Re Shields, Geoffrey Neil Keith & Anor, Ex Parte the Official Receiver in Bankruptcy & Ors
[1995] FCA 997
•7 Dec 1995
CATCHWORDS
BANKRUPTCY: - Powers and duties of trustee - right to enter property for the purpose of taking possession and attaching property - whether trustee may only enter property pursuant to a warrant issued under s 130 Bankruptcy Act - whether trustee may enter property with consent of the bankrupt - meaning of 'consent' - trustee's title to real property - when title vests in equity - when title vests at law - power to seize property of bankrupt - whether power must be exercised in accordance with the United Nations Convention on the Rights of the Child
PROPERTY OF BANKRUPT- whether property divisible amongst creditor's - whether vehicle used primarily as a means of transport within the meaning of s 116(2)(ca) Bankruptcy Act - whether aggregate value of the vehicle is more than prescribed amount - meaning of 'aggregate value' - whether cost of sale should be deducted
ACCESS TO BOOKS AND RECORDS - whether s77A notice should be set aside - notice issued following s 81 examination - whether irregularities in s 81 examination are grounds for setting aside s77A notice.
Bankruptcy Act 1966 (Cth): s 5, s 13, s 15, s 18, s 19, s19AA, s 55, s 56, s 58, s 77, s 77A, s 77C, s 81, s116, s 129, s 130, s 135(1), s 156A, s 160
Bankruptcy Rules 1966 (Cth): r 135, r 178
Real Property Act 1900 (NSW) s 90, s 124
Minister for Immigration and Ethnic Affairs v Teoh (1995) 128 ALR 353
Coco v The Queen (1994) 179 CLR 427
Entick v Carrington 2 Wils 275; 95 ER 807
Re Bayliss; Ex parte Hadotone Pty Limited & Ors v Official Trustee in Bankruptcy (1987) 15 FCR 91
Crowley v Murphy (1981) 52 FLR 123
Re Ditfort; Ex Parte Deputy Commissioner of Taxation (NSW) (1988) 83 ALR 265
Sheahan v Joye (Unreported, Branson J, 1 June 1995)
RE: GEOFFREY NEIL KEITH SHIELDS & ANOR, EX PARTE THE OFFICIAL RECEIVER IN BANKRUPTCY;
ISAAC JOHN MACKAY SHIELDS & ORS v THE OFFICIAL RECEIVER IN BANKRUPTCY & ANOR
No. NB209 of 1992
Beazley J
7 December 1995
Sydney
IN THE FEDERAL COURT OF AUSTRALIA )
) No. NB209 of 1992
NEW SOUTH WALES DISTRICT REGISTRY )
)
BANKRUPTCY DIVISION )
RE: GEOFFREY NEIL KEITH SHIELDS AND NORMA ROSE SHIELDS (aka NORMA RAE SHIELDS)
EX PARTE:THE OFFICIAL RECEIVER IN BANKRUPTCY as trustee of the bankrupt estates of Geoffrey Neil Keith Shields and Norma Rae Shields
ISAAC JOHN MACKAY SHIELDS
First ApplicantGEOFFREY NEIL KEITH SHIELDS
Second Applicant
NORMA ROSE SHIELDS
Third ApplicantTHE OFFICIAL RECEIVER IN BANKRUPTCY
First Respondent
THE OFFICIAL TRUSTEE IN BANKRUPTCY
Second Respondent
CORAM:BEAZLEY J
PLACE: SYDNEY
DATE: 7 DECEMBER 1995
SHORT MINUTES OF ORDER
The Court answers the separate question
Whether a trustee in bankruptcy is required to obtain a warrant under of s 130 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) before entering upon property occupied by the bankrupts for the purpose of attaching property.
No.
The Court answers the separate question
Whether a Nissan Patrol station wagon of which the trustee took possession was divisible property of the bankrupts, Geoffrey and Norma Shields.
No
The Court dismisses the application that the S 77 A notice dated 12 January 1995 be set aside.
The Court orders that the applicants pay the respondents' costs of and incidental to the proceedings heard on 26 October 1995.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
) No. NB209 of 1992
NEW SOUTH WALES DISTRICT REGISTRY )
)
BANKRUPTCY DIVISION )
RE: GEOFFREY NEIL KEITH SHIELDS AND NORMA ROSE SHIELDS (aka NORMA RAE SHIELDS)
EX PARTE:THE OFFICIAL RECEIVER IN BANKRUPTCY as trustee of the bankrupt estates of Geoffrey Neil Keith Shields and Norma Rae Shields
ISAAC JOHN MACKAY SHIELDS
First ApplicantGEOFFREY NEIL KEITH SHIELDS
Second Applicant
NORMA ROSE SHIELDS
Third ApplicantTHE OFFICIAL RECEIVER IN BANKRUPTCY
First Respondent
THE OFFICIAL TRUSTEE IN BANKRUPTCY
Second Respondent
CORAM:BEAZLEY J
PLACE: SYDNEY
DATE: 7 DECEMBER 1995
REASONS FOR JUDGMENT
BEAZLEY J: There are two issues before me for determination as separate questions. They are:
Whether a trustee in bankruptcy is required to obtain a warrant under of s 130 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) before entering upon property occupied by the bankrupts for the purpose of attaching property.
Whether a Nissan Patrol station wagon of which the trustee took possession was divisible property of the bankrupts, Geoffrey and Norma Shields.
There is also before me a claim that a notice issued to the first applicant pursuant to s 77A of the Bankruptcy Act (the s 77A notice) be set aside. Although this claim was made in the same application in which the separate questions arose, it is a discrete matter. As the claim is within a short compass, it has been convenient to hear and determine it at the same time as the separate questions.
Background Facts
The first applicant, (Isaac Shields) is the brother of the second applicant (Geoffrey Shields). The second applicant and his wife, the third applicant (Norma Shields) became bankrupt on 29 January 1992 pursuant to the provisions of s 56 of the Bankruptcy Act. The Official Trustee in Bankruptcy thereby became trustee of their estates.
Prior to the date of bankruptcy, Geoffrey and Norma Shields had granted bills of sale over certain farming and other equipment. One bill of sale, dated 29 October 1987, was granted in favour of Dorothy Isobel Shields, Geoffrey and Isaac Shields' mother. Another, dated 29 May 1990, was granted in favour of Isaac Shields.
In their statement of affairs filed pursuant to s 56(2) of the Bankruptcy Act, Geoffrey and Norma Shields disclosed personal assets comprising a small amount of cash at bank, household furniture and effects located upon a rural property known as "Whitegums" at Nyngan and real property located at 59 Wombiana Street, Nyngan. "Whitegums" is a farming property upon which Geoffrey and Norma Shields had carried on a farming partnership. They had become the registered proprietors of that property on 19 October 1990. On the same day, they executed a mortgage over the property in favour of Isaac Shields as to 734/1000 shares and Dorothy Isobel Shields as to 266/1000 shares as tenants in common.
On 17 June 1994, Peter Dwyer, a senior assistant official receiver employed by the Insolvency and Trustee Service Australia (ITSA), entered upon the property "Whitegums" for the purposes of taking possession of certain equipment. He was accompanied by the sheriff and possibly a third person. A local real estate agent was also in attendance. Mr Dwyer had with him a list of equipment which he had prepared from the bills of sale to which I have referred. Mr Dwyer directed the sheriff's officer to try to avoid attaching any of the chattel property that could be identified as being subject to the bill of sale to Isaac Shields dated 29 May 1990.
It is not clear whether Geoffrey and Norma Shields had been informed that Mr Dwyer was to attend the property on that day. In any event, they did not know who he was when he entered upon the property. After Mr Dwyer identified himself, he and Geoffrey Shields had the following conversation:
Geoffrey Shields:
"Oh, you're bloody Dwyer."
Mr Dwyer:
"Yes, and I am here to list everything and then take it all to be sold".
Geoffrey Shields:
"You have no right to be here. Nothing belongs to me. It all belongs to other people."
Mr Dwyer:
"I will do what I like and no one can stop me."
Immediately after this conversation, Norma Shields broke down and was in such a state that Geoffrey Shields called an ambulance. The ambulance arrived a short time later. Norma Shields was conveyed to Nyngan Hospital where she was admitted for 3 days. After the ambulance had left, the sheriff's officer intervened and said to Geoffrey Shields:
"Let them go ahead because they have the right and they are your trustees and they are there to look after your interests."
Mr Dwyer and the sheriff then took an inventory of equipment on the property. Geoffrey Shields did not interfere with their doing so. After the listing had been completed, Mr Dwyer advised Geoffrey Shields and his son James, that no one was authorised to remove the equipment which had been
identified as property of Geoffrey and Norma Shields.
Mr Dwyer's initial intention had been to arrange an "on site" auction of certain of Geoffrey and Norma Shields' goods under the control of a local agent. However, after having attended on the property on 17 June, he abandoned that idea and decided to sell the goods in Sydney. He arranged for the goods to be removed from "Whitegums" and transported to Sydney for sale by auction.
As at the date of their bankruptcy, Geoffrey and Norma Shields owned a 1981 Nissan Patrol station wagon. The vehicle was not on the property at the time that possession was taken of the other goods. When possession was later obtained its registration plates had been removed.
All items, including the Nissan Patrol, were sold at auction. The Nissan Patrol sold for $3000. The gross proceeds of sale of all property was $8005. After deduction of charges and commission of $4712.37, an amount of $3292.63 was paid to the trustee. There was no breakdown of the expenses of sale or the auctioneer's commission so as to relate any part of that expenditure to a particular sale item. Thus it was not possible to determine the net sale value of the Nissan Patrol.
Geoffrey Shields contends that the Nissan Patrol wagon was the family vehicle. He said that he and his wife have no other means of transport. They live about 30 kilometres from town in a remote area. One of their sons, Keith, is 14 years old and attends Nyngan high school. He travels to and from school by bus. Geoffrey Shields describes his son as having a learning disability and as needing constant help with his education. This cannot now be arranged as, without the vehicle, they have no means of transporting him around. Nor is Keith able to participate in extra curricular school activities because the school bus only operates in ordinary school hours.
The Bankruptcy Act: Statutory Scheme
A debtor may present a debtor's petition. If the petition is accepted by the Registrar, the debtor becomes bankrupt: ss 55(1); 55(4A). All, or a majority of, the members of a partnership may present a debtor's petition against the partnership: s 56(1). In this case, Geoffrey and Norma Shields presented their petition under s 56(1).
Upon bankruptcy, the debtor's property vests forthwith in the Official Trustee or a registered trustee: s 58(1). "Property of the bankrupt" is defined in s 5 to mean "property divisible amongst the bankrupt's creditors". Section 116(1) specifies the property divisible amongst creditors. Property used by the bankrupt primarily as a means of transport, where the aggregate value of that property does not exceed $2500, does not fall within the bankrupt's divisible property: s 116(2)(ca); s 116(2A)(b).
Where a law of the Commonwealth or a State requires the transmission of property to be registered, the property immediately vests in the trustee in equity. The property does not vest in the trustee at law until registration has been completed: s 58(2). The Real Property Act 1900 (NSW) is a law of a State which requires the transmission of real property to be registered.
The Bankruptcy Act imposes various duties upon the bankrupt's trustee. Before dealing with those duties, it is important to keep in mind the distinction between the Official Receiver and the Official Trustee. The Governor-General may, by Proclamation, declare any part of Australia to be a Bankruptcy District for the purposes of the Act: s 13. In general terms, each state has been proclaimed to be a separate Bankruptcy District. There is appointed for each Bankruptcy District an Official Receiver and such officers as are necessary to assist the Official Receiver: s 15(1). Official Receivers are under the control of the Court: s 15(2).
The Official Trustee's office exists by virtue of s 18 of the Act. The Official Trustee becomes the trustee of a bankrupt's estate, unless a registered trustee becomes the trustee pursuant to s 156A: s160. Here, as no registered trustee had consented to act, the Official Trustee became the trustee of Geoffrey and Norma Shield's estate.
The duties of a trustee, including the Official Trustee, are prescribed by s 19. They include a duty to ascertain the assets and liabilities of the bankrupt: s 19(1)(b). The trustee must forthwith take possession of all the property of the bankrupt capable of manual delivery: s 129(1). The court, upon application by the trustee, may enforce possession: s 129(2). The court may issue a warrant for seizure of property if the trustee has reasonable grounds for suspecting that there is any property of the bankrupt on or in specified premises: s 130(1). At the time the trustee takes possession of or attaches property of the bankrupt, the trustee is required to make an inventory of the property, date and sign the inventory and cause a copy to be served on the bankrupt: rule 178.
The Official Receiver may, in the name of, and on behalf of, the Official Trustee, exercise any of the powers of, or perform any of the functions of, the Official Trustee: s 18(8). The Official Receiver may therefore act as the trustee of a bankrupt's estate, as occurred here.
The Official Receiver, may to the extent that the trustee has indicated that the trustee does not propose to do so, investigate so much of the bankrupt's conduct and examinable affairs, and the books, accounts and records kept by the bankrupt as is relevant to the bankruptcy and the cause of the bankruptcy: s 19AA(1)(b),(c) and (d). The Official Receiver is entitled at all reasonable times to full and free access to all premises and books for any purposes of the Act and for that purpose may make copies of, or take extracts from any such book: s 77AA(1). The Official Receiver may authorise, in writing, an officer to exercise powers under s 77AA(1). The Official Receiver may, by notice in writing, require a person to give the Official Receiver such information as the Official Receiver requires for the purposes of the performance of the functions of the Official Receiver or a trustee: s 77C.
The bankrupt shall do all such things and acts in relation to his property and its realisation as are required by the Trustee or as are ordered by the Court upon the application of the trustee: s 77(e). The bankrupt is also required to aid, to the utmost of the bankrupt's power, in the administration of the bankrupt's estate: s 77(g).
Separate Question 1
As at 17 June 1994, the Official Trustee had not become registered as proprietor of "Whitegums" as required by s 90 of the Real Property Act 1900 (NSW). The property remained registered in the name of Geoffrey and Norma Shields, subject to the registered mortgage to Isaac and Dorothy Shields. Thus, the property was vested in equity in the Official Trustee, but remained vested at law in Geoffrey and Norma Shields.
It is common ground between the parties that no warrant was issued under s 130 authorising Mr Dwyer's entry upon "Whitegums" on 17 June 1994. Counsel for the applicants submitted that the Official Trustee was only entitled to enter the property with permission, which had not been given, or under the authority of a warrant, which had not been obtained. He relied upon Entick v Carrington 2 Wils KB 275; 95 ER 807; Crowley v Murphy (1981) 52 FLR 123 and Re Bayliss; Ex parte Hadotone Pty Limited & Ors v Official Trustee in Bankruptcy (1987) 15 FCR 91. He further submitted that a person's common law rights cannot be abrogated except by the express words or necessary intendment of a statute: Baker v Campbell (1983) 153 CLR 52; Coco v The Queen (1994) 179 CLR 427.
Counsel for the Official Trustee submitted that the Official Trustee was the true owner of the property and entitled to enter at any time. Alternatively, it was submitted that Mr Dwyer's entry was consensual. It was conceded that other modes of authorised entry, e.g. pursuant to s 77AA(1), or perhaps pursuant to an order of another court requiring the delivery up of goods, did not apply to the entry on this occasion.
Entick v Carrington is ancient authority for the well established principle that a person cannot enter upon another's property except as authorised by law. The Lord Chief Justice at 2 Wils KB at 291; 95 ER at 817-8 stated:
"Our law holds the property of every man so sacred, that no man can set his foot upon his neighbour's close without his leave; if he does he is a trespasser, though he does no damage at all; if he will tread upon his neighbour's ground, he must justify it by law."
In Crowley v Murphy Lockhart J, with whom Northrop J agreed, stated at 141:
"Even today, there is no right at common law to enter a person's home or premises for the purposes of search or seizure without the permission of the owner or occupier, except in the case of a search for stolen goods. Entry without such permission or the authority of a valid warrant is to commit a trespass and to render the trespasser liable to damages. Statutes authorising the issue of search warrants must be expressed in clear and unambiguous language."
The rights of a person in possession have been considered most recently in Coco v The Queen. Mason CJ, Brennan, Gaudron and McHugh JJ stated at 435-436:
"Every unauthorised entry upon private property is a trespass, the right of a person in possession or entitled to possession of premises to exclude others from those premises being a fundamental common law right. In accordance with that principle, a police officer who enters or remains on private property without the leave or licence of the person in possession or entitled to possession commits a trespass unless the entry or presence on the premises is authorised or excused by law".
In Re Bayliss; Ex parte Hadotone Pty Limited & Ors v Official Trustee in Bankruptcy (1987) 15 FCR 91 Spender J stated at 101:
"...the power to authorise search and seizure is a drastic power, and the legislature has in section 130 of the Act specifically provided the circumstances in which such a power might be exercised in relation to the property of the bankrupt."
However, this statement has to be read in context. In re Bayliss, the court was dealing with a seizure of property other than that of the bankrupt. In any event, with respect to counsel, the applicant's submission begs the question. Before an entry can be said to be unauthorised, the respective rights of the person in possession and the person entering have to be determined. The provisions of both the Bankruptcy Act and the Real Property Act 1900 (NSW) are relevant to this question.
It will be recalled that as at 17 June 1994, Whitegums was vested in the trustee in equity. The general scheme of the Real Property Act is that a person claiming an estate or interest in land under the provisions of the Act must become registered as proprietor before being entitled to deal with the land: s 41. No dealing with the land by the trustee is effective to pass any estate or interest in that land until the transmission has been registered. Until the trustee becomes registered, a person may deal with the bankrupt as registered proprietor: see Re Palmateer (1890) 16 VLR 793; Equity Trustees, Executors and Agency Co Limited v Ayrey (1900) 26 VLR 625. In practice, a trustee usually lodges a caveat to protect the trustee's interest.
Section 124 of the Real Property Act limits the right to bring an action for the recovery of land by a person not registered as proprietor, against a registered proprietor, except in 6
specified circumstances, for example, by a mortgagee against a mortgagor in default. An Official Trustee, not registered as proprietor, does not fall within those exceptions. See Kelly v Doody (1871) 5 SALR 132; Patterson v Murray (1896) 15 NZLR 487; Howie v Barry (1909) 28 NZLR 681; Orr v Smith (1919) 38 NZLR 818. Ballman The Torrens System in New South Wales (2nd Ed.) states at 401 that a bankrupt registered proprietor would be protected from ejectment proceedings by s 124 until such time as a transmission has been registered.
Thus, if a trustee wished to take possession of real property of a bankrupt, and assuming that the bankrupt did not voluntarily surrender possession, it would be necessary for the trustee to become registered as proprietor and to take proceedings to obtain possession. The Bankruptcy Act does not provide any mechanism for such proceedings. However, s 30 of the Bankruptcy Act allows the court to make such orders as is considered necessary for the purposes of carrying out or giving effect to the Act. An order for possession could be made under this section. In my opinion, leaving aside any question of consent, it follows that unless the trustee is otherwise authorised by the Bankruptcy Act, the trustee does not have the right to enter upon property at any time "as owner".
There is no provision in the Bankruptcy Act which gives the trustee unrestrained access to property. The Bankruptcy Act imposes various duties and obligations on both the trustee and bankrupt. I have referred above to the bankrupt's obligation to do all such things and acts in relation to his property and its realisation as are required by the trustee, or as are ordered by the Court upon the application of the trustee: s 77(e). The trustee has an obligation to take possession of property of the bankrupt capable of manual delivery: s 129. A trustee could direct a bankrupt to assist in the attachment or delivery of divisible property. However, neither s 77(e) nor s 129 gives the trustee any right of self help. In particular, s 129 does not give a right to enter property for the purposes of taking possession of property or for enforcing a direction given under s 77(e). Such a direction could be enforced by an order under s 30. More likely however, a trustee would apply to the court to enforce possession: s 129(2). For this purpose a warrant under s 130 might issue. However, unless the Bankruptcy Act authorises entry, or unless entry has been authorised by an order of the court, including the issue of a warrant, a trustee has no right to enter upon property of which the bankrupt is registered proprietor, unless that entry is with the consent or by the leave or licence of the bankrupt. It follows in this case that the trustee was not entitled to go upon the property unless the Shields' consented to Mr Dwyer's entry.
"Consent" is a word of wide connotation. It is defined in The Macquarie Dictionary (2nd Ed) to mean "to give assent, agree, comply or yield; assent, acquiescence, permission or compliance". The Shorter Oxford English Dictionary on Historical Principles (3rd Ed) defines "consent" to mean "agree, accord...voluntarily to accede to or acquiesce in a proposal, request, etc.; to agree comply, yield...compliance, concurrence, permission". In Coco v The Queen, the High Court used the phrase "leave or licence". The Macquarie Dictionary defines "leave" to mean "permission to do something"; and "licence" means "formal permission or leave to do or not to do something". Permission has the sense of allowing or letting something to be done. It may also mean "express or formal permission": see The Macquarie Dictionary. However, I do not consider that a formal or express permission is necessary for the purposes of authorising entry upon property occupied by a bankrupt. Provided that it is clear that there has been a consent to the entry, including by way of acquiescence in, or yielding to, the entry.
It will be recalled that Geoffrey Shields did not attempt to remove Mr Dwyer from the property. Nor did he ask him to leave, although Mr Shields was hostile to his presence and Mr Dwyer's approach was heavy-handed. Mr Shields was counselled by the sheriff as to Mr Dwyer's rights. Thereafter, Geoffrey Shields allowed Mr Dwyer and the sheriff to remain on the property and to identify the items of property which it was sought to attach. I consider that, in allowing Mr Dwyer and the sheriff to remain on the property and to attach the goods, Geoffrey Shields yielded to Mr Dwyer's presence on the property. In my opinion, that was sufficient to constitute consent to Mr Dwyer's entry.
Had Geoffrey Shields told Mr Dwyer to leave the property or otherwise resisted his entry, I consider that he would not have been entitled to remain on the property. The Official Trustee would then have been required to obtain the assistance of the court, either by applying for an order under s 30 or for the issue of a warrant under s 130. However I do not consider that, before a trustee can exercise the powers under the Bankruptcy Act to attach property, it is necessary that an order be obtained under s 30 or a warrant be issued under s 130.
It follows from what I have said that it is not necessary for a trustee to obtain a s 130 warrant before entering onto property occupied by a bankrupt. However, if the trustee does not obtain the consent, leave or licence of the bankrupt to enter the property, the entry would be unauthorised.
Separate Question 2
This question raises two issues. The first is whether the Nissan Patrol station wagon was used by Geoffrey and Norma Shields "primarily as a means of transport" within the meaning of s 116(2)(ca). The second is whether the "aggregate value" of the vehicle was more than $2500.
I am satisfied that the vehicle was used primarily as a means of transport by Mr and Mrs Shields. Mr Shields gave evidence as to the use which was made of the vehicle and that the family had no other means of transport. As the words of s 116(2)(ca) are words of ordinary English meaning, involving an easily understood concept, I do not consider that it is necessary to elaborate on this aspect further.
That leaves the question whether "the aggregate value" of the vehicle was greater than $2500.00. The phrase "aggregate value" is not defined by the Bankruptcy Act. Nor is "value" defined. "Net value" is defined: s 5. However, s 116(2) does not refer to net value. The phrase "aggregate value" is also used in s 116(2)(c) which provides that the divisible property of the bankrupt does not include "ordinary tools of trade, plant and equipment, professional instruments and reference books of the bankrupt whose aggregate value does not exceed $500".
The Macquarie Dictionary (2nd Ed.) defines "aggregate" to mean "total or combined, a total or gross amount" and "value" to mean, inter alia, and relevantly for the purposes of s 116(2), "monetary worth". In my opinion, the phrase "aggregate value" in s 116(2) means the total value of the particular piece of property or pieces of property used by the bankrupt primarily as a means of transport. In the instant case, there was only one piece of property satisfying this description. Accordingly, it is the value of that item to which regard must be had for the purposes of determining whether it falls within the paragraph.
There is nothing in the Bankruptcy Act to indicate that for the purposes of determining "aggregate value", the cost of sale should be deducted. Indeed, the tenor of the Bankruptcy Act is to the contrary. Thus, the definition of "net value" does not take into account the costs of sale, or the costs of dealing with an asset. Further, it would distort the clear intent of s 116(2)(ca) to protect from creditors a bankrupt's primary means of transport, if its value depended upon, for example, the cost of transport of the vehicle to a place of sale, or the commission on, or other cost of sale. Accordingly, I am of the opinion that the 1981 Nissan Patrol did not fall within s 116(2)(ca).
It was next submitted that the seizure of the 1981 Nissan Patrol wagon was unlawful as, in exercising the powers conferred by the Act, the Official Receiver failed to act in conformity with Article 3(1) of the United Nations Convention on the Rights of the Child. The Convention was ratified by the Commonwealth Executive on 17 December 1990 and entered into force for Australia on 16 January 1991. Article 3(1) of the convention provides:
"In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration."
The status and application of the Convention for the purposes of Australian law were considered by the High Court in Minister for Immigration and Ethnic Affairs v Teoh (1995) 128 ALR 353. Mr Teoh had applied for permanent resident status in Australia. At the time of his application, Mr Teoh was married to an Australian citizen. There were 3 children of that marriage and 4 other children of Mrs Teoh who lived with the family.
Under s 6 of the Migration Act, 1958 (Cth), an authorised officer of the Minister had a discretion to grant or refuse an application for an entry permit. The High Court held that, in the absence of statutory or executive indications to the contrary, the applicant had a legitimate expectation that administrative decision-makers would act in conformity with the Convention and treat the best interests of the child as a primary consideration.
There was no dispute that the interests of Keith Shields, the son of Geoffrey and Norma Shields, were not taken into account when a decision was made to take possession of the 1991 Nissan Patrol. Under the Bankruptcy Act, the trustee has an obligation to deal with the divisible property of a bankrupt in accordance with the provisions of the Act. Teoh was concerned with the exercise of a discretionary power. There is no discretion vested in the trustee in relation to the bankrupt's divisible property. Accordingly, I agree with the respondent's submission that the trustee is not bound by the Convention.
Whether the s 77A notice should be set aside
Following an examination of Isaac Shields under s 81 of the Bankruptcy Act on 17 November 1994, a section 77A notice dated 12 Januray 1995 was issued and served on him. The circumstances of that examination are relevant to the question whether the s 77A notice should be set aside.
It is first necessary to refer to the provisions of s 77A which provide:
"(1)Where a person (in this section called the "investigator") is conducting under section 19AA an investigation relating to a person (in this section called the "bankrupt"), subsections (2) and (3) of this section apply.
(2)For the purposes of the investigation, the investigator may by writing require a person to produce:
(a)to a specified person, being the investigator or another person; and
(b)at a specified place, and within a specified period or at a specified time on a specified day, being a place, and a period or a time and day, that are reasonable in the circumstances;
specified books, or specified classes of books, that:
(c)are books of an associated entity of the bankrupt;
(d)are in the possession of the person of whom the requirement is made; and
(e)in the investigator's opinion, are relevant to the investigation.
Section 81 provides that where a person becomes a bankrupt the Court or Registrar may, upon the application of the trustee or
Official Receiver summons the bankrupt, or an examinable person, for examination in relation to the bankruptcy. Isaacs Shields was an examinable person for the purposes of the bankruptcy of Geoffrey and Norma Shields.
Geoffrey Shields had also been summonsed to appear for an examination under that section on the same day, 17 November 1994. Geoffrey Shields did not attend. However, Isaac Shields attended before the Registrar and asked leave to appear for Geoffrey Shields. Leave was opposed. Counsel for the Official Receiver informed the Deputy Registrar that he had intended to examine both Geoffrey Shields and Isaac Shields during the course of the day. Mr Shields asserted however, that he had never been served with a summons to appear. Counsel for the Official Receiver sought to file in court an affidavit of service of the s 81 summons on Isaacs Shields.
The Deputy Registrar refused Isaacs Shields' leave to appear on behalf of Geoffrey Shields on the basis that under s 81(7) of the Bankruptcy Act, a bankrupt could only be represented by a solicitor or counsel at a s 81 examination. However, Isaac Shields was granted leave to appear under s 81(8) as a creditor of Geoffrey Shields. That section provides that "Where a person is summoned for examination ..., a creditor ... may take part in the examination..."
The Deputy Registrar next indicated he would deal with the application for examination of Isaac Shields. Counsel for the Official Receiver called Isaac Shields for examination. The Deputy Registrar told Isaac Shields he would be given the opportunity to dispute service of the summons and that when that issue was dealt he would make a direction whether Isaac Shields would be examined that day.
Mr Shields was shown a copy of the affidavit of service of the summons upon him. The affidavit stated:
On Sunday the 13th day of November 1994 at 3.45 o'clock in the afternoon, I served Isaac John Mackay Shields with a Summons Under Section 81(1) of the Bankruptcy Act 1966 dated 26 October 1994 by delivering it to him at 8 Carolina Park Road, Avoca Beach in the said State.
I identified the person served as being Isaac John Mackay Shields by asking him "Are you Isaac John Mackay Shields, the person named in this Summons?", to which he replied, "Yes, I am".
Annexed to this affidavit and marked with the letter "A" is a true copy of the Summons Under Section 81(1) of the Bankruptcy Act 1966 dated 26th October 1994.
Conduct money of $20.00 was tendered but refused."
Isaac Shields denied that he was served with any document on Sunday 13 November 1994. However, he conceded that a man had entered his property on the Sunday afternoon. He said that the man said:
"Is there an Isaac Shields here?"
He said that he saw that the man had some papers in his hand and said to him:
"Are they Court papers, if so you are out of time...the Court documents can only be delivered during Court hours."
Mr Shields said he turned to go inside to get his copy of the Federal Court Rules. He said that he looked back and saw the man walking out of the property, still carrying papers in his hand. Mr Shields conceded that he would have gone to the ground floor of the premises sometime during the course of the day, but said he did not find any papers left there.
The process server was not called for cross examination. Rule 135(1) of the Bankruptcy Rules provides that where a party to a proceeding has served an affidavit on another party to the proceedings, the second party may, by notice in writing served a reasonable time before the hearing, require the deponent of an affidavit to attend for cross-examination. If the deponent does not attend, the affidavit shall not be used without the special leave of the court: r 135 (2).
Although Isaac Shields disputed service, he did not request that the process server be available for cross-examination. The Deputy Registrar referred to Re Ditfort; Ex Parte Deputy Commissioner of Taxation (NSW) (1988) 83 ALR 265 where Gummow J held that although strict proof of observance of the requirements for service of bankruptcy notices and bankruptcy petitions was necessary, personal service could be effected by bringing the process to the person's notice, even if it was not handed to the person: see Thomson v Pheney (1832) 1 Dowling's Practice Cases 441. The deputy registrar found:
"On the evidence before me this morning, I am satisfied that if Mr Shields was not the person served, he was at least able to take actual, corporal possession of the documents that were served on him on the....13th day of November 1994 at 3.45 o'clock in the afternoon."
Isaac Shields objected. He said:
"I am not prepared for this. Now, I do not know what they are going to ask or anything else. That is the point that frightens me. So if I go into the witness stand and I need other documents or I do not have it then I ask that I be excused, or something."
However, the Deputy Registrar directed that Isaac Shields be examined.
Subsequent to the s 81 examination, Isaac Shields was served with a s 77A Notice which required the production of the following books:
"1.All books evidencing or recording the establishment of the Shields Family Trust, the trustee of which is Nejeki Pty Limited."
All books evidencing or recording the transfer of debts owing or alleged to be owing by the bankrupts (or either of them) to you, from yourself to the trustee of the Shields Family Trust.
All books evidencing or recording the application for, approval of and creation of Bill of Sale dated 21st May 1990 between the bankrupts and yourself registered number
90 02308.
All books evidencing or recording the application for, approval of and creation of a Mortgage dated 19th October 1990 from the bankrupts to yourself and Dorothy Isobel Shields.
All books evidencing or recording loans made by yourself to the bankrupts or either of them.
A copy of the record maintained in your computer evidencing calculation of the debt of $134,426.00"
Counsel for the applicant submitted that the s 77A notice should be set aside as it had been issued as a result of information obtained from the s 81 examination in circumstances where that examination had been conducted unfairly. Two aspects of unfairness were alleged. First, it was said that Isaac Shields was prejudiced by the examination as he was examined when he was not expecting to be and was not prepared. Secondly, it was submitted that he should have been able to test the question of service by cross-examining the process server: see Sheahan v Joye (Unreported, Branson J, 1 June 1995) where her Honour stated at 9:
"A party who chooses to file during the course of a hearing an affidavit upon which he or she wishes to rely faces the risk that the deponent will be required for cross-examination, and in my view, ought in caution to have the deponent available for cross-examination unless he or she has reached an agreement with the other side that it is not necessary to do so."
It was submitted that had Mr Shields been able to test the process server's affidavit evidence, he may have been able to establish that he had not been served with the s 81 summons, with the consequence that the s 81 examination may not have proceeded.
Mr Dwyer readily conceded that the decision to issue the s 77A Notice was made as a result of the information obtained in that examination. However, he said that other material was also relied upon including: the mortgage, the certificate of title; and the correspondence and notes in his file, which included the statement of affairs filed by Geoffrey and Norma Shields and a letter from Isaac Shields dated 7 October 1994 in which Isaac Shields informed the Official Receiver that he was owed a sum of $134,426 by Geoffrey and Norma Shields.
I am not satisfied that there was any irregularity in the s 81 examination. First, although r 135 did not apply as the affidavit had not been served prior to the hearing, the Deputy Registrar could have rejected the affidavit unless the process server was available for cross-examination. However, Isaac Shields did not seek to cross-examine the process server. Secondly, even if there was some irregularity in the proceedings, I am not satisfied that the section 77A notice ought to be set aside. It was central to counsel's submission that the information obtained from the s 81 examination provided the only material upon which the notice was founded. However, this was not the case. The other material in the possession of the trustee upon which he relied was sufficient to enable him to compile a s 77A notice in the terms which he did, even without the information provided in the s 81 examination. Thus, even if there was prejudice to Isaac Shields in proceeding with the s 81 examination, I am of the opinion that that prejudice does not effect the validity of the s 77A notice.
I certify that this and the preceding 26 pages
are a true copy of the Reasons for Judgment
of the Honourable Justice Beazley.
Associate:
Dated: 7 December 1995
APPEARANCES
Counsel for the Applicant: Mr I Davidson
Counsel for the Respondent: Mr J Johnson
Solicitors for the Respondent: Sally Nash & Co
Dates of hearing: 26 October 1995
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