FEDERAL COURT OF AUSTRALIA

Dick v McIntosh [2002] FCA 1135

BANKRUPTCY - Respondent declared bankrupt in High Court of Justice of United Kingdom - bankrupt with assets in Australia - application to Court to act in aid of a United Kingdom bankruptcy - whether examination and investigation to identify property of the bankrupt should be permitted.

Bankruptcy Act 1966 (Cth), s 29, s 81, s 116

Radich v Bank of New Zealand (1993) 45 FCR 101 Appl

Ayres;  Ex parte Evans (1981) 51 FLR 395 Cited

Galbraith v Grimshaw [1910] AC 508 (HL) Cited

Re Doyle;  Ex parte Brien v Doyle (1993) 41 FCR 40 Cited

Australian Mutual Provident Society v Gregory (1908) 5 CLR 615 Cited

ANDREW DICK AS TRUSTEE OF THE PROPERTY OF ANN CAPPER McINTOSH (A BANKRUPT) v ANN CAPPER McINTOSH (A BANKRUPT)

Q7305 OF 2000

COOPER J

BRISBANE

13 SEPTEMBER 2002

THE COURT ORDERS THAT:

1.         The order of the Court made on 31 July 2001 appointing Gregory Michael Moloney Receiver without security of the divisible property of Ann Capper McIntosh in Australia be amended to insert after the words “Bankruptcy Act 1966 (Cth)” the following words:  “... and ascertained by reference to the commencement of her bankruptcy in the United Kingdom on 26 April 1999, ...”.

2.         The District Registrar of the Queensland District of the Court pursuant to s 81 of the Bankruptcy Act 1966 (Cth) summon Ann Capper McIntosh to attend for examination on oath under s 81 of the said Act before the District Registrar or a Deputy District Registrar about her examinable affairs (as defined in s 5 of the said Act) and that she bring with her to such examination for production thereat such books as are within her possession or control which relate to her said examinable affairs.

3.         The applicant may be represented at such examination of Ann Capper McIntosh about her examinable affairs by Gregory Michael Moloney, the Receiver of the divisible property of Ann Capper McIntosh situate within Australia and by counsel and/or by solicitor, and, subject to s 81(10) and (11) of the Bankruptcy Act 1966 (Cth), the applicant, by Gregory Michael Moloney and by counsel and/or solicitor, conduct the examination of the said Ann Capper McIntosh.

4.         The applicant and the respondent be at liberty to apply to this Court on seven days notice, such notice to include drafts of any orders sought together with any affidavit material to be relied upon to support the granting of such orders, for any ancillary or consequential orders or directions in this matter as may be necessary.

5.         The respondent pay the applicant’s costs of and incidental to the further application, to be taxed if not agreed.

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

REASONS FOR JUDGMENT

background and orders sought

1                     The applicant is the trustee of the respondent’s bankrupt estate.  The respondent was adjudged bankrupt by the High Court of Justice in London, England on 26 April 1999.

2                     On 31 July 2001, pursuant to a request of the said High Court of Justice, I made orders under s 29 of the Bankruptcy Act 1966 (Cth) (“the Act”) which included :

“1.       GREGORY MICHAEL MOLONEY, upon his consent in writing to act as Receiver, be appointed Receiver without security of the devisable property, within the meaning of section 116 of the Bankruptcy Act 1966 (Cth), of Ann Capper McIntosh situate within Australia with authority to take all necessary steps to obtain possession of and to sell the same and to receive the proceeds thereof, and, to do all such acts and things as may be necessary or expedient for the purposes of giving full force and effect hereto.

2.         GREGORY MICHAEL MOLONEY be authorised to remit money received by him under these orders to the Applicant as trustee in bankruptcy in whom the estate of the bankrupt Ann Capper McIntosh is vested pursuant to section 306 of the Insolvency Act 1986 (UK) after payment of any encumbrances on the said property and of the costs, charges and expenses that may be incurred in the exercise of any of the powers hereby conferred or otherwise hereunder.

3.         GREGORY MICHAEL MOLONEY be authorised to appoint, if necessary, solicitors in Australia to advise or assist him in the discharge of his duties hereunder.

4.         The costs of the Applicant of and incidental to this Application including reserved costs be taxed as between solicitor and client and that when so taxed, GREGORY MICHAEL MOLONEY be at liberty to pay the same out of any monies of the bankrupt in Australia received by GREGORY MICHAEL MOLONEY.

5.         The Applicant and the bankrupt be at liberty to apply to this Court on seven days notice for any consequential or ancillary orders or directions in this matter as may be necessary.”

3                     The applicant, pursuant to Order 5 has applied for further orders and directions.  Various relief was claimed but in its final form the applicant sought the following orders :

1.         That the respondent file and serve an affidavit within twenty-eight days detailing all assets held by her from 1991 to the present date.  If any assets held by her have been disposed of, the date of disposal and the consideration received.

2.         That a summons pursuant to s 81 of the Bankruptcy Act 1966 (Cth) issue to the respondent requiring the respondent to attend to be examined on oath.

3.         The Court declare that the court appointed Receiver conduct the examinations on oath mentioned in Order 2 supra have the same powers as a Trustee could exercise in the conduct of the examination.

4.         The applicant and the bankrupt be at liberty to apply to this Court on seven days notice for any ancillary or consequential orders or directions in this matter as may be necessary.

5.         Such further order as the Court deems fit.

6.         Costs.

4                     The respondent opposed the granting of any relief.

5                     By letter dated 10 August 2001, the Receiver sent to the respondent and her solicitors a form of Statement of Affairs and a form of Income Questionnaire and Statement for completion by the respondent.  By facsimile dated 20 September 2001 to the respondent’s solicitors, the Receiver sought documentation relating to dealings in shareholdings held by the respondent in three companies;  Karina Pty Ltd ACN 010 059 915 (“Karina”), Paradise Resorts International Pty Ltd ACN 010 345 301 (“Paradise”), and Capperco Pty Ltd ACN 000 590 938 (“Capperco”).  He also sought financial accounts of these companies.

6                     By letter dated 4 October 2001 from the respondent’s solicitors, a Statement of Affairs and Income Questionnaire was provided to the Receiver.  The letter in part stated :

“You will note some details are not complete.  As discussed we are awaiting provision of documentation from our client’s accountants and the accountants of the companies referred to in previous correspondence.  We shall provide those materials to you as soon as the same are to hand.”

7                     The respondent disclosed in the documentation provided, that :

(a)        she had been a director of Karina and Paradise;

(b)        she had sold an undisclosed number of shares in Karina to an unknown transferee on 30 December 1996;

(c)        she had received $30,340 as her one-third share of an estate property sold on 21 April 2001;

(d)        she was unemployed and wholly supported by her husband;

(e)        she had no assets or income and that save for the debt of £425,076 owed to Lloyds of London, the petitioning creditor in her bankruptcy, she had no creditors.

8                     On 12 October 2001, the Receiver sought payment of the sum of $30,340 from the respondent.

9                     On 17 October 2001, the Receiver requested that the respondent attend at the Receiver’s office on 26 October 2001 to discuss her financial affairs.  Further correspondence passed between the Receiver’s and the respondent’s solicitors concerning payment of the sum of $30,340 and the provision of information to the Receiver as to the respondent’s financial affairs.

10                  On 5 December 2001, the respondent’s solicitors wrote to the Receiver in the following terms :

“Our client instructs us that the representatives of your firm have attempted to contact her family and make enquiries in relation to our client’s financial affairs.

Our client is not a bankrupt in Australia nor is your Mr Moloney her Trustee in Bankruptcy.  As a result, we are instructed to insist that her privacy and that of her relatives is respected.  We ask that you do not contact such persons in future, and as previously advised, direct all correspondence and enquiries to our firm for a response.”

11                  On 14 December 2001, the Receiver again wrote to the respondent’s solicitors seeking information and documentation relating to the disposition by the respondent of her shareholding in the three companies, payment of the proceeds of the sale of real property in Bauer Street, Southport, Queensland and seeking the attendance of the respondent at the Receiver’s office to discuss her financial affairs.  The letter indicated that unless the respondent co-operated with the Receiver, the Receiver would seek orders for the respondent’s examination and for the production of documents.  The respondent has failed to co-operate with the Receiver.

12                  On the further hearing of the application on 3 September 2002, an affidavit of Anne Campbell, solicitor, was filed on behalf of the respondent.  That affidavit had attached to it print-outs of searches of the records of the Australian Securities and Investments Commission in respect of Karina, Paradise and Capperco.  It also had attached real property searches of properties being Lot 2 on BUP 1734, Lot 254 on RP 89454, Lot 44 on RP 726804 and Lot 59 on BUP 3698.

13                  The company searches reveal that the respondent ceased to be a director of each of the companies on 6 May 1999 and that in 1999 her shareholding in each of the companies passed to Walter Stevenson McIntosh, a person born on 18 June 1974 in Sydney, New South Wales, whose address is recorded at 50 Old Burleigh Road, Surfers Paradise, Queensland, which is disclosed in the company searches and in the respondent’s Statement of Affairs as the residential address of the respondent and her husband Walter Gilbert McIntosh.

14                  The real property searches disclose that :

(a)        Lot 2 on BUP 1734 was sold by the respondent and two others as the personal representatives of the estate of Florence Edith Capper, deceased and that the sale was registered on 6 April 2001;

(b)        Lot 44 on RP 726804 is owned by Capperco and is not subject to any registered encumbrance;

(c)        Lot 59 on BUP 3698 is owned by Capperco and is not subject to any registered encumbrance.

submissions

15                  The applicant by his counsel submitted that he needed to examine the respondent and to inspect documents to establish :

(a)        what property was now held by the respondent and was held by her at the commencement of her bankruptcy on 26 April 1999;

(b)        whether the shares disposed of to Walter Stevenson McIntosh in 1999 in each of the companies were sold for valuable consideration, and if so, whether the consideration has been paid or whether the applicant has equitable rights, previously held by the respondent, enforceable against the shares or the transferee, or, legal rights, previously held by the respondent, enforceable against the transferee for payment of the consideration as a debt due.

16                  The respondent opposed the making of the orders sought for the following reasons:

(a)        she had not received notice of the orders sought and she was unclear whether it was the applicant or the Receiver who sought additional orders;

(b)        the property in respect of which the Receiver seeks information, or to claim, was property disposed of prior to the appointment of the Receiver on 31 July 2001 and therefore the Receiver has no power to make inquiry as to its disposition;

(c)        she has no obligation to co-operate with the Receiver in respect of his inquiries concerning any property and its disposition prior to the appointment of the Receiver;

(d)        the order appointing the Receiver over the divisible property of the respondent lacks utility because there is no commencement of the bankruptcy for the purposes of s 116 of the Act;

(e)        the Receiver has no power to make applications under ss 120, 121 or 122 of the Act to set aside dispositions of property, and, to seek orders to examine the respondent for that purpose, is misconceived.

conclusion

17                  Order 1 of the orders made on 31 July 2001 was an order made under s 29 of the Act. The order is to be read and operated by reference to two matters of fact and law.  The first is that the respondent is bankrupt by virtue of an order made by the High Court of Justice in London on 26 April 1999 and certain legal consequences follow from her being adjudged bankrupt.  The second is that her bankruptcy commended on 26 April 1999:  s 278 of the Insolvency Act 1986 (UK) (“the UK Act”).  Subject to the applicable rules of private international law, the bankruptcy order of the High Court of Justice will be recognised by Australian Courts:  see Australian Private International Law 3rd Ed. Sykes & Pryles at pp 791 - 793;  Radich v Bank of New Zealand (1993) 45 FCR 101 at 105 - 106.  Additionally, Australian Courts exercising jurisdiction under the Act will act in aid of and ancillary to courts of other countries having jurisdiction in bankruptcy:  s 29(2) of the Act.  One of the main uses of sections such as s 29 of the Act is to enable recourse to be had to a bankrupt’s property in the country to the courts of which the request is made:  Ayres;  Ex parte Evans (1981) 51 FLR 395 at 407 - 408.

18                  The “divisible property within the meaning of s 116 of the Bankruptcy Act 1966 (Cth)” to which order 1 refers is property falling within the description of s 116(1) subject to the limitations contained in s 116(2) of the Act.  The commencement of the respondent’s bankruptcy for the purpose of identifying which property is to be divisible amongst the creditors of the respondent in the administration of her bankruptcy is 26 April 1999.  No issue of “relation back” arises in respect of the commencement of her bankruptcy.  The rule of relation back was abolished in the United Kingdom with the introduction of the UK Act and the date of commencement of a bankruptcy administered under the UK Act is the date upon which the bankruptcy order is made:  s 278, s 283;  Fletcher The Law of Insolvency Sweet & Maxwell, London (1990) at pp 174 - 176.  Further, the local relation back provisions for the purpose of ascertaining the commencement of a bankruptcy under the Act, are inapplicable to a foreign bankruptcy:  Sykes & Pryles at pp 792 - 793;  Galbraith v Grimshaw [1910] AC 508 (HL) at 510, 512 - 513;  Re Doyle;  Ex parte Brien v Doyle (1993) 41 FCR 40 at 56.

19                  The order appointing a Receiver of the respondent’s divisible property operates prospectively from its making on 31 July 2001.  It is then a question of identifying what property is subject to the order.  As appears in my reasons relating to the making of the order on 31 July 2001, the property is the “free assets” of the bankrupt in Australia as at the date of the commencement of her foreign bankruptcy with all the liabilities to which they were subject on that date:  see [2001] FCA 1008 at [19] - [20];  Radich v Bank of New Zealand at 121 - 122;  Galbraith v Grimshaw at 511, 512, 512 - 513.

20                  Whether or not the applicant is bound by any dealings of the respondent with her Australian divisible property since the commencement of her foreign bankruptcy will depend upon the nature of the property, the nature of the dealing and the application of Australian rules of private international law applicable to such property:  Australian Mutual Provident Society v Gregory (1908) 5 CLR 615 at 623 - 625, 628 - 629, 630 - 631, 633 - 634, 644 - 646;  Re Doyle;  Ex parte Brien v Doyle at 45ff.

21                  The property of the respondent includes all legal and equitable rights and obligations she had at the commencement of her bankruptcy and which arose out of her dealings with her property subsequent to the date of the commencement of her bankruptcy.  Those rights or obligations may be valuable rights capable of enforcement by the Receiver  in such a way as to produce funds for distribution in the winding up.

22                  It is within the power of the Receiver to do all things necessary or expedient to identify such property and to take it into possession and to sell the same;  the order of 31 July 2001 in terms gives him that power.  The contention of the respondent that any dealing with her property prior to 31 July 2001 is irrelevant to the ascertainment of her divisible property for the purposes of Order 1 of 31 July 2001, is misconceived and no basis for refusing an order for her examination on the application of the applicant made under Order 5 of the orders made on 31 July 2001.

23                  I am satisfied that the respondent has not, and will not, co-operate with the Receiver to fully identify her property, using that term in its widest sense as used in the Act, with a view to making it available to the applicant in the administration of her bankruptcy.  Acting under s 29 of the Act, this Court may make an order for an examination under s 81 of the Act:  Radich v Bank of New Zealand at 125.  Accordingly, I am satisfied that an order for the issue of a summons under s 81 of the Act should be made.

24                  I am not satisfied that any requirement that the respondent provide further written material as to her property and property dealings would be productive of anything other than further delay.  In my view, the most expeditious means of identifying what property, if any, is available to the Receiver is to require that the respondent be examined on oath under s 81 of the Act as to her examinable affairs (as defined in s 5 of the Act) and that she produce any relevant books in her possession or control at the examination.

25                  The applicant should be permitted to attend at, and have the carriage of the examination, by the Receiver and by counsel or solicitor.

26                  In order to avoid any further doubt as to the property the subject of Order 1 made on 31 July 2001, I propose to amend the said order to insert after the words “... the Bankruptcy Act 1966 (Cth)” the following words:  “... and ascertained by reference to the commencement of her bankruptcy in the United Kingdom on 26 April 1999, ...”.

27                  The respondent by her refusal to co-operate with the Receiver has forced the applicant to seek further orders.  Additionally, the respondent has opposed the making of the orders and has failed in her opposition.  In these circumstances the applicant’s costs of and incidental to the further application should be paid by the respondent.

Associate:

Dated:              13 September 2002