FEDERAL COURT OF AUSTRALIA

Official Trustee in Bankruptcy, in the matter of Lyons [2000] FCA 1428

BANKRUPTCY – application for a Letter of Request to a foreign court to act in aid of an Australian bankruptcy – whether bankrupt should be notified of the application – whether bankrupt may act to frustrate the administration of the bankrupt estate if notified of the application – whether the application sought enforcement of a judgment, or administrative assistance

Bankruptcy Act 1966 s 29(4)

Re Doyle (dec’d); Ex parte Brien v Doyle (1993) 112 ALR 653 cited

Re Clunies-Ross; Ex parte Totterdell (1988) 82 ALR 475 cited

Clunies-Ross v Totterdell (1988) 20 FCR 358 cited

Re Ayres; Ex parte Evans (1981) 51 FLR 395 followed

Ayres v Evans (1982) 56 FLR 235 cited

IN THE MATTER OF SEAN GERARD LYONS

OFFICIAL TRUSTEE IN BANKRUPTCY

N 7182 OF 2000

TAMBERLIN J

SYDNEY

13 OCTOBER 2000

IN THE MATTER OF SEAN GERARD LYONS

THE COURT ORDERS THAT:

1.         The applicant is to serve a copy of the application and the draft Letter of Request on Sean Gerard Lyons together with a copy of supporting material and details of the next mention date.

2.         The matter be stood over to 9.30 am on 27 October 2000.

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

IN THE MATTER OF SEAN GERARD LYONS

REASONS FOR JUDGMENT

1                     I have directed the applicant Trustee to give notice of the application and I now set out my reasons for adopting that course.

2                     This is an application made ex parte by the Official Trustee in Bankruptcy (“the Trustee”) for a Letter of Request to issue from the Federal Court of Australia to the High Court of New Zealand for the purpose of administering the bankrupt estate of Sean Gerard Lyons (“Lyons”).

3                     The application is made pursuant to s 29 of the Bankruptcy Act 1966 (“the Act”) which relevantly provides:

“SECTION 29           COURTS TO HELP EACH OTHER

29(1)   All Courts have jurisdiction under this Act, the Judges of those Courts and the officers of or under the control of those Courts shall severally act in aid of and be auxiliary to each other in all matters of bankruptcy.

29(2)   In all matters of bankruptcy, the Court:

(a)       shall act in aid of and be auxiliary to the courts of the external Territories, and of prescribed countries, that have jurisdiction in bankruptcy; and

(b)       may act in aid of and be auxiliary to the courts of other countries that have jurisdiction in bankruptcy.

29(3)   Where a letter of request from a court of an external Territory, or of a country other than Australia, requesting aid in a matter of bankruptcy is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction.

29(4)   The Court may request a court of an external Territory, or of a country other than Australia, that has jurisdiction in bankruptcy to act in aid of and be auxiliary to it in any matter of bankruptcy.

29(5)   In this section, “prescribed country” means:

(a)       the United Kingdom, Canada and New Zealand;

(b)       a country prescribed by the regulations for the purposes of this subsection; and

(c)        a colony, overseas territory or protectorate of a country specified in paragraph (a) or of a country so prescribed.”

4                     The decision of the Federal Court to make such a request of the High Court of New Zealand under s 29(4) is discretionary.  This is to be contrasted to the language of par 29(2)(a) which is concerned with requests to the Federal Court by overseas Courts.  Paragraph 29(2)(a) imposes a duty on the Federal Court to act in aid of and be auxiliary to the courts of prescribed countries which include New Zealand.  The existence of the discretion in subs 29(4) when a request is sought to be issued by the Federal Court is an important difference in relation to the question of notice because it allows scope for argument as to the matters which are appropriate to be taken into account and the weighting which should be given to them when making a decision whether to issue the Letter of Request.

5                     The Draft Letter of Request attached to the Trustee’s application is in the following terms:

“TO:   The Justices of the High Court of New Zealand

WHEREAS:

1.         Sean Gerard Lyons (“the bankrupt”) became a bankrupt on 23 April 1996 upon the making of a Sequestration Order by the Federal Court of Australia under the provisions of the Bankruptcy Act, 1966 and the Official Trustee in Bankruptcy was appointed the Trustee of the estate of Sean Gerard Lyons.

2.         It appears from information given to the Official Trustee in Bankruptcy by the bankrupt and on investigation and enquiries by the Official Trustee in Bankruptcy that Sean Gerard Lyons would be or may be, but for his bankruptcy, entitled to certain shares and interest in real and personal property located in New Zealand.

3.         It has been represented to this Court that it is necessary for the purpose of justice and the due administration in bankruptcy of the estate of Sean Gerard Lyons under and in accordance with the bankruptcy laws of the Commonwealth of Australia that the property should be made available to the Official Trustee as Trustee of the estate of Sean Gerard Lyons so that it may be dealt with by him under and in accordance with those laws for the purpose of realising it for the benefit of the creditors of Sean Gerard Lyons.

4.         It has further been represented to this Court that it is necessary for the purposes of justice and the due administration in bankruptcy of the estate of Sean Gerard Lyons under and in accordance with the bankruptcy laws of the Commonwealth of Australia that the bankrupt may have committed offences within the Commonwealth of Australia evidenced by non-disclosure of assets and the official Trustee in Bankruptcy says that investigations should be available to him in New Zealand as trustee of the property of Sean Gerard Lyons so that any offences can properly be pursued by him in accordance with those laws for the purposes of being able to sufficiently identify and charge the bankrupt with any offences which he may have committed under the Bankruptcy Act, 1966, as amended.

5.         In order that the property may be so made available and the investigations completed and dealt with, it is necessary to request the aid of your Honourable Court.

I ……………………………………………… as a Judge of the Federal Court of Australia,  do hereby request, that for the above reasons and for the assistance of this Federal Court, you, as the Justices of the High Court of New Zealand, or one or more of you:-

(a)       By vesting in the Official Trustee in Bankruptcy as Trustee of the property of Sean Gerard Lyons, the Trustee appointed under the Bankruptcy Act 1966 (Australia) as the Trustee in Bankruptcy of the estate of Sean Gerard Lyons, the possession and control of the property, real and personal, of the said Sean Gerard Lyons in New Zealand, with liberty to sell and lease the same and receive the proceeds of such sale or leasing with authority to take such steps and do such acts and things as may be necessary for those purposes;

(b)       grant to the Trustee the power of investigation for the purpose of investigating the property of the bankrupt and any offences which he may have committed;

(c)        grant such orders on application by the Official Trustee as may be necessary and proper for the purpose of implementing the order in paragraphs (a) and (b) above and ancillary thereto;

A letter of request does hereby issue requesting the High Court of New Zealand to act in aid and be auxiliary to this Honourable Court in the following manner:

(i)         By vesting in the Official Trustee in Bankruptcy as Trustee of the property of Sean Lyons, the Trustee appointed under the Bankruptcy Act, 1966 (Australia) as the Trustee in Bankruptcy of the estate of Sean Gerard Lyons, the possession and control of the property, real and personal, of the said Sean Gerard Lyons in New Zealand, with liberty to sell and lease the same and receive the proceeds of such sale or leasing with authority to take such steps and do such acts and things as may be necessary for those purposes;

(ii)        To empower the Official Assignee of New Zealand appointed under Section 135 of the New Zealand Insolvency Act, 1967:-

(a)       to issue and conduct public examinations of persons with respect to the bankrupt or his property pursuant to Section 68 New Zealand Insolvency Act, 1967;

(b)       to issue pursuant to New Zealand Insolvency Act, 1967 a search and seizure Warrant;

(c)        to do all things and acts necessary to give effect to the administration of the estate of Sean Gerard Lyons, a bankrupt and to give to the Official Assignee the powers set out in New Zealand Insolvency Act, 1967 and New Zealand Companies Act. 1993;

(d)       to obtain such advice or assistance as he considers necessary in the discharge of his duties hereunder.

(iii)      The Court to have such powers to make such orders as required to give full force and effect to the Bankruptcy Act, 1966, as amended (Australia) with respect to the bankrupt estate of Sean Lyons.”

6                     On the making of a sequestration order all property of the bankrupt wherever situated vests in the Official Trustee: see ss 58(1) and s 116 of the Act.  However, the position of property outside Australia may be complicated as a consequence of the provisions of foreign law especially with respect to immovable property and the transfer or vesting thereof: see Re Doyle (dec’d); Ex parte Brien v Doyle (1993) 112 ALR 653 at 657 ff.

7                     No notice of this application has been given by the Trustee to Lyons who resides in Australia.  When the matter came on for hearing I raised the question of whether such notice should be given to Lyons.  It was submitted on behalf of the Trustee that notice was neither necessary nor appropriate having regard to the history of the matter and because there was a reasonable apprehension that Lyons may take steps to either impede or avoid the implementation of the assistance sought from the High Court of New Zealand.

8                     An affidavit has been filed by Maria Psomas (“Psomas”) dated 31 July 2000.  She is the officer in the employ of the Trustee who is responsible for the administration of the bankrupt estate of Lyons.  She recounts the history of the matter as follows.  Lyons was made bankrupt on 23 April 1996.  The earliest act of bankruptcy was 20 October 1995.  She annexes a copy of the Statement of Affairs of Lyons.  The liabilities in that estate amount to $383,342.60.  There was no disclosure of any substantial assets available to unsecured creditors.  She recounts the history of Lyon’s affairs and refers to various unsatisfactory aspects of his evidence on public examination.  No tax return has been lodged by Lyons since 1989.  She refers to anomalies in relation to the financial affairs of Lyons in respect of various entries in his bank records.  There are a number of supporting documents attached to the affidavit. 

9                     Psomas summarises the concerns of the Trustee in relation to the affairs of Lyons including his failure to provide information to the Trustee and the obtaining of significant funds from Sealeigh Holdings Limited (“Sealeigh”) which have not adequately been explained.  The Trustee believes that Lyons is currently operating Sealeigh and is not simply a consultant as asserted.  Lyons is said to live with no visible means of support and has failed to provide information promised in his public examination.  The Trustee has gathered information that Sealeigh has a substantial development taking place in Auckland and that the interest of Lyons in that company may be of benefit to the creditors in bankruptcy.  The Trustee refers to the fact that s  81A Notices have been served on entities associated with Lyons and have not been answered.  The Trustee wishes to conduct public examinations of Lyon’s brother and to inquire into specified bank accounts held with the Bank of New Zealand.  The Trustee also wishes to investigate property registered in the name of Sealeigh or mortgaged or charged by that company.  For these purposes the Trustee seeks the assistance of the High Court of New Zealand which has jurisdiction with respect to bankruptcy matters.

Notice

10                  The grant of assistance by the Court of one nation in the administration of a bankrupt estate pursuant to the law of another country is quite distinct from the enforcement of a judgment of another Court.  In the case of enforcement, specific procedures are prescribed by local legislation pursuant to International Convention.  In the case of applications for aid or assistance in bankruptcy administration no specific procedure is prescribed.  International co-operation especially between countries with similar bankruptcy regimes has a long history especially in relation to Courts of Commonwealth countries.

11                  There is no authority directly on point on the question as to whether notice is required to be given in relation to an application for a Letter of Request to issue pursuant to s 29(4) of the Act.  It appears that on at least one previous occasion a similar request to that which is sought in the present case has been made by the Court but I have been unable to obtain any information as to whether it was opposed or whether any reasons were given in relation to the issue of the request.

12                  In addition, I was referred to two other cases where related issues were considered by the Court.  The first was a decision of French J in Re Clunies-Ross; Ex parte Totterdell (1988) 82 ALR 475.  In that case the bankrupt was legally represented at the hearing of the application for the Letter of Request and the application was opposed.  That case was somewhat unique in that it involved questions as to the status of the Cocos (Keeling) Islands. 

13                  For relevant purposes the order made by French J was as follows:

“1.       A letter of request do issue requesting the Supreme Court of the Cocos (Keeling) Islands Territory to act in aid of and be auxiliary to this honourable court in the following manner:

            ‘By vesting in Geoffrey Frank Totterdell, the person appointed under the Bankruptcy Act 1966 (Cth) as the Trustee in Bankruptcy of the estate of John Cecil Clunies-Ross, the property real and personal of the said John Cecil Clunies-Ross in the Cocos (Keeling) Islands Territory and the possession and control thereof, with liberty to sell and lease the same and receive the proceeds of such sale or leasing with authority take such steps and do such acts and things as may be necessary for those purposes.’”

14                  In considering the exercise of the discretion whether to issue the Letter of Request his Honour said at 486:

“Having established that this Court has power to issue a letter of request to the Supreme Court of Cocos and that that court has the power to act in aid this court still has a discretion to make the request or not.  That discretion will be exercised with regard to considerations of utility and comity.”

15                  The decision of French J went on appeal and was affirmed by the Full Federal Court: see Clunies-Ross v Totterdell (1988) 20 FCR 358.  At 361 the Full Court referred to the operation of s 29(4) in these terms:

“Moreover, we do not agree that even if it could be shown that, for any reason, it was possible or even probable, that the court of an external Territory would not honour the request, this Court should not make a request pursuant to s 29(4).  As has been seen, the legislative scheme contemplates co-operation by Australian courts, and courts of external Territories, in bankruptcy matters.  There are obvious advantages in such a provision.  The scheme envisages that, in the ordinary course of events, requests for aid will be made and honoured, subject to the need to modify these administrative arrangements to meet the circumstances of a particular case by imposing appropriate conditions or the like: see Re Ayres; Ex parte Evans (1981) 51 FLR 395; 34 ALR 582, per Lockhart J (at 404-409; 588-593); affirmed on appeal by Ayres v Evans (1981) 56 FLR 235).  This is not to say that that this Court has no discretion under s 29(4).  But it is a different thing to suggest that it is appropriate that this Court should not act under s  29(4) unless it is first satisfied that it is probable that the court of the external Territories will honour the request.  It should be borne in mind that s 29(4) also authorises requests to the courts of other countries (which the Australian Parliament could not empower to respond), the legal systems of which it would be quite inappropriate to examine in advance when the statute is silent on the point.”

16                  Another case in which related issues were considered was Re Ayres; Ex parte Evans (1981) 51 FLR 395 (Lockhart J).  That case concerned an application to the Federal Court from the High Court of New Zealand to enable the New Zealand Official Assignee in Bankruptcy to obtain control of the bankrupt’s property in Australia.   The situation was therefore the converse of the present case in which the application for the request is made to the Australian Court and where the Request is addressed to the High Court of New Zealand.  The relevant provision for consideration in Ayres was par 29(2)(a) which requires the Federal Court to act in aid of and auxiliary to the jurisdiction of the High Court of New Zealand.  At the outset of his judgment Lockhart adverted to the question of notice and said at 396-397:

“The High Court of New Zealand issued two letters of request for the aid of this Court to enable the Official Assignee in Bankruptcy of the estate of William Henrty Ayres (the bankrupt) who has been adjudicated bankrupt in New Zealand, to obtain control of the bankrupt’s property in Australia.

There have been very few occasions in the past when the aid of this Court has been sought by letters of request.  The procedure to be followed in cases of this kind has not been prescribed, so I directed the official assignee to file applications and serve them on the bankrupt.

The course taken in these matters satisfies me of the desirability generally of ensuring, when future letters of request are issued by foreign courts seeking the aid of this Court, that the bankrupt is served with notice thereof and that evidence is given by the moving party as to the administration of the estate including the assets and liabilities if the bankrupt and the countries in which the creditors reside.

…

The bankrupt was adjudicated bankrupt by the High Court of New Zealand on 5^th December, 1979.  Pursuant to s. 42 of the Insolvency Act 1967 (N.Z.) the estate of the bankrupt vested in the official assignee.  The bankrupt has not been made bankrupt in Australia.” (Emphasis added)

17                  His Honour pointed out at 405 that the object of s 29 is to enable all courts having jurisdiction under the Act in the prescribed countries, which have similar bankruptcy legislation to Australia, and the courts of other countries having jurisdiction in bankruptcy to act in aid of and be auxiliary to each other in bankruptcy matters.  The section does not create any new rights but only creates new remedies for enforcing existing rights: see Hall v Woolf (1908) 7 CLR 207 at 212.  His Honour rejected an argument that the request should not be acceded to because the proved creditors of the bankrupt included Crown revenue authorities and that therefore to grant the request would be to enforce foreign revenue laws which was contrary to public policy.  His Honour took the view that the High Court of New Zealand by issuing a Letter of Request was simply seeking to administer a bankrupt estate in accordance with the bankruptcy legislation of New Zealand and that although New Zealand Revenue authorities would benefit indirectly from the transmission of funds from Australia to the Official Assignee this was not as the result of an attempt to enforce the country’s revenue laws but was simply a consequence of the administration of the bankruptcy under New Zealand law.  In so doing his Honour made the important underlying distinction between enforcement and administrative assistance.

18                  As to the form of the request and order which should be made his Honour directed the Official Assignee to bring in Short Minutes so the matter could be determined after hearing Counsel as to the form of the Order.

19                  The decision of Lockhart J in Re Ayres was affirmed on appeal by the Full Federal Court in Ayres v Evans (1982) 56 FLR 235.  As to the form of assistance which could be provided Fox J, in the Full Court, made the following observations at 240-241:

“The relevant jurisdiction of a court exercising federal jurisdiction in bankruptcy can however only stem from s 29, and it is from that source that this Court derives jurisdiction.  It seems to me that there is no doubt that the aid which can be provided includes transfer of the appellant’s interest to the official assignee, or the appointment of a receiver of it for the official assignee.  The form of relief granted in this case is not challenged, and this includes an order for the appointment of a receiver.   Section 29(2)(a) at least requires the court to entertain an application for aid in a case to which it applies.  It has jurisdiction to give aid.  However the nature, extent and terms of the aid remain a matter for the discretion of the court …” (Emphasis added)

20                  The making of the Orders sought in the present case in terms of the Letter of Request filed with the application could have a significant effect on interests of Lyons in New Zealand.  I am not satisfied that the evidence presented raises such an apprehension of possible avoidance by Lyons that notice should be dispensed with.  On general principles, in the absence of any specific requirement, it seems to me that Lyons should be given notice of the application for the Letter of Request and of the terms of the Request and orders sought together with a copy of the material relied on to support the application.  He should also be informed of the date the matter is to be fixed before the Court for determination of the Letter of Request so that he is given an opportunity to make submissions as to whether the Request should be made and also as to the form of the Request.  The power is a discretionary one and Lyons should be given an opportunity to be heard if he so wishes.  Accordingly, I will not proceed to a determination of the application on an ex parte basis.  I direct the applicant Trustee to serve a copy of the application and the draft Letter of Request on Lyons together with a copy of the supporting material and details of the next mention date.  I stand the matter over to 9.30 am on 27 October 2000 to enable the notification process to be implemented.

Associate:

Dated:              13 October 2000