CATCHWORDS

BANKRUPTCY - Appeal from decision of trustee under s 178 of the Bankruptcy Act 1966 - Decision under s 272(c) to refuse return of passports and consent to depart - nature of court's discretion under s 178 - wide discretion to make orders as court thinks just and equitable - comparison of s 272(c) discretion with discretion under s 139ZU - whether compassionate grounds for departure are of sufficient weight - consideration of likelihood of return to Australia -consideration of expeditious and effective administration of the bankrupt estate.

Bankruptcy Act 1966 Cth, ss 178, 272, 77, s 139ZU,

s 149(1)(b)-(n)

Re Wheeler: Ex parte Wheeler v Halse (1994) 54 FCR 166

Re the Estate of John Lewis Foster (a bankrupt) 1 April 1993, Cooper J, unreported (see also 67 ALJ 630)

Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40

Re Tyndall; Ex parte Official Receiver (1977) 30 FLR 6

RE: JOSE MOLINA  EX PARTE: HUGH JENNER WILY

NO. NB 2666 OF 1993

Tamberlin J

Sydney

15 December 1995

IN THE FEDERAL COURT OF AUSTRALIA)                 

GENERAL DIVISION                  )    No. NB 2666 of 1993

BANKRUPTCY DISTRICT               )

OF THE STATE OF NEW SOUTH WALES

          RE:                     JOSE MOLINA

                                  A Bankrupt

                                  JOSE MOLINA

                                  Applicant

          EX PARTE:               HUGH JENNER WILY

                                 Respondent

CORAM:        TAMBERLIN J

PLACE:        SYDNEY

DATED:        15 DECEMBER 1995

                   MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.        The applicant pay the costs of the respondent of the application

NOTE:     Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

GENERAL DIVISION                  )    No. NB 2666 of 1993

BANKRUPTCY DISTRICT               )

OF THE STATE OF NEW SOUTH WALES

          RE:                     JOSE MOLINA

                                  A Bankrupt

                                  JOSE MOLINA

                                  Applicant

          EX PARTE:               HUGH JENNER WILY

                                  Respondent

CORAM:        TAMBERLIN J

PLACE:        SYDNEY

DATED:        15 DECEMBER 1995

                    REASONS FOR JUDGMENT

This is an appeal under s 178 of the Bankruptcy Act 1966, as amended, ("the Act"), against a decision by the trustee under s 272(c) to refuse permission to the applicant, who is an undischarged bankrupt, to leave Australia. The trustee also refused to return his passports. The applicant holds both a Spanish and an Australian passport.

Section 272 of the Act provides:

          "272 A person who:

          (a) .....

          (b) .....

          (ba)being liable to make a contribution to the trustee under subsection 139P(1) or 139Q(1), leaves Australia, ... without permission of the Court;

          (c)  not being a person to whom paragraph (ba) applies, after he has become a bankrupt and before he is discharged from the bankruptcy, without the consent in writing of the trustee of his estate, leaves Australia, ...

          is guilty of an offence and is punishable, on conviction, by imprisonment for a period not exceeding 3 years."

Section 178 reads:

          "178.  If the bankrupt .... is affected by any act ... or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable."

The applicant is not a person presently liable to make a relevant contribution. Accordingly, if he is not to commit an offence he must obtain the consent of the trustee in writing of the trustee .

The purpose which underlies s 272(c) is not to punish the bankrupt but rather to ensure the expeditious and effective administration of the bankrupt estate. In forming a view on this the Court must take into account the opinion of the trustee as to what is conducive to the timely and efficient administration of the estate. It is also important to bear in mind that applications for consent to depart are:

          "..... ordinarily related to the freedom of a subject, who is neither a criminal nor under criminal restraint, to travel to pursue his legitimate commercial or personal desires. "

per Deane J, in Re Tyndall Ex parte Official Receiver (1977) 30 FLR 6 at 10-11.

The sequestration order was made on 13 October 1993 when the trustee was appointed. The Statement of Affairs showed assets of nil and liabilities of $1,073,821.  The evidence discloses that the bankrupt has not delivered any property to the trustee, nor has he paid any money to him in respect of the estate.  After the sequestration order was made, the applicant, as required by s 77(a)(ii) of the Act, surrendered his passport to the trustee.

The applicant was a certified practising accountant and previously ran his own practice, which included lodging taxation returns for his, mainly Spanish speaking, clients. He was a registered tax agent until his bankruptcy.

In April 1995 Mr Molina informed the trustee that he wished to travel to Spain to attend to a family matter associated with his father's death and he wished the trustee to release his passport. The passport, in the custody of the trustee, had expired and the applicant said that he had applied for a new one. The trustee now holds both his passports.

The trustee called a meeting of creditors to obtain their opinion on the matter. The two creditors present at the meeting opposed the motion that the applicant be permitted to travel overseas and the trustee declined to release his passport. The applicant then applied to the Federal Court for release of his passport on what are essentially compassionate grounds.

The affidavit of the applicant, dated 1 May 1995, discloses that he attended a creditor's meeting at the office of the trustee. At that meeting there was present a representative of the Australian Taxation Office, which is owed in excess of $200,000. Two other creditors, and the State Bank of New South Wales and Norbev Pty Limited had given proxies to the trustee.  After some discussion the creditors' vote was against the proposal. It was indicated in a telephone conversation that Norbev Pty Limited, which is owed in the order of $1,800, was not prepared to consent.

The reason advanced by the bankrupt in his affidavit of 1 May 1995 for seeking the return of his passport was that his father died on 30 March 1995 and he had expressed a wish to have all his family present while his ashes were scattered over the Mediterranean Sea near his home town of Malaga.  The sister of the bankrupt lives in Spain but was in Australia in April and early May 1995, as a result of the death of the bankrupt's father. The mother and sister of the bankrupt were due to fly out of Sydney on 2 May 1995. The applicant said he intended to return to Spain and to remain there for about 4 weeks and then return to Australia.  He stated that he has no assets and was currently employed as an accountant earning
$100 per day, working 3 days per week. The costs of the trip to Spain, it was said, would be met by his sister.

Principles

It is clear that the discretion of the Court on an appeal pursuant to s 178 is conferred in the widest terms and the Court may make such order as it thinks just and equitable. The appeal is conferred not only on the bankrupt or creditors but also in respect of any other person "affected" by any decision of the trustee.

The exercise of appellate jurisdiction under s 178 is not limited to reviewing conduct of the trustee which is "performed absurdly, unreasonably or in bad faith" and the broad wording of the section is not to be read down by reference to any such implied restrictions. See Re Wheeler: Ex parte v Halse (1994) 54 FCR 166.

Furthermore, s 272(c) of the Act does not impose any specific constraints on the discretion of the trustee when deciding whether to consent to a bankrupt leaving Australia where the bankrupt is not liable to make a contribution. It is an open discretion but it must be exercised judicially and on grounds which can reasonably be considered relevant to such a decision as gleaned from a consideration of the Act.

In contrast, where a bankrupt is liable to pay a relevant contribution, the Act is more stringent and requires that the Court itself must make an order granting permission for the bankrupt to leave the country before he can depart. It is not a matter simply for the trustee. The discretion is much narrower. The Court is prohibited, under s 139ZU, from granting permission in such a case unless it is satisfied that it is necessary for the bankrupt to leave Australia in order to continue to derive income or, that it is appropriate for compassionate reasons relating to death or serious illness of a close relative of the bankrupt to allow the bankrupt to leave Australia. Moreover, if any payments in respect of the contribution will fall due before the bankrupt proposes to return to Australia, the Court must be satisfied that those payments have been made or that appropriate arrangements to ensure the making of those payments have been made.

A further restriction contained in s 139ZU(3) is that the Court must not grant permission where it satisfied that any of the grounds for objection to discharge of the bankrupt, set out in s 149D(1)(b) to (n) inclusive, are established.

The operation of s 139ZU was considered by Cooper J of this Court in Re The Estate of John Lewis Foster (a bankrupt) (Unreported, 1 April 1993).  See also the Note in 67 ALJ 630-631. In that case the bankrupt's evidence was that he wished to travel to Europe to attend a conference which was work- related and which would benefit him in his employment. The travel was a prize won by his employer and the bankrupt proposed to take his wife with him on the trip. His Honour held that the condition in s 139ZU(2)(a) did not apply to the bankrupt as it had not been shown that it was necessary for him to leave Australia in order to continue to derive income.

A second ground was raised in that case, namely that the wife of the bankrupt had undergone major surgery for a brain tumour and that he had been advised by a neurosurgeon that the trip would be beneficial to her as part of her recuperation. His Honour held that the compassionate ground in s 139ZU was not limited to apply only in respect of close relatives outside Australia. Accordingly, he found on the evidence that it was appropriate, for compassionate reasons, that the bankrupt should be allowed to leave Australia. The compassionate grounds raised in that case were of course particularly cogent.

In the present case the compassionate circumstances are not as strong as those advanced in the Foster case.

It is now more than eight and a half months since the death of the father. The sister and mother of the bankrupt have been in Spain since May 1995.  By way of oral evidence before me the applicant indicated that it was still planned, on his return to Spain to carry out the scattering of his father's ashes. He asserted an intention to return to Australia.

However, the bankrupt has made no offer to substantiate his assertion that he will return to Australia by the provision of security.  His family ties within Australia are minimal. He has no assets in this country and has incurred debts amounting to over $1 million. Included in that sum is an amount of over $200,000 owed to the Australian Taxation Office. In these circumstances, there are powerful reasons which might cause him not to return to Australia. The question whether a bankrupt is, on the evidence likely to return, is a relevant consideration. See Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40 at 43, per Bowen CJ. In the present case, there are in my view powerful reasons to doubt his assertion that he will return.

The trustee has indicated to the Court that he anticipates that he will need the assistance of the bankrupt in relation to the possible recovery of property on behalf of the estate. That is a matter of some weight in the light of the experience and knowledge which the trustee has in relation to the administration of this bankrupt estate.

In view of the time which has now elapsed since the death of his father and the countervailing considerations referred to above, I do not consider that the matters advanced by the bankrupt are sufficient to warrant the grant of consent to his departure or the return of his passports. 

Accordingly, I refuse the application and order the applicant to pay the costs of the respondent.

I certify that this and

the preceding eight (8)

pages are a true copy of the

Reasons for Judgment herein of

his Honour Justice Tamberlin.

Associate:

Date:                               15 December 1995

Solicitor for Applicant:                  Brendan Pigott

Solicitor for Respondent:           M D Nikolaidis & Co

Date of Hearing:                    12 December 1995                               

Date Judgment Delivered:                  15 December 1995