Re: Malan, Ex Parte: Malan v Boothe

[1994] FCA 1115

JUDGMENT No. .~L..LJ .L$

CATCHWORDS

BANKRUPTCY - wilful and deliberate failure to submit statement

of affairs - committal for contempt - application for release from gaol after 14 months notwithstanding refusal to purge contempt

CONTEMPT - committal for contempt - principles to be applied on application of release from gaol notwithstanding refusal of contemnor to purge contempt

20 SEPTEME3ER 1994 LIBRARY

Re: JOHN H MALAN ex Darte JOHN H	V STEPHEN W BOOTHE
NB 237 of 1993

FEDERAL COURT

EINFELD J OF AUSTRALIA

SYDNEY - . ,~ii L J ~ S

IN THE FEDERAI. COURT OF AUSTUIA )

BANKRUPTCY DISTRICT OF THE STATE )	NO. NB 237 of 1993
OF NEW SOUTH WALES	1

Re :  JOHN H MALAN

Bankrupt

Ex parte:  JOHN H MALAN

Applicant

And : STEPHEN ALAN BOOTHE as Trustee of the Estate of JOHN H MALAN

Respondent

MINUTE OF ORDERS

The Court orders that:

1.   the warrant of committal for contempt dated 5 August 1993 be discharged

1. the applicant be released immediately from custody

2. paragraphs 3, 5, 6 and 7 of the application be dismissed

4.  the application for an annulment of the bankruptcy be adjourned to the Duty Judge on 25 October 1994

5.    the applicant file and serve any affidavits upon which it is intended to rely in support of the application for

annulment by not later than 4pm on Friday 14 October 1994

m:	Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.
EINFELD J  SYDNEY

20 SEPTEMBER 1994
IN THE FEDERAL COURT OF AUSTRALIA )

BANKRUPTCY DISTRICT OF THE STATE )	No. NB 237 of 1993
OF NEW SOUTH WALES	1

Re :  ,TOHN H MALAN

Bankrupt

Ex parte:  JOHN H MALAN

Applicant

And : STEPHEN AIAN BOOT= as Trustee of the Estate of JOHN H MALAN

Respondent

REASONS FOR JUDGMl?NT

EINFELD J SYDNEY 20 SEPTEMBER 1994

A sequestration order was made against the estate of John Malan on 9 February 1993, consequent upon his failure to comply with a bankruptcy notice founded on a judgment of the District Court given on 10 May 1991. I have been told today that the dispute concerned fees or other moneys said to be owing to a solicitor

Mr Silvas, that the judgment of the District Court was made after	a lengthy hearing, and that an appeal against the judgment was
subsequently dismissed by the Court of Appeal on 3 July 1992. I have not been supplied with the judgment of the District Court or of the Court of Appeal, but I was informed from the bar table by the solicitor for the trustee that the District Court disbelieved some or much of the evidence of Mr Malan in the proceedings and that the Court of Appeal, although giving leave to appeal out of time, refused to overturn the findings made in these regards.
Then on 20 July 1993, Justice Foster in this Court found the bankrupt guilty of contempt of court for failing to provide a statement of affairs as required by section 54 of the Bankruptcy Act. The bankrupt was committed to prison but the order of committal was suspended for 14 days and directed to lie in the court office in that period. The matter was listed for mention before the Duty Judge on 27 July 1993. On that day there was no appearance on behalf of the bankrupt, but no further action was taken except that the warrant was ordered to issue and be executed after the expiry of another 14 days, that is, on or after 4 August 1993, subject to any other order in the meantime. Liberty to apply in relation to the matter was granted. On 9 August 1993, the Australian Federal Police executed the warrant, and Mr Malan has been in Long Bay gaol ever since. Meanwhile, on 22 July 1993, a transfer by him to his wife of his half interest in the family residence at Lidcombe for the
consideration of $1 was declared void under section 120 of the Bankruptcy Act by Justice Burchett.
On the evidence available to me, the matter of his imprisonment has been discussed within the office of the trustee, between the trustee and the Official Receiver, and between the trustee and a number of registrars of the Court on occasions since that time. In October 1993 the matter was referred to the Duty Judge in chambers but no action was taken, it being left to the parties to move the Court if either so wished for the purpose of dealing with the imprisonment. Apparently nothing was done apart from the discussions and telephone calls referred to as the matter was not again before the Court at all until Mr Malan made application on 22 August 1994 for a number of orders, the first two of which seek his release from prison. On 6 September 1994, he telephoned a registrar of the Court to ask that, as he was not legally represented, he be permitted personally to attend on the hearing of his application. A judge's order is needed for such an excuse to leave prison. He also asked that an interpreter be supplied. Both requests were approved on the same day by Justice Sheppard who fixed the matter for hearing before me today. His Honour also ordered that the registrar notify the trustee of the hearing and provide the trustee with a copy of the application and of the affidavit in support. The trustee has thus attended by his solicitor today.
The affidavit in support of the application is short and relates only to Mr Malan's request for release. It discloses that he is
now 50 years and 7 months old, and provides some of the history
I have just recounted. It says that (sic):

I do no t in t end t o f i l e a s ta tement o f a f f a i r s .

I do no t in t end to ab ide t o any cour t o r d e r s which

d e r i v e d from t h e i n j u s t i c e done by cour t c a s e 3509 o f

1989   i n Sydney D i s t r i c t Cour t .

M r Malanfs intention not to file a statement of affairs has been

maintained throughout his incarceration for 14 months, but on what he has told me today, it turns out that if in fact he did file such a statement, it would reveal nothing of interest or value to creditors. He now has no assets and owns no property. Apart from the debt on which he was made bankrupt, he has other debts including some $12,500 owed privately in respect of a loan to prosecute his appeal to the Court of Appeal, and approximately $1000 for interpretersp fees at different stages of various proceedings.

In support of his application Mr Malan, of Romanian origin but speaking excellent English, has traversed a wide range of matters. He has impressed upon me the fact that he has been the subject of a major injustice going right back to the original claim upon him by Mr Silvas in the District Court. He says that the judgment of Judge Levine in that Court on which the bankruptcy notice and petition were based was unjustly obtained, and that he did not owe or should not have been found to owe the monies claimed against him. He has obvious hostility to Mr Silvas and his action for the alleged debt.

Today the trustee filed an affidavit which basically sets out

other aspects of the history of the matter. In particular, it recounts that despite many requests both before and after his committal for contempt, the bankrupt has continually refused to provide a statement of affairs, and declares that the only asset of the bankrupt's estate available to creditors is his restored half-interest in the family home at Lidcombe. This property was sold at auction on 10 September 1994 and it is anticipated that

the sale of the property will complete in the next month. The
trustee's affidavit states:

I apprehend that the applicant is making the application currently before the Court for the purposes of attempting to interfere with the orders made by this Court with respect to the sale of the property and with respect to possession of the property. My apprehension is based upon my dealings with the applicant, from his conduct towards me, and to the Court in general.

No evidence was advanced to support this apprehension other than

M r Malan's general unwillingness to assist the trustee in any way

and his recalcitrance in the whole legal process in which he has found himself. However, the affidavit also states that at an interlocutory stage in the proceedings before the Court of

Appeal, the applicant said to President Kirby:

I no get justice, I go get gun.

The affidavit goes on:

applicant generally, I also apprehend what the	In view of that statement and the conduct of the
applicant may do, or seek to do with respect to Theodore Silvas, the party who obtained the sequestration order against the applicant, and to a certain extent what he may do, or seek to do, to the legal representatives and myself in connection with this matter.

The clear inference is that if released the bankrupt may, unilaterally and outside the law, do harm to one or more of those people.

In response to my direction last week that if the trustee was opposing the application for release he should file and serve a written outline of argument and a list of authorities, a written submission for continued detention was provided yesterday. The trustee submitted, and his solicitor expandedthe argument orally today, that it is his duty to maintain the solemnity of the Bankruptcy Act and to oppose the application. I quote from the submissions:

In these circumstances, the Trustee says that he must oppose the application.

That was also the position taken from the bar table. The submissions also included a statement that:

in view of the applicant's failure to purge his contempt and the totality of the circumstances, the Court ought not to grant the orders as sought in paragraphs 1 and 2 of the application.

The circumstances referred to are that the bankrupt has

continually failed and deliberately refused to file a statement	of affairs. The written submissions made on behalf of the
trustee included also that a party found guilty of contempt is precluded by law from being heard in relation to an application for his release from custody. At the commencement of argument today, it was put on behalf of the trustee that that rule of law has been moderated in more recent times but that the Court nonetheless possesses a discretion not to hear either the applicant for release or the application itself and should exercise the discretion not to do both in this case.
I know and can conceive of no binding rule of law in Australia that a person may or should not be heard in relation to any application to seek personal liberty, still less that any application for release from imprisonment for an unpurged contempt of court should not be dealt with at all. Free societies do not restrict the capacity of persons to be heard in their own cause, particularly when seeking liberty and release from detention. If there were such a rule of law in modern times, for myself I would be unprepared to apply it unless constrained by powerful and explicit binding authority. No such authority has been produced. Hence I heard Mr Malan and his application today at considerable length.
The trustee also submitted that the release of M r Malan from detention would create a precedent for other bankrupts to refuse to file a statement of affairs. I have been in the law for a
one. Very rarely if ever have the floodgates actually opened. longtime, and have heard floodgates arguments virtually from day
If they ever have, any trickle emerging from the gates previously locked shut has usually operated to the benefit of the social order. If in fact anything I do today creates an undesirable precedent, it will be a matter for the legislature to deal with. But it is my experience and belief that few bankrupts would be willing to go to prison for even a short period of time, let alone for as long as 14 months, merely not to provide a statement of affairs that would reveal nothing of substance for creditors to access. In any event, if willing to go to prison for failing to file a statement of affairs, a bankrupt would hardly be concerned about filing an untruthful or incomplete statement of affairs that withholds or misrepresents the actual asset position. I say this in particular in this case because the trustee, through his solicitor, sought to suggest in argument that Mr Malan may have secreted away some gold or other valuable asset. There was not a whiff of evidence to support this suggestion but if it were true, and Mr Malan laughs it off as absurd, it seems hardly likely that he would be prepared to reveal such an asset in a statement of affairs if he is willing to go to jail for 14 months to avoid having to complete the form at all. I should also add that deterrence is only one goal of
punishment. It cannot justify a long or life sentence if other aspects of the exercise dictate otherwise.
This case has revealed a considerable gap in the way in which this aspect of the legislation is administered. The trustee
make an application for the release of a bankrupt committed to argued that he is not required, and should not be expected, to
prison for contempt of court for failing to file a statement of affairs, especially where the failure continues. In addition he says that this estate has now been, to use his expression, "frittered away" to such an extent that there are inadequate funds to permit him to make such an application. He says, and it ought to be acknowledged as true, that the matter has been raised with some registrars of the Court at different stages perhaps with a view to the Court taking its own action in this regard. The Court did not do so as perhaps it might have but courts rarely act on their own motion in relation to anything in strict party/party litigation, except perhaps where attention is drawn to matters that might otherwise be overlooked. It seems that this Court has either no or inadequate procedures to deal with matters such as this, such that it would list of its own motion an application for the release of a bankrupt from prison for contempt of court in these circumstances. The prospect of a person in prison simply being locked up and the key lost or thrown away looms large. Although the matter was once privately drawn to the attention of a Judge, to some extent, it seems to have happened here. The problem should be addressed as a matter of some urgency, leading to a procedure being introduced which would ensure that from time to time or at regular intervals during the course of a bankrupt's incarceration, the incarceration is reviewed by a Judge in open court and on evidence, even if the evidence has to be taken in whole or part from the bar table.
The trustee also raised two other arguments in his written submissions. Althoughwhen confrontedwiththe impossibility and
irrelevance of these arguments during oral submissions he resiled from them, it is appropriate that I note and briefly deal with them. One submission was that the application should be refused because the applicant had declined an offer by the Legal Aid authorities to fund an application for his release. Mr Malan explains that the reason he declined that offer was because the

- l0 -

Legal Aid authorities, whom he did not contact himself but who were apparently referred to him by someone, only agreed to fund the application for his release and not any of his other complaints against the injustices which have allegedly been done to him.

Looking at that attitude abstractly and objectively, it may appear to be irrational, but I can understand his feelings in this regard. This is no criticism of the Legal Aid authorities who have no reason at all to fund unidentified generalised complaints of injustice. But looked at from Mr Malan's point of view, I can understand that he does not wish to avail himself of legal aid which has been denied to him in the past in respect of his substantive position, merely to relieve the authorities of the embarrassment of his continued incarceration.

The other matter raised by the trustee but resiled from in argument was his fear that the applicant would physically interfere with or attempt to interfere with the sale of the Malan

only under pressure from me. Not only was it raised in the	family's Lidcombe home. The withdrawal of this argument was made
written outline of submissions, it or something similar again appeared in the affidavit presented today. It has absolutely nothing to do with this application. The incarceration of a bankrupt person for contempt of court for failing to file a statement of affairs cannot be continued for the purpose of addressing fears of this kind, even assuming they are real. Just as Mr Malan himself must be encouraged to use the legal system to address any injustices, so must the trustee address any genuine fears he may have by appropriate legal process or through the police. The Bankruptcy Act and Court are not the proper agencies through which those matters may be dealt with nor are these proceedings. Apart from the absence of evidence to support these apprehensions, as previously noted, they certainly provide no basis for refusing this application.
Thus the quite difficult question falling for consideration is whether Mr Malan should be released from prison despite failing to file a statement of affairs up to now, or whether he should be left there for some further unstated and indeterminate period in the sure knowledge that he will never do so.
It must first be acknowledged that the failure to file a statement of affairs is regarded by the legislature, quite rightly, as a serious contempt, and the Court must give full faith and weight to the legislative will in this respect. It must also be said that contempt of court is a different type of
offence to the criminal offences for which people are normally committed to prison, as the cases have frequently explained. At
the same time, there must be a sense of finality and proportionality of a committal to prison for any offence, including contempt of court.
Mr Malan explains that consequent upon the taking over of the Lidcombe house by the trustee, his wife and two grown children aged 22 and 15 who attend university and high school respectively, have had to move into a single room elsewhere, and that upon his release he will presumably have to go to that room. He acknowledges that that would create an impossible situation over any appreciable period of time. He says that both he and his wife are suffering from ill-health and that neither can work or fully work as a result. She gets some form of pension and presumably he is entitled to one himself. There is also community provision for emergency housing for people in the type of desperate circumstances here. Even if part of this problem has been contributed to by Mr Malan's steadfast, even defiant, attitude of non-cooperation with the authorities, it must be recognised that he has a deep feeling of injustice and there may be -- and I say no more than that -- grounds for that feeling. On the other hand, to refuse to acknowledge that the legal system is moving on, as inevitably it will, especially in the absence of cooperation from Mr Malan, so as to result in the authorities acting continually and inexorably to comply with their duties, is foolish in the extreme.
accountable for the performance and non-performance of those The trustee has important duties under the Bankruptcy Act and is
duties. Like the Court itself, these duties have been given by the Australian Parliament. They are not essentially discretionary and are not even peculiarly Australian. The duties relate to matters which our Parliament, like the legislatures of virtually every other democratic country in the world, and many countries which are not democracies, has dictated. They include provisions requiring bankrupts to disclose their assets and liabilities and to assist trustees to pay legal debts. Mr Malan has simply acted as if this law did not exist. No court is permitted to or should ignore that fact. To the extent that trustees have many discretions, there is no encouragement to exercise them in favour of bankrupts who refuse to cooperate in any way and thumb their noses at all the statutory provisions. In other words, there is no incentive to a trustee to show understanding to a bankrupt who refuses to assist in the administration of the bankrupt estate. At the end of the day, it is not reasonable to expect a trustee to face serious adverse personal consequences merely because there is an allegation that long before the trustee's appointment, injustices were done to the bankrupt. If injustices were done in this case, they were not done by this trustee.
The balancing up of the conflicting criteria is by no means simple, but I have come to the conclusion that 14 months imprisonment for failing to file a statement of affairs is more than ample punishment and ought to be brought to an end. The
be taken into account. So must the likelihood that a statement tragic circumstances of Mr Malanls entirely innocent family must
of affairs, if filed, would reveal nothing unknown that could be brought to account for the benefit of creditors. I also take into account the considerable public cost of maintaining him at Long Bay with no apparent benefit to anyone. The consequence of accepting the trustee's submissions to the contrary would be either to impose upon Mr Malan an indefinite period of imprisonment or to fix a sentence of substantially more than 14 months. Such detention would in my view offend traditional standards of mercy, compassion and humanity in the light of the gravity of the offence and the time served. In my opinion, the conclusion is inevitable that his committal for contempt should be concluded and that he should be discharged. I therefore order that the warrant be discharged and that he be immediately released from custody.
The application before the Court also seeks a number of other orders, none of which is supported by any evidence. One of them is for discharge from bankruptcy which is no longer a matter for the Court. Mr Malan also seeks a stay of any legal process against him and against the property at Lidcornbe, but I know of no legal process against him at the moment or against the property which has been sold. Thus there is no point in making any stay order, even if there was power to do so. He also seeks an order to annul the writ of execution for the property, but such a matter, even if available, has now been overtaken by events. There was probably no writ of execution as such but the
trustee's acquisition of a right to sell the property has long since been obtained and the right has already been exercised
because the property has been sold. There is thus nothing to annul.
Mr Malan also seeks an order for damages to him and his family for, as he puts it:

In justice suffered from malicious prosecutions through the legal system of the District Court, Supreme Court and Federal Court proceedings.

The Bankruptcy Court is not able to award damages of this kind. If Mr Malan wishes to pursue such a case he will have to commence proceedings for damages for malicious prosecution. Whether they could or should be commenced in the Federal Court and what the chances of success are are serious questions to be considered. They undoubtedly require expert legal advice. The only matter in the rest of the application within my jurisdiction today is a request for annulment of the bankruptcy. No evidence has been filed in support of an annulment so I will merely adjourn that application to permit evidence to be filed to support it.

Applications 1 and 2 are granted. Applications 3, 5 , 6 and 7 are refused. I adjourn the application for annulment to the Duty Judge on Tuesday 25 October 1994 and order that by not later than 4 pm on Friday 14 October 1994, the applicant file and serve any affidavits upon which he wishes to rely in support of the

application for annulment.	preceding pages ar
Reasons for Judgm

The applicant appeared in person

Solicitor for the	P.J. Harkin of Ternes &
respondent	Salier

Date of Hearing	20 September 1994
Date of Judgment	20 September 1994