Re Yacoub, G.H

[1991] FCA 756

Re: GAMAL HABIB YACOUB
No. S B601 of 1990
FED No. 756
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
O'Loughlin J.(1)

CATCHWORDS

Bankruptcy - application for early discharge - need for trustee to investigate circumstances surrounding the sale by the bankrupt of his house and to determine whether any unpaid purchase price remains - application for discharge therefore premature.

HEARING

ADELAIDE

#DATE 2:10:1991

Applicant Appeared in Person.

Official Trustee Appeared in Person

Counsel for the Petitioning Creditor : Mr S.M.W. White

Solicitors for the Petitioning Creditor : White Berman

ORDER

The application be dismissed.

The bankrupt pay the costs of the Petitioning Creditor's opposition to this application to be taxed if not agreed.
NOTE: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

JUDGE1

Application for discharge from bankruptcy.

A sequestration order was made against the estate of Gamal Habib Yacoub by this Court on 6 June 1990. The petitioning creditor, Brian Matthew Senior, had obtained a judgment against the bankrupt in the District Court of Adelaide on 16 February 1990 in the sum of $64,348 plus costs. It appears that Mr Senior is the only creditor to have lodged a proof of debt in the bankrupt estate. Subject to the question that relates to the circumstances in which the bankrupt disposed of his residential house property, it would seem that the bankrupt's only asset was $75 cash in the bank.

1. In 1986 the bankrupt was carrying on the practice of his profession as a medical practitioner. Mr Senior consulted him and incurred loss and damage as a result of negligent treatment. The judgment debt represents Mr Senior's assessed damages and losses.

2. In May 1990 the bankrupt obtained leave to appeal to the Full Court of the Supreme Court against the finding of negligence but he had to meet an order for security for the payment of costs with respect to that appeal. That security was fixed in the sum of $2,500 by Master Kelly; the bankrupt has said in his affidavit in support of his current application that he was unable to prosecute his appeal because he could not meet that order for security for the payment of costs. Mr Yacoub did not have conventional professional indemnity insurance and was, therefore, wholly dependent upon his own financial resources to prosecute the appeal.

3. In support of his application for a discharge, Mr Yacoub claimed that he has co-operated with his trustee and that his conduct "has been satisfactory". He also pointed to what he described as his very poor financial position since 1981, commenting that he would not be able to pay any significant contribution to his estate.

4. From the bar table, he added that, as a result of a recent back operation, his health has improved dramatically. He now wishes to return to the workforce - not to the medical profession but to the business world. I understand from his oral submissions that he perceives his continuing bankruptcy as an impairment to his chances of establishing himself in the business world.

5. They are matters which I can take into consideration, bearing in mind that, in normal circumstances, the provisions of s.149 of the Bankruptcy Act 1966 ("the Act") would apply so that a discharge would not occur for a period of three years. As it is, the trustee in bankruptcy has filed his report opposing the application for discharge on numerous of the grounds referred to in sub-s.150(6) of the Act. Mr Senior has also filed a notice of opposition to the application in his capacity as a creditor in the estate.

6. Much of the information in the trustee's report about the bankrupt's history as a medical practitioner is contentious and, save for one matter, plays no part in a consideration of the merits of this application. The outstanding matter is this: the bankrupt is not now practising and is not likely, in the future, to obtain re-registration to resume practice as a legally qualified medical practitioner. The bankrupt has said that he voluntarily decided not to renew his registration in 1987 because of ill health. The trustee has said in his report that the bankrupt's registration was cancelled by the Medical Practitioners' Professional Conduct Tribunal and in part 10(c) of his report has added these words:
   

"... the Board had declined to restore the bankrupt's name to the Register but had offered the bankrupt a hearing as to whether or not the bankrupt was a fit and proper person to be registered; up to the date of the letter the bankrupt had not availed himself of that opportunity."

1. The contents of the bankrupt's affidavit in answer to the trustee's report put that allegation in issue and refers to the bankrupt's state of health. The short answer is that in either case, the likelihood of the bankrupt being able to contribute to his estate from any future earnings in his capacity as a medical practitioner is remote. That is not to say anything of the bankrupt's ability to contribute from other remunerative sources. The bankrupt, who is now 57, claimed that he is living on unemployment relief; in his application for remission of fees, he showed how the whole of his benefits were disposed of for family expenses, including school fees.

2. The trustee has levelled numerous complaints against the bankrupt. They include claims that no books of account have been delivered up, that the bankrupt has failed fully and truly to disclose details of his property, that the bankrupt has omitted material information and has falsified an entry in books of account, that the bankrupt put the petitioning creditor to unnecessary expense by bringing a frivolous or vexatious action - that is, the abortive application for leave to appeal - and also that the bankrupt has contributed to his bankruptcy by culpable neglect of his business affairs. Finally, there is an allegation that the bankrupt has been guilty of fraud.

3. All these claims have been denied by the bankrupt and none of them have been sufficiently particularised by the trustee in his report. If it was necessary to rely on them or indeed on any of them, it would be necessary for the trustee to place far more information before the Court. His proposition that sub-s.150(12) of the Act entitled the Court to rely, without question, on these averments is not sufficient when the averments are, as is the case here, challenged by the bankrupt.

4. But having said that, there is one matter which renders this application for a discharge of bankruptcy clearly premature; for simplicity I will refer to it as "the house transaction". According to the trustee's report, the bankrupt purchased a house at Houghton in or about the month of June 1983. From the bar table, the bankrupt stated, as I understood him, that money was advanced to him by his brother, his brother's wife and other unnamed and unknown people to assist in the purchase of that house.I cannot express any opinion about the accuracy of the information that the bankrupt gave the Court but, for the purposes of my further remarks, I will assume it to be accurate.

5. The trustee's report discloses - and indeed the bankrupt agrees - that in April 1988, the house property was transferred to a company by the name of MGY Pty. Ltd ("the company"). This company was incorporated on 12 November 1987 and the shareholders on subscription were the bankrupt and his brother, Magdi Habib Yacoub. The bankrupt informed me that he should never have been a shareholder and upon realising the mistake that had been made, he immediately transferred his share to his three children. It is not readily apparent how such a mistake could have occurred.

6. According to the trustee's report, the books of account of the company showed that, as at 30 June 1988, the company was indebted to the bankrupt in the sum of $94,704.58. Mr Marsh, the company's accountant, was called by the bankrupt. The evidence that he gave corroborated the information in the trustee's report to which I have just referred and he agreed, in response to a question from me, that the credit balance of about $94,000 as at 30 June 1988, had its genesis in the house transaction.

7. Mr Marsh stated that subsequent to the bankrupt perusing the company's 1988 accounts, the bankrupt contacted him and orally instructed him to change the "narration" from Gamal Habib Yacoub to Marianne Yacoub, the bankrupt's brother's wife. The word "narration" was the word used by Mr Marsh to identify the title of the loan account in the books of account of the company.

8. As I understood Mr Marsh's evidence, he agreed with a proposition that the request to change the narration had been made by the bankrupt with the explanation that the figure of $94,000 was truly owing to Marianne Yacoub. Mr Marsh accepted his client's instructions and amended the narration accordingly. He neither sought nor was given any corroborative material or information, either oral or written, which would have substantiated the bankrupt's instructions.

9. For his part, the bankrupt admitted that he disposed of the house to the company but maintained that there are no moneys owing by the company to him for the reasons that I have attempted to explain.

10. Mr Marsh was cross-examined at some length by Mr White, counsel for Mr Senior, and by Mr Pipkin, the trustee. It is clear from his evidence that his only knowledge of the financial relationship between the bankrupt and the company derives from what the bankrupt has told him, plus some primary documents to which he referred during the course of his evidence. Those primary documents did not, however, include any settlement statement in respect of the house transaction.

11. Mr Marsh explained in some detail the existence of certain foreign currency transactions which generated some gains and some losses. I gather from his evidence that he believes that those foreign currency transactions were conducted in the name of, and for the beneficial interest of, the company; he also believes that they were erroneously recorded in the loan account which was initially created in the name of the bankrupt and subsequently changed to the name of Marianne Yacoub. But, as Mr White pointed out, even accepting Mr Marsh's evidence at face value, the company could still owe, on this relevant loan account dealing with the house transaction, at least $30,000.

12. There are two important issues that emerged as a result of this day's proceedings. Both of them should be investigated fully and expeditiously by the trustee. The first is one of quantification:- that is an inquiry to determine how much (if any) was owed by the company as a result of the house transaction and to what extent any loan account may have been affected by other lawful transactions. The second issue is the change in identity of the loan account - the change in the "narration", to use Mr Marsh's expression - and whether that change was justified.

13. I revert back to Mr Yacoub's claim that his brother and sister and others lent him moneys to acquire the house. There are two legal propositions which spring immediately to mind if that statement is accepted as accurate. The first is that Mr Yacoub was never the beneficial owner of the house but was merely holding it as a trustee. The second is that he was a debtor of those people. In that case, the house was legally and beneficially his and he was entitled to enjoy the benefits of the proceeds of its sale, including any inflationary element and capital appreciation. In the latter case, as a matter of law, when Mr Yacoub disposed of the house to the company, the company would owe the whole of the purchase price to Mr Yacoub because of the relationship of vendor and purchaser. It would be no business of the company how Mr Yacoub dealt with his creditors.

14. The evidence and submissions that I have heard this morning do not answer any of those propositions but I have been informed - again from the bar table - that proceedings have been instituted in the District Court by the trustee against the company claiming, presumably, the figure of $94,000 or thereabouts. Those proceedings will, if they proceed to completion, answer these and other questions which are important to the proper administration of this bankrupt estate.

15. Hence, the house transaction and the permutations which may flow from it are matters that must properly be investigated by the trustee; that can only be done whilst he remains trustee in bankruptcy. To accede to Mr Yacoub's application and to grant a discharge would mean the cessation of the trustee's office. That would be wholly inappropriate.

16. This application must, therefore, be dismissed. There will be an order of dismissal accordingly.

17. There will also be an order that the bankrupt is to pay the costs of Mr Senior's opposition to this application; those costs are to be taxed in default of agreement.