BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA

Bankruptcy Act - s.129 - contempt of court - standard of proof required.

Bankruptcy Act - s.131 - if money is saved by a bankrupt from post-bankruptcy earnings, a respondent to an application under s.129 must pay over the money to the trustee if he is not entitled to retain it as against the bankrupt or the trustee.

Evidence - question of identification - failure to cross-examine - failure of respondent to give evidence - manner in which evidence is to be assessed in light of such failures.

Solicitors for the Official Trustee: Adams and Gilbertson

Finds that Dr John James Kerrison committed a contempt of this Court.

Orders that the matter be adjourned to a date to be determined for further submissions.

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

The Official Trustee in Bankruptcy, in his capacity as trustee of the bankrupt estate of Mrs Baiba Kerrison, seeks an order that the respondent to these proceedings, John James Kerrison, a retired medical practitioner and the husband of Mrs Kerrison, be found guilty of contempt of Court. The application is based upon the allegation that Dr Kerrison has refused to pay or deliver to the Official Trustee the sum of $9,000. It is alleged that this sum represents money that Dr Kerrison has in his possession or power and that it is money that he is not, by law, entitled to retain as against Mrs Kerrison or the Official Trustee.

2. Mrs Kerrison was declared bankrupt on her own petition on 29 May 1987. At the date of her bankruptcy she was engaged in full-time employment as a registered nurse. She has continued in that employment and, at the time when she gave evidence, she held a responsible position with a well known Nursing Home earning slightly in excess of $500 per week after tax.

3. Dr Kerrison formerly carried on practice as a medical practitioner in a country town in the Riverland district. When he, his wife and their family moved to the city in 1982, he elected to retire and thereafter assumed the role of housekeeper for the family. He was declared bankrupt on 3 October 1988.

4. The $9,000 which gave rise to this application represents the sum of money that was paid to Annesley College on 3 January 1989 as school fees for two daughters of Dr and Mrs Kerrison. Although they are not encompassed in the present application, two amounts of $5,000 and $376 were also paid on 10 and 27 January 1989 to Prince Alfred College for the school fees for one of their sons. It is common ground that Annesley College supplied a cheque for $9,000 to Mrs Kerrison and that Prince Alfred College paid over $5,000 to Mrs Kerrison's trustee in bankruptcy. Central to the determination of this application is the identification of the final recipient and subsequent disposition of the $9,000.

5. On 22 February 1989 Mrs Kerrison filed an application in this Court seeking an order in these terms:-

"That the Official Receiver withdraw his illegitimate

claims for any moneys paid by Baiba Kerrison as schooling

fees."

6. The application was heard before von Doussa J. who, in his judgment delivered on 10 April 1989, said that he was prepared to accept that the orders sought by Mrs Kerrison were "declaratory orders declaring against the title of the trustee to the sums of money prepaid as 1989 school fees". In support of her application Mrs Kerrison had maintained that the sums of $9,000 and $5,000 came from her savings subsequent to her bankruptcy and, hence, did not form part of her property that was divisible amongst her creditors. She repeated these claims when giving evidence in these proceedings. Prima facie, such an assertion, if true, would enable a bankrupt to invoke the provisions of sub-s.131(1) of the Bankruptcy Act 1966 ("the Act"). However the trustee disputed the truth of her assertion.

7. Von Doussa J. summarised the evidence of Mrs Kerrison in support of her application in great detail. As I am only referring to the outcome of those proceedings as part of the background to this present application it is sufficient to say that his Honour concluded that he was "unable to accept" Mrs Kerrison's evidence.

8. The dismissal of Mrs Kerrison's application still left unresolved however, the whereabouts of the $9,000 and the identity of the party who had possession of it or power over it. In the belief that it had come into the possession or power of Dr Kerrison, the Official Trustee instituted these proceedings in Mrs Kerrison's bankruptcy naming him as the respondent. The application relies upon the provisions of sub-s.129(4) of the Act. That sub-section and sub-s.129(5) are in the following terms:-

"129(4). If a person has in his possession or power any

moneys or security that he is not by law entitled to

retain as against the bankrupt or the trustee, he shall

pay or deliver the moneys or security to the trustee.

. . .

129(5). A person who does not pay or deliver to the

trustee any moneys or security that he is required by

subsection (4) or (4A) so to pay or deliver is guilty of

contempt of court."

The prelude to the filing of the application in this matter was a letter dated 11 April 1989 (the day following the publication of the reasons of von Doussa J.) written by the solicitors for the applicant to Dr Kerrison. It said:-

"The $9,000.00 is property of the bankrupt which is

vested in our client pursuant to the provisions of the

Bankruptcy Act 1966. On behalf of our client we hereby

demand that you pay the sum of $9,000.00 to our client

within 3 days of the date of this letter."

9. Thereafter, the author of the letter referred to and quoted the provisions of sub.ss.129(4) and (5). Dr Kerrison replied, enigmatically, by letter dated 24 April 1989 in these terms:-

"re your correspondence of 11.4.89 which was received on

20.4.89.

From notification, both orally and written, you are aware

that all correspondence addressed to me and my wife is

seized by the Official receiver.

It is thus, impossible for me to respond to your demand

in that letter.

John Kerrison."

10. Upon the hearing of the present application, the first witness for the applicant was Mr March, the Business Administrator of Annesley College. His evidence in chief was limited to a verification of the contents of his affidavit that was sworn on 14 September 1989 and filed in these proceedings on the following day. In it he said that he knew both Dr and Mrs Kerrison personally and that on 3 January 1989, one or other of them paid $9,000, in cash, to the College for 1989 school fees. When cross-examined by Dr Kerrison (who represented himself throughout the proceedings) it became apparent that Mr March was on annual leave at the time when the payment was made and had relied on the College's business records when deposing to the payment of the $9,000 on 3 January. Mr March said that, on 31 January 1989 after his return to work, he received a phone call from a person who identified himself as Dr Kerrison. The caller requested him (Mr March) to repay the $9,000 and arrangements were made for Mrs Kerrison to pick up a cheque for the money on the following day. On 1 February 1989, at about 8.50 am Mrs Kerrison attended on Mr March and took delivery of the cheque. At her request, he changed the identity of the payee from "J. Kerrison" to "B. Kerrison" because, as she said in her evidence, her husband did not have a bank account.

11. The next witness was Mr Young, the Manager of the Glenside Branch of Westpac Banking Corporation. His affidavit of 28 September 1989 which was filed on 2 October 1989 was tendered without objection but, as I said at the time, some of it contained inadmissible passages of hearsay evidence. I therefore intend to disregard those sections. He had not met Dr Kerrison prior to 1 February 1989 and although he claimed to recognise him in Court and referred to him as a person who attended at his bank on 1 February, I would not have been prepared to rely on his evidence of identification in isolation. There were times during Dr Kerrison's cross-examination of Mr Young when the nature of Dr Kerrison's questions suggested that he was putting the question of identification at issue. I will return to that subject later in these reasons but it will assist the narrative if I state at this stage that I am totally confident that it was Dr Kerrison who attended at the bank shortly after 4 pm that day.

12. I return therefore to summarise the evidence of Mr Young. As result of arrangements made that morning through the agency of Bill Kerrison, an employee of Westpac who formerly worked at the Glenside Branch under Mr Young and a son of Dr and Mrs Kerrison, Mr Young received Mrs Kerrison at the bank at about 4.05 pm. She was known to him personally and it was he who let her into the bank building (the bank was closed to the public at 4 pm). Mrs Kerrison produced a cheque for $9,000 made payable to "B. Kerrison" which cheque was drawn on the account of Annesley College. She signed the cheque and left the building. Mr Young handed the cheque to one of the tellers, Mr Attiwill, with instructions to cash the cheque and give the proceeds to the man who was in the bank and whom he (Mr Young) believed to be Dr Kerrison.

13. There was nothing further in Mr Young's evidence on the subject of identification. In particular, there was nothing to suggest that he observed Mrs Kerrison and the man speaking to or, indeed, recognising each other. But it is preposterous to contemplate that it could have been some stranger. It had to be someone very close to Mrs Kerrison and it could not have been her son Bill who was well known to Mr Young. Banking hours had concluded; it is a fair inference that there would have been few, if any, other members of the public in the banking chamber. Furthermore, the evidence of Mr March of Annesley College had established that a male caller, who identified himself as Dr Kerrison rang him the preceding day and made the arrangements that led to Mrs Kerrison calling for and taking delivery of the cheque.

14. The next witness was the bank teller, Mr Attiwill, who verified that he cashed a cheque for $9,000 and gave it to a man whom he believed to be Dr Kerrison. In his cross-examination of Mr Attiwill Dr Kerrison again touched, circuitously, on the question of identification. Because Dr Kerrison lacked legal qualifications I had Mr Attiwill leave the Court room and endeavoured to explain to Dr Kerrison that if he was putting identification in issue, it was for him to put to the witness, clearly and assertively, that the witness was mistaken and that Dr Kerrison was not the man who was in the bank. Notwithstanding this advice I regard it as most significant that no such question was put to Mr Attiwill when his cross-examination resumed. Although Mr Govan, the Acting Official Receiver was called as part of the applicant's case, I pass over his evidence as it did not assist me in determining the events that occurred on 1 February 1989.

15. The final witness for the applicant was Mrs Kerrison who appeared under subpoena. I am compelled to say that she was a most unsatisfactory witness. She was obviously in a distressed state; she had, in my opinion, a fixation that she had been most unfairly treated. Even so, after making every allowance for her, I still remain convinced that she deliberately refrained from telling me all she knew.

16. As to the events of 1 February 1989, she claimed that she could not remember whether she went to the Glenside Branch of the bank and although she conceded that she took delivery of the cheque for $9,000 from Mr March she claimed that she does not now know what has happened to that cheque - I do not believe her. I believe that she has deliberately feigned loss of memory to protect her husband and to prevent the family from having to disgorge the $9,000 to her trustee.

17. Dr Kerrison did not give evidence and called no witnesses.

18. Before I proceed to state my findings of fact I first address the question of onus of proof. What is involved in these proceedings is not an alleged contempt in the face of the court, nor is it claimed that there has been a deliberate failure to comply with an order of the court. In one sense the issue between the applicant and Dr Kerrison is a form of proceedings for the recovery of moneys in respect of which it is claimed Dr Kerrison has no entitlement. Yet the Bankruptcy Act has chosen to identify it as a contempt of court, thereby importing into it a risk of grave consequences.

19. Dr Kerrison argued that nothing short of proof beyond reasonable doubt should be accepted. Mr Adams, counsel for the Trustee disputed this, saying that the ordinary civil onus was sufficient or, at the most, that the civil onus as qualified by the "Briginshaw test" would be the appropriate standard.

20. In criminal cases it is for the prosecution to establish the guilt of the accused beyond reasonable doubt. But the standard of proof required to prove a criminal offence in civil proceedings is no higher than the standard of proof-

proof on the balance of probabilities - ordinarily required in civil proceedings. I cannot accept that the issues in this case could be classified as criminal proceedings; nor can I understand how the order sought against Dr Kerrison could be classified as proof of a criminal act in civil proceedings. However, severe consequences could flow from an adverse finding and the adverse effects on a party whose conduct is the subject of an application should not be overlooked. It is well therefore to remember the remarks of Dixon J. (as he then was) in Briginshaw v. Briginshaw [1938] HCA 34; (1938) 60 CLR 336, where the learned judge said at p 362:-

"But reasonable satisfaction is not a state of mind that

is attained or established independently of the nature

and consequence of the fact or facts to be proved. The

seriousness of an allegation made, the inherent

unlikelihood of an occurrence of a given description, or

the gravity of the consequences flowing from a particular

finding are considerations which must affect the answer

to the question whether the issue has been proved to the

reasonable satisfaction of the tribunal".

Denning L.J. approached the same problem in this way:-

"So also in civil cases, the case may be proved by a

preponderance of probability, but there may be degrees of

probability within that standard. The degree depends on

the subject-matter. A civil court, when considering a

charge of fraud, will naturally require for itself a

higher degree of probability than that which it would

require when asking if negligence is established. It

does not adopt so high a degree as a criminal court, even

when it is considering a charge of a criminal nature;

but still it does require a degree of probability which

is commensurate with the occasion" (Bater v. Bater (1951)

P p 35 at p 37).

21. In Lemmer v. Bertram (1971) 2 SASR 397, Walters J. had to consider the question of burden of proof in a civil case where the plaintiff sued the defendant (a policeman) for assault and false imprisonment. He said, at pp 399-400 (after referring to Briginshaw and Bater):-

"Whilst the authorities make it plain that the rule to be

applied in a case such as the present one is that a court

should require proof of the plaintiff's case merely on

the balance of probabilities, the sufficiency of proof

may well be affected by the presumption of innocence.

As one of the probabilities of the case, the 'ordinary

presumption of innocence' cannot be excluded (cf. Doe d.

Devine v. Wilson [1855] EngR 708; (1855) 10 Moo PC 502, at p 531 (14

ER 581, at p 592); Motchall v. Massoud (1926) VLR

273). I think, therefore, that even in a civil

proceeding, the standard of proof cannot be disassociated

from the subject-matter of the action and the nature of

the allegations upon which it is based, particularly

where, as here, the crime of assault is clearly charged

on the pleadings. It seems to me that the unlikelihood

of the defendant committing such a crime forms one of the

elements which might be weighed. On the other hand, the

presumption of innocence cannot shut out findings of fact

which can and ought to be properly made on the evidence,

or the inferences which can and ought to be drawn upon

those findings".

22. There are conflicting authorities on this subject. For example, in Barrie and Lowe's Law of Contempt (2nd Ed.) there is a discussion of those types of contempt (such as that alleged in the present proceedings) that are creatures of statute and they are classified as "civil contempt" (see Ch 13). On the other hand, McDonald, Henry and Meek: Australian Bankruptcy Law and Practice states that the relevant contempt is of a criminal character and must be proved beyond reasonable doubt: (para 1200). Wilcox J. said that the standard of proof in civil contempt proceedings was "little short of proof beyond reasonable doubt": (Flamingo Park Pty Ltd v. Dolly Dolly Creation Pty Ltd [1985] FCA 123; (1985) 59 ALR 247 at p 262). In Re Plumbers and Gasfitters [1987] FCA 117; (1987) 72 ALR 415 his Honour added that "in rare cases", the disobedience of an order may also involve a criminal contempt and that in such a case proof beyond reasonable doubt was the required standard (at p 436). Keely J. noted these views in G.T.S. Freight Management Pty Ltd v. Transport Workers Union (unreported: judgment delivered 21 March 1990) commenting:-

"In the time available I have not been able to give this

question as much consideration as is desirable, in the

light of the High Court's decision in Mudginberri

(supra). In the circumstances I have decided that, in

determining the motion, the civil standard of proof

should be applied but in the manner set out in Briginshaw

v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-362 where Dixon J.

said:-

'The truth is that, when the law requires the proof of

any fact, the tribunal must feel an actual persuasion of

its occurrence or existence before it can be found. It

cannot be found as a result of a mere mechanical

comparison of probabilities independently of any belief

in its reality . . . The seriousness of an allegation made,

the inherent unlikelihood of an occurrence of a given

description, or the gravity of the consequences flowing

from a particular finding are considerations which must

affect the answer to the question whether the issue has

been proved to the reasonable satisfaction of the

tribunal. In such matters 'reasonable satisfaction'

should not be produced by inexact proofs, indefinite

testimony, or indirect inferences.'"

23. If a person has in his possession or power any moneys or security that he is not by law entitled to retain as against a bankrupt or the trustee, it could be said that he is impeding the administration of the bankrupt estate and therefore impeding the administration of justice. Should that be the correct approach, then there are grounds for considering that the type of contempt that is contemplated by sub-s.129(5) is criminal contempt: (Australian Meat Industry Employees Union v. Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 66 ALR 577 at p 583). On the other hand, the purpose of these proceedings, notwithstanding the manner in which they are couched, are designed to induce a person in Dr Kerrison's position to hand over moneys in respect of which it is claimed that he has no entitlement. He has not disobeyed any order of any court: he is merely challenging the application to him of a particular statutory provision. A question of contempt will only surface with clarity if his challenge is unsuccessful. Even at that stage, the Rules give to the court a discretion to direct that any warrant lie in the office of the Registrar and that it not be executed if the person complies with such conditions as are specified by the court: (Rule 176).

24. Recognising these competing views, it would seem appropriate to adopt the remarks of the majority in A.M.I.E.U. v. Mudginberri at p 585.

"There is, accordingly, much to be said for the view that

all contempts should be punished as if they are quasi-criminal

in character, notwithstanding the adoption of

the contrary view by some members of this court in the

decisions to which we have already referred."

25. The conclusion that I have therefore reached is that I should regard the statutory form of contempt that is presently under consideration as quasi-criminal in character that requires a standard of proof which, though short of the criminal onus, is nevertheless consistent with the Briginshaw test.

26. As I have earlier said, some of the questions asked in cross-examination of the two bank officers suggested that the case for the defence was one of mistaken identity. As Mrs Kerrison claimed a complete lack of memory, she thereby avoided any direct questions about her husband's whereabouts on the afternoon in question.

27. The combined effect of the evidence of Mr Young and Mr Attiwill, without more, fell short of positive identification. Each of them was honest enough to concede to the making of assumptions and taking things for granted. However their evidence is not thereby to be totally disregarded. It is to be assessed in the light of all other evidence - not the least of which is Mrs Kerrison's false evidence about her lack of memory and Dr Kerrison's failure to challenge, clearly and openly, the bank officers by putting to them that they were mistaken about their beliefs about his presence in the bank. To those matters can be added his failure to give evidence. He was asked whether he wished to avail himself of the opportunity and he was given an explanation of the permitted extent of cross-examination. Allowing for his lack of forensic experience, examples of questions that might be asked of him in cross-examination were proffered. He then made his choice and declined to give evidence. That decision is not, in itself to be held against him and his silence is not to be used as a make-weight where proof is otherwise lacking. In fact, it is essential to bear in mind that it would be impermissible to draw an inference adverse to him because of his failure to give evidence.

28. But on the other hand, his failure to give evidence leaves uncontradicted, the evidence that formed part of the applicant's case, thereby making the drawing of inferences from such uncontradicted evidence the more acceptable. In discussing the decision in Jones v. Dunkel [1959] HCA 8; (1959) 101 CLR 298, the following passage appears in Cross on Evidence (3rd Aust. ed para 1.43):-

"First, the unexplained failure by a party to give

evidence, to call witnesses, or to tender documents or

other evidence may, not must, in appropriate

circumstances lead to an inference that the uncalled

evidence would not have assisted that party's case."

(See also Spence v.Demasi (1988) 145 LSJS 310 at 321 per Cox J. with whom White J. agreed; see further The Queen v. Byron (1988) 145 LSJS 141 and Paynter v. Dickmann (unreported: judgment delivered 14 December 1989), both judgments of the Full Court of the Supreme Court of South Australia in criminal and civil proceedings respectively, emphasising that the confidence with which one can draw a conclusion is greatly strengthened by the fact that a party did not give evidence.)

29. Before I state my conclusions there remains to be mentioned a further argument that was advanced by Dr Kerrison.

Bankruptcy Act: s.131

30. Sub-sections (1) and (2) of this section are as follows:-

"131(1) Subject to this section, a bankrupt who is in

receipt of income is entitled to retain it for his own

benefit.

(2) The Court may, upon the application of the trustee,

order that all, or such part as the Court thinks fit, of

the income of the bankrupt shall be paid to the trustee

for the benefit of the bankrupt's creditors."

31. The uncontradicted evidence of Mrs Kerrison was that the $9,000 was her money. She claimed, and this claim was disputed by her trustee in the proceedings before von Doussa J., that it came from her post bankruptcy savings. In these proceedings it is not necessary for me to express a view on this issue; it is sufficient to say that even if Mrs Kerrison can, at any stage, convince the Official Trustee that the $9,000 came from post bankruptcy savings the provisions of s.131 are of no assistance to Dr Kerrison in these proceedings. He mistakenly assumed that if he could convince the court that the $9,000 came from Mrs Kerrison's savings since her bankruptcy, he would thereby defeat the claim that has been made against him; in effect, he sought to argue that if he did have in his possession or power the $9,000 it was a private matter between him and his wife and it had nothing to do with the Official Trustee.

32. But this simplistic approach completely overlooks the language of sub-s.129(4). It is not limited in its application to the rights of the trustee; it is expressly extended to the rights of the bankrupt (i.e. Mrs Kerrison). Hence, Dr Kerrison is not entitled to have in his possession or power any moneys or security "that he is not by law entitled to retain against the bankrupt or the trustee" (emphasis added). Holding, as I have, that the $9,000 originated from Mrs Kerrison (without expressing a view as to when she acquired it) there is, at the least, an obligation on the part of Dr Kerrison, to lead evidence on the subject of his alleged entitlement to that money as against his wife. This he has wholly failed to do and in the absence of such evidence (which I interpolate is nothing more than an evidentiary onus) there is nothing before me that remotely suggests that Dr Kerrison has any form of entitlement to the $9,000.

33. I am satisfied to the required degree that the sum of $9,000, the property of Mrs Kerrison, was paid to Annesley College in early January 1989. I am not concerned, for reasons which I have endeavoured to explain, to ascertain whether it came from her pre - or post - bankruptcy savings. I find that there is no evidence to suggest that her husband, Dr Kerrison had any entitlement to that money.

34. I further find that Dr Kerrison rang Mr March, the Business Administrator of the College and requested the College to refund the sum of $9,000. The College agreed and it is significant that the cheque was originally drawn in favour of "J. Kerrison". Mrs Kerrison attended by arrangement at the College on 1 February 1989 and took delivery of a cheque for $9,000. At her request the identity of the payee was changed to "B. Kerrison" and it is a matter of importance to note that Mrs Kerrison explained that this was because her husband did not have a bank account. The manner in which the cheque was drawn satisfies me that it was Dr Kerrison who made the phone call the preceding day.

35. The evidence that a cheque, undoubtedly the same cheque, was cashed the same day at the Glenside Branch of Westpac and that Mrs Kerrison was present at the bank and endorsed the cheque as a prerequisite to it being cashed is overwhelming. Whilst she was present in the bank (after the completion of trading hours) a male person was also present who, after Mrs Kerrison left, stayed behind to collect the proceeds of the cheque. The bank officers took this man to be Dr Kerrison. As I did not believe Mrs Kerrison when she claimed that she had no memory of the events that occurred at the bank, I regard it as a matter of great importance that she failed to give evidence as to the identity of the man who subsequently took receipt of the $9,000. I also bear in mind Dr Kerrison's failure, during his cross-examination of the two bank officers to put to them that he was not the person whom they saw that afternoon. In my assessment, the clear inference is that Dr Kerrison was the man who received the $9,000.

36. There being no evidence to suggest that he is by law entitled to retain the $9,000 as against his wife or her trustee, he was required, by virtue of the provisions of sub-s.129(4) of the Act to pay the moneys to the trustee. The letter of 11 April 1989 from the trustee's solicitors constituted a sufficient demand for payment but Dr Kerrison has seen fit to refuse the demand. He must therefore be classified as a person who has not paid to the applicant trustee the sum of $9,000 as required by sub-s.129(4). He is therefore guilty of contempt of court.

37. I am empowered as a consequence of this finding to impose a fine or to order the committal of Dr Kerrison to prison for such period as I might determine. However I will refrain from making any such decision until the parties have had an opportunity to consider these reasons.

38. I therefore stand this matter adjourned for further submissions to a date to be determined after consultation with the parties.