Re Nassar Ex parte Macks & Anor [1995] FCA 213

IN THE FEDERAL COURT OF AUSTRALIA) ) SOUTH AUSTRALIA DISTRICT REGISTRY) ) GENERAL DIVISION ) No. SB 1698 of 1994 ) BANKRUPTCY DISTRICT OF THE ) ) STATE OF SOUTH AUSTRALIA ) Re: ABDO NASSAR Bankrupt Ex parte: PETER IVAN MACKS Applicant SHARRON LEA NASSAR Respondent REASONS FOR DECISION CORAM: Branson J. PLACE: Adelaide DATE: 7 April 1995 By application dated 28 March 1995 the applicant, who is the trustee of the estate of Mr Abdo Nassar ("the bankrupt"), sought certain declarations and related orders. He sought a declaration that a certain Mitsubishi vehicle ("the car") has at all times been the property of the bankrupt and has vested in the applicant as trustee of the estate of the bankrupt and an order for the delivery up of the car. He further sought a declaration that the moneys credited to a bank account in the name of the respondent with the Australian & New Zealand Banking Group Limited ("the bank account") are moneys forming part of the property of the bankrupt which have vested in the applicant as trustee of the estate of the bankrupt and an order that the respondent account to the applicant and make restitution to him of the moneys held by the respondent to the use of the respondent. The applicant sought orders that the respondent deliver up the car and be restrained from dealing with or disposing of her assets pending the hearing of the application. On 28 March 1995 von Doussa J made ex parte interim orders operative until 5.00 pm on Tuesday 4 April 1995 to allow the application to be argued on an inter-partes interlocutory basis. The matter was argued before me on Tuesday 4 April 1995. Both the applicant and the respondent were represented by counsel. Although counsel for the respondent made complaint of the limited time available to the respondent to gather evidence for the hearing he declined an offer of an adjournment indicating that the respondent wished the matter to be heard and determined on the evidence then available. The affidavits read on the application, all without objection, were:- (a) an affidavit of the applicant sworn on 28 March 1995 with exhibits; (b) an affidavit of the respondent sworn 3 April 1995 with exhibits; (c) an affidavit of the bankrupt sworn 3 January 1995; and (d) an affidavit of Mr Ibrahim Salama sworn 3 April 1995. At the close of argument on 4 April 1995 I indicated that I considered it necessary for the purpose of giving effect to the Bankruptcy Act 1966 to make interlocutory orders to protect the position of the applicant with respect to the property referred to in the application of 28 March 1995. However I advised counsel that I did not consider that there was sufficient evidence before me to allow the formulation of appropriate interlocutory orders. In particular I considered that the respondent should have the opportunity to place before me evidence as to her capacity and willingness to provide some form of security to the applicant to protect his position should it eventually be determined that his claims to the car and to restitution of the moneys credited to the bank account are soundly based. In addition I wished to have evidence as to who would drive the car and for what purposes if the respondent were to retain possession of it and of any significant inconvenience which the respondent would suffer if she were required to deliver up the car. I further wished to know whether the respondent would agree at her own cost to arrange insurance on the car in the names of both herself and the applicant with full disclosure being made to the insurer as to the competing claims made in respect of the car. I adjourned the matter for one week to allow the respondent to file and serve such further affidavit or affidavits on the issue of balance of convenience generally as she might be advised. No objection was taken on behalf of the respondent to the interim orders made by von Doussa J on 28 March 1995, being, in effect, extended until 5.00 pm on 11 April 1995. I made orders to achieve that result. It seems to me that it may be of assistance to the parties if I publish reasons for my decision taken on 4 April 1995 that it is appropriate for interlocutory orders to be made on the application dated 28 March 1995. The formulation of such orders will have to await the further hearing of this matter on 11 April 1995. The following are my reasons. Counsel in this case were in agreement that the first issue for my determination was that of whether there is a serious question to be tried as to the ownership of the property in dispute. Technically this may not be the appropriate test (see s30 of the Bankruptcy Act and the consideration thereof in Re Bayliss; ex parte Official Trustee (1987) 15 FCR 167). However in my view, in making an interlocutory injunction in reliance on s30(1)(b) of the Bankruptcy Act it will generally be appropriate for the Court to be guided by the general principles applicable to the making of interlocutory injunctions. Such principles were enunciated by Mason ACJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153. They are that in order to secure an injunction applicants must show:- (a) that there is a serious question to be tried; (b) that they will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (c) that the balance of convenience favours the granting of an injunction. I turn first to the issue of whether there is a serious issue to be tried as to the ownership of the car. The applicant places weight principally on the following considerations:- (a) the bankrupt listed a Mitsubishi car in the depreciation schedule of his income tax return for the year ended 30 June 1993. The value given for, and the description of such car is consistent with its being the car. A Balance Sheet as at 30 June 1993 of Abdo Nassar - Import and Export Consultant also includes as a fixed asset item "Motor Vehicles" with a value consistent with such "vehicles" being the car; (b) the Royal Automobile Association has insured the car from 19 January 1995 to 14 February 1995 in the name of the bankrupt as the insured. A Certificate of Currency in relation to such insurance was exhibited to an affidavit sworn by the applicant. I note that the evidence before me was insufficient to establish how this limited policy of insurance came to be taken out. I do not place weight on it for present purposes; (c) the admission of the respondent that prior to the bankruptcy of the bankrupt the car was insured in his name; (d) the evidence of the respondent that of the purchase price of the car of $18,815, $10,450 came from an insurance payment made to the bankrupt in respect of a Nissan station wagon registered in her name but insured in the name of the bankrupt. As to the car the respondent places weight on the following:- (a) that the invoice for the car is in the name of the respondent; (b) that a "Camry" vehicle which was traded-in on the purchase of the car was registered in the name of the respondent. I note in this regard that there is no evidence before me as to the name, if any, in which this vehicle was comprehensively insured, although there is evidence before me which suggests that the bankrupt claimed depreciation on this vehicle for his income tax purposes; (c) that the balance of the purchase price came from an insurance payment made in respect of a Nissan station wagon registered in her name, albeit that it was insured in the name of the bankrupt and the insurance payment was made to him. Counsel for the respondent, Mr Edmonds-Wilson, asked me to assume that it is not uncommon within families for cars to be insured in the names of individuals who do not have insurable interests in such cars where to do so will minimise premium costs. I am prepared to accept this may on occasions occur. I do not feel able to go further than this. Mr Edmonds-Wilson also asked that I not draw any inference adverse to the respondent on the issue of the ownership of the car and the Camry vehicle from the bankrupt's income tax return referred to above. No evidence from the bankrupt has been placed before me on this application. I do not have the benefit of his explanation for the relevant entries in his depreciation schedule of his income tax return or in his Balance Sheet as at 30 June 1993. On the face of it these entries (which were accepted during argument as relating to the car and, in the case of the depreciation schedule, also the Camry vehicle) are assertions by him of ownership of the two vehicles. In assessing whether there is a serious question to be tried as to the ownership of the car I consider it appropriate to give weight to these assertions. Mr Steele, counsel for the applicant, asks me also to give weight to the implied assertion made by the bankrupt in arranging insurance in his own name in respect of the car that he had an insurable interest in the car. The respondent has sworn that "it was less expensive for my husband to arrange for insurance of all of our vehicles due to his entitlement to a no claim bonus". In the circumstances I am prepared to give limited weight only for present purposes to the insurance arrangements with respect to the car. Nonetheless having regard to the totality of the evidence before me I am satisfied that there is a serious issue to be tried as to the ownership of the car. I turn to consider the moneys paid to the credit of the bank account. It is not in dispute that between 6 October 1994 and 28 December 1994 amounts totalling in excess of $77,000 were paid into the bank account, principally from overseas sources. On the issue of a serious question to be tried as to the ownership of these moneys the applicant places weight on the following:- (a) the bank account was opened within days of an order in the nature of a Mareva injunction being made against the bankrupt. I note that order was made by von Doussa J on 28 September 1994 and the bank account was opened 5 October 1994 (a weekend intervened between these two dates); (b) that the bankrupt swore an affidavit in these proceedings on 3 January 1995 in support of an application for an order that his trustee be restrained, until the determination of an appeal against the sequestration order made in respect of the bankrupt's estate, from contacting a wide class of persons including the bankrupt's business associates. The application was unsuccessful. The affidavit includes the following paragraphs:- "2. For many years my main business activity has been, and still is, to negotiate trade contracts between South Australian and Australian businesses on the one hand, and overseas businessmen, mostly businessmen living in the Middle East region and Europe. During this time I have made many important business contacts who I deal with on a weekly basis in my business. These are mostly Middle East businessmen living in Adelaide, the Middle East region and Europe. . . . . . . . . . . . . . . . . . . . . . . . . 5. As I earn commission on arranging contracts and trade, and as I sell only my time, the events mentioned in paragraph 3 would substantially ruin my chances to earn income in the only area I have been self trained for, and by ethnic origin, can easily work in and commercially derive income. I doubt that I could then maintain my business at all. 6. I could not estimate the financial loss that this would be for me, but I would estimate I have a chance to make $150,000 gross commission income in the next twelve months from this area, and maintain a business for the benefit of my creditors, if my appeal is lost, and myself if my appeal is successful. 7. I have a wife and 6 children living at home. My current business is their entire source of income." As to the above affidavit Mr Steele makes the following points:- (a) that in view of the description of the bankrupt's ongoing business and the bankrupt's assessment of its possible future profitability it is remarkable that the bankrupt's estate is without funds (as is conceded to be the case). The sequestration order in this case was made on 21 December 1994 and a finding made that the act of bankruptcy occurred on 16 August 1994; (b) that it is a reasonable inference that the moneys which have been paid into the bank account reflect commissions which are due and payable to the estate of the bankrupt; (c) that the above inference is consistent with the assertion of the bankrupt on 3 January 1995, at a time when large sums had been paid into the bank account in the immediately preceding months, that his business was the "entire source of income" of his wife and children; (d) that the bank statements of the bank account for the period from the opening of the account until 6 January 1995 show regular and substantial withdrawals from the account such that the account was overdrawn from 30 December 1994 to 6 January 1995. Such an apparent lack of frugality in the operation of the account is suggested to be inconsistent with what might reasonably be expected of a parent of relatively young children who finds herself in straitened circumstances. Moreover it is suggested that it might be thought to be consistent with an expectation in the operator of the account of the receipt of significant future payments; (e) that the number of automatic teller machine withdrawals and card entries at bank branches (which make up a high proportion of the debit entries on the account) are suggestive of an attempt to disguise the identity of the person or persons making such withdrawals and the purposes for which moneys from the account were being used. In this regard I note that the respondent has not disclosed in her affidavit whether any person other than her is authorised to make withdrawals from the account. On behalf of the respondent weight was placed upon the sworn denials of the respondent that the moneys credited to the account are the property of her husband. The respondent has deposed to the fact that the moneys were advanced to her as loans by long standing friends of her husband and herself and that they are not related to business dealings. Mr Edmonds-Wilson asked me to accept, as I do accept, that I should not overlook the possibility of cultural difference between those who might be called Anglo-Australians and those of Middle Eastern origin in assessing the likelihood of substantial unsecured loans being made between long standing friends. The respondent is supported in her evidence by an affidavit sworn by one of the persons responsible for transferring moneys to the bank account, Mr Ibrahim Salama of Dubai in the United Arab Emirates. Mr Salama states in his affidavit:- "3. I am a long-standing friend of the bankrupt Mr Abdo Nassar ("Mr Nassar"). I am of Palestinian origin. Mr Nassar and I originated from the same town in Palestine and I have known Mr Nassar for very many years. I also know Mr Nassar's wife Mrs Sharron Lea Nassar ("Mrs Nassar"). There is a family relationship between my family and the family of Mr Nassar. 4. I have not had any business dealings with Mr Nassar or his wife. I do not owe any money to Mr Nassar, and I am not holding any money or other assets of Mr Nassar. 5. I became aware in about September or October 1994 of the difficulties that Mr Nassar was having with his financial position and the consequent hardship for Mr Nassar, Mrs Nassar and their family. I decided I would make a loan of money to Mrs Nassar. In early October 1994 I made arrangements to send by international transfer the sum of $5,000 in United States dollars to be paid into Mrs Nassar's bank account with the ANZ Bank in Adelaide. 6. In mid-December 1994 I arranged to send from my account the further sum of $3,000 in Australian dollars to Mrs Nassar's bank account with the ANZ Bank in Adelaide as a further loan to her. The 2 payments of money that I have made to Mrs Nassar are made because of my friendship with Mr Nassar and Mrs Nassar and not out of any obligation or debtor/creditor relationship with Mrs Nassar or Mr Nassar." Further the respondent exhibited to her affidavit a copy of a facsimile transaction which she deposes to having received from another of the individuals who has provided her with moneys, Mr Sami Dejemaa Aissa of Algiers, Algeria. Excluding formalities the facsimile transmission is in the following terms:- "This letter is to confirm that I lent my friend Mrs Sharon Nassar some money for her personal needs. This money came from my own personal funds and is a loan to Mrs Nassar which she may pay me back when she can. The money is not a loan to Mr. Nassar and has nothing to do with Mr. Nassar. It is not Mr Nassar's money. I do not owe Mr Nassar any money and I have never owed Mr. Nassar any money. I have never had any business dealings with Mr. Nassar. My money I loaned to Mrs Nassar was from: Credit Lyonnais account number 747307Q at Cartier Latin, Paris, France, Agence No 421 by telegraphic transfer $15,000 US and $12,250 US. Bank draft sent from UBS Geneva Airport Branch $17,230 US which I had a friend transmit from Geneva, which is why the receipt is in my friends name. The $17,230 US was from my money which my friend was holding at the time. Bank draft sent from Credit Lyonnais at Cartier Latin, Paris, France $3,000 US. The receipt for these loans are sent with this fax." The receipts referred to in the above transmission were not placed in evidence. I have taken the above matters into account. However I note that the respondent has provided no explanation for the rapid rate of withdrawal of the moneys credited to the bank account, or of the high proportion of automatic teller machine withdrawals and card entries on the account. She has not given evidence of whether any person other than her is authorised to operate the account or of how the monies credited to the account have been expended. She has not explained the apparent lack of frugality in the operation of the account whilst she is in apparently straitened circumstances and dependent on the generosity of friends for her support and that of her children. No explanation has been provided to me of the assertion by the bankrupt in his affidavit of 3 January 1995 that his business was the "entire source of income" of his wife and children. I further note that the only person resident in Adelaide who the respondent identifies as having lent her moneys, Mr Ziad Abiad of Skye, did not give evidence on the application either by affidavit or orally. In my view the inferences suggested by Mr Steele to be open are in the circumstances reasonably open. Having regard to the totality of the evidence I am of the view that there is a serious question to be tried as to the ownership of the moneys credited to the bank account. I am further satisfied that unless appropriate interlocutory orders are made the applicant would suffer irreparable injury for which damages would not be an adequate compensation should he ultimately succeed on his application. The respondent has sworn that she does not have employment and that she has relied since her husband's bankruptcy on the financial support of friends. Although on the respondent's case that financial support has been considerable, the only evidence before me suggests that it has been largely dissipated. The car could be damaged or destroyed before the final determination of the application in circumstances in which, without appropriate orders, any insurance moneys payable may not be available to the applicant should his claim to the car be successful. Without appropriate orders the car could be sold before the final determination of the application. Counsel for the applicant informed me that the applicant was not prepared to give the usual or any undertaking as to damages: the estate of the bankrupt is without funds. It was therefore necessary for me to consider whether in such circumstances it would be appropriate for me to make any order in the nature of an injunction on this application. As von Doussa J pointed out in his ex tempore reasons for decision when granting interim relief to the applicant in this matter on 28 March 1995 it is not the usual practice of the Court to make injunctions of the kind here sought unless they are supported by an undertaking as to damages given by the trustee. In the usual case it may be expected that the trustee would be indemnified in respect of any call on his or her undertaking from the estate. Here the trustee can not expect to be so indemnified: the estate is without funds. There is no rule of law requiring the giving of an undertaking as to damages. In Allen v Jambo Holdings Ltd [1980] 1 WLR 1252 at 1256 Denning MR stated as follows:- "There is one other point that I must mention. It is said that whenever a Mareva injunction is granted the plaintiff has to give the cross-undertaking in damages. Suppose the widow should lose this case altogether. She is legally aided. Her undertaking is worth nothing. I would not assent to that argument. As Shaw LJ said in the course of the argument, a legally aided plaintiff is by our statutes not to be in any worse position by reason of being legally aided than any other plaintiff would be. I do not see why a poor plaintiff should be denied a Mareva injunction just because he is poor, whereas a rich plaintiff would get it. One has to look at these matters broadly." It seems to me that in determining what orders are necessary for the purpose of giving effect to the Bankruptcy Act within the meaning of s30 of the Act the Court should not be unduly influenced by whether or not the trustee of the bankrupt estate in question is in a position to give an undertaking as to damages. The proper administration of an estate without funds may well require that an injunction be granted in the public interest notwithstanding that the trustee is not in a position to give an undertaking as to damages. In my view this is such a case. I consider that appropriate orders ought to be made notwithstanding the understandable unwillingness in the circumstances of the trustee to give the usual undertaking as to damages. As indicated above, on 11 April 1995 I will receive, subject to all proper objections, such further affidavit or affidavits as the respondent seeks to place before the Court on the issue of the balance of convenience. I will then hear counsel as to the appropriate form of the interlocutory orders to be made on the application. I certify that this and the preceding pages are a true copy of the Reasons for Decision of Justice Branson. Associate: Dated: Counsel for the Applicant : Mr M Steele Solicitors for the Applicant : Ward & Partners Counsel for the Respondent : Mr G Edmonds-Wilson Solicitors for the Respondent : Minter Ellison Baker O'Loughlin Hearing Date: : 4 April 1995