IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISTON ) No. P4 of 1983 ) BANKRUPTCY DISTRICT OF TIM STATE ) No. G287 of 1983 ) OF NEW SOUTH WALES AND THE ) No. G319 of 1983 ) AUSTRALIAN CAPITAL TERRITORY ) BETWEEN: THE DEPUTY COMMISSIONER OF TAXATION AND: PETER LEOPOLD CLYN# AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY AND: WILLLAM EDWARD ANDREW No. W838 of 1983 Re- PETER LBOPOT.D CLYNE Ex parte: WILLIAM EDWARD ANDREW ORDER JUDGE MAKING ORDER Neaves J. DATE OF ORDER: 23 December 1983 WHERE MADE: Canberra THE COURT ORDERS THAT: 1. in The application by the trustee of the estate £ OL to of the bankrupt for leave to make an allowance the bankrupt pursuant to paragraph 135(1)(j) the Bankruptcy Act 1966 be refused. The trustee's costs of the application be paid out of the estate of the bankrupL. IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION ) No. P4 of 1983 ) BANKRUPTCY DISTRICT OF TIE STATE ) No. G287 of 1983 No. G319 of 1983 OF NEW SOUTH WALES AND THE ) AUSTRALIAN CAPITAL TERRITORY ) BETWEEN: THE DEPUTY COMMISSIONER or OF TAXATION AND. PETER LEOPOLD CLYNE AND: THE OFFICIAL TRUSTEE IN ~— BANKRUPTCY AND: WILLIAM EDWARD ANDREW No. W838 of 1983 Re. PETER LEOPOLD CLYNE Ex parte: WILLIAM EDWARD ANDREW CORAM: Neaves J. DATE. 23 December 1983 REASONS FOR JUDGMENT This 1s an application by William Edward Andrew ("the applicant"), the trustee of the estate of Pcter Leopold Clyne (''the bankrupt"), for an order that the applicant be at liberty to make an allowance to the bankrupt pursuant to paragraph 135(1)(j) of the Bankruptcy Act 1966 to enable payment of certain medical and incidental expenses. As filed the application sought the leave of the Court in respect of amounts totalling $7,581.86. That amount was subsequently reduced to $3,488.21 itemised as follows - Dr. J.F. Martin 175.00 Dr. K.R. Thompson & Associates 359.00 Epworth Hospital 2,122.41 Dr. Michael Luxton 561.80 Melbourne Diagnostic Group 235.00 Dr. Brian Bunton 35.00 $3,488.21 ft may be noted that the amounts making up the balance of the $7,581.86 include amounts for air fares and hotel expenses. The applicant relies upon his affidavit sworn 24 November 1983. He states that he has been informed by the bankrupt and verily believes that he, the bankrupt, has incurred various medical and incidental expenses as a result of an illness which commenced on 21 October 1983 and that the bankrupt has received restricted income since the date of his illness and is unable to attend to payment of the various accounts. The trustee further states that, as a result of enquiries he has made, he has been informed that the bankrupt is not entitled to Commonwealth assistance in relation to his medical expenses as he is an uninsured person. Annexed to the affidavit are copies of letters received by the trustee from the bankrupt. 'The letters are dated 3 November 1983 (2 letters), 8 November 1983, 15 November 1983 and 17 November 1983, The following 1s an extract from one of the letters dated 3 November 1983 - "IT am unlikely to have much income in the next few months. Meanwhile, my medical expenses in Melbourne...two specialists, one week in in- tensive care, and the angiogram...are likely to be $6000-7000; and the expenses of open-hearted surgery and the lengthy convalescence after that will be very substantial too. "Could some way be found of using the $30,000 about to be paid to you by Sharsie Pty. Ltd. to pay these and other current expenses? "You will recall that under its agreement of 1/7/83 Sharsie Pty. Ltd. 1s bound to pay my personal expenses, and of course it is willing to do so. On the other hand, its cepayment of $30,000 ahead of time is quite voluntary, and of course the company would very much prefer to make this payment on terms that it is used wholly or partly to pay my expenses. "My suggestion is that the payment should be treated as a prepayment of interest under the agreement of 1/7/83. This would make it income, and the consequences would be that under the orders made by Beaumont J. one quarter would go to you and three quarters would be available to me. My 75% could then be used to pay current and future medical expenses, perhaps also other expenses." The letter dated 8 November 1983 reads - "I refer to my previous note concerning the use of Sharsie Pty. Ltd.'s funds for the payment of medica] and other expenses. "I understand this was discussed at the Creditors' meeting and you have taken it under advisement but 1t occurs to me that there would be an easier way of doing it rather than the one previously suggested .- "Under its agreement of Ist July 1983 - which, so far as T know remains legally binding on both parties - Sharsie Pty. Ltd. is required to pay all my personal and business expenses. You will find a copy of this agreement in the annexure to the supplemental Statement of Affairs. Sharsie Pty. Ltd. cannot pay money to anyone but yourself but it is under no obligation to pay any money to you either at this point of time. "The arrangement that occurs to me, especially if no-one objects to it, is that in terms of the agreement Sharsie should pay such personal and business expenses as you approve of. From time to time Sharsie would present you with a number of accounts and, subject to your approval, you would pay these accounts after drawing the necessary funds from the Sharsie account. "rf these moneys were passed through my personal Bank Account and then paid out, you would be entitled to 25% of what was paid in and, of course, some arrangement would need to be made co ensure that you do, in facl, receive this 25%. In other words, if bills totalling $7,500-00 are awaiting payment Sharsie would pay $10,000 to you and you would pay the bills and retain the other $2,500, in accordance with the orders made by Beaumont J. "This is simply an alternative suggestion and you might let me know, in due course, what you and your advisers feel about it. The best course, although I'm not sure about this, would be to submit the proposed arrangements to the Commonwealth Crown Solicitor and ask beforehand whether there is likely tou be any objection." The Following 18 an extract from the letter dated 15 November 1983 - "Owing to my recent illness, I have had no income for some weeks, and a number of accounts are awaiting payment. Your assistance 1s requested in this regard. "As suggested in recent correspondence, if 1t is possible, I would like you to pay these accounts from the funds presently available from Sharsie Pty. Ltd., by re- questing Wantrup & Assoc. to forward you the total amount of $7,321.46 from Sharsie's funds with the State Bank of Victoria, and then (subject to your being satisfied that the payments are genuine and reasonable) you would pay them yourself. "It is submitted that this procedure would be consistent both with the agreement of 1/7/83 between Sharsie Pty. Ltd. and myself, and with the various court orders which entitle the State Bank of Victoria to pay moneys to you, and to no one else." Then followed details of accounts totalling $7,321.46. Of that amount $3,227.81 represented accounts in relation to which the present application is madc. The letter dated 17 November 1983 contained the following paragraph - "I refer to my letter of the 15th November, and our conversation of today's date when you indicated that you intend to apply to the Court under Sec. 135(1)(j) for leave to appropriate the funds which Sharsie Pty. Ltd. intends to pay to you to the payment of such accounts as you consider to be 'just'." Thereafter followed details of the bankrupt's recent medical history. The truth of the matlers set out in the above letters has not been established in evidence before me. This is of some importance in so far as the letters purport to set out the bankrupt's financial position. There has also been tendered in evidence before me a letter dated 12 December 1983 addressad by the bankrupt to the trustee. It reads - "I refer to your application under Sec. 135(1)(j) which is before the Court today. "As indicated in a separate letter of today's date, I have just received a retainer of $2500, and 25% of this has been paid to you in accordance with the orders made by Beaumont J. "There is quite a good chance of further income becoming available in the next few weeks... "Tt seems to me that application under Sec. 135(1)(j) should only be made as a last resort, and with a Jittle give-and-take from those concerned I think I can pay the non- medical bills submitted to you From my income. "Therefore IT would like to suggest that you limit your application to the medical bills ...™ Paragraph 135(1)(j) of the Bankruptcy Act 1966 provides - "(1) The trustee may, with the permission of the ereditors granted by resolution passed at a general meeting or of the committee of inspection or with the leave of the Court, do all or any of the following things: (j) make such allowance out of the estate as he thinks just to the bankrupt, the spouse of the bankrupt or the family of the bankrupt; and te Any allowance which 1s to be paid following the approval of the creditors or the Leave of the Court under that paragraph is to be paid out of the bankrupt estate. There 1s more than a suggestion in the letters to which I have referred that the allowance is to be paid out of moneys to be made available to the trustee by a company known as Sharsie Pty. Ltd., a company which the bankrupt says was incorporated on 2 March 1983 at the bankrupt's request and for his benefit. It is, however, asserted that that company is under no obligation to pay any moneys to the trustee. Unless those moneys when paid form part of the bankrupt estate paragraph 135(1)(4) of the Act would provide no warrant for the trustee dispersing those moneys in payment of the expenses incurred by the bankrupt. There is no material before me as to the amounts which have been brought to the credit of that estate. The bankrupt has not yet been publicly examined as to his property, trade dealings and affairs. The trustee, while requesting that the leave of the Court be given to the payment of the proposed allowance, has not put forward any reasons why that course should be followed. The Deputy Conmissioner of Taxation, who is said to be the only creditor of the estate, opposes the making of the order. In a document prepared by the bankrupt and described as a supplement to his statement of affairs statements are made that the bankrupt propases to continue to practise as a tax consultant and to write books about tax avoidance, a book being with the publishers (page 7), that he has paid his debts punctually (except those due for income tax) and that he has continued to pay his debts netwithstanding certain orders made by the Court on 17 August 1983 by using international cheques available to the bankrupt on his personal current account with Creditanstalt Bankverein, Vienna (page 24). The material placed before me falls short of satisfying me that leave should be granted to the trustee to make an allowance to the bankrupt to enable payment of the medical and incidental expenses the subject of the application. Leave is accordingly refused. I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Neaves. DATE: 23 December 1983 | O° Os Associate