Patel v Ruhe

Federal Court of Australia|2016-05-13|Before: Hill JJ, Buchanan J

The application under s 179 of the Bankruptcy Act 1966 (Cth) for an inquiry be dismissed.
The applicant pay the respondents' costs, as taxed if not agreed.
The matter be listed for directions on 3 June 2016 at 9.30 am. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The applicant (Dr Patel) is a bankrupt. 2 This judgment considers an application under s 179 of the Bankruptcy Act 1966 (Cth) ("the Act") that an inquiry be ordered into the conduct of the respondents, who are the trustees of the bankrupt estate of the applicant. The question of whether an inquiry should be ordered is being considered as a separate question, which is a conventional approach to the issue and one I directed in pre-trial hearings. 3 Dr Patel was made bankrupt on his own petition on 14 May 2014. Mr Schon Condon agreed to act as trustee. Dr Patel had a good relationship with Mr Condon but Dr Patel's major creditors were dissatisfied with Mr Condon's administration of Dr Patel's bankrupt estate. At a meeting of creditors on 1 December 2014, Mr Condon was removed as trustee and replaced by the respondents. 4 That day, the respondents revoked Mr Condon's permission for Dr Patel to travel overseas on the following day, causing the loss (Dr Patel claims) of over $8,000 in prepaid amounts and considerable personal inconvenience. Thus began a history of conflict between Dr Patel and the respondents. 5 For reasons I will explain, in my view the trustees' conduct in revoking Dr Patel's approval to travel at the last moment was high-handed and unwarranted. The position is not improved by the failure of the trustees, in the present proceedings, to candidly admit an error of judgment in that respect. That lack of insight and candour has caused me to consider carefully the allegations about the subsequent conduct of the trustees, of whom it may certainly be said that the drain of their fees on the bankrupt estate is much more than Mr Condon's was, or would have been. 6 Despite those reservations, I am not able to conclude that the administration of the estate by the respondents has been unreasonable, that it is likely that it will be or that there are otherwise sufficient grounds to order an inquiry into the conduct of the respondents. 7 A significant factor in this assessment has been that Dr Patel appears intent on not co-operating with his trustees or providing them with timely or comprehensive information. That is a stand he maintained with the assistance of his initial solicitors. 8 Compliance with a proper request of a trustee in bankruptcy is not optional. Administration of a bankrupt estate is not a form of forensic contest. Administration of the estate of a bankrupt is, moreover, a serious business with considerable public policy implications, not to mention the interests of creditors, as well as the bankrupt. 9 I am not satisfied that Dr Patel has co-operated with his trustees as he should. His co-operation should be full and unreserved. I do not think it has been. 10 I am not satisfied that grounds for an inquiry have been established.

Background matters 11 Dr Patel has lived in Australia for over 30 years, since 1984. He is a plastic and reconstructive surgeon. At the time of his bankruptcy, his practice was located in the Australian Capital Territory. 12 As I mentioned earlier, Dr Patel was made bankrupt on his own petition on 14 May 2014, and Mr Condon was appointed the trustee of his bankrupt estate. Dr Patel's evidence was that he was introduced to Mr Condon by Mr Bakous Makari, Dr Patel's accountant. Mr Condon made a report to creditors on 14 August 2014 in which, based on the statement of affairs completed by Dr Patel, Mr Condon reported that Dr Patel's liabilities exceeded his assets by $642,617. 13 Section 55 of the Act requires a bankrupt to file a statement of affairs with a debtor's petition for bankruptcy. Section 6A(2) and (3) provide: 6A Statement of affairs for purposes other than Part XI … (2) A reference in a provision of this Act referred to in subsection (1) to a statement of affairs is a reference to a statement that: (a) is in an approved form; and (b) includes a statement identifying any creditor who is a related entity of the debtor or bankrupt; and (c) contains a declaration that, so far as the debtor or bankrupt is aware, the particulars set out in the statement are correct. (3) If the trustee has reasonable grounds to suspect that: (a) any particulars set out in a statement of affairs that was filed by a person are false or misleading in a material respect; or (b) any material particulars have been omitted from that statement; the trustee may, by written notice given to the person, require the person, within a specified period of not less than 14 days, to provide such information or to produce such books as are specified in the notice for the purpose of enabling the trustee to decide whether the particulars set out in the statement are correct. 14 Section 77(1) of the Act provides: 77 Duties of bankrupt as to discovery etc. of property (1) A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause: (a) forthwith after becoming a bankrupt, give to the trustee: (i) all books (including books of an associated entity of the bankrupt) that are in the possession of the bankrupt and relate to any of his or her examinable affairs; and (ii) any passport or document issued for the purposes of travel held by the bankrupt; and (b) attend the trustee whenever the trustee reasonably requires; and (ba) give such information about any of the bankrupt's conduct and examinable affairs as the trustee requires; and (bb) as soon as practicable after becoming a bankrupt, advise the trustee of any material change that occurred between the time the bankrupt lodged his or her statement of affairs and the time the bankrupt became a bankrupt; and (bc) if a material change occurred later, advise the trustee of that change as soon as practicable after the change occurs; and (c) attend a meeting of creditors whenever the trustee requires; and (d) at each meeting of creditors at which the bankrupt is present, give such information about any of the bankrupt's conduct and examinable affairs as the meeting requires; and (e) execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and (f) disclose to the trustee, as soon as practicable, property that is acquired by him or her, or devolves on him or her, before his or her discharge, being property divisible amongst his or her creditors; and (g) aid to the utmost of his or her power in the administration of his or her estate. 15 The duty of co-operation and assistance stated by s 77 of the Act is a fundamental one. It does not accommodate obstruction of a trustee or a refusal or failure to respond to proper requests for information or assistance. 16 In Mr Condon's report on 14 August 2014, he referred to the following matters: F. STATEMENT OF AFFAIRS 1. Assets … c) Real Estate Property i. The Bankrupt disclosed that he does not currently own any Real Estate Property. ii. Land and Property Information searches have been conducted in the name of the Bankrupt, to identify current or previous ownership of real property. Search results have confirmed that the Bankrupt has not owned any real property, currently or previously. iii. The Property where the Bankrupt currently resides is in the name of his wife and has always been as such. I have been advised by the Bankrupt that he has never funded or serviced any mortgage on this Property. I note the Bankrupt's spouse purchased the property in 2010 and my investigations are continuing into the potential 50% interest of the Bankrupt Estate in the property. iv. I will report to Creditors on this aspect in my future correspondence. v. I also note that the Solicitors of the Purchasers have raised their concerns in relation to the possible ownership of overseas assets in the name of the Bankrupt. In this regard, Creditors are referred to Section H (2) of this Report for further details. … H. INVESTIGATIONS … 2. Non-Disclosed Assets a) I have investigated the existence of any undisclosed Assets available for the benefit of Creditors. This area of investigation also extends to Assets held by related Parties to which The Bankrupt may have an equitable interest. b) In this regard, I have conducted various independent registry searches/requests to identify any Assets not disclosed to me. c) To date, the results of my investigations have not identified any Assets undisclosed to me by the Bankrupt. d) Notwithstanding the above, I advise I have been contacted by one of the Creditors in relation to his concerns regarding the existence of some overseas assets owned by the Bankrupt. The Creditor also suspects that the Bankrupt earns an income overseas. I am yet to complete my investigations into these aspects. It is my intention to issue a formal notice to the Bankrupt pursuant to Section 77 of the Act requesting for information on this aspect. e) Should Creditors have any information in respect of any assets or income undisclosed by the Bankrupt, I request they send written advice to my office at their earliest convenience. f) I will report to Creditors on this aspect in my future correspondence. … 4. Preference Payments i. Preference payments are payments or transfers of assets made by the Bankrupt to a Creditor within six (6) months before the commencement of the Bankruptcy. To be voidable, it must have been entered into when the Bankrupt was insolvent, and the payment results in the recipient of the transfer gaining an advantage over other Creditors. ii. I advise I have received from the Bankrupt, the CBA and NAB bank statements for the twelve (12) month period prior to the date of the bankruptcy however, I am yet to finalise my investigations into possible preference. iii. I will report to Creditors on this aspect in my future correspondence. 17 Those entries are relevant to some of the matters ventilated in the present proceedings. 18 It appears that within the period approximately 18 months before his bankruptcy, Dr Patel sent funds overseas on a number of occasions, most of it within the period commencing six months before his bankruptcy. The bulk of the money transferred was to Dr Patel's brother, Miten Patel (a little over $45,500). The significance, if any, of all those transactions was not explored in the proceedings, but it is certainly a matter about which a trustee may make enquiries. 19 On 28 August 2014, Mr Condon wrote to Dr Patel seeking further information arising from a suggestion by a creditor, Medici Clinics (Aust) Pty Ltd and Medici Clinics Pty Ltd (together "Medici") that he had business interests in Nairobi, and earned income there. Dr Patel's relationship with Medici and its directors is a very poor one. Dr Patel responded robustly to Mr Condon, denying any such interests or income. 20 On 9 September 2014, Dr Patel's brother, Miten Patel, sent an email to Mr Condon saying: I can confirm as a Director of Avenue Group (Kenya), that Chandrashekhar Patel has no financial interest in the our healthcare business and derives no income from it as he ceased to be a shareholder in 1991. The business was inherited by the four brothers in 1986 when our father, Dr Bhailalbhai Patel, passed away. In 1991, Chandrashekhar and Raj Patel, my third brother, agreed to sell their share of the business to Nilesh Patel, my second brother, and myself. Part of the sale proceeds were paid immediately and remainder agreed to be paid over a number of months. Collapse of the bank where the repayments were being deposited led to a dispute between the brothers over responsibility for loss of these funds. This was eventually resolved and formal share transfer documentation completed in 2003. Chandrashekhar and Raj ceased to have any financial interest in the business as of 1991 and derived no income from the business between 1991 to 2003 or thereafter. 21 Mr Condon appears to have been satisfied with this information. However, Medici was dissatisfied with Mr Condon's administration of the bankrupt estate and approached the respondents to consent to act as replacement trustees. Another major creditor, Bendigo and Adelaide Bank Limited ("Bendigo Bank"), made a similar request. Mr Condon was asked to convene a meeting of creditors for this purpose and, in due course, he did so. 22 On 21 November 2014, Mr Condon despatched a circular to creditors. It was brief. Mr Condon reported: D. INVESTIGATIONS Since the issue of my previous Report and in relation to the concerns raised by one of the Creditors regarding possible overseas income and assets in the name of the Bankrupt, I advise the following:- 1. I have conducted my investigations and in the process have received documentation relating to the Bankrupt's prior involvement with a clinic in Nairobi; 2. The Bankrupt sold his share in the said Clinic to a related party in or around the year 1987; 3. Based on the available documents, it appears that the transfer may have occurred at a fair value and the funds received by the Bankrupt; 4. Considering the time period that has passed since the sale of the Bankrupt's share in the clinic, I do not intend to conduct any further investigations into this aspect. Furthermore, I have received confirmation from the Bankrupt that he does not earn any overseas income and have no evidence to contradict this statement. Should Creditors have any information in respect of any other assets or believe the disclosure made by the Bankrupt regarding overseas income is incorrect, I request they send written advice to my office at their earliest convenience along with any documentation that would assist me with my investigations further into this aspect. Should I not receive any advice from the Creditors, my investigations in this respect will be deemed complete. E. OTHER ADMINISTRATIVE MATTERS The Bankrupt provided my office with a written request to travel overseas between 2 December 2014 and 10 January 2015. I note the following in this respect:- 1. The Bankrupt advised that the purpose of the trip was for business and personal reasons. I note the trip is funded by the Bankrupt himself. Given his overall level of disclosed income, this is reasonable. 2. Based on the disclosure made and supporting documents provided by the Bankrupt, the Bankrupt has been granted travel approval with an undertaking to return his passports back to this office within seven (7) days from the date of his return to Australia. 3. At this point in time, I have accepted the information provided by the Bankrupt as correct. Notwithstanding this, should at any point in time I become aware of any false declaration made by the Bankrupt, I, as the Trustee of his Bankrupt Estate, am able to lodge an objection to his discharge from bankruptcy on the grounds of providing false or misleading information to me. 4. I have confirmed with the Bankruptcy Regulation Unit of the Australian Financial Security Authority that the Bankrupt's attendance is not required at the forthcoming Meeting of Creditors. 23 Mr Condon also advised that a meeting of creditors had been convened for 1 December 2014 to consider whether he should be replaced as trustee of the bankrupt estate. 24 On 1 December 2014, the meeting took place. Mr Condon, as trustee, determined voting rights arising from submitted proofs of debt. Medici's proof of debt was nominally $5.7 million. It was admitted to vote for $1.00. Bendigo Bank was admitted to vote for the full amount of its proofs of debt ($1,250,675.97 and $51,259.18). More than 75% of the value of votes approved Mr Condon's replacement (in effect, Bendigo Bank, whose motion was seconded by Medici). 25 Ms Ruhe has deposed to the fact that it was six weeks before the new trustees were provided with documents in Mr Condon's possession. In the meantime, a dispute had developed between the new trustees and Mr Condon about the withdrawal of funds by him from the bankrupt estate, which was in due course formally reported to the Australian Financial Security Authority. That matter is not before me and I will say no more about it, except to say that I accept Ms Ruhe's evidence (which was not challenged and on which she was not cross-examined) that there was a period of time in which she had little of the material made available to Mr Condon from Dr Patel. 26 It is convenient, before I deal with some particular issues, to refer to a report made to creditors by Mr Sellers on 2 April 2015. This report made the following comments: 2. FINANCIAL POSITION … 2.1 Cash at bank … My preliminary investigations of above accounts suggest that the bankrupt may hold other accounts with financial institutions specialising in international money transfers. I am yet to receive those account statements to ascertain if there are any funds available for creditors. … 2.2 Cash on hand My preliminary investigations have revealed that the bankrupt withdrew large sums of cash (in excess of $80k) 12 months prior to his bankruptcy. I am yet to finalise my investigations into the nature and purpose of those cash withdrawals and will update creditors in due course. … 2.5 Art, jewellery & collectables The bankrupt disclosed items in this class of assets valued at $650. I have requested the bankrupt on two separate occasions to allow my representatives access to his residence to conduct a listing of personal assets. My requests to date have been ignored. I have sighted numerous artwork and collectables on published photos of the Deakin property. Whilst I am not in position ascertain ownership at this stage, this information warrants further investigations given the bankrupt's high earning capacity. 2.6 Medical practice & tools of trade The bankrupt disclosed tools of trade valued at $2,000. I have requested the bankrupt on two separate occasions to allow my representatives access to his business to conduct a listing of assets. My requests to date have been ignored. … 2.10 Superannuation … Pursuant to Sections 116(2)(d) and 128A of the Act, a bankrupt's interest in a superannuation fund is non-divisible property of his bankrupt estate provided that the superannuation fund is a regulated fund and superannuation contributions have not been made to defeat creditors. My investigations have revealed that on 29 April 2014, the bankrupt rolled over his superannuation funds totalling $1,065,628 from a self-managed superannuation fund, Ravbol Pty Ltd ATF Patel Family Superannuation Fund (PFSF), to Australian Super. My review of the bankrupt's member's statements with PFSF for the reporting period from 1 July 2010 to 30 June 2013 revealed that:  Majority of funds paid into PFSF were concessional contributions and reasonable given bankrupt's level of income.  Non-concessional contributions of $8,236 do not appear excessive given the age and earning capacity of the bankrupt and therefore are unlikely to be categorised as transfers to defeat creditors.  No funds were taken by the bankrupt from PFSF. … 2.13 Overseas assets and income Certain creditors have brought to my attention that the bankrupt may have offshore assets and/or income. My preliminary investigations indicate that the bankrupt may have transferred cash overseas in 12 months prior to his bankruptcy. I am yet to ascertain the purpose of these transactions and will update creditors in due course. 2.14 Equitable interest in properties owned by related parties Sale of 9 Coronation Drive, Broulee, NSW (Broulee property) My investigations revealed that the bankrupt was the legal owner of the Broulee property in his capacity as the trustee for CST. The Broulee property was sold and settled in June 2014, shortly after the commencement of his bankruptcy. The former trustee had determined that the bankrupt had no interest in the Broulee property. I have requested information from CST to ascertain whether the bankrupt may have had any equitable interest in the Broulee property and put him on notice that I shall seek compensation if investigations reveal same. Sale of 67 Stonehaven Crescent, Deakin, ACT (Deakin property) In his SOA, the bankrupt disclosed that he was living in the Deakin property. I understand that the Deakin property, which is registered in the name of bankrupt's spouse, has recently been sold for $1.71m. I have requested information from the bankrupt and his spouse to ascertain whether the bankrupt may have any equitable interest in the Deakin property. I have put the bankrupt's spouse on notice that I shall seek compensation from her if investigations reveal same. … (Emphasis in original.) 27 I have set those matters out because there are specific allegations in the present proceedings that the respondents have acted unreasonably in making enquiries about the Deakin property, the Broulee property, artwork, the superannuation fund, overseas assets and work tools.

The grounds of complaint 28 The grounds of complaint pressed at the hearing were expressed as follows: (a) That the trustees refused the applicant permission to travel overseas on 2 December 2014. (b) That the trustees acted unreasonably in making allegations that the bankrupt was behind in his income contributions and used this as a basis for not allowing him to travel on 2 December 2014 when in fact the bankrupt was ahead in meeting his obligations to the bankrupt estate. (c) That the trustees have acted unreasonably in the investigation of the property located at 67 Stonehaven Crescent, Deakin ACT alleged to be an asset in part of the bankrupt when such enquiries were made by the former trustee Mr Schon Gregory Condon, who was replaced by the current trustees, on 1 December 2014 and in consequence have caused the bankrupt estate unnecessary expense by way of proceedings commenced in the Federal Circuit Court. (d) That the trustees acted unreasonably in the calculation of income contribution for the period 14 May 2015 to 13 May 2016 by not allowing work-related business deductions for the purposes of the Contribution Assessment Period 2 (CAP 2). (e) That the trustees have acted unreasonably in the investigation of overseas assets alleged to be those of the bankrupt when such enquiries were made by the former trustee Mr Schon Gregory Condon, who was replaced by the current trustees, on 1 December 2014 and in consequence have caused the bankrupt estate unnecessary expense. (f) That the trustees have acted unreasonably in the investigation of the alleged artwork, and the sale of the Broulee property and investigation of the bankrupt's business when such enquiries were made by the former trustee Mr Schon Gregory Condon, who was replaced by the current trustees, on 1 December 2014 and in consequence have caused the bankrupt estate unnecessary expense. (g) That the trustees have acted unreasonably in making further enquiry into the bankrupt's superannuation fund in circumstances where the former trustee performed such investigations and in consequence of this caused unnecessary expense to the bankrupt estate. (h) As a large creditor Medici is influencing the discretion of the trustee about various investigations to the exclusion of consideration of the interests of smaller creditors.

The evidence 29 At the hearing I admitted into evidence, without objection, most of the contents of the following affidavits:

For the applicant: (1) Affidavit of Chandrashekar Patel filed on 21 August 2015; (2) Affidavit of Chandrashekar Patel filed on 12 November 2015 (not paragraphs 3-14); (3) Affidavit of Chandrashekar Patel filed on 17 November 2015; (4) Affidavit of Chandrashekar Patel filed on 18 December 2015; (5) Affidavit of Lynette Margaret Patel filed on 25 September 2015 (not paragraphs 28-37); (6) Affidavit of Lynette Margaret Patel filed on 17 November 2015; (7) Affidavit of Bakous Makari filed on 14 October 2015; (8) Affidavit of Bakous Makari filed on 4 February 2016; (9) Affidavit of Brian Raymond Silvia filed on 18 December 2015; (10) Affidavit of David Raffman filed on 19 January 2016; (11) Affidavit of Douglas Paul Schirripa filed on 4 February 2016; (12) Affidavit of Robert Neil Brook filed on 4 February 2016; (13) Affidavit of Peter Gregory Vickers filed on 4 February 2016; (14) Affidavit of Aaron John Coonan filed on 4 February 2016; (15) Affidavit of Ramesh Patel filed on 4 February 2016;

For the respondents: (16) Affidavit of Alice Fay Ruhe filed on 2 October 2015; (17) Affidavit of Alice Fay Ruhe filed on 10 December 2015 (not paragraphs 4-15); (18) Affidavit of Alice Fay Ruhe filed on 2 February 2016 (not paragraphs 5-11); (19) Affidavit of Alice Fay Ruhe filed on 17 February 2016. 30 Those affidavits annexed numerous documents. Most of them require no attention and were not referred to in submissions. 31 In addition, I received as an exhibit an expert report by Mr Brian Raymond Silvia, Liquidator, who was asked to, and did, express opinions about various judgments made by the trustees. Mr Silvia is a Chartered Accountant and is a member of Chartered Accountants Australia and New Zealand, formerly the Institute of Chartered Accountants in Australia, a specialist insolvency practitioner, a Registered Trustee in Bankruptcy, an Official Liquidator and a Principal of BRI Ferrier. 32 I found Mr Silvia's opinions interesting and informative, but ultimately inconclusive, both as to the matters about which he spoke and the issues which I need to decide.

The tests to be applied 33 The tests to be applied are well established, and were not in dispute. The duties of a trustee of a bankrupt estate are set out in s 19 of the Act. Although a trustee may not disregard the legitimate interests of a bankrupt, a primary duty of a trustee is to protect the interests of creditors and recover for the estate such property as may reasonably be recovered in a commercially sound way. Judgments are required. The judgments are ones for the trustee to make and the Court will normally not interfere unless it is clear that some maladministration of the estate has occurred or is likely (see e.g. Re Gault; Gault v Law (1981) 57 FLR 165 at 173; Macchia v Nilant (2001) 110 FCR 101 at [50]; Trkulja v Morton [2005] FCA 659 at [4]; Maxwell-Smith v Donnelly [2006] FCAFC 150 at [53]; Moore v Macks [2007] FCA 10 at [30]; Boensch v Pascoe [2007] FCA 1977 at [10]-[15]; Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 at [11]-[20]). 34 With those considerations in mind I may address the particular grounds of complaint in a little more detail.

(a) Revoking permission to travel 35 Mr Condon referred, in his circular of 21 November 2014, to the fact that he had given Dr Patel permission to travel. 36 Section 272 of the Act provides: 272 Leaving Australia with intent to defeat creditors etc. (1) A person who: (a) within 6 months before the presentation of the petition on or by virtue of which he or she became a bankrupt, left Australia, or did an act preparatory to leaving Australia, with intent to defeat or delay his or her creditors; or (b) after the presentation of the petition on or by virtue of which he or she became a bankrupt and before he or she became bankrupt, left Australia, or did an act preparatory to leaving Australia, with intent to defeat or delay his or her creditors; or (c) after he or she has become a bankrupt and before he or she is discharged from the bankruptcy, without the consent in writing of the trustee of his or her estate, leaves Australia, or does an act preparatory to leaving Australia; is guilty of an offence and is punishable, on conviction, if the offence relates to the doing of a thing specified in paragraph (a) or (b), by imprisonment for a period not exceeding 5 years or, in any other case, by imprisonment for a period not exceeding 3 years. (2) The trustee may impose written conditions on a consent given for the purposes of paragraph (1)(c). If the bankrupt is liable to make a contribution to the trustee under section 139P or 139Q, the conditions may include conditions regarding the payment of that contribution. (3) If the bankrupt contravenes any condition imposed by the trustee, the bankrupt is guilty of an offence and is punishable, on conviction, by imprisonment for a period not exceeding 1 year. 37 Obtaining permission to travel is therefore an important element of control of a bankrupt during the administration of a bankrupt estate. It is no small matter. Strictly speaking, preparatory steps should not be taken before seeking permission but in many cases insistence on that formality may come to be seen as unnecessary, or even oppressive. 38 In fact, Dr Patel made arrangements for his trip on 2 December 2014 before he formally sought Mr Condon's permission but nothing turned on that once permission was given. Any risk of loss if permission was refused was clearly his to bear. 39 Mr Condon's permission was given on 14 November 2014. It was subject to the condition that: … a contribution amount of $6,413.14 is required from you for your Income Contribution Liability to the Estate before your travel date on 2 December 2014, which is to be deposited into the following account: … 40 Documents attached to one of Ms Ruhe's affidavits show that the amount required was paid on 21 November 2014, followed by a further $10,000 on 27 November 2014. It is now accepted that Dr Patel was in fact ahead in his contributions when he was due to leave the country on 2 December 2014. 41 Furthermore, Mr Condon had reported to creditors on 14 August 2014 and 21 November 2014 that he had received timely payments from Dr Patel. 42 Nevertheless, when the new trustees were appointed on 1 December 2014, they notified the Australian Federal Police that Dr Patel should not be allowed to leave the country. Dr Patel was informed by telephone and email. In the email he was told: The creditors have resolved today to replace Schon Condon and appoint Alice Fay Ruhe and Kenneth Sellers as joint & several trustees of your bankrupt estate. We have notified the Australian Federal Police that the new trustees have not granted you with an authority to travel notwithstanding that the previous trustee may have allowed same. We are yet to receive information from the previous trustee with respect to your financial affairs. I will need to review your financial position before the trustees can make a decision with respect to your request to travel overseas. As you can appreciate, we were appointed today and it will take time before we obtain information from yourself and the previous trustee. (Emphasis in original.) 43 In her affidavit, Ms Ruhe offered a number of explanations for this act of restraint, none of which I accept as justification for what happened. 44 First, in her first affidavit (filed on 2 October 2015), Ms Ruhe sought to characterise the restraint on Dr Patel's travel as the "December Travel Request" by saying as follows: 32. Given our appointment as trustees on 1 December 2014, I was required to review, assess and investigate the Bankrupt's financial position and examinable affairs prior to making a decision as to whether we would allow the Bankrupt to travel as proposed between 2 December 2014 to 10 January 2015 (December Travel Request). (Emphasis in original.) 45 Thereafter, the term "December Travel Request" was used to refer to the new trustees' decision to withdraw Mr Condon's permission for Dr Patel to leave Australia. I regard this as a most unacceptable drafting technique. It was used to give colour to the proposition that the unilateral action of the trustees in preventing Dr Patel from leaving the country (through the restraint to be imposed by the Australian Federal Police) was a response to his request. It was not. 46 The next explanation (in the same affidavit) was: 36. The reason the Bankrupt was restricted from travelling pursuant to the December Travel Request was due to us being unaware of the Bankrupt's financial and examinable affairs. 47 A later and fuller explanation (in her affidavit filed on 2 February 2016) proceeded as follows: the new trustees had insufficient time to assess what was required from Dr Patel before he travelled; he seemed to be behind in his contributions; Medici had expressed concerns about Dr Patel's overseas connections; he had practised in both India and Nairobi; there was a family-owned hospital in Nairobi; Medici was concerned that he was a flight risk; because the trustees had been appointed only one day before they had "some concerns"; the trustees had insufficient time to "assess the impact of the Bankrupt's travel on the administration of the Bankrupt Estate"; based on discussions with Medici and Bendigo Bank there were concerns about Mr Condon's administration of the bankrupt estate so that it was required that "we undertake our own enquiries in making a decision regarding the Bankrupt's request for travel". 48 Dr Patel had been given permission to travel by the trustee of his bankrupt estate. He had met the condition imposed by the trustee that his contributions be up-to-date. I can see no foundation for any suggestion that appointment of new trustees vitiated or revoked the prior approval. 49 Counsel for the respondents referred me to Deputy Commissioner of Taxation v Andrew (1984) 52 ALR 701, where Beaumont J said that where there were two trustees, each trustee must consent to departure. That decision concerned Mr Peter Clyne. A Full Court had earlier held that, at law, two trustees had been (separately) appointed (see Clyne v Deputy Commissioner of Taxation (1984) 52 ALR 657). One (Mr Andrew) had consented in Clyne's own petition; the other (Mr O'Brien) had consented in a creditor's petition. The Full Court said (at 664): In this matter we must conclude that by force of law each of the two trustees is a trustee of the estate of the bankrupt. This is, in the circumstances, the necessary consequence of the trial judge's making, correctly in our opinion, a sequestration order on the creditor's petition. This consequence was not contemplated by the legislation which intends initially at least only one trustee. Considerable confusion and practical difficulties will obviously result if each attempts to administer the estate. This problem can be resolved either by the creditors or the court on application by one of the trustees or the controlling trustee under s 50. … [This conclusion was reversed by the High Court (see Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589), but not until after Beaumont J's judgment]. 50 The position considered by Beaumont J has no parallel with the present case. No doubt the new trustees had a power to revoke the permission to travel given by Mr Condon but it was a power to be exercised reasonably, and not on the basis of mere unsupported suspicion, much less unsupported allegation. Despite any concerns that might have been expressed about Mr Condon's administration there is no evidence before me to suggest that his judgment with respect to Dr Patel's likely return was seriously open to question. The new trustees have subsequently given Dr Patel permission to travel on more than one occasion. 51 I do not accept any suggestion that there were grounds to think that Dr Patel was behind in his contributions. The suggestion is based on the following statement by Mr Condon in his circular on 21 November 2014: C. INCOME CONTRIBUTIONS As advised in my previous Report, the Bankrupt was assessed as liable to pay a sum of $114,850 in Income Contributions for the first year of his bankruptcy on estimate basis. To date, I have received timely payments from the Bankrupt totalling to a sum of $79,724, thus leaving a balance of $35,126 at the time of writing this Circular. 52 Quite obviously, Dr Patel was paying by instalments and doing so in a timely fashion. 53 Another justification offered, in the same affidavit, was that Dr Patel had breached s 272(1)(c) of the Act because he made his travel plans before he sought Mr Condon's permission. I regard that as nothing more than a weak attempt to retrospectively justify the trustees' conduct, but it does not do so. Such a consideration was irrelevant to the conduct of the new trustees at 1 December 2014. I doubt they even knew about it at that date. Its inclusion in the affidavit was argumentative and an attempt at prejudice and it should not have happened. 54 One last matter deserves mention. In the same affidavit, Ms Ruhe said: 38. … it was open to the Bankrupt to contact AFSA's Regulation and Enforcement department, the Commonwealth Ombudsman or apply to the Court under section 178 of the Act for a review of our decision. To my knowledge, the Bankrupt did not take any of these steps in relation to his travel request. 55 If I had read that paragraph as a suggestion that it was a practical course open to Dr Patel to approach the Court for urgent injunctive relief on the evening of Monday, 1 December 2014, and that justified the trustees' conduct, I would have taken a very serious view of the trustees' apparent lack of appreciation of the standards of reasonableness which should govern the exercise of their discretion. However, no doubt Ms Ruhe was suggesting some later review of the position by the Court, or the other agencies she nominated. That would be cold comfort to Dr Patel as he contemplated his frustrated travel plans on 2 December 2014. In any event, the matter is receiving attention now. 56 The plain fact of the matter is that the trustees unilaterally revoked Dr Patel's permission to travel on what appear to me to be unsatisfactory grounds. The action was high-handed and heavy-handed, depending as it did on the threat of intervention from the Australian Federal Police. 57 All that said, however, this unfortunate beginning (which can have done nothing for Dr Patel's enthusiasm to co-operate with the new trustees) has only limited relevance to the matters which will, finally, determine the present application. 58 The present application must be determined by reference to the ongoing administration of the bankrupt estate, and not just by reference to its unfortunate debut.

(b) Allegations of non-payment 59 Ms Ruhe's misplaced suspicion that Dr Patel was behind in his contributions continued, unallayed, for some time, until the trustees conceded their error. I have already expressed my view about the initial explanation for the suspicion and dismissed it as unjustified. 60 However, this issue was relatively quickly resolved and it can have no great bearing on the ultimate issue of whether an inquiry should be ordered.

(c) The Deakin property 61 The factual summary below is based on skimpy material and may prove to be unreliable, but it is all that the Court has been provided with. The trustees no doubt laboured under the same difficulty. 62 Around 20 May 1997, Oslead Pty Ltd (then corporate trustee for The Patel Family Trust) purchased the Deakin property. On 15 July 1999, Boli Pty Ltd was appointed replacement trustee and on 30 September 1999 the Deakin property was transferred to it. The beneficiaries of the trust include Dr and Mrs Patel and other family members. 63 Much later, apparently on 14 May 2015, Mrs Patel sold the Deakin property to a third party for $1,710,000 (of which Mrs Patel was to retain $454,343.02 after discharge of debt and sale expenses). The method by which the property came to be registered in Mrs Patel's name (on the assumption that it was by 14 May 2015) was not established by the evidence, except that counsel for Dr Patel withdrew a suggestion made at one point that she had purchased it. 64 In 2005, Mrs Patel as borrower (with Dr Patel as guarantor) sought a loan of $1,330,500 said to be made up of a purchase price for an investment property of $810,000, discharge of a present debt on an owner occupied property of $280,000, an increase to the existing home loan by $200,500 (therefore to $480,500) and stamp duty of $40,000 (total $1,330,500). 65 On the loan application documents, Mrs Patel and Dr Patel both indicated that they were the owner of their current residence (the Deakin property). 66 On the evidence of Mr Makari, and Dr and Mrs Patel, in 2008 Dr and Mrs Patel signed application forms for another loan, leaving Mr Makari to fill in the details. Indeed, Dr and Mrs Patel both stated that their applications were blank when they signed them. Mr Makari, therefore, clearly acted as their agent. Those applications show the Deakin property as an asset of each of them, to its full estimated value of $1.2 million. 67 In his bankruptcy, Dr Patel has denied any legal or beneficial ownership of the Deakin property and both he and Mrs Patel have, through their solicitors up to the time of the hearing, resisted attempts by the trustees to obtain further information or documents concerning it or the question of Dr Patel's possible interest in it. 68 This was a question left unresolved when Mr Condon was replaced. The new trustees were not prepared to accept Dr Patel's denials of any equitable interest in the Deakin property without an opportunity to examine that question more for themselves. I can well understand why. 69 The trustees commenced proceedings in the Federal Circuit Court of Australia ("FCCA") to seek declarations to the effect that Dr Patel is a co-owner of the property. That does not appear to me to be a fanciful suggestion based on the information which the trustees had when they were faced with resistance to disclosure of the relevant material. No doubt the trustees also hoped further clarity would emerge when documents were produced under compulsion in those proceedings. 70 In the present proceedings, I have been asked to find that the conduct of the trustees in commencing the proceedings in the FCCA was unreasonable. I reject any suggestion to that effect. 71 The proceedings in the FCCA appear to have settled at mediation on 11 April 2016, as reflected in orders made by consent by Judge Hartnett on that day which included payment by Mrs Patel to the respondents of $182,500. 72 Furthermore, and in any event, by his lack of co-operation (whether through his then solicitors or otherwise), Dr Patel forfeited any right to a conclusion in his favour in respect of this issue. So far as I can see on the material before me, Dr Patel was in flagrant breach of his own obligations. Either material which once existed was destroyed for one reason or another, or it was being deliberately withheld. If destroyed without breach of the law, the trustees were obliged to do the best they could to resolve the matter and seeking a judicial determination seems to me to have been a logical step. If material was deliberately withheld, the course chosen by the trustees was also warranted, whatever further steps may have been open to them to address that breach of the Act. 73 I see no basis to conclude that there was any maladministration of Dr Patel's bankrupt estate in this respect. Rather, the trustees had a clear and obvious obligation to consider such a step in the interests of creditors.

(d) Calculation of income contributions for CAP 2 74 Mr Silvia explained, in his expert report: 8 INCOME CONTRIBUTIONS Bankrupts are liable to contribute to their estates from their post-bankruptcy income. Liability is assessed for each year beginning on the date of, or anniversary of, adjudication, referred to as a Contribution Assessment Period or "CAP". Trustees are required to make both a prospective assessment of income at the beginning of a CAP and a retrospective assessment after the CAP. If the bankrupt's income for a CAP exceeds an Income Threshold provided for in the Bankruptcy Act (which is indexed quarterly, and can be adjusted for dependents and hardship), the bankrupt is required to contribute half of his or her earnings, net of income taxes, to the Trustee on account of the estate. A bankrupt is required to make payments with respect to the prospective assessment. If the bankrupt's circumstances change, the bankrupt may seek reassessment of his or her liability to pay contribution. If, on the retrospective assessment, the bankrupt has over-paid contribution, the extent of overpayment is credited against future liabilities to pay contribution, although no refund is payable if the over-payment is in the final CAP for the bankruptcy or if the bankrupt has no further liability to make an income contribution. If the bankrupt has under-paid, the bankrupt is liable to make an additional payment of contribution in the following CAP. Liability for contribution survives a bankrupt's discharge. … 75 CAP 1 payments ($114,849.50 for 14 May 2014 to 13 May 2015) were assessed by Mr Condon and the assessment had not (at the time of hearing) been disturbed by the respondents. That did not necessarily represent a final position. At the time of hearing the present application, Dr Patel had yet to provide his income tax return to 30 June 2015, saying the return had not been completed and filed. 76 The respondents had, to the date of hearing, assessed CAP 2 payments (14 May 2015 to 13 May 2016) officially at $116,234.70. In that assessment, the respondents had accepted an estimate by Dr Patel that his income from private practice would be $104,000, but they rejected a claimed estimate of work-related expenses of exactly the same figure ($104,000), which implied that Dr Patel would work in that period effectively for no net income. The trustees initially accepted that he would receive a "housing benefit" from his wife of $2,600 (later revised to $1,200). 77 The assessment of the housing benefit, it was agreed, might be put aside for present purposes. The real question is what approach should reasonably be taken to the claims for projected work expenses of $104,000. 78 I will put aside the coincidence of identical figures, although that may well have excited doubt about the reliability of the projected expenses. However, Dr Patel simply cannot expect acceptance of his estimate if he does not support it by adequate documentation accompanied by rational explanation. I can see no evidence of either. Mr Silvia offered no independent basis for the calculation either. 79 In my view, the trustees were not obliged to guess at a respectable and reliable figure. They did not have to take a stab in the dark. Dr Patel had a clear choice: he could co-operate with, and assist, his trustees to make a responsible estimate for the purpose of their own calculations; or, deprive them of the information and assistance necessary to do so. If he chose the latter course then, apart from any breach of the Act which he may have been committing, he may scarcely accuse the respondents of being unreasonable. 80 I reject Dr Patel's arguments to that effect. 81 One further matter might also be mentioned. As the trustees pointed out, the Act gives an explicit right to approach the Inspector-General in Bankruptcy to review the trustees' assessment of required calculations (s 139ZA). Dr Patel did not use this more direct and intended procedure. Normally, that would be the place to start. So to say does not deny the existence of any power in the present proceedings, but I also see no reason to order an inquiry into this aspect of the respondents' conduct in the present case when Dr Patel did not use the means of review clearly given to him under the Act.

(e) Overseas assets 82 The complaint about any investigation of overseas assets or interests is based upon the simple assertion that Dr Patel has no such interests. This line of enquiry appears to have been prompted by suspicion held by Medici. I accept that the trustees have an independent obligation to come to their own view about whether it is reasonable and commercially useful to pursue those enquiries, but they are not bound to desist simply because Dr Patel insists that there is nothing to discover. 83 In the present proceedings an affidavit from an advocate in Kenya (who is also an English solicitor) was read which deposed to searches which did not record that Dr Patel held a registered interest in the property where the Nairobi practice is located. The affidavit said further (on the basis of the deponent's own knowledge as representative of The Avenue Group Limited) that Dr Patel did not hold, and had never held, shares in that company (or any of its associated companies) since 2004 or any legal interest in such shares. 84 It seems that this information had not been provided to the trustees except as part of these proceedings. No doubt the trustees will now take it into account but it does not seem to me to advance Dr Patel's present case very far. 85 Mr Condon concluded his investigation into this issue on the basis of his own investigations and statements by Dr Patel and his brother. The respondents were not bound to leave matters there. The material now before the Court does not dispose of, or even address, the question of whether Dr Patel may have beneficial interests overseas, except for the assertions made by his brother, to whom he sent funds shortly before declaring himself bankrupt. 86 I am not satisfied on the evidence before me that the respondents have made any error of judgment or administration in pursuing their enquiries further. 87 I find the suggestion by Dr Patel that he has an interest in stopping those enquiries because they are a drain on his bankrupt estate to be hollow. Any diminution in the value of that estate seems unlikely to have a direct consequence for him after a distribution is made to creditors. At least that is so if a true picture was shown by the statement of affairs which he filed.

(f) Art work / Broulee property 88 It seems to me that the conclusion is inescapable that Dr Patel, with the assistance of his then solicitors, frustrated the respondents from making any timely and independent valuation of the furnishings in the Deakin property at the time it was offered for sale, and his "tools of trade" which he valued at only $2,000. 89 In the 2005 loan application (in which both Mrs Patel as applicant and Dr Patel as guarantor indicated they were owners of the Deakin property), household items and paintings were assigned a value of $200,000. It seems clear to me from the terms of the statement of assets and liabilities in that loan application (including the reference to two motor vehicles and the fact that certain outgoings were "paid by business") that the statement was a joint one. 90 This was not a matter which it was unreasonable of the trustees to pursue. 91 The status of enquiries about the proceeds of sale from disposition of the Broulee property by Dr Patel, in his capacity as trustee for the Canberra Service Trust ("CST") was the subject of the new trustees' report to creditors by the respondents on 2 April 2015. 92 The respondents were entitled to seek further information about this matter, and to pursue it further if they judged it desirable to do so. Dr Patel has affirmed in the present proceedings that Mrs Patel is the "sole beneficiary of CST". That statement is not a reliable summary of the effect of the trust deed which names Mrs Patel as the primary beneficiary but which extends the beneficiary class to include Dr Patel, as well as family members and a wide array of others, including "any person (excluding the Settlor) whose name appears on the Australian Commonwealth Electoral Roll as at [11 July 1999]", any relative by blood, marriage or adoption of such a person born before the Vesting Day (well into the future), any company in which any possible beneficiary holds shares and many others. 93 The respondents are not bound by Dr Patel's assertions about this matter, nor by the fact that Mr Condon did not pursue it.

(g) Superannuation 94 Little was said about this at the hearing. Mr Condon pointed out to creditors in his report on 14 August 2014 that, generally, funds held in a regulated superannuation fund are a "non-divisible" asset, but he had made some enquiries nevertheless in the interests of prudence. 95 I set out earlier what the respondents said in their report to creditors on 2 April 2015. There was no reason why the respondents should not satisfy themselves and report to creditors in their own right. They had replaced Mr Condon as trustee due to concerns about his possible lack of diligence. As I said earlier, it is hard to see why Dr Patel has a direct interest in the additional cost to his bankrupt estate of those further investigations.

(h) Undue influence 96 In Fuller, A Bankrupt v Wily (unreported, 28 June 1996), Sheppard, Spender and Hill JJ, sitting on an appeal from Jenkinson J, said: Subject to some consequential matters, the concluding paragraph of his Honour's judgment was as follows: "I do not find anything in the evidence to suggest conduct on the part of the trustee that would warrant consideration of removing him. It is not uncommon for a trustee to have some association with a major creditor in a bankruptcy. It is not unusual for a trustee to have funds provided by one of the creditors in bankruptcy. It does not seem to me that on this evidence any perception could reasonably have arisen that there was anything improper in the relationship between this trustee and Piper Alderman or with the creditors who, the evidence shows, have been providing funds. The application must be dismissed." … It should be made clear at this point that a trustee in bankruptcy, particularly a private trustee, usually has no access to funds for the purpose of prosecuting proceedings or conducting an examination of the bankrupt except those which are brought to the credit of the estate as assets of the bankrupt or are provided by or on behalf of creditors or other persons who may consider that they have a sufficient interest in the outcome of the administration of the bankruptcy to warrant expenditure on legal proceedings. If funding for these purposes is not available from these sources, trustees are faced with the dilemma of either having to fund the costs of the examination or other proceedings personally or not to undertake them. And, if the only source of funds is the assets of the bankrupt, the trustee may consider it to be in the best interests of creditors not to risk the assets in litigation but to preserve what is there for the benefit of creditors. These are common problems in the administration of bankrupt estates. They are the matters to which his Honour was referring in the final paragraph of his judgment earlier quoted. It is unusual for a creditor to put a trustee in bankruptcy in funds for any purpose unless the creditor sees benefit itself in the exercise which is being undertaken. That is so, usually, whether the creditor is a private creditor or whether it may be an instrumentality of government such as the Commissioner of Taxation. The reason for this is that creditors, being owed money by a bankrupt, are understandably unwilling to chase a bad debt with further moneys which may or are likely to be lost. There are some circumstances in which the Government may provide funds but this is not a course which happens with any regularity. 97 Those observations from four very experienced Judges are a powerful indication that a trustee is not forbidden or even discouraged from contact and discussion with major creditors in whose interests (in part at least) the administration of the bankrupt estate will proceed. Nor does it represent a conflict of interest if such a creditor puts a trustee in funds, or even if a trustee pursues matters where the likely result will contribute first (or perhaps only) to payment of the trustee's own fees (see Marsden v Screenmasters Australia Pty Ltd, in the matter of Cardinal Group Pty Ltd (in liq) [2015] FCA 1256 at [55] and [59]-[60]). 98 Medici have had no particular influence at creditors' meetings, being admitted to vote by both Mr Condon and the respondents for only $1.00. Ms Ruhe has said that the respondents do not propose to adjudicate on the Medici proofs of debt until the resolution of litigation between Medici and Dr Patel. 99 There is no reason why Medici may not provide information to the respondents which is relevant to the administration of the bankrupt estate. Of course, the respondents must make a responsible effort to establish the true position; they may not act on suspicion or rumour alone. I have been critical of what happened in the very early stage of the administration, apparently as a result of ill-founded innuendo that Dr Patel was a flight risk, but that is not a pattern which appears to me to have been established as one repeated thereafter. 100 It is not irrelevant that the cost of pursuing these additional enquiries, if fruitless, will diminish the share of the bankrupt estate available for creditors. As I have said, if Dr Patel's statement of affairs is reliable it will have no direct impact on him. 101 It goes without saying that pursuit of the enquiries cannot be used as a surrogate means of oppressing Dr Patel to satisfy some ultimate objective of Medici or its directors but there is no evidence before me to suggest any such failing by the trustees, at least after December 2014.

Summary 102 The criticisms I have made of the revocation of Dr Patel's permission to travel on 2 December 2014 need not be repeated again. Those criticisms do not lead to a finding that the respondents may have been derelict in the administration of Dr Patel's bankrupt estate. There has been no other case made out for an inquiry. It would be futile to order one. 103 Indeed, the travel issue aside, I do not see any substance at all in Dr Patel's complaints. So far as I can assess on the evidence before me he has, with the assistance of his then solicitors, embarked on a calculated course of resistance to the requests of the respondents. Any sense of grievance he may feel arising from the humiliation of the procedure now being imposed upon him arises in the first instance from his voluntary declaration of bankruptcy, the legitimate interests of his creditors in recovering what they can and from the operation of the Act. The administration of a bankrupt estate is not a private affair conducted for the convenience of the bankrupt. It is a public undertaking which seeks to balance ultimate release for a bankrupt from the possibly crushing burden of debt, with the protection of creditors from even greater loss than they may inevitably suffer from having the bankrupt's debts extinguished, wholly or partly unsatisfied. 104 Dr Patel has an obligation to co-operate to the best of his ability. His failure, or continued refusal, to do so will no doubt engender suspicion about his real motivation. It may prolong his bankruptcy.

Orders 105 The application for an inquiry will be dismissed. Other orders were sought in the application, including an order under s 178 of the Act that Dr Patel's contributions be reduced. I have not dealt with those additional matters although the proposed orders which depended on an inquiry first being ordered must fall away. 106 It will be necessary to list the matter for directions to ascertain the likely future of the balance of the application.

Costs 107 The trustees argued that Dr Patel should pay the trustees' costs, rather than their only recourse being against the bankrupt estate. The trustees pointed out that recourse against the bankrupt estate was available without a specific order to that effect (see Coshott v Burke [2013] FCA 553 per Allsop CJ at [43]). 108 I accept the trustees' submission that primary responsibility for the trustees' costs should be imposed upon Dr Patel, rather than upon the bankrupt estate where they will be borne effectively by the creditors. I will therefore order that the applicant pay the trustees' costs, as taxed if not agreed. An additional and separate order of indemnity is unnecessary, as the trustees argued. I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.

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