Re Brazel, A.J. v Ex parte Royal Nominees Pty Ltd [1995] FCA 404

REASONS FOR JUDGMENT This is an application on the part of Royal Nominees Pty Ltd for an order that the debtor, Allan Joseph Brazel, be restrained from departing from the Commonwealth of Australia until 6 p.m. on 2 June 1995 or such other date as this Honourable court does order. The application for an injunction is now pressed to extend to 23 June 1995. The creditors petition was listed to be heard on 1 June 1995 but was adjourned over until 23 June 1995. The application further seeks an order that a Mr. Stevenson, who was the controlling trustee of the debtor's property at the time of the application, keep possession of the debtor's passport for that period. When the matter was last before the court, there was then pending a creditor's meeting to be held on 31 May, 1995 to consider a scheme of arrangement and a creditor's petition which was to be heard on 1 June 1995. On that occasion, the controlling trustee was ordered to deliver up the passport to the District Registrar pending the hearing of the adjourned application. The application was adjourned to today in the expectation that the petition would be determined yesterday and the fate of the passport would be determined by the outcome on the petition. The creditors at the creditors meeting rejected the scheme of arrangement and released the controlling trustee. On 1 June 1995, the petition was adjourned by the District Registrar in order to enable the debtor to place material before the District Registrar to support an argument that, in all the circumstances, a sequestration order ought not to be made. On the last occasion that the matter was before me I indicated that it would be appropriate, if the debtor pressed for the return of the passport, to put specific travel proposals before the court including material from Air Pacific as to what was required by the airline by way of travel documentation, what the airline was offering by way of complimentary travel, and also, material indicating the purpose of the proposed travel by the debtor to Fiji. An affidavit was filed setting out various commercial transactions and arrangements under negotiation between companies associated with Mr Brazel; Cupid Resorts Pty Ltd, which gives its address as Level 3, Bowman House, 276 Edward Street, Brisbane, and a Fijian company, Nagani Island Resort Limited. The details of a proposed joint venture prima facie appear in an undated letter from the debtor to Messrs. Murray and Associates, Solicitors. However, no travel details are given and there is no material from Air Pacific. The debtor, in an affidavit filed on 9 May 1995 in paragraph 12, estimates his liabilities to be approximately $3,141,633.00, which he says substantially represents monies loaned to him by financial institutions in relation to the purchase of land comprising the resort at Hervey Bay, and the development of the resort which monies are secured by registered mortgages over land owned by him. The resort to which he refers is a complex called Honeymooners Paradise at Hervey Bay, Queensland. The debtor prepared for the controlling trustee a statement of affairs which indicated as assets: cash at bank $100.00; interest in secured assets $725,500.00, being total assets of $725,600.00. The liabilities disclosed were: secured creditors of $193,000; 118 unsecured creditors totalling $591,522.63, making for a total liability of $784,522.63. On this basis the debtor had an estimated deficiency of $58,922.63. However, the debtor claimed that there were contingent assets being causes of action against lending institutions and others totalling in excess of $3,000,000.00. The controlling trustee, in a report to creditors, specifically referred to what the controlling trustee considered were preference payments and transactions which would, on any bankruptcy, necessarily be the subject of investigation. In particular, paragraph 2.4 of the report states that the business of Honeymooners Paradise had been transferred to a company and the assets of the debtor acquired by that company for a consideration of approximately $40,000.00. A perusal of the creditors and the statement of the debtor in his affidavit that, in fact, the level of indebtedness is close to $3,000,000.00 would suggest that any transfer at $40,000.00 was at a gross undervalue and would be voidable. This transaction is clearly one that, in the event of a bankruptcy, will require the public or private examination of the debtor to determine what has occurred. There is also a suggestion in the report of the controlling trustee that preferential payments may have been made to some creditors in relation to the construction of the resort. The applicant bases its claim to the orders sought principally on the level of indebtedness of the debtor, that the debtor has recently asked for his passport to be returned and having regard to a statement contained in a letter to the controlling trustee written by the debtor on 23 May 1995. In paragraph 13 of that letter the debtor states :- "I would also like to further point out that I have continued to preserve the business in the interests of creditors on a number of occasions. I could have put well over $200,000 in my pocket and fled the country, and taken up a position at a salary of over $100,000 a year with any number of resorts, and could be leading a comfortable lifestyle, as many other people have done before me. I elected not to do such as my sole intention is to pay my creditors 100 cents in the dollar. I have enticed my newly married wife over the last twelve months to borrow money in her name to contribute to the payment of my debts. I had no reason legally or morally to do such as my debts were incurred before I met and married my wife. You have totally destroyed my credibility and integrity. I do not believe that you have conducted your responsibilities in the interests of creditors. I again implore you to refrain from selling and disposing of the furniture, and the closure of the resort at Hervey Bay. I anxiously await your written response. My alternative, of course, is to seek publicity and Ministerial advice in this matter if an amicable arrangement is not forthcoming." It is submitted on behalf of the applicant that paragraph 13 indicates that there is $200,000.00 available for creditors and that it is the present intention of the debtor to flee Australia with that money. The debtor filed an affidavit which explained what he meant by that paragraph in the letter. The $200,000.00 mentioned in the letter was a draw down on an $800,000.00 development construction loan obtained in 1994. That money, so it seems, has gone into the development of the resort. Insofar as the statement as to employment opportunities as a resort manager is concerned, the debtor put before the court a number of references and documents relating to courses and employment overseas. It is clear from the material that the debtor has worked out of Australia for a number of years when he believed that it was in his best interests to do so at that particular time. The debtor says that he has no intention of fleeing Australia; that he has connections here. He also says that he intends to resist the bankruptcy proceedings and has issued proceedings in the Supreme Court of Queensland against Metway Bank and others seeking substantial damages, which actions he says he intends to pursue. The applicant submits that I have power under s.30(1)(b) of the Bankruptcy Act 1966 (Cth) ("the Act") to make such orders, including declaratory orders and orders granting injunctions or other equitable remedies, as the court considers necessary for the purpose of carrying out or giving effect to the Act. The debtor submits that there is no basis for the court to hold his passport, or to prevent him from going overseas because he has not been made bankrupt at this stage and he is not a fleeing debtor. There is a potential difficulty in granting the relief sought by the applicant. The Act specifically provides for a case where a debtor is seeking to flee the jurisdiction with a view to avoiding payment of his or her debts, or preventing or delaying proceedings against him or her under the Act. Those provisions are contained in s.78 of the Act and if the relevant criteria contained there are made out, the court has power to issue a warrant for the arrest of the debtor and to provide for committal of the debtor to jail until the court otherwise orders. The Act also deals specifically with the circumstances in which limitations on overseas travel will be imposed. Section 77 of the Act requires that upon a person becoming bankrupt, the person shall, unless excused by the trustee or prevented by illness or sufficient cause, forthwith deliver to the trustee all books that are in the possession of the bankrupt which relate to any of his or her examinable affairs, if any, and the bankrupt's passport. Once a contribution notice is given by a trustee, then the bankrupt may not leave Australia without obtaining the permission of the court to do so. The Act also contains several criteria which limit the ability of the court to give such permission. Section 30 of the Act ought not to be given such a construction as would impinge or reduce the common law rights of a person where there are specific provisions which deal relevantly with the circumstances in which those common law rights are to be infringed or abrogated. There is a considered judgment of Spender J. in Re Bayliss Ex parte Hadatone Pty Ltd (1987) 15 FCR 91 (especially at 97-102) which deals with the relevant principles. On the material the debtor does not fall within any of the specific provisions. However, he is subject to proceedings in this court and he is therefore amenable to any order of the court properly made under the power contained in s.30(1)(b). Although I doubt that s.30(1)(b) ought to be construed as giving a power to restrain a person leaving the jurisdiction prior to the making of a bankruptcy order, it does not on this application fall for me to form any concluded view in relation to it. Even if the power to restrain the debtor leaving Australia exists, the material does not to my mind make out a case for the exercise of the power. However the question of the passport is a different matter. The debtor says that the passport is his property. That is a common but mistaken view. The property in a passport under s.6A of the Passport Act 1938 remains always in the Commonwealth. There is however a right to obtain a passport as a travel document to enable a person to exercise a common law right of travel and freedom of movement where in order to make use of that right a passport, as an internationally recognised travel document, is necessary. In the instant case, there is before the court no specific proposal in relation to overseas travel. There is therefore, with the passport being held by the court, no present impediment of any common law right of travel. The position may be different should a specific occasion arise where the debtor wishes to exercise his right of travel for business or any other purpose and in order to do so needs his passport, or access to his passport as a document of international travel, to allow him to leave the country. If and when that occasion arises the question will then be whether or not there are circumstances which would enable the passport to be withheld notwithstanding that the withholding of the passport impinged or abrogated the debtor's common law right of travel. Whether the passport ought to be retained pending the hearing of the creditors petition is a question of balancing the public interest in ensuring that if the debtors estate is sequestrated, any order of the court or the operation of the Act is not rendered nugatory by the debtor's refusal to return to Australia against the debtor's common law right of freedom of movement and travel.