Bankruptcy Act 1966: s. 43(1)(b)(i)

Solicitors for the Creditor: Tress Cocks and Maddox

1. It is satisfied that the debtor has committed the act of

bankruptcy alleged in the petition of failure to comply with the

requirements of the bankruptcy notice.

2. It is satisfied with the proof of the other matters of which s.

52(1) of the Act requires proof.

THE COURT ORDERS THAT:

1. A sequestration order be made against the estate of the debtor.

2. The costs of the petitioning creditor (including any reserved

costs) be paid out of the estate of the debtor except where an

order as to costs has previously been made.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is the hearing of a petition for sequestration of the estate of Kenneth Dudley Taylor ("the debtor"). The petition alleges two acts of bankruptcy, in the alternative. The first is that the debtor within six months before the presentation of the petition failed on or before 14 June 1991 either to comply with the requirements of the Bankruptcy Notice served on him or to satisfy the Court that he had a counter-claim, set-off or cross demand of the requisite kind (s. 40(1)(g) of the Bankruptcy Act 1966 ("the Act")). The alternative act of bankruptcy is that the debtor within six months of the presentation of the petition departed Australia on 29 March 1991 and remained outside Australia with intent to defeat or delay his creditors (s. 40(1)(c)(i)).

2. The petitioning creditor is Natwest Australia Bank Limited which obtained final judgment against the debtor in the Supreme Court of Victoria on 2 July 1990 in the sum of $1,355,996.48. The failure of the debtor to pay the amount of the judgment debt together with interest led to the issue by the petitioning creditor of the bankruptcy notice which was served upon the debtor and its non-compliance is the foundation of the first alleged act of bankruptcy.

3. The debtor opposed the petition on three grounds, two of which were pressed at the hearing (the third, relating to alleged non- compliance with the Court's orders relating to service of the petition, was abandoned). The first ground of opposition is that the debtor was not ordinarily resident in Australia at the time of commission of either act of bankruptcy and that (in relation to the alternative claim) he did not depart Australia on 29 March 1991 and remain outside Australia with intent to defeat or delay his creditors. Section 43(1) of the Act requires that, before a sequestration order can be made against the estate of a debtor, the debtor must have committed an act of bankruptcy and that at the time when the act of bankruptcy was committed the debtor:

"(i) was personally present or ordinarily resident (the

emphasis is mine) in Australia;

(ii) had a dwelling-house or place of business in

Australia;

(iii) was carrying on business in Australia, either

personally or by means of an agent or manager; or

(iv) was a member of a firm or partnership carrying on

business in Australia by means of a partner or

partners or of an agent or manager (s. 43(1)."

4. The petitioning creditor relies solely on the assertion that the debtor was ordinarily resident in Australia at the relevant time.

5. The evidence led at the hearing was by affidavit, supplemented by the tender of documents; there was no oral evidence.

6. The debtor gave no evidence in the case, although counsel for the debtor sought to read two affidavits sworn by him. For reasons which I gave at the time, I declined to grant leave for these affidavits to be read at the hearing. Bankruptcy rule 135 provides, so far as relevant, that where notice has been given to a party requiring a deponent of an affidavit filed by that party to attend for cross-examination at the hearing, unless the deponent is produced for cross-examination before the Court or the Court gives "special leave" to use the affidavit, the affidavit shall not be used. I took a liberal view of the expression "special leave", but there was no cogent evidence before me as to why he had not attended, notwithstanding that it was agreed between the parties that proper notice had been given to him to attend and the usual formalities complied with in that respect.

7. The history of the debtor's travel arrangements was the subject of detailed evidence from the Department of Immigration, Local Government and Ethnic Affairs. It is clear that the debtor travelled throughout the world, using Australia as his base, on many occasions after at least the middle of 1988, and probably well before that, and that his most recent departure from Australia was on 6 July 1991. It is possible that he will be present in Australia for the purpose of certain Supreme Court proceedings later this year. Yet the proceeding in this Court affects his status and could result in his bankruptcy, which obviously he knows; but he has offered no cogent explanation as to why he did not attend for cross-examination. I declined to allow his affidavits to be read on the hearing. Even if I had allowed them to be used I would have given them little weight in his absence.

8. In October 1984 the debtor and others were instrumental in having listed on the Australian Stock Exchange a public company, the Northern Queensland Company Limited ("TNQC"), which was engaged in the business of exploring and developing gold mining properties. The debtor was the Chairman of directors and the largest shareholder in TNQC. About that time the Republic of Ghana, West Africa, implemented investment and mining policies to encourage the re-development of its industries including its gold mining industry. TNQC was able to secure substantial mining concessions at Konongo which is about 100 miles inland from Accra, the capital of Ghana. The debtor was responsible for obtaining these mining concessions for TNQC. TNQC, through certain subsidiaries, established a gold mining operation at Konongo. The operating company is Southern Cross Mining Limited ("SCML"). The debtor is the Chairman of directors of companies which directly or indirectly own a large parcel of shares in SCML. He is a director of SCML.

9. The mine commenced production in June 1988. From 1988 onwards the debtor travelled from Australia to various countries including the United Kingdom, Canada, Ghana, Singapore and Malaysia, mainly, if not entirely for business purposes many of which were connected with the gold mining activities of SCML and its associated companies in Ghana. For business reasons connected with the affairs of these companies it was decided in early August 1990 by the boards of relevant companies that the debtor should be in Ghana together with a Dr Henry, a metallurgist, as executive directors of SCML for so long as was necessary to ensure the continued smooth operation of SCML and certain other business activities. It was decided and agreed in by the debtor about August 1990 that he would have to spend a considerable amount of time in Ghana to further the business activities of SCML and related companies and if necessary establish a place of residence there.

10. Although the evidence is not precise, it is plain that in December 1990 the debtor was in Ghana (I assume he had some place of residence there), attending to the business affairs of the gold mining venture.

11. There are on foot in the Supreme Court of New South Wales proceedings which concern the business activities of entities with which the debtor is connected, and they are listed for hearing in July this year. There was a meeting of parties interested in that litigation, held in the Ivory Coast, West Africa on 8 and 9 May 1991 for the purpose of seeking a resolution of the issues in dispute between the parties in the Supreme Court proceedings with a view to the eventual sale of shares in SCML. The meeting was attended by various persons including the debtor.

12. Although counsel for the petitioning creditor did not abandon the petitioning creditor's reliance on the act of bankruptcy that the debtor departed Australia on 29 March 1991 and remains outside Australia with intent to defeat or delay his creditors, he did not seek to argue it and for good reason. The travels of the debtor to and from Australia in the last few years have been for business reasons including those which have taken him to Ghana on more than one occasion. The evidence does not establish that his departure from Australia was for the purpose alleged in the petition. This ground is not established; nor is it seriously contended that it is.

13. The critical question in the case is whether the debtor was ordinarily resident in Australia on 14 June 1991 when he committed the act of bankruptcy of failing to comply with the requirements of the bankruptcy notice served on him on 24 May 1991.

14. "Resident" and "ordinarily resident" are not terms of art in Australian law. Rather, they have been used in the statute law of this country and the United Kingdom for many years. The question of residence arises in many different statutory contexts including legislation concerning bills of sale (Attenborough v Thompson (1857) 2 HandN 559 per Pollock C.B. at 563); copyright (Phonographic Performance Limited v Pontin's Limited (1967) 3 All ER 736 per Cross J. at 739) and income tax (Robertson v Federal Commissioner of Taxation [1937] HCA 32; (1937) 57 CLR 147; Koitaki Para Rubber Estates Limited v Federal Commissioner of Taxation [1941] HCA 13; (1941) 64 CLR 241 per Starke J. at 246 and Williams J. at 249; Commissioners of Inland Revenue v Lysaght (1928) AC 234 per Lord Buckmaster at 247; Levene v Commissioners of Inland Revenue [1928] UKHL 1; (1928) AC 217 per Lord Warrington of Clyffe at 232).

15. As observed by Lord Scarman in R v Barnet London Borough Council (1983) 2 AC 309 at 340, "ordinary residence" has, in effect, now supplanted domicile as the test of jurisdiction in certain legislation and has therefore become an increasingly important concept in recent legislation.

16. I shall not attempt to give any comprehensive definition of the word "resident". It has no technical or special meaning for the purposes of the Act. Nor do the words "ordinarily resident" have any such technical or special meaning. They are ordinary English words. Whether a debtor is ordinarily resident in Australia is a question of fact and degree. That point is made by many of the reported cases, both in this country (see for example Robertson v Federal Commissioner of Taxation per Dixon J. at 163) and the United Kingdom (see Re Brauch; Ex parte Britannic Securities and Investments Limited (1977) 3 WLR 354 per Goff L.J. at 364), where his Lordship conveniently collects some of the relevant authorities.

17. As mentioned earlier, s. 43(1)(b)(i) of the Act requires that, before a sequestration order can be made by the Court, the debtor must have been ordinarily resident in Australia at the time of the commission of the act of bankruptcy (other alternatives are offered); so the legislative direction necessarily requires that the question of ordinary residence must be determined at a particular time. Viscount Sumner said in Lysaght at 245:

"One thinks of a man's settled and usual place of abode as

his residence. ... in many cases in ordinary speech one

residence at a time is the underlying assumption and, though

a man may be the occupier of two houses, he is thought of as

only resident in the one he lives in at the time in

question."

Burchett J. in Re Vassis; Ex parte Leung [1986] FCA 21; (1986) 9 FCR 518 said (at 524-5) that the phrase "ordinary resident in Australia" in s. 43 of the Act must convey the former of the two meanings attributed by Lord Sumner (i.e. a person's settled and usual place of abode). A person may have two places of residence; for example, a city flat and a country house. He may regularly live in each. He cannot be physically present in both at the same time, but he may be resident (or ordinarily resident) in each at the same time. People may come and go from the place in which they are ordinarily resident in a large variety of circumstances and on various occasions. It is always a question of fact and degree.

18. To say that a person is ordinarily resident in Australia must mean something more than that he is resident in Australia. The word "ordinarily" connotes a comparison, a measure of degree. A person may have more than one residence, but he is not necessarily ordinarily resident in each of them. The question must be determined for the purposes of s. 43 of the Act at a particular time. One must ask the question whether at that time the person was ordinarily resident in Australia. The concept of "ordinary residence" for the purposes of the Act, in my opinion, connotes a place where in the ordinary course of a person's life he regularly or customarily lives. There must be some element of permanence, to be contrasted with a place where he stays only casually or intermittently. The expression "ordinarily resident in" connotes some habit of life, and is to be contrasted with temporary or occasional residence: see Levene and Lysaght. As Lord Warrington said in Levene at 232: " 'Ordinarily resident' means according to the way a man's life is actually ordered." The concept of ordinarily resident cannot be stated in definite terms; each case must be determined on its facts and after taking into account all relevant matters: see the Canadian case of Thomson v Minister of National Revenue (1946) SCR 209 per Estey J. at 231.

19. It depends on the facts of each case whether the debtor is ordinarily resident in Australia at the time of the commission of the relevant act of bankruptcy. At first blush it may seem strange to say that a person can be ordinarily resident in more than one country at the same time; but on closer analysis it is not. Plainly you cannot be physically present in more than one place at the same time. But the lifestyles of people vary greatly. Some people in the ordinary pursuit of their lives regularly or customarily live in more than one place, each of which has an element of permanence about it and is not merely a place of casual or intermittent resort.

20. Most people, if asked where they were ordinarily resident at a particular time, would name but one place: their home, because that would be the only place in which they normally or customarily live, although they may travel to other places on holidays or business intermittently. Other people may have two or more houses or flats and stay for various purposes and varying lengths of time in each. It may, depending on the circumstances, be permissible to say that at a particular time they are ordinarily resident in each of the places, though they may be at that time physically present somewhere else. This point is made in many of the reported cases, including the judgment of the House of Lords in Barnet London Borough Council, especially per Lord Scarman at 342-348; but I must express a reservation about one passage from his Lordship's judgment at 342 where he said:

"I note that in the 19th century bankruptcy case

In Re Norris (1888) 4 TLR 452 it was accepted

that one person could be ordinarily resident in

two countries at the same time."

This statement was indeed made in Re Norris by the Lord Chancellor (Lord Halsbury), but the question in that case, and in the English bankruptcy cases generally, was whether the debtor had "ordinarily resided in England within a year before the presentation of the petition" (s. 6(1)(d) of the Bankruptcy Act 1883 (Eng); the same provision was considered by the Court of Appeal in Re Brauch under the Bankruptcy Act 1914 (Eng)). The Australian bankruptcy legislation before the Act (the 1966 Act) contained the same provision (see Bankruptcy Act 1924 (Cth), s. 55(1)(d) and earlier State legislation). It is well established by the English authorities that the time during which the debtor must ordinarily reside in England need not be the whole of the year before the presentation of the petition; it must be within (to use the words of the English sections) a year before that date: re Hecquard (1889) 24 QBD 71 per Lord Esher M.R. at 74; re Brauch at 366. During the year before the presentation of the petition the debtor, for the purposes of the English bankruptcy legislation, may have been ordinarily resident in one country for a particular period and in England for another period. The English cases must be read with this important difference in mind between the English legislation and the requirement in s. 43(1)(b)(i) of the Act that the debtor be ordinarily resident in Australia at the time when the act of bankruptcy was committed.

21. I return to the facts of the case. As mentioned earlier, the debtor travelled, not infrequently, from at least the middle of 1988, from Australia to various countries throughout the world including the United Kingdom, Canada, Singapore, Malaysia and Ghana. In each case he did so for business reasons. The evidence in the main is derived from the travel history of the debtor gleaned from his passenger cards, both outgoing and incoming, retained by the Department of Immigration, Local Government and Ethnic Affairs. Indeed, the evidence of the Department as to its system of collecting and collating records including incoming and outgoing passenger cards is carefully and fully set out in an affidavit of an officer of the Department. I shall not set out every detail of travel of the debtor overseas, but shall relate his most recent travel history.

22. The outgoing and incoming passenger cards relating to the debtor show the following. On 10 October 1990 he declared in his outgoing passenger card that he was leaving Australia as a "resident departing temporarily" for the United Kingdom for 30 days for business purposes. On 15 March 1991 he declared in his incoming passenger card that he was a "resident returning to Australia", having spent five months principally in Ghana. On 29 March 1991 the debtor signed an outgoing passenger card stating that he was an Australian resident departing temporarily for Ghana for four months and that he lived in New South Wales. The debtor departed Australia on 29 March 1991 with his wife and daughter.

23. On 3 July 1991 he signed an incoming passenger card stating that he was a "visitor or temporary entrant" (as distinct from a person "migrating to Australia" or "resident returning to Australia"), intending to stay in Australia for four days and that his country of residence was Ghana. The purpose of his four day visit was said to be "business". This is the only card in the whole of the relevant history of the overseas travel of the debtor in which he does not describe himself as an Australian resident either departing temporarily or returning to Australia. But, on 6 July 1991, when the debtor left Australia most recently, he signed his outgoing passenger card describing himself as an Australian resident departing temporarily for four months, that the country in which he would spend most of his time was Ghana and that the purpose of his visit there was business.

24. In my opinion the evidence establishes that, although the debtor may (it is not clear if he did or for how long) have established a place of residence in Ghana after the middle of March 1991, he remained ordinarily resident in Australia. Indeed, the debtor's own declarations on the migration forms (which are the only direct evidence on the point) show that, subject to the one rather curious exception of the re-entry card of 3 July 1991, he described himself as an Australian resident either leaving or returning to Australia as the case may be. Of course, statements by persons on migration forms are not definitive of their truth and these facts must be placed in the context of the rest of the evidence, which is essentially the evidence of Mr G T Down, a solicitor and business associate of the debtor. However, I am left with the firm impression that the debtor may have established, after mid March 1991 some residence, be it temporary or otherwise, in Ghana and that his wife and daughter left Australia with him on 15 March 1991, but for how long and to what country and in what circumstances is not clear. The evidence falls far short of establishing that he abandoned his Australian residence.

25. The strong inference from the evidence that, over many years the debtor was ordinarily resident in Australia, has not been displaced by the evidence that the business interests in Ghana may have led him to a desire to and in fact perhaps establish a place of residence in Ghana. He may in truth at the relevant time have been both resident (indeed, ordinarily resident) in Ghana and in Australia; the two are not inconsistent. But the evidence establishes to my satisfaction that on the relevant date, namely, 24 June 1991, the debtor was ordinarily resident in Australia.

26. The formal requirements of the Bankruptcy Act 1966 and the Bankruptcy Rules have been complied with and accordingly a sequestration order shall be made against the estate of the debtor.

27. The Court is satisfied of the matters of which proof is required by s. 52(1) of the Bankruptcy Act 1966, and satisfied that the petitioning creditor has established the act of bankruptcy based on the debtor's failure to comply with the requirements of the bankruptcy notice. The Court makes a sequestration order against the estate of the debtor. The costs of the petitioning creditor of the application, including any reserved costs, shall be paid out of the debtor's estate except where an express order as to costs has previously been made.