Wangelin v van der Velde

Case [2016] FCA 410

FEDERAL COURT OF AUSTRALIA

Wangelin v van der Velde [2016] FCA 410

File number: QUD 185 of 2016
Judge: COLLIER J
Date of judgment: 21 April 2016
Catchwords: BANKRUPTCY – decision of trustees to refuse to permit bankrupt to leave Australia – application by bankrupt to have decision of trustees set aside under s 178 Bankruptcy Act 1966 (Cth) – bankrupt a national and resident of Germany – whether just and equitable to make orders sought by bankrupt – relevant principles
Legislation:

Bankruptcy Act 1966 (Cth) ss 77, 178, 178(2), 272, 272(1)(c)

Queensland Building and Construction Commission Act 1991 (Qld) s 71

Queensland Building and Construction Commission Regulation 2003 (Qld)
Cases cited:

Frost v Sheahan [2009] FCAFC 20

Groves v Robinson [2013] FCA 490

Healey v Prentice (No 2) [2000] FCA 1598

Moore v Macks [2007] FCA 10

Oshlack v Richmond River Council (1998) 193 CLR 72

Re the Bankrupt Estate of Hudson [2004] FCA 172

Re Tyndall (1977) 30 FLR 6

Sarkis v Moussa [2013] FCA 373

Sopikiotis v Vince [2013] FCA 592

Wilson v Commonwealth [1999] FCA 219
Textbooks: McDonald, Henry & Meek, Australian Bankruptcy Law & Practice (Thomson Reuters, subscription service)
Date of hearing: 20 April 2016
Registry: Queensland
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 47
Counsel for the Applicant: Mr D Marks QC
Solicitor for the Applicant: Wellners Lawyers
Counsel for the First and Second Respondents: Mr NM Cooke
Solicitor for the First and Second Respondents: Rostron Carlyle Lawyers

ORDERS

QUD 185 of 2016
BETWEEN:

BURKHARD WANGELIN

Applicant
AND:

TERRY GRANT VAN DER VELDE

First Respondent

JASON SHANE CRONAN

Second Respondent

JUDGE:

COLLIER J

DATE OF ORDER:

21 APRIL 2016

THE COURT ORDERS THAT:

1.The decision of the trustees not to permit the applicant to return to Germany be set aside in accordance with s 178 of the Bankruptcy Act 1966 (Cth).

2.The trustees are directed to consent in writing to the applicant leaving Australia.

3.The trustees pay the applicant’s costs, to be taxed if not otherwise agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

COLLIER J:

  1. Mr Wangelin is a German national and resident, 68 years of age, and an undischarged bankrupt under the Bankruptcy Act 1966 (Cth) (the Act). The respondents are his trustees in bankruptcy (the trustees). The trustees have refused Mr Wangelin permission to leave Australia and return to Germany. Mr Wangelin now applies to this Court to have that decision of the trustees set aside in accordance with s 178 of the Act. Section 178 provides:

    Appeal to Court against trustee’s decision etc.

    (1)If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.

    (2)The application must be made not…

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AGLC
Wangelin v van der Velde [2016] FCA 410
Case
[2016] FCA 410
Decision Date

CaseChat Overview and Summary

In Wangelin v van der Velde, the Federal Court of Australia was asked to review a decision made by the trustees of a bankrupt's estate. Mr Wangelin, a German national and resident, sought to have the trustees' decision to prevent him from leaving Australia set aside. The trustees had refused to allow Mr Wangelin to leave the country due to his failure to provide a statement of affairs and other relevant documents, including bank statements. The trustees also expressed concerns about the disposition of funds from the sale of a property owned by Mr Wangelin's late wife.

The primary legal issue before the court was whether it was just and equitable to set aside the trustees' decision under section 178 of the Bankruptcy Act 1966 (Cth). The court had to consider the principles governing the exercise of its discretion in such matters, including the trustee's administrative role, the relevance of the trustee's opinion, and the principle that the court should not unduly interfere with the day-to-day administration of the bankrupt's estate.

The court found that the trustees' concerns about the disposition of the sale proceeds and Mr Wangelin's failure to provide necessary documentation were valid. However, the court concluded that it was just and equitable to set aside the trustees' decision, as Mr Wangelin had made efforts to cooperate with the trustees and the trustees had indicated they would consider allowing him to leave if provided with some form of security. The court emphasised the importance of achieving a result that was equitable for all parties, including the creditors.

The court ordered that the trustees' decision to prevent Mr Wangelin from leaving Australia be set aside and directed the trustees to consent in writing to Mr Wangelin's travel. The trustees were also ordered to pay Mr Wangelin's costs.

Orders

Orders of the court

1. The decision of the trustees not to permit the applicant to return to Germany be set aside in accordance with s 178 of the Bankruptcy Act 1966 (Cth).

2. The trustees are directed to consent in writing to the applicant leaving Australia.

3. The trustees pay the applicant’s costs, to be taxed if not otherwise agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Mr Wangelin seeks the following orders:1.That the decision of the trustees not to permit the applicant to return to Germany be set aside in accordance with s 178 of the Bankruptcy Act 1966 (Cth).2.That a decision be substituted permitting the applicant to travel to Germany in accordance with s 272(1)(c).3.That the respondent pay the applicant’s costs.Background Mr Wangelin is an architect, based in Niefern-Oschelbrunn in Germany. He has clearly spent a great deal of time in Australia – indeed it appears that he and his late wife conducted a building business in Brisbane. He deposes that he returned to Germany to live at the end of August 2014 after the death of his wife in June 2014. From the material before me it appears that Mrs Wangelin had suffered a terminal illness requiring extensive medical treatment. It is also apparent that Mr Wangelin was significantly emotionally affected by the death of his wife at the time of her death, and remains so affected. Mrs Wangelin bequeathed Mr Wangelin the entirety of her estate, which included a 1/8th share in a property in Moorooka, a suburb of Brisbane. Mr Wangelin entered into an agreement for the sale of that property for the amount of $182,500 on 11 July 2014 to Ms Ling Yan Sun, the partner of one of the co-owners of the property. It appears that, of those proceeds of sale, $155,391.43 has been dispersed to a German bank account. At the hearing yesterday it became clear that the German bank account is that of Mr Wangelin. On 25 July 2014 the Queensland Building and Construction Commission (QBCC) obtained a judgment against Mr Wangelin in the District Court of Queensland in the sum of $282,378.69. Salient facts relating to this debt are the subject of evidence of Mr Darren Philip, a Debt Recovery Officer employed by the QBCC. In an affidavit sworn 13 April 2016, Mr Philip deposes that, in summary:·Mr Wangelin had held a building licence pursuant to the Queensland Building and Construction Commission Act 1991 (Qld) (the QBCC Act) and the Queensland Building and Construction Commission Regulation 2003 (Qld).·On or about 3 February 2001 Mr Wangelin had entered into a contract for the construction of 12 two-storey residential units at a property located at Woody Point in Queensland, and had paid an insurance premium to the QBCC in respect of the construction of those units.·In 2004 and 2005 the QBCC received complaints from nine of the unit owners in respect of alleged defective or incomplete building work at the units. The QBCC found that the complaints were warranted and made payments to the claimant unit owners.·Pursuant to s 71 of the QBCC Act the payments made by the QBCC to the unit owners, being made pursuant to the insurance policy in respect of which Mr Wangelin had paid premiums, were recoverable from Mr Wangelin as a debt. A sequestration order was issued against Mr Wangelin’s estate on 26 March 2015 referable to the District Court judgment, the date of the act of bankruptcy on which the sequestration order was based being 12 January 2015.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The decision of the trustees the subject of this application is set out in Mr van der Velde’s affidavit sworn 23 March 2016 paragraphs 36-41. These paragraphs read as follows:My Decision to Refuse the Applicant Permission to Leave Australia36.In the period between the Date of Appointment and late January 2016, the Applicant failed to complete and provide a copy of his statement of affairs.37.While the Applicant has since provided a copy of his statement of affairs, there are a number of elements of his bankrupt estate that I require further information upon.38.In particular I require detailed particulars as to what became of the portion of the Proceeds following the transfer of the sum of $155,391.43 to a German bank account held in Mrs Wangelin’s name.39.I require information from the Applicant, as well as documents in support, namely copy bank statements, so as to demonstrate what portion, if any, of the amount of $155,391.43 remains in Mrs Wangelin’s account.40.Given the Applicant was the sole beneficiary under the Will, he was entitled to receive the benefit of the Proceeds. I am of the view that the Proceeds ought form part of the Applicant’s bankrupt estate. I require information from the Applicant as to the current sum remaining of the Proceeds and to the extent those monies have been dissipated, I require information from the Applicant as to the recipient(s) of any such payments, the purpose for the payment and invoices, receipts or other similar documents demonstrating and verifying same.41.Additionally, I require the Applicant’s personal bank account statements confirming the current balance of any accounts in the Applicant’s name and the balance of any such accounts at the Date of Appointment. The Applicant has failed to provide me with same.Procedural history The parties appeared before me at a directions hearing on 15 March 2016. At that time I ordered, inter alia, that:By 8 pm on 21 March 2016, all parties use their best endeavours to arrange a teleconference between the parties, the parties’ legal representatives and a representative of the applicant’s bank in Germany, to request the applicant’s bank in Germany to provide copies of the applicant’s bank accounts. In an email to my Chambers dated 18 March 2016 Mr Wangelin’s lawyers informed my associate that the applicant’s bank in Germany had declined to participate in a teleconference. That the bank had so declined is accepted by all parties to this proceeding.Submissions of the parties Both parties have filed detailed submissions in this case, and yesterday made extensive oral submissions. In summary, the trustees say:·there is evidence that Mr Wangelin is indebted not only to the QBCC, but also ABW and the Australian Tax Department;·Mr Wangelin has failed to provide a substantive response in relation to the transfer of $155,391.43 to the German bank account of Mrs Wangelin;·Mr Wangelin has failed to provide a copy of his statement of affairs between the date of the trustees’ appointment and late January 2016;·Mr Wangelin has failed to surrender his passport to the trustees;·principles in Re Tyndall (1977) 30 FLR 6 support the position taken by the trustees;·Mr Wangelin remains in breach of his obligations under s 77 of the Act;·a denial of permission to Mr Wangelin to travel may encourage him to remedy his breach of statutory duty;·Mr Wangelin has not tried hard enough to assist the trustees, including in relation to production of material they need to administer the estate;·the trustees would consider allowing Mr Wangelin to leave Australia if they were provided with some form of security.

Ratio Decidendi

Legal Principle Established

So far as concerns evidence of Mr van der Velde:·In the view of the trustees, the main issue is Mr Wangelin’s bank statements and his failure to provide them to the trustees.·The trustees acknowledge that Mr Wangelin’s German bank has refused to cooperate with them.·The trustees do not need Mr Wangelin to remain in Australia for matters related to his alleged debts associated with the Australian Tax Department and ABW.·The trustees want source material from Mr Wangelin, in particular bank statements.·The trustees do not consider that it would be difficult for Mr Wangelin to provide that source material.Consideration The provisions of s 178 have been the subject of consideration in numerous decisions of this Court. In Moore v Macks [2007] FCA 10 at [28] Besanko J helpfully summarised principles relevant to the interpretation of s 178 as:1.Under the section, the court is fulfilling a supervisory role judicially, rather than an administrative role standing in the shoes of the trustee. As such, grounds for judicial review must be established by an applicant Re Wheeler; Ex parte Wheeler v Halse [1994] FCA 1348; (1994) 54 FCR 166 (‘Wheeler’) at 170 per Lee J, and the exercise of the court’s power is wholly in its discretion. The court has the ‘widest possible discretion as to the appropriate order which should be made in the particular case’ (Re Tyndall; Ex parte Official Receiver [1977] FCA 15; (1977) 17 ALR 182 (‘Re Tyndall’) at 186 per Deane J).2.The impugned act, omission or decision of the trustee in bankruptcy need not be absurd, unreasonable, or taken in bad faith before it is subject to review or a resultant order of the court under the section (Re Tyndall at 186 per Deane J). Indeed, the act, omission or decision of the trustee may be subject to review even though it was commercially sound at the time it was made: Macchia at 116 per French J. At the same time the trustee’s opinion will be a relevant factor in the exercise of the court’s discretion, and there is no presumption that the court will intervene in a given case. The fact that the court might have taken a different course to the trustee in bankruptcy at the relevant time is not, without more, a basis to disturb the trustee’s decision: Re Tyndall at 186 per Deane J; Macchia at 116 per French J.3.The court is able to take into account information which was not available to the trustee at the time of an impugned act, omission or decision (Gray v Clout (1990) 27 FCR 141, 144 per Pincus J).4.The exercise of the discretion is subject to the principle that the court will not unduly interfere with the day-to-day administration of a bankrupt’s estate by a trustee in bankruptcy: Re Tyndall at 186 per Deane J.5.The section does not provide an avenue for a bankrupt to pursue his or her personal interests at the expense of creditors (Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 139 per Brennan CJ, Gaudron and McHugh JJ) nor does it ‘create a cause of action which sounds in damages’, either in tort or under the general law (Macchia at 119). Both of these propositions reflect the purpose of the section which is to give the court a supervisory role with respect to a trustee in bankruptcy in the administration of the bankrupt’s estate.6.Ultimately the question is what result would be ‘just and equitable’ in the circumstances of the case.(cf observations of Gordon J in Sopikiotis v Vince [2013] FCA 592 at [24]).