FEDERAL COURT OF AUSTRALIA

Miao v Michell [2015] FCA 22

THE COURT NOTES THAT:

Upon the undertaking being given to the Court by the applicant to return to Australia at the request of the respondent (the trustee).

THE COURT ORDERS THAT:

1.    The trustee's decision of 5 January 2015 be set aside.

2.    The trustee is directed to consent to the applicant leaving Australia and if in his possession to return her passport forthwith, subject to the following conditions:

(a)    She maintain the addresses whilst she is abroad and/or in Australia of which she has currently notified the trustee.

(b)    She consents to the trustee sending correspondence in connection to the administration of her estate to any one of such contact addresses for the purpose of service of any document.

(c)    She forthwith provides to the trustee a duly completed statement of affairs.

(d)    She provide full copies to the trustee of airline tickets from and to Australia.

(e)    She advises the trustee of the source or sources of funds for any such travel.

(f)    She notifies the trustee in writing of any change to her residential address in Australia within seven days of the date of any change.

3.    There be no order for costs in favour of the applicant.

4.    The trustee's costs of and incidental to the application be treated as his costs and expenses of the administration of the applicant's estate.

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

REASONS FOR JUDGMENT

1    The applicant has made an application pursuant to s 178(1) of the Bankruptcy Act 1966 (Cth) (the Act) seeking a review of a decision of the trustee of her estate, the respondent, who has not consented to her overseas travel in accordance with s 272(1)(c) of the Act.

2    I have determined to grant her application subject to conditions.

3    It is appropriate to set out certain background facts.

4    The respondent is a registered trustee in bankruptcy, an official and registered liquidator and a director of the accounting firm PCI Partners Pty. Ltd.

5    He was appointed trustee of the estate of the applicant pursuant to a sequestration order made by Registrar Allaway of the Federal Circuit Court of Australia on 3 July 2014.

6    Following his appointment as trustee, the applicant filed an application with the Federal Circuit Court for review of the sequestration order, being proceeding number MLG 785 of 2014 (the application for review).

7    Pending the outcome of the application for review, the respondent did not take any significant steps in the administration of the estate, save for the registration of a caveat over the applicant’s property at Unit 2, 144 Nicholson Street, Footscray, Victoria.

8    The application for review was refused by his Honour Judge Burchardt of the Federal Circuit Court on 7 November 2014.

9    The applicant has sought to appeal his Honour’s decision on the application for review and the appeal is to be heard by me on 20 February 2015.

10    Following the delivery of Judge Burchardt’s decision, the respondent on two occasions attempted to contact the applicant to provide her with correspondence which explained her responsibilities as a bankrupt, including the requirement to submit a Statement of Affairs. The first occasion was on 11 November 2014 via a text message sent by Mr Scott Benger of the respondent’s staff to the applicant. The second occasion was by direct contact with the applicant at this Court on 18 December 2014 after the directions hearing held before me concerning the applicant’s appeal. On each of the two occasions, the applicant refused to accept the correspondence.

11    At the time of the hearing of the present application, the applicant had not yet submitted her Statement of Affairs or provided to the respondent any other information concerning her assets and liabilities or income and expenditure.

12    Further to her failure to provide the respondent with her Statement of Affairs, the applicant also refused to provide the respondent with details of her residential address in Melbourne.

13    On 30 December 2014, the respondent was informed by a member of his staff, Mr Jerome Miranda, that Mr Miranda had been notified by an officer of the Australian Federal Police that the applicant had attempted to board a plane for an overseas flight. The respondent was not aware that the applicant had intended to travel overseas, as she had not sought the prior permission of the respondent to so travel. The applicant was prevented from leaving Australia.

14    Pursuant to s 272(1)(c) of the Act, a bankrupt is not entitled to leave Australia or do any act preparatory to leaving Australia without the consent of her trustee.

15    On 5 January 2015, the applicant attended the respondent’s office and requested that he provide his consent to her travel overseas. The applicant provided him with a handwritten letter which noted that she needed to travel overseas for family reasons because her mother was in hospital. She also, apparently, indicated that she was unable to obtain a letter from that hospital confirming her mother’s illness and hospital stay. The applicant also noted that she would be returning to Melbourne on 2 February 2015 and that the airfare was being funded by some rental income that she was receiving.

16    On that same day, the applicant attended at the respondent’s office on a further occasion and again requested that he provide his consent to enable to her to travel overseas. During the applicant’s second attendance, the respondent handed her a letter which said:

In order for me to consider your request, I request the following:–

•    Completed Statement of Affairs;

•    Letter from either the doctor or hospital from where your mother is being treated confirming her illness;

•    An email address, telephone contact number and overseas address where you will be staying in China;

•    Details of your previously booked flight that was to have occurred on 30 December 2014 including a copy of your return air ticket;

•    Details of your current annual income so I can assess whether you are liable to make any income contribution to your estate; and

•    Details of how your trip including airfares and living expenses are being funded.

17    The 5 January 2015 letter received from the applicant did not contain information of the type requested in the respondent’s letter of the same day. Further, at the time of the application before me, the respondent had not been provided with any further information from the applicant in relation to his request. Accordingly, the respondent was not able to adequately consider the applicant’s request in light of not having been provided with the information required.

18    The respondent’s position before me was that he had not refused the applicant’s request to allow overseas travel but had merely requested that the applicant provide further information pertaining to her affairs so as to enable him to properly consider her request.

19    Whilst the respondent’s position at the time this application came on before me was reasonable and appropriate, nevertheless, the respondent’s position did amount to a constructive refusal to give his consent to the applicant’s overseas travel.

20    When the matter came on for hearing on 23 January 2015, I indicated to the applicant my view as to the less than satisfactory nature of the applicant not having provided to the respondent her current residential address in Australia, and also a completed Statement of Affairs. I indicated to the applicant that if both matters were attended to, I might be favourably disposed to granting her application. The first deficiency was rectified on 23 January 2015. As to the second matter, I gave the applicant the long weekend to rectify the deficiency and adjourned the further hearing of the matter until this morning.

21    I was advised this morning that the applicant has now completed and handed to the respondent her Statement of Affairs, albeit that there seems to be some issue either as to the form or content thereof, but that need not trouble me further for present purposes.

Legislative provisions

22    Upon becoming bankrupt, a person is obliged to surrender his or her passport to the trustee in bankruptcy (see s 77(1)(a)(ii)).

23    A bankrupt is not entitled to leave Australia or do any act preparatory to leaving Australia without the written consent of the trustee (see s 272(1)(c)). A trustee may impose written conditions on any consent to overseas travel (see s 272(2)). If the bankrupt is liable to pay an income contribution, the conditions may include conditions regarding the payment of that contribution.

24    Failure by the bankrupt to comply with a request by a trustee to return to Australia is a ground of objection to discharge (see s 149D(1)(h)).

25    A bankrupt may appeal against the trustee’s decision to refuse to return the bankrupt’s passport and not to give his written consent to the bankrupt leaving Australia pursuant to s 178 of the Act (see Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 (Re Tyndall)).

26    The object of restrictions upon a bankrupt’s travel is to ensure the proper administration of the Act and the bankrupt’s estate and not as a penalty imposed upon a citizen as a consequence of an inability to pay debts leading to the making of the relevant sequestration order (see Re Tyndall at 190-1 per Deane J).

27    Section 272(1)(c) of the Act does not impose any specific constraints on the discretion of the trustee to consent to the bankrupt leaving Australia in circumstances where the bankrupt is not liable to make a contribution (see Re Molina; Ex parte Wily [1995] FCA 1057).

28    The trustee’s discretion is an “open” discretion, but it must be exercised judicially and on grounds which can reasonably be considered relevant to such a decision as discerned from the context and language of the Act.

29    One such consideration is the timely and efficient administration of the bankrupt’s estate. At the forefront of matters to be considered in the exercise of the trustee’s discretion is whether the proposed visit is genuine, whether the bankrupt is likely to return to Australia and whether the visit will hamper the administration of the estate (see Re Hicks; Ex parte Lamb (1994) 217 ALR 195 at 198 per Heerey J; [1994] FCA 1473).

30    It is appropriate to say something concerning the nature and scope of the review under s 178.

31    The wording of s 178 is such as to confer upon the Court the widest possible discretion as to the appropriate order which should be made in the particular case. It is not necessary, for example, to show that the trustee’s decision was unreasonable, absurd or made with an absence of good faith. Indeed, it is not necessary to show that the trustee has done anything wrong as such. The trustee’s decision may, on the material before him, have been quite correct and reasonable, yet the Court has a wide ranging supervisory jurisdiction on the material before it to substitute its own decision if appropriate. See generally Re Tyndall and also the discussion in Macchia v Nilant (2001) 110 FCR 101 at [36]–[38] per French J (cf Healey v Prentice (No 2) [2000] FCA 1598 at [20]-[21] per Madgwick J).

Should consent be granted?

32    In my opinion, consent to the applicant’s overseas travel should be given.

33    First, in my view, the applicant’s reasons for her overseas travel are genuine. She has an elderly and sick mother that she would like to visit and tend to for a short time whilst her mother’s carer is not available; her mother is 90 years of age and has now been discharged from hospital.

34    Second, the trip is only for a short time. The applicant proposes to return to Australia for the hearing of her appeal. Moreover, she is prepared to give an undertaking to the Court to return to Australia on request by the respondent. This is not a situation where there might be considered to be incentives for the applicant not to return to Australia.

35    Third, given that the applicant has now completed a Statement of Affairs, it does not seem to me that the overseas trip will unduly impede the administration of her estate. Indeed, given that the applicant has an outstanding appeal in substance against the sequestration order, there is little to be done by the respondent in terms of administration in the next few weeks in any event. Moreover, even if some aspects of the applicant’s Statement of Affairs have been unsatisfactorily completed, I do not see that as a basis to refuse consent to the travel sought.

36    Generally, there are now changed circumstances since the respondent’s consideration of this matter. The applicant has now given detailed evidence before me justifying the legitimate reasons for her proposed travel. Moreover, the applicant has now provided her residential address in Australia and has also provided her Statement of Affairs to the respondent. Although the respondent’s decision on the material before him was reasonable, in my view the changed circumstances justify the setting aside of that decision. I see no good reason why the applicant ought not be permitted to leave Australia, subject to an appropriate undertaking and subject to certain conditions.

37    I will make the necessary orders subject to discussion with the parties.

Associate:

Dated: 28 January 2015