Re Maher, D. In the matter of Maher, D. v Official Trustee in Bankruptcy In the matter of Official Trustee in Bankruptcy v Maher, D
[1993] FCA 73
•24 Feb 1993
7 3 ,1qq3
JUDG;dEMT No. ........ ........ .. ........ .. ,
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION ) BANKRUPTCY DISTRICT OF ) THE STATE OF VICTORIA
) No. VB 1969 of 1991
Re: DENNIS MAHER
A Bankrupt
IN THE MATTER of DENNIS MAHER
Applicant
- and -
OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
- and -
IN THE MATTER of the OFFICIAL
TRUSTEE IN BANKRUPTCY
Applicant
- and -
DENNIS MAHER
Respondent
Coram: Olney J Place: Melbourne Date: 24 February 1993
| 2 M | I A | . |
MINUTE OF ORDERS
.-
THE COURT ORDERS that:
1. The bankrupt's application filed 30 July 1992 seeking orders pursuant to section 179(1) of the Bankruptcy Act be dismissed;
| b | '3 | 2. The bankrupt's application filed 12 August 1992 seeking |
| -a | U | |
| -7 | 8," | |
| '! | " 1 | |
| .- |
the review of the order of Registrar Morris made on 31
July 1992 be dismissed;3. The bankrupt's application filed 1 October 1992 seeking the annulment of the sequestration order made on 16 July
1991 be dismissed;
4. The Court's decision on the Official Trustee's contempt application filed 21 August 1992 remain reserved until further order;
5. The question of costs remain reserved pending the Court's decision on the contempt application;
AND DIRECTS that:
1. The Official Trustee in Bankruptcy have leave within 14 days to make and serve further submissions in writing relating to the contempt application filed on 21 August
1992 and the bankrupt have leave to make and serve
written submissions in reply within 14 days thereafter;
2.
In the event that the Official Trustee in Bankruptcy does not make and serve any further submissions within the time limited by direction l, the bankrupt shall have leave to make further written submissions within 14 days thereafter.
NOTE : Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF ) THE STATE OF VICTORIA
) No. VB 1969 of 1991
Re : DENNIS MAHER
A Bankrupt
IN THE MATTER of DENNIS MAHER
Applicant
- and -
OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
- and -
IN THE MATTER of the OFFICIAL
TRUSTEE IN BANKRUPTCY
Applicant
- and -
DENNIS MAHER
Respondent
Coram: Olney J Place: Melbourne Date:
24 February 1993 REASONS FOR JUDGMENT INTRODUCTION The Court has before it four separate applications relating to the affairs of the bankrupt. The factual context in which these matters have arisen is nothing if not complex. Regrettably, there is no easy way to establish a basis for dealing with the issues raised and accordingly I propose to trace the history of this Court's involvement with the bankrupt. In so doing reference is made to various affidavits filed in the Court. For the most part, those that are mentioned are relied upon by the parties in relation to the matters presently under consideration.
BACKGROUND
Dennis Maher (the bankrupt) was made bankrupt on 16 July 1991 upon the petition of American Express International Inc. (AMEX). The act of bankruptcy relied upon by AMEX was the failure of the bankrupt to comply with the demand of a bankruptcy notice served on the bankrupt on 9 March 1991 which related to a default judgment for $54,801.32 obtained by AMEX against the bankrupt in the County Court of Victoria on 19 January 1990 (the AMEX judgment).
Following service of the bankruptcy notice but before the
the bankrupt filed an affidavit sworn by him on 22 March 1991 expiration of the time fixed for compliance with the notice, in which he asserted that the default judgment had been obtained whilst he was overseas, that he believed he had a good defence to AMEX's claim and that on 18 March 1991 he had commenced proceedings in the County Court to obtain orders, inter alia, to set aside the judgment and for leave to defend the action. No application was made to the Court or to the Registrar pursuant to subsections 41 (6A) or 41 (6B) of the
Bankruptcy Act to extend the time for compliance with the bankruptcy notice. The bankrupt's affidavit of 22 March 1991 did not assert that he had a counter-claim, set-off or cross- demand of the type referred to in paragraph 40(l)(g) of the Act, and accordingly the provisions of subsection 41(7) did not apply.
AMEX presented its petition on 26 April 1991 and service was effected on 14 June 1991. Upon the first return of the petition on 18 June 1991 the debtor appeared in person and the matter was adjourned to 16 July 1991. At the same time orders were made that the bankrupt file and serve a notice of opposition and any affidavit in support by 5 July 1991 and that the petitioning creditor file and serve any affidavit in reply by 12 July 1991.
No notice of opposition or affidavit was filed by the bankrupt. On 16 July 1991 the bankrupt did not appear and the sequestration order was made. The Official Trustee was
appointed as trustee of the estate. On 1 August 1991 solicitors acting for the bankrupt filed an application for an order to stay the sequestration order or alternatively for an order that the sequestration order be rescinded (the rescission application). The application was made returnable on 21 August 1991 and was supported by an affidavit of the bankrupt's then solicitor Con Kiatos (Kiatos) sworn and filed on 5 August 1991 in which he asserted that he
had become aware of the sequestration order on 23 July 1991, that the debtor was then overseas in Hong Kong and that the bankrupt had instructed h ~ m to seek to have the sequestration order rescinded or stayed pending an application to the Supreme Court to appeal against a decision of the County Court refusing an application to set aside the AMEX judgment. Annexed to Kiatosf affidavit was a document said to be an affidavit proposed to be sworn by the bankrupt on his return from overseas and prior to the hearing of the application. The document exhibited set out what appears to be the basis of the bankrupt's claimed defence to AMEX's claim and included a copy of a notice of appeal said to have been filed on 26 July 1991. From the copy notice of appeal it appears that the application to set aside judgment was dismissed by the County Court on 21 June 1991.
Upon the return of the rescission application on 21 August 1991 the bankrupt was represented by counsel, as was AMEX. Orders were made adjourning the matter to 11 September 1991
and for the filing of further affidavits. On 11 September 1991 the application was further adjourned to 30 October 1991 on which day the bankrupt, AMEX and the Official Trustee all appeared. The bankrupt was given leave to amend the application in order to claim annulment of the bankruptcy. Orders were made for the filing of further affidavits and the matter was adjourned to l1 December 1991. In addition, an order was made requiring the bankrupt to file and serve on the Official Trustee a statement of affairs as required by section
54 of the Act, by 21 November 1991.
An amended application was filed on 14 November 1991 seeking an order that the sequestration order be annulled. The bankrupt filed an affidavit sworn by him on 19 November 1991. On 11 December 1991 the amended application was further adjourned to 12 February 1992 when orders were made to permit the further amendment of the application and for the filing of further affidavits. The bankrupt was also ordered to file a statement of affairs by 17 January 1992. A statement of affairs sworn on 29 November 1991 was filed on 11 December 1991.
The amended application was further adjourned on 12 February 1992 to 18 March 1992. Pursuant to leave granted on 12 February 1992 the applicant filed a further amended application on 26 February 1992 in which in addition to annulment he claimed declarations that the sequestration order ought not to have been made on the grounds that he was not
that he was not at the time that the bankruptcy notice was aware of the adjournment of the hearing of the petition and served on him nor at the date of sequestration order indebted to AMEX in any sum whatsoever. In addition, the bankrupt sought a discharge pursuant to what was then section 150(1) of the Act. (By operation of section 55 of the Bankruptcy Amendment Act 1992, the application for discharge lapsed on 1 July 1992. ) On 18 March 1992 the further amended application was again adjourned to 27 May 1992. However, on 18 March 1992 Ryan J made a self-executing order whereby the application would stand dismissed without any adjudication on the merits if by 27 May 1992 the AMEX judgment had not been set aside.
On 31 March 1992, upon the application of the Official Trustee, the Registrar issued a summons pursuant to section 81(1) of the Act requiring the bankrupt to attend on 2 June 1992 and to give evidence in connection with his affairs. (A similar summons requiring the bankrupt to attend and be examined on 19 March 1992 had been issued on 27 February 1992 but had not been served.)
On 22 May 1992 the bankrupt filed a further application in which he sought first an order that the Official Trustee be removed as trustee of the bankrupt's estate and second, in the alternative, that the Official Trustee be directed to make application to the County Court to set aside the AMEX judgment on terms set out in the application. This application was supported by an affidavit sworn by the bankrupt's solicitor
Alwyn Samuel in which some of the history of the matter was
canvassed and which concluded with a request that Ryan J's
order of 18 March 1992 be amended to substitute 1 July 1992 for 27 May 1992 as the date by which the AMEX judgment had to be set aside. This last-mentioned matter was dealt with on 22 May 1992 when orders were made varying the hearing date of the amended annulment application to 24 June 1992 and varying the date by which the AMEX judgment was to be set aside to 23 June 1992. The application of 22 May 1992 for removal of the trustee was adjourned for hearing on 29 May 1992.
The removal application came before me on 29 May 1992 when I reserved my decision. On 1 June 1992 I dismissed the application for reasons then published.
The bankrupt attended before Registrar Morris on 2 June 1992 as required by the summons issued on 31 March 1992. The examination was adjourned to 16 June 1992 when it was continued and further adjourned to 15 July 1992.
An application to further vary the self-executing order of 18 March 1992 was filed by the bankrupt on 23 June 1992. The application also sought the removal of the Official Trustee or alternatively an order requiring the Official Trustee to make application to the County Court to set aside the AMEX judgment . It was supported by an affidavit sworn by the bankrupt on 23 June 1992. The relief sought in relation to the self-executing order was refused by Ryan J by order made
on 23 June 1992 and at the same time the balance of the application was set down for hearing on 1 July 1992. On that day it was further adjourned to 22 July 1992. On 21 July 1992 the bankrupt swore an affidavit which was filed in Court on 22 July 1992 when the application was part-heard by Jenkinson J. The hearing continued for a short period on 24 July 1992 and was stood over to 27 July 1992, on which latter day an order was made by consent dismissing the application. The resolution of the application resulted from an agreement reached between the bankrupt and the Official Trustee providing for the indemnification of the trustee for costs incurred in the taking of proceedings to set aside the AMEX judgment. No further action has been taken to set aside the judgment.
The bankrupt did not appear upon the adjourned public examination on 15 July 1992 although his solicitor was in attendance. It was said that the bankrupt was ill. The examination was adjourned to 24 July 1992 but on that day the bankrupt again did not appear although once again he was represented by his solicitor. Orders were made adjourning the examination to 31 July 1992 and directing the Official Trustee to prepare and file a draft warrant for the apprehension of the bankrupt which the Registrar directed lie in the office of the Registrar untll 31 July 1992 and not issue unless the bankrupt failed to attend for examination on that day.
The bankrupt filed a further application on 30 July 1992 in
which he sought orders for an inquiry into the conduct of the Official Trustee in relation to the administration of the estate and for the removal of the trustee. This is one of the matters presently before the Court and reference will be made later to the full details of the application. I will refer to this application as "the section 179 application".
The bankrupt did not attend the adjourned public examination on 31 July 1992 but was represented by counsel. Registrar
Morris ordered that the warrant of apprehension be issued forthwith. The examination was adjourned to a date to be fixed. The warrant of apprehension was executed on 7 August 1992 when the bankrupt was taken before Registrar Morris. After a short hearing the examination was adjourned to 13 August 1992. The warrant of apprehension was discharged.
The bankrupt did not appear at the adjourned examination on 13 August 1992 but he was represented by counsel. An affidavit of the bankrupt's solicitor Alwyn Samuel sworn 13 August 1992 was filed in Court. Annexed to the affidavit was a certificate from a medical practitioner bearing date "12/9/92" (presumably intended to be "12/8/9ZU) certifying the bankrupt "unfit to attend work on the 12th, 13th and 14th day of August because of stress". Upon the application of counsel for the Official Trustee the matter was adjourned for further hearing before the Court later that day when Sweeney J made orders as to costs and the further conduct of the examination. A date for the continuation of the examination of the bankrupt was
notified in accordance with the order of Sweeney J. later set, namely 20 August 1992, and the parties were On 19 August 1992 the bankrupt filed an application (dated 12 August 1992) seeking an order reviewing the order of Registrar Morris made on 31 July 1992 for the issue of a warrant of apprehension and also seeking an order staying the examination of the bankrupt pending the hearing and determination of the application. I shall refer to this application as "the review
application". The application was supported by an affidavit of the bankrupt's solicitor Alwyn Samuel dated 12 August 1992 but filed on 19 August 1992.
The bankrupt did not appear for examination on 20 August 1992 but was represented by counsel who produced to the Registrar a certificate from a medical practitioner bearing date 19 August 1992 certifying the bankrupt "unfit for work on the 20th and 21st August '92 for a stress related illness". Registrar Morris ordered that a warrant of apprehension be issued forthwith.
On 21 August 1992 the Offlcial Trustee filed an application seeking the punishment of the bankrupt for contempt of court by reason of his failure to appear on 24 July 1992, 31 July 1992, 13 August 1992 and 20 August 1992. This is one of the matters presently before the Court and more detailed reference to the application will be made later. I will refer to this application as "the contempt application".
The review application came before Ryan J on 26 August 1992 as
did the contempt application. Upon the bankrupt's undertaking
to the Court to attend before Registrar Morris for the resumption of his examination on 9 September 1992 his Honour ordered, inter alia, that execution of the warrant of apprehension issued on 20 August 1992 be stayed until 2.15pm on 9 September 1992 or further order, that the contempt application and the section 179 application be adjourned to 16 September 1992 and that the examination of the bankrupt pursuant to section 81 of the Act be resumed on 9 September 1992.
The bankrupt appeared before Registrar Morris on 9 September 1992 and was further examined. The examination was then adjourned to a date to be fixed and the warrant of apprehension was discharged.
On 16 September 1992 the section 179 application and the contempt application were adjourned by consent to 21 October 1992.
By application bearing date "23 September 1990" which was filed on 1 October 1992 the bankrupt sought an order that the sequestration order be annulled. This application (the annulment application) was set down for hearing on 21 October 1992.
application, the section 179 application and the review On 21 October 1992 the further hearing of the contempt application was adjourned to 25 November 1992. No order was
made on the annulment application.On 24 November 1992 the bankrupt caused a summons to be issued requiring both the Deputy Registrar and the Official Trustee on 25 November 1992 to produce:
any books and/or documents in your custody or control an relatron with 3 applications by the bankrupt, and, in particular, the following documents:
All books, records, diary notes, correspondence, transcripts, reports and documents relating to the admrnrstration of the Estate of Denrs Maher (a bankrupt).
An application by the Official Trustee to set aside the summons addressed to the trustee was heard on 25 November 1992 in conjunction with the other matters set down for that day. On that occasion Ryan J ordered that the section 179 application, the review application, the contempt application and the annulment application be adjourned to a date to be fixed not before 2 February 1993. His Honour also set dates for the filing of affidavits and ordered that the summons to the Official Trustee for production of documents be set aside. On 9 December 1992 the bankrupt filed separate affidavits in support of the section 179 application and the annulment application. The latter application has not been pursued and it is unnecessary to refer to the affidavit filed in support of it.
On 17 December 1992 the bankrupt was at Tullamarine Airport about to depart for overseas when a search warrant, issued pursuant to section 130 of the Act, was executed. At the time some documents (including the bankrupt's passport) and money in his possession were seized. Permission, which had previously been given, for him to travel overseas was revoked. By application filed on 24 December 1992 the bankrupt sought orders for the return of the seized money and his passport and for permission to travel out of ~ustralia. Initially the application came before Sweeney J on 24 December 1992 when no orders were made and on 8 January 1993 Ryan J adjourned it for hearing on 13 January 1993. On 12 January 1993 the bankrupt filed 2 affidavits in support of the application which was heard by Ryan J on the afternoon of 13 January 1993 when a number of orders were made including an order, subject to conditions imposed by the Court, that the bankrupt have permission to travel overseas between 14 January 1993 and 29 January 1993. At the same time, the hearing of the 4 applications referred to in Ryan J's order of 25 November 1992 was fixed for 8 February 1993. Subsequently, by consent, the order of 13 January 1993 was varied to give the bankrupt permission to travel overseas between 21 January 1993 and 6 February 1993.
When the 4 applications were called on for hearing on 8 February 1993 the bankrupt, through his counsel, sought an adjournment on the ground that the bankrupt had only that
morning arrived back from overseas and had not been able to properly instruct counsel. After hearing argument and some evidence I directed that the hearing commence on 10 February
1993. The hearing did in fact commence on 10 February 1993 and continued on 11, 12 and 15 February 1993 on which latter day I reserved my decision. In the course of the hearing, on
11 February 1993, counsel for the bankrupt sought and obtained leave to file in Court an affidavit of Alwyn Samuel sworn on 10 February 1993.
As previously indicated, the bankrupt did not pursue the annulment application during the hearing. One of the reasons for not so doing was said to be that an application for special leave to appeal to the High Court is at present pending in another matter in which one of the arguments upon which the bankrupt seeks to rely will be raised. At this stage the argument has been rejected at first instance by a single judge of this Court and on appeal by the Full Court. The bankrupt's counsel also indicated that he was not in a position to proceed on the other ground raised in the annulment application which has to do with the validity of the
AMEX judgment. There was some controversy between the parties
as to how the annulment application should be dealt with. On the one hand the bankrupt sought to have it adjourned indefinitely pendlng the application to the High Court whereas on the other, the Official Trustee sought to have it dismissed. As long ago as 25 November 1992 Ryan J made orders for the hearing of the application and gave directions for the
Affidavits were duly filed. The hearing date was specifically filing of affidavit material in support and opposition to it.
fixed by further order on 13 January 1993. It was not until the bankrupt's case was about to be opened on 10 February 1993 that counsel indicated that the annulment application would not be pursued. In my view it is quite inappropriate that the annulment application should simply stand adjourned pending the conclusion of other proceedings. It may be that if the argument which is to be raised in the High Court was the only one to be relied upon, a different conclusion may well be
open, but the bankrupt seeks to raise the question of the AMEX judgment. Presumably he wants this Court to go behind that judgment. He could have been, and in my view he should have been, ready to proceed on that question but has chosen not to do so. The annulment application will be dismissed.
Nor was the review application pursued at the hearing. Obviously, the question of reviewing the decision to order the issuing of the warrant of apprehension which had been executed and discharged before the review application had been filed could never have achieved any useful purpose. The review application will be dismissed.
The two live matters before the Court are the section 179 application and the contempt application. It is appropriate that these two matters be dealt with separately as quite different considerations apply to the resolution of them. Before doing so, 1 will identify the affidavit material relied upon by the Official Trustee.
Fiona Catherine Davis Smith (MS Smith), a solicitor employed
in the office of the Australian Government Solicitor, has made
four affidavits. The first in time was affirmed on 13 August 1992, and was filed in Court on that day in relation to the matter dealt with by Sweeney J. The second, also affirmed on 13 August 1992, was filed on 21 August 1992 and had to do with the question of deferring the bankrupt's examination which was raised in the review application, and which was dealt with by Ryan J on 26 August 1992. The third affidavit was affirmed and filed on 21 August 1992 in support of the contempt application filed that day. MS Smith's final affidavit, affirmed on 22 December 1992, was in reply to a number of minor points raised in the bankrupt's affidavit of 9 December
1992. Mrs Margaret Evelyn Bull (Mrs Bull), an officer in the employ of the Official Receiver in Bankruptcy, swore an affidavit on
23 December 1992 in response to the bankrupt's affidavit of 9 December 1992. Mrs Bull's affidavit has exhibited to it a large number of documents from the records of the Official Trustee.
Terence David Clarke (Clarke), an assistant Official Receiver in Bankruptcy swore an affidavit on 27 May 1992 which was used in the proceedings which came before me on 29 May 1992. On 2 February 1993 he made a further affidavit in which he corroborated and explained some aspects of Mrs Bull's
affidavit and replied to some aspects of the bankrupt's affidavit of 9 December 1992. On 2 February 1993 Blanche Theresa Manuel (MS Manuel), an officer in the employ of the Official Receiver in Bankruptcy, swore an affidavit relating to her dealings with the bankrupt in the period from July 1991 to March 1992.
The bankrupt was cross-examined by counsel for the Official Trustee. He was an unimpressive witness. By and large both his affidavit and oral testimony lacked credibility. His inability (or rather, in my view, his reluctance) to identify the source of the money used to fund hls wife's legal costs in a 23 day hearing in the County Court ln June, July and August
1992 was but one instance of his general attitude of prevarication when pressed on issues likely to damage his case. Except to the extent that his evidence was corroborated from some other credible source, I found the bankrupt's testimony lacking both in candour and credit.
Clarke, MS Manuel, Mrs Bull and MS Smith were cross-examined by counsel for the bankrupt. Clarke, MS Manuel and Mrs Bull were subjected to a deal of criticism during their respective cross-exammations and in counsel's final address. In my view, such criticism was unfair and unwarranted. Each witness appeared to me to be both competent and honest. In accordance with hormal practice each had made contemporaneous notes of conversations and other relevant events. Those notes have
been put in evidence and the authors cross-examined on them.
I accept such notes as have been put in evidence as an
accurate record of the events they purport to record. To the extent that the bankrupt's evidence contradicts the contents of any of such notes, I have rejected it as lacking credit.
THE SECTION 179 APPLICATION The bankrupt's application filed on 30 July 1992 seeks orders: 1. That thrs Honourable Court enquire into the conduct Of the Official Trustee in relation to the administration of the Estate of Dennis Maher and in particular enquire lnto the Official Trustee's conduct of the public examination of the said Dennis Maher and into the Official Trustee's
failure to take reasonable steps to preserve the said
estate of Dennis Maher and into the Offrcial Trustee's
conduct of the defence of proceedrngs m the County Court
of Victorra between Elizabeth Joanne Marie Maher as
plaintiff and the Officral Trustee and others as
defendants being action number MC915276 in that Court.2. That this Honourable Court remove the Official Trustee as trustee of the estate of Dennis Maher and make such order as rt thinks proper.
3. That the Official Trustee pay the applicant's costs of
t h ~ s applrcatron. 4. Such further or other orders as may be lust.
The statutory basis for the jurisdiction of the Court upon the application of a bankrupt to enquire into the conduct of a trustee and to remove and replace a trustee 1s found in subsection 179(1) of the Bankruptcy Act which provides:
179(1)
The Court may, on the applicatron of the Registrar, the Inspector-General, a credltor or the bankrupt, inquire Lnto the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:-
(a) remove the trustee from off~ce; and (h) make such order as it thinks proper.
matters particularised in the application. After referring to In opening the bankrupt's case counsel did not adhere to the "the problems relating to AMEX", counsel indicated that the
bankrupt relied upon the following matters:* The failure of the Official Trustee to prevent the eviction of the bankrupt from his home at 9 Knight Street, Clayton pursuant to a writ of possession obtained
by the National Australia Bank (NAB).
* The seizure and sale by the Official Trustee of a caravan
said to belong to the bankrupt's daughter.* The failure of the Official Trustee to prevent the
attempted sale by the NAB of farm properties at Buchan.
* The failure of the Official Trustee to advise the
bankrupt of claims made against the estate.
* The failure of the Official Trustee to properly
administer the estate.
* The attempts made by the Official Trustee to stop the
bankrupt going overseas.During the course of the hearing two other matters were raised; one related to a Holden utility and the other to the
company named Kitoria Pty Ltd. Further, by way of general seizure by the Official Trustee of goods said to belong to a submission, it was said that there has been a total destruction of any proper relationship between the bankrupt and the Official Trustee and that regardless of the rights and wrongs of the matter, it is now desirable that another trustee should be appointed to administer the estate.
I propose to deal with each of the foregoing matters. There is clearly some overlap between the various matters raised but I will, so far as possible, endeavour to deal with them as discrete issues.
1. The Eviction
The bankrupt's evidence (as set out in his affidavit of 9 December 1992) was that on or about 25 October 1991 the Sheriff called at 9 Knight Street, Clayton (hereafter referred to as Knight Street) and informed him that he had been instructed to evict the bankrupt and his family from those premises pursuant to an order obtained in the Supreme Court by the NAB. The bankrupt sald that he immediately contacted Clarke at the Official Receiver's office and advised him that his (the bankrupt's) wife had a half share in Knight Street and other properties registered in his name, that he (the bankrupt) was not indebted to the NAB and that Clarke should take proceedings to protect property which would form assets of the estate. He said that Clarke told him that he would make arrangements to stop the bank from proceeding with the
eviction and that he would investigate the bank's claim
against the estate. On 29 October 1991 the Sheriff, in the absence of the bankrupt and his family, cleared the house at Knight Street of its contents and dumped the same on the nature strip in front of the house. Shortly thereafter the bankrupt took proceedings against Clarke in the Supreme Court in an endeavour to regain possession of the property but these proved abortive. On 7 December 1991 the bankrupt's wife took proceedings in the County Court claiming an equitable interest
in certain properties registered in the bankrupt's name and obtained an interlocutory injunction against, inter alia, the NAB and the Official Trustee preventing them from taking any action against those properties. On 20 January 1992 the injunction was continued until the hearing and determination of the proceedings. Mrs Maher's action (in which the bankrupt was one of the defendants) commenced in June 1992 and was heard over a period of 23 days. The decision was given on 2 November 19 9 2 . The bankrupt said the judge's decision "vindicated my claim that I was not indebted to the National Australia Bank". This is not an interpretation of the decision adopted by his counsel in these proceedings. However, it is the case that the judge found the NAB mortgage to have been altered after it had been executed and declared its registration over the title to Knight Street and 2 other properties to be void.
Clarke denied that he at any time said to the bankrupt that he would make arrangements to stop the NAB from proceeding with
the eviction of the bankrupt. Clarke's contemporaneous file
notes suggest that he had telephoned the bankrupt on 28 October 1991 to advise that a statement of affairs was required. In the same conversation Clarke advised the bankrupt that it appeared that the NAB was a secured creditor and as such the Official Trustee "would not step in". It is a fair inference that this last comment referred to the then impending eviction of which the bankrupt had been given notice on 25 October 1991. In an undated letter which bears the
Official Trustee's date stamp suggesting it was received on 1
November 1991, the bankrupt's then solicitors Klonis Kirby &
CO wrote to Clarke as follows:
RE: Mr Dennis Maher
Federal Court Flle VB1969
We act for Mr Dennis Maher.
We are instructed that Mr Kratos has, on behalf of Mr Maher advised you on 25 and 28 October, 1991 of the Supreme Court matters herein.
We are instructed as follows:-
1. In Supreme Court Proceedings 1991 No. 12422, 12429 and 12430 the Natronal Australra Bank Limlted has entered judgment against our client pursuant to one of those judgments.
2. Pursuant to the said judgment, the Sheriff selzed our client's home situate at and known as 9 Knight Street, Clayton "the property" and expelled Mr Maher and his fam~ly on 29th October, 1991 as well as selzrng the two farm properties also owned by Mr Maher.
3. Our client believes judgment was entered against hlm because of:-
(a) neglect by Messrs Masons, his former Solicitors, to frle a Letter of Credrt to satisfy an order for securlty for costs made by Master Evans on the 17th July 1991. (b) the order in default may otherwise be rrregular rn that he may have been bankrupt at the tlme. 4. Further, Mr Maher rnstructs he has a sound defence to the
substantive actrons by the National Australia Bank. 5. The Sheriff's Officers have on Tuesday the 29th October 1991 informed Mr Maher that he has until Sunday the 3rd November 1991 to remove all his family's possessions from
the property, failing w h ~ c h it wrll be thrown away.
It would be to the obvious detriment of the bankrupt estate if the National Australra Bank were permitted to force a sale of the property at a forced sale by the Sheriff, with the consequent much reduced prices, without the judgment and its merits being contested.
The detriment caused by disposal of Mr Maher's possession is self-evrdent.
Our client requests that you immedrately commence proceedrngs as follows:-
A.
to seek an interim injunction that the Sheriff give up possession of 9 Knight Street, Clayton and not hinder our client or his family returning there.
B.
to seek to set aside the Judgments in the Supreme Court matters referred to above.
As this matter rs in (sic) of great urgency to our client, we request that we have your confirmation that the above proceedings will be rssued forthwith. If we do not have such conf~rmation by 10.00 am on Frrday 1st November, 1991 we propose tomorrow to apply on Mr Maher's behalf for a mandatory injunction that you issue such proceedings forthw~th.
This letter may be produced to the Court at the hearing of the matter.
It is common cause that on 1 November 1991 Klonis Kirby & CO as solicitors for the bankrupt commenced proceedings in the Supreme Court claiming a mandatory injunction to compel Clarke to issue proceedings in the Supreme Court in 3 matters in which the NAB had obtained summary judgment with a view to having those judgments set aside. This was the action which the bankrupt said was abortive. There was nothing in the statement of claim or in an affidavit sworn by the bankrupt on
4 November 1991 and filed in those proceedings to suggest that
Clarke had given the assurance said to have been given to the bankrupt. Furthermore, the letter from Klonis Kirby & CO received on 1 November 1991 suggests that the bankrupt had not
that if such instructions had been received, that no reference Given the circumstances of the case it is highly improbable instructed his solicitor concerning the alleged assurance. would have been made to the claimed conversation in either the
letter, the statement of claim or the affidavit.I reject the bankrupt's evidence that Clarke gave an assurance that he would make arrangements to stop the NAB from proceeding with the eviction. For similar reasons I reject the bankrupt's assertion that he advised Clarke at any time prior to the eviction that his wife claimed a half share in Knight Street and the other properties.
I am satisfied that nothing was brought to the attention of Clarke prior to the eviction of the bankrupt from Knight Street that called for him to take any action to try to prevent the eviction being carried out.
2. m
In his affidavit of 9 December 1992 the bankrupt said that on
or about 5 December 1991 he learned that a 30 foot caravan
belonging to his daughter Julieanne Louise Maher (Miss Maher)
had been removed from 9 Knight Street. He said that he
thereupon contacted his daughter who wrote to Clarke on 16
December 1991 claiming ownership. In a letter dated 22
January 1992 signed by MS Manuel for the Official Trustee, a
request was made for details concerning the claim. The
bankrupt said in his affidavit that on 13 February 1992 his
as it had been given to her as a gift on her 18th birthday in daughter advised MS Manuel that the caravan was owned by her 1983. It is said that the Official Trustee ignored the claim
and "promptly" sold the caravan for $3,900. The bankrupt
claimed it to have been worth $15,000.The affidavit of Samuel sworn 10 February 1993, which was filed by leave during the course of the proceedings, asserts that acting on the instructions of Miss Maher he issued a writ against the Official Trustee out of the County Court at Melbourne on 5 February 1993 claiming return of the caravan and damages for conversion.
In the course of cross-examination, in response to questions from the bench, the bankrupt said that his daughter had written a letter to the Official Trustee in response to the request for details of her claim, and he said that he knew this because he had posted the letter, although he could not say when.
Contemporaneous file notes made by Clarke indicate that on 3 December 1991 in a telephone conversation with one Michael Maine, a solicitor acting for the NAB, Maine advlsed him that there was a caravan and other equipment at Knight Street. It is common cause that Clarke made arrangements for the caravan to be seized on behalf of the Official Trustee shortly thereafter. The records of the Official Trustee show that by letter dated 16 December 1991 Miss Maher claimed ownership of
the caravan and requested delivery of it to an address at
Clayton. The letter made no reference to the caravan having
been a gift for her 18th birthday. By letter dated 22 January 1992, MS Manuel on behalf of the Official Trustee wrote to Miss Maher and after referring to her letter of 16 December 1991 requested that within 14 days she provide documentary evidence of her title or alternatively, should no documentation exist, she was asked to provide a brief outline of the circumstances under which ownership of the caravan passed to her. There is no evidence in the records of the Official Trustee of any response having been received and this notwithstanding the assertion by the bankrupt in his affidavit that his daughter advised MS Manuel on or about 13 February 1992 that the caravan had been given to her on her 18th birthday in 1983 and his evidence in Court that on a date unknown he had posted a letter written by his daughter to the Official Trustee to the same effect. By letter dated 22 April 1992 Mrs Bull on behalf of the Official Trustee wrote again to Miss Maher to the address which had been given in her letter of 16 December 1991 and to which the letter of 22 January 1992 had been sent. Mrs Bull referred to and enclosed a copy of MS Manuel's letter of 22 January 1992, and went on to indicate that unless evidence to support the claim to ownership was provided withln 14 days the caravan would be sold. No response was received and the caravan was sold early in May 1992 for $3,900.
No evidence was provided from Miss Maher in these proceedings. There has been no explanation as to why she could not give evidence or swear an affidavit. Samuel's affidavit of 10 February 1993 raises more questions than it answers. Presumably he swore the affidavit in his capacity as Miss Maher's solicitor and it goes without saying that he would not have done so without her instructions, as otherwise he would be in breach of his professional duty of confidentiality. Given the lateness of the affidavit it must be inferred that Miss Maher had been in touch with him some time just before 10 February 1993. The absence of any evidence from Miss Maher herself called for an explanation and none was given. The only inference I can draw from the failure of Miss Maher to give evidence in these proceedings is that any evidence she might have been able to give would not have supported the claim being made.
I reject the bankrupt's evidence that he posted a letter to the Official Trustee on behalf of his daughter following receipt by her of the letter of 22 January 1992. In the absence of a reply to two letters written 3 months apart, the Official Trustee was obviously entitled to assume that Miss Maher had no intention of pursuing her claim to ownership of the caravan. The fact that proceedings in her name were not taken for well over a year after the seizure, and then only on the eve of the trial of these proceedings suggests that whatever claim she now makes, it has not been one that has concerned her to any extent over the intervening period. Another fact which throws some doubt on the claim that the
interview with MS Manuel on 5 February 1992, at which his caravan was a gift to her by her parents is that in an solicitor Jonathan Wong was present, the bankrupt had asked why the caravan had been seized as it had not been listed in his statement of affairs. Accepting, as I do, that the notes made by MS Manuel at the time faithfully record what was said on that occasion, it appears that the bankrupt did not then assert that the caravan belonged to his daughter, nor did he make any reference to it having been a birthday present.
The bankrupt has failed to establish any facts which would lustify a finding that the Official Trustee had acted otherwise than in a perfectly proper manner in relation to the caravan.
3. The Attemvted Sale of the Buchan Properties The letter from Klonis Kirby & CO quoted above which appears to have been received by the Official Trustee on 1 November 1991 raised the prospect of the forced sale of the properties at Knight Street and Buchan by the NAB. At that stage what was being sought was the Official Trustee's assistance in having the Sheriff give up possession of Knight Street and to have the NAB judgments set aside. The Court proceedings foreshadowed in that letter were in fact commenced on 1 November 1991 and in them the bankrupt sought to compel the Official Trustee to take action in relation to those judgments.
On the same day as he received the letter last referred to,
the matters raised. Although there is no extrinsic evidence Clarke had a number of telephone conversations in relation to to indicate the order in which the conversations took place, it appears from the contents of Clarkels contemporaneous file notes that he first spoke to someone at the Sheriff's office who advised that the bankrupt had been evicted on 29 October. Clarke was also told that the solicitor acting for the NAB was Michael Maine of Abbott Tout Russell Kennedy. Clarke telephoned Maine who told him that the NAB had a mortgage over 3 properties and that he would provide the Official Trustee with copies of the certificates of title and the mortgage document. Clarke also spoke to Mr Klonis of the bankrupt's solicitors. He told Klonis that the Official Trustee was not prepared to intervene in the matter between the bankrupt and the NAB as it was his impression that the NAB was exercising its rights as mortgagee. He also advised Klonis that he was "somewhat in the dark" due to the bankrupt's failure to provide a statement of affairs despite numerous requests.
On 4 November 1991 Clarlce received from Abbott Tout Russell Kennedy photocopies of the following documents namely, certificate of title volume 5118 folio 518, certificate of title volume 6847 folio 258, certificate of title volume 8941 folio 014, mortgage M658502V and a notice of demand dated 13 October 1990 addressed to the bankrupt by the NAB requiring payment of $382,885.11 said to be owing to the NAB and secured by mortgage M658502V. Each of the three certificates of title
the NAB being mortgage M658502V. The Copy mortgage document indicated that a first mortgage was registered in favour of showed the bankrupt as the sole registered proprietor and each was in the name of the bankrupt as mortgagor and the NAB as mortgagee and the land affected by the mortgage was shown as the three titles referred to above. It would have been obvious from the copy documents received that certificate of title volume 5118 folio 518 was the title to Knight Street and that the other 2 titles related to the 2 properties at Buchan.
Late on 4 November 1991 (the print of the facsimile machine suggests it was at 5.07pm) Klonis Kirby & CO sent to Clarke by fax a letter enclosing a copy of an affidavit sworn by the bankrupt that day in relation to the bankrupt's Supreme Court action against Clarke. The affidavit dealt mainly with the bankrupt's case to have the NAB judgment set aside but it also had exhibited to it a copy of an affidavit sworn by the bankrupt on 7 July 1991 and filed in Supreme Court proceedings between the NAB and the bankrupt in support of an application by the bankrupt to set aside the NAB judgment. In the latter document the bankrupt set out his dealings with a Mr McDonald, the NAB branch manager with whom he had dealt. It is unnecessary to canvass in detail all of the matters deposed to but for present purposes a number are relevant. I refer in particular to the following passages which are extracted from
the af fidavit :
3. ... Mr McDonald stated that he required security for the
proposed loan to me and I stated to him that I was prepared to deposit with hrm four titles which I had in
my possessron. subject of these various proceedrngs and the title to the These titles are the three titles the North Road property. I stated to Mr McDonald that he could retain each of these titles as security for the proposed transaction and that he could collect the money lent to me from the settlement of the proposed sale of the North Road property.
4. The value of the properties described in the four certificates of title which I deposited with Mr McDonald was between $900,000 and $1,000,000 at the time.
5. Mr McDonald did not state to me that he required to take formal security over these titles by way of mortgage, or otherwise. Had Mr McDonald required formal security I would not have been prepared to enter rnto such an arranqement as I considered the holding of four unencimbered titles to be more than -sufficient, particularly in view of the value of the properties - . described in the various titles.
6. It now appears that at the time I signed a mortgage over
the three properties the sub3ect of these actions, which is exhibit "ASM 1A" to the Affidavrt of Alexander Stewart McDonald sworn the 17th of May 1991 and filed herern. At the trme I signed this document I drd not understand what
I was signrng nor did I have any intention of giving
formal securrty to the Plaintiff herein. As previously stated, I would not have grven the Pla~ntrff thrs amount of security had the transaction been properly explarned to me.
7. ... At the time I srgned the document I was under the
impression that the document was a form of acknowledgment for the deposit of the titles previously referred to herein.
11. I refer to the Affidavit of Noel Richard Young sworn the 16th of May 1991 and exhibits thereto. In particular, I refer to the letter of the 26th of September 1989 from the Plaintrff to me whrch forms part of exhrbrt "NRY 2". Upon recerving thrs letter I became aware that the Plaintrff purported to hold registered mortgages over the various propert~es. Accordrngly, immediately upon receipt of this letter, I contacted the then manager, Mr Gnrel, to state my surprise at the assertion that registered mortgages were already held. I further stated to him that I would not agree to any further ref~nancmg
proposals as suggested in the letter and I would look to
sell one or more of the properties rn order to d~scharge
my rndebtedness to the bank so that I may retrleve the
trtles whrch I believed were held on security deposit by
the bank.13. I state that my conduct throughout has been consistent wrth my orrgrnal understanding with Mr McDonald namely, that the tltles would be deposited with the bank wrth a view to the bank holding these titles on safety deposit until all of my indebtedness to the bank had been repaid. I do not deny being rndebted to the bank although I do deny the alleged extent of my indebtedness.
Wong, who was then acting as the bankrupt's solicitor. The On 3 December 1991 MS Manuel received a telephone call from thrust of the conversation was that Wong advised that the NAB intended selling Knight Street the following week. He asked that the Official Trustee stay the bank's action and required the consent of the Official Trustee either to take action or join in action by the bankrupt to set aside the proposed sale on the ground that the sale would be detrimental. Wong claimed that the property (presumably all of the 3 properties covered by the NAB mortgage) was worth about $750,000 and that the bank was owed $380,000. He said that a "fire sale" would bring forth a very low return. MS Manuel recorded the conversation in a memo to Clarke and sought his instructions as to what should be done. Clarke contacted Wong that day by telephone. Wong repeated the claim that a forced sale would be detrimental to the estate and would realise significantly less at auction, thus leaving less surplus to the estate. Clarke restated the Official Trustee's attltude that as the NAB was a secured creditor and was legally in possession he could not see that there was any basis upon which the bank could be hindered. Also on 3 December 1991, Clarke,-telephoned
Maine. The file note made by Clarke at the time suggests that the purpose of his call was to ascertain the total indebtedness of the bankrupt to the NAB and whether the properties had been valued for sale. Maine told him that the properties had been valued for sale and were to be auctioned in accordance with their valuation. He said that the two
Knight Street on 7 December 1991, and that he expected that rural properties were to be auctioned on 6 December 1991 and after realisation there would be a deficiency. He undertook to provide Clarke with the valuations and details of the amount owing by the bankrupt, said to be $495,102.47 as at 29 November 1991 plus legal costs of at least $10,000. Maine said that the larger rural property had been valued at $170,000, the smaller one at $130,000 and Knight Street at $96,000. He also said that all but 80 acres of the rural
-.
properties was i r e and because of environmental issues could not be cleared. The next action seems to have been on 5 December 1991 when Wong telephoned Clarke and said that the validity of the mortgage document was in question as was the quantum of the debt owed to the NAB. He requested that Clarke intervene in the interests of the bankrupt. Clarke told him that he had been told that $495,000 was owing to the NAB but Wong stated that he understood that the amount should only be $150,000. Clarke reiterated that he would not intervene in the sale but would question the bank concerning the amount of its claim,
-.
-.
ana li apt;roprt=~+ :ay alr:: , -tance. Wong then hinted that there may be Court actlon.
Although all of the relevant documents are not before t
Court it is common cause that on 7 December 1991 t~..bankrupt's uriEe (Mrs Maher) obtained an interim interlocutory
NAB from proceeding with the sale of the 3 properties cowred injunction in the County Court at Melbourne restraining the by its mortgage. The basis upon which the injunction was obtained appears to have been a claim by Mrs Maher that she was entitlcd to a half interest in the 3 properties and further that she disputed the NAB mortgage. A writ was filed on 16 Decemer 1991 joining, inter alia, the bankrupt, the NAB and the Official Trustee as defendants. On 20 January 1992 an order was made continuing the injunction until the hearing and determination of the proceeding. On 20 January 1992 MS Smith
appeared on behalf of the Official Trustee and informed the County Court that it was not the intention of the Official Trustee to take any part in the proceeding but rather to abide the decision of the Court as it was the Official Trustee's view that the NAB had security over the properties and the bankrupt had no equity. On 12 March 1992 Mrs Maher obtained judgment by default against the Official Trustee.
Mrs Maher's action was heard in the County Court over a period of 23 hearing days during June, July and August 1992. The judge delivered his reserved decision on 2 November 1992. He found that Mrs Maher was entitled to an undivided half share as tenant in common with the bankrupt in each of the 3 properties referred to in the NAB mortgage. He also found that the bankrupt had no authority, either express or implied, to mortgage or create any form of security over Mrs Maher's equitable interest in the three properties and further that the mortgage document had been altered after it was executed by the bankrupt by the addition of the title particulars of
the two Buchan properties. His Honour found that the material
alteration made to the mortgage instrument by or at the
direction of McDonald after its execution constituted fraud and consequently as registration of the mortgage under the
Transfer of Land A c t , had been procured by fraud, the bank, as a party to the fraud through the actions of its servant or
agent McDonald, could take no benefit from the registration.The allegation that the mortgage instrument had been altered after being executed by the bankrupt was not originally part of Mrs Maher's case but rather was included in an amendment to the statement of claim made by leave on 10 June 1992 which I am told was about a week before the trial commenced.
One of the complaints made against Clarke in his capaclty as the responsible officer of the Official Trustee is that when he received a copy of the mortgage from the NAB'S solicitors on 4 November 1991 he did not detect that the two title numbers relating to the Buchan properties appeared to have been typed at a different time from the title relating to Knight Street. But when it was put to the bankrupt's counsel (who had also appeared for Mrs Maher in the County Court) that the amendment relating to this issue had not been made until a very late stage in the proceedings, I was told that there had been difficulty in obtaining access to the documents. I do not accept this explanation. As long ago as 7 July 1991 the bankrupt had sworn an affidavit in which he referred to the
mortgage as having been exhibited to another party's affidavit (para. 6 quoted above) and I am satisfied that a copy of the mortgage was available to the bankrupt and his legal advisers long before the issue of forgery was raised in the County Court proceedings.
In his opening, the bankrupt's counsel complained that the Official Trustee had failed to prevent the attempted sale of the Buchan properties and in the application itself, one of the particular matters into which an enquiry is sought is "the Official Trustee's conduct of the defence of proceedings in the County Court of Victoria between Elizabeth Joanne Marie Maher as plaintiff and the Official Trustee and others as defendants ...". Given that an injunction restraining the sale of the properties was in force from 7 December 1991, the conduct of the Official Trustee must be assessed on the information he had or ought reasonably to have had before him at that time. Clarke had first seen a copy of the mortgage on 4 November 1991. I reject the suggestion that the mortgage on its face indicated forgery. The copy titles showed that registration had been duly effected and given the absence of any allegation of forgery at that stage it was reasonable that Clarke should rely upon the registration as evidence of the validity of the document. Apparently the mortgage had passed whatever scrutiny the Registrar of Titles subjected it to before accepting it for registration. The only information Clarke had which questioned the validity of the mortgage was
the copy of the affidavit the bankrupt had sworn on 7 July 1991 and Wongfs statement on 5 December 1991. To that stsge nothing had been done by the bankrupt in relation to the mortgage and Wong did not amplify his assertion that the validity of the mortgage would be challenged. It seems to me that there was no cause for the Official Trustee to take any action, he having been told that Court proceedings were likely. Furthermore, it is my opinion that in deciding not to take an active role in defending Mrs Maher's County Court action but rather to abide the decision of the Court the Official Trustee adopted a proper and prudent approach to those proceedings.
4. The Failure to Advise the Bankru~t of Claims In his opening the bankrupt's counsel, in itemising the matters relied upon by the bankrupt, said:
The next matter is that there has been a failure to advise Mr Maher of the various claims made against the estate. That 1s set out in paragraph 34 of the affidavrt in December.
(Ts 52)
Counsel probably intended his reference to paragraph 34 to include paragraphs 31 to 35 inclusive, the general thrust of which I summarise as follows:
On 9 April 1992 the bankrupt wrote to the Official Trustee requesting he forward any documents in relation to any proceedings being taken regarding the estate but, he said, the letter was not answered. On 8 September 1992 he again wrote requesting advice on what claims had been lodged against the estate and other matters concerning the funding of the legal
costs of the Official Trustee. He said that further
correspondence ensued between Clarke and himself but no answers were given to his queries relating to claims lodged against the estate. On 6 October 1992 MS Smith wrote to him and advised that he could obtain information on his file by
applying under the Freedom o f Informat ion A c t . In his affidavit the bankrupt said (in para. 31) that his letter of 9 April 1992 was prompted by his discovery that his
public examination under section 81 had been set down for hearing on 18 March 1992 but had been adjourned because the summons for his attendance had not been served. He said this concerned him as he had returned to Knight Street in March 1992 and had informed the Official Trustee of his address and could easily have been served with any documents at that address.
This last assertion does not sit comfortably with the fact that the letter the bankrupt wrote on 9 April 1992 gave his address as 3/124 Xelvinside Road, Noble Park which is the address shown in the section 81 summons issued on 27 February 1992.
The bankrupt failed to mention in his affidavit that on 28 April 1992 he attended at the Official Trustee's office with his solicitor Samuel and had an interview with Mrs Bull. I accept Mrs Bull's evidence that exhibit MEB 22 to her
affidavit is a true contemporaneous record of that interview and that at the time she supplied the bankrupt with various information in relation to properties at Lot 4 South Gippsland Highway, Cranbourne, 9 Knight Street, Clayton, Coolum in Queensland, 1358 Centre Road, Clayton and Anchorage Way, Dutson. She also provided copies of proofs of debt lodged by the ANZ Bank and the Bank of New Zealand and informed the bankrupt of the information contained in a letter received from the NAB in relation to a debt of $511,186.06 which it alleged was owing to it by the bankrupt.
On 14 September 1992 the Official Trustee received from the bankrupt a letter dated 8 September 1992 which was transmitted by fax at 2.30pm on the day of its receipt. Clarke replied by letter dated 15 September 1992 which was sent to the bankrupt by fax at 9.48am on that day.
The full text of the bankrupt's letter and of Clarke's reply are set out below:
PER FAX 629 2885
The O f f r c l a l Trustee i n Bankruptcy 9 Knight S t
Level 10 470 Collrns S t r e e t Clayton 3169 Melbourne 3000
Sept ' 8 th , 1992 Dear S i r s RE: BANKRUPTCY ESTATE OF DENNIS MAHER NO VB 1969 OF 1991
ATTENTION A PAGE & T CLARKE
I r e f e r t o my various reques ts t o your o f face attemptrng t o
a s c e r t a i n t h e current s t a t u s of my 'a l leged ' bankrupt e s t a t e . I would apprecrate a s a matter of urgency t h a t I be given an
opportunity t o inspect your books, accounts, and records by Monday 14 September 1992 a t 4.00 pm a s I bel ieve I am e n t i t l e d t o under t h e Bankruptcy ~ c t .
I would appreciate your advice as t o what claims have been admitted, denied and rn dispute. I a l s o would apprecra te your
advice a s t o which of t h e c r e d i t o r s is f inancing t h e l e g a l
c o s t s an r e l a t i o n t o my publ ic examination and t h e varrous o the r ac t ions being taken agaanst me.
There a r e a number of p o t e n t i a l ac t ions and a number of cu r ren t
l e g a l ac t ions , t h e r e s u l t of whrch may depend on your a c t i o n s
taken i n t h e pas t and i n t h e near fu tu re . I suggest a c lose
l i a r s o n wrth your o f f r c e and myself would a s s i s t a l l p a r t r e s
involved i n my bankruptcy r a t h e r than what I be l i eve t o be my
persecution by t h e l e g a l fo rces i n t h e Bankruptcy Court.
Notwithstanding t h e above, i f your o f f r c e and t h e var ious
c r e d r t o r s would r a t h e r a confrontatron approach may it be on
your conscious ( s i c ) and t h e c r e d i t o r s spending v a s t sums of
money on t h e l e g a l professron during t h i s recessaonary period. I put you on no t i ce t h a t i f you do not cooperate and allow m e
access t o t h e documentation r e f e r r e d t o here in and provide m e
with an interim repor t of my bankruptcy t o d a t e wi th in t h e t i m e
spec i f i ed , I intend t o t ake t h e appropr ia te ac t ion agains t you
and in tend t o w r i t e t o a l l t h e a l l eged c r e d i t o r s s e t t i n g o u t
t h e accura te version of my bankruptcy. Yours Farthfully
Dennrs Maher.15 September 1992 Mr Dennis Maher
Facsimile No. 544 5688
Dear Sir
RE: YOUR BANKRUPT ESTATE NO 1969 OF 199116 (M41
I refer to your facsimile transmrssion dated 8 September 1991 and recerved on 14 September 1991 at 2.30pm.
I wish to advise that the relevant sectron of the Act upon
which you rely to seek information is Section 170(2) of the
Bankruptcy Act 1966 which states:-'The trustee shall, at the request of the bankrupt, furnish to the bankrupt information reasonably requ~red by the bankrupt concerning his property or affarrs' .
In respect of this section of the Act I would appreciate your further advice as to the purpose of your request. Obviously, rf there is a partlcular rssue then there may be a partrcular sectron of the file that may relate. Notwithstanding however, there are certarn sectrons of your frle whrch I must claim professronal privrlege, for example, advice to my solicitor and any related response.
I note in your facsimile that you would apprecLate my advlce as to what claims have been admitted, denred and in dispute. Thrs request appears to be somewhat vague and I would appreciate either your elaboration or something more specific so that I may reply.
On the questron of legal costs I advrse that costs are being funded by the Commonwealth and to date none of the creditors
have partic~pated rn any fundmg. I note your comment that there are a number of current and/or potential legal actions. In respect of any potentral actions I request that you provrde full details, in writing, in order that I may judge each on their merits. A closer lrarson, as you suggest, can only be of benefit.
Finally, in respect of your request to be given an opportunity to inspect the file by Monday 14 September 1992 at 4.00 pm I w ~ s h to advise that it will take me a week or two to prepare the file. I also require that you respond to the above matters prior to my preparing the file for your inspection. As indicated above I will require, say two weeks after receipt of your further advrce, before the relevant sections of the file will be avarlable.
I trust that this will be satisfactory.
Yours faithfully
(signed)T D CLARKE
FOR OFFICIAL RECEIVER
The bankrupt replied by letter dated 2 October 1992:
PER FAX 629-2885
The Official Trustee in Bankruptcy
~ e v e l 10 9 Knight Street
470 Colllns Street Clayton, 3169 Melbourne 3000 October 2nd 1992 Dear Slrs RE: BANKRUPT ESTATE OF DENNIS MAHER
NO. VB 1969 of 1991
ATT: Mr T.D. CLARKEI refer to your facsimile of 15 September and thank you for the contents therern.
Without wrshlng to be dlfflcult however, I suggest that you have not answered my letter In sufficient detail to enable me to assess my position. I note that it would take you a week or two to prepare your file and I therefor request that you contact me by your letter once your offlce 1s Ln a posltlon for me to lnspect my file.
I seek an explanation as to the professional privilege issue and would appreciate the citation of any case law in support of your propos~tron.
My request in respect of claims is qulte clear, however if you are unable to answer this matter I am sure I will be able to clarify same upon perusal of my file. It is often s a ~ d that some business keep two sets of books. I assure you that if it is your intention to create two sets of books to prejudice the presentatron of my legal actions a subpoena at the appropr~ate time on your office and those of the varrous alledged creditors may become embarrassing.
(sic)
Yours Faithfully
DENNIS MAHER.(signed)
On 6 October 1992, MS Smith wrote to the bankrupt at the
request of the Official Trustee to provide an explanation of legal professional privilege. In the final paragraph of her letter she said:
You may a l s o request access t o your f i l e v i a Freedom of
Information. Once a reques t has been made pursuant t o t h e Act
and an approprrate f e e pa id my c l i e n t has twenty-eight ( 2 8 ) days wrth l n whrch t o process your request .
The evidence establishes that the assertions made in paragraphs 31 to 35 of the bankrupt's affidavit are without foundation.
5. Failure to Pro~erlv Administer the Estate In his opening counsel for the bankrupt said:
Next, your Honour, t h e r e has r e a l l y been, we would submit, no
proper adminrstrat ion of t h e e s t a t e . There would have been by
t h r s s tage , w e say, a proper rnqulry r n t o what clarms, i f any,
t h e ANZ bank i n p a r t i c u l a r , and t h e National Bank, have.
( T s p. 52)
The bankrupt has not made any specific allegations of fact to support this complaint although Clarke was cross-examined at
properties over which the NAB claimed to hold security. some length concerning matters relating to the value of the It is now the bankrupt's case that no debt is due to NAB. He says that whatever liability there may be to the bank it is owed by a company, not by him. This of course is contrary to his sworn affidavit of 7 July 1991 in which he admitted some liability to the bank (para. 13 quoted above) and is inconsistent with Wong's statement to Clarke on 5 December
1992 that he understood the debt to be only $150,000.
Whatever may be the position, the NAB has not yet submitted a proof of debt and in the circumstances the Official Trustee has neither admitted nor rejected its claim.
So far as the properties at Knight Street and Buchan are concerned, the decision of the County Court would seem to deprive the NAB of the ability to rely upon its mortgage as a security, but this is not to say that the bank does not hold some equitable security by way of deposit of the title deeds. The County Court decision is at present subject to an appeal by the NAB and it is not possible to say when the matter will be finally resolved.
The ANZ Bank also claims to be a secured creditor. It has submitted a proof which has been neither admitted nor rejected. The bankrupt has indicated that he disputes the bank's claim. At present the bank is in possession of the rents and profits of one of the properties over which it
claims security. The bank has not yet valued its security for the purpose of its proof of debt. In addition to the foregoing, the bankrupt disputes a claim for $180,000 made by Westpac Bank. This bank has security over a property in Queensland which is registered in the bankrupt's name and which is subject to a registered mortgage in favour of Westpac. In proceedings commenced in the County Court of Victoria on 8 April 1992 Mrs Maher claimed a half
interest in the property free from encumbrances. There is no evidence as to how far those proceedings have progressed but there is clearly a need for them to be resolved before the extent of Westpac's claim can be finalised.
It should not be overlooked that the bankrupt did not file his statement of his affairs until 11 December 1991. In the statement of affairs he disclosed 3 secured creditors and 5 unsecured creditors and indicated that he disputed each claim. By the time the statement of affairs was flled Mrs Maher's action against the NAB had been commenced. The decision in those proceedings was not given until 2 November 1992 and is at present being appealed against. For virtually the whole of the intervening period the bankrupt has had current before this Court an application for the annulment of the bankruptcy and he has made 3 applications for the removal of the Official Trustee. Apart from that, he failed on 5 occasions to attend for examination. Given all these circumstances it is not
During cross-examination and in his final address the the administration of the estate. surprising that relatively little progress has been made in bankrupt's counsel suggested that the officers having conduct of the administration of the estate on behalf of the Official Trustee lacked the training and qualifications to deal with an estate of the complexity of the bankrupt's. Counsel said that the estate should be administered by a lawyer. I absolutely reject counsel's criticism both of the competency of the
officers concerned and of their conduct of the affairs of the estate. Clarke, MS Manuel and Mrs Bull were all cross- examined at some length. Many of the questions put to them were hypothetical. Each impressed me as being competent in his or her respective field of activity. What this evidence did demonstrate was that their tasks have been rendered significantly more difficult by the failure of the bankrupt to co-operate in the early stages of the administration by delaying the submission of his statement of affairs and later by his aggressive attitude. The suggestion that a lawyer should administer the estate is odd given the bankrupt's long catalogue of complaints against lawyers whose lack of diligence, it would seem if the bankrupt is to be believed, has resulted in judgments of considerable proportions being entered against him. It is clear that the Official Trustee and his officers have access to competent legal advice as and when required.
A recurring feature of the bankrupt's various problems is that 6. Overseas Travel things happened whilst he was overseas. On his evidence, he spent much of his time overseas in the period of a year or so before the sequestration order was made and for some little time thereafter. On 23 September 1992 Clarke had been to premises at 2-6 James Street, Clayton which were registered in the name of a company associated with the bankrupt's family. While at those premises he discovered and removed various documents relating to the examinable affairs of the bankrupt
being financial dealings overseas during periods between 1988 and 1991 involving millions of dollars. It is not unreasonable that the Official Trustee may have suspected that the bankrupt could have had assets overseas but none were disclosed in his statement of affairs.
On 5 October 1992 the bankrupt wrote to the Officlal Trustee seeking permission to travel overseas between 10 and 19 October 1992. The letter set out the reason for the request which related to various business opportunities the bankrupt wished to explore. In the events which happened the bankrupt did not travel as originally planned but subsequently sought and received permission to leave Australia on 17 December 1992 and return on 29 December 1992.
In the belief that the bankrupt intended to depart for overseas on 10 October 1992 the Official Trustee sought and obtained from an eligible judge a warrant pursuant to section
bankrupt's luggage and clothing at Tullamarine Airport and the 130 of the Bankruptcy Act authorising the searching of the seizing of the bankrupt's property including any property that may be connected with, or related to, the bankrupt's
examinable affairs or books (including books of an associated
entity of the bankrupt) relevant to such affairs.As it happened, the bankrupt did not seek to travel on 10 October 1992 and the warrant was not executed. However, on 16 December 1992 the Official Trustee sought and obtained a further warrant in similar terms which was in fact executed at Tullamarine Airport on 17 December 1992. Included amongst the documents seized on that occasion were the bankrupt's passport and a number of documents suggesting that there were a number of bank accounts in overseas countries in his name. The bankrupt did not depart Australia on 17 December 1992 but did leave on 21 January 1993 in circumstances described earlier in these reasons.
The bankrupt has claimed that during earlier interviews at the Official Trustee's office, when Mrs Manuel had asked about bank accounts both local and overseas, he had disclosed to her accounts in Switzerland, Italy, Hong Kong, Singapore and England with small or no credit balances in them and that at all times the Official Trustee was aware of these accounts and had declined to take any steps as there were no funds of any distinction in them.
It is common cause that the bankrupt completed his statement
of affairs at the Official Trustees' office on 29 November 1991 in the presence of MS Manuel. MS Manuel made notes of the discussion that took place at the time and her notes accord in general with the information in the statement of affairs. There is no mention of the overseas bank accounts in either the statement of affairs or MS Manuel's notes. MS Manuel denied the bankrupt's assertion that she told him not to refer to the accounts until he was able to provide full details.
MS Manuel had a further meeting with the bankrupt on 5 February 1992 at the Official Trustee's office. On this occasion the bankrupt's then solicitor Wong was present. In advance of the meeting MS Manuel had prepared a list of questions to be put to the bankrupt and she said that she put those questions to him. One of the questions related to the account numbers, branches and banks of all bank accounts. MS Manuel made notes of the interview which record that in answer to this and other questions the bankrupt said he would provide answers that afternoon or the following day. No answers were ever provided. The bankrupt denied that he had given such an undertaking. Wong was not called to give evidence about the interview.
I reject the bankrupt's evidence that he had informed the Official Trustee of his interests in overseas bank accounts. I accept MS Manuel's evidence that no such information was ever provided to her.
acted responsibly in taking the steps he did to have the In this context, I am of the view that the Official Trustee bankrupt's property searched at Tullamarine Airport on 17 December 1992 and in revoking the authority to travel on that day.
There is no substance in the bankrupt's complaint that the Official Trustee has tried to prevent him from travelling overseas.
7. The Holden Utility
The bankrupt gave no evidence concerning this matter nor did
his counsel refer to it in opening.It is fact that the bankrupt's statement of affairs referred to as an asset:
Holden Utility 1975 unreg $19,000.
MS Manuel's typed notes made of the interview held on 29
November 1991 record at the foot of the first page:Asset: An unregrstered Holden Ute (rts worth $19,000) it is converted, has big tyres. Currently located at CARTECH, 40 Levenswell Road, Moorabb~n,
Attn: Chris Ross Ph. 555 4828.
In handwriting below the name of Chris Ross the word "Sold" appears and there is an arrow pointing down from Ross's name to the word "Preference?". On a second page of the notes the following appears:
It was left there to be painted before bkt went to USA. Very nice vehrcle. Bkt sent this frrm a letter of demand. CARTECH
has sold thrs vehicle to a friend for $4,000 six months ago.
There is no evidence before the Court as to the source of the information recorded in this last note. It may have come from the bankrupt or it may have been the result of an inquiry made by MS Manuel. Whatever may be the fact, it was not something the bankrupt's advisers thought sufficiently important to lead evidence on or to refer to in opening the case. In particular no evidence has been called to suggest that the vehicle was in fact worth the amount claimed by bankrupt or anything like it.
8. Kitoria Ptv Ltd
On 23 September 1992 with the permission of the ANZ Bank, the
mortgagee in possession, Clarke visited premises at 2-6 James
Street, Clayton and removed certain goods. The premises are
registered in the name of Kitoria Pty Ltd, a company which is
associated with the bankrupt's family.It is common cause that Kitoria Pty Ltd has since claimed ownership of the seized goods and has instituted Court proceedings against the Official Trustee to recover same.
On 7 October 1992 MS Smith on behalf of the Australian Government Solicitor wrote to Samuel in response to a letter he had written on the previous day. Samuel's letter is not in
evidence but MS Smith's reply is. The relevant parts of the reply are as follows:
Dear Mr Samuel
BANKRUPT ESTATE OF DENIS WLHER
NO: VB 1969 OF 1991I refer to your letters dated 6 october 1992 addressing the deed of rndemnity between Mrs Maher and my client and the removal of chattels from 2-6 James Street, Clayton.
2-6 James Street. Clavton
Purdy Kirkham 1s act~ng jointly for both my client and the ANZ Bank. My client will not be instructing Purdy Kirkham to return any chattels that you alleged have been removed.
As you are no doubt aware, Kitoraa Pty Ltd was deregistered on 31 October 1989. At that date Mr Denis Maher was a Director of the Company and was the owner of shares. As at the date of bankruptcy, Mr Maher still was the owner of shares in the Company and they vested in the Official Trustee in Bankruptcy. Any purported transfer of Mr Maher's interest after thrs date is void as against the Trustee.
Yours faithfully
(signed)
Fiona Smith
Senior Sollcrtor
for the Australian Government Solicitor
As I understand it the bankrupt disputes that he is a shareholder in Kitoria Pty Ltd. It has not been demonstrated how this issue impinges upon the present application. It was not raised in the bankrupt's evidence nor in counsel's openlng. The dispute seems to be between a company in which the bankrupt disclaims any interest and the Official Trustee and is presently the subject of other litigation.
9. The Bankru~t's relations hi^ with the Official Trustee
between the bankrupt and the Official Trustee has resulted very strongly that any perceived breakdown in the relationship The substantial volume of evidence before the Court suggests entirely from the bankrupt's own conduct. On the findings I have made in these proceedings it is obvious that the bankrupt is not a person whose statements of fact can be relied upon as being worthy of credit. He has not been frank with the Official Trustee in disclosing the nature and
extent of his affairs. His evidence in Court has lacked credibility and on a number of issues has been found to be wrong. There is no reason to believe that a change of trustee would alter either the bankrupt's attitude to the bankruptcy or to those charged with the task of administering his estate.
9. Conclusion
Section 179(1) of the Bankruptcy Act calls for the Court to
determine the preliminary question of whether on the grounds
and facts before it, a case has been made and for an inquiry
into the trustee's conduct (re Alafaci (1976) 9 ALR 262 per
Riley J at p. 268). On the grounds and facts presently before
the Court no such case has been made out. The applicationwill be dismissed.
THE CONTEMPT APPLICATION
The Official Trustee's appllcatlon flled on 21 August 1992
seeks the following orders, namely:
1. THAT t h e Court a d p d g e t h a t t h e bankrupt Respondent ( ' t h e
bankrupt ') is g u i l t y of contempt of t h e Court i n tha t : -
A. Without proper excuse t h e bankrupt f a i l e d and/or
refused t o a t t end before t h e Registrar of t h e Court
t o be examined pursuant t o Sect ion 81 of t h e Bankruptcy Act 1966 on -
( i ) 24th July,1992 a t 10.15am and t h e r e a f t e r ;
(ii) 31s t Ju ly , 1992 a t 10.15am and t h e r e a f t e r ;
( r i i ) 13 th August, 1992 a t 10.15am and t h e r e a f t e r ;
( i v ) 20th August 1992 a t 10.15am, and t h e r e a f t e r .
B. The bankrupt has wi l fu l ly and/or contumaciously
refused t o a t t end before t h e Reg i s t r a r of t h e Court to be examined pursuant to Section 81 of the
Bankruptcy ~ c t 1966 on:- (i) 24th July, 1992 at 10.15am;
(iii) 13th August, 1992 at 10.15am;
(iv) 20th August, 1992 at 10.15am.
(i) 13th August, 1992;
(ii) 20th August, 1992;
the bankrupt through his Counsel represented to the Registrar of the Court that the bankrupt was unable to attend to be examined pursuant to Section 81 of the Bankruptcy Act 1966 because he was so 111 as to be unable to attend the examlnatron when in fact he was able to attend at Court.
2. THAT the Court make such Orders as it deems fit rn order
to punlsh the bankrupt for each of the contempts referred to in paragraph 1A to C hereof and/or to ensure that the bankrupt attend such examinations pursuant to Section 81 of the Bankruptcy Act 1966.
3. SUCH further and other Orders as may be just.
By reason of events subsequent to the application, a summary
of which appears earlier in these reasons, the Official
Trustee does not now seek an order that the bankrupt attend
for examination pursuant to section 81 of the Act.
Trustee to identify the basis of the Court's jurisdiction to In the course of argument I invited counsel for the Official punish for contempt in a case like this and I was referred to section 31 of the Federal Court Act and subsection 264A(2) of
the Bankruptcy Act.I do not propose to canvass those provisions in detail except to observe that the effect of section 31 of the Federal Court
Act is that the Court has the same power to punish contempts of its power and authority as was possessed by the Supreme Court of Judicature in England at the commencement of the
Judica ture Act 1903. It cannot be doubted that the power to punish contempts extends to circumstances in which a judgment or order of the Court has not been obeyed, nor that it is a contempt to wilfully fail to respond to a subpoena ad testificandum or subpoena duces tecum, but I remain to be convinced that a
summons issued pursuant to section 81 of the Bankruptcy A c t can properly be so described. Nor am I convinced that subsection 264A(2) elevates a summons to attend to the status of a subpoena.
These issues have not been adequately addressed during the proceedings and as they go to the very basis of the Court's authority in the matter I prefer not to express any opinion without first affording counsel the opportunity to make
submissions. Accordingly, my decision in respect Of the contempt application will remain reserved. I invite the Official Trustee to furnish to the Court and the bankrupt's legal advisers any submissions he may wish to make in writing within 14 days from this date. In the event that the Official Trustee furnishes any such submissions, the bankrupt will be entitled to make written submissions in reply within 14 days of receiving same. In the event that the Official Trustee does not make any submissions within the 14 day period, the bankrupt will be entitled to furnish to the Court in writing any submissions he may desire to make within the following 14 days.
COSTS As all 4 applications have been heard together and indeed throughout their respective lives have for the most part been dealt with cognately I propose to reserve the question of costs in relation to the 3 applications dealt with in these reasons until the contempt application has been finally resolved.
I certify that thls and the preceding 54 pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice Olney
Dated : 24 February 1993
Mr C. Francis QC and Mr P. Cawthorn (instructed by Alwyn
Samuel) appeared for the bankrupt.
Mr J. Lenczner (instructed by the Australian Government
Solicitor) appeared for the Official Trustee in Bankruptcy.
D a t e o f : 10, 11, 12 and 15 February 1992
Place : Melbourne Date of Judament: 24 February 1992
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