Re Zdenek Weiss v the Official Trustee In Bankcuptcy [1984] FCA 2; 1 FCR 40 Bankruptcy (1 February 1984)

FEDERAL COURT OF AUSTRALIA

Re: ZDENEK WEISS
And: THE OFFICIAL TRUSTEE IN BANKCUPTCY
No. 293 of [1984] FCA 2; 1978
1 FCR 40
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND
THE AUSTRALIAN CAPITAL TERRITORY
Bowen C.J.(1)

CATCHWORDS

Bankruptcy - Trustees - Control over trustee by Court - Refusal by trustee to allow bankrupt to travel overseas - Relevant Considerations.

Bankruptcy - Refusal by trustee to allow bankrupt to travel overseas - Control over trustee by the court - Relevant considerations in exercising court's discretion to allow bankrupt to travel overseas - Bankruptcy Act 1966 (Cth), ss 77(a), 178, 272(c). The bankrupt applied to the official trustee in bankruptcy for permission to travel overseas, which permission was refused. The bankrupt then applied to the court pursuant to s. 178 of the Bankruptcy Act 1966 (Cth).

Held: (1) The bankrupt should be given permission to travel overseas as: (a) the evidence indicated that the bankrupt would return; (b) the bankrupt's absence during the limited period proposed would not significantly interfere with the due administration of the bankrupt's estate.

Re Tyndall [1977] FCA 15; (1977) 30 FLR 6, referred to.

(2) The official trustee acted correctly in refusing permission for the bankrupt to travel overseas having regard to the circumstances before him and in appearing before the court and placing evidence and argument before the court.

HEARING

1983, November 29; December 8, 9; 1984, February 1. 1:2:1984
APPLICATION.

Application by the bankrupt to the court that the official trustee give consent to the bankrupt leaving Australia in compliance with s. 272(c) of the Bankruptcy Act 1966 (Cth).

E. C. C. Lewis, for the applicant.

P. Urquhart, for the official trustee.
Cur. adv. vult.

Solicitors for the applicant: Weiss & Co.

Solicitor for the official receiver: T. A. Sherman, Acting Commonwealth

Crown Solicitor.

J. J. ISLES.

ORDER

1. Zdenek Weiss be given permission to travel overseas returning no later than 7 February 1984.

2. Zdenek Weiss pay to the Official Trustee in Bankruptcy his costs of this application.

Orders accordingly.

DECISION

This is an application by Mr. Zdenek Weiss, a bankrupt, for permission to travel overseas. Originally Mr. Weiss applied to Mr. Bluett, the Official Receiver in Bankruptcy, for this permission but permission was refused. Mr. Bluett has the conduct of the estate of the bankrupt on behalf of the Official Trustee in Bankruptcy. The matter comes before this Court under s.178 of the Bankruptcy Act 1966. In acting under this section the Court has to make its own decision, paying due regard to the decision of the Official Trustee who carries responsibility for the administration of the bankrupt estate. The Court is not confined to interfering with the decision only if it appears that the Official Trustee has acted absurdly, irresponsibly or in bad faith (Re Tyndall [1977] FCA 15; (1977) 30 FLR 6).

2. Mr. Weiss, who is a solicitor, became bankrupt on 28 April 1978 upon his own petition. In a report dated 31 August 1983 the Official Trustee reported that debts of $1,449,689.00 had been proved and assets of $4,647.89 had been realised. Although for some time after he was made bankrupt Mr. Weiss was denied a practising certificate, he is currently the holder of a full practising certificate as a solicitor. Since his bankruptcy Mr. Weiss has returned to Czechoslovakia, where he was born, each year shortly before Christmas and on each occasion he has returned to Australia towards the end of January the following year. This has occurred at Christmas in 1978, 1979, 1980, 1981 and 1982. His mother is 75 years of age and lives in Prague and one reason for his travelling to Czechoslovakia each year is to stay with her for a while. He usually transacts business whilst he is overseas. The proposal which Mr. Weiss put forward on this occasion was that he wished to leave Sydney on 12 December 1983 and to return by the end of January 1984. In the course of the hearing before me reference was made to circumstances which caused him to alter this proposal to amend the time of his return to the first week of February 1984. Mr Weiss gave evidence that he had some business to transact on behalf of various clients in Czechoslovakia, Vienna, Zurich, London and also West Germany. He offered to give further particulars if required. Although he entered the witness box, he was not examined on this aspect of the matter.

3. On 27 September 1983 he wrote to the Official Trustee asking for permission to travel overseas and received a reply from the Official Trustee dated 26 October 1983 refusing permission and stating that information had been received which would indicate that he had assets or a source of income, details of which he had not given to the Official Trustee. It was further stated that his public examination had been relisted for hearing on 8 December 1983 and that the question whether permission to leave Australia would be given was dependent on the outcome of the public examination. The application before me first came on for hearing on 29 November 1983. The application was opposed by the Official Trustee. Evidence was given by him that he had received from the Deputy Commissioner of Taxation information concerning the following matters:

"(a) An amount of $25,000.00 which the bankrupt had
allegedly received during the financial year ending 30
June 1983 as payment for his services to a Mrs. RocheO
(also known as Mrs. LaRoche).

(b) A Rover motor vehicle registered no. GDV-182 which was
then registered in the name of Weiss and Co., the
nominee being the bankrupt.

(c) A home unit at 8/157 Victoria Road, Bellevue Hill, the
registered proprietor of which being Bohumila Weisova
of Czechoslavakia, the mother of the bankrupt, of which
the then official (sic) owner may be the bankrupt.

(d) Alleged loans received by the bankrupt from his mother
in February and November 1982.

(e) The purchase by the bankrupt in October 1982 of a 1978
Mini Moke registered no. JOL-329.

(f) The purchase by the bankrupt of certain furniture in
1982.

(g) An account held by the bankrupt with Diners Club
Limited."

Counsel for the Official Trustee indicated that the Official Trustee wished to investigate these matters at the public examination on 8 December 1983. A further complication was that Mr. Weiss had been charged under s.176A of the Crimes Act 1900 (N.S.W.) with conspiracy to cheat and defraud and the committal proceedings in respect of this charge had been set down to commence on 19 March 1984. It had at one time been suggested that the public examination might have to be stood over until after the committal proceedings had been heard; however, at the hearing before me the attitude of both parties was that the public examination would proceed at least in relation to matters extraneous to the committal proceedings.

4. At the hearing on 29 November 1983 I was not prepared to grant permission to Mr. Weiss to travel overseas without having heard the result of the public examination on 8 December 1983. Accordingly I stood the matter over to 2:15pm on 8 December 1983. When the matter came on for hearing before me on that date the public examination was still in progress so I adjourned the matter to 9 December 1983. When the matter came on on 9 December 1983 I was informed by Counsel for the Official Trustee that the examination had revealed that a home unit at Bellevue Hill had been purchased several years ago in the name of the bankrupt's mother, Mrs. Weissova. The evidence given by the bankrupt was to the effect that none of the consideration in relation to that purchase had been provided by him and that it was acquired in his mother's name having regard to his precarious position. It appeared that the bankrupt's mother did not supply the consideration. It was provided by the bankrupt foregoing fees to which he would become entitled from a client, Mr. Clyne, and by having discharged some of Mr. Clyne's liabilities. The vendor of the home unit was a company of Mr. Clyne. The Trustee took the view that the bankrupt was the beneficial owner of the home unit and that there had been a nondisclosure of that property by the bankrupt, indeed a concealment of his interest in it. If there were such nondisclosure and concealment, they would amount to offences under the Bankruptcy Act. The Trustee wished not only to obtain the beneficial interest in the home unit for the benefit of the creditors, but also to proceed against the bankrupt in relation to the alleged offences.

5. There was also evidence at the examination of a loan of $11,300.00 being obtained by Mr. Weiss from his mother in Vienna in Australian currency and that he brought this to Australia. The Trustee took the view that this was really in the nature of an advancement by the mother to the son, if in fact it was the mother's property. The Trustee wished to investigate this matter further. The third matter investigated concerns some items of Chinese furniture which the bankrupt in the course of the examination had admitted he had acquired after he had become a bankrupt in the amount of approximately $2,500.00. This after acquired property had not been disclosed to the Trustee. The bankrupt in his examination said he did not understand it to be his duty to make such a disclosure. The Trustee wished to pursue this matter further both in relation to the ownership of the property and in relation to the possible offence which had been committed.

6. Evidence had also been given by the bankrupt during the examination that he purchased a Mini Moke motor vehicle for about $2,500.00 and gave that vehicle to his son as an eighteenth birthday present. That transaction had not been disclosed previously to the Trustee and the Trustee wished to move against the son to recover the vehicle. Evidence was also given in relation to a Rover motor vehicle of which at all material times the bankrupt had been the principal driver. It was registered in the name of Weiss & Co. which is the firm name under which the bankrupt practices as a solicitor. Mr. Weiss was shown in the register as the nominee. Another matter which arose during the examination concerned the income which Mr. Weiss derived as a solicitor. It appeared that some part of that income was received by him in the form of cash which was neither recorded in his books of account nor shown in his bank deposit book. His evidence was that each year he informs his accountant for the purpose of preparing income tax returns of the amount of the cash fees which were unrecorded in books and in doing so he relies simply upon his memory. This was a matter which the Trustee wished to take further and that it might be necessary for the accountant to be approached for the purpose of obtaining information from him. Evidence was also given during the examination concerning a number of building society accounts, one of which was in the name of Peter Clyne, but in relation to which Mr. Weiss was one of the authorised signatories. Another building society account was in the name of Mrs. Gorelik and Mr. Weiss was the sole authorised signatory in respect of this account. The Trustee wished to investigate whether Mr. Weiss had an interest in the funds in this account.

7. I am conscious of the fact that the evidence revealed in his public examination suggests that he has committed various offences against the Bankruptcy Act which have characteristics involving nondisclosure and concealment. However, these are matters to be litigated at the proper time. It is a basic principle that a resident of Australia is entitled to expect that he may travel freely notwithstanding the fact that he is a bankrupt provided it will not lead to his staying overseas in order to defeat or delay his creditors and provided it will not interfere with the due administration of his bankrupt estate (see Re Tyndall, supra at p 15). It is to secure the proper administration of bankrupt estates that bankrupts are required by the Bankruptcy Act to give their passports to the Trustee (para. 779(a)) and to obtain the permission of the Trustee before travelling overseas (para. 272(c)). This interference with the travel of bankrupts is not for the purpose of punishing or expressing disapproval of them for offences or alleged offences against the Bankruptcy Act.

8. It is clear that this request for permission to travel overseas is on a different footing from the request for permission on previous occasions. Not only is Mr. Weiss presently the subject of a charge under s.176A of the Crimes Act but may well be the subject of further charges under the Bankruptcy Act. On the other hand Mr. Weiss again went into the witness box and gave evidence of his intention to return to Australia and to face any charges and he repeated his undertaking to the Court to return. He was not cross-examined about this. Mr. Weiss has four children in Australia aged 19, 18, 16 and 14 years and as has been mentioned, has a practice here as a solicitor. The evidence before me indicates that Mr. Weiss will return within the time limited if given permission to travel overseas and will not seek to remain overseas in order to defeat or delay his creditors.

9. However, there remains the question whether the proper administration of the estate will be delayed or interfered with by his absence over Christmas and January. On the assumption that he will return, the administration insofar as it relates to proceedings against him for offences under the Bankruptcy Act will be able to take a normal course. So far as further enquiries into his affairs are concerned, enquiries of his accountant may proceed during his absence although it is true that any further enquiries directed to Mr. Weiss will have to be deferred until his return. It does not appear to me that his absence during the limited period proposed would significantly interfere with the due administration of his bankrupt estate.

10. In the result I have come to the conclusion that I should make an order giving permission to Mr. Weiss to travel overseas returning not later than the first week of Feburary, that is, no later than 7 February 1984.

11. The Official Trustee acted correctly in refusing permission, having regard to the circumstances which were before him at the time. He also acted correctly in appearing before this Court and placing the evidence and arguments before the Court which he did.

12. In the circumstances, I am of opinion that I should make an order for costs against Mr. Weiss. Such an order may not be worth much but Counsel for the Official Trustee has asked for it and I think that the Trustee is entitled to have it.