Swan v Kerr

[2007] FMCA 1215

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SWAN v KERR [2007] FMCA 1215

BANKRUPTCY – Appeal against decision of trustee refusing permission for bankrupt to travel overseas – family commitments – inquest into the death of the bankrupt’s father – bankrupt previously travelling overseas with the consent of the trustee – public examination of the trustee revealing issues of concern to the trustee – imposition of income contributions by the trustee – non payment by the bankrupt – unresolved challenge to income contribution assessment – imposition of conditions on travel by the trustee – bankrupt living itinerant lifestyle – supported by friends and relatives – appeal dismissed.

Bankruptcy Act 1966 (Cth), s.178

Dunwoody v Offiical Receiver [2005] FMCA 1634
ReHicks; ex Parte Lamb (1994) 217 ALR 195

Applicant: RICHARD JAMES SWAN

Respondent: DAVID KERR

File Number: SYG2197 of 2007

Judgment of: Driver FM

Hearing date: 25 July 2007

Delivered at: Sydney

Delivered on: 25 July 2007

REPRESENTATION

The Applicant appeared in person

Counsel for the Respondent: Mr Spencer

Solicitors for the Respondent: Gadens Lawyers

ORDERS

1. The application is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG2197 of 2007

RICHARD JAMES SWAN

Applicant

And

DAVID KERR

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. I have before me an application under s.178 of the Bankruptcy Act1966 (Cth) (“the Bankruptcy Act”) appealing against a decision of the applicant's trustee in bankruptcy to refuse his permission for the bankrupt to travel to the United Kingdom to attend an inquest into his father's death. The application filed on 16 July 2007 is supported by an affidavit by the bankrupt, Mr Swan. Mr Swan also gave oral evidence under cross‑examination. Mr Swan also tendered a bundle of character references (exhibit A1).

2. The application is opposed by the trustee.  The trustee relies upon the affidavit of David Kerr filed on 23 July 2007 to which were exhibited a bundle of documents.  Mr Kerr was cross‑examined by Mr Swan on his affidavit. 

3. Relevantly, the background facts are that Mr Swan was bankrupted in 2005.  Shortly after being bankrupted he was permitted to travel overseas and returned.  He surrendered his passport to the trustee.  He sought permission to make a subsequent trip which, according to the evidence, might well have been permitted subject to conditions, but Mr Swan was unable to meet those conditions.  Mr Swan's father died in a fire in the United Kingdom on 3 March 2006.  He sought the trustee's permission to travel to the United Kingdom in order to attend an inquest into the death of his father and in order to provide support to his family.  That request was declined by the trustee unless Mr Swan could meet conditions, in particular relating to an income contribution obligation which Mr Swan had not met. 

4. Annexure F to the affidavit of Mr Kerr is a letter dated 12 January 2007 in which Mr Swan was informed by the trustee of the assessment of an income contribution liability of $29,826.90.  Mr Swan was required to make 12 monthly payments of $2,485.58 commencing on 19 February 2007.  Mr Swan sought reconsideration of that decision by the Inspector General in Bankruptcy.  The result of that reconsideration was that the contribution liability was increased to $31,324.47 (see annexure I to the affidavit of Mr Kerr).  Mr Swan has applied to the Administrative Appeals Tribunal (“the AAT”) for review of that decision.  At this stage that application has not been determined by the AAT, although it appears likely that there may be some resolution in September this year.  To date no contribution payments have been made by Mr Swan. 

5. Counsel for the trustee questioned Mr Swan about a number of matters in cross‑examination.  It was apparent from the questions and answers that Mr Swan currently has no fixed address.  He has provided a postal address to the trustee, but his place of residence varies from time to time.  He is married, but visits his wife at irregular intervals.  It appears from the evidence that Mr Swan is dependent upon friends and relatives for accommodation and day‑to‑day living needs.  He is unemployed and has been unemployed since February this year when he suffered a back injury.  His work experience is in the building industry and his evidence is that he has been unable to secure any further employment since February because of his injury, although he is planning to undertake retraining through the Commonwealth Rehabilitation Service. 

6. Mr Swan holds two passports, an Australian and a UK passport which are in the possession of the trustee. Mr Swan has a number of relatives in England, including his mother. There is an unresolved issue concerning the transfer of a significant parcel of shares from Mr Swan to his mother. Mr Swan has also been the subject of public examination under the Bankruptcy Act which resulted in financial transactions involving Mr Swan of some concern to the trustee being revealed. The issues relating to those transactions and the location of money the subject of those transactions has not been resolved.

7. The general principles in relation to the review of a trustee's decision to refuse permission for overseas travel were dealt with in this Court in Dunwoody v Official Receiver [2005] FMCA 1634 by Riethmuller FM at [9] – [29]. That discussion of general principles was lengthy and I need not repeat it here. I adopt the principles discussed by Riethmuller FM in that case for the purposes of this proceeding. Significantly, at [20] Riethmuller FM referred to the decision of Heerey J in ReHicks; ex Parte Lamb (1994) 217 ALR 195 where his Honour identified matters that would usually be relevant in determining an application such as this. Heerey J said:

   I suggested to counsel for the trustee in argument that the following issues were, while not necessarily conclusive, nevertheless at the forefront of the matters to be considered in exercising my discretion: 

   (1)     is the proposed visit genuine?

   (2)     is the bankrupt likely to return to Australia as promised?

   (3)     will the visit hamper the administration of the estate

   ? 

   
   
   

8. Riethmuller FM also referred to the repeal of division 4C of Part VI of the Bankruptcy Act in 2002 which had the effect of conferring on the trustee the discretion to permit overseas travel notwithstanding non‑payment of income contributions. Prior to that amendment an application to the Court was required. Riethmuller FM observed[1] that it was a legitimate exercise of the trustee's discretion to withhold permission to travel overseas in circumstances where the non‑payment of income contributions was unsatisfactory and there was some scope that payment might be secured. 

   [1] At [29]

9. In the present case I accept that Mr Swan has previously shown a willingness to comply with requirements of the trustee in relation to his travel arrangements.  Early in his bankruptcy he travelled overseas and returned and surrendered his passports.  Exhibit A1 establishes that a number of persons who know Mr Swan regard him as being a reliable person of good character.  It is apparent that in the trustee's mind things have changed since 2005 when Mr Swan was permitted to travel overseas.  In particular, the public examination conducted by the trustee has revealed transactions of concern and those concerns have not been resolved.  The Trustee is also concerned about transfer of shares to Mr Swan's mother in the UK.  In fact, a demand has been made of her by the trustee.  I understand no response has been received. 

10. Also relevant is that, although the overseas travel was presented as urgent in view of the coronial inquest to be conducted into the death of Mr Swan's father, annexure Q to the affidavit of Mr Kerr, being a letter from the coroner to the solicitors for the trustee dated 17 July 2007, discloses that the inquest is only expected to last approximately half an hour on 2 August 2007 and that Mr Swan has not been called to give evidence at the inquest, but was invited to attend as a family member.  It follows that Mr Swan's attendance at the inquest is not required, although it would probably be of benefit to him and his family were he able to attend.  That said, Mr Swan's father died on 3 March 2006 and his presence in the UK to give support to his family, especially his mother, would have been a continuing issue since then.  The inquest is simply another step in the process of dealing with that death.  I asked Mr Swan whether members of his family had travelled to Australia to visit him and he told me that they had not done so since he had been made bankrupt in 2005. 

11. It is also relevant that Mr Swan expects to be able to purchase tickets to travel to and from England with the assistance of his relatives.  He obtains support from friends and relatives in Australia to meet his day‑to‑day needs, but has been unable to secure any assistance from friends or relatives to make any income contributions required by the trustee for the benefit of his creditors. 

12. In terms of the matters identified by Heerey J, I accept that the proposed visit of Mr Swan to the UK is genuine.  There is an inquest to be conducted on 2 August 2007 into the death of his father.  It is undoubtedly true that his presence in the UK at that time would be a support to his mother and other members of his family, as indeed it would have been at any time since 3 March 2006.  There is also a reasonable likelihood that Mr Swan will return to Australia as promised.  He has travelled overseas in the past and returned.  He has secured from a number of people assurances of his good character.  As against that, he appears to have stronger ties in terms of familial relationships in the UK than he does in Australia.  He is unemployed and hence has no work commitments in Australia.  He has a wife in Australia, but they have been apart for significant periods extending to three months in the last year or two.  The enquiries by the trustee have revealed financial transactions of concern and there must be some possibility that Mr Swan may not wish to assist the trustee in pursuing enquiries into those transactions.  There is some risk that he may not return to Australia. 

13. Thirdly, there is the question whether the visit will hamper the administration of the estate.  If Mr Swan does not return, the administration would be affected in that the absence of Mr Swan from Australia would inhibit the ability of the trustee to compel information or documents from him or to pursue other enquiries, but at the present time, while Mr Swan has provided a postal address and a phone number it has not been easy for the trustee to deal directly with him because of his itinerant lifestyle.  That difficulty would probably increase while he was out of the country. 

14. The appeal in the AAT against the compulsory income assessment would be adversely affected while Mr Swan is outside of Australia, although it would probably be possible for him to attend to some matters by mail or telephone.  His intention is to return to Australia prior to any need for him to attend the AAT in September.  If he did not then attend the resolution of the matter in the AAT would probably have to be dealt with without him.  At this stage Mr Swan has not purchased any tickets for his intended travel and I accept that he has been reluctant to do so until he knows that he has consent. 

15. The trustee's position is that the consent will not be given unless Mr Swan deals with the matter of his income contributions to the satisfaction of the trustee.  Relevantly, that would require payment of at least some of the income contributions due since February this year or payment of a lump sum or the provision of a bank guarantee securing the full amount of $31,324.47, which would only be called upon if Mr Swan failed to return from the UK (see annexure N to the affidavit of Mr Kerr). 

16. Mr Swan in his evidence stated that until today he had not properly understood the option of a first demand bank guarantee and that he would have a number of persons available who would be willing to pledge funds in the event that he did not return to Australia, although he did not think that he would be able to secure the provision of cash from his friends and relatives in order to secure a bank guarantee or in order to deposit sufficient funds to satisfy the trustee into an account available to the trustee. 

17. In my view, the question of the outstanding income contributions is an important one in this case.  Mr Swan has paid nothing by way of income contributions, notwithstanding that he has a liability to do so.  I accept that he suffered a back injury in February this year which has restricted his work opportunities, but he seemed to me to be an intelligent man and I am not convinced that he has done everything he could to secure gainful employment in circumstances of a very tight job market.  In the past he has earned very substantial income through property investment involving millions of dollars and it would seem to me that if he truly wished to he could obtain gainful employment in order to meet or partially meet the income contributions required of him.  It is also of concern to me that Mr Swan is able to secure the support of friends and relatives for his personal needs, including overseas travel, but he is unable to secure tangible support from anyone for the benefit of creditors through income contributions or the deposit of funds to guarantee his return to Australia. 

18. The exercise of discretion by the trustee to withhold consent, unless the issue of the income contributions can be satisfactorily dealt with in the short‑term, was in my view a proper one.  I would not be minded to give consent to the overseas travel on terms significantly different from those proffered by the trustee. 

19. It ought to be possible for Mr Swan to make further efforts to obtain funds or the promise of funds to satisfy the conditions proposed by the trustee.  That may not permit him to travel in time for the coronial inquest hearing on 2 August, but it would permit him to travel in the reasonably near future in order to give the support to his family that he wishes to give.  Given that, I am unwilling to grant consent to travel on terms different to those already imposed by the trustee.  I see no reason to disturb the trustee's decision. 

20. For the purposes of s.178 of the Act, having regard to the matters referred to by Mr Swan and the trustee in their evidence, I am not satisfied that it would be just and equitable to make orders pursuant to s.178 to allow Mr Swan to leave the jurisdiction as requested by him on terms different from those proposed by the trustee.

21. I therefore dismiss the application.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate: 

Date:  30 July 2007