Re Ralls, G.B.
[1992] FCA 951
•8 Jul 1992
JUDGMENT No. ........ ........ .. ,...,. ?)-I 1 92 IN THE FEDERAL COURT OF AUSTRALIA )
GENE= DIVISION 1 BANKRUPTCY DISTRICT OF THE
1 No WB 164 of 1990 STATE OF WESTERN AUSTRALIA 1 GARY BADEN RALLS
Ex Parte: THE OFFICIAL TRUSTEE IN RaNKRUPTCY. THE TRUSTEE OF GARRY BADEN RALLS. A EANKRUPT
Applicant
And : GARY W E N RALLS
Respondent
PRINCIPAL
EINFELD J PERTH B h 30 JULY 1992
,
On 20 February 1990 Garry Baden Ralls filed his own petition in bankruptcy which was accepted by the Registrar in Bankruptcy on the same day. As a consequence, Mr Ralls became bankrupt under section 55 of the Bankruptcy Act and the
| • | Official Trustee became the trustee of his estate. | ||
| The relevant facts for this matter are not in dispute. Mr Ralls is a registered proprietor of some real property in New Zealand. The value of the land as at May 1991 was of the | |||
| order of $A113,000 - as half owner of the land, Mr Ralls' interest would then have been of the order of $56,500. On the | |||
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| person acceptable to his brother would be limited. Thus the value of Mr Gary Rallsr interest may be regarded as somewhat less than this strictly mathematical calculation. | |||
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interest in the land. At the time of the bankruptcy, Mr Ralls
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lodged a statement of affairs. This showed that ,at,,the 41me 1.': ,,I
he had some five debts in total. The biggest one :was a debt #*L,* .,;L .7. I i.0 to the Taxation Office which, together with interest, amdunted ,.' P to approximately $90,000. The other debts were ik &spect of credit cards or accounts and totalled a little under $6500.
Since that time all the other debts, apart from the taxation debt, have been paid. Whilst I am informed that the Official Trustee has not advertised for creditors to come forward in the estate, the evidence of Mr Ralls in an affidavit of 27 May
was no cross-examination of him and I was therefore asked by 1992 is that he has no other debts in the bankruptcy. There the parties to proceed upon the assumption that the only proved or provable debt in the estate is the tax debt. Mr Ralls has failed to comply with the notice under section 77 and has not signed and delivered the transfer requested. Accordingly, the Official Trustee applies to the Court for an order for his commitment to prison for failing to comply with the direction to do so. He asks that the warrant for committal lie in the Office of the Registrar for seven days from the date of the order and that it not be executed if, within that time, the Memorandum of Transfer is signed and delivered.
The only question raised in this matter is whether an Australian tax debt can be met by property in a foreign country - in this case in New Zealand. It is agreed that acco~ding to principles of private international law, our courts will not enforce a foreign revenue law either indirectly or directly and will not entertain actions to collect taxes of foreign countries. A number of cases have been cited in this regard but as there is no dispute about the matter there is no point in my examining them in any detail now.
It will suffice to say that a Full Court of this Court in Avres v Evans [l9811 39 ALR 129 by majority interpreted
where this Court is asked to assist with obtaining control of section 29 of the Bankruptcy Act for the purpose of cases a New Zealand bankrupt's estate in Australia. In the particular case the majority of the debts were revenue debts to the New Zealand government.
According to the Full Court, section 29 is based upon the concept that our courts should "act in aid of and be auxiliary to" the courts of other countries having jurisdiction in bankruptcy. There are two machinery provisions of the section. Sub-section (3) deals with cases where a letter of request from a court of a country other than Australia requests aid in a matter of bankruptcy. This Court may then exercise "such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction". Sub-section (4) is the reciprocal provision, namely that this Court may request a court of another country with jurisdiction in bankruptcy to assist it in a bankruptcy matter.
The applicant trustee says that section 29 has nothing to do with this case because this is not a request to Australia by a foreign court to assist in the recovery of any property here, nor by contrast has Australia requested New Zealand to assist in the recovery of the property concerned in this matter. By section 5 of the Bankruptcy Act, property is defined as including property outside Australia. Section 77(e) provides that:
77. A bankrupt shall execute...
(e) such instruments and generally do all such acts and things in relation to his property and its realisation as are required by the Act or by the trustee or are ordered by the Court upon the application of the trustee.
The trustee therefore argues that the procedure that has been adopted on this occasion is an available procedure in respect of property outside Australia.
The respondent bankrupt argues that section 77(e) should be read as excluding property outside Australia required to satisfy a revenfie debt owing in Australia. The respondent also seeks to incorporate in the interpretation of section 77 a concept of reasonableness so that the request of the trustee under paragraph (e) at any rate should only seek the participation and co-operation of the bankrupt when it would be reasonable to require him to do so.
For my part, I cannot see that the section admits of any such gloss. No authority has been quoted in support of a reading down of the statutory provision in the suggested way and it seems to me that to do so would introduce a major qualification and difficulty into bankruptcy administration without a logical reason. In some cases it would also involve a significant amount of evidence and factual considerations if it were to be the case. I do not think that the question of reasonableness has any room for operation here. If it did, it could hardly be thought to be unreasonable to require a
bankrupt to transfer property of value to meet debts which had accumulated in the estate. The basic argument of the respondent is that the trustee should have proceeded by action under section 2 9 ( 4 ) in that there should have been a request to the New Zealand court for some assistance in the matter. The argument obviously is that if that had been done, the New Zealand court, which would have been bound by the same private international law or common
law, would have denied the request on the grounds that it would thereby be assisting in the recovery of a tax debt due to the Australian government.
The problem I have with this proposal is that the respondent
was unable to formulate the nature of the request that would
be made and I cannot for myself think of what could have been
asked. It should first be observed that sub-section (4)
provides that the Court may request the foreign court for
assistance. In other words, there would have to have been an
application to this Court for a letter of request to the New a Zealand court exercising bankruptcy jurisdiction to do some act which would assist the Australian court in the administration of its bankruptcy jurisdiction.
In fact, this Court does not need any assistance from the New Zealand court in this matter. This Court in fact would have nothing to do with this matter itself were it not for the application presently before the Court which seeks to punish
Official Trustee. Provided the request is lawful, the Court the bankrupt for failing to comply with a request of the itself has no immediate role in the gathering in of bankrupt estates or in their administration. The respondent argued that section 77 is what was described as an administrative or procedural provision. If so, that would highlight the fact that the Court would hardly be involved in anything that arose within its terms unless there was said to be some unlawfulness in the conduct of the trustee within the powers which section 77 bestows.
The Official Trustee's solicitor suggested that the New Zealand court might have been requested to appoint what is known under the New Zealand Insolvency Act as an Official Assignee to act as receiver of the bankrupt's property in New Zealand. It is not necessary for me to resolve that matter now but it would seem to me that this would involve an application to this Court to request the New Zealand court to direct that outcome. Assuming, as appears to be conceded, that this would be a possible course to adopt, it would seem to fie to be a most awkward and cumbersome, not to say expensive, course with dubious results.
By far the most direct and least expensive mechanism for gathering in the New Zealand property is the course which the Official Trustee has adopted in this case. Without any challenge to the validity of section 5 as it impinges on section 77(e) of the Australian Bankruptcy Act, nothing has been raised which would suggest that there was any unlawfulness in a request pursuant to section 77(e) to the
bankrupt to execute the transfer in question. What precisely the Official Trustee does with the property thus transferred is not a matter for present consideration but to uphold the respondent's viewpoint here would mean that section 77(e) must be read down so as to exclude property in a foreign jurisdiction whose realisation was being sought to obtain payment or a contribution to payment of a tax debt in Australia. It would also mean reading down the definition of
property in section 5 to exclude property in a foreign jurisdiction where the purpose or a result of its realisation was to pay a revenue debt that had been incurred in Australia.
I can see no basis for restricting the operation of those sections in that way. I recognise that the authorities which have been quoted to establish the common law in this regard do embrace the concept of indirect use of foreign courts to enforce the revenue laws of other countries but this is certainly not such a case. According to the undisputed evidence here, the bankrupt came into his condition or position by reason of some unfortunate business or entrepreneurial undertakings. There seems no reason to adjudge him in any way culpable in some moral or legal sense because of this circumstance. It just happened that because of either losses of money or inabilities to earn money for various reasons, he was unable to meet his debts, particularly a taxation debt which he says resulted from a retrospective taxation law or one with retrospective effect.
This is unfortunate but it does not seem to me to give rise to any suggestion that the section 77 procedure used by the Official Trustee is some indirect attempt to obtain the enforcement of an Australian revenue law by a New Zealand court. In fact, nothing is requested of the New Zealand court and I am doubtful, despite what has been put, that the New Zealand court would or could have anything to do with the matter in question here.
This bankruptcy came about by the bankrupt's own petition. The Tax Office did not obtain a sequestration order with a view to coming into possession of property in New Zealand to meet the tax debt. There seems no question here that either the Tax Office or the Official Trustee is attempting to bypass the common law that would apply here and presumably in New Zealand in relation to the enforcement of foreign revenue laws. The laws in question here are the laws of bankruptcy and the administration of bankrupt estates.
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The Official Trustee is a completely separate authority to the Tax Office. It is not the agency of the Tax Office. Its role here is strictly limited by the Bankruptcy Act to its capacity as trustee of the estate of the bankrupt. I do not believe that making this request, or requiring the bankrupt to sign and deliver the relevant transfer, was an unlawful act under section 77 or was not justified or permitted by that section. The application will in principle be granted but I shall hear the parties on the form which should be adopted to enforce the
property in issue. trustee's rights under the Bankruptcy Act in relation to the [Discussion] I order that the respondent bankrupt sign and deliver to the applicant trustee a transfer of his half share in the land contained in New Zealand Certificate of Title volume 876 folio
64 by not later than 4 pm on Wednesday 15 July. Such signing
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is to take place before a public notary practising in Western Australia and be on the form of a memorandum of transfer under the New Zealand Land Transfer Act 1952. I also order that the respondent within the same period deliver to the applicant the duplicate certificate of title over the same land.
[Other provisional orders recorded but not transcribed]
[Discussion on costs]
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30 Julv 1992
On the issue of costs, I stated on 8 July 1992 that the matter raised in defence of the failure to deliver the transfer was of some substance but otherwise reserved the issue of costs until the matter is next before the Court. I also said that in the event that the earlier orders were complied with, it may be taken that I would order that the costs of this application shall be borne by the estate. I have now been
informed by letter from the Australian Government Solicitor • that the respondent bankrupt has complied with the Court's orders. I therefore order that the costs of this application be borne by the estate.
I certify that thls and the
Reasons for Judgment herein of h ~ s Honour Just~ce Elnfeld
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