Sent v Jet Corporation of Australia Pty Ltd
[1984] FCA 178
•27 JUNE 1984
Re: PETER LEOPOLD CLYNE
And: JOHN WILLIAM O'BRIEN; WILLIAM EDWARD ANDREW and DEPUTY COMMISSIONER OF
TAXATION
Nos. W838 and W929 of 1983
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.
CATCHWORDS
Bankruptcy - Trustee - Control over trustee by Court - Refusal by trustee to allow bankrupt to travel overseas - Relevant considerations.
Bankruptcy Act 1966 ss.178, 272(c)
HEARING
SYDNEY
#DATE 27:6:1984
ORDER
Application for permission to travel is refused.
Costs reserved.
JUDGE1
This is an application by a bankrupt pursuant to s.178 of the Bankruptcy Act, 1966 for permission to leave Australia for a period of three months. The applicant became bankrupt in September 1983 upon the petition of the third respondent. The first and second respondents are trustees of the estate of the bankrupt pursuant to orders made by the Full Court - now under appeal to the High Court.
Although the jurisdiction of the Court is attracted by s.178, the inhibition upon the applicant's travel plans is imposed by s.272 of the Act, whereby a bankrupt is constrained from leaving Australia without the consent in writing of his trustee. For the reasons given herein on 23 February 1984, the consent of the first respondent, which was given at one stage, is insufficient for present purposes: the applicant must procure also the consent of the second respondent to his overseas visit and this has never been forthcoming.
The principles to be applied in an application of this type were explained by Deane, J. in Re Tyndall (1977) 30 FLR 6. Tyndall was followed and applied by Bowen, C.J. in Re Weiss (unreported l February 1984) and I also propose to follow it. Deane, J. there said (at pp 14-16):
"It is only in recent years that the Commonwealth bankruptcy legislation has made it an offence for a bankrupt to travel overseas without the consent of his trustee and has required a bankrupt to surrender his passport to his trustee once a sequestration order is made. Bankruptcy does not, of itself, involve any criminal offence. A citizen should be free to travel if and when his commercial activities or personal desires prompt him so to do. Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at insuring the proper administration of the bankruptcy laws and of bankrupt estates under such laws and not as a penalty imposed upon a citizen as a consequence of inability to pay debts leading to the making of a sequestration order. In some cases, the possibility that the bankrupt has committed offences under the Act and is seeking to abscond from possible prosecution will be extremely relevant. There has not, however, in this case been any suggestion that the bankrupt is endeavouring to abscond to avoid possible prosecution. In some cases the financial rewards to be derived by the bankrupt's estate from such overseas travel will clearly outweigh any inconvenience in the administration of that estate resulting from the bankrupt's departure from the jurisdiction. This is not, however, such a case for the reason that, as I have said, I am unconvinced that the bankrupt estate of the applicant could be expected to benefit over and beyond the $40 per month which the bankrupt has currently undertaken to pay to the trustee. In some cases, the requirements of the prompt and efficient administration of the estate of the bankrupt and the administration of the Act will justify the refusal to grant leave to travel overseas. This is, in my view, such a case.
Taking into account all the circumstances of the present matter, I have reached the conclusion that, in the present stage of administration of the applicant's bankrupt estate, I should not grant the leave which he seeks. The provisions of s.77(a) and s.272 of the Act recognize that a bankrupt's legitimate desires to travel overseas must, in an appropriate case, be subordinated to what is necessary for the proper and efficient administration of his estate in bankruptcy and the administration of the bankruptcy law. All in all, the circumstances of the present case are such as to make that subordination necessary.
Nothing in what I have said should be taken as indicating any view as to the attitude which should be adopted by the official receiver, as trustee of the bankrupt's estate, in relation to any future application which the bankrupt might see fit to make to him for leave to travel overseas. In partic ular, in the event that an appropriately specific application for leave to make a particular overseas visit is made to him, the official receiver may well decide that, subject to any safeguards which he might consider necessary to ensure the bankrupt's return, the administration of the bankrupt's estate and of the Act would not be adversely affected by the making of the proposed trip. Again, the official receiver may well decide that, at some stage in the future, leave in general terms to travel overseas if and when he desired so to do could be granted to the bankrupt without any prejudice to either the administration of the bankrupt's estate or of the Act. In the one case the official receiver would be justified in granting, subject to such safeguards as he considered necessary, leave to travel overseas in an appropriate limited form. In the other he would be justified in granting, subject to any safeguards which he might consider still to be necessary, such leave in a general and unrestricted form."
The applicant seeks permission to travel to Austria upon the condition that he undertakes to the Court to return within a period of three months. He bases his application upon four distinct grounds which he outlined in his opening as follows:
"Firstly, I have had a heart problem and I have had conflicting advice as to whether or not immediate surgery is necessary or whether it can safely and advisedly be deferred. I want to make it quite clear at the outset that I am not overstating my case and I do not think I have ever done that. I do not claim that for medical reasons I need to go. I merely claim that my health and the conflicting advice that I have received make it reasonable for me to want to go.
Basically my case is that I have to balance one risk against another. If I need surgery now, every month that I do not have it increases the risk of a stroke or heart attack. If I do not really need surgery now but I have it just the same, the risks are quite obvious and it will be reasonable, no more than that, that I want an overseas opinion on the basis of which I can make a final decision. Of course, this aspect is put as very urgent because every month increases that risk factor in one direction.
A number of medical reports are tendered on the basis that they prove the fact of my having received certain advice and ... they are not intended to prove the correctness of that advice and, indeed, the gist of my case is that the advice cannot all be correct and I have received conflicting advice.
The second respondent has indicated, and I think the third respondent has also indicated in slightly different language, that providing the reports are tendered on that basis then on that limited basis they are not being objected to ....
The second ground, which is also associated with my heart problem, is a wish to have sanatorium treatment; that is to say some treatment in an institution where a regime of diets and fresh air and freedom from stress and a certain amount of exercise and so forth under the control of the cardiologist tends to have a therapeutic effect on an angina condition which reduces perhaps the necessity for seeking an operation, but there again I am not going to overstate that.
There are similar institutions in Australia except they are not, so far as I know, under the care of a cardiologist and therefore they are not orientated towards heart disease and if one does have a heart attack while there it can take many hours before a specialist can be called.
The third ground which is also put as a legitimate reason for wanting to go, and no more than that, is that I need a spell between what I might call spasms of litigation. The litigation in which I have been involved since my heart problem in October I do not think I need to describe to your Honour because your Honour has had the good fortune or ill fortune to preside over much of it.
The situation now is that my trial on the charge that your Honour is familiar with (the applicant is referring to proceedings in this Court under the Administrative Decisions (Judicial Review) Act in respect of committal proceedings in which the applicant was charged with breaches of regs.40 and 42 of the Banking (Foreign Exchange) Regulations)) has been fixed for 30 July, and that is a charge carrying a maximum imprisonment of 5 years, and also there is obviously going to be a long complex public examination. Mr. Andrews in his affidavit estimates it at 5 days and it is clear, and I put it no higher than that, there is some possibility of that leading to some further prosecutions.
It also now seems to be fairly clear and accepted by the third respondent, and probably by the others as well, that that examination will not take place until the High Court has given its decision (on the appeal from the decision of the Full Court) because of a number of matters that the High Court has to decide which are basic to the scope and extent and content of that examination and, indeed, on one theory that the second respondent has now put to the High Court, which is a new one, there may have to be two examinations. He has put on an affidavit that there are two estates, two trustees, quite separate except that the greater subsumes the lesser - and I am not quite sure how he defines greater and lesser - but if that theory is accepted, there will have to be two examinations with each trustee investigating his own sector, so to speak.
In any event, it is fairly obvious that will not happen until after the High Court has given its decision and if the High Court determines the matter in May (the appeal was in fact argued in May; judgment was reserved), judging by its normal practice, unless they give a decision there and then, it will probably be August/September before they give it.
So, between the litigation that has kept me busy 7 days a week for the last few months and at the other end the trial and a very complicated and inherently dangerous examination, I will be putting to your Honour that a person caught up in that kind of net of litigation - it might be fair to say he has helped to create it - suffering from a heart condition where it is commonplace that stress and strain are the equivalent of deadly poison, would want to be allowed in the interval to go home for 3 months right away from the hurly-burly of things and to build up one's strength and get one's second wind, but again it is only put as a legitimate aspiration.
Also, I will be drawing your Honour's attention to one segment of Mr. Andrews' affidavit which ... suggests that of course when one talks about the health problems of a bankrupt one is not only trying to appeal for sympathy, but a healthy bankrupt is much more able to produce income for his creditors than a person who is paralysed or sick or dying in hospital, and in his quiet Scottish taciturn way there are two ways in Mr. Andrews' affidavit where he draws attention to that fact.
I must confess I had not thought of it, but your Honour did make an order (by consent) that 25 per cent of whatever I earn goes to my creditors and it might be in their interests to keep me healthy and active as far as possible.
The fourth matter has nothing to do with health and arises in this way, that the prosecution concerns the acquisition of an apartment in Vienna and there are three Viennese witnesses who would need to be called for the defence. Their evidence is regarded by me as essentia1. Two of them have indicated that they will not be able to come out here and the third has made it quite plain that he will not come - even when the prosecution wanted to call him they were unable to persuade him to come.
The only way to get that evidence is under the Witnesses Examination Act 1900 (an order under this Act was recently made by the Supreme Court of New South Wales) ..."
The respondents' attitude to the application varied: the first respondent was in the end content to submit to the order of the Court; the second respondent opposed the grant of leave; and the third respondent, apparently the only creditor - see reasons for judgment dated 14 March 1984 - vigorously opposed the application. (The third respondent claims to be a creditor of the bankrupt in the sum of $1.3m. and apart from a sum of $30,000 paid to the first and second respondents recently, together with the sum of $64,000 paid yesterday (26 June 1984) only nominal payments totalling $5,775.00 have been made by the bankrupt for the benefit of his creditor. In addition, the sum of $5,000 has been recovered pursuant to the order made under s.50 by Neaves, J. The third respondent was able to recover the sum of $108,000 from third parties pursuant to s.218 of the Income Tax Assessment Act, 1936. This amount has been credited in reduction of the third respondent's debt.)
By reason of the complexities of the affairs of the applicant, the hearing of the application has extended over a considerable period of time. In the result, although I am not at the moment persuaded to give effect to any of the first three grounds advanced by the bankrupt in support of his application, it is unnecesary that I express any final view on them for, even if I were inclined to accede to the application on any such grounds, the imminence of the trial in the District Criminal Court, due to commence on 30 July 1984, coupled with the examination of witnesses in Austria about to take place, would render futile the grant of the leave sought on any of the three bases mentioned. However, without in any way encouraging the applicant to do so, I would be prepared to reserve liberty to the applicant to renew his application on those grounds should he be advised to do so.
The fourth ground of the application should, I think, be looked at differently. As has been said, the Supreme Court of New South Wales has recently made an order (at the behest of the applicant but without opposition from the prosecution) under the Witnesses Examination Act, 1900 (N.S.W.). That order provides for the examination of a number of witnesses to be called by the applicant at his tria1. The examination is to take place in the Australian Embassy at Vienna commencing on 9 July 1984. The examination is expected to be concluded within three or four days.
Prima facie, in my opinion, the applicant has established a good reason for the grant of leave to travel for the purpose of attending at the examination in Austria even if he were to be legally represented on that occasion. The applicant has, to date at least, made no final decision whether to be legally represented at the tria1. He has at least seriously considered retaining counsel at the trial but even if he were to be represented at the examination, as now seems likely, I am satisfied that he would be prejudiced in the presentation of his case at the examination if he were not there, even if his only role were the instruction of counsel representing him: the evidence to be given in Austria is by no means straight-forward and counsel may well require the benefit of some explication of the circumstances of the case from the applicant before the examination, both in and out of conference with the witnesses, and during the examination itself. The liberty of the subject is involved (the applicant faces a maximum possible sentence of 5 years' imprisonment) and, prima facie, in my view, this circum stance is sufficiently important of itself to justify the grant of permission to trave1.
The second and third respondents seek to answer the prima facie case thus raised by the applicant in a number of ways. It must be said at the outset that the case they make is a formidable one and, indeed, so far as concerns the first three grounds of the application, their case may well have been of overwhelming force. So much so, that it is no injustice to the applicant to say that it is difficult to imagine a stronger case against the grant of leave on any of those three grounds. These respondents, and, in particular, the third respondent, point, for example, to the totally unsatisfactory conduct of the applicant in the handling of his affairs described by Neaves, J. in his reasons for judgment dated 17 August 1983 in the application made by the third respondent under s.50 of the Act. Those reasons were tendered in evidence in this proceeding at the applicant's invitation.
Neaves, J. there said (and the same ground was traversed in this application):
"It is clear that the two companies, Nesseldorf Pty. Limited and Sharsie Pty. Limited are used by the judgment debtor as repositories of moneys coming to his hands either in the form of cash or cheques in connection with the business activities in which he is engaged as a consultant on legal, taxation and financial matters and by way of royalties on books of which he is the author. Indeed, the judgment debtor makes no secret that those companies and others are used by him as bankers in order to render ineffective any action taken by the applicant under section 218 of the Income Tax Assessment Act 1936 or otherwise to recover the amounts of income tax due and payable pursuant to the assessments and amended assessments to which reference has been made.
It is also clear that moneys are periodically remitted overseas and that the judgment debtor intends to continue to do so. The material before me establishes, and I do not understand it to be disputed, that between June 1980 and June 1983 moneys remitted to Vienna by or on behalf of the judgment debtor totalled in excess of $650,000. That figure may well be conservative. In the proceedings before McGregor J. the judgment debtor gave evidence that in the financial years 1980-81 and 1981-82 he sent overseas whatever remained after meeting from the moneys he received expenditure for living and office expenses."
Although the applicant was concerned, in this proceeding, to deny at first that he "controlled" Sharsie Pty. Ltd., the applicant later conceded virtually the same thing, namely that he was "associated" with the company in the sense that it normally acted in accordance with his directions. Given that concession, the findings made by Neaves, J. cast considerable doubt, to say the least of it, upon the probity of the applicant, especially when seen against the background of statements made by the applicant, in various of his publications, advocating that debtors remit funds overseas in order to put the funds beyond the reach of creditors.
The third respondent also submits that, notwithstanding the view of the first respondent to the contrary, if consent to leave this country were granted to the applicant, there is at least a significant risk that he would not return and, of course, the administration of his estate in bankruptcy would be significantly impeded by his absence. This again is a formidable submission. The third respondent supports his argument by referring to the general lack of probity of the applicant already mentioned. Specifically, the third respondent points to a number of provocative statements made by the applicant in a number of his publications. For instance, in "New Adventures in Tax Avoidance", the applicant, in a chapter entitled "Modern Tactics of Tax Warfare" said (at p.126):
"Design a programme of defence against such premature tax claims.
By 'premature', I mean an attempt to recover the tax before your tax appeal, or further appeals to the Federal or High Court, have been heard and determined.
The programme of action which emerges from our previous discussion to block such an attempt is as follows:-
1. Make sure your tax appeal looks as respectable and substantial as possible.
2. If a writ is issued, file some sort of holding defence. (See Chapter 31 as to those that are available.)
3. If the fiend applies to strike out your defence, counter-claim for an order that his proceedings be stayed until your tax appeal has been heard and determined. (Or your advisers may feel that the 'holding defence' looks too shoddy, and could be counter-productive, in which case they will apply, as soon as the writ is served, for a stay of proceedings.)
4. Your application for a stay will come before the Master. If he refuses to give you a stay, appeal to a judge. If he refuses, too, appeal to the Full Court or Court of Appeal of your State. If they refuse, seek special leave to appeal to the High Court. The question on what principles such a stay ought to be granted is important enough, I believe, to warrant the grant of special leave.
5. If all this fails, he will obtain judgment. But if you still need time, fight the bankruptcy proceedings ... apply to have the bankruptcy notice set aside on some technicality, appeal to the Federal Court, try and appeal to the High Court ... not much chance, this time] ... fight the sequestration order itself on some other technicality; appeal to the Federal Court again; apply for special leave to the High Court again, but take an advocate with the hide of an elephant ... they can be pretty nasty if they suspect they are being used in this way.
6. Then ... no, that's the end of the road, you should have salvaged all your assets by then. Slip away to Switzerland, to join your collection of Krugerrands, and forget all about the fiscal fiend]" (Emphasis added)
At the personal level, the third respondent also relies upon a number of statements made by the applicant from time to time when overseas that he would never return to Australia. In his work "Outlaw Among Lawyers", he said (at p.117) that upon leaving Australia in 1972, at a time when his creditors were pressing, he thought he would never return. Likewise, in his publication "How Not to Pay Any Taxes", after describing crossing the border between the United States and Canada in 1975 without a passport, arguably at least in breach of a bail condition, the applicant said (at p.234) that he had no intention of returning to Australia. Taken at face value, as they must be, such statements hardly assist the applicant in the assertion he now makes that, if permission to travel is granted, he has every intention of returning.
Then the respondents say that if leave to travel were granted, there is at least a real prospect that the applicant will waste assets, which would otherwise be available for creditors, by engaging in the extravagant lifestyle of which he so openly boasts: the applicant has never sought to conceal his expensive tastes in hotel accommodation and leisure activities, especially Viennese operetta.
In my opinion, the matters thus raised in opposition to the application are of sufficient weight to disentitle the applicant to the grant of permission to travel on any of the first three grounds advanced by him. Indeed, the opposition case is so formidable as to displace the prima facie case in favour of the grant of permission to leave the country on the fourth ground put by the applicant in the event that such leave were sought on an unconditional basis only.
However, in my view, the position is different if leave is granted subject to conditions designed to allay the fears so rightly expressed, in varying degrees, by the respondents. I think that it is possible to achieve a sufficient degree of protection of the interests of creditors in the circumstances by imposing appropriate safeguards by way of conditions on the grant of travel permission for the purpose nominated in the applicant's fourth ground. In particular, if conditions were imposed on the grant of leave to the effect first, that the applicant could leave the country only for a limited time of three weeks for the sole purpose of attending the examination in Vienna; and secondly, that the bankrupt should provide security in an adequate amount so as to ensure, in practical terms, his return, then, in my opinion, an appropriate balancing of the interests of the bankrupt on the one hand, and of his creditor or creditors on the other hand, could be achieved: given the safeguard of those conditions, it is just and equitable in all the circumstances that travel be permitted for the particular purpose mentioned.
In my view, a sum of $140,000 is an appropriate sum to be provided by way of security for this purpose. As Neaves, J. found, in the passage cited above, the applicant remitted overseas amounts in excess of $650,000 between June 1980 and June 1983. This suggests that it is not unreasonable to expect that the applicant raise an amount of $140,000 by way of security. Provided its value were properly established, property of that worth could be provided in lieu of cash for this purpose. The cash fund or other security so provided should be available for the benefit of the applicant's estate in the event of default on the part of the bankrupt in compliance with the conditions to be attached to the permission to trave1. As a matter of machinery, I think that this is best achieved by directing that the fund be paid into Court. If desired, provision can be made for the temporary payment out of the funds in Court by way of investment in order to earn interest in the interim.
Although it is a condition of the grant of bail in the criminal proceedings against the applicant that he deposit the sum of $170,000 and enter into an agreement to forfeit that sum should he fail to honour his bail terms, it is clear that, should such forfeiture occur, the applicant's bankrupt estate will be in no way advantaged. For that reason, in my view, specific provision should be made in this proceeding to ensure that, if the applicant does default, his estate will stand to benefit: if the bail monies were forfeited, only the Crown would benefit. Further, the fund or security to be provided should, in my view, be provided from sources other than the applicant's bankrupt estate.
In these circumstances, I indicated to the parties at the conclusion of the hearing of the application that I would be prepared to grant the applicant leave to travel on the limited basis and subject to the conditions mentioned. Specifically, I am prepared to make orders as follows, subject to the applicant's proferring the following undertakings:
"1. Upon the applicant undertaking to the Court that he will if given consent by the first and second respondents as hereinafter directed:
(a) Travel directly to Vienna transiting in Zurich or Frankfurt.
(b) Give three days' notice to each of the respondents of the date of his proposed departure.
(c) That he will report to the First Secretary (Consular and Administrative) or in his absence the next most senior Consular and Administrative Officer present at the Australian Embassy, Vienna on the day after his arrival in Vienna during ordinary business hours and thereafter on each business day up to and including the date of departure.
(d) Leave Vienna no later than 19 July 1984 to fly directly to Sydney transiting in Zurich or Frankfurt.
(e) Not leave Vienna between the day of arrival and the day upon which he departs Vienna on the flight contemplated by (d) above.
(f) Return to Australia from Vienna not later than 21 July 1984.
(g) On receipt of his passport number M975395 from the Australian Federal Police or from any person on their behalf forthwith deliver same to the first respondent to hold on behalf of the first and second respondents for amendment as hereafter provided.
(h) Do all things necessary and sign such documents as may be necessary to permit his passport number M975395 to be altered so as to provide that it is valid only until and including 23 July 1984 and that it is available only for travel to Austria transiting in Zurich or Frankfurt and return to Australia via the same route.
(i) Upon his return to Australia surrender his passport number M975395 to the first respondent to hold on behalf of the second respondent and himself.
2. And upon the applicant providing evidence to the first and second respondents satisfactory to them that the sum of $140,000 (not being part of the estate of the bankrupt otherwise available for distribution amongst creditors) has been paid into Court to abide the further order of the Court.
ORDER THAT
1. That the first and second respondents be directed to consent in writing to the applicant leaving Australia on or after 30 June 1984 for the sole purpose of travelling to Vienna and returning to Australia not later than 21 July 1984.
2. That the first respondent for and on behalf of himself and the second respondent present to the Passport Office, Department of Foreign Affairs, Chifley Square, Sydney, the applicant's passport number M975395 if and when the same shall be handed to them or either of them by the Australian Federal Police or the applicant for amendment so as to provide that such passport is valid only until and including 23 July 1984 and that it is available for travel to Austria transmitting in Zurich or Frankfurt and for return to Australia via the same route.
3. That passport number M975395 as and when altered in accordance with order 2 be handed by the trustees to the applicant forthwith upon the trustees giving the consent referred to in order 1.
4. That prior to such consent being given the first and second respondents receive evidence satisfactory to them that the amendment referred to in order 3 above has been made.
5. That the trustees be directed to hand the applicant's passport as and when so amended to the applicant upon the consent being given in accordance with order 1.
6. The applicant be restrained from applying for the issue of a further passport or for any variation of passport number M975395 as altered in the manner contemplated in order 2 herein pending further order of the Court.
7. Grant liberty to apply on such notice as a Judge of this Court may allow.
8. Reserve special liberty to any party to apply in the event that:
(a) An order is made by the Supreme Court of New South Wales and any other Court of competent jurisdiction revoking the order made by Carruthers, J. on Monday 18 June 1984 and being exhibit R9 in the proceedings herein.
(b) For any reason it appears that the examination of witnesses contemplated by exhibit R9 will not or is likely not to proceed on the dates therein set out.
9. Discharge existing interim injunction granted on 1984 restraining the applicant from leaving Australia without the leave of the Court.
10. Costs reserved."
The applicant has already indicated that he does not propose to accede to the conditions proposed and, instead, asks that the application be dismissed in order that he may appea1. As has been said, in the absence of the undertakings sought, I do not propose to grant permission to trave1.
I make the following orders:
1. Application for permission to travel is refused.
2. Costs reserved.
54