Groves, in the matter of Groves (Bankrupt) v Robinson (Trustee) [2013] FCA 490
FEDERAL COURT OF AUSTRALIA
Groves, in the matter of Groves (Bankrupt) v Robinson (Trustee) [2013] FCA 490
IN THE FEDERAL COURT OF AUSTRALIA
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IN THE MATTER OF EDMUND STUART GROVES (A BANKRUPT)
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Applicant
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AND:
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MARK JULIAN ROBINSON AND ANDREW JOHN SCOTT AS TRUSTEES OF THE PROPERTY OF EDMUND STUART GROVES (A BANKRUPT)
Respondents
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DATE OF ORDER:
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WHERE MADE:
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Upon the following undertakings being given to the Court:
(a) By
the applicant, Edmund Stuart Groves to undertake to return to
Australia, at any time in the future, at the request of the respondents
made on not less than 28 days’ notice and to agree to pay for all travel
expenses and out of pocket expenses incurred in regards to any future
attendances that may be required of him in Australia;
(b) By
Viryan Collins-Rubie to undertake to pay the applicant’s travel
expenses to Australia and his accommodation and living expenses whilst
he is in Australia, for the purpose of public examination or other
purposes dictated by the trustee;
THE COURT ORDERS THAT:
2. The trustees are directed to consent to the applicant leaving Australia, subject to the following conditions:
(a) whilst
in Australia, the applicant co-operate with his trustees, including
attending a meeting with them at their Sydney office on 4 June 2013 at
11am, or such other place and time as might reasonably be fixed by the
trustees after consultation with the applicant;
(b) the
applicant furnish to his trustees an undertaking signed by him to
return to Australia at any time in the future at the request of his
trustees made on not less than 28 days notice;
(c) Ms
Collins-Rubie furnish to the trustees a signed undertaking to meet the
cost of the applicant’s return airfares to Australia for that purpose
and living expenses in Australia;
(d) the
applicant furnish full copies of airline tickets to and from Australia
for the purpose of attending in response for any such request made by
the trustees not later than 14 days prior to the departure date for
Australia as specified in the airline tickets;
(e) the
applicant advise his trustees of the source or sources of funds for any
such travel to Australian including any copy of electronic transfer or
other payment documentation and of the bank account details used for the
acquiring of such air travel;
(f) the
applicant notify the trustee of his residential address abroad and
continue to notify the trustee of any change to that residential
address;
(g) the
applicant maintain email and telephone addresses and numbers whilst
abroad for the purposes of being contacted by his trustees and notify
his trustees of any change in those addresses and numbers;
(h) the
applicant maintain in Australia an address for the service of notices
upon him, either at a solicitor’s office or at an accountant’s office
and notify his trustees of that address for service prior to his
departing Australia;
(i) the applicant accept service of a summons for his public examination prior to his departure from Australia if the trustees make application for his public examination;
(j) the applicant notify his trustees of his residential address, telephone number and email address whilst in Australia and of any change thereof within five (5) business days of any change;
(k) the applicant complete prior to departure Australia income questionnaires, and pay any assessed income contributions prior to departing Australia;
(l) upon
application by the trustees, the registrar is to fix dates for public
examination in August forthwith and, after consultation with the
applicant and the trustees and their respective legal representatives.
3. The
respondents pay the applicant’s costs of the hearing of the matter on
Thursday 9 May 2013 and Friday 10 May 2013, and attendance at judgment
on 13 May 2013, but otherwise there be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
QUEENSLAND DISTRICT REGISTRY
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GENERAL DIVISION
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QUD 213 of 2013
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IN THE MATTER OF EDMUND STUART GROVES (A BANKRUPT)
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BETWEEN:
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EDMUND STUART GROVES
Applicant
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AND:
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MARK JULIAN ROBINSON AND ANDREW JOHN SCOTT AS TRUSTEES OF THE PROPERTY OF EDMUND STUART GROVES (A BANKRUPT)
Respondents
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JUDGE:
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LOGAN J
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DATE:
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13 MAY 2013
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PLACE:
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BRISBANE
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REASONS FOR JUDGMENT
1 Section 272 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) provides, materially:
A person who:
…
(1) (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 …. 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.
2 Mr
Edmund Stuart Groves is a bankrupt. He became a bankrupt by order of
the Federal Magistrates Court (now the Federal Circuit Court of
Australia) (Federal Magistrates Court) made on
29 January 2013. That court’s order specified that the date of the act
of bankruptcy upon which the order was made was 14 September 2012.
Messrs Scott and Robinson of PPB Advisory were appointed by the Federal
Magistrates Court as the joint and several trustees of Mr Groves’
bankrupt estate.
3 Mr
Groves was then overseas. Earlier this year, and whilst still overseas,
Mr Groves sought the consent of his trustees to leave Australia. In
effect, he sought such consent in advance of his proposed journey to
Australia for the purpose of giving evidence in two court proceedings.
It will be necessary a little later in these reasons to refer in more
detail both to those proceedings and to events which have transpired
since Mr Groves first sought that permission.
4 For
the moment it is necessary merely to record that, initially, Mr Groves’
trustees took the view that it was neither possible nor appropriate for
consent to be given while he was overseas. Later, and in response to
the initiation of proceedings in this Court, they came to take the view
that consent ought to be given but only on particular terms and terms
which Mr Groves does not regard as reasonable.
5 The
first of the trustees’ decisions was conveyed by a letter sent to Mr
Groves care of a Mr Pearce on 24 April 2013. That letter stated:
Section 272 of the Bankruptcy Act applies to a bankrupt leaving or doing an act preparatory to leaving Australia. You do not need permission to enter Australia.
It
is not appropriate to consider an application to leave Australia until
you are in Australia. I note that you will be required to attend a
Public Examination in order to assist with the administration of your
bankrupt estate.
The Passport Alert will not be removed. It does not prevent you from entering Australia.
6 That
elicited an application to this Court for the review of the trustees’
decision or alternatively, so it was put, failure to make a decision. In
turn, the trustees, after an exchange of correspondence and while the
review proceeding was extant, came to send a further letter, one of 30
April 2013, this time to solicitors acting on behalf of Mr Groves. It
was in that letter that particular conditions were specified and for the
first time allegations were made by the trustees as to what was said to
be a lack of cooperation on the part of Mr Groves with them.
7 The
parties have adopted what seems to me to be the quite sensible,
pragmatic and, it must be said also, lawfully possible position of
treating the present application as one which extends to the trustees’
further decision, if it be that, of 30 April 2013. For that reason it is
not necessary to dwell upon whether, viewed severally, the decision of
24 April 2013 should be regarded as one amenable to review, or for that
matter, whether in that review the issues raised in the trustees’
further letter of 30 April 2013 should be regarded as a separate
decision or nonetheless relevant considerations in respect of the review
of the decision of 24 April 2013.
8 The
long and the short of it is that the Court is seized with an
application for the review of a decision by the trustees only to consent
to Mr Groves’ departure from Australia on terms more particularly
related in the letter of 30 April 2013.
9 Before
turning in detail to those conditions and to other background facts, it
is first necessary to set out some principles which attend an
application for review of this nature.
10 The root authority is Re Tyndall
(1977) 30 FLR 6, (Deane J). As to the provision which confers the
jurisdiction to review trustees’ decisions, s 178 of the Bankruptcy Act,
his Honour concluded that the Court’s jurisdiction was one of the
widest possible discretion and not confined only to interfering with a
trustee’s act, omission or decision if the Court concluded that the
trustee had acted absurdly, unreasonably or in bad faith. More
particularly, and in the context of a consent by a trustee to leave
Australia, Deane J’s conclusion was that travel restrictions found in
the Act were to be regarded as having the purpose of ensuring the proper
administration of Australia’s bankruptcy law and of bankrupt estates
pursuant to that law. They were not in the nature of a penalty imposed
upon a bankrupt by virtue of an inability to pay debts which had
resulted in that person’s bankruptcy. His Honour stated (at p 15):
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 to do so. Restrictions upon such travel under the bankruptcy
legislation must be seen as being aimed at ensuring 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.
11 One
finds in some cases concerned with the review of trustees’ decisions
with respect to overseas travel consideration of proposals for
employment overseas and, in turn, whether that would be in the interests
of the administration of a bankrupt estate. It is trite to state that
each case must be measured by reference to its peculiar facts. Further
and more fundamentally, it is to be remembered that it is also a feature
of our bankruptcy law that, in return for the forfeiture of property
divisible amongst creditors and, these days, also in return for
liability in ways for which the Act provides to make income
contributions to the estate, bankruptcy frees a person from earlier
liabilities and enables a person, initially subject to restrictions for
which the Bankruptcy Act provides then, after discharge, more freely, to
get on with business and personal life subject, enduringly of course,
to the stigma, and it should be regarded as that, of having been a
bankrupt.
12 The
Bankruptcy Act, then, has the feature of enabling, subject to detailed
provision for the administration of a bankrupt’s estate and for division
of property amongst a bankrupt’s creditors and for the making in
certain circumstances of an income contribution by a bankrupt to the
estate, a fresh start by the bankrupt. It is just such a fresh start
which forms the essence of Mr Groves’ desires and also those of his
wife, Ms Viryan Collins-Rubie. There are humane as well as commercial
considerations to be taken into account in decisions of this kind for
the reasons which I have just mentioned.
13 In Re Molina ex parte Wily [1995] FCA 1057, Tamberlin J made the point on p 5 that:
…,
s 272(c) of the Act does not impose any specific constraints on the
discretion of the trustee when deciding whether to consent to a bankrupt
leaving Australia where the bankrupt is not
liable to make a contribution. It is an open discretion but it must be
exercised judicially and on grounds which can reasonably be considered
relevant to such a decision as gleaned from a consideration of the Act.
[emphasis in original]
14 And then at p 6:
In contrast, where a bankrupt is liable to pay a relevant contribution, the Act is more stringent and requires that the Court
itself must make an order granting permission for the bankrupt to leave
the country before he can depart. It is not a matter simply for the
trustee. The discretion is much narrower. The Court is prohibited, under
s 139ZU, from granting permission in such a case unless it is satisfied
that it is necessary for the bankrupt to leave Australia in order to
continue to derive income or, that it is appropriate for compassionate
reasons relating to death or serious illness of a close relative of the
bankrupt to allow the bankrupt to leave Australia. Moreover, if any
payments in respect of the contribution will fall due before the
bankrupt proposes to return to Australia, the Court must be satisfied
that those payments have been made or that appropriate arrangements to
ensure the making of those payments have been made.
[emphasis in original]
15 Mr
Groves is not subject to the strictures found in s 139ZU. It is
necessary firmly to bear that in mind when considering his review
application.
16 Lurking
in the background, for judicial officers anyway, of applications of
this kind is, at least in my case, the rhetorical question, “Will this
be another Skase case? Will this be a case where a person subject to
Australian insolvency laws defies those laws and chooses, perhaps in
luxury, perhaps not, to live the life of a fugitive?” Skase was not a case which came up in this Court under the Bankruptcy Act, see: Australian Securities Commission v Christopher Charles Skase (unreported, Pincus J, 30 May 1991) (Skase).
Rather, it was an application by the Australian Securities Commission,
as the Australian Securities and Investment Commission was then known,
under the provisions of the then s 573 of the Companies Code.
17 At
the time when the Commission made its application in respect of Mr
Skase, an application determined on 30 May 1991, he was then resident in
Spain. The purpose of the Commission’s application was to continue an
order which had been made for the delivering up of Mr Skase’s passport
and, further, to continue an order prohibiting him from leaving
Australia without the Court’s consent. He had earlier left with
permission. That permission was granted against the background of the
spectacular insolvency towards the end of 1989 of a group of companies
known as the Quintex Group. That group, as the Court’s judgment records,
at para 5, was to a considerable extent under the control of Mr Skase.
Shortly before the corporate collapse there were some transactions
which, as the Court noted also on p 2:
…
would tend to give rise to a suspicion that an attempt was being made
by [Mr Skase] to get rid of assets. It has been proved that as at the
end of September 1989, shortly before the receivership of the Quintex
Group, there was a substantial amount of money paid to discharge the
liability on a Rolls Royce motor car given to a stepdaughter of [Mr
Skase]. Apparently two such cars were given, and they were, shortly
after the making of the gifts, shipped overseas.
To continue with the recitation of background facts in Skase on p 3:
In
May 1990, a London property was transferred to Alexandra, a
stepdaughter of [Mr Skase]. That is said to be worth over £200,000 and
(without going into considerable detail) there is some reason to suspect
that precautions were taken by [Mr Skase] against the possibility of
his bankruptcy. In September 1990 a suit was instituted, in a sum in
excess of a third of a million dollars against [Mr Skase]. In the same
month [Mr Skase] failed to appear before Wylie D.C.J. in respect of a
certain investigation. About the same time, [Mr Skase's] solicitor gave
evidence which explained his difficulties in contacting [Mr Skase]. The
solicitor did not, apparently, then have any contact telephone number
and relied upon communications through [Mr Skase's] secretary and upon
[Mr Skase's] telephoning the solicitor; it was then admitted that [Mr
Skase] was at times hard to contact.
In
November 1990, there was service of process on [Mr Skase] at a
Magistrates Court hearing and some attempt, it appears, at evasion of
that service. In December 1990, judgment was obtained by a bank in a sum
of about $1.5M. against [Mr Skase]. The solicitor who acted for the
bank in that matter has made an affidavit explaining that the solicitors
for [Mr Skase] did not respond to facsimiles inquiring after [Mr
Skase's] address. As it seems to me, it is [Mr Skase's] having made
difficulties and (on the face of it) attempting to conceal his address,
which has been, partly at least, the cause of this application’s having
been brought.
18 As
I have already observed, these cases are necessarily factually
specific. Having regard to some of the facts I am about to relate, some
might see a degree of factual correspondence or at least an analogy in
some circumstances pertaining to Mr Groves but there are very real
differences. Further, the task of reviewing the trustees’ decision is
not one of comparing and contrasting it with circumstances arising under
another Act in respect of another individual. The review must be
conducted against the background of a decision in respect of Mr Groves
and the background facts as they are revealed on the evidence presently
to hand, which is much different to that which was before the trustees
when the decisions of 24 April 2013 and of 30 April 2013 were made.
19 The
biggest difference, and it is an eloquent one indeed for me, is that Mr
Groves is physically present in Australia and was so at the time when
his application finally came to be heard in court. Further, Mr Groves
came to Australia at a time when, necessarily, he knew that his trustees
were actively opposing his being given consent to leave Australia other
than on terms which Mr Groves regarded as unreasonable. At the time
when he came to Australia, he was under no obligation to come here.
There was no date fixed for his public examination; much less had he
been served with any summons under the Act to attend for public
examination. Further, on the evidence, he came here for the purpose
expressly of giving evidence in two court proceedings and, as it
transpired, this proceeding also.
20 He
was not subject to a subpoena from either the Supreme Court of
Queensland, the Supreme Court of New South Wales, or for that matter
this Court. He truly did come voluntarily and as I have stated, full in
the knowledge that he may not have permission to leave. He necessarily
knew that because, though this proceeding had been commenced prior to
his departure for Australia, it had not been concluded in its hearing.
Further, in the course of an adjournment of the hearing, opportunity was
availed of by his solicitors to communicate with him in relation to
hearing arrangements. I do not see that as the act of a man who is
dismissive of his status as a bankrupt and of all the obligations
entailed in that. There are other indications on the evidence of that
attitude.
21 Mr
Groves was made bankrupt, as I have stated, on 29 January 2013, while
then overseas. That very day, and upon Mr Groves’ express instructions,
an Australian resident representative, Mr Pearce, who was (and remains)
an accountant, expressly retained in advance by Mr Groves, made contact
with the newly-appointed bankruptcy trustees. The day following,
facilitated by Mr Pearce, a lengthy telephone conference occurred
between one of the trustees, Mr Scott, Mr Pearce and Mr Groves. As a
sequel to that, and as a necessary consequence of bankruptcy, the
trustees sent to Mr Groves a statement of affairs for completion.
22 It
is to be recalled in relation to that statement of affairs that it was
completed by Mr Groves whilst he was abroad. I take that into account in
terms of what is, undoubtedly, a degree of generality in some of the
answers given. It is of course the case that modern communications
greatly facilitate the communication of information across vast
distances, and rapidly. Nonetheless, the statement of affairs was
completed by Mr Groves necessarily without the benefit physically of
being able to sit down with his chosen accounting expert, Mr Pearce.
Further, and though perhaps surprisingly, the evidence in this regard is
lacking in detail, it is necessary to record that Mr Groves’ financial
affairs were not uncomplicated. He was, as he related in his evidence, a
director at one time of some hundreds of companies. Further, and again
though the evidence was perhaps surprisingly somewhat sparse, he was a
director of companies in the ABC Child Care Group which collapsed
spectacularly some years ago.
23 Mr
Groves sent back his statement of affairs to his trustees on 12
February 2013. There was a follow-up inquiry of him by way of a
questionnaire from his trustees under s 77 of the Act. This, too, on the
evidence was the subject of a prompt response by him, again via Mr
Pearce.
24 Being
overseas at the time Mr Groves could, if he was so disposed, just have
treated Australia and his bankruptcy as a rather unpleasant memory from
the very moment of his sequestration up to and including his evidence in
this Court last week. I do not regard him as having done that. He has
quite literally acted in ways that do not admit of any such conclusion.
25 In
his affidavit, Mr Scott, at para 54 through to and including para 75,
has set out the particular conduct which he says amounts to a failure on
the part of Mr Groves to cooperate, having regard to answers given in
the statement of affairs and to other evidence which is investigations
to date have disclosed. These might be summarised as follows:
the
payment on or about 14 September 2012 of the sum of $475,000 to Kanbeki
Proprietary Limited (Kanbeki) of which Mr Groves’ wife is director;
an alleged gift of what are described as the Poinsettia properties, having a value in all, so it is said, of some $3.4 million;
an alleged failure to provide information concerning various trusts;
an alleged failure to provide information concerning the Castle Development Group LLC;
an alleged failure to disclose the disposition of certain vessels and motor vehicles.
26 To
each of these Mr Groves has, in turn, by affidavit made detailed reply.
While his reply is not, in itself, a complete answer, it seems to me
that particular dispositions which, at an early stage of investigation
might give rise for concern, may well not be all that they seem in terms
of giving rise to voidable dispositions. Each of the matters which I
have mentioned are undoubtedly ones which might properly form the basis
for further inquiry of Mr Groves, either informally or pursuant to s 77
or on public examination. The impression with which I was left was that
Mr Groves was able to provide further information and was quite willing
so to do in respect of these subjects.
27 Further,
though understandably – because it must be remembered that these are
transactions about which necessarily a trustee must know nothing at the
time of appointment and must endeavour to understand the same with a
view to gathering in the property of the bankrupt so as to divide it
amongst creditors – the trustees’ views were necessarily tentative. It
is all too easy for suspicion to arise in circumstances where one’s
information base is limited and, for that matter, all too easy to be
suspicious about those who are suspicious when one’s information base is
not limited in that way (or at least can be not limited if one has
ready access to documents which have been under one’s control). I put it
this way on the basis that I do not consider in any way that the
trustees have acted in bad faith or for that matter that Mr Groves has.
It is just that in respect of the matters which I have mentioned they
have approached each from different perspectives. I do not detect, as I
have stated, any disposition on the part of Mr Groves to do anything
other than to enhance as best he can his bankruptcy trustees’
information base in respect of these matters.
28 It
is necessary now to say something further about Mr Groves’ and his
wife’s plans for the future and to their present circumstances. Ms
Collins-Rubie is a successful businesswoman in her own right. She has
interests in two English language colleges in Australia, situated on the
Gold Coast. These, on the evidence, are profitable undertakings,
profitable to the extent where, even to Mr Groves’ recollection, she is
able to derive an income of some $230,000 annually. It may be that this
income is greater than that. It may be also that, with a little more
inquiry, Mr Groves may have been able to establish a precise figure for
his wife’s income than the one specified in his statement of affairs. It
seems to me that he was going upon a recollection made while overseas
and, inferentially, discussion with his wife.
29 It
is to be remembered in respect of persons in business, as opposed to
wage and salary earners, that it can sometimes be difficult to predict
from year to year what one’s annual income is to be. Further, it is not,
in respect of spouses in business or a profession at all unusual, at
least in my experience, for the other spouse not to be completely
familiar with the exact amount of a spouse’s income. One is left merely
with the impression that there is a good income there. What does flow
from the knowledge that Mr Groves’ wife has a good income is that it is
readily explicable how it is that he came to Australia on a business
class airfare. His wife was, undoubtedly, well able to afford the same
and her evidence is that she paid for that.
30 The
evidence discloses that Mr Groves and his wife have followed what one
might describe as a peripatetic existence internationally over the last
eight months or so. That has entailed (before bankruptcy) two return
visits to Australia. One of these, notably, was so that Mr Groves might
attend one of his children’s graduations. The very strong impression
which I have on the evidence is that Mr Groves is close to his children.
Each of his children are Australian residents. They are each young
adults. Whilst they are, of course, free to move abroad themselves,
there is nothing on the evidence which suggests any plan on the part of
each of them so to do. Mr Groves’ wife, Viryan, is an Australian
citizen. She has property herself on the Gold Coast. That is where Mr
Groves proposes to live, or at least base himself, whilst he is in
Australia.
31 Mr
Groves holds a Canadian passport. He has never held an Australian
passport although, necessarily, given his length of residence here, he
must have secured rights of permanent residence. Given Mr Groves’ ties
with his children, I doubt very much whether he would wish to live the
life of a fugitive from Australia’s insolvency and criminal laws.
32 Of
the two Supreme Court proceedings, one, as I have mentioned, is in the
Queensland Supreme Court. The plaintiff in that proceeding is Mr Groves’
former wife, Dr Le Neve Groves. Mr Groves is a defendant in those
proceedings but the effect of his bankruptcy was, so far as he was
concerned, to stay those proceedings against him and to render such
claim as Dr Groves had against him to be nothing more and nothing less
than a debt provable in his bankruptcy. There are other defendants in
that proceeding. In a purely financial sense, bankruptcy put an end to
Mr Groves’ personal liability as far as the Queensland Supreme Court
proceeding is concerned. He is, though, nonetheless volunteering to give
evidence in the proceeding. Having regard to the issues on the
pleadings in that case, which very much concern inter-relationships
between Dr Le Neve Groves and Mr Groves, there may well be deeply
personal reasons why he would wish nonetheless to give evidence. For all
that, in a financial sense, for the reason which I have given, the case
is no longer a threat to him.
33 The
position so far as the New South Wales Supreme Court proceeding is
concerned is even more remote from Mr Groves. He is not a party to that
proceeding at all. Rather, on the evidence, the purpose of his giving
evidence in that proceeding is so as to assist the insurers of the ABC
group of companies who are, inferentially, standing behind a party to
that proceeding. That, too, is eloquent in relation to Mr Groves’
attitude to insolvency laws. He is disposed to attend voluntarily to
assist an insurer of the company of which he was once director.
34 Mr
Groves and his wife have plans to establish an English language college
in Vancouver in Canada. Canada, of course, is a place where Mr Groves
is entitled as of right as a Canadian citizen to live. Ms Collins-Rubie
is, on the evidence, well-experienced in the conduct of just such a
business. Their plans in that regard are necessarily at an aspirational
stage, necessarily because of the uncertainty which hangs over whether
Mr Groves would be able to live abroad. Both Mr Groves and his wife have
been quite frank, in my view, as to their intention to set up permanent
residence in Vancouver for that purpose. The Act does not forbid a
bankrupt from living abroad and, it must be said, from living abroad
permanently. Rather, what it requires is a consent informed by whether
that will or will not assist in the administration of the estate.
35 It
was doubtless open to Parliament, scarified by the Australia experience
with respect to Mr Skase perhaps, to change our Bankruptcy Act. Skase,
as I have mentioned, was a case that came up under our Corporations
Law, but one might have thought if there were to be a concern concerning
the limits of Australian sovereignty in relation to insolvency, that it
would have resonated generally across corporations as well as
bankruptcy laws. Instead, s 272 in its present form remains in the form
in which it was materially at the time of Skase’s
case, subject only to the revision in respect of income contribution
requirements. These, as I have said, are not material to Mr Groves.
36 Mr
Groves has undertaken to return to Australia for the purpose of his
public examination. His wife has undertaken to meet the cost of his so
doing.
37 Impressions
in the witness box are, of course, fleeting. Nonetheless, I thought
each was quite genuine in giving their respective undertakings. Ms
Collins-Rubie in particular, I thought, was under quite some emotional
strain when she gave that undertaking and was well and truly conscious
of its seriousness. I do not doubt that the consequence of the collapse
of the ABC Group and Mr Groves’ subsequent, personal bankruptcy have
placed very particular strains on each of them. That they are still
husband and wife, proposing to make a fresh start, attests to me not
just the strength of a personal relationship but also give a degree of
confidence with which I can act upon Ms Collins-Rubie’s undertaking to
fund her husband’s return.
38 It
is desirable, in my view, that Mr Groves and his wife know the date
upon which any public examination of him will commence, prior to any
departure from Australia. I therefore propose to direct the registrar to
fix dates in that regard forthwith, after consultation with the
trustees and Mr Groves and their respective representatives. As to
dates, the trustees’ initial view was that a public examination would
not be possible until September. They have, on reflection, revised that
to August. It does not at all surprise me in relation to an insolvency
of some $23 million, against the background of a spectacular corporate
collapse with many different directorships on the part of a bankrupt and
doubtless many transactions, that trustees would need such time to
investigate and make best use of a public examination. I envisage that
the summons for the examination will be served on Mr Groves prior to any
departure from Australia.
39 The
question becomes should there be a departure before that examination or
for that matter at all. Some might say it is not terribly long until
August but it is a very long time indeed to be cooling one’s heels in
Australia when the alternative is an ability to commence future planning
in a more concrete way in Canada. Mr Groves is proposed to be an
employee of the English language college. The role which he can play
would doubtless be limited by an Australian bankruptcy, if only in a
practical way. Nonetheless, I can well understand why it is that Ms
Collins-Rubie would wish to have the assistance of her husband.
40 It
is put on behalf of the trustees that Mr Groves is a flight risk, in
other words, that there is a risk of his becoming a fugitive from
compliance with Australian insolvency laws, including, in particular,
requirements to cooperate with his trustees and to attend for public
examination.
41 It
is said by some that the only certainties in life are death and taxes.
Even the latter for some is perhaps not a certainty. It would be foolish
therefore to conclude that there is no risk in relation to flight by Mr
Groves. Further, at the time when the trustees formed their view, Mr
Groves was not in Australia. There may be a risk but, at the risk of
hindsight proving otherwise, I regard it as an acceptable risk.
42 The
question then becomes whether or not to impose conditions, either of
the kind promoted by the trustees or at all. The conditions promoted by
the trustees were twelvefold, namely:
1. the
bankrupt cooperate with the trustees during his time in Australia
including attending a meeting with the trustees in their Sydney office
on 4 June 2013 at 11 am;
2. the
bankrupt undertake to return to Australia at any time in the future at
the request of the trustees made on not less than 28 days notice and
agrees to pay for all travel expenses and out of pocket expenses
incurred in regard to any future attendances that may be required of the
bankrupt in Australia;
3. the
bankrupt provide four copies of airline tickets to and from Australia
not later than 14 days before his anticipated departure date;
4. the
bankrupt advise the source of funds for the travel to Australia,
including copies of bank account statements and electronic transfer
documentation evidencing the source of funds paid and received for the
purpose of acquiring the airline tickets;
5. the
bankrupt provides a detailed copy of his itinerary during his time in
Australia including details of all flights booked, accommodation and all
telecommunication addresses that he proposes to use during that period;
6. the bankrupt delivers his passport to the trustees for the duration of his stay in Australia;
7. the bankrupt advises the source of funds which the bankrupt proposes to use during the duration of his stay in Australia;
8. the
bankrupt is to provide the trustees with reasonable notice before he
intends to leave Australia so that the trustee can amend the passport
alert allowing travel from Australia back to Canada. The trustees are
prepared to be flexible on what constitutes reasonable notice;
9. the
bankrupt undertakes to notify the trustees of any change of his
residential address and telecommunication addresses within five business
days of any change;
10. the bankrupt completes income contribution questionnaires and pays any assessed contributions;
11. as further security, the bankrupt provides to the trustees appropriate security in the amount of $AU500,000;
12. the
trustees may revoke their consent by email address to an email account
nominated by the bankrupt if there is any material breach by the
bankrupt of any of the above conditions.
43 Those
conditions were formulated in the trustees’ letter of 30 April 2013,
which was sent prior to Mr Groves coming to Australia. Obviously enough,
not all of those conditions are now well adapted to Mr Groves being
present in Australia. Of particular concern to Mr Groves was the
security requirement. It is, of course, a little odd to impose upon a
bankrupt a requirement to provide security, unless one recalls that, at
the time, the trustees had a view about a particular disposition in
relation to Kanbeki. Further, the trustees’ fixing of an amount was
informed by the costs that would attend the estate in endeavours abroad
to secure assistance for Mr Groves’ forced return in the event that he
did not return voluntarily.
44 I
can well understand why, having regard to the information then to hand,
the trustees were of the view that a security of that amount was
required. It is to be borne in mind as well that the trustees were not
aware, or at least had not reflected upon, an ability on the part of
Mr Groves’ wife to fund overseas travel of which they were aware.
45 I
have reflected long and hard upon whether some form of security ought
to be imposed, perhaps by way of a performance bond, perhaps by way of a
charging of property by Mr Groves’ wife, which would then be forfeited
in the event of a failure on the part of her husband to return. In the
end and informed by a view which I have reached concerning Mr Groves and
his wife, I have decided that it would not be appropriate to condition
any consent as to departure upon the giving of a security. If, truly,
there is a disposition to flee, then the amount of a security cast
either in the sum mentioned by the trustees or perhaps in some lesser
sum robustly calculated by reference to a cost of an application to a
foreign court, might just be regarded as a price worth paying on the
part of Mr Groves and his wife, if, indeed, there are more substantial
assets sequestered abroad.
46 The
end result then is that I am persuaded that there is good reason to
overturn the trustees’ decisions. In a sense, that persuasion arises
from an overtaking of events, ie, Mr Groves physical presence, even
though he knew he might not be able to leave, but the bases for that
were already there prior to his coming to Australia. It is just that his
physical presence here has confirmed what seems to me to be a
disposition not to ignore Australian insolvency law.
47 The orders then that I propose to make are these:
1. The trustees’ decisions of 24 and 30 April are set aside;
2. The trustees’ are directed to consent to Mr Groves leaving Australia subject to the following conditions:
(i) Whilst
in Australia Mr Groves cooperate with his trustees including attending a
meeting with them at their Sydney office on 4 June 2013 at 11 am or
such other place and time as might reasonably be fixed by the trustees
after consultation with Mr Groves;
(ii) Mr
Groves furnish to his trustees an undertaking signed by him to return
to Australia at any time in the future at the request of his trustees
made on not less than 28 days notice;
(iii) Ms
Collins-Rubie furnish to the trustees a signed undertaking to meet the
costs of Mr Groves’ return airfares to Australia for that purpose and
living expenses in Australia;
(iv) Mr
Groves furnish four copies of airline tickets to and from Australia for
the purpose of attending in response to any such requests made by the
trustees not later than 14 days prior to the departure date for
Australia as specified in the airline tickets;
(v) Mr
Groves advise his trustees of the source or sources of funds for any
such travel to Australia including any copy of electronic transfer or
other payment documentation and of the bank account details used for the
acquiring of such air travel;
(vi) Mr
Groves notify the trustee of his residential address abroad and
continue to notify the trustee of any change in that residential
address;
(vii) Mr
Groves maintain email and telephone addresses and numbers whilst abroad
for the purpose of being contacted by his trustees and notify his
trustees of any change in those address and numbers;
(viii) Mr
Groves maintain in Australia an address for the services of notices
upon him, either at a solicitor’s office or at an accountant’s office
and notify his trustees of that address for service prior to his
departing Australia;
(ix) Mr
Groves accept service prior to his departure from Australia for his
public examination if the trustees make application for his public
examination;
(x) Mr
Groves notify his trustees of his residential address, telephone number
and email address whilst in Australia and of any change thereof within
five business days of any change;
(xi) That
he complete prior to departing Australia income questionnaires and pay
any assessed income contributions prior to departing Australia.
48 Application
has been made on the part of Mr Groves for an order for costs. The
application was made in a way which recognised that there had been an
evolving factual situation which confronted the trustees which, in turn,
may have, so it was submitted, ramifications for whether costs would
completely follow the event. The discretion as to costs is of course a
general one, although one which must be exercised judicially, informed
by the usual way in which the discretion is exercised, which is that
costs follow the event. On behalf of the trustees, it was submitted also
that there have been an evolving situation which made the trustees’
position very difficult indeed.
49 The
view that I have reached is that the end result was very much
influenced by the evidence which Mr Groves came to give by affidavit and
then by oral evidence, and the same in respect of his wife. The oral
evidence components necessarily could not have been known to the
trustees in advance of the commencement of the hearing but the affidavit
evidence was. It is not necessary to, nor would it be appropriate, to
reach any conclusion as to what might have been the fate of the
application if, indeed, it had been heard whilst Mr Groves was abroad
and perhaps subject to his being examined by telephone or video link
from abroad, with the same applying to his wife.
50 The
job of a trustee is difficult and onerous and requires the making of
value judgments. It is to trustees, who are officers of courts
exercising jurisdiction in bankruptcy, that day-to-day administration of
estates is conferred. It is important that courts not second-guess
trustees. There is, though, a review jurisdiction to be exercised and Mr
Groves was perfectly entitled to engage that jurisdiction. The result
of his engaging that jurisdiction is that I have set aside the trustees’
decisions. I have done that though against a factual foundation
different to that which confronted the trustees. Some of that factual
foundation was nonetheless, revealed to the trustees by the time the
hearing commenced. That then factual foundation did give cause for
thought and ought, in my view, to have given cause for thought, about
whether to press the case to hearing.
51 Given
that, the view that I have reached is that Mr Groves ought to have his
costs of the hearing of the review application on Thursday and Friday of
last week and of attendance for judgment, but nothing more. That, in my
view, will give due recognition to the change in the information base
but also to a persistence on the part of the trustees in resisting the
review application.
52 It
is not part of my intention in awarding costs that the trustees be
denied an indemnity from the funds under their administration in respect
of costs. Further, and this needs to be made explicit, I do not wish it
to be a sequel to the costs order that there be any element of
triumphalism on the one part with Mr Groves or a disposition to find
fault in the future on the part of the trustees. It is my earnest hope
that the outcome will, on the one part, see a continuation of a
disposition to cooperate by Mr Groves and, on the other part, a
disposition by the trustees to act reasonably in the interests of the
administration of his bankrupt estate. There will be orders accordingly.
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