Mulhern, in the matter of Mulhern (Bankrupt) v Pearce

REASONS FOR JUDGMENT 1 Mr Michael Richard Mulhern is a bankrupt. He has filed a substantive application in the Court in which he seeks the annulment of his bankruptcy, pursuant to s 153B of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). Inferentially, from that application, its basis is that he is able to satisfy the Court that the sequestration order in question ought not to have been made. 2 Having regard to his affidavit filed on 13 April 2012, it seems that the foundation for the annulment application is that the statutory conditions set out in s 43 of the Bankruptcy Act were not in fact in existence at the time when the sequestration order was made. More particularly, it seems that the basis of the annulment application is that the condition laid down in s 43(1)(b) of the Bankruptcy Act was not, in any of the permutations specified in that paragraph, met. That paragraph of s 43(1) requires one or the other at least of the residence, dwelling house, carrying on business or membership of a firm with Australia to be present. On the face of Mr Mulhern's affidavit, he deposes to matters which, if accepted, might call into question the existence of such a jurisdictional fact at the time of the act of bankruptcy. 3 It is not today that the annulment application falls for hearing; rather, what is for hearing today is the interim relief which Mr Mulhern seeks in his application. As specified in that application, the interim relief is: The Australian, Irish and USA travel documentation seized on 8 January 2012 be returned at the interim hearing date. 4 Quite properly, Mr Mulhern's trustees in bankruptcy have approached the interim application on the basis that it is premised upon dissatisfaction on his part with a decision made by his trustee on 3 April 2012 not to return to him any of his passports and, more particularly, not to give a related permission for him to depart from Australia. Such a decision of a trustee is reviewable pursuant to s 178 of the Bankruptcy Act. I approach the interim application on the basis that, in substance, it is an application for the review of the trustees' decision. 5 There is a history to this matter in this Court following the making of the sequestration order, so far as Mr Mulhern's present presence in Australia is concerned. That history commences with an order which I made in August last year for the issuing of a warrant pursuant to s 78 of the Bankruptcy Act for Mr Mulhern's arrest: see Pearce (Trustee) v Mulhern (Bankrupt) [2011] FCA 930. A sequel to that was Mr Mulhern's arrest upon his coming to Australia in January 2012. That in turn led to consequential proceedings as a result of that arrest, initially before Buchanan J: see Pearce (Trustee) v Mulhern (Bankrupt) (No 2) [2012] FCA 7; and thereafter before Flick J: see Pearce (Trustee) v Mulhern (Bankrupt) (No 3) [2012] FCA 16. The following month, ie, in February this year, an application of the present kind was heard by Jagot J. Her Honour dismissed that application for reasons which she delivered on 2 February 2012: see Pearce (Trustee) v Mulhern (Bankrupt) (No 4) [2012] FCA 54. 6 As I apprehend it, the position in relation to a bankrupt's freedom of movement from Australia, which undoubtedly touches upon the bankrupt's liberty, is not the same as that which prevails in respect of other jurisdictions concerning a person's liberty. By that, I mean that, so far as bail is concerned and in the absence of particular statutory provision to the contrary, the position is that, even though a bail application has been refused, an alternative to an appeal is to renew that application before another judge of the court, that judge not being bound by the earlier decision to refuse bail but being at liberty if so persuaded to grant bail: see Scrivener v DPP (2001) 125 A Crim R 279. 7 Here, the position is one of a jurisdiction to review a decision of a bankruptcy trustee. Mr Mulhern was entitled, if so advised, to seek to appeal against the judgment given by Jagot J dismissing the application to review the decision of the trustee refusing permission to leave Australia and to give him his passports for that purpose. It would not, in my opinion, have been competent for him to approach another judge to see if that judge would, notwithstanding the order of refusal, nonetheless be persuaded that it was just and equitable to make an order permitting him to leave Australia. A corollary of that, in my opinion, is that, were there to be no material change in circumstances but nonetheless a later decision of a trustee doing nothing more than noting an absence of material change and refusing the request for permission to leave Australia, a question could well arise as to whether that a later review application was an abuse of process or frivolous. 8 That is not this case and, again quite properly, the trustees have not approached Mr Mulhern's present application on that basis. The decision of 3 April 2012 by the trustees was made against the facts as they then stood which were not in all material respects the same as they stood in January and early February 2012. That is not to say that anterior facts are irrelevant, only that the position is not a static one. The question which falls for determination today is whether I am persuaded that it is just and equitable in terms of s 178(1) to make an order which, in effect, reverses the trustees' decision. 9 The onus lies on Mr Mulhern to persuade me that it is just and equitable to make such an order. There was a question as to the relevance of his affidavit. Its relevance, in my opinion, goes to show that there is a basis for his challenging the sequestration order. It is not irrelevant, in my opinion, to take that into account. The affidavit also discloses, though, that he is, at least prior to his arrest in January, someone who resided in the United States. For quite how long beforehand and whether or not any of the criteria in s 43 of the Bankruptcy Act were met at the time of the act of bankruptcy is another question entirely and one not for resolution today. As it was before Jagot J, the fact that Mr Mulhern is not presently ordinarily resident in Australia is relevant. 10 Also apparent, indeed common ground, is that Mr Mulhern's wife resides in New York in the United States along with their children. Yet further, it is common ground Mr Mulhern's father has passed away while he has been in Australia. The absence of permission to travel overseas has prevented his returning to Ireland for a funeral observance and to give comfort to his now widowed mother. These were facts present before Jagot J. Her Honour regarded them as relevant and so do I. They raise all too humane considerations as to why it is perfectly understandable that Mr Mulhern would wish to be able to travel from Australia. 11 It must be said that Mr Mulhern made reference in the course of submissions, but not evidence, to other factors, perhaps business related factors. It is important though that the case be decided on evidence, not statements untested from the bar table. 12 So far as this type of application is concerned the principles are as stated by Deane J in Re Tyndall (1977) 30 FLR 6. That case is something of a root authority in relation to matters of this kind. Suffice it to say, restriction on travel under the Bankruptcy Act are to be approached on the basis that the restriction and a refusal of travel is warranted only for the purpose of ensuring due administration of the Bankruptcy Act and, more particularly, the due administration of a bankrupt estate under that Act. A travel restriction flowing from bankruptcy is not justifiable on the basis that it is some penalty imposed on the bankrupt. 13 The foundation for Mr Mulhern's bankruptcy is referable to a judgment of the Supreme Court of Queensland, Dodrill v The Irish Restaurant & Bar Co Pty Ltd & Ors [2009] QSC 317. Reference to that case is presently relevant only in the sense that paragraph 5 of the reasons of Daubney J a letter from Mr Mulhern who was the third respondent in those proceedings is quoted. At that stage he asserted that he resided in New York and, due to personal family business and financial circumstances, was unable to travel to Australia for the trial of that matter which was set to commence in March 2009. 14 The trustees have set out in a letter of 3 April 2012 their reasons for refusing the requests made of them by Mr Mulhern by his then solicitors in March for permission to depart Australia and related return of his passports. Set out in that letter 10 considerations which trustees took into account: 1. You have not offered to provide any surety to support your assertion that you will return to Australia. 2. Your evidence in the public examination held on 17 January 2012 was that your entire family is resident in New York. 3. You have no identifiable assets in Australia. 4. I calculate that your personal debts in Australia (including the debt which you owe to the Bank of Queensland debt) to be in excess of $60,000,000. 5. You made admissions during your public examinations that you had left Australia on two (2) occasions in February and August 2011 without seeking my consent because you felt that you had no obligation to do so. 6. You have not offered any undertaking to the Court (or to me) to return to Australia, should I grant your request. It appears to me based on the letter from your solicitors, Hynes Lawyers, dated 2 March 2012, that it is in fact your intention to not return to Australia. 7. You initially failed to attend public examinations under Section 81 of the Bankruptcy Act 1966 (Cth) ("the Act") despite being personally served with a Summons to do so on or about 19 July 2011. 8. You have breached the undertakings which you gave to the Federal Court of Australia on 16 January 2012 casting serious doubt on the worth of any undertaking given by you to return to Australia and your ultimate trustworthiness. 9. I have been advised by Lynch Morgan Lawyers, the solicitors for the petitioning creditor, Mitch Dodrill, that you informed Mr Dodrill in a telephone conversation which took place shortly before 2 March 2012, that if you left Australia you would never return. Lynch Morgan Lawyers have also advised that Mr Dodrill is prepared to swear an affidavit to this conversation. 10. You have generally failed to comply with your duties as a bankrupt throughout the period of your bankruptcy, including, but not limited to: a) You have failed to properly answer questions put to you by my staff and I regarding your examinable affairs. b) You have failed to provide me with information and documentation, when requested to do so in writing, regarding assets which you own, including, but not limited to: An apartment which you own with your wife at Suite 1203, 175 Huguenof Street, New York, USA, which appears to be valued at over $US1,000,000. Properties which you jointly own with your wife at 10 and 12 Brittany Lane, New Rochelle, New York, USA which appear to have a combined value of over $US7,500,000. Your interest in Celtic Pacific General Building Contractors, LLC ("Celtic"), which appears to own a property at 8 Brittany Lane, New Rochelle, New York, USA. c) You have failed to provide me with information and documentation, when requested to do so, relating to other matters which are relevant to the administration of your bankruptcy. d) You have failed to pay required amounts of income contributions, as assessed by me. e) You have failed to arrange to pay funds which you held in your bank account at the date of your bankruptcy to me. f) You failed to voluntarily deliver your passports to me, despite being notified by me in writing that you were required to do so. g) You have failed to attend public examinations under Section 81 of the Act, despite being personally served with a Summons to do so. h) You have left Australian on two (2) occasions during the period of your bankruptcy without seeing my written consent. i) On 28 February 2012, you failed to accept two (2) letters which Michael Dullaway of my office and I attempted to personally hand to you, requiring you to attend a number of outstanding matters relevant to the administration of your bankruptcy. 15 It was on those bases that the trustees concluded: Your consistent failure to comply with your statutory duties as a bankrupt is not only frustrating the administration of your bankrupt estate, but it also leads me to have serious concerns that in the event that I return your passports to you and authorise you to travel overseas, you will not return to Australia should I request that you do so. 16 The evidence led by the trustees today bears out each of the 10 matters to which the trustees refer. In making that observation I should not be taken as agreeing that Mr Mulhern owes the Bank of Queensland a debt, only that the trustees calculation is one made out on the evidence. It was quite apparent in the submissions made to me on behalf of Mr Mulhern that he has an animus, to say the least, in relation to the Bank of Queensland. Whether or not there is substance behind that animus is not for decision today. It is plain that there is a subsisting judgment of an Australian court which grounds the bankruptcy notice; that is the Queensland Supreme Court judgment to which I have referred. That judgment remains in place. 17 It is also apparent that there is another judgment, on this occasion one of this Court, which relates to Mr Mulhern's bankrupt estate. I refer in that regard to Pearce v Mulhern [2010] FCA 446 wherein an adjudication was made as to Mr Mulhern being the registered holder of the issued share capital of each of Mulhern Constructions Pty Ltd and Dicey's Gladstone Pty Ltd with similar orders being made as to his holding half of the issued shares in Celtic Pacific Properties Pty Ltd. One of the facts apparent on the evidence before me is that Mr Mulhern has, it seems, transferred after bankruptcy shares in an overseas company to his wife. 18 Mr Mulhern seemed to be labouring under the understanding that, because he asserted he had no assets in Australia, there was no point in the bankruptcy and moreover no point in his being required to remain in Australia or at least to have the consent to leave refused. That, with respect, is a misapprehension of the consequence of bankruptcy. It is apparent from the evidence led on behalf of his trustees that there are quite real questions in relation to his holding of assets, including moveable assets offshore which remain unanswered. While that remains the case, in terms of an absence of answering of questions concerning what comprises the property of the bankrupt, it seems to me that it is quite legitimate, in terms of the true focus of why it is that a bankrupt should be declined permission to leave Australia, that Mr Mulhern remain. It is incumbent upon him, and this needs to be repeated, it is incumbent upon him to assist in the administration of his bankrupt estate while he remains a bankrupt. That is so however much he may feel, rightly or wrongly, that that bankruptcy was procured by, at the very least, a misstatement of evidence as to his residency, if not worse than that. While a bankruptcy subsists it is incumbent on a bankrupt to assist a trustee. Further, distasteful though it may be to approach the subject, the trustee is entitled to particulars of Mr Mulhern's late father's will with a view to establishing whether or not there is any interest which has passed to the trustees pursuant to the Bankrupcty Act in terms of after-acquired property. 19 It will be apparent from what I have stated that I am not persuaded that it is just and equitable to make an order today overturning the decision of the trustees and having the effect that Mr Mulhern is granted permission to leave Australia with his passports being returned to him for that purpose. 20 There was a question in earlier proceedings in this bankruptcy as to whether or not Mr Mulhern used the alias Derek O'Malley. That I regard as an open question on the material presently to hand and, in deciding that the application should be dismissed today, I do not base my decision on Mr Mulhern's alleged use of an alias rather there are other aspects in the history of this matter in terms of quitting Australia without permission and other subjects canvassed in the 10 matters taken into account by the trustee, which, in my opinion, provide ample enough basis for not being satisfied that it is just and equitable to set aside the trustees decision. 21 Another factor which I take into account, but which I do not regard as determinative, is that it is possible for the Court to hear the substantive application as early as 23 April 2012, but in any event on 17 May 2012. I well appreciate that Mr Mulhern's remaining in Australia is a source of hardship, both personal and financial, but in the circumstances to hand the administration of the Bankruptcy Act and this bankrupt estate in particular would, in my opinion, be hindered seriously by his absence from Australia. For these reasons the application is dismissed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.