qld) on 17 January, 1991 (although the amount has been amended to reflect the appropriate exchange rate).

3. The ground upon which the respondent opposes the making of a sequestration order is that he is an undischarged bankrupt under a sequestration order made by the New Zealand High Court on 4 February, 1991. He will not be eligible for an automatic discharge from that bankruptcy until 4 February, 1994.

4. An officer of the applicant has sworn that it submitted a proof of debt in the New Zealand bankruptcy which "was accepted by the Official Assignee". I got the impression in the course of argument that the applicant did prove in the respondent's bankruptcy in respect of the debt which is the subject of the registered judgment. In view of the difference between the amount of the judgment debt, NZD110,287.25, and the debt of NZD45,000.00 shown as owing to the applicant in the summary of affairs (which is based on information provided by the respondent to the Deputy Official Assignee), it is not clear whether both these amounts are in respect of the same debt, although they may be.

5. In support of his objection, the respondent has sworn that he has no assets in Australia other than current commissions owing as an employed real estate salesman. The amount of those commissions is not stated. The summary of affairs filed in the New Zealand bankruptcy shows liabilities to unsecured creditors in excess of NZD8,000,000.00 and no assets. The applicant did not produce any evidence throwing any doubt upon these statements.

6. The Deputy Official Assignee, in a letter to the respondent's solicitors dated 18 May, 1992, says:
   "The bankrupt has advised the Official Assignee that he has no assets
   of any worth in either New Zealand or Australia. The Official
   Assignee has no reason to doubt the truth of that assertion and
   consequently the Official Assignee sees no practical point in his
   seeking the aid of the Australian Courts pursuant to s. 135 of our
   Act."
   

7. However, the letter continues:
   "Obviously that stance would be reviewed in the event that it were
   discovered that the bankrupt was possessed of assets in Australia."
   

8. When asked what advantages would flow from the respondent being adjudicated bankrupt in Australia, which advantages could not be obtained equally as well in the New Zealand bankruptcy, the response was that there would be a trustee resident in Australia who would have "hands on control" of any money or property into which the respondent may come into possession. The applicant, however, did not suggest that it had any grounds for suspecting that the respondent had or might come into possession of any property which would be divisible in an Australian bankruptcy, apart from referring to what the respondent says about the commissions owing to him and apart from submitting that whether there were grounds for such a suspicion would depend on the respondent being examined.

9. Under the Insolvency Act 1967 (N.Z.), all the property of a bankrupt, including after-acquired property, vests in the Official Assignee; such property includes assets of any description "whether situated in New Zealand or elsewhere": see ss. 2 and 42. Unlike the position under s. 131 of the Australian Bankruptcy Act 1966 (Cth), the after-acquired income of a New Zealand bankrupt appears to vest in the Official Assignee under the general vesting provision, s. 42, although by s. 53(1) the Official Assignee, with the consent of the creditors, may make an allowance of money out of the bankrupt's property for his support.

10. Moreover, the Official Assignee has full and effective power to ensure that he can realise any divisible assets the respondent may have or may later acquire in Australia for the benefit of creditors in the New Zealand bankruptcy, including the applicant. Section 29(2) of the Bankruptcy Act obliges this Court to act in aid of and be auxiliary to the courts of New Zealand that have jurisdiction in bankruptcy.

11. By s. 29(3), if a request for aid in a matter of bankruptcy is made by the appropriate New Zealand court to the Federal Court, this Court can exercise such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction. Those powers are extremely wide: see s. 30 of the Bankruptcy Act and Ayres v Evans (1981) 56 FLR 235.

12. If the applicant had grounds for suspecting that the respondent was in possession of assets in Australia (or in New Zealand for that matter), it would be a simple matter for it to pass that information on to the Official Assignee. There is no reason to doubt that that official would take action to ensure that it was realised for the benefit of the respondent's New Zealand creditors who, as I have said, include the applicant.

13. As to the commissions to which the respondent referred, the applicant did not suggest that on the known information there would be any foundation for an application under s. 131(2) of the Bankruptcy Act 1966 in an Australian bankruptcy: prima facie, those commissions would not be available to the respondent's creditors if he were to be bankrupted here; see s. 131(1). Nor did the applicant suggest either in relation to these commissions or in any other respect that the provisions of the New Zealand bankruptcy legislation were inadequate to ensure the proper administration in that bankruptcy of all of the respondent's property, wherever situated.

14. So far as the question of the respondent being examined is concerned, the applicant did not suggest that there were any difficulties being encountered in having the respondent examined or even that it wanted such an examination. Its only submission was that it could not form any view as to whether the respondent might have concealed assets until there was an examination. In any event, under s. 69 of the Insolvency Act 1967 (N.Z.), the applicant (as well as the Official Assignee) can apply to the New Zealand court for an order that a bankrupt be examined. So there is no impediment to the applicant relying on s. 29 of the Bankruptcy Act to procure the respondent's examination before the Federal Court.

15. The applicant relied on a statement by Fry L.J. in In Re Artola Hermanos; Ex parte Andre Chale (1890) 24 QB 640 at 647 in support of a submission that, once there is proof of the matters required by s. 52(1) of the Bankruptcy Act, the applicant, as a petitioning creditor, had a prima facie right to a sequestration order unless some valid reason to the contrary is shown. That has long been accepted as a correct statement of general principle applying to the manner in which the court's discretionary power to make a sequestration order under s. 52 is to be exercised. See, e.g. Cain v Whyte (1933) 48 CLR 639 at 646.

16. But in In re Artola Hermanos, Fry L.J. also recognised that where there was a bankruptcy in another jurisdiction, the question whether or not there were assets of the bankrupt within England was a powerful consideration governing how that discretion to order an administration in bankruptcy in England should be exercised. In In re Robinson; Ex parte Robinson (1883) 22 QB 816, the fact that it was not shown that an undischarged Scottish bankrupt had assets in England was taken to be sufficient reason for not ordering an administration in bankruptcy in England on the petition of an English creditor of the bankrupt, which was based on a debt incurred in England prior to the commencement of the Scottish sequestration.

17. Here I am asked to make a sequestration order by a New Zealand corporation which has proved in the respondent's New Zealand bankruptcy, probably in respect of the same debt incurred by the respondent in New Zealand, which is the subject of the bankruptcy notice on which the petition I have to deal with is based. There is no evidence that the respondent has any divisible assets in Australia: the only evidence is to the contrary. Nor is there any evidence that the respondent has incurred any debts here since the commencement of the New Zealand bankruptcy which remain unpaid. Moreover, the Official Assignee, through the New Zealand court, could invoke in aid of his administration of the respondent's estate (which comprises all the respondent's property in Australia and New Zealand and wherever else it may be situated) the extremely wide powers of this Court; the evidence indicates that the Official Assignee will do just that, if circumstances justify it.

18. If I were to make a sequestration order here, the result would be that the affairs of the debtor would be subject to two administrations in bankruptcy when no good reason is advanced by the applicant to show why such a duplication would be of the slightest benefit to any creditor of the respondent.

19. I therefore dismiss the petition.