Re Radich, N.C.L. Ex Parte Bank of New Zealand
[1992] FCA 476
•25 JUNE 1992
Re: NICHOLAS CHARLES LUKE RADICH
Ex Parte: BANK OF NEW ZEALAND
Cred. Pet. No. 2934 of 1991
FED No. 476
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
Cooper J.(1)
CATCHWORDS
Bankruptcy - application for sequestration order - judgment debt registered - bankruptcy notice filed and served - creditors petition filed - opposition to making of sequestration order - formal conditions satisfied - prima facie entitled to order - discretion to dismiss petition - sufficient cause - bankruptcy in New Zealand - show that the making of an order is a futility because there is presently no property and will be no property available in a second bankruptcy - change of domicile - after acquired property available for an Australian administration - failure to discharge onus - debt still owing.
Bankruptcy Act 1966, Sections 52, 116(1)(a), 29.
Insolvency Act 1967 (New Zealand) section 135.
Cain v. Whyte (1932) 48 CLR 639
Clyne v. Deputy Commissioner of Taxation (1985) 5 FCR 1
In Re Betts Ex parte Betts (1987) 1 QB 51
In Re Leonard Ex parte Leonard (1986) 1 QB 473
Bayne v. Blake (No. 2) (1909) 9 CLR 360
In Re Field (A Debtor) (1978) Ch 371
In Re Patrick Michael Darcey v. The Pre-Term Foundation (Application No. G520 of 1986, Unreported, Sydney 23 May, 1988; Fox, Wilcox and French JJ.)
Ayres v. Evans (1981) 56 FLR 235
Re Osborne Ex parte The Trustee (1932) 15 B and CR 189
Re Ayres Ex parte Evans (1981) 51 FLR 395
Hall v. Woolf (1908) 7 CLR 207
Ex parte Robinson (1883) 22 Ch D 816
Rozenbes v. Kronhill (1956) 95 CLR 407
Re Mitchelson Ex parte Mitchelson (1979) 39 FLR 366
HEARING
BRISBANE
#DATE 25:6:1992
Counsel for the Applicant: Mr J.D. McKenna
Solicitors for the Applicant: Cooper Grace and Ward
Counsel for the Respondent: Mr L. Bowden
Solicitors for the Respondent: Broadbents
ORDER
I ORDER THAT :-
1. The estate of Nicholas Charles Luke Radich be sequestrated.
2. The applicant's costs of and incidental to the petition in this matter including reserved costs be taxed and paid in accordance with the Bankruptcy Act.
3. I direct that a draft of this order be delivered to the Registrar within seven (7) days in accordance with Rule
124(2).
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
JUDGE1
This is an application on behalf of the Bank of New Zealand for a sequestration order against the estate of Nicholas Charles Luke Radich.
On 8 June, 1990 in the High Court of New Zealand the applicant obtained against the respondent a judgment in the sum of NZ$110,094.72 for a debt together with interest in the sum of NZ$49,339.02 and costs and disbursements in the sum of NZ$288.83. On 12 December, 1990 the said judgment was registered in the Supreme Court of Queensland in an amount of A$128,474.32.
On 11 May, 1991 a bankruptcy notice filed on 30 April, 1991 was served on the respondent. On 22 November, 1991 a creditors petition was filed alleging that the respondent had failed to comply with the bankruptcy notice or to satisfy the court that he had a counterclaim, set-off or cross-demand equal to or exceeding the sum specified in the Bankruptcy Notice. On 23 January, 1992 the respondent filed a notice of intention to appear and oppose the making of a sequestration order. The notice listed the following grounds of opposition :-
"(a) The debtor was adjudicated bankrupt by the New Zealand High Court of Justice on the 4th February, 1991.
(b) All of the debtor's assets were by virtue of the New Zealand decree, assigned to the Official New Zealand Assignee.
(c) The Petitioning Creditor herein has proved in the New Zealand bankruptcy.
(d) The debtor has no assets either in Australia or in New Zealand.
(e) The making of a further Sequestration Order against the debtor is unreasonable, unnecessary and unjust.
(f) The making of a further Sequestration Order against the debtor would gravely prejudice the debtor and/or his family and/or other persons.
(g) The making of a further Sequestration Order against the debtor would prejudice the debtor in his employment in Australia as a Solicitor and his future prospects in relation thereto.
(h) The making of a further Sequestration Order in Australia would amount to a needless expenditure of costs for no good purpose and in circumstances where there are other procedures available for the administration of the debtor's Australian estate and/or assets (if any).
(i) The Court, in all the circumstances, ought not to make a Sequestration Order."
The power of the Court to make a sequestration order on a creditor's petition is contained in section 52 of the Bankruptcy Act 1966. The section, so far as is presently relevant, provides :-
"52(1) At the hearing of a creditor's petition, the Court shall require proof of -
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing, and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor -
(a) that he is able to pay his debts; or
(b) that for other sufficient cause a sequestration order ought not to be made,
it may dismiss the petition".
It is common ground between the parties that the formal conditions for the making of an order have been satisfied and that prima facie the applicant is entitled to the order sought.
The discretion in the Court to dismiss the petition lies in section 52(2)(b) upon the Court being satisfied "for other sufficient cause a sequestration order ought not to be made".
The approach to be taken by the Court was laid down by the High Court of Australia in Cain v. Whyte (1932) 48 CLR 639. The Court agreed with the formulation of Philp J. at first instance where he said (48 CLR at 645-646) :-
"I approach that question with the full appreciation that, prima facie, on proof of the matters mentioned in sec. 56(2), the Court will proceed to make an order for sequestration, and that it is for the debtor to show some cause overriding the interest of the public in the stopping of unremunerative trading, and the rights of individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order".
The Full Court in Clyne v. Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 in applying Cain v. Whyte observed :-
"The circumstances which may constitute "other sufficient cause" for dismissing a bankruptcy petition are extremely variable. It is not appropriate to attempt to catalogue or circumscribe them: see Cain v. Whyte (1933) 48 CLR 639 at 645".
The respondent migrated to Queensland in April, 1988. His family followed him shortly thereafter. There is no suggestion that he left New Zealand to avoid the consequences of his financial affairs. Since arriving in Australia the respondent has been admitted as a solicitor of the Supreme Court of Queensland. He is a partner of Broadbents, Solicitors of the Gold Coast.
On 4 February, 1991 the respondent was made bankrupt by order of the New Zealand High Court.
In consequence of his bankruptcy in New Zealand the respondent is prevented from practising as a sole practitioner. This means that he cannot continue to practice as a principal if James Broadbent, his partner, retires from the partnership. Mr Broadbent has deposed that he wishes to retire from the partnership at an early date to pursue his own commercial interests.
The respondent deposes to his present situation as follows:-
"8. I have no assets in Australia or anywhere else, apart from basic furniture which is essential for the use of my family. There are two cars, a 1982 Falcon and a 1988 Mitsubishi Magna. The former was purchased with a personal loan which has approximately fifteen months to run and the latter is leased. The monthly payments are able to be made only because my wife is in full time employment. The two vehicles are needed so that we can both get to work. The property in which I reside together with my wife and four children is rented on a week to week basis at the rate of $300 per week. I would never be able to afford that level of rent were it not for the fact of my wife's full time employment as a Director of a Day Care Centre.
9. In late 1990 when the Bankruptcy proceedings against me in New Zealand were a distinct possibility, I enquired from the Queensland Law Society Inc as to my ability to practise as a Solicitor in Queensland if I were rendered bankrupt or took advantage of Part X of the Australian Bankruptcy Act. I was informed, and I verily believe, that I cannot practise as a sole practitioner, nor can I operate a Trust Account, nor occupy any other fiduciary position. Annexed hereto and marked with the letter "D" is a true copy of a letter dated 19 September, 1990 from the Queensland Law Society Inc conforming the limits on my Practising Certificate. Those restrictions have caused and continue to cause, major difficulties in properly carrying out my Solicitor's duties. It is self-evident that a usual and significant part of the practise of law involves the occupying of positions of trust for clients, and the inability to do so affects my credibility as a Solicitor.
10. At the time that I joined the legal firm of Broadbents in April, 1990, Mr Broadbent advised me that at a future date he would wish to retire from the practice to pursue his own business interests. He has now told me that he wishes to retire from practise as soon as possible. This is because he will this year have to frequently travel overseas on business and that is incompatible with his duties as principal of a legal firm. As already stated I am prevented by the Queensland Law Society Inc from operating as a sole practitioner and there is insufficient work to justify the involvement of another Solicitor in place of Mr Broadbent. I am concerned that Mr Broadbent's wish to withdraw from Legal Practise may overcome any obligation he may feel towards me, and that the practice could be sold by him to a third party who would not require my continuing participation. If that were to happen, my chance of employment elsewhere would be minimal because there are no vacancies for senior Solicitors on the Gold Coast.
11. Finally, the fact remains that, with a young family to support, I need to be able to re-establish my earning capacity. To do that I need to be able to practise law on my own account and vigorously expand that law practice. I do not believe that there is anything more which I can do for my creditors, and a further bankruptcy would simply be an impediment to my re-establishing myself".
The respondent's wife, Judith Radich, deposed :-
"3. Although the bankruptcy occurred in New Zealand some fourteen months ago, we have been living with his insolvency for the almost four years that we have been living in Australia. When we came to Australia the only money which we had came from the sale of our furniture and personal effects in New Zealand. With that money we acquired cheap and secondhand furniture and household effects for our family's use. That is all that we have now, and we live on a week to week basis on our joint incomes. As a mother I am very concerned that we have nothing in reserve for family emergencies, nor do we have health insurance, life insurance for my husband, disability insurance tec. I accept that we must re-establish ourselves but that is not possible whilst my husband remains bankrupted and our future is in the hands of others.
4. I have always handled the family's day-to-day finances, and initially upon our arrival in Australia, I remitted some money back to New Zealand to creditors particularly to those who were unsecured. I did this because I hoped that given time to sell properties in New Zealand in which my husband had interests, the total indebtedness which he had could be met in full. I know that, despite being in Australia, my husband expended considerable effort in trying to market the properties, or to refinance the debt. This was unsuccessful largely because of the low regard in which New Zealand investment is held in Australia".
Mr Broadbent deposed as to his knowledge of the respondent's financial circumstances :-
"I have known Mr Radich and his family for almost the entire time that they have been in Australia, and am therefore well able to make the following observations :
(i) I have seen nothing which could indicate that any of them have assets in Australia, other than usual personal belongings such as clothing, household effects, children's toys etc. Such furniture that they have is basic and inexpensive.
(ii) Mr Radich's wife, Judith, has had to go out to work to help support the family. This is despite having four young children to care for, which by any view is a full time job in itself. If it were not for the fact of Mrs. Radich's income, then there is no doubt in my mind that the family would not have been able to survive on Mr Radich's income alone."
There was raised on the material an issue as to holdings by the respondent in a number of Australian companies. These were discovered by the applicant and not disclosed to the Official Assignee in New Zealand. I am satisfied that the shares held and directorships are not held beneficially for the respondent but for others. The circumstances of his becoming involved in these companies, I am satisfied, are merely incidental to his practice as a solicitor and they have been fully explained in the material read on this application.
Mr John Gilbert Rollinson, the Deputy Official Assignee, Christchurch, New Zealand, swore an affidavit on behalf of the applicant on 24 March, 1992. He deposed, inter alia: -
"3. NICHOLAS CHARLES LUKE RADICH was adjudicated bankruptcy in New Zealand on 4 February 1991 in the High Court at Christchurch on the petition of United Banking Group Limited. At the date of his adjudication, Mr Radich had already left New Zealand and was living in Queensland.
4. The value of proofs of debt filed to date amounts to NZ$1,981,742.50. The Bank of New Zealand has filed a proof of debt for NZ$1,922,999.00. Other creditors who have proved are :-
United Bank $33,786.00 ANZ Bank $ 8,779.42 National Bank visa $10,355.66 Rural Bank $ 5,095.08 Telecom Auckland Limited $ 727.54 $58,743.70
5. Down to the date hereof, the Official Assignee in New Zealand has not realised any assets in Mr Radich's bankruptcy.
6. On 21 February, 1991 and in response to a questionnaire forwarded to Mr Radich by the Official Assignee, Mr Radich disclosed :-
(a) his gross weekly income as being Aust$300.00;
(b) he leased 2 motor vehicles;
(c) he jointly operated, with his wife, a bank account at the Runaway Bay Branch of the National Australia Bank, the balance of which did not exceed $500.00 at any one time.
7. In correspondence with the Official Assignee, Mr Radich has advised that he has no assets in New Zealand, and claims to have no assets in Australia. I have made enquiries about a family trust. The asset of the family trust was understood to be a commercial building in Dargaville, Northland. A copy of the deed of trust has only just been produced by Mr Radich's solicitor in Whangarei after requests by my office. There is still insufficient information about the trust to satisfy the Official Assignee's enquiries.
8. Administration of Mr Radich's estate has been difficult because Mr Radich is not in New Zealand and is not subject to the controls available to the Official Assignee over bankrupts resident in New Zealand. the Official Assignee has been hampered in ascertaining Mr Radich's assets. The Official Assignee has not been able to make a house inspection of Mr Radich. He has not been able to ascertain whether transactions involving the family trust are voidable under the Insolvency Act 1967. Mr Radich cannot be personally examined.
9. Because the estate holds no assets, the Official Assignee in New Zealand has not been able to mount proceedings or to apply to have the Official Receiver for Queensland appointed receiver of Mr Radich's property in Australia.
10. In circumstances such as the present case, if a sequestration order is made in Australia in respect of a person already adjudicated bankruptcy in New Zealand, it is normal practice for the Official Assignee in New Zealand to co-operate with the Official Receiver in administering the debtor's bankruptcy".
The respondent's wife deposed that she was the trustee of the family trust referred to by Mr Rollinson and that the building referred to was the commercial premises in which the respondent and his former partners conducted their practice as solicitors in New Zealand. She further deposed that the trust's interest which she held was assigned to the interests of her husband's former partners when the respondent ceased to practice as a member of the partnership. there is no suggestion in the material that she received any consideration for the transfer. If anything, the suggestion is that the transfer was set-off against an alleged indebtedness of the respondent to the practice. Mrs Radich has offered to assign to the Official Assignee any interest which the trust may have in any property whatsoever.
The respondent applied for discharge from bankruptcy in New Zealand. That application was refused on 10 April, 1991. The Official Assignee neither supported nor opposed the application. In the application Mr Rollinson swore an affidavit dated 27 March, 1992 in which he deposed :-
"3. The Official Assignee has to date not realised any assets in the bankruptcy and so far as he has been able to establish there is no realistic prospect of any assets eventuating.
4. In correspondence with the Official Assignee the bankrupt has advised that he has no assets in New Zealand and no assets of any consequence in Australia. Enquiries are still proceeding into the circumstances of a family trust established by the bankrupt and while those are not yet completed it appears unlikely that the trust has any present assets.
5. The bankrupt's absence from New Zealand has created difficulties in the administration of the estate, it has for example not been possible to conduct a physical inspection of the bankrupt's home and its contents. The process of gathering details of the family trust and other assets has been a protracted one if only because of the need to conduct all enquiries by correspondence.
6. The grounds cited in the bankrupt's application for discharge include the assertion that there has been no misconduct on his part and that he has co-operated with the Official Assignee. I acknowledge that the Bankrupt has responded to requests for information and I am not aware of any basis on which it could be asserted that he has been unco-operative or misconducted himself."
The present applicant was represented on the respondent's application for discharge in New Zealand and opposed the making of the order. The respondent gave evidence upon the application and was cross-examined. The application was refused not for any adverse finding as to the respondent on his affairs or any misconduct on his part prior to or after his bankruptcy. Rather, Master Hansen in his written reasons was not satisfied that the respondent had shown substantial or compelling reasons why a discharge was appropriate prior to the automatic discharge under the New Zealand Bankruptcy law at the expiration of three years from his being declared bankrupt.
The position then is that the respondent will remain an undischarged bankrupt in New Zealand until 4 February, 1994 unless he can satisfy a New Zealand Court that he ought to be discharged at an earlier date.
The respondent's principal ground in resisting the order sought is that he has no assets and no probability of any becoming available. In support of this proposition, Counsel for the respondent relied upon In Re Betts Ex parte Betts (1897) 1 QB 51. Lord Esher M.R. said in Betts at 52 - 53 :-
"It is proposed to make the debtor a bankrupt, and he has made an affidavit in which in effect he says that it is no use making him a bankrupt, because he has no assets which could be dealt with in the bankruptcy and no prospect of ever having any. If that were all, I should repeat what I have said in former cases - namely, that the Court is not at this stage of the proceedings in a position to know whether that statement of the debtor is true, and cannot accept it as a sufficient ground for not making a receiving order. But I think that the law may properly be stated thus. If the Court is clearly convinced, not merely by the statement of the debtor, but from all the circumstances of the case, that there cannot be any assets or any prospect of any coming into existence, and that, if a receiving order is made, the only effect will be a mere waste of money in costs, then in such a case the Court has a discretion in the matter, and will be justified in exercising that discretion by refusing to make the order. The question, therefore, is whether the circumstances afford sufficient grounds for thinking that the present is such a case. In this case the debtor was made a bankrupt some years ago. At that time the income of certain trust funds was settled upon him on the terms that, if he became bankrupt, his right to that income ceased at once. It is true that the trustees of the settlement had a discretion to make him an allowance; but that is not an asset, for they may at any time withdrawn the allowance. Therefore that asset is wholly gone. Then is there any other asset? The former bankruptcy is still standing, and the petitioning creditor was a creditor under it. If he thought there were any assets, he could put the trustee under that bankruptcy in motion to obtain the benefit of them. He takes no steps for that purpose. That being so, why does he propose to make the debtor a bankrupt a second time? I do not wish to fathom his motives, but it seems clear to me that he must know that there are no assets, and no probability of any becoming available. It is said that there is a possibility of assets. But I think that a Court of justice ought not to take into consideration a possibility of which there is no probability. There does not appear to me to be in this case any possibility of assets in a business sense. There being no probability or even possibility in a business sense of the existence of assets which would pay off the debts under the first bankruptcy, and so become available for the purposes of the second, it appears to me that the result of making a receiving order would only be to cause a waste of money in costs which would be incurred uselessly". Lopes and Rigby LL.J. agreed.
The respondent submits that his circumstances fall squarely within the circumstances which moved the Court in Betts to dismiss the petition. He submits that his evidence that he has no assets is supported by the evidence of his wife, his partner Mr Broadbent and the Official Assignee in his New Zealand bankruptcy which remains in being. He submits that the later affidavit of Mr Rollinson shows that there has been an investigation of his affairs and that Mr Rollinson has concluded that "there is no realistic prospect of any assets eventuating" and that on the available material he has concluded that "it appears unlikely that the trust has any present assets".
The respondent further submits that in the proceedings for his discharge in New Zealand he was cross-examined as to his assets and affairs and that this appears, as it does, from the reasons of Master Hansen.
The reasons of Master Hansen were tendered as evidence of the fact that the respondent was cross-examined and this was conceded by Counsel for the applicant. It is not suggested that I am bound by or should necessarily accept the conclusions drawn by the Master on the evidence before him. The important feature of the New Zealand proceedings before the Master is that, notwithstanding the proceedings and cross-examination of the respondent, there is no suggestion that the respondent in fact has any assets in New Zealand or Australia of which the Official Assignee is unaware or that the respondent is being other than truthful when he deposes in these proceedings to having no assets.
The applicant submits that in the instant case there has been no public examination of the respondent in his New Zealand bankruptcy and that at this stage it cannot be known whether or not a second bankruptcy in Australia will have any result in terms of getting in assets for distribution to the respondent's creditors. In support of the submission reference was made to a number of decisions. For present purposes the most important are In Re Leonard Ex parte Leonard (1896) 1 QB 473, 475; Bayne v. Blake (No. 2) (1909) 9 CLR 360, 364 and In Re Field (A Debtor) 1978 Ch 371, 375.
In Bayne v. Blake (No. 2) at 364-365 Griffiths C.J. with whom Barton and O'Connor JJ. agreed said :-
"We have been asked now to allow a further ground of appeal to be taken, fiz., that there is no reason to think that there are any assets in the estate of either of the appellants. First of all, there is no evidence before us that that is the true state of the facts. But, if it were, that that is a ground for not making an order for sequestration is conclusively negatived by In re Leonard; Ex parte Leonard. As pointed out in that case, when a petition is presented it is impossible to say whether there will prove to be any assets or not. "All the petitioning creditor" said Lord Esher, M.R. "then knows or need know is that a debt is owing to him, and that, after taking the necessary steps to procure payment of that debt, he cannot get payment of it; and therefore he asks that the debtor may be made bankrupt. "The Court cannot at that stage tell whether the proceedings in bankruptcy will have no result. If the debtor is made bankrupt, there will be a public examination of him, and then it may be ascertained whether he has any assets. At the time of the petition and adjudication the Court has not the proper materials for judging whether there are assets or not". So that the objection is really no objection at all. The case of In re Betts; Ex parte Betts, mentioned in the appellants' statement, was a case in which the debtor was already bankrupt, and that was held to be a ground for refusing to make him bankrupt a second time, the only possible result of which would be to give rise to disputes between two sets of assignees under the adjudication, and, as there were no assets, it would be entirely futile".
In Re Field at 375 - 376, Megarry V.C. said :-
"I turn, then, to the first of the propositions that I mentioned, on which Mr Kirsten's main submissions rested. Put shortly, he contended that where it was established that the debtor had no assets and no prospects of acquiring any, the court should dismiss the petition; for to make a receiving order in such circumstances would merely increase the costs, and would do no good. In the present case, he said, the debtor fell within this doctrine, and so the receiving order should be set aside. Now it is plain that there is considerable support for some doctrine of this sort; but it is equally plain that the doctrine is hedged about by important precautions. After all, if it were open to a debtor to avoid having a receiving order made against him simply by alleging utter destitution, both present and future, such pleas of destitution might become popular; and prospective bankrupts might hasten to rid themselves of any assets or prospects which might hamper them in making such a plea. A man may indeed be too poor to be made bankrupt: but the burden of proof is heavy.
I would describe In re Betts, Ex parte Betts (1897) 1 QB 50 as the leading case on this branch of the law, were it not for the fact that the judgments so strongly emphasise the special circumstances of the case, and that it is not to be regarded as a precedent for any other case unless the circumstances are the same or exactly similar. There, the debtor was already bankrupt. The petitioning creditor in the second bankruptcy had proved for a prior debt in the first bankruptcy, and only a small dividend had been paid in it; the bankrupt was undischarged. In those circumstances, the Court of Appeal set aside the receiving order in the second bankruptcy proceedings because, in the words of Lord Esher M.R., at p 52, the court was
"clearly convinced, not merely by the statement of the debtor, but from all the circumstances of the case, that there cannot be any assets or any prospect of any coming into existence, and that, if a receiving order is made, the only effect will be a mere waste of money in costs". In the first bankruptcy, the existence of assets would have been fully probed; and if subsequently assets appeared, they would be taken for the first bankruptcy, and so would not be available for a second bankruptcy until all the debts under the first bankruptcy had been paid".
The position contended for by the respondent has been considered by the Full Court in Clyne v. Deputy Commissioner of Taxation and In Re Patrick Michael Darcey v. The Pre-Term Foundation (App. No. G520 of 1986, Unreported, Sydney 23 May, 1988; Fox, Wilcox and French JJ.).
In Clyne the Court (Fisher, Morling and Wilcox JJ.) said at pages 6 - 7 :-
"The appellant referred us to authority for the proposition that a bankruptcy court should exercise its discretion against the making of a sequestration order where the debtor has no assets which may be recovered on behalf of the creditors. However, this course has been regarded as appropriate only in cases where the lack of assets is clear beyond question so that the presentation of the petition amounts to oppression: see In Re Betts; Ex p Betts
(1897) 1 QB 50, Re Somers; Ex p Union Creditor Bank Ltd. (1897) 4 Mans 227. It is not enough that the Court has no information to indicate that there are assets: see Bayne v. Blake (1909) 9 CLR 360 at 364 and In Re Leonard; Ex p Leonard (1896) 1 QB 473, in both of which cases it was pointed out that when the petition is presented it will not - normally, their Honours meant - be possible to say whether there will prove to be assets or not. Even an appearance of absence of assets after investigation has been held to be an insufficient reason for refusing to make a sequestration order: see Re Field (1978) 2 All ER 981".
In Re Darcey, the appellant was a member of a Roman Catholic religious order. He had sworn vows of poverty, chastity and obedience. The vow of poverty required a member to have and continue to have no personal income or assets. The appellant deposed that he had no assets and that at the time of the proceedings he was studying theology at a Catholic Seminary in Sydney. The judgment debt arose out of a costs order in proceedings involving the appellant and the respondent. At first instance the appellant contended that the bankruptcy petition ought to be dismissed on the basis that bankruptcy would be a futile exercise given the continuing poverty of the appellant. The appellant's evidence of having no assets or income was not challenged. The submission was rejected and a sequestration order made. The appellant appealed.
In the judgment of French J. in the Full Court (which was agreed in by Fox and Wilcox JJ.), His Honour referred to In Re Leonard Ex parte Leonard at 475; In Re Betts Ex parte Betts at 52, 53 and 54; Bayne v. Blake (No. 2) at 364 and In Re Field at 375. His Honour then concluded at pages 7 - 8 :-
"The acceptance that the appellant did not have any "personal assets" in this case does not dispose of the question whether there might be property available for disposition to his creditors. The fact that assets which have or might yet come his way have been or would be disclaimed or assigned pursuant to his vows, does not provide a complete answer.
I suspect that in the end this sequestration will prove to be a fruitless, time wasting and unmeritorious exercise which has little to do with the public interest. However on the principles established in the cases, I am unable to say that his Honour erred in the exercise of his discretion..."
It is clear from the decision in Darcey that the Court is not concerned merely with the property of the debtor at the time the bankruptcy petition comes before the Court. It is concerned with the property of the bankrupt which would be divisible amongst the creditors in the event that sequestration was ordered. By section 116(1)(a) of the Bankruptcy Act 1966 "all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him, or has devolved or devolves on him after the commencement of the bankruptcy and before his discharge" is property divisible amongst the creditors of the bankrupt.
For the respondent to bring himself within the factual circumstances which moved the Court to dismiss the petition in Betts, he must show not only that he has no assets within the jurisdiction but that any after acquired property in Australia would not become available for an Australian bankruptcy because it would be taken for the existing New Zealand bankruptcy (See Field at 376). That is, the respondent must show that the making of an order is a futility because there is presently no property and will be no property available in a second bankruptcy (see Bayne v. Blake (No. 2) at 365).
The respondent seeks to discharge this onus by submitting that section 42(2)(a) of the Insolvency Act 1967 (NZ) assigns to the Official Assignee in New Zealand "(a)ll property whatsoever and wheresoever situated belonging to or vested in the bankrupt at the commencement of the bankruptcy, or acquired by or devolving upon him before his discharge". Thus it was submitted that it was open to the Official Assignee in New Zealand to seek under section 135 of the Insolvency Act 1967 (NZ) letters of request for this Court to make orders in relation to any after acquired property in aid of the New Zealand bankruptcy administration. Such a request, it was submitted, would be given effect to in this country by virtue of section 29 of the Bankruptcy Act 1966 and orders for the appointment of a receiver for both immoveable and moveable property would be made (see Ayres v. Evans (1981) 56 FLR 235 especially at 240 - 241; Re Osborne Ex parte The Trustee (1932) 15 B and CR 189).
It was further submitted that, having regard to the respondents total indebtedness in New Zealand and his present financial circumstances, it was unlikely that he would ever acquire sufficient property before his discharge in the ordinary course of his bankruptcy in New Zealand to pay out in full his New Zealand creditors.
Section 29 of the Bankruptcy Act 1966 does not create new rights, but only creates new remedies for enforcing existing rights (Re Ayres Ex parte Evans (1981) 51 FLR 395 at 405; Hall v. Woolf (1908) 7 CLR 207 at 212). Thus the Official Assignee in New Zealand may not by recourse to the acting in aid provisions of either the New Zealand or Australian bankruptcy legislation acquire or enforce rights in relation to property of the respondent which he does not have in law or equity.
In his affidavit material the respondent speaks of "settling" in Queensland. The present circumstances of his family in Queensland, his desire to take over the practice of Broadbents, Solicitors, and the whole tenor of the affidavit material he filed including his wife's affidavit wherein she deposes :- "we are now settled in Australia and cannot conceive of our returning to New Zealand to live" would tend to suggest that the respondent has formed an intention to permanently reside in Queensland and abandon his domicile of origin in New Zealand. If the respondent has acquired a domicile of choice in Queensland, and the material suggests that he has done so, that circumstance operates to limit the rights of the Official Assignee in respect of property acquired after the respondent abandoned his New Zealand domicile. Irrespective of what rights the Official Assignee may have had in relation to after acquired property wherever situated while the respondent was domiciled in New Zealand, the Official Assignee cannot assert any title to property not locally situated there, which was acquired after the respondents domicile in New Zealand came to an end (Hall v. Woolf at 211 - 212). In consequence, as a matter of probability, any after acquired property of the respondent coming into his hands after settling in Australia, would not pass to the New Zealand Official Assignee and become available for the purposes of the New Zealand administration. Such property, should it come into existence would be available for an Australian administration if the sequestration order is made. It is not possible at this point in time for the Court to say whether as a matter of probability such property will or will not come into existence.
Although I am satisfied that the evidence of the respondent, his wife, his partner and the investigations of the Official Assignee in New Zealand (notwithstanding any difficulties arising from the respondent's presence in Australia) supports a conclusion that he presently does not have property in Australia beyond some minimal household effects, that does not conclude the matter. Like French J. in Darcey, I suspect that in the end any sequestration in Australia will prove to be a fruitless and time wasting exercise. However, the general principles established by the authorities are certain and it cannot be said that it is clear beyond question that an Australian sequestration will produce no property divisible amongst creditors prior to the discharge of the respondent from bankruptcy in Australia in the ordinary course. The respondent therefore fails to make out his main ground of objection.
The mere fact of the existence of the continuing bankruptcy administration in New Zealand, and that the applicant has lodged a proof of debt in that administration, does not of itself in the exercise of a discretion call for a refusal to make a further sequestration order. It is only in circumstances where the making of an order would be futile (Ex parte Robinson (1883) 22 ChD 816) or the proceedings amount to an abuse of process that a discretionary refusal of a creditor's prima facie right to an order would be considered. Those circumstances have not been made out in this case.
The respondent further submitted that the making of an order would cause him and his family hardship because he would be further prejudiced in his practice as a solicitor in circumstances where his insolvency occurred because of a collapse in the New Zealand economy and property values and not because of any speculation or misconduct on his part. A second sequestration will cause no further inhibitions on the respondent's ability to practice as a solicitor or act as a company director beyond those presently imposed because of his New Zealand bankruptcy. Whether or not he will be entitled to a discharge from bankruptcy in Australia when his discharge in New Zealand occurs, will depend upon his personal circumstances and any other relevant considerations at that time. It does not however necessarily follow that his status as a bankrupt will extend beyond his discharge from bankruptcy in New Zealand. It therefore cannot be said with any certainty that an Australian bankruptcy would subject the respondent to any hardship beyond that which he presently experiences because of his New Zealand bankruptcy.
In the result the respondent has failed to discharge the onus upon him that there exists "other sufficient cause" that a sequestration order ought not to be made.
The applicant in support of the application submitted that there was a suggestion of earnings being wrongfully diverted and a want of frankness with the New Zealand Official Assignee concerning matters such as shareholdings and income which, when coupled with the respondent's professional employment and the need to protect the Australian financial community, justified the making of a sequestration order. The former of these allegations were made by the applicant in the New Zealand proceedings and the respondent was cross-examined on them. In fairness to the respondent I should record that there is nothing in the material before me which supports the submissions and there is nothing in his conduct as a solicitor in Queensland demonstrated on the material which would suggest that he is placing his clients' interests or the Australian financial community at risk.
In coming to the conclusion that an order sequestrating the estate of the respondent ought to be made, I have had regard solely to the fact that the respondent has not shown sufficient cause why an order ought not be made and in those circumstances prima facie on the proof of the matters set out in section 52(1) of the Bankruptcy Act 1966, the Court will proceed to make an order for sequestration (Cain v. Whyte at 646; Rozenbes v. Kronhill (1956) 95 CLR 407 at 414; Re Mitchelson Ex parte Mitchelson (1979) 39 FLR 366 at 371).
I am satisfied that the applicant has made out the matters stated in the bankruptcy petition, of the service of the petition and of the fact that the debt on which the applicant relies is still owing. The respondent did not attempt to satisfy me that he was able to pay his debts and on the evidence he clearly cannot do so.
I ORDER THAT :-
1. The estate of Nicholas Charles Luke Radich be sequestrated.
2. The applicant's costs of and incidental to the petition in this matter including reserved costs be taxed and paid in accordance with the Bankruptcy Act.
3. I direct that a draft of this order be delivered to the Registrar within seven (7) days in accordance with Rule
124(2).
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
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