Re: Ward

[1988] FCA 859

i

CATCEWORDS

BANKRUPTCY - Application for an extension of period of	bankruptcy to 8
years - incomplete public examination	- pending criminal proceedings -

alternate power of examination provided for in the Act - discretion of

court in respect to discharge of bankrupts .

Bankruptcy Act 1966: Sections 69, 81, 149, 150

Re Francis Dennis Ward and Keith Reginald Knight

ex parte the Official Trustee	in Bankruptcy
W 390 of 1983

PLACE :  Sydney.

CORAM:  Einfeld J.

DATE	:	6 May 1988.
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~

IN TEE FEDERAL COURT OF AUSTRALIA	1
1

DIVISION	GENERAL	1	No. W 390 of 1983
1
BANKRUPTCY DISTRICT IN TEE	1 1

STATE OF NEW SOUTH WALES	AND	THE	1 1
AUSTRALIAN	CAPITAL	TERRITORY	1

Re :	FRANCIS DENNIS WARD and
-
REGINALD KEITE KNIGHT

Debtors
Ex parte TEE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

CORAM: Einfeld J.

DATE:  6 May 1988

PLACE: Sydney

MINUTE OF ORDERS

1. That the application be dismissed.

2. That the applicant pays the costs of the bankrupts

Note: Settlement and entry of these orders	is dealt with in accordance
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with Order 124 of the Bankruptcy Rules.

IN TEE FEDERAL COURT OF AUSTRALIA	)
1
GENERAL DIVISION	) No. W 390 of 1983
1
BANKRUPTCY DISTRICT IN THE	)
1
STATE OF NEW SOUTH WALES AND THE	)
1

AUSTRALIAN CAPITAL TERRITORY )

- Re :

Debtors

Ex parte TAE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

CORAM: Einfeld J.

DATE: 6 May	1988
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PLACE: Sydney

REASONS FOR JUDGMENT

The estates of Francis Dennis Ward (Ward) and Reginald Keith Knight

(Knight) (the bankrupts) were sequestrated on 9 May 1983. Under the terms of section 149 (1) of the Bankruptcy Act 1966 (the Act) automatic

discharges from the bankruptcies would have taken place on 9 May 1986.
Eowever, objections to their discharges were	lodged and served in 1986

on the grounds of prejudice to the administration of the estates. It was

said then that the public examinations of the bankrupts had not been

able to be completed due to the currency of lengthy criminal proceedings against them. As a result the periods of bankruptcies were extended to 9 May 1988. The applicant now seeks a further three year

extension of the two periods of bankruptcy to 9 May	1991 on the	same
grounds. This application is bound by section	149 ( 8 )	of the Act to be

taken and decided before	9 May this year.
The bankrupts have been committed to stand trial	in the Supreme Court of
New South Wales	on a number of charges relating to what is alleged to be

their "company stripping" activities during the years 1978 to 1980.

Their committals were on five charges of conspiring to defraud the

revenue (9.86 (l)(e) Crimes Act 1914) and five charges of conspiring to

prevent or defeat the execution or enforcement of a law of the

Commonwealth (s.86 (l)(b) Crimes Act 1914). They were also committed on

a number of charges relating to the fraudulent appropriation of company

property by a director. However, I am informed that the Director of

Public Prosecutions has decided to indict them on one charge	of
conspiracy only.

The applicant says that the earlier public examinations did not cover the matters concerned in the criminal proceedings. The applicant has

expressed a desire to examine the bankrupts further under section 69 of

the Act but is of the opinion that these examinations should not be held

until the criminal proceedings have been finalised. It should be noted

that when the public examinations were adjourned on 3 0 November 1983 to

a date to be fixed, no criminal prosecutions were pending against either

bankrupt, although they were in prospect.

In an affidavit sworn on 12 April 1988, George Lionel Caddy of the

applicant's office states that information through further public

examinations of the bankrupts is still required by that office on the
following matters:

(a) The commissions or other moneys earned or profits gained by them

or trusts (in respect of which the applicant may have some

claim) arising from their alleged "company stripping"

activities.

(b) The tracing of these funds to discover their final disbursement

or accruement.

(C) The tracing of the moneys referred to in the charges amounting

in total to $7,739,361.00, to discover their final disbursement

or accruement.

(d) Associated matters which may arise in the course of such

examinations.

Further information is also required from Knight concerning moneys

received from Austral Oil Estates Limited in respect of which company

he has been convicted under the provisions of section	227	of the
Companies Code.

The Official Receiver in Bankruptcy	v Todd & Others (1986) 70 AI,R 119, a
decision of the Full Federal Court, is authority for the view that	a

discharged bankrupt may be examined under section 81 of the Act. At 120

Justice Fisher points out, as I believe with respect rightly, that:

"The Act does not link temporally the completion of the

administration of the bankrupt's estate, and in particular

the ascertainment of the assets, their realization and

distribution, with the obtaining of a discharge with its

consequential change of status and release from debts."

In support of this view, his Honour recalled section 152(1) of the Act:

"152(1) A discharged bankrupt shall, notwithstanding his

discharge, give such assistance as the trustee reasonably

requires in the realization and distribution of such of

his property as is vested in the trustee."

Bence in general terms, section 81 would be available for further

examination after any discharge.

The bankrupts oppose this application on the following bases:

1.      There are no facts establishing that the Court should in its

discretion extend the period of the bankruptcy to eight years -

and it would be unjust to the bankrupts to do so.

2.      There has been considerable and unjustified delay on the part of the Official Trustee.

3.      There would be caused undue oppression and hardship that cannot

be justified as being in the public interest.
4 .	They may be examined at any time under section 81 of the Act and

the bankrupts would welcome the examination and are willing to

answer all questions put to them on the matters and for the

purposes referred to.

5.	The last public examinations took place in September, October
and November 1983 and there has been no attempt since then to
complete the examination or further examine the bankrupts even for the purposes of testing whether the bankrupts would refuse
to answer any questions on the matters referred to or at all.

6.      During the last public examinations before Registrar Jolliffe,

an unsuccessful application was made by the bankrupts for a stay

of the examinations on the ground that their answers may

incriminate them in the then contemplated proceedings. In

opposing the application, the Official Trustee argued that he

was under a statutory duty to investigate the conduct, trade,
dealings, property and affairs of the bankrupts and to examine them in the limited time available. He relied on sections 14
(2). 19 (l)(f), 69(9), 69(12) and 149 of the Act. Be submitted
that a stay of the public examinations would lead to an
indefinite delay and interfere with his administration of the estates.
7.	The criminal trial is now expected to begin some time in 1989.
If found guilty the bankrupts will then have to face the

possibility of appeals and prison sentences. Their loss and the

loss to their families will then be enough without continuing

bankruptcies.

8.	This is the second application by the applicant for an extension
of the period of bankruptcy. The first, lodged in 1986 and
unopposed by the bankrupts, relied then on the same ground as is

relied on now. The present application has been made just as the

Director of Public Prosecutions has elected to proceed on a
single count of conspiracy and a trial date is in prospect.
9.	As was held in Re Clyne; ex parte Deputy Commissioner of
Taxation (1986) 6 8 ALR 603, it is for the Court to determine
where the competing public interests lie, balancing the need to investigate the affairs of the bankrupts and the protection of the bankrupts from unfair prejudice through their examination.

10. The provisions of the Act for discharge earlier than the three

year statutory period and for automatic discharge after 3 years

recognizes the need for bankrupts to rebuild their lives and

affairs: see Re Kersten (1986) 65 ALR 372.

11. The applicant has not discharged the onus on him that the

extensions of the two bankruptcies until 1991 are essential to

their proper administration and to the finding and recovering of

assets available for distribution. They have not pointed to any

transaction, or to any asset, or to any other particular matter

which it is suggested further examination will make recovery at

all likely.

There seems to be no specific authority on the appropriate criteria for

extending an already extended period of bankruptcy. None were cited in

argument. Such applications are obviously discretionary, with the

Court having regard to the facts of the particular cases. Such matters appear to raise similar questions to the general discretion provided in

the case of discharges under section	150(9) of the Act.
The general observations of Lockhart	J in Re Reilly; ex parte the Debtor
(1979) 36 FLR 268	at 278 are, as usual, helpful:

"In considering whether a bankrupt should receive a

discharge it has been laid down repeatedly that the court

must have regard not only to the interests of the bankrupt

and his creditors but also to the interests of the public

and of comnercial morality. In the exercise of its

discretion the court must also consider the conduct	of the
bankrupt relevant to his bankruptcy."

In Re Benda, an unreported	decision on 26 April 1985, Toohey J
considering the principles relevant	to early discharge, was of the view
that the court has a broad discretion in the area and is	obliged to look
at all the	circumstances including the conduct of the bankrupt and
decide whether the	early discharge is justified. Be said

"An application for discharge from bankruptcy involves

considerations wider than the interests of the bankrupt and

his creditors	. . .
In	all the circumstances I see nothing to be gained by
refusing the application for discharge. The creditors	will

gain nothing and the bankrupt's prospects of rehabilitation
will be stultified. Notwithstanding that the bankrupt has
contracted substantial liabilities, the evidence does not

suggest that he entered into ventures that were doomed to

failure or that he acted rashly in respect of his financial

affairs. There is nothing in his conduct or in the

circumstances of this bankruptcy to warrant attaching

conditions to any order of discharge."

The criteria listed by Woodward J in Re Maher	(1985) 61 ALR 592 are
particularly useful:

"Other relevant circumstances that may be taken into account

include such diverse matters as: the age of the applicant

(Re Mallan (1975) 6 AIR 161), the magnitude of the

deficiency of the estate (Re Harding (1981) 57 FLR 320), the

number of creditors (Re Benda (Supra) and Re Reilly

(Supra)), the objections to the application of, or absence

of objections from, creditors (Re Gianacas (1983) 48 AIR 537

and Re Benda), the applicant's 'culpability' in entering

into the debts (Re Benda), his present domestic, social and

financial circumstances , whether he is in employment or

whether his bankruptcy is affecting his chances of obtaining

employment (Re Gianacas and Re E!enda), any contribution he

has mde to the estate since its sequestration, his general
conduct in dealing with the trustee, and even the effect of

the social stigma of bankruptcy. The above list is by no

means an exhaustive one, and each application must, of

course, be viewed in the light of its own circumstances."

The evidence shows that neither Ward nor Knight has had any

communication with the applicant from the commencement of the public

examinations to date apart from being served with the first notice of

objection in 1986. There is no evidence that the bankrupts have not

been willing to cooperate with the applicant at all times since their

respective estates were sequestrated on 9 May 1983.

In his affidavit sworn 18 April 1988 and in his oral evidence, Ward

states that he has been seriously prejudiced by the continuation of

bankruptcy; that he has been unable to attempt to regain a place in the

commercial world because	of his inability to conduct his	own affairs,
conduct bank accounts or be	a director of a company. He pays	a large

rent but is a married man with four children to support and educate aged

16, 13 and twins aged 4 . He has borrowed substantial amounts of money

from friends and relatives. His wife has sold assets of her own

including furniture and a car. His present activities are somewhat

strangely expressed in that he seems to be engaged in some form of

financial or building consultancy without earning any money for it.

There is, however, no evidence, and there was no suggestion in cross-

examination, that he has any or any appreciable income. He	says this
would change if he was released from bankruptcy.

A debt of $7 ,000 .000 .00 claimed by the Deputy Commissioner of Taxation

and based'on arbitrary assessments under section 167	of the Income Tax
Assessment Act	is being challenged by Ward and is presently waiting to

be listed for hearing.

In relation to the claim of the applicant through Mr Caddy that further information is required about moneys earned or profits gained from the businesses carried on by the bankrupts prior to bankruptcy, Ward says

that there are no moneys, or assets derived from such moneys, presently

in existence.

Knight says that he is presently employed	as a clerk at a net salary of
$15,860. As he had qualifications in	law, economics and accountancy he

would be in a position to command a much higher salary if he was

discharged from bankruptcy. As he is a man of 51 years of age his opportunities for employment are decreasing. He has remarried since his bankruptcy and has a son from that marriage born on 27 April 1987. Eis

wife who is expecting another child later this year is dependent on him.

They live in rented premises paying $170.00 per week. The assets of the

two	are of the order of $215.00 cash, a motor car valued'at $1.000.00
and furniture with	an estimated value of $27,000.00.

Knight has also lodged an appeal against his income tax assessments which comprise a substantial part of his debts. He gives the same reply

as Ward as to the additional information required by the applicant.

It seems to me that all or many of the objections	of the bankrupts to
this application are clearly	correct. There is no explanation as to why

the public examinations were truncated in 1983 after a stay on the

grounds of possible self incrimination was refused and the criminal

proceedings had not yet begun. Eowever, the most important of the

objective matters are	that further examinations may take place	after
discharge under section 81 of the Act. The applicant argues	that	this

examination is more susceptible to the claim of self incrimination

because unlike under section	69 of the Act, it contains no limitation on
examinations for that reason.
The bankrupts both say they	would not object to answering questions on
the matters sought by the applicant. For my part, I can see nothing incriminating in the answers they have indicated would be	given to the

further public examination	envisaged and therefore no likelihood	that in
a section 81 examination such a privilege	against	answering would be

relied on or granted. The applicant says he wants to wait until after

the criminal proceedings are completed. So far as I can see, if the

bankrupts are acquitted, privilege against self incrimination is at worst unlikely to be available to them as a basis for not answering; and if they are convicted, for all practical purposes it will certainly not

avail them either in law	or in any other way.
R v Owen (1951) VLR 393 was a case where an accused charged with

offences under the Bankruptcy Act had made oral and written statements to an officer at the Official Receiver’s office pursuant to a statutory

duty to do so. These statements were tendered against	him at his trial.
Allowing the tender, Sholl J held:

1. A person is not bound to answer incriminating questions unless

there is some statutory provision specifically requiring answer.

2. A statement by an accused (otherwise than at his trial) is not

admissible unless it is voluntarily made in the sense of not

being made undue oppressive or improper circumstances.

3.      Statements made by an accused under proper circumstances are admissible unless

(a) the law applicable has left open the right of the person

to object to self incrimination and

fb) the objection was taken at that time.

The corollary, the applicant says, is that where as in section 81 no

such escape clause exists, there is no power to compel self

incriminating answers. Even if this is so - and I do not believe the

matter to be foreclosed - with their trials reasonably close at hand,

and a large folder of overt acts of the conspiracy alleged against them,

as well as the committal proceedings, now available, I find it

difficult to imagine that they do not know what their defences are to

the charges. Nothing would be gained and much would be lost by their

swearing on oath before me that they do not object to answering the

questions foreshadowed by the applicant, if in fact they do propose to

and will object if that bluff were called.

For those reasons, I can see no reason to extend these bankruptcies

further. I therefore decline to make the orders sought by the

applicant and order that he pay the costs of the bankrupts.

Solicitors and Counsel	Mr. C. Darvall, QC
for the Applicant	and Mr. T.P. Lonergan instructed by
Lobban McNally & Barney
Solicitors
Solicitors and Counsel	Mr. M. MacGregor, QC
for the Respondents	instructed by
E.W. Renouf & Co.
Solicitors
Date of Rearing	19 April 1988
Date of Judgment	6 May 1988