Re Ernst Abraham Siewertsz Van Reesema [1983] FCA 1 (4 January 1983)

FEDERAL COURT OF AUSTRALIA

Re: ERNST ABRAHAM SIEWERTSZ VAN REESEMA
No. 666 of 1979
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
McGregor J.

CATCHWORDS

Bankruptcy - application for discharge - objection by the Official Receiver - failure to attempt to make contribution to estate - bankrupt a man of education and experience - avoidance of making contribution to Estate towards debts - frustrating tactics.

Bankruptcy Act 1966 s. 149, s.150

Income Tax Assessment Act 1936 s.177 s.208

HEARING

SYDNEY
4:1:1983

ORDER

1. The application for discharge is refused.

2. Each side is to pay its own costs.

DECISION

ERNST ABRAHAM SIEWERTSZ VAN REESEMA (bankrupt) has applied for discharge pursuant to s.150 of the Bankruptcy Act 1966. The Official Trustee had lodged an objection dated 19 November 1981 to which I refer later.

The estate of the bankrupt was sequestrated on 14 September 1979 on the petition of a creditor EMMANOUIL GIAMEOS presented on 19 June 1979. The amount of the debt alleged in the Petition was $12,384.91; bankrupt in his Statement of Affairs referred to it as "$15,000 approx." incurred by him for legal costs. To this matter more detailed reference is made later. No amount has been paid off the debt.

It will be useful to set out some of the facts leading up to this application.

The bankrupt, born in 1931, came to South Australia in 1963. He became in that year the State Manager of the firm "Encyclopaedia Brittanica". He remained in that appointment until the end of 1963 when, because of a dispute over the payment of commission, he left the employ of that firm. He has informed the Official Receiver that he had to take legal action to recover moneys he believed to be owing to him for commissions. This action was taken in Sydney. It was settled in 1976 when he received the equivalent of 7,000 pounds. This sum was in replacement of income he should have been paid as commission. The settlement, however, was expressed in terms that if the payment was made he would not proceed with the action. This, so the applicant said in evidence, was because the defendant was concerned that it would or might be sued for by others presumably for amounts thought similarly to be owing.

From 1964 until 1968 the bankrupt was involved in the management of several companies which sold and marketed cookware, electrical appliances, wall cladding, advertising and painting. Those businesses had all ceased prior to 1970. The statement to this effect appears in the Official Receiver's report.

In 1970 he became a land agent, being given a licence from the appropriate authority for that purpose. Assisted by the use of this licence, the bankrupt, in 1971, became involved with a company, Maelor Jones Pty. Limited, a real estate company established in South Australia.

The bankrupt denies the substance of what the Official Receiver's report alleged viz. that he acquired control of the shares of this company in 1971. He claimed that 4799 shares were acquired by his parents and one was held in his own name as trustee for the five trusts of his children of which later mention is made. After that time several more companies were incorporated, the bankrupt becoming a director and shareholder and trading in the land speculation and real estate field.

On 16 February 1973, the estate of his former wife was sequestrated. Their marriage was dissolved on 30 October 1978. Property disputes between them have been resolved by deed. To this I refer later.

The bankrupt gave evidence of various convictions he had suffered. On 23 November 1967 he pleaded guilty to a charge brought pursuant to the Unauthorised Documents Act 1916 (South Australia). This arose out of using a document coloured blue which he had designed that "at 20 paces had the form of a summons". It was used to recover a large amount owing but comprised of many small debts. He agreed it was designed to instil some disquiet and fear into the person who received it. For this offence he was fined $50.00.

On 25 February 1974 he was convicted of an offence under the Secret Commissions Prohibition Act 1920 (South Australia) s.7; though it may be the convictions were referable to the aiding and abetting s.10 of that Act. He was advised that by reason of this conviction he was disqualified from being a director of a company. He resigned directorships on 20 November 1974. It may be more correct to say that by reason of that conviction he was prohibited without the leave of the Court from being a director or promoter or from taking part directly or indirectly in the management of a company. See Companies Act 1962-1974 (South Australia) s.122.

In 1975 he contracted to purchase a shopping centre at Banksia Park from the Petitioning Creditor. He said in evidence before me that the contract, whilst in his own name, stated it was for and on behalf of a company to be formed and that the company was formed and signed a transfer and was totally ready to settle on the first day of settlement. But he refused to settle for reasons not necessary to consider here. A dispute arose as to whether the bankrupt should have settled or was entitled to decline to settle that transaction on the particular day. He took action in the Supreme Court claiming (inter alia) a declaration that the contract between the parties dated 24 September 1975 was still valid and of full effect and lodged a Caveat on the title of the property. The action was heard by Walters J. The bankrupt lost this action. The Caveat was removed by order of the Court and he was ordered to pay the costs of the then vendor who became the Petitioning Creditor. An appeal brought by the bankrupt against that decision to the Full Court of the Supreme Court of South Australia was, on 27 January 1978, dismissed. Bankrupt did not pay the costs as ordered. He also gave evidence to the effect that he sought and was granted leave to appeal to the Privy Council against this decision. The order of events in this regard is referred to in the judgment of Sangster J. upon the application for sequestration of his estate to which I will refer later. However, the leave granted is noted in that judgment as including the condition that he should prepare the record and transcript of proceedings and lodge the same with the proper officer of Her Majesty in Council within three calendar months. He told me that the record and transcript have not been so lodged. It was in respect of the unpaid costs of the case in the Supreme Court referred to above that a sequestration order was sought in a Petition presented by the Petitioning Creditor, Emmanouil Giameos. The hearing of the Creditor's Petition was first apparently to be by Judge Rogerson. The bankrupt objected to him presiding whereupon his Honour withdrew. The hearing was undertaken by Sangster J. though bankrupt's counsel unsuccessfully sought to have him disqualify himself. The bankrupt had filed a Notice of Opposition. The proceedings lasted four days and were the occasion of submissions on various technicalities as appears from the Reasons for Judgment delivered on 14 September 1979 by Sangster J. There was also a denial by the bankrupt of the service on him of the Bankruptcy Notice. His Honour rejected the evidence of bankrupt and others on this point and accepted the evidence of others that the service was effected. In his Reasons mentioned earlier and referring to a so called Medical Certificate produced to seek an adjournment on the bankrupt's behalf, he said -

"Van Reesema gave his evidence fluently, convincingly and with an obvious capacity to marshall facts and recognise the significance of questions. Unfortunately from the point of view of credibility his actions speak more loudly than his words. He clearly masterminded Dr. Sumner's "medical certificate" (exhibit C1) as a mere device in aid of an undeserved adjournment the three affidavits (his own, Dr. Sumner's and Coombe's) aimed at refuting Frayne's claim to having served documents. He is obviously prepared to resort to any procedures which the law permits and for the purposes of which the truth can be stretched or altered to suit his own ends, which ends currently appear to be directed at delaying rather than determining issues, real or pretended."

Sangster J. found that the Petitioning Creditor was entitled to the Sequestration Order and costs but granted a stay of execution of his orders for 21 days awaiting the outcome of bankrupt's then pending application to the Full Court of the Supreme Court of South Australia for a further stay of proceedings. The decision of Sangster J. is reported in (1979) 27 ALR 509.

In November 1975 bankrupt became interested in the purchase of a city building viz. Alliance House in Grenfell Street, Adelaide, for $300,000. He said he was advised there would be available by Australian Fixed Trusts Limited a loan for $1,000,000. A company was formed, Alliance House Pty. Ltd., to effect the purchase and take the transfer of the property. When the time came to settle the transaction the bankrupt claimed the loan was not forthcoming. Settlement was delayed several times; and finally he was told only $650,000 was available and on less favourable terms than anticipated. He declined to take up the offer of the loan, so became unable to settle the purchase. This is but one of many involvements by the bankrupt in corporate activity but shows the magnitude of a project in which he has interested himself. It gives some indication of what might be the nature of his activities in the future if granted a discharge from bankruptcy. And it is but one instance of a company with whose formation he has been concerned.

Referring it seems to the conviction under the Secret Commissions Prohibition Act 1920 (earlier mentioned) he said in evidence that in 1975 "we applied for leave to the Supreme Court to be a director"; the matter was heard in March or April 1975 and Zelling J. refused the application. Though he had resigned his directorships he maintained an "interest" in companies. As a result of the direct or indirect involvement of the bankrupt in the management of these companies, he was, by summons issued on 15 March 1978. Charged with two offences against the Companies Act supra. On 14 January 1980 he was found guilty of the two offences and in respect of activities with the companies, Maelor Jones Pty. Ltd. and Armor Coatings (Marketing) Pty. Ltd. It appears from an extract from the judgment of Carter S.S.M. that his participation in the affairs of the companies the subject of the charges was considerable. By letter dated 15 January 1980 addressed to his Solicitor, he asked that if he were found guilty of relevant conduct, which he denied, that the Court take into consideration all of his possible offences by way of the same conduct, attitude and actions from the period February 1974 to 14 January 1980. On 29 January 1980 he was sentenced to three months' imprisonment on each of the two charges.

Against this sentence the bankrupt appealed to the Supreme Court. On 11 June 1980 Mohr J. dismissed the appeal. His Honour in the reasons for his judgment referred to the "main ground" of appeal being a denial by the bankrupt that his counsel had instructions to request the court when sentencing him to take into account the commission of other offences, i.e. as opposed to the possible commission of other offences. Referring to the evidence of bankrupt and the person who appeared for him, Mohr J. said that he could not accept their protestations of lack of memory and communication concerning the matter. Later he said that the bankrupt's whole attitude had quite clearly been one of contempt for the law; that the penalty was well merited. In his affidavit dated 5 July 1982 in the proceedings before me the bankrupt said -

"As to the order and judgment of Judge Mohr part of which is recited on pages 10 and 11 of the report I say that Mohr J. ought to have disqualified himself because of his prejudice and that my appeal to the High Court in respect of that is still on foot."

The accusation of "prejudice" has not been elaborated. Bankrupt lodged a further appeal, this time to the Full Court of the Supreme Court of South Australia. It was dismissed though it does not appear precisely on what ground.

From this decision I understand the bankrupt to say he has appealed to the High Court but despite the lapse of time that appeal has not yet been heard.

On 1 October 1979 the bankrupt filed with this Court a Notice of Appeal against the Sequestration Order on various grounds including that the case involved a constitutional issue. After a hearing on 11 December 1979 the appeal was, on 20 December 1979, dismissed for want of prosecution. See 27 ALR at p.525. The Court said, inter alia, at p.533, that there had been inexcusable delay on the part of the appellant (bankrupt), breach by him of his undertaking to the court and of the orders of the court; and that it was not satisfied that there was any reasonably arguable case for the appellant on the appeal; and delay would increase the prejudice to the respondent and any other creditors.

Bankrupt has had considerable involvement with other companies which he listed for the Court (Ex.A) of which he has in the past been a director. The shareholders of these are his parents, brother and an associate, Mr. Coombe. The principal one of these is Je Maintiendrai Pty. Ltd. One of its assets is a shopping centre or what is described as Toorak Village. Another is land at Morphett Vale. Bankrupt's evidence is that his own involvement as a director and as a shareholder (though not holding beneficially) ceased on 20 November 1974 and 20 January 1978 respectively.

The bankrupt has achieved an enviable life style in that claiming to have no assets he has been able since 1963 to live successively in two houses owned by companies. Presently, and since 1966, he lives at 1 College Street, College Park, on a property said to be owned by Armor Coatings (Australasia) Pty. Limited and, said by his witness Mr. Coombe, to be valued at well over $250,000; and described by his former wife as a "mansion with a tennis court standing in one acre of ground". For this property rental of $3,000 a year is payable to the company; but because of moneys which may be due by the company to the bankrupt he does not have to produce any cash. The house contains art treasures and antiques and furniture which he thinks are worth in excess of $300,000. Further, he has the use of a Volvo motor car, all expenses for which are paid by Je Maintiendrai Pty. Ltd. his five children, the youngest of whom he has not had to support since 9 September 1981 when his contributions for her upkeep were some $15.00 per week, all have the benefit of Trusts in their favour. The effect of the bankrupt's evidence was that the assets in each Trust are of equal value. One of his children estimated these in the case of her Trust to be $400,000. On that assumption the assets in the Trusts would total $2,000,000. His evidence is to the effect that the finance for the acquisition of property held by these Trusts was provided by his parents who lived in The Hague. The Bankrupt expressed the opinion that the assets were not worth that much, but would total between $1,000,000 and $2,000,000. In his affidavit dated 24 August 1982 filed in the Family Court, copy of which was tendered by him and received in evidence before me (Ex.J), para.4(c), he said the maintenance of the children and their financial security are adequately provided for by the Trusts and holdings specifically created for this purpose. In the Family Court there was a settlement of, inter alia, a property claim brought by his wife. Property was made available not by the bankrupt but by companies of the Van Reesema group referred to earlier. He has the convenience of a loan account which is expressed in the accounts of one or more of the Van Reesema group of companies as a debt for some $14,600 - the precise sum he did not know. He said of this account -

". . . . any advance made to me by any company that was a loan and not income was charged against or set off against the loan account with Maelor Jones Investments (Noarlunga). As Mr. Pearce mentioned some time earlier in this hearing, Noarlunga was the company used by the group as a finance arm and all of the other companies, including myself, my parents and my brother have a loan account with Noarlunga either in credit or in debit."

According to a schedule of the Van Reesema group of companies submitted by the bankrupt, in this company, incorporated in 1973, there are three shares issued, held by Henri Siewertsz Van Reesema, Mr. Coombe (who was a witness for him and is a long time associate) and the company, Je Maintiendrai Pty. Ltd. The shares in this last company incorporated in 1963 are shown as held by the five Trusts, one for each of his children, totalling 2200 class "C" shares, and his parents 9000 preference, 2400 class "E" and 2 class "A" shares.

The bankrupt impresses as being an intelligent, educated and plausible man. He has operated in this country as a night club proprietor, as a builder, a successful salesman and a licensed valuer. He has studied law at Leiden University. Yet with these advantages, the bankrupt has made no contribution to the payment of debts in his estate. The bankrupt in his submissions pointed out that no debt of any proven creditor had been admitted. The Official Receiver's answer to this was to refer to a policy directive. I would have preferred that in this application the Court had had the benefit of an explicit decision by the Official Receiver as to debts, yet I can understand a disinclination to incur more costs when, though debts have been proven, no money is available for distribution. Some short reference may be made to amounts owing. The Giameos debt, as I have said, is for costs. In respect of the debt to the Commissioner for Taxation, the Official Receiver's report refers to an assessment having been "raised" and, in the bankrupt's affidavit of 5 July 1982, he refers to it as "tax and penalties assessed on receipts which do not constitute income." I would infer that s.177 of the Income Tax Assessment Act 1936 has either been or could be invoked. According to the bankrupt's evidence, some proceeding to question that the tax was payable had been attempted but proper procedural steps may not have been taken. The bankrupt's oral evidence before this court confirms, if it were necessary to say so, that he had, in receiving the settlement of his litigation with Encyclopaedia Brittanica, incurred a tax liability. See also Income Tax Assessment Act 1936, s.208. I do not accept his version of what happened in his discussion with an officer on the staff of the Commissioner for Taxation. The debt incurred in relation to the ski hire was the subject of a judgment, even if signed after sequestration. The debt to Pembroke School, was not disputed in his Statement of Affairs, though now disputed. He said in the copy affidavit referred to above used in the Family Court proceedings that ". . . I am paying off Pembroke School fees of previous years." This is inconsistent with some of his viva voce evidence. In his letter to the Official Receiver's office dated 30 January 1982, para. 2, the bankrupt wrote -

"Pembroke School: $5597.58.
This is a total of school fees in respect of my three children. My son was improperly expelled from the school for smoking, whilst the others of the same group of smokers were not expelled. The Headmaster resigned the following year because of risking unpopularity with parents, increasing resistence to his peculiar manner of running the school, and my son, having been the best potential student of my 5 children has been seriously handicapped and prejudiced by the schools actions. I may add that I was not consulted at all whilst the boy was officially under my care and control pursuant to Family Court arrangements. I have a claim against the school that far exceeds the sum outstanding for school fees. The claim ought to be rejected."

The bankrupt's statement in his written submissions (MFI 4) that this was stated in his Statement of Affairs to be one of "Disputed Claims" is clearly incorrect. Part of his oral evidence did, however, agree that the debt was a "possibility". The bankrupt's evidence and explanations as to his liabilities, reflect on his credibility rather than assisting one to doubt that he does owe the amounts proven.

Despite losing the Giameos litigation, an appeal against that decision and there being made on the judgment for costs then awarded against him the Sequestration Order, an appeal against which was dismissed, as I have mentioned earlier, the bankrupt still treats his debt for costs as "disputed". The litigation in the Supreme Court he has been able to sustain so far without providing any finance, his own costs having been paid by the company formed to acquire the Banksia shopping centre, and the Giameos costs so far remaining unpaid.

In his commercial dealings bankrupt has entered into guarantees. These are referred to in his Statement of Affairs and in the Official Receiver's report. In his affidavit sworn 5 July 1982, he swore -

". . . . I say that at the time of entering into the guarantees there was no reasonable or probable ground of expectation by me or the lender that my guarantee would ever need to be called upon or was intended to be called up."

Some illumination of how the bankrupt has behaved in the past as to payment of debts may be found from copies of affidavits provided by his wife (who was his witness in his case before me) in the Family Court proceedings. She said in her affidavit dated 20 October 1978 -

"My husband has always been in trouble with bad debts. Summonses were coming regularly to be served at our home. These debts and the resulting actions which arose out of the debts caused me considerable worry and anxiety because most of the time my husband was away from home when the documents were served. I had strict instructions from my husband that I

was not allowed to accept any document even a registered letter.
. . . . .
On the 1st of January 1977 I left the respondent and moved out of the matrimonial home. At the time my husband was spending approximately sixty to seventy percent of his time interstate. The main reason for my leaving was the fact that he had now become a professional litigant and because I was constantly being harrassed by people coming to the home to serve documents relating to court proceedings. . . .
. . . . .
My husband has often told me that it is difficult for him to get solicitors to act for him. On one occasion he told me that somebody had referred to him as a professional litigant. He seemed quite amused by this phrase and in fact took it as quite an honour. I remember a person who was employed by my husband specifically to keep records in respect of his court matters. He had an office in Flinders Street in the Maelor-Jones Building. A list of Court cases was kept on the wall and at any one time there could be in excess of thirty matters pending in various courts."

I am satisfied the bankrupt, if disposed to do so, could have, in these last

three years, earnt money and contributed money towards payment of his debts. After sequestration of his estate in September 1979, on 16 October 1979, he was able to make an overseas trip to United States of America and Europe. His expenses were paid and, so he claims, moneys lent to him by his brother for use on the trip. He has, with the assistance of a tertiary education allowance, been able to spend two years taking a University course with subjects having no relation to the field in which he might earn income. The bankrupt composed for his wife an affidavit for use in these proceedings. In it she expressed opinions she was not qualified nor able otherwise to express. His preparation of his wife's affidavit read before me indicates a readiness to manipulate (perhaps "mastermind" in the sense used by Sangster J.) others to his own advantage.

The Official Receiver stated in his Report as to s.150(6) of the Bankruptcy Act 1966 that he had no reason to believe that the bankrupt has committed any act which constitutes an offence under that Act; but makes other submissions therein which it is not necessary to detail. The Notice of Objection filed by or on behalf of the Official Receiver on 20 November 1981 and amended against objection in these proceedings, states the following ground:-

"That the bankrupt is able, or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate."

This objection has been established by the evidence.

Authorities which offer guidance on this application are: Re Haines (1937) 10 A.B.C. 83; Re David Howard Prince; Ex parte the Bankrupt (1961) 19 A.B.C. 39; Re Forbes (1959) 20 A.B.C. 8; Re John Maxwell Gray (1960) 19 A.B.C. 29; Re Mallan (1975) 25 F.L.R. 20; Re Reilly; Ex parte The Debotr [1979] FCA 2; (1979) 36 F.L.R. 268. They indicate that in an application for discharge a Court is not concerned only with the interests of the bankrupt but also of his creditors and matters of commercial morality; and the conduct of the bankrupt relevant to his bankruptcy. In considering an application for discharge it is necessary to bear in mind what might be pursuits and behaviour of the bankrupt if discharge were granted. On this subject, I find assistance from his previous activities and convictions and the expressions (which coincide with my own views) of Sangster J. and Mohr J. quoted above. The material in his wife's affidavit already mentioned corroborates my own view. I find the bankrupt's viva voce and affidavit evidence, not all of which I have referred to, in relation to various debts and to his guarantees to be unsatisfactory; though it does appear that liability on some guarantees may no longer remain. I am satisfied he is one who is ready to continue to avoid his liabilities by unacceptable denials and tactics designed to thwart recovery; that he has and will resort to procedures which in a commercial setting will seek to frustrate those to whom he has obligations, put off creditors, and generally to carry on as a "professional litigant". Yet he is anxious to resume his commercial activities in a setting away from Adelaide where his present tendencies are not known. In addition to my view, earlier expressed, that the ground of objection has been established, I am satisfied, on the whole of the evidence and having regard to the authorities mentioned, that the application for discharge ought not be granted.

I order that:

1. (i) Time for filing the Official Receiver's report be abridged so that the filing of it on 25 June 1982 is to be treated as being sufficient compliance with the Act and Rules.

(ii) The delivery of a copy of it to the applicant on 1 July 1982 is a sufficient compliance with the Act and Rules.

2. The Official Receiver be relieved of the consequences of:-

(a) having failed to include in the Official Receiver's Report the bankrupt's address and occupation;

(b) the incorrect spelling of the name of the bankrupt;

(c) the failure to send the Notice of Objection to Yatala Caol;

(d) the failure, if any, to post a copy of the Notice of Objection to the Inspector General or Trustee.

None of above orders would cause or have caused any injustice substantial or otherwise to the applicant.

I refuse to make an order of discharge.

Each side is to pay his own costs.