Re The Bankrupt Estate of Giuseppe Alvaro the Official Trustee in Bankruptcy

[1993] FCA 675

6 7 s 9 3

JUDGMENT No. ........ .,...,,,,. 1 ,,..... .....

V

NOT SUITABLE FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	)
)
SOUTH AUSTRALIA DISTRICT REGISTRY	)
1
GENERAL DIVISION	1

SB 1305 of 1990 RE: THE BANKRUPT ESTATE OF GIUSEPPE
ALVARO

Ex Parte

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

GIUSEPPE ALVARO. GIROLAMA ALVARO,
PAUL ALVARO. CARMINE ALVARO and

COMBRAN PTY LTD

Respondents

SB 240, 241 of 1991 RE: THE BANKRUPT ESTATES OF PAUL
ALVARO AND ROSINA ALVARO

Ex parte

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

PAUL ALVARO. ROSINA ALVARO. P & R
ALVARO ENTERPRISES PTY LTD. PAUL
ALVARO. ELENA GALIMI and MARIA

CONCETTA ALVARO

DATE : 31 August 1993

Respondents

SG 30 of 1993	THE APPLICATION OF P & R ALVARO ENTERPRISES PTY LIMITED
SG 78 of 1993	THE APPLICATION OF COMBRAN PTY LTD

CORAM: Burchett J.
PLACE: Adelaide

EX TEMPORE REASONS FOR JUDGMENT

BURCHETT J.:

These matters pose a number of questions, all of which arise out of three applications under s.121 of the Bankru~tcy

1966 to set aside certain settlements constituting discretionary trusts established by the bankrupts. The Official Trustee says the settlements were fraudulent attempts to defeat creditors, and in particular the Commissioner of Taxation; were shams; and involved property bought with funds of the bankrupts, so as to give rise to resulting trusts under which the Official Trustee is now entitled to the properties. Interlocutory injunctions were granted, after an interlocutory hearing, to restrain the disposal of the trust properties. Thereafter, preparation for the hearing of the principal proceedings has been underway and directions have been given, including a direction to the trustees of the discretionary trusts to file their affidavits.

The first application with which I have to deal stems from that direction. Two trustees, the companies P & R Alvaro Enterprises Pty Limited and Combran Pty Limited, say they have no other trust property, than that affected by the injunctions, from which to pay for appropriate legal assistance. They have brought an application, in relation to the bankruptcy proceedings, for judicial advice as to whether they are justified in expending trust funds on the defence of the proceedings. As their only funds are the subject of the injunctions, this necessarily means that they seek by their applications to achieve indirectly the effect of a variation of the injunctions. I accept the submission of counsel for the Official Trustee that an order directly varying the injunctions would be a more appropriate way of affording such relief as I find them entitled to. There should not however be an open-ended order permitting use of the funds frozen by the dispute.

What I shall do is make an order designed to allow the trustees to obtain legal advice and assistance in order to file affidavits showing matters relating to the history and operation of the trusts, and other matters appropriate to be evidenced by trustees in such cases, but not so as to take over the defence by the bankrupts of their claimed propriety in effecting the settlements in question. When the contemplated material has been filed, the court will be in a much better position to assess the appropriateness of any further variation of the injunctions.

In the circumstances, I do not think any other relief should now be granted. The effect of judicial advice always depends upon the disclosure made by the trustee to the court. In this case, the very existence of any trust is in dispute. The remarks of Mr Justice Cave in In re Holden. Ex Darte The Official Receiver (1887) 20 QB 43 at 46-47 are therefore in point. His Lordship said:

"Most of the cases where costs have not been allowed to trustees have been cases where they were trustees of a deed which was invalid when it was executed, for instance, where the deed itself was an act of bankruptcy; in such a case the trust is invalid when the trustee undertakes it. Again, where the trust was valid when the deed was executed, if the trustees resist an application to have it declared void under the Bankruptcy Act, and fail, it would be wrong to give them the costs thereby incurred. In such a case they know that the creditors have a right to apply to set aside the deed, and they must get the best advice they can and decide what course they ought to adopt."

The result of the partial relief I am granting by way of varying the injunctions, which the Official Trustee does not oppose, may be to assist from a practical point of view in resolving the trustee's problem. It may also result in an appropriate representative order being made, so that all potential beneficiaries may have their interests represented and may be bound by the result of the hearing. The desirability of finality in this respect ought not to be overlooked.

The next question raised is whether a filing fee was Australia Regulations in respect of the trustee's properly exacted under reg. 2 of the Federal Court of applications. Regulation 2(2) provides:

"A fee is not payable under this regulation upon the

filing of a document relating to -

(b) a proceeding in the Court in the exercise by the Court of original jurisdiction vested in it by the Bankruptcy Act 1966".

Yesterday I dealt with a like problem under reg. 2A - whether a hearing fee was exigible. I held it was not, on the ground that reg. 2A sub-reg. (2) applied to except this hearing, as being "of an interlocutory nature only." I referred to Narain v. Parnell (1986) 64 ALR 561 at 571-572, where some authorities as to the meaning of "interlocutory" are discussed. I also pointed out that the phrase "of an interlocutory nature" has a broader and less precise import than the adjective "interlocutory."

In Narain v. Parnell, which is a decision of my own, I was also concerned (at 572) with the meaning of the expression "relate to". I referred to Rea. v. Mur~hy (1985) 61 ALR 139 at 145, where committal proceedings, which were not judicial, were held to have occurred "in relation to the judicial power of the Commonwealth" because that power would be called upon to be exercised at any subsequent trial. There is here at least as clear a connection as that, between the applications brought by the trustees and the bankruptcy proceedings in

connection with which the trustees seek relief. Accordingly,	I think the trustees were entitled to proceed without paying
filing fees, as well as without paying hearing fees.
The final question is whether a particular issue should be decided separately, either at or prior to the hearing of the principal proceedings. The lssue concerns the admissibility of certain evidence put forward by the Official Trustee. That evidence consists of admissions made upon pleas of guilty entered by the settlors, the bankrupts, in criminal proceedings, in which they were convicted upon their pleas of conspiracy to defraud the Commonwealth. Their counsel contends that the admissions were made, and had expressly been sought by the Director of Public Prosecutions, with the concurrence and at the desire of the Commissioner of Taxation, on the basis that these admissions were "for the purposes of the criminal proceedings onlyu. Reliance was placed on a document in which was set out certain matters the subject of mutual arrangements between the Director of Public Prosecutions and the bankrupts. Clause 11 of that document provided that

"the pleas, statements re facts, submissions and all other matters associated with the pleas are without prejudice to the rights of the DPP and any person named herein in any existing or future civil/tax proceedings and on the part of defendants, and each of them are made for the purpose of this matter being dealt with by Mr Harris or the court on sentence, but not otherwise".

Mr Harris was the Magistrate who dealt with the committal

proceedings in respect of the bankrupts.

The bankrupts' case was put in a number of ways. It was

said there is a discretion to exclude the evidence, and cases such as Bunnina v. Cross (1978) 141 CLR 54 were cited. In the criminal law, the issues raised by that authority are usually dealt with by a voir dire hearing, but these are civil proceedings, and the principle of Bunnina v. Cross is something of a novelty in such a setting. Counsel for the bankrupts referred to Cross on Evidence, 4th ed., para. 11130, as providing some support for the proposition that the principle may be applied in civil proceedings. He also referred to Tavlor v. Harvev [l9861 2 Qd R 137, Pearce v. Button (1985) 60 ALR 537 at 551-552, Mazinski v. Bakka (1979) 20 SASR 350 at 361 and 381, and Mood Music Publishina CO Ltd v. De Wolfe Ltd [l9761 Ch. D. 119 at 127. Other cases are

cited in the passage in Cross.

The bankrupts' argument also raised broader questions of public policy, the effect of the convictions, estoppel and the scope and effect of the admissions. These issues, it seems to me, would have to be determined, not in isolation, but as part and parcel of the complex of circumstances from which the rights and liabilities in issue must be ascertained, including circumstances elicited upon the public examinations of the bankrupts.

In my opinion, it would be wrong to attempt the artificial division of those circumstances which the	application seeks. Although the one issue of the
applicability of the Bunnina v. Cross principle, if it stood alone and apart from the broader questions to which I have referred, might be capable, as it is in criminal proceedings by way of voir dire, of a separate determination, there would then remain problems as to the manner in which an appeal would proceed. Would it proceed by leave immediately, or would it proceed as part of any other appeal which might ultimately result from the final determination of the matters?
In my opinion these problems, when added to the fact that the Bunnina v. Cross question is only one of a complex of questions requiring decision in relation to the challenged evidence, dictate the answer at which I have arrived, that a trial of a separate issue, either before or at the hearing, should not be ordered by me. Accordingly, I decline the application.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons £01: Judgment herein of his Honour Mr Justice Burchett.

Associate:  My-

Date: 28 September -1993

Counsel for the Official Trustee	Mr D. Meagher Q.C.
in Bankruptcy:	with MS S. Singh

instructed by the

Official Receiver for
the Bankruptcy
District of South
Australia

Counsel for the Respondents	Mr M.L. Abbott Q.C.
Giuseppe, Girolama and Paul	with M r H. Patsouris
Alvaro in matter no. SB 1305 of 1990 and the Respondents Paul and Rosina Alvaro in matter nos. SG 30 of 1993 and SB 240 and 241 of 1991:
Solicitors for the Respondefits	Messrs Patsouris &
Giuseppe and Girolama Alvaro	Associates
in matter no. SB 1305
of 1990:
Solicitors for the Respondent	Messrs Condello & CO
1305 of 1990 and the Respondents
Paul Alvaro in matter no. SB nos. SG 30 of 1993 and SB 240 and 241 of 1991:
Counsel for the Respondents	Mr P.N. Waye with
Carmine Alvaro and Combran Pty	~r J. ~earce
Limited in matter no. SB 1305 of 1990 and the Applicant in matter no. SG 78 of 1993:
Solicitors for the Respondents	Messrs W.A.G. Morris
Carmine Alvaro and Combran Pty	Pearce & Associates
Limited in matter no. SB 1305 of 1990 and the Applicant in matter no. SG 78 of 1993:
Counsel for the Respondents	MS C.M. Branson Q.C.
P & R Enterprises Pty Ltd, Paul	with Mr H. Patsouris
junior, Elena and Maria Alvaro in matter nos. SB 240 and 241 of 1991 and the Applicant in matter no. SG 30 of 1993:
Solicitors for the Respondents	Messrs Condello & CO
P h R Enterprises Pty Ltd, Paul junior, Elena and Maria Alvaro in matter nos. SB 240 and 241 of 1991 and the Applicant in matter no. SG 30 of 1993:
Dates of hearing:	30 and 31 August 1993