Re Hicks, S.C. v Ex parte Lamb, K.W

[1994] FCA 125

1 2 5     SLt-

JUDGMENT No. ........ ........ .. I ........ ....

I N THE FEDERAL COURT OF AUSTRALIA	) )
VICTORIA DISTRICT REGISTRY	) No. VB 1473 of 1993
)

GENERAL D I V I S I O N 1

B E T W E E N :

Re: STEPfIEN CHARLES HICKS

Debtor

E:c P a r t e : KENNETH WAYNE LAMB

JUDGE :	Heerey J
m:	4 March 1994
W:	Melbourne

EX TEMPORE REASONS FOR JUDGMENT

This is an application brought by a bankrupt under s.178 of the Bankruptcy Act 1965 (Cth) (the Act) to review a decision of the trustee refuslng to consent to the bankrupt leaving Australia. Absent such consent, leaving Australia would be an offence under s.272(c) of the Act. At the outset I note that it is common ground that the provisions of Part VI, Division 4C do not apply because the bankrupt is not liable to pay to the trustee a contribution under ss.l39P(l) or 139Q(1).

August 1990. He would by now have been discharged, but on 22 October 1993 the trustee flled a notice of objection to discharge on grounds that the bankrupt had continued to manage a corporation while a bankrupt without leave to do so under	the trustee particulars of his income, and had failed to fully	s.229 of the Corporations Law, had failed to fully disclose to
disclose to the trustee beneficial interests which he had in certain property.
It is, I think, fair to say that the administration of the estate has been a contentious one. The sense of conflict which one gets on hearing the history of the matter was heightened when- I was told from the Bar table at the resumption of the hearing after lunch that the bankrupr: had been arrested by police at 1.00 pm on a charge of forgery and was to appear before a magistrate shortly. Counsel for the bankrupt disputed that and said that hls client was assisting police with their enquiries. In any event, there being no evldence as to the incident, I do not think I should take it into account. If in fact the bankrupt is charged, any question of bail and overseas travel is obviously a matter for the magistrate before whom he appears.
The travel the bankrupt wishes to undertake involves a visit to Kuala Lumpur, Malaysia, leavlng Melbourne next Tuesday, 8
were deposed to by the bankrupt as follows. He says that he March and returning on 18 March. The purpose of that visit
is employed by Genesis Projects Pty Limited as a contract administrator and estimator. He has been employed by that company since January last year. His work includes responsibility for supervision of construction projects undertaken by any company in his employer's group, including outside entities for which the group recovers a fee. He was told in the week commencing 21 February by Mr Jeffrey Parry, who is the managing director of Genesis, that he, the bankrupt, was required to travel to Malaysia as part of his employment, together with Mr Ty Wardner, an architect and director of War Developments Pty Limited.
Mr Wardner swore an affidav~t in this application and was cross-examined before me. He deposed that his company was in a joint venture with Genesis in respect of a development called the Parameswara Resort at Malacca. In his affidavit Mr Wardner said:

A sequestration order was made against the bankrupt on 27

"I have arranged a visit to Malaysia for the period of 8 March 1994 to 17 March 1994 in order to discuss the joint venture development with our venturers in Malaysia, together with meetings planned with the Minister for State for Malaysia responsible for the development. For the purpose of these meetings I require the attendance of the bankrupt as a representative of Genesis in order to deal with aspects of the venture of which I am not familiar, nor qualified to discuss. I am an architect, not a contracts administrator nor estimator."

Mr Wardner expanded on that account somewhat in his oral evidence. It may be that "joint venture" is not an entirely

his company and Genesls. In essence they want to establish a	accurate description of the relationship at the moment between
very large development on an 11,000 acre site involving a potential investment of up to US $600 million. If this project is established, as I understand it, Genesis and M r Wardner's company will then become joint venturers with other parties. However at the moment the vlsit is, in a sense, speculative, and if the project is not established then neither Genesis nor, presumably Mr Wardner, will make any money out of it. However I see no reason to disbelieve Mr Wardner's evidence that he sees a need for the bankrupt to be present to provide advice and skilled assistance in dealing with potential builders and others in Malaysia who may be involved in the project, should it get off the ground.
This is a convenient point. to mention that, on the invitation of counsel for the bankrupt, Mr Wardner in his evidence gave an undertakrng to this Court that he would travel with the bankrupt and hold the bankrupt's passport in his possession durlng the visit.
From the point of view of Genesis, it is stated in an affidavit sworn by Mr Parry and not disputed before me that Genesis is a small concern which employs four key personnel, one of which is the bankrupt.
For varlous reasons detailed in Mr Parry's affidavit the only person available on behalf of Genesis to make the visit to
Malaysia at the relevant period is the bankrupt. Mr Parry also deposes that he is most satisfied with the work of the
bankrupt and is of the vlew that he is the best person to represent the employer on the trip with M r Wardner to Malaysia.
On 25 February 1994 Nessrs Henty, Jepson and Kelly sent a fax to the trustee in the following terms, formal parts omitted:

"We write to advise that we act on behalf of Genesis
Projects Pty Ltd.

Our client company is currently engaged in a joint venture in Malaysia. Our client requires Mr Hicks, pursuant to his terms of employment, to travel to Malaysia to negotiate a riumber of building contracts on behalf of the joint venture. We now enclose copy correspondence addressed to Mr Jeff Parry, the managing director of Geriesis Projects , con£ inning the request for Mr Hicks to travel to Malaysia for the period Tuesday, 8 March 1994 to Thursday, 17 March 1994.

We would be grateful if you would confirm by return facsimile that you have no objection to our client travelling to Malaysia and that Mr Hicks may collect his passport from you to allow him to travel to Malaysia. We require your confirmation of the above by no later than 10 am Monday, 28 February 1994."

(Emphasis added. )

The enclosure was a letter from Genesis to Henty, Jepson and
Kelly, as follows:

"We require Mr Steve Hicks to travel to Malaysia pursuant to his employment with our company. Would you kindly write to Mr Hicks' trustee, Mr Wayne Lamb, Ernst and Young, Melbourne, and seek his consent. We enclose for your ~nformatlon some travel details for your information and a letter from our client War Group."

The trustee refused permission. At a meeting held on 1 March	1994 at which Mr Wardner and Mr Voitin from Henty, Jepson and
Kelly were present, although not the bankrupt, the trustee refused to glve any reasons for his decision not to give consent or return the bankrupt's passport. Mr Voitin pressed the trustee for reasons. The trustee said that he would give those to Mr Voitin but only on the condition that those reasons were not passed on to Mr Wardner nor the bankrupt. Mr Voitin said that he was unable to accept those conditions as he wouid need to obtain instructions from his client.
Counsel for the trustee has, before me, persisted in the contention that his client could not disclose reasons to Zenty, Jepson and Kelly because they were not acting for the bankrupt. In support of this it was pointed out that some other solicitor had acted for the bankrupt at public
examination hearlngs .
It seems to me that there has been a misreading on the trustee's part of the true situation. There is no logical reason why, notwithstanding what the bankrupt's legal representation was in other matters, in this particular matter, which was of benefit both for him and his employer, the one solicitor should not act for both. That is precisely what the Henty, Jepson and Kelly letter of 25 February says quite explicitly when it refers to "our client travelling to Malaysia".
following issues were, while not necessarily conclusive, I suggested to counsel for the trustee in argument that the
nevertheless at the forefront of the matters to be considered in exerclsing my discret~on:

(i)      Is the proposed visit genuine?

(ii)     Is the bankrupt likely to return to Australia as promised?

(iii)    Will the visit hamper the administration of the estate?

See generally Re Tyndall (1977) 17 .-R	182, Weiss v Official
Trustee (1983) 1 FCR 840.

As to the first question, I find that the proposed visit as deposed to by the bankrupt, Mr Tyndall and Mr Parry is genuine. I think a conclusion to the contrary would be quite irrational. I do not see how I could conclude that this proposed venture does not exist or is an elaborate pretext to get the bankrupt out of the country.

Secondly, as to the likelihood of the bankrupt's returning, one practical consideration weighlng in this regard is the undertaking given by Mr Wardner and already referred to which would make it practically difficult for the bankrupt to depart to some third country. Counsel for the trustee claimed that the bankrupt's own affidavit did not state that it was his

intention to return to Australia. Paragraph 13 of that

affidavit is as follows:

as to why he objects to the proposed visit to	"I have not received any reasons from the trustee
Malaysia required as part of my employment. I am married with a 54 year old child, I reside in Melbourne, I have no other money other than the income I receive as part of my employment with the employer. I have three ch~ldren from a previous marriage also resident in Melbourne. I have no reason not to return to Australia and every reason to do so. The vislt is for a perlod of 10 days.

I must confess an inability, reading that as a matter of ordinary English, to see it otherwise than as a statement of intention to return to Australla on the conclusion of the visit.

As to the hampering of the administration of the estate in the meantime, the trustee deposed that he conducted a public examination under s.81 of a Mr Fusinato on 15 February 1994 which examination has been adjourned to 18 March 1994. Mr Fusinato has been summoned to attend for puSlic examination on 9 March, having been unable to attend on 15 February for medical reasons. There are no speciflc events relating to the administration of the estate planned for the period for which the bankrupt plans to be away and which would require his attendance. Counsel for the trustee did not suggest that the physical presence of the bankrupt would be needed during the period of the proposed journey for any purpose in connection with the admrnistration of the estate.

The trustee deposed to a number of concerns which his ~nvestigations have prompted. He says has formed the opinion that the bankrupt controls the company Wang Tip Pty Limited,

Wang Tip is the trustee of the Wang Tip Trust, the	(Wang Tip) whlch holds one-third of the shares in Genesis.
benefic1.aries of which are the bankrupt and his wife and the appointor of which is the bankrupt. However, there is no evldence that the shares held by Wang Tip in Genesis are held subject to the Wang Tlp Trust.
The trustee also deposed to an op~nion that the bankrupt controls Wang Tip. This oplnlon apparently is based on evidence at the public examination last year that the bankrupt provides advice to Wang Tip, has completed the company's ledgers, has paid cheques into company's bank account, has altered entries on the company's cheque butts where he considers such entries to be incorrect, has instructed- the company's accountants by telephone, but could not explain the basis for the large sums of money passing through the company's books. I do not suggest, of course, that the rrustee is not justified in pursuing this matter but thus far the evidence would not seem to justify a conclusion that the bankrupt controls Wang Tip.
In any case, whoever controls Wang Tip there seems to be no basis for concluding that Wang Tip controls Genesis, given that it only holds one-third of the shares in the latter. As
I understand his argument, counsel for the trustee contended
that because the bankrupt, via Wang Tip, controlled Genesis he was free to decide whether he went to Malaysia or not and therefore was not, as he deposed, at risk of losing his job if he could not go. Apart from anything else, this argument is
contrary to the evldence of Mr Parry, who was not cross-
exammed.
The trustee also deposed that he believes the bankrupt receives a substantial income whlch passed through the books of Wang Tip to another company called Fa~rlea International Pty Llmited which has purchased on behalf of the bankrupt a property at 15 Woodridge Court, Eltham, where the bankrupt
resides, and that the bankrupt also has a beneficial interest in a property at 88 Morris Street, Tootgarook, registered in the name of his father in law and his wife.
There was some brief cross-examillation of the bankrupt about these matters which did not seem to me to take the matter very much further. Some of the books of Wang Tip were in evidence and they did show some substantial payments of $100,000,
$59,000, and $10,000 going out of Wang Tip which were debited
to the loan account of the bankrupt's w~fe. These payments were apparently in connection with the purchase of the Eltham property. The bankrupt denied that the funds necessary for these payments were derived by Wang Tip as a result of his efforts. He swore that the funds came from his wife's family. The evidence does not enable me to make any positive finding as to where the truth lies as to this.
It was also alleged by the trustee that the bankrupt derived
more benefit than from Genesis that he reveals and that his stated salary of $28,000 was del~berately f~xed at a level
which 1s sufficiently low to ensure that Part 6 Division 4C would not affect him. The only evidence advanced in support of the argument was from a gentleman experienced in the same kind of work who deposed that a salary of $28,000 was "low" for a person of the bankrupt's skill. I do not think, on the present stage of the evidence, I can be satisfied as to the truth of this allegat~on. AgaLn it seemed inconsistent with the evidence of Mr Parry.
Counsel for the trustee stressed that his client had taken these various matters into account in refusing permission. He also said that the provisions of s.139ZU were relevent in showing the legislative scheme and should be considered by the Court in the exercise of its discretion. He accepted, however that in reviewing the trustee's discretion under s.178 the Court is considering the matter afresh. But it is to be noted that if s.139ZU did apply, s.l39ZU(3) would have the effect that the court wouid not grant permission if it is satisfied that any of the grounds for objection referred to in s.l49D(l)(b) to (n) inclusive, "has been established". In other words, it would be not sufficient for the Court to find that the trustee was of the belief thar those grounds existed. It would be odd, therefore, that if, under the more general and, perhaps, less rigorous regime of s.178, it would be sufficient for the trustee to defeat an application merely by saying he held a belief as to the relevant matters without havrng to prove their existence.
of investigation by the trustee but I am satisfied, for the I am not suggesting that there are not matters that are worthy
purposes of the present application, there is a genuine need to travel. I am satisfied that there is no unreasonable risk that the bankrupt will not return and that the administration of the estate will not be hampered in the meantime. That belng so, I thlnk, it would be wrong to exercise the discretion against him simply because of suspicions and concerns about the estate.
Counsel for the applicant sought an order for costs. That was opposed by counsel for the trustee who pointed out, amongst other things, that in Weiss although the application was successful Bowen CJ said that because the trustee acted correctly in appearing before the court and placing the argument which he did, the successful applicant should pay the costs.
Costs are of course a discretionary matter. It seems to me, however, that I think I should order that the respondent trustee pay the applicant's costs. There are a number of reasons for this conclusion not the least of which is the general rule that costs follow the event. I do not think the trustee asslsted matters by he stand he took in relation to refusing to give reasons for his refusal. Trustees exercising this power can affect the freedom of bankrupts quite significantly. Consistently wlth modern views, decision- makers acting under statutory powers should give fully and frankly their reasons for the decisions they take that affect
others.
Moreover, the trustee opposed the grant of consent on a number of factual grounds whl-ch have falled. I will make the orders granting permission to travel and for costs that I have indicated. I should add that these orders are made on the undertaking glven to the court by Mr Wardner.

I certify that this and the

preceding twelve ( 12 ) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey.

ADDearanCeS

-

Counsel for the debtor:	D Denton
Solicitor for the debtor:	Henty Jepson & Kelly
Counsel for the trustee:	J Nolan
Solicitor for the trustee:	Blake Dawson Waldron
Date of hear~ng:	4 March 1994

JUDGES' CHAMBERS
FEDERAL COURT OF AUSRALIA
450 LITTLE BOURKE STREET

2 AUSTRALIA L&

'*>WX<<CX- MELBOURNE, 3000

16 March 1994

Sonia Cornale
Federal Court of Australia
Principal Registry
Law Courts Building
Queens Square

SYDNEY NSW 2000

Dear Sonia,

Re: Stephen Charles Hicks Ex parte: Kenneth Wavne Lamb

No. VB 1473 of 1993

I enclose a copy of the judgment delivered by his Honour M r

Justice Heerey in the above matter on 4 March 1994.

Thls judgment is not for general distribution.

Regards,

David ~rehnan

Associate to Heerey J

enc