Tinkler v Melluish

NICHOLAS J: 1 This proceeding was commenced by the applicant on 24 January 2017. An application to abridge time for service of the originating process was made to me (as Duty Judge) on 25 January 2017. The proceeding was fixed for hearing on 27 January 2017 on the basis that the matter was urgent and that the applicant would suffer hardship if the proceeding was not heard and determined on that date. 2 The applicant, Mr Tinkler, is a bankrupt. A sequestration order was made in relation to his estate on 9 February 2016. The respondent, Mr Melluish, was appointed trustee. In this proceeding the applicant seeks a review of the respondent's decision refusing the applicant permission to leave Australia so that he may travel to the United States of America ("USA") in the period 29 January 2017 to 8 April 2017. The applicant seeks an order requiring the respondent to provide him with written consent to travel to the USA during that period and to deliver up his passport so that he may do so. 3 On 13 January 2017 the applicant requested permission from the respondent for travel by the applicant to the USA to visit his children in Hawaii and to explore employment opportunities in the USA including to attend a job interview scheduled to take place in New York on 1 February 2017. The applicant's solicitor's letter to the respondent seeking such permission enclosed another letter from the applicant's father, Mr Leslie Tinkler, advising that he would fund the applicant's trip to the USA and all associated expenses. 4 The applicant resides in Coffs Harbour with his fiancée and their two young children. The applicant proposed to travel with them to Hawaii on 29 January 2017. The applicant's ex-wife lives in Hawaii with four children from his first marriage. According to the applicant, his ex-wife was proposing to travel overseas, and the applicant and his fiancée were required to be in Hawaii by 30 January 2017 so that they could care for the four children who reside there while the applicant's ex-wife was away. 5 The applicant annexed to his first affidavit made in support of the present application a redacted copy of a letter which is said to have been written by the President and CEO of a US company with whom the applicant is seeking employment. Both the name of the CEO and the name of the company were redacted from the copy of the letter produced by the applicant. A copy of the letter in unredacted form was admitted into evidence at the hearing. 6 At the conclusion of the hearing on 27 January 2017 I indicated to the parties that I was not satisfied that the applicant should be permitted to travel on 29 January 2017 as he proposed. In particular, I was not satisfied that there was any reason why the arrangements made in relation to both the job interview in New York and the care of the children in Hawaii could not be modified to accommodate a later departure date. 7 The applicant sought permission from the respondent to travel on a number of occasions in 2016. On 9 May 2016 he sought permission to travel to Honolulu on 25 May 2016 to visit his children in Hawaii during the local summer school holidays and to travel to London to explore employment opportunities. He proposed to return to Australia on 14 August 2016. The applicant's request for permission to travel was refused by the respondent. However, the applicant saw his four children in June 2016 when they visited Australia, presumably during their school holidays. 8 On 24 August 2016 the applicant made another request for permission to travel to the USA between 8 September 2016 and 30 September 2016 which was also refused. It was his intention to attend a mining conference in Nevada, and to be in Hawaii on 12 September 2016 for his daughter's birthday. The letter from the applicant's solicitor to the respondent seeking this permission enclosed a copy of a letter dated 17 August 2016 from Oceltip Coal 2 Pty Ltd ("Oceltip") and was signed by the applicant's father, Mr Leslie Tinkler, as Director of Oceltip, indicating that the anticipated travel costs of $12,000 would be paid by Oceltip. 9 The applicant entered into an employment agreement with Oceltip on or about 19 April 2016 although the written employment agreement does not appear to have been signed until 10 May 2016. The employment agreement provided for the applicant to receive remuneration of $120,000 per annum (inclusive of any superannuation contribution) with wages to be paid monthly. 10 On 3 June 2016 the respondent issued to the applicant an income assessment for the period 9 February 2016 to 8 February 2017 in the amount of $60,407.30. However, in his letter of 17 August 2016, Mr Leslie Tinkler advised that Oceltip was involved in a contractual dispute which was apparently preventing Oceltip from paying the applicant's wages but that he was hopeful the dispute could be resolved in the following few weeks. By 24 August 2016 no payments had been made by the applicant toward the assessment. On that date the applicant's solicitor informed the respondent: 2.1 Steps have been taken over the past two months to procure payment of our client's wages. We are instructed: 2.1.1. Our client is making enquiries of third parties to provide an unsecured loan to make payment of the contributions. 2.1.2. Our client does not currently have sufficient funds to make the contributions. 2.1.3. Our client is aware he is liable for the contributions regardless of whether he currently has sufficient funds to pay. 2.1.4. Our client is attempting to procure payment as quickly as possible without ruining the prospects of being employed in the future. 2.1.5. As soon as funds are to hand, the contributions will be paid. 11 On 3 November 2016 the respondent wrote to the applicant advising that the respondent had not received any payments in relation to the respondent's income contribution liability and that the arrears totalled $37,754.55. 12 The applicant's solicitor wrote to the trustee on 13 January 2017 (on the same date the most recent request for permission to travel was made) advising the trustee that the applicant "… has not been paid any amount in his capacity as employee of Oceltip …" and that the applicant had been unemployed since 30 September 2016. A copy of the employment agreement and a letter dated 13 January 2017 signed by Mr Leslie Tinkler on behalf of Oceltip was enclosed advising that the applicant's employment ended on 30 September 2016 and that he had not worked with the company since then. 13 According to a report to creditors dated 13 December 2016, there are about 15 creditors as disclosed in the statement of affairs claiming an amount totalling approximately $554m. This includes a debt said to be owed to Ms Rebecca Tinkler, the applicant's ex-wife, in the amount of about $11m. The same report includes the following statements by the trustee: My investigations in relation to the bankrupt estate are on-going due to the complexity of the Bankrupt's financial affairs. At this stage, the Bankrupt has failed to co-operate in the provision of reasonable financial records including copies of bank account or credit card statements in relation to his personal living expenses. In addition, the documentary evidence in relation to the sale or transfer of assets including among other things the disposition of racing vehicles which has been provided to date is not satisfactory. To date, there are a number of outstanding requests which have been made to third parties in relation to family trusts and the Bankrupt's control over the assets of those trusts. A clearer view of the asset position of the Bankrupt and the Trustee's ability to recover any further assets is likely to occur following the conduct of section 81 examinations. At this stage, whilst I have identified certain transactions which may be recoverable for the benefit of creditors, I am unable to confirm the quantum of the likely realisations. 14 There are a number of transactions in which the applicant, various related entities and members of his family may have been involved prior to his bankruptcy that the respondent wishes to investigate. However, any examination of the applicant or his family is unlikely to occur unless the respondent secures funding. He hopes to do this by selling a property owned by the applicant at Batar Creek, New South Wales which appears to be the only significant asset owned by the applicant at the date of the respondent's appointment. But the position in relation to that property is complicated by the existence of a mortgage in favour of a secured creditor and a possible claim by Mr Leslie Tinkler to an equitable interest in the property. 15 No summons have been issued pursuant to s 81 of the Bankruptcy Act 1966 (Cth) ("the Act") for the examination of any person in relation to the applicant's examinable affairs. It is apparent from the respondent's evidence that the applicant is not likely to be required to attend any such examination until sometime after he proposes to return to Australia. 16 Section 77(1) of the Act imposes various obligations on a bankrupt who, unless excused by the trustee or prevented by illness or other sufficient cause, must (inter alia) forthwith after becoming a bankrupt give to the trustee any passport or document issued for the purposes of travel held by the bankrupt; give such information about any of the bankrupt's conduct and examinable affairs as the trustee requires; and aid to the utmost of his or her power in the administration of his or her estate. 17 Section 272(1)(c) of the Act relevantly provides that an undischarged bankrupt who without the consent in writing of the trustee of his or her estate, leaves Australia, or does an act preparatory to leaving Australia, commits an offence punishable on conviction by imprisonment for a period not exceeding three years. Section 272(2) and (3) provide: (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 commits an offence and is punishable, on conviction, by imprisonment for a period not exceeding 1 year. 18 Section 178(1) of the Act provides if the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable. The nature of the jurisdiction conferred on the Court by s 178 of the Act was considered by French J in Macchia v Nilant (2001) 110 FCR 101. As his Honour observed, it is not necessary for the applicant for relief to show that the trustee's decision was incorrect. The Court may make an order under s 178 even if the trustee's decision was "quite correct and reasonable" on the material then available to the trustee. 19 The authorities recognise that a trustee's decision to refuse a bankrupt permission to travel overseas is in a special category because it affects the freedom of movement of a person who may not have committed or been charged with any offence. In Re Tyndall, Ex parte Official Receiver (1977) 17 ALR 182, Deane J said at 187: It can be said at once that I do not regard a decision by the trustee on an application by a bankrupt for permission to travel overseas as coming within the category of decision which should be treated as being within the ordinary day-to-day administration of a bankrupt estate. Even though applications for such leave are not uncommon, they must always be treated as being of fundamental importance, requiring careful consideration of all relevant circumstances for the reason that they are ordinarily related to the freedom of a subject, who is neither a criminal nor under criminal restraint, to travel to pursue his legitimate commercial or personal desires. His Honour also said at 190-191: It is only in recent years that the Commonwealth bankruptcy legislation has made it an offence for a bankrupt to travel overseas without the consent of his trustee and has required a bankrupt to surrender his passport to his trustee once a sequestration order is made. Bankruptcy does not, of itself, involve any criminal offence. A citizen should be free to travel if and when his commercial activities or personal desires prompt him so to do. Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at insuring the proper administration of the bankruptcy laws and of bankrupt estates under such laws and not as a penalty imposed upon a citizen as a consequence of inability to pay debts leading to the making of a sequestration order. In some cases, the possibility that the bankrupt has committed offences under the Act and is seeking to abscond from possible prosecution will be extremely relevant. There has not, however, in this case been any suggestion that the bankrupt is endeavouring to abscond to avoid possible prosecution. In some cases the financial rewards to be derived by the bankrupt's estate from such overseas travel will clearly outweigh any inconvenience in the administration of that estate resulting from the bankrupt's departure from the jurisdiction. 20 His Honour's decision has been applied in numerous cases in which a bankrupt has sought review of a trustee's refusal to give a consent to travel including by Bowen CJ in Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40. In that case there was some evidence to suggest that the bankrupt may have committed a number of offences under the Act. The Chief Justice said at 43: I am conscious of the fact that the evidence revealed in his public examination suggests that he has committed various offences against the Bankruptcy Act 1966 (Cth) which have characteristics involving nondisclosure and concealment. However, these are matters to be litigated at the proper time. It is a basic principle that a resident of Australia is entitled to expect that he may travel freely notwithstanding the fact that he is a bankrupt provided it will not lead to his staying overseas in order to defeat or delay his creditors and provided it will not interfere with the due administration of his bankrupt estate (see Tyndall's case at 15). It is to secure the proper administration of bankrupt estates that bankrupts are required by the Bankruptcy Act 1966 (Cth) to give their passports to the trustee (par. 77(a)) and to obtain the permission of the trustee before travelling overseas (par. 272(c)). This interference with the travel of bankrupts is not for the purpose of punishing or expressing disapproval of them for offences or alleged offences against the Bankruptcy Act 1966 (Cth). 21 In Re Hicks; Ex parte Lamb (1994) 217 ALR 195, Heerey J dealt with an application by a bankrupt for review of his trustee's decision refusing the bankrupt permission to travel. His Honour suggested (at 198) that the questions that were at the forefront in the exercise of the Court's discretion in reviewing the trustee's decision in that case were: (i) Is the proposed visit genuine? (ii) Is the bankrupt likely to return to Australia as promised? (iii) Will the visit hamper the administration of the estate? 22 It is clear that his Honour did not consider these issues to be the only considerations relevant to exercise of the discretion. One consideration that may also be of significance in some cases is the extent to which the bankrupt has complied with his or her obligations under the Act. In some cases it may also be relevant to consider whether the bankrupt has been candid in relation to the bankrupt's proposed travel including, for example, the funding arrangements pertaining to such travel. 23 It was not submitted on behalf of the respondent that the applicant did not genuinely wish to travel to the USA to spend time with his children and to explore employment opportunities. I accept that the applicant genuinely desires to visit his children in Hawaii and that he also genuinely wishes to explore employment opportunities in the USA. Sworn evidence from the applicant directed to these matters was not challenged in cross-examination. 24 The possibility that the applicant might obtain some gainful employment in the USA has the potential to benefit his creditors. Of course, the applicant would need to obtain the respondent's consent if he was required to return to the USA to take up any employment opportunity there or in another country unless he had been discharged from bankruptcy or his bankruptcy had been annulled. 25 It was submitted on behalf of the respondent that the applicant presents a "flight risk" which I understood to mean that there was an unacceptable risk of the applicant not returning to Australia. I do not accept this submission. 26 I am satisfied that it is unlikely that the applicant will not return to Australia on or before 8 April 2017 if this is made a condition of the consent to travel. Having regard to s 272(3) of the Act, the consequences of any failure on the part of the applicant to comply with that or any other condition that is imposed could be very serious indeed. As I have mentioned, a bankrupt who contravenes such a condition commits an offence that is punishable on conviction by imprisonment for a period not exceeding one year. A failure on the part of the applicant to return to Australia as required by the relevant condition would almost certainly result in the issue of a warrant for his arrest. 27 The next question is whether the administration of the applicant's estate will be hampered if the applicant is permitted to travel to the USA and remain there until 8 April 2017. It seems to me likely that the respondent will need to make a fresh assessment of the applicant's income and contribution given the cessation of his employment on 30 September 2016: see generally Pt VI, Div 4B of the Act including, in particular, s 139W, s 139X, s 139Y and s 139Z. The respondent is likely to require further information from the applicant for the purpose of making that assessment. I accept that the applicant's absence from Australia during the next several months has the potential to hamper the respondent's ability to obtain information relevant to the making of such an assessment. However, I think this is best dealt with not by refusing to allow the applicant to travel pending the making of a fresh assessment but by requiring the applicant to give an undertaking to the Court that will require him to provide to the respondent such information as the respondent may reasonably require during the applicant's absence overseas in connection with the administration of the applicant's bankrupt estate. This will include any information that may reasonably be required by the respondent to enable him to make a fresh assessment pursuant to s 139W of the Act. 28 Subject to the applicant providing such an undertaking, I am satisfied that the administration of the applicant's bankrupt estate will not be hampered as a result of the applicant being outside Australia until 8 April 2017. 29 It was submitted by the respondent that the applicant has not complied with his obligations under s 77 of the Act. The principal matter relied upon by the respondent in support of this submission was an alleged failure by the applicant to produce to the respondent documents in his possession, custody or control relating to a company called Bentley Resources Pte Ltd. There is a dispute about this which it is not possible for me to resolve on the present application. 30 In closing submissions it was submitted on behalf of the respondent that the applicant should be required as a condition of being permitted to travel to pay the income contribution assessment issued on 3 June 2016. I do not propose to impose any such condition. Evidence was given by the applicant to the effect that he did not receive any wages during the period he was employed by Oceltip. This evidence was not challenged in cross-examination. Similarly, the applicant's evidence that he does not have the means or ability to pay the income assessment issued on 3 June 2016 was not challenged in cross-examination. On the basis of the evidence before me, I am minded to accept the applicant's evidence on these matters. 31 It was also submitted on behalf of the respondent that the applicant should be required to provide security in the amount of $500,000 which would be forfeited in the event the applicant failed to return to Australia by 8 April 2017. I am not satisfied that it is necessary to impose such a requirement in order to ensure the applicant's return or that it would be just or equitable to do so. 32 Subject to the applicant providing to the Court an undertaking that in the event the applicant travels to the USA pursuant to any consent given in accordance with the Court's orders: (a) he will return to Australia by no later than 8 April 2017 and, as soon as practicable thereafter, return his passport to the respondent; and (b) he will during the period in which he is absent from Australia provide to the respondent such information as the respondent may reasonably require in connection with the administration of the applicant's bankrupt estate including any information that the respondent may reasonably require to enable him to make any assessment pursuant to s 139W of the Act: I propose to make the following orders: (1) The respondent's decision made on 20 January 2017 refusing the applicant consent to travel to the USA be set aside. (2) The respondent be directed to give to the applicant consent in writing to travel to the USA on the following conditions: (a) the applicant shall return to Australia by no later than 8 April 2017; (b) the applicant shall provide to the respondent in writing full and up-to-date details of his address and contact information (including his mobile/cell number and email address) at which he may be contacted in the USA and shall promptly notify the respondent by email of any change thereto; and (c) the applicant shall provide to the respondent prior to his departure a true copy of the applicant's airline ticket for his return travel to Australia. (3) The respondent be directed to return to the applicant the applicant's passport for the purpose of enabling the applicant to travel in accordance with the consent referred to in proposed order 2. (4) Each party have liberty to apply on 48 hours' notice. 33 I will hear the parties on the question of costs. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.