Re Edelsten, G.W. Ex Parte Donnelly, M.C. v Edelsten, G.W. & ors

Re: GEOFFREY WALTER EDELSTEN
Ex parte: MAX CHRISTOPHER DONNELLY
No. N B497 of 1988
FED No. 694
Bankruptcy - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Northrop J.(1)

CATCHWORDS

Bankruptcy - After acquired property of bankrupt - business and assets of companies conducting 24 hour medical centres - whether shares of companies conducting medical centres held in trust for bankrupt - whether property of companies property of bankrupt.

Practice and Procedure - Application for declarations re criminal offences struck out - degree of proof required - hostile witness - principles applied where a party and other likely persons do not give evidence.

Bankruptcy Act 1966 ss58, 116, 149

Corporations Law s464

Companies Code s227

Inglis v Moore and Ors (1979) 24 ALR 411

Briginshaw v Briginshaw and Anor (1938) 60 CLR 336

Sharrment Pty Ltd and Ors v Official Trustee in Bankruptcy (1988) 18 FCR 449

Jones v Dunkel and Anor (1959) 101 CLR 298

In re Lovell; Ex parte Dixon (No 3) (1904) St R Qd 262

Pioneer Concrete Services Ltd v Yelnah Pty Ltd and Ors (1986) 5 NSWLR 254

Dennis Wilcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267

HEARING

MELBOURNE

#DATE 11:9:1992

Counsel for the Applicant: Mr A.B. Shand QC with Mr R.I. Harper

Solicitors for the Applicant: Isenberg, Spedding and Player

Counsel for the Mr J.I. Fajgenbaum and
1st Respondent: Mr I.R. Jones (from 28 April 1992 to

1 May 1992)

Dr Edelsten appeared in person from 25 May 1992 until the completion of the hearing

Solicitors for the Mowbray Erdynast
1st Respondent: (up until 25 May 1992, on which day

they withdrew)

Dr Edelsten acted on his own behalf as from 25 May 1992

Counsel for the 2nd, 4th, Mr J.D. Mattin
6th, 7th, 8th, 9th, 10th, (appeared on 28 April 1992
11th, 12th and 13th Respondents: only)

Solicitors for the 2nd, 4th, Christopher L. Tiller and Co
6th, 7th, 8th, 9th, 10th,
11th, 12th and 13th Respondents:

Counsel for the Liquidator Mr T. Irlicht appeared on
of the 9th Respondent: 25 May, 9-12 June, 28-29 July 1992

Solicitors for the Liquidator Irlicht and Broberg
of the 9th Respondent:

Counsel for the Mr G.R. Ritter QC with
14th Respondent: Mr D.G. Collins and Mr A.T. Schlicht

Solicitors for the Webbs Solicitors 14th Respondent:

ORDER

THE COURT MAKES THE FOLLOWING DECLARATIONS:

1. That Ian Charles Goodman at all material times held and holds his shares in the companies VIP Management Pty Ltd, VIP Health Corporation Pty Ltd (in liquidation), VIP Holdings Pty Ltd and VIP Health Care Pty Ltd in trust for Geoffrey Walter Edelsten.

2. That Esther Edelsten at all material times held and holds her shares in the companies VIP Health Corporation Pty Ltd (in liquidation), VIP Holdings Pty Ltd and VIP Health Care Pty Ltd in trust for Geoffrey Walter Edelsten.

3. That Ruth Rowena Davoren at all material times held and holds her shares in VIP Management Pty Ltd in trust for Geoffrey Walter Edelsten.

4. That by virtue of the sequestration order made on 10 March 1988 against the estate of Geoffrey Walter Edelsten and the provisions of the Bankruptcy Act 1966, the beneficial interests in each and all of the shares held by Ian Charles Goodman, Esther Edelsten and Ruth Rowena Davoren in VIP Management Pty Ltd, VIP Health Corporation Pty Ltd (in liquidation), VIP Holdings Pty Ltd and VIP Health Care Pty Ltd, and each of them have vested in Max Christopher Donnelly as the trustee in bankruptcy of the estate of Geoffrey Walter Edelsten.

THE COURT MAKES THE FOLLOWING ORDER:

The further hearing of the application is adjourned to a date to be fixed to enable the parties to make submissions as to the future conduct of the hearing and as to what orders should be made in relation to the costs of the application in the light of the reasons for judgment.

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

JUDGE1

A INTRODUCTION

Geoffrey Walter Edelsten is a medical practitioner. For a number of years before 1988 he was involved in the operation of 24 hour medical centres in the State of New South Wales and in other States. Essentially the medical centres were businesses at which people could attend for medical consultations with medical practitioners at any time of the day or night. In early 1988 it became apparent to Dr Edelsten that he was facing problems both in relation to the conduct of the medical centres in New South Wales and with respect to his right to practise medicine in New South Wales. In February 1988 he approached an accountant and patient of his, namely Kenneth John Thurtell, whom he had known for some 20 years and asked him if he would be interested in getting involved in the running of the medical centres. As a result of discussions between Dr Edelsten, his then wife Leanne, and Ken Thurtell, an arrangement was entered into by which Ken Thurtell took over the ownership of the businesses then being conducted by Leanne at a number of medical centres in New South Wales. The arrangement was oral. To give effect to the arrangement Ken Thurtell made use of a company controlled by him, namely Rylejazz Pty Ltd, which later changed its name to VIP Medical Centres of Excellence Pty Ltd, hereinafter called "Excellence". Excellence made no payment to Mrs Edelsten or to Dr Edelsten but Excellence thereafter received the business assets and any goodwill that went with the medical centres, the benefit of future income from the medical centres and became liable for the payment of the expenses incurred in conducting the medical centres. Excellence entered into an arrangement with Dr Edelsten to provide him with certain monies and to continue to engage him as a doctor carrying out his practice at the medical centres.

On 10 March 1988 a sequestration order under the Bankruptcy Act 1966 was made against the estate of Dr Edelsten. As a result Dr Edelsten thereupon became a bankrupt. Under s58 of the Bankruptcy Act all his property, as defined in the Bankruptcy Act, vested forthwith in his trustee in bankruptcy, Max Christopher Donnelly. No objection to the discharge of the bankruptcy having been entered in conformity with s149 of the Bankruptcy Act, Dr Edelsten was discharged upon the expiration of three years from the date of his bankruptcy. As a result Dr Edelsten ceased to be a bankrupt as from 11 March 1991 but as a discharged bankrupt he still has obligations imposed upon him by the Bankruptcy Act. The effect of this was that under sections 58 and 116 of the Bankruptcy Act property devolving on or acquired by Dr Edelsten between 10 March 1988 and 11 March 1991, being after acquired property, vested in his trustee in bankruptcy. Property devolving on or acquired by Dr Edelsten after 11 March 1991 does not vest in his trustee in bankruptcy. The present case involves issues relating to after acquired property, being property, as defined in the Bankruptcy Act, that was acquired by or devolved upon Dr Edelsten on or after 10 March 1988 and before 11 March 1991.
From the beginning of the year 1988 it became apparent to Dr Edelsten that in all probability he would be deregistered as a medical practitioner in New South Wales and therefore would be unable to practise as a doctor in that state. In fact he was so deregistered in December 1988. Earlier in 1988 Dr Edelsten told Ken Thurtell that even if he were deregistered in New South Wales he would not be barred from practising his profession in Melbourne and that therefore he would return to Melbourne which was his home town. Dr Edelsten suggested that Excellence should be involved in the establishment of a 24 hour medical centre in Melbourne. Early in 1988 Dr Edelsten and Ken Thurtell, following various investigations by Dr Edelsten, came to Melbourne and agreed that a medical centre would be opened at a property at Kingsbury, a suburb north of Melbourne near LaTrobe University. The methods by which the medical centres were conducted will be discussed briefly later in these reasons, but at present it is sufficient to note that Excellence decided to proceed with the establishment of the centre, which is known as the Kingsbury medical centre, or "Kingsbury" for short. Kingsbury opened in May 1988. Excellence entered into a lease of the property and engaged Dr James Strong as the medical director. Dr Edelsten spent most of his time in Sydney until after his deregistration as a medical practitioner. Dr Edelsten did not move to Melbourne full- time until just before Christmas 1988. Thereafter, Excellence provided Dr Edelsten with accommodation, a car, meals and living expenses and a weekly allowance. He was employed initially as a general practitioner working shifts as required but at the same time acted as an adviser and consultant to Excellence with respect to the management of the medical centre. In November 1988 a second medical centre was opened by Excellence at Dandenong known as the Dandenong medical centre, or "Dandenong" for short. Dr Edelsten did some work there but spent most of his time at Kingsbury.
Early in March 1989 Dr Edelsten urged Ken Thurtell to expand the number of medical centres in Melbourne. Mr Thurtell did not want to do this but wanted Excellence to consolidate the existing centres both in Melbourne and in Sydney before expanding further. Thereafter, by various means which will be discussed in more detail later, a number of other medical centres were established in Melbourne. Initially this was done through a company called Segment Pines Pty Ltd which later changed its name to VIP Management Pty Ltd. This company is hereinafter called VIP Management. The first medical centre opened by VIP Management was at Kealba, a suburb to the west of Melbourne. Between the time the Kingsbury medical centre was opened and 11 March 1991, a number of other medical centres were established including medical centres at Dandenong, Kealba, Clayton, Brunswick, Mill Park and Broadmeadows. In addition, a medical centre was opened in Adelaide. Attempts were made to open a centre at Moonee Ponds.
Towards the middle of the year 1989 Ken Thurtell resolved to sell the interests of Excellence in the medical centres in Melbourne and Sydney. Negotiations took place between Ken Thurtell on behalf of Excellence and a Brian Forshaw but nothing came of those negotiations. Negotiations took place between Ken Thurtell and Dr Edelsten for the sale of the shares in Excellence to the company Circuit Towers Pty Ltd, a company which will be examined in more detail later in these reasons, but the agreement was never executed. Eventually, towards the end of 1989, there was an oral agreement entered into by Ken Thurtell on behalf of Excellence and Dr Edelsten on behalf of Circuit Towers, that Circuit Towers Pty Ltd would purchase the medical centres of Excellence in Melbourne and Sydney for $900,000 to be paid by monthly instalments of $15,000 per month. The sale was to Circuit Towers Pty Ltd. In about December 1989, Circuit Towers Pty Ltd took possession of the Kingsbury and Dandenong medical centres and paid out certain creditors of Excellence as the first payment of $15,000. No further payments have been made since then.
Prior to the agreement between Excellence and Circuit Towers at the end of 1989, Circuit Towers Pty Ltd had become involved with the medical centres in Melbourne, and for that matter in Sydney. Circuit Towers subsequently became VIP Health Corporation Pty Ltd and is hereinafter called "VIP Health Corporation". By various means, VIP Health Corporation became the company which, in substance, conducted all the VIP medical centres in Melbourne, including Kealba, and Adelaide from about June 1989.
It is clear that this was so by the end of 1991. This is illustrated by a letter written by Dr Edelsten on VIP Health Corporation letterhead and dated 5 December 1991. This letter was written after Dr Edelsten had become a discharged bankrupt. It was written to doctors engaged at the medical centres and was signed by Dr Edelsten without any identification of the capacity in which he had signed. The first page of the letter, which contains the letterhead, states "HEAD OFFICE - 30 Sydney Road Brunswick". At the foot of that page 8 medical centres are listed namely Broadmeadows, Brunswick, Clayton, Dandenong, Kealba, Kingsbury, Mill Park and Adelaide. The form of the letterhead page supports the conclusion that in December 1991 VIP Health Corporation was conducting the businesses of medical centres at those eight sites.
VIP Health Corporation continued to conduct the medical centres in Victoria and at Adelaide but eventually became insolvent. By an agreement dated 13 February 1992, and called the sale agreement, and entered into between VIP Health Corporation and Australian Medical Developments Limited, VIP Health Corporation sold certain assets and rights to Australian Medical Developments. The sale agreement was entered into after an earlier agreement, dated 24 December 1991, had been entered into between Ian Charles Goodman, as vendor, and NPM Properties Limited, the then name of Australian Medical Developments, whereby Mr Goodman agreed to sell the shares of the VIP companies, together with the shares in two other companies, to NPM Properties Limited. That agreement was never carried out because of the fact that VIP Health Corporation had ceased to carry on the business at any of its medical centres. The recitals in the sale agreement state that VIP Health Corporation ceased trading on 10 January 1992 in consequence of its insolvency but that until then it had operated medical centres from leased premises at various locations; that VIP Health Corporation had displayed advertising and promotional signs affixed to the 24 hour medical centres which it had previously conducted; that VIP Heath Corporation had agreed to sell and Australian Medical Developments had agreed to purchase the assets of VIP Health Corporation as set out in the schedule to the agreement and that VIP Health Corporation Ltd granted to Australian Medical Developments certain rights in respect of the use of the advertising and promotional signs. Australian Medical Developments agreed to pay the sum of $3000 for those rights with respect to each medical centre previously operated by VIP Health Corporation and to pay the sum of $258,228 for the assets, the subject of the sale, to be paid by a deposit of $15,000 within 30 days and the balance by monthly instalments of $15,000. In addition, interest was to be paid. The schedule lists a large number of assets, being the subject of the sale, but it is impossible to identify in which medical centre those assets were situated or in many cases just what the assets are. For instance, there are two items merely called "equipment" with assigned values of $26,319 and $17,322 respectively appearing in the schedule, there being no identification as to what that equipment comprised. Thereafter, Australian Medical Developments entered into new leases with respect to five medical centres previously being conducted by VIP Health Corporation at Brunswick, Kingsbury, Mill Park, Broadmeadows and Kealba. Apparently it is now conducting medical centres at those sites and is occupying those sites pursuant to the new leases.
VIP Health Care Pty Ltd and VIP Holdings Pty Ltd are two other companies forming the group of VIP companies although the history surrounding those two companies is not so clear. In these reasons, a reference to the VIP companies will be a reference to the four companies VIP Health Corporation, VIP Management, VIP Health Care and VIP Holdings.
The shareholders of the VIP companies named in the company records lodged with the Australian Securities Commission do not include Dr Edelsten as a shareholder. Nor is he a director named in the formal records of those companies. Max Christopher Donnelly, as the trustee of the estate of Dr Edelsten, is claiming that, in law, during the period of his bankruptcy, Dr Edelsten became the owner of the shares of the VIP companies and therefore the ownership of those shares vested in him as the trustee in bankruptcy. He claims also that the property of the VIP companies became the property of Dr Edelsten and thus vested in him as the trustee in bankruptcy. The activities and property of the VIP companies, apart from VIP Health Corporation, seem to have disappeared.
B NATURE OF CLAIMS
By application filed in the Federal Court of Australia, New South Wales District Registry on 1 August 1991, Mr Donnelly, as the trustee in bankruptcy of Dr Edelsten, sought a number of orders against nine respondents being Dr Edelsten, the four VIP companies and four named directors of those companies. Thereafter a number of orders were made including the adding of additional respondents and in particular Australian Medical Developments which was added pursuant to an order made on 6 March 1992. When the matter came on for hearing on 28 April 1992 it was apparent that the application, being made as it was under the Bankruptcy Act, should have been made pursuant to the provisions of the Bankruptcy Act and Bankruptcy Rules with all the documents being filed with the Registrar in Bankruptcy. Orders were made on that date making necessary amendments to the documents which had been filed and directing that the matter proceed on the basis that it was in the Federal Court exercising jurisdiction in bankruptcy pursuant to the provisions of the Bankruptcy Act. All these proceedings therefore came within the file number NB 497 of 1988, being the file opened by the Registrar in Bankruptcy in Sydney on the making of the sequestration order against the estate of Dr Edelsten.
Pursuant to the application in its final amended form, the trustee seeks a number of orders pursuant to the provisions of the Bankruptcy Act. Many orders are sought and many of the orders are complex. For the sake of the record, the application, in its final amended form which is headed "Further Amended Application" and which was filed in Court on 3 June 1992 is annexed to these reasons. In substance, the trustee is seeking a number of declarations as a step leading to the making of substantive orders to enable him to recover the after acquired property of Dr Edelsten. The Court ruled that it would hear and determine the claims in so far as they related to the declarations sought but to defer the hearing and determination of the substantive claims until after judgment had been given with respect to the declarations. Even so, the hearing occupied four weeks, despite the estimation given by the parties before the application was set down for hearing that the hearing would take four days.
In substance, the declarations sought fell into two broad categories. The first category related to the shares held by the eight individual respondents, apart from Dr Edelsten, being the listed shareholders of the VIP companies or persons who may have a claim to the beneficial interest in those shares. The declarations so sought are that at all material times the owners of the shares in the VIP companies held those shares in trust for the trustee in bankruptcy. The essence of the nature of this group of declarations is illustrated by part of declaration 7 as sought in the further amended application, namely "A declaration that by virtue of the First Respondent's bankruptcy on 10 March 1988 and the provisions of the Bankruptcy Act, 1966 (Cth), the beneficial interests in each and all of the shares in the VIP Companies and each of them ... have vested in the Applicant".

The second group of declarations relate to what are described as "all of the assets, undertaking and businesses owned and/or conducted by the VIP Companies and each of them". Included within this description, so it is alleged, are the assets and rights, the subject of the sale agreement dated 13 February 1992 entered into by Australian Medical Developments, but the trustee claims that the description extends much wider than those assets and rights. The essence of this group of declarations is illustrated by the other part of declaration 7 as sought in the further amended application, namely "A declaration that by virtue of the First Respondent's bankruptcy on 10 March 1988 and the provisions of the Bankruptcy Act, 1966 (Cth), the beneficial interests in ... each and all of the assets, undertaking and businesses owned and/or conducted by the VIP Companies and each of them as set out in paragraph 6 of the Amended Statement of Claim filed herein have vested in the Applicant". In that declaration, the reference to the companies set out in paragraph 6 of the amended statement of claim was used to describe 10 medical centres which, at some time, had been conducted by one or other of the VIP companies and included the five medical centres currently being conducted by Australian Medical Developments in Brunswick, Kingsbury, Mill Park, Broadmeadows and Kealba. These five medical centres are described as "the former VIP Clinics". The essence of the declarations sought against Australian Medical Developments is illustrated by declaration 10 as sought in the further amended application, namely:

"A declaration that by virtue of the First Respondent's bankruptcy on the 10th March, 1988 and the provisions of the Bankruptcy Act, 1966 (Cth) the beneficial ownership of each of all the assets, undertaking and goodwill of each of the businesses ... (being the former VIP Clinics purported to be conducted by Australian Medical Developments) ... have vested in the Applicant".

Interlocutory orders have been made restraining the disposition of shares in the VIP companies and the assets, undertaking and goodwill of the former VIP Clinics.
The further amended application contains a schedule of parties and is a useful reference for the identification of those parties. It is noted that VIP Health Corporation is now in liquidation. On 25 May 1992 in matter No VG 3152 of 1992 the Court made an order that the trustee, as applicant in that matter, have leave to continue the proceedings in matter No NB 497 of 1988 against VIP Health Corporation. In matter No VG 3152 of 1992 it was established that on 25 February 1992 a summons was filed in the Supreme Court of Victoria for an order that VIP Health Corporation be wound up pursuant to s464 of the Corporations Law. On 24 April 1992 the Supreme Court of Victoria ordered that VIP Health Corporation be wound up and that Barry Keith Taylor be appointed liquidator.
The essence of the trustee's claim is that on all the evidence it is clear that Dr Edelsten was the controller and manager and guiding hand of all the activities of the VIP companies and that he manipulated other persons to become shareholders and directors of those companies who, in reality, did what he requested or directed them to do. It was contended that Dr Edelsten conducted the medical centres for his own purpose with the result that the shareholders of the VIP companies held their shares in trust for Dr Edelsten. It was contended further that in truth the VIP companies should be treated as mere shams and that all the property of the VIP companies was, in truth and in law, the property of Dr Edelsten. It was said that this property and the shares of the VIP companies vested in Dr Edelsten during the period of his bankruptcy and thus, pursuant to the provisions of the Bankruptcy Act, vested in the applicant as trustee of the bankrupt's estate.
The essence of the case put by the respondents is that the VIP companies were in fact real companies, that they were and are separate and distinct from the shareholders of those companies and of the directors of those companies that Dr Edelsten in fact did not control those companies and that even if he did neither the property in the shares of those companies nor the property of those companies vested in Dr Edelsten and, therefore, did not vest in the trustee.
It must be remembered that, for the purposes of the claims, the relevant period is the period during which Dr Edelsten was a bankrupt, namely from 10 March 1988 to 10 March 1991 inclusive. Of that time Dr Edelsten was in prison between 2 August 1990 and 10 March 1991. He was released from prison on 3 August 1991. The application was issued on 1 August 1991.
C PROCEDURAL MATTERS
1. REPRESENTATION OF PARTIES
At this stage, it is helpful to refer to some procedural matters. When the application came on for hearing on 28 April 1992, senior and junior counsel appeared for each of the trustee, Dr Edelsten and Australian Medical Developments respectively. Counsel for the trustee announced that no orders were being sought against the respondents Dianne Joy Adams (3rd respondent), Raymond Bartlett (5th respondent) and Christine Wenberg (13th respondent), but it is noted that any declarations made could affect those respondents. The one counsel appeared for Ian Charles Goodman (2nd respondent), Esther Edelsten (4th respondent), the four VIP Companies (6th, 7th, 8th and 9th respondents), Rodney Kevin Edelsten (10th respondent), Ruth Rowena Davoren (11th respondent), Hymie Edelsten (12th respondent) and Christine Wenberg. Counsel announced that those respondents would take no further part in the proceedings. Counsel then retired. On 25 May, the order giving leave to continue the proceeding against VIP Health Corporation (in liquidation) having been made, a solicitor appeared for the liquidator and was granted leave to retire during the giving of evidence but to appear and make submissions after the hearing of the evidence had been completed. He did that. At the same time leave was granted to the legal representatives of Dr Edelsten to no longer represent him. Thereafter, Dr Edelsten appeared in person.
2. STRIKING OUT CERTAIN CLAIMS
On 29 April 1992 counsel for Dr Edelsten submitted that paragraphs 1, 2, 8 and 10 of the application as it then stood should be struck out. After hearing submissions the Court ordered that paragraphs 1, 2, 8 and 10 of the application be struck out and that the reasons for that order would be published later. These are those reasons.
The paragraphs challenged were as follows:

"1. A declaration that at all material times the First Respondent was the controlling mind of and a director of the VIP Companies and each of them within the meaning of the Companies (New South Wales) Code and the Companies

(Victoria) Code.

2. A declaration that at all material times the VIP Companies and each of them and their businesses were effectively operated by and on behalf of the First Respondent.

8. A declaration that the First Respondent is in breach of his duties to the Applicant pursuant to Section 77(f) and Section 77(g) of the Bankruptcy Act, 1966 (Cth).

10. An order that each of the First, Second and Fourth Respondents deliver to the said Receiver and Manager within 14 days of the making of this order such financial records, management records, books of account and other records, correspondence, documents including information stored on computer whether reduced to writing or not, of the VIP Companies as may be required by him in their possession, custody, control or power."

In relation to paragraph 8 counsel for the trustee announced in the course of his submissions that that declaration was not being pursued. A common issue arose in relation to paragraphs 1 and 2. The substance of the submissions made on behalf of Dr Edelsten was that these declarations were declarations that Dr Edelsten had committed a criminal offence and, therefore, the declarations should not be made. Section 227 of the Companies Code provides:

"227. (1) A person who is an insolvent under administration shall not be a director or promoter of, or be in any way (whether directly or indirectly) concerned in or take part in the management of, a corporation without the leave of the Court. Penalty: $5,000 or imprisonment for one year, or both."

Dr Edelsten was an insolvent under administration within the meaning of that section.
It is quite apparent that the declarations sought related to conduct by Dr Edelsten which could constitute an offence under s227. The series of declarations being sought are in the nature of establishing a basis to allow the substantive orders sought in the application to be made. It is clear that the mere fact that Dr Edelsten may have committed a criminal offence under s227 of itself is not a necessary step in the process of making the substantive orders sought. The authorities make it clear that a court should not make orders of a declaratory nature in civil proceedings that a person has committed a criminal offence. The position is stated very strongly and clearly by a Full Court of the Federal Court of Australia in Inglis v Moore and Ors 1979 24 ALR 411. For this reason the Court struck out the orders sought in paragraphs 1 and 2 of the application as it then stood.
Paragraph 10 comes within a different category. After seeking a number of declarations, paragraph 9 sought an order that the applicant or some other person be appointed receiver and manager of the business and assets of the VIP Companies. The order sought in paragraph 10 appeared to be in aid of the powers of a receiver and manager so appointed. Paragraph 11 sought orders conferring the normal powers upon a receiver and manager. In those circumstances paragraph 10, on its face, appeared to be directed to matters which are very wide and obscure and seemed to be directed to confer a power on a receiver manager to, in effect, obtain discovery. On the facts of this case, it seemed an embarrassment to allow that paragraph to remain as distinct from the normal type of powers as sought by order 11. If a receiver manager is to be appointed that is the time to consider the nature and extent of the powers to be conferred on the receiver manager and to any ancillary orders to be made to support those orders.
For those reasons the Court made the order it did on 29 April 1992.
3. DEGREE OF PROOF
During the course of the case many submissions were made as to the degree of proof required or, put another way, the degree of satisfaction required to establish the case presented by the trustee. Detailed reference was made to a number of authorities including Briginshaw v Briginshaw and Anor (1938) 60 CLR 336 and a number of subsequent cases. It is sufficient for present purposes to say that the trustee must satisfy the civil onus having regard to the nature of the allegations made, particularly against Dr Edelsten. A high degree of satisfaction must be reached by the Court before being satisfied of the truth of the matters supporting the allegations. To adopt the terminology used by Lockhart J in Sharrment Pty Ltd and Ors v Official Trustee in Bankruptcy (1988) 18 FCR 449 a high standard of proof applies. I have adopted this standard in making findings of fact and the views expressed have regard to that high standard of proof. This applies to the findings of fact referred to later in these reasons.
4. ADMISSIBILITY OF EVIDENCE AS AGAINST AUSTRALIAN MEDICAL DEVELOPMENTS
During the hearing of the evidence a number of other interlocutory matters were raised and a number of oral reasons for judgment were given in relation to those matters. Probably the most important of those interlocutory matters was a submission made on behalf of Australian Medical Developments in relation to the admissibility of evidence against it. That submission was finally made at the close of the evidence called on behalf of Dr Edelsten. Oral reasons for judgment were given on 9 June 1992 rejecting the submission made on behalf of Australian Medical Developments. A copy of those reasons are annexed to these reasons. Those reasons form an important part of the overall case. After that ruling had been made, counsel for Australian Medical Developments announced that no evidence would be called on behalf of that company.
D EVIDENCE
1. OVERVIEW
In conformity with directions given, the evidence was presented by affidavit. Counsel for the trustee read affidavits sworn by 11 separate persons namely Kenneth John Thurtell, sworn 19 April 1992, Rodney Kenneth Richards, sworn 29 October 1991, Rosa Stroszynski sworn 14 February 1992, Dianne Joy Haralambakis (formerly Dianne Joy Adams and hereinafter referred to as Dianne Adams) sworn 18 June 1991, Ronald Pereira, sworn 11 March 1992, David Poustie sworn 18 February 1992, Grant Edward Spedding, three affidavits sworn 3 March 1992, 10 March 1992 and 13 March 1992 respectively, Sharon Richards, sworn 30 October 1991, Deborah Jan Harrison, sworn 13 February 1992, Ruth Rowena Davoren, two affidavits sworn 8 July 1991 and 13 September 1991 respectively and Brian Forshaw, sworn 2 April 1992. With the exception of Sharon Richards, whose affidavit was used to produce formal documents, each of these witnesses was cross-examined at length by Dr Edelsten and by counsel for Australian Medical Developments. Counsel for the trustee was granted leave to re-examine Ruth Davoren on the basis that she was a hostile witness.
Dr Edelsten read affidavits sworn by two separate persons namely Graham Strong, sworn 29 November 1991 and Donna Curran sworn 22 April 1992. Each was cross-examined by counsel for the trustee and by counsel for Australian Medical Developments. Apart from some exhibits, no evidence was presented by affidavit on behalf of Australian Medical Developments. In particular, it is noted that Dr Edelsten did not give evidence on oath and could not be cross-examined.
Apart from Sharon Richards, who presented formal evidence only, and Grant Spedding, the solicitor for the trustee, all the other witnesses were either former business associates of Dr Edelsten or had worked with Dr Edelsten in relation to the medical centres being conducted in Melbourne. Brian Forshaw had been involved in negotiations with some of the witnesses and with Dr Edelsten in relation to the proposed medical centre at Moonee Ponds. With the exception of Rodney Richards, and in some respects, Ruth Davoren, each of the witnesses presented as witnesses of truth, although as is to be expected, there were conflicts in the detail of the evidence so given. The passage of time and the complexity of matters make it difficult for accurate recall of all details.
Thirteen witnesses gave evidence. Ken Thurtell in substance gave evidence from the point of view of Excellence and from a practical point of view ceased to be involved late in the year 1989. Sharon Richards gave formal evidence only. Grant Spedding, the solicitor for the trustee, gave limited evidence which included evidence of telephone conversations he had with receptionists at a number of former VIP medical centres on 20 February 1992 being before Australian Medical Developments was added as a respondent. This evidence was to the effect that on ringing a telephone number a receptionist answered in the name of "Australian Medical Clinic". On enquiry of the receptionist as to VIP Health Corporation he was told that VIP Health Corporation had recently had a change of name but that Australian Medical Clinic was carrying on the same as before and that Dr Edelsten was still involved in the conduct of the Australian Medical Clinic at the former VIP clinics. These conversations took place after the sale agreement of 13 February 1992.
Mr Brian Forshaw was a developer and gave evidence concerning negotiations between himself, on behalf of his company, and various people including Dr Edelsten in relation to the possible opening of a medical centre by the VIP companies at Moonee Ponds. These discussions took place in late 1989 and early 1990 but did not come to fruition. In fact a medical centre was opened at Moonee Ponds as part of the development of Brian Forshaw and the witnesses Dianne Adams and Deborah Harrison were indirectly involved with that medical centre. In addition Deborah Harrison was and is directly involved with that medical centre.
All the other witnesses were employed by Excellence or one of the VIP companies or were doctors engaged in the provision of medical services at VIP medical centres. Dr Strong commenced employment with Excellence in May 1988 and remained connected with the VIP medical centres until about 1991. Ruth Davoren was employed by Excellence in September 1988 to work at the medical centres in Sydney in connection with Dr Edelsten. She came to Melbourne in January or February 1989 and severed her active connection with the VIP medical centres in Melbourne in June 1989. Dianne Adams commenced employment with Excellence in April 1989 and ceased her employment in January 1990. Donna Curren commenced her employment in April 1989 and ceased her employment in early 1990 but retained a connection with Kealba after that. Deborah Harrison commenced her employment in May 1989 and ceased her employment in January 1990. Ronald Pereira was an accountant and was employed during the period August and September 1989. Rosa Stroszynski was an accountant and was employed from the beginning of October 1989 and left in February 1990. Dr Poustie commenced his work with the medical centres in about November 1989 and ceased his work in July 1991.
In addition to the witnesses, other people, being respondents to this application, were involved with the VIP medical centres. The respondent Ian Goodman was a friend and supporter of Dr Edelsten. More will be heard about him later. The respondent Esther Edelsten is Dr Edelsten's mother. The respondent Hymie Edelsten is Dr Edelsten's father. Mr Rodney Edelsten is Dr Edelsten's brother and more will be heard about him later. The respondent Raymond Bartlett was a director of Circuit Towers Pty Ltd, the company which became VIP Health Corporation. He appears to have no direct connection with the VIP medical centres. The respondent Christine Wenberg will be mentioned later in these reasons.
2. PARTICULAR WITNESSES (i) RODNEY RICHARDS
The witness Rodney Richards comes within a different category. After seeing and hearing him in the witness box I formed the view that he was completely unreliable as a witness and that no reliance could be had on anything he said except to the extent that it was supported by evidence from other witnesses. Rodney Richards sought out Dr Edelsten and ingratiated himself with him with the expectation of making large financial gains. He fell out with Dr Edelsten and his fury with and hatred of Dr Edelsten seemed to have no bounds. His affidavit contained much material which could well be said to be scandalous and in fact counsel for Dr Edelsten sought an order that the affidavit should be removed from the file of the Registrar in Bankruptcy. In so doing counsel relied upon sub-rule 134(1) of the Bankruptcy Rules. That rule reads:

"134(1) The Court may, on the application of a party to proceedings, order that scandalous, irrelevant or objectionable matter included in a document filed in connexion with proceedings be struck out and may further order that the costs of the application be paid as between solicitor and client by the person by or on whose behalf the document was filed."

The Court ruled against that motion and gave oral reasons for so doing on 25 May 1992. The essence of the scandalous aspects contained in the affidavit related to the relationship between Dr Edelsten and Ruth Davoren and the power which Dr Edelsten had over Ruth Davoren to force her to do his will.

In the witness box Rodney Richards presented as a person who had no regard for the truth. He made wild statements and when pressed developed further outlandish explanations to try to justify the first. He presented as a bully and a ruthless type of person who would say and do anything to try to achieve an end which he thought might favour him or harm Dr Edelsten. For the record, I do not rely upon his evidence at all since evidence of other witnesses which would corroborate part of his evidence can be accepted in its own right.
(ii) RUTH DAVOREN
Ruth Davoren, although married, had become involved in an emotional attachment with Dr Edelsten while still in Sydney. In February 1989 she came to Melbourne and cohabited with him in Melbourne. She played an active part in VIP Management but worked at Kingsbury as an employee of Excellence. Her harmonious relationship with Dr Edelsten came to an end in June 1989 in acrimonious circumstances. Nevertheless, in giving her evidence, Ruth Davoren disclosed a kindly attitude towards Dr Edelsten. Her memory was not good and she was bitter in some regards in relation to her shareholding in VIP Management. Initially, counsel for the trustee had relied on her first affidavit but following lengthy cross-examination by Dr Edelsten he sought leave to put to her the second affidavit. This was objected to. This step was taken as laying the foundation for the seeking of an order that she be treated as a hostile witness.
In ruling on an objection to counsel putting the second affidavit to Ruth Davoren I said:

"It is fair to say that the cross-examination of Dr Edelsten took a rather unusual form; a form which normally counsel appearing for an opposing party would not be allowed to do in the cross-examination. It consisted essentially, of stating what had occurred or what the position was and then asking of the witness: Do you agree: Is that not so? or words to that effect. One finished with the impression that, in reality, Dr Edelsten was, in substance, giving evidence of what his version was of all these events which he sought, then to establish by the oath of the witness, Ruth Davoren. It also became apparent during cross-examination that the witness seemed to have very little clear recollection of what had occurred and when asked questions as to what did occur, what was said or what had happened, her recollection was very, very bad. But in answer to questions put to her as to statements or events, she had no hesitation in saying yes or no as the case may be.

In re-examination, counsel for the applicant put to the witness an affidavit sworn by her on 13 September 1991 apparently relied upon by an opposing party in this application. Objection was taken to the witness being asked questions about that affidavit and there then ensued argument as to the relevance of this. It became apparent that counsel for the applicant was seeking to establish a basis for declaring the witness hostile so as to be allowed to conduct the re-examination in the manner of a cross-examination to the extent to which counsel considered it necessary for the purpose of doing justice."

The evidence given by Ruth Davoren needs to be scrutinized with great care. As will become apparent later in these reasons, I accept most of the evidence given by Ruth Davoren but I do not accept her evidence that she contributed any money for the shares in VIP Management or provided funds for that company to continue operation. This does not negate that on some occasions she paid small amounts of cash to satisfy debts owed by VIP Management.
3. JONES V DUNKEL
An evidentiary matter which was argued at length was the principle, and its application, discussed in Jones v Dunkel and Anor (1959) 101 CLR 298 and the many other cases which have expanded and refined the opinions expressed therein, namely that inferences may more readily be drawn adverse to a party who does not give evidence on oath or does not call witnesses who would be expected to be called by that party and who are able to give evidence. In this case the respondent Goodman is a person who would be expected to be called as a witness by Dr Edelsten. In applying the general principle I have had regard to the fact that Dr Edelsten gave no evidence. Inferences against him, based on other evidence, can be drawn more readily. The absence of evidence from other witnesses in circumstances where Dr Edelsten could have called those witnesses likewise enables the Court to more readily draw inferences adverse to Dr Edelsten but based on the evidence given. In fact the whole of the evidence supports strongly the conclusion that Dr Edelsten was the guiding hand and controlling mind of the activities of the VIP companies both initially within the companies and eventually with respect to the conduct of the medical centres.
4. OBSERVATIONS ON DR EDELSTEN
It became clear, particularly during his cross-examination of the witnesses, that Dr Edelsten was the driving force behind the medical centres being conducted by Excellence and the VIP Companies in Melbourne and Adelaide. It was apparent that he was a very hard worker, worked long hours and needed little rest. He was a perfectionist and bossy. He had no hesitation in telling other persons what to do. He had a wide ranging mind, always trying to expand his activities and appeared to have an insatiable desire to make money by any means. He had a strange power of persuasion over people with whom he worked. He used this power to get them to do what he wanted them to do. Most witnesses acknowledged his abilities and drive. He was fully aware that as a bankrupt his activities were restricted and in particular he was aware that the provisions of the Companies Code prevented him from being a director, promoter or concerned in, or taking part in, the management of a company. He was a person who, apparently, formed the idea to create the VIP companies to establish and conduct medical centres. He was the person who decided who should be the shareholders and directors of the VIP companies and he tended to move them around to suit his will. At the same time it was clear that the VIP companies, and in particular VIP Management and VIP Health Corporation, were in fact real companies in that they existed, they took leases of land to enable the VIP medical centres to be conducted, conducted bank accounts, presented claims to the Health Insurance Commission seeking reimbursement of Medicare payments for services provided by doctors engaged by them at the medical centres and paid the salaries of persons employed at the medical centres.
The impression of the dominance of Dr Edelsten is strengthened by the way in which he conducted the cross-examination of the witnesses. It is true he did not give evidence. It is true that difficulties arise in using this as a factor in forming a view of the evidence since it could not be done if he had been represented by a legal representative. Nevertheless, he appeared as an articulate, intelligent person with much drive and a very good memory. From his questions it was obvious he had a very clear memory of the activities of Excellence, the VIP companies and the medical centres. His knowledge of the details of their activities was outstanding. This led him to put much detailed material in cross-examination of the witnesses. The further the cross- examination went the clearer it became that in truth and in fact he was the driving force and dominating personality behind the VIP companies and the medical centres in Melbourne and Adelaide.
5. CONTROL OF THE VIP COMPANIES
Most of the evidence was directed to establishing the fact that the one constant figure, namely Dr Edelsten, was the controlling mind of the VIP companies. It may well be that because of the emphasis placed on this aspect of the case the parties failed to present adequate evidence on other aspects. In particular, the formal evidence relating to the VIP companies is, to say the very least, very meagre. In a case of this kind one would have expected a substantial amount of documentary evidence, particularly documentary evidence brought into existence at the appropriate times by the relevant VIP companies. There is no such evidence although there is evidence that some minutes of directors' meetings were in fact written by external accountants, that leases were in fact entered into. Some formal documents relating to the establishment of the companies and the appointment of directors and bank records were referred to. There are some formal documents in evidence but it appears that in many respects and for practical purposes the difference between the VIP companies was ignored. This is illustrated by the exhibit to the affidavit of Donna Curren. In December 1989 she was employed at Kingsbury, in all probability by Excellence, possibly by VIP Health Corporation. At that time Dianne Adams was the area supervisor of the VIP medical centres, employed probably by Excellence, or possibly by VIP Health Corporation. By letter dated 29 December 1989 she informed Donna Curren that she was to be moved to a lower position and at a lower rate of pay as from 3 January 1990. The letter was on the letterhead of VIP Management which formally had no interest in this matter. When this was drawn to the attention of Donna Curren she made a comment to the effect that the nearest piece of paper was always used. Dianne Adams said she used that letterhead because it was the only one available.
Even the formal documents to the affidavit of Sharon Richards supported by an exhibit, R8, relating to the return of an allotment of shares of Circuit Tower Pty Ltd (in some documents referred to as Circuit Towers Pty Ltd) does not give a full picture of the shareholders and directors of the VIP companies. By a letter from the then solicitors for the respondents dated 15 November 1991, the contents of which were accepted by the trustee, the shareholders of the VIP Companies are stated as follows:

"1. VIP Health Corporation Pty Ltd

Ian Charles Goodman 12 shares

Esther Edelsten 1 share

2. VIP Management Pty Ltd

Ruth Davoren 11 shares

Ian Charles Goodman 1 share

3. VIP Health Care Pty. Ltd.

Ian Charles Goodman 12 shares

Esther Edelsten 1 share

4. VIP Holdings Pty. Ltd.

Ian Charles Goodman 12 shares

Esther Edelsten 1 share"

The other documents suggest that with respect to VIP Health Corporation Dianne Adams and Ian Goodman became the holders of six shares each on 14 June 1989 and that on the same date each was appointed a director of that company. On 20 October 1989 Dianne Adams ceased to be a director. Dianne Adams gave further evidence of her interest in those companies and this will be referred to later. Christine Wenberg was appointed a director on 31 January 1990 although it appears she is not a shareholder.
As far as VIP Management is concerned it appears it changed its name from Segment Pines Pty Ltd in March 1989. Although Ruth Davoren is still recorded as being the holder of 11 shares she has played no part in that company since June 1989. It is interesting to note that VIP Management commenced proceedings in the District Court of NSW against Ruth Davoren in relation to a number of matters. Ruth Davoren and Ian Goodman were appointed directors of VIP Management in February 1989 and April 1989 respectively, but, apparently, Ruth Davoren is no longer a director and an Amanda Patterson is now a director but the date of her appointment is not known.
According to the records produced, Ian Goodman has been a director of VIP Health Care since 26 June 1989 while Christine Wenberg was appointed a director on 31 January 1990. She does not appear to be a shareholder of that company. This company was incorporated on 26 June 1989. VIP Hair Care Pty Ltd was incorporated on 26 June 1989 but changed its name to VIP Holdings on 7 March 1990. Its directors are Ian Goodman and Christine Wenberg appointed 26 June 1989 and 31 January 1990 respectively. Again it appears Christine Wenberg has no shares in this company.
It seems reasonably clear that some time before February 1992 VIP Health Corporation became the only VIP company controlling the activities of all of the VIP medical centres. It is not clear how this came about and again there is a dearth of evidence directed to that issue. Dianne Adams says that when Ruth Davoren returned to Sydney in June 1989 VIP Management became stagnant, it was just left to sit. The evidence suggests, and I accept, that since about the end of June 1989, all the VIP medical centres were operated by VIP Health Corporation. In view of the fact that Australian Medical Developments claims title to the assets set out in the sale agreement of 13 February 1992 attention should have been directed to showing that VIP Health Corporation was in fact the owner of all those assets despite the fact that some of the medical centres involved were initially conducted by Excellence and at least one by VIP Management. This was not done but it must be remembered that the overall onus of proof remains on the trustee.
The way the matter proceeded, most of the cross-examination by counsel on behalf of Australian Medical Developments seemed to be directed to establishing the fact that Dr Edelsten was not the controlling mind or manager of the VIP companies. As a result it seemed to have been overlooked that in fact its real concern should have been in relation to its sale agreement of 13 February 1992 and the ownership of the assets which it then bought and the rights to use the promotional and advertising material for a limited period. The absence of direct evidence on many of these issues has made the task of the Court more difficult.
6. HOW 24 HOUR MEDICAL CENTRES OPERATE
It is helpful to describe, in broad outline, how the business of a 24 hour medical centre operates. This summary is taken primarily from the evidence of Dr Strong, in explanation of the medical aspects, Ken Thurtell, in explanation of the proprietor's interest, and is supported by evidence from other witnesses and in particular the evidence of Donna Curren.
The proprietor must first find a suitable site. This involves finding a site on which there exists a building which can be adapted for the purpose, in an area where it is likely to serve a large number of persons of a type likely to want medical attention at any time of the day or night. The proprietor must obtain a lease of the premises and fit out the building for use as a medical centre. It is helpful to persuade the lessor to do this even though, as a result, the rental may be at a higher rate. A number of consulting rooms for use by doctors is required as is a reception and waiting area and offices to provide for the accommodation of administration staff. The fitting out exercise can be fairly expensive. In addition, the proprietor must provide the facilities to enable the medical practitioners to carry on their practice, a certain amount of medical equipment, the provision of medical supplies and the provision of non-professional staff such as receptionists, nurses, accountants, bookkeepers, supervisors and the whole range of employees necessary to carry out a successful business. The premises must be maintained and kept at a high standard. All this takes money but much of the equipment can be obtained by lease rather than by purchase and the fittings may be transferred from site to site.
It is necessary for the proprietor to engage medical practitioners who are normally treated as if they were independent contractors although some who undertake extra activities may be paid a retainer. Rosters need to be prepared to ensure that at least one doctor is on duty at all times and there may be as many as three, four or more doctors on duty at the same time during busy periods. The medical practitioners work independently at the centres and are encouraged to develop ongoing doctor-patient relationships with their own patients but this cannot always be done. In practice the medical practitioners, in effect, conduct their own medical practices within the medical centre but without the worry of having to provide their own surgeries and staff to assist them. The power of referral to specialist doctors can be made. A medical practitioner on the roster usually has a fixed starting time but not necessarily an exact finishing time. The practitioner may work through until the patient demand is reduced or he or she is relieved by another doctor.
The essential arrangement between the proprietor and the medical practitioner is that the medical practitioner keeps a percentage of the consultation fee, as paid by the Health Insurance Commission, often referred to as Medicare. This percentage can vary but normally is of the order of 40% to 50% of the rebate from Medicare. The balance of the rebate goes to the proprietor. Normally the accounts are "bulk-billed" for the vast majority of medical services provided. Other rebates may come from other sources as in the case of workers compensation, repatriation patients and matters of that kind. Sometimes patients may pay in cash and make their own claim on Medicare.
Under this system the medical practitioner pays no rental or leasing fee nor contributes to the salaries of the support staff. All the equipment is provided by the proprietor including furnishings, medical equipment, medication and bandaging. In addition, the proprietor may provide other services such as weight reduction programmes which in some cases may need to be supervised by a medical practitioner by way of consultation. The products supplied to the patient under such a scheme are paid for by the patient to the proprietor.
When a patient attends the medical centre their name and time of arrival is entered in a day book and particulars of that patient are entered on a folding card which is filled out by the receptionist. This folding card is kept by the proprietor as a permanent record of the particulars of the patient. When the consultation fee is to be paid by way of "bulk-billing" the patient's Medicare card is presented to the receptionist who imprints the Medicare voucher with the card details. In due course the medical practitioner who then sees that patient enters his name and provider number on that voucher. The provider number is given by the Health Insurance Commission to each doctor. There is a separate provider number with respect to each premises from which the medical practitioner provides a service. The voucher, having been put in the folding card, is presented to the doctor when the patient sees that doctor. Details of the patient's medical history and consultation notes are entered on the folding card. This card can then be used for subsequent visits. At the completion of the consultation, the medical practitioner fills out the Medicare voucher with the appropriate service number or code and the patient signs the voucher. The medical practitioner then returns the folding card and the voucher to reception. If the patient pays cash the payment is made by the patient to the receptionist.
A separate Medicare voucher is filled out for each patient for each consultation. The clerical staff of the proprietor then process the vouchers grouping them under the names of the individual medical practitioners and forward them to the Health Insurance Commission in order to claim the Medicare rebate. In due course a cheque is returned made payable to each doctor, together with a remittance advice. The cheque and remittance advice are in the name of the medical practitioner but the cheque is paid into a special account in the name of the proprietor who then pays the medical practitioner's share of the remittance. There may be variations from time to time to this general picture but in substance that is how the system works. The business depends upon the cashflow resulting from Medicare payments. Once established, provided the number of patients remains at a high level, the Medicare rebates should provide ample funds for a profitable business. It is claimed that the cashflow so generated can be used in setting up a medical centre with the consequence that the proprietor does not need any capital.

Again that authority does not really assist the trustee in the present case. If anything it is more akin to the declaration that the shares in the VIP companies are held by the shareholders in trust for Dr Edelsten. Rumpf's case applied the principle of a resulting trust. Rumpf's case did not proceed to consider whether the property of a company was, in reality, the property of the shareholders of the company.
The submissions made on behalf of the trustee are very similar to those rejected by the Full Court in Sharrment's case. The principles of law to be applied in cases of this kind are clear. I accept the principles as set out earlier in these reasons. As Lockhart J said at p 454, "the real difficulty in this case is not to determine the applicable principles of law but rather to characterize the transactions as a matter of fact".
The relevant findings of fact in this case have been set out earlier in these reasons. The VIP companies, and in particular VIP Health Corporation, are corporate bodies which were created and controlled by Dr Edelsten. At the same time each of the VIP companies, and in particular VIP Health Corporation, conducted activities which would be expected to be performed by a corporation engaged in the business of conducting medical centres. It seems to be accepted that of the VIP companies, VIP Health Corporation is the only company which owns property and its activities can be used to illustrate the relevant facts.
VIP Health Corporation entered into leases of land with respect to the premises at which the medical centres were being conducted. It opened and operated accounts with banks. It leased equipment, furnishings and other materials necessary for the conduct of the centres. It employed persons to perform duties in relation to the running of the centres. It engaged medical practitioners to provide professional services. It entered into all the usual transactions to enable the centres to function, although the payment of its debts left much to be desired. It was a real corporation carrying on a real commercial activity, even though Dr Edelsten may have been taking unauthorized payments from that company. The purpose for the creation and management of the companies by Dr Edelsten may have been to evade his liabilities under the Companies Code and Corporations Law and with the idea of preventing property becoming available for distribution among his creditors, but this does not detract from the true legal position of the companies being separate and distinct legal personalities from the person who controls them. Even if the whole scheme of the companies was devised by Dr Edelsten for the purpose of defeating his creditors the overall facts of this case do not justify the conclusion that the property of VIP Health Corporation is the after acquired property of Dr Edelsten and thus vests in the trustee. On all the facts of the case the Court finds that the property of the VIP companies was not the property of Dr Edelsten and, therefore, has not vested in the trustee.
Finally, on this aspect of the matter, it is useful to refer to what was said by Lockhart J in Sharrment at p 461:

"It is perhaps tempting to draw the inferences which were drawn by the trial judge. I fully recognise that there is an unpleasant aura pervading the facts of the case. First comes the very complex series of interlocking transactions in 1979, followed about a year later by the purchaser of The Chase. The purchase then works to the benefit of Mr Wynyard's family, while Mr Wynyard's creditors and in particular the Commissioner of Taxation have recourse to little, if any, funds and are denied recourse to the proceeds of the sale of The Chase. It remains that, when dispassionately reviewed, the evidence simply cannot support the inferences sought by the Official Trustee."

With all necessary adaptations the same may be said concerning Dr Edelsten and the facts of this case. Nevertheless, it is important to remember that the unpleasant aura pervading the facts of this case cannot fill the void occasioned by lack of evidence.
Accordingly the Court refuses to make the declarations sought by the trustee on this aspect of his claims.
The corresponding declarations sought against Australian Medical Developments depend upon the fact that VIP Health Corporation was not the owner of the assets, the subject of the sale agreement of 13 February 1992, and of the rights connected with the use of the names. On the findings already made it is clear that the trustee must fail in relation to the declarations it seeks against Australian Medical Developments. At the same time it is noted that issues could well arise between VIP Health Corporation (in liquidation) and Australian Medical Developments, arising from the subsequent liquidation of VIP Health Corporation. It is not necessary for this Court to express any views on that matter.
F PROPOSED ORDERS
Accordingly the Court makes declarations 1 to 4 set out earlier in these reasons, being declarations corresponding to declarations 1, 2, 3 and 5 of the declarations contained in the further amended application. The Court refuses to make the declarations set out in paragraphs 6, 7, 8, 10, 11 and 14 of the further amended application.
In these circumstance it is proposed to make the declarations 1, 2, 3 and 4 as set out in these reasons and to adjourn the further hearing of the application to a date to be fixed to enable the parties to make submissions as to what further orders should be made and what orders should be made in relation to the costs of the application.

[1992] FCA 694

11 SEPTEMBER 1992