Re Byrne
[1989] TASSC 17
•23 February 1989
Serial No 10/1989
List "A"
CITATION: Re Byrne; Ex Parte Official Trustee [1989] TASSC 17; A10/1989
PARTIES: RE BYRNE; EX PARTE OFFICIAL TRUSTEE
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 29/1984
DELIVERED ON: 23 February 1989
JUDGMENT OF: Crawford J
Judgment Number: A10/1989
Number of paragraphs: 45
Serial No 10/1989
List "A"
File No 29/1984
RE BYRNE; EX PARTE OFFICIAL TRUSTEE
REASONS FOR JUDGMENT CRAWFORD J
23 February 1989
The applicant, the Official Trustee in Bankruptcy, is the trustee of the bankrupt estate of the respondent, Terence William Byrne. The application has been made under s149(12) of the Bankruptcy Act 1966 for a direction that the bankrupt shall not be discharged from bankruptcy by virtue of the section.
The bankrupt became a bankrupt by a sequestration order made on 27 February 1984 on the petition of a creditor, the act of bankruptcy being failure to comply with the requirements of a Bankruptcy Notice. In the normal course of events he would have been automatically discharged from bankruptcy on 27 February 1987, that is upon the expiration of 3 years from the date of bankruptcy, by virtue of s149(1). However, on 22 January 1987 a Notice of Objection to Discharge dated 20 January 1987 was entered on behalf of the Official Trustee by filing with the Registrar of Bankruptcy, pursuant to s149(3)(c). Its effect, as held by me in Official Trustee in Bankruptcy v Byrne 41989, was to extend the period of the bankruptcy to 27 February 1989 (see s149(7)(a)). If the application now before the court is successful the result will be that the respondent will remain a bankrupt, with no entitlement to automatic discharge, until his discharge is ordered by a court at some future time under s150.
The bankrupt appeared before the court by counsel to argue that he was discharged on 27 February 1987 by virtue of the automatic provisions in s149(1), the basis of the argument being that the Notice of Objection to Discharge was ineffective. On 13 February 1989 I ruled that the Notice effectively extended the period of bankruptcy to 27 February 1989 and that this application was properly before the court. The question of costs on the preliminary point was reserved. The further hearing of the application was listed for 16 February 1989, on which day the bankrupt's counsel appeared to advise that he was instructed to take no further part in the hearing and he then withdrew. The hearing therefore proceeded without the bankrupt or his counsel being present.
The relevant provisions of s149 are:–
"(12) The Court may, at any time before the discharge of a bankrupt, on the application of the Registrar, the Inspector–General, the trustee or a creditor, direct that the bankrupt shall not be discharged from bankruptcy by virtue of this section.
(13) In deciding whether to make an order under sub–section (12), the Court shall take into account such matters (if any) as are prescribed for the purposes of this sub–section."
The matters prescribed for the purposes of subs(13) are contained in r51A as follows:–
"51A The following matters are prescribed for the purposes of sub–sections 149(10) and (13) of the Act:
(a)whether the bankrupt is able, or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate;
(b)whether the discharge of the bankrupt would prejudice the administration of his estate;
(c)whether the bankrupt has co–operated in the administration of his estate;
(d)the conduct of the bankrupt, in respect of the period both before and after the date of the bankruptcy;
(e)any matters arising out of the conduct of the bankrupt as a bankrupt, being matters that are the subject of an investigation that is not completed;
(f)the age and state of health of the bankrupt;
(g)any evidence adduced by the bankrupt, the Inspector–General, the trustee, the Official Receiver or a creditor relating to –
(i)the circumstances in which the debts of the bankrupt were incurred, including the bankrupt's experience in, and understanding of, financial matters and of the obligations imposed on the bankrupt as a result of incurring the debts; and
(ii)the conduct of the bankrupt's creditors, including the nature and extent of any inquiries made by the creditors into the bankrupt's ability to pay his debts and whether the bankrupt was induced to incur debts by conduct on the part of the creditors that departed from the standards of normal and reasonable commercial practice."
Evidence presented to the court consisted of the contents of affidavits. I will state the facts established by them.
The respondent had previously been declared a bankrupt on 6 August 1962 and was discharged on 4 March 1971. However the estate was not finalised until 1985 when funds sufficient to pay the creditors in full were obtained from the realisation of property in which the estate had an interest. There was in fact a surplus of $19,772.59 which was transferred to the current bankruptcy. This sum was the only money received by the applicant in this bankruptcy, no realisations having been made otherwise.
In his statement of affairs the bankrupt disclosed sixteen creditors totalling $45,133 and no assets. However, twenty nine proofs of debt were received claiming a total of $181,126.28. Twenty two have been admitted to rank for dividend for $51,292, two have been withdrawn and five for claims totalling $126,036.17 have yet to be resolved. Four of the admitted proofs of debt were incurred by the bankrupt but involved the provision of services in respect of properties in which his wife, Mary Helen Byrne and his son, Gregory Terence Byrne had, or shortly afterwards received, an interest being for $836 for surveying of properties at Rocky Cape and Stonor, $1785 for bulldozing on property at Tunnack, $305 for plumbing and excavation at Orford and $2314 for other surveying at Rocky Cape.
There was no admissible evidence of the age of the bankrupt but the affidavit of the Official Receiver, Digby Nicholas Bartholomew Ross, filed on 9 November 1988, stated that he was born on 20 July 1921. Insofar as it may be in his favour I will accept that he is 67 years of age. There was no evidence concerning his state of health.
The bankrupt has not contributed to the estate from any income he may have earned. The Official Receiver attested that the bankrupt has not kept him informed of his employment, income, assets or dependants. Further aspects concerning the bankrupt's failure to communicate and co–operate with the Official Receiver appear later in this judgment. It is apparently because of his lack of co–operation that the Official Receiver does not know whether he is able to make a significant contribution to the estate.
A public examination of the bankrupt under s69 was carried out and the examination was adjourned indefinitely, having commenced on 8 May 1984 and been continued on 24 May and 23 August in the same year. An attempt was made to have admitted into evidence transcripts of the examination on each of those days, but I am only prepared to admit the transcript for 23 August 1984, the other transcripts not having been certified, or certified, signed and sealed, as prescribed, which is the requirement of s255(9).
At interview the bankrupt stated that he had not kept any books of account in relation to his farming activities and land dealings.
It appears that on 30 April 1981, prior to his bankruptcy, the bankrupt cashed a cheque for $96,208.33 drawn on the trust account of his solicitors. At his public examination on 8 May 1984 he gave evidence that upon cashing the cheque he received the sum in bank notes which he kept in a gladstone bag until they were spent. He has not provided any records showing how it was spent. At his public examination he provided little information useful in accounting for the expenditure although he was asked about it on each of the three days of the hearing. He stated that amounts were expended on cattle, fencing, holidays in Australia and New Zealand, a fur coat and paying bills, but his evidence was not sufficient to establish the amounts expended on each item nor to whom they were paid. The difficulty the Official Receiver had in his endeavours to ascertain from the bankrupt where the money went is evidenced by the following passage in the transcript for 23 August 1984. The Official Receiver asked the questions:
"Mr Byrne, I have asked you repeatedly to endeavour to account for the $96.000?–––Well, I cannot account for it. I told you before, and I am still on oath, and I cannot, no matter what anyone says. It just went.
Can you give any indication as to how the money was spent?–––No, I cannot.
Between 30 April and 1 October?–––No, I cannot. It went around the banks and I know it went around to Roberts and Co. They got all the money.
Well, according to the accounts they got just over $21,000?–––Well, that would be right.
What other banks received money?–––The Commercial Bank, what did they get? They were a couple of years and I never got no money only what she paid. She paid the rates. You know, I was broke for about – now, can I have a say or not. I will tell you – – –
Mr Byrne, I am simply asking what amounts other banks received – – –?–––I do not have no other banks. I never dealt with no other banks. I only dealt with the Commercial.
So, you are saying that a substantial amount of that $96,000 – – –?–––Of course it did.
Was paid to the Commercial Bank?–––Definitely.
Your evidence suggests $16,000?–––I do not know what it was but I know it would be a lot. I do not know what the amount was.
In your examination you said that you applied between $15,000 and $16,000 to the Commercial Bank?–––I gave them – and I do not know – – –
With interest?–––But I gave them a lot of money and I cannot exactly say what the figure was.
Would you have given them more than $16,000?–––I do not know. They have the records down there and they could easily be picked up from the bank. There is no dispute about records being picked up from the bank. You can have the records from my bank tomorrow.
With respect, there may be a dispute, Mr Byrne, would you not agree, as to who paid the money?–––Who paid it? Yes. A lot of money was paid. I was bankrupt here for 10 or 12 years and you would not let me move. She had to pay all the rates on the property at Oatlands. She had to pay the interest to the bank to keep the place afloat, yet you say she is getting the benefit from me.
Mr Byrne, you did give evidence that you did keep some records of your dealings?–––There was some things wrote down on, you know, a pad – some of the things wrote down what I did.
Did you keep a record of what you did with the $96,208?–––No, no, no record whatsoever. I could not even tell the taxation what records there was. I do not have a clue. I never had a clue.
Did you keep any record – – –?–––As I said, it was in the Gladstone bag and I kept paying people, and you have got a lot of things there what I did pay, and the Gladstone bag went empty and that was it.
Did you keep a record of any of your dealings?–––No, not really. I used to write some things down in the books and a few things down in the books you know, but I cannot recall what it was.
Would you make a record of your property transactions?–––Beg pardon?
Would you make a record of your property dealings?–––No, it was only by memory.
Right?–––By memory.
You did not make a record of property dealings; you did not make a record of the $96,000 being spent; what did you make a record of?–––Well, it all went by memory.
You said you did write some down on a pad?–––A very, very few things.
What did you record?–––I do not know what I writ down now. I just forget what I did have on it. It is no good of saying that I did because I did that much dealing over 3 or 4 years, I would not know what I writ down. The pad was there the day it got burnt in the house. As I said, the few bits of things we did have and everything in the house for 40 years what the wife saved and everything got burnt in the house and the insurance has not paid yet.
Can you describe this pad, this record that you – – –?–––No, I cannot. I cannot describe anything. I know there was a pad there, that is all – a writing pad."
Later the following passage occurred:
"Mr Byrne, you explained to the court that one of the transactions on your Roberts Stewarts account in June 1981 where there was a debit of $11,000 for a tractor was that you were acquiring that tractor on hire purchase?–––Yes, yes.
Did you consider at that time buying that tractor for cash, the cash that you had in the Gladstone bag?–––No way, no way, no. I come down here to AGC and it was not on hire purchase, it was on something else, a different other thing it was on.
A lease or – – –?–––Something like that, and anyhow, the car was there, too, as I told you in my last examination.
I am simply asking, Mr Byrne, did you consider paying cash?–––No way. I never had it.
You had $96,000?–––No.
Are you saying you did not have that money?–––What time of the year was that?
That was on 26 June 1981, according to Roberts Stewarts account?–––Yes.
Now you have said that – or you do not disagree with the bank's information that you received the $96,208.33 on 30 April?–––Yes.
So that less than 2 months later – – –?–––Two months?
Well, 30 April you get the cash – – –?–––The same year, 1981?
Yes. On 26 June you buy the tractor?–––Yes.
Well, 22 June is when it is debited to your account and it is 26 June when it is credited. Now I am asking: did you give consideration to paying for the tractor out of the Gladstone bag?–––I cannot recall I did. I would not have come up the road and borrowed the money if I was going to, would I? I borrowed all that money.
You borrowed all that money to buy the tractor?–––All the money.
And to buy the car?–––No. The car – there was a car traded in on the car, about $3000, I think it was, they give me off the new one, and all the rest was borrowed off AGC.
I put it to you if you had that money in the Gladstone bag, you would not need to borrow money?–––I do not know. I do not know anything about what my reasons was but I borrowed all the money.
So you might have borrowed the money even though you had the cash in the Gladstone bag?–––I do not know if I had it or not, I told you. I do not know whether I had it in the bag or not, the money. I do not know what I had."
It can be seen that the bankrupt maintained that he had not kept a record of property transactions nor of how he spent the sum of $96,208.33, apart from "very, very few things" he noted on a writing pad, but he could not remember what was on it, and it had been destroyed in a fire.
Prior to the public examination the Official Receiver requested the bankrupt's solicitors, E R Henry Wherrett and Benjamin, to supply copies of settlement statements and other information concerning his property dealings. At his examination on 23 August 1984 the following questions and answers occurred:
"Mr Byrne, I would like to pursue my inquiries regarding the property transactions, the property transfers, but I have some difficulty with the solicitors, Henry, Wherrett and Benjamin, providing the information?–––Yes.
Do you have any objection to the solicitors providing me with their file?–––Yes. It has been talked over between Henry and I, and Henry said between lawyer and client, he is not obliged to hand them over."
At the end of the examination, the following conversation took place between the Registrar and the bankrupt:–
"Mr Byrne, I wanted first of all to thank you very much for your assistance in my difficulty about having the matter on on 14 August and you actually appearing today. I also wanted to point out to you that you have an obligation under the Bankruptcy Act to assist – I think the act says 'to the utmost' in the administration of the estate?–––Yes.
Now, that means obtaining documents?–––Yes.
To assist the trustee in his administration of your estate?–––Yes.
Failure to do that has been held to be similar to contempt of court?–––Yes, sir.
I would like you to think about that in relation to the documents that the trustee is asking you to assist him to obtain?–––Thank you, sir.
It will certainly shorten these proceedings which are getting long enough?–––Thank you.
I will adjourn this examination generally?–––Thank you, very much.
THE WITNESS WITHDREW"
Subsequent requests were made to the solicitors unsuccessfully and eventually on 5 February 1987, a letter was sent by the Official Receiver to the bankrupt. I will quote the full terms of the letter so that its context can be understood.
"Please find enclosed a copy of a Notice of Objection that I have filed with the Registrar in Bankruptcy. The objection has the effect of extending the period of your bankruptcy from three to five years (until 27 February, 1989).
Your dealings in respect of your bankruptcy can not be considered satisfactory as you failed to keep and preserve sufficient books of account to record your business transactions in respect of the five year period immediately prior to your bankruptcy. You have also failed on various occasions to reply to correspondence sent to you concerning your estate including annual statements of income, assets and employment which you were required to complete and return to this office.
I have conducted substantial investigations concerning your affairs and am not satisfied the deficiency in your estate can be satisfactorily explained. I note that other members of your family appear to have benefitted from properties you have transferred and from debts which are proveable in your estate. I am concerned that since becoming bankrupt you have collected a quantity of files from E R Henry, Wherret & Benjamin, solicitors, concerning your property dealings and have ignored several requests by me for access to these files. In view of all the above circumstances I consider further investigations of your affairs are required and I must oppose your discharge from bankruptcy until these investigations are satisfactorily concluded. Furthermore, I direct you to produce to me all copies of settlement statements in relation to your property dealings forthwith."
The letter was accompanied by a copy of the Notice of Objection to Discharge from Bankruptcy dated 20 January 1987 and its grounds were expressed as follows:
"THAT the discharge of the bankrupt by force of this section would prejudice the administration of his estate in that investigations in which the bankrupt was involved have yet to be completed.
THAT the bankrupt has failed to co–operate in the administration of his estate in that:–
1He has not completed and returned annual statements of income, assets and employment forwarded to him.
2He has not delivered to me copies of settlement statements or other documents concerning his property dealings when requested.
3He has failed to respond to correspondence requesting him to assist in the administration of his estate.
THAT the conduct of the bankrupt, either in respect of the period before or the period after the date of bankruptcy, has been unsatisfactory in that he omitted to keep and preserve such books, accounts or records as sufficiently disclose his business transactions and financial position within the period of five years immediately preceding the date on which he became bankrupt."
The bankrupt responded by telephoning Mr Cook of the Official Receiver's office on 20 February 1987. Mr Cook asked him the whereabouts of the files and he replied that they fell off the back of a truck. Mr Cook asked him whether they had fallen off the back of a truck from the time he left the solicitor's office till the time he got home and he replied, "all I can say is they fell off the back of a truck and I don't know where they are". He said that his solicitor had telephoned him to come and get his files. The evidence clearly establishes that the bankrupt was wilfully being unco–operative and I am satisfied that he deliberately withheld the files and records from the Official Receiver despite a number of requests for them which were made to his knowledge.
On 12 October 1983, four months before the sequestration order was made, a contract to purchase 51.26 hectares of land known as "Pine Crest" was entered into by the bankrupt "or nominee". The price was $77,500. The contract described the property as being situated at Tunnack and as including a house and out buildings. The title reference was Certificate of Title Volume 3023 Folio 64. Chattels, the value of which was stated to be $1500, were included. The records of the Recorder of Titles reveal that the property was transferred into the name of the bankrupt's wife, Mary Helen Byrne, on 7 February 1984 only twenty days before the sequestration order was made. Between the contract and the transfer there appeared in the Mercury newspaper of 5 November 1983 a notice advertising for sale blocks of land from a subdivision of the land and directing inquiries to T W Byrne of Tunnack, which was the address of the bankrupt.
The records of the Recorder of Titles relating to the "Pine Crest" property show that:
(a)On 8 May 1984 Certificate of Title Volume 3023 Folio 64 was replaced by two titles indicating the property was subdivided.
(b)The certificate of title relating to a small portion of the land (Volume 4086 Folio 55) was transferred to another party.
(c)The certificate of title relating to the remainder of the land (Volume 4086 Folio 56) showed the registered owner to be Mary Helen Byrne.
(d)On 22 May 1985 Certificate of Title Volume 4086 Folio 56 was replaced by seven titles indicating the property "Pine Crest" was further subdivided.
(e)Two of the seven certificates of title, relating to a house property and a total of approximately 15 hectares of land, were transferred to another party.
(f)Mary Helen Byrne became the registered owner of the other five titles.
(g)Three of the five titles registered in the name of Mrs. Byrne were subsequently transferred to other parties in June and September 1985 for considerations totalling $45,000.00.
(h)On 14 November 1985 the two remaining titles registered in the name of Mary Helen Byrne were transferred to Gregory Terence Byrne for a consideration of $13,000.00.
On 10 January 1984 about seven weeks before the bankruptcy, the bankrupt signed as guarantor two mortgages, subsequently registered, describing his wife as mortgagor and Nigel Rutherford Henry as mortgagee. The mortgages were for loans of $60,000 and $17,000 respectively. The mortgage for $60,000 was over the "Pine Crest" property and the mortgage for $17,000 was over that property and some other pieces of land. The Official Receiver ascertained that two log cabins were constructed early in 1986 on the two blocks of land transferred to Gregory Terence Byrne, the bankrupt's son, on 14 November 1985. An affidavit by a builder, Peter Thompson, established that in December 1985 he saw an advertisement in the Mercury newspaper calling for a builder to quote for the building of two log cabins. He telephoned the telephone number in the advertisement and as a result he came to meet the bankrupt. They met at the property at Tunnack and Mr Thompson quoted for the job and was engaged by the bankrupt to assemble two log cabins for the agreed price of $4,000. They were to be built on two adjacent blocks of land. The cabins were in kit form and already on site. The bankrupt said that he was residing in a new brick house approximately half a kilometre up Tunnack Road from the lands in question. In January and February 1986 Mr Thompson erected the log cabins. The bankrupt engaged Mr Thompson, monitored progress of the work and visited the site on a number of occasions to do so and terminated the contract following a dispute concerning materials. Mr Thompson dealt with no other persons in relation to the job. All payments were made by Mr Byrne but with cheques not bearing his signature. Clearly the bankrupt gave the impression that the cabins were owned by him.
Arian van Brug, a real estate agent of Orford, attested by affidavit that on 3 May 1988, in response to a telephone message, he telephoned and on the next day met one Terry Byrne at a property at Tunnack. I am satisfied that the man he met was the bankrupt. Mr van Brug was told by the bankrupt that he wanted five properties listed for sale. Together they viewed the properties. One was a ten acre lot with a log cabin and a weatherboard house. Another was a five or seven acre lot containing a log cabin. Another had an A V Jennings designed house on it and another had a house on it which the bankrupt described as his house. He told Mr van Brug that he had an approval to subdivide the lot containing the log cabin and weatherboard house and that he wished to list it for sale as two separate properties. He was the only person with whom Mr van Brug dealt and upon the basis of his instructions Mr van Brug listed the properties for sale and subsequently dealt with potential purchasers. The bankruptcy was not disclosed. Clearly Mr van Brug was given the impression that the bankrupt owned the properties and I am satisfied on the evidence that the bankrupt did not tell him that the properties were owned by another, or that he was acting as agent for the owner.
The evidence of the Official Receiver was that on 5 November 1986 and 2 December 1986 he "wrote" to the bankrupt requesting that he provide the records apparently received by him from E R Henry Wherrett and Benjamin or advise where they were located. No reply was received. This evidence does not of course satisfy me that the bankrupt received those letters. Similarly the evidence was that on 16 December 1987 the Official Receiver "wrote" to the bankrupt requesting him to attend the office of the Official Receiver for an interview but no attendance was achieved. On 14 March 1988 a letter was sent to the bankrupt by the Official Receiver addressed to him at Tunnack, stating that applications for the issue of summonses under s81 to be directed to the bankrupt's wife and son had been prepared with a view to a hearing date on 13 April 1988 and the letter proceeded:
"The applications for issue of summons under Section 81 of your wife and son are now prepared. The proposed hearing date is Wednesday 13 April 1988.
Before I lodge the applications for the summons to be issued, I wish to discuss with you some information that has come to my attention since your Public
Examination. This information relates to property dealings that you and your family have been involved in and is as a result of investigations by my office and the Australian Taxation Office.
I have made available the time of 10.30am Wednesday 23rd March, 1988 for you to attend my office for discussions. I have no objection to your solicitor attending with you.
Please confirm that you will attend at this time."
As a consequence of that letter being received by the bankrupt, there was a telephone conversation between him and the Assistant Official Receiver, Mr P D Anstie, during which the bankrupt complained about his family being harassed and said that his wife and son would issue a writ claiming damages. He hung up on Mr Anstie who was unable to engage him in discussions regarding the desired attendance by him at the office.
As a result, on 23 March 1988 a letter was prepared by Mr Anstie for the Official Receiver. It was addressed to the bankrupt at Tunnack. It purported to direct him "pursuant to section 77" to call at the Official Receiver's office within twenty one days, at a time convenient to the bankrupt, to discuss his dealings in real estate, his transactions with his wife and son and the finalisation of the administration. There is no evidence that the letter was in fact received by the bankrupt, nor that it was posted to him although it was placed in an outgoing mail tray with the intention that it be posted.
The Official Receiver "wrote" again to the bankrupt on 6 May 1988 requesting him to attend the office for an interview. No response was achieved but once again there is no evidence that the bankrupt received the letter.
Notwithstanding that the evidence is insufficient to satisfy me that a number of individual letters were in fact received by the bankrupt, I am satisfied that he has been well aware that the Official Receiver wanted him to be interviewed and to provide information and he has wilfully been unco–operative. The following is an extract from para12 of an affidavit from the bankrupt on 12 December 1988 which was read into evidence:
"I admit that I have in 1988 not gone to the office of the Official Receiver because I have felt that I am only going to be further harassed. I cannot understand what further (sic) the Official Receiver requires of me".
I must come to a decision based on the evidence before me. I note that the bankrupt has complained of being harassed by the Official Receiver's office and has stated that he does not know what the Official Receiver requires of him. Having lost the preliminary objection, he did not appear before the court to substantiate his complaints, to answer the allegations made on behalf of the applicant or to oppose the application. The deponents of the affidavits used by the applicant were not cross–examined and questions of credit do not arise.
In Re Gaskell [1904] 2 KB 478 Vaughan–Williams LJ said at p482:
"After all the overriding intention of the Legislature in all Bankruptcy Acts is that the debtor on giving up the whole of his property shall be a free man again, able to earn his livelihood, and having the ordinary inducements to industry. Sometimes it is not right that the bankrupt should be free immediately; he must pass through a period of probation; and theoretically there may be cases in which he ought not to be free at all, but prima facie he is to give up everything he has, and on doing that he is to be made a free man."
In Re Palenkas (1982) 66 FLR 115 Fitzgerald J said at p116:
"It is well established that, despite the general legislative policies underlying the Act, it may be appropriate in particular cases because of the public interest in acceptable standards of commercial morality that the status of bankruptcy with its attendant consequences should be continued in respect of some bankrupts, perhaps even permanently, but certainly for a longer than usual time."
When dealing with an application for discharge under s150 Lockhart J said in Re Harding (1981) 57 FLR 320 at 332:
"In considering an application for discharge, it has been said on many occasions by the courts that regard must be had not only to the interests of the bankrupt and his creditors but also to the interests of the public and to commercial morality. In the exercise of its discretion the court must also consider the bankrupt's conduct relative to his bankruptcy: See Re Prince; Ex parte The Bankrupt (1961) 19 ABC 39; Re Gray (1960) 19 ABC 29; Re Mallan (1975) 25 FLR 20; Re Reilly; Ex parte The Debtor (1979) 36 FLR 268; Re Weiss; Ex parte The Bankrupt Unreported (Federal Court of Australia, McGregor J, 3rd September, 1980); Re Kolomy (1981) 56 FLR 157".
Keeping these pronouncements in mind I turn to a consideration of what the evidence has established relevant to the matters prescribed in r51A. Before doing so, it is to be noted what Fitzgerald J said in Re Palenkas (supra) at p117 to the effect that it is incorrect to isolate some only of the prescribed matters. Instead his Honour said, the court is required to take all such matters into account. Some may support discharge, others may support the opposite conclusion. To this should be added however that on the evidence some may not require consideration at all. I will deal with the prescribed matters in order.
(a)Whether the bankrupt is able, or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate.
As the 5 year period expires on the 27th of this month, it can be said with virtual certainly that the bankrupt will not make any contribution within that period. That he is currently able to do so has not been made out. The evidence shows that he is able to attend to matters concerning the subdivision and sale of lands in the name of his wife and son and the erection of buildings thereon. It does not establish whether he has earned or is earning any income from such activities. Taking into account his age of 67 years it is certainly unlikely that persons outside his close family or friends would currently be employing him. It has not been established on the evidence that there is some interest in property which could be applied for the benefit of his creditors.
(b)Whether the discharge of the bankrupt would prejudice the administration of his estate.
(c)Whether the bankrupt has co–operated in the administration of his estate.
I will deal with these two paragraphs at the same time because the evidence requires it. The Official Receiver claimed that discharge will prejudice the administration of the estate in that his investigations have not been concluded concerning the extent of the income of the bankrupt since becoming bankrupt, the extent of property vesting in the Official Trustee as a result of his property dealings and possible offences he may have committed in breach of the Act.
I am satisfied that the bankrupt has not co–operated in the administration of his estate. Commonsense and experience requires me to conclude that his failure to satisfactorily explain at his public examination what happened to $96,208.33 in cash was intentional. He wilfully refused access to files and papers held by his solicitors and then, having obtained possession of them refused to hand them over for examination, or alternatively destroyed them. His statement to Mr Cook that the documents fell off the back of a truck was, in my opinion, untruthful. He has failed to respond to requests from the Official Receiver's office that he attend the office and has failed generally to respond satisfactorily, or at all, to correspondence. It is in my view likely that his refusal to co–operate has arisen out of a desire to keep secret information which might be used by the Official Trustee for the benefit of his creditors or against him. Because of his lack of co–operation the Official Receiver has not been able to conclude his investigation concerning the income, property and activities of the bankrupt both before and after the bankruptcy. It may well be that the estate has, or has had, some entitlement to property for the benefit of creditors, the discovery of which has been hindered by the lack of co–operation.
Under s77 it is the duty of a bankrupt forthwith after he becomes a bankrupt to deliver to the trustee all the books, documents, papers and writings in his possession relating to his trade dealings, property or affairs; to wait at such times on the trustee as the trustee reasonably requires and give such information concerning his conduct, trade dealings, property and affairs as the trustee requires; and to "aid to the utmost of his power in the administration of his estate". He has failed to perform his duties. Prima facie he has committed offences against s265 and s270.
Taken on its own, I am satisfied that in the interests of the creditors and in the interests of the public, based on a consideration of acceptable standards of commercial morality, the failure of the bankrupt to co–operate disentitles him from the automatic discharge most bankrupts may enjoy.
(d)The conduct of the bankrupt, in respect of the period both before and after the date of the bankruptcy.
As already stated prima facie he has committed breaches of s270. The section makes it an offence not to keep such books, accounts and records as are usual and proper in any business carried on by a bankrupt and as sufficiently disclose his business transactions and financial position during any period while the business was being carried on within the period of five years immediately preceding the date of bankruptcy; or, having kept such books, accounts or records, to not preserve them. His evidence on his public examination was to the effect that he kept virtually no books, accounts or records.
So far as his conduct after the date of bankruptcy is concerned, I am unable to make precise findings. His failure to co–operate has made it difficult for the extent of his conduct to be ascertained.
(e)Any matters arising out of the conduct of the bankrupt as a bankrupt being matters that are the subject of an investigation that is not complete.
The evidence does not cause consideration of this aspect, except in so far as the bankrupt's failure to co–operate with the Official Receiver, as I have outlined, has prevented the Official Receiver from completing his investigations of property subdivisions and sales, and the erection of the log cabins seemingly under the direction of the bankrupt.
(f) The age and state of health of the bankrupt.
As stated earlier, I will assume that he is aged 67. That does not influence me in this case. There is no evidence of his state of health.
(g)Any evidence adduced by the bankrupt, the Inspector–General, the Trustee, the Official Receiver or a creditor relating to –
(i)the circumstances in which the debts of the bankrupt were incurred, including the bankrupt's experience in, and understanding of, financial matters and of the obligations imposed on the bankrupt as a result of incurring the debts; and
(ii)the conduct of the bankrupt's creditors, including the nature and extent of any inquiries made by the creditors into the bankrupt's ability to pay his debts and whether the bankrupt was induced to incur debts by conduct on the part of the creditors that departed from the standards of normal and reasonable commercial practice.
There is little evidence relevant to sub–para(i). He had been bankrupt before. It appears that he incurred some debts totalling $5240 for the benefit of real estate in which his wife and son had, or shortly afterwards received, an interest. It appears probable that he incurred debts at a time when he was keeping no, or very few, proper records.
There is no evidence relevant to the conduct of the bankrupt's creditors.
Particularly because of matters relating to paras(b), (c) and (d) of r51A my conclusion is that this is a proper case for a direction under s149(12) that the bankrupt shall not be discharged. The result will be that to obtain his discharge he will have to apply under s150.
The order of the court is that the bankrupt, Terence William Byrne, shall not be discharged from bankruptcy by virtue of s149 of the Bankruptcy Act 1966. I will hear counsel as to costs.
0
2
0