CATCHWORDS BANKRUPTCY - application for directions - matter arising in connection with the administration of estate - claim for repayment - whether appropriate for directions Bankruptcy Act 1966 s134(4) Re: Driller (1972) 21 FLR 159 RE: NEIL JAMES DUCKWORTH; EX PARTE OFFICIAL TRUSTEE IN BANKRUPTCY NO WAG 1465 OF 1993 R D NICHOLSON J PERTH 20 OCTOBER 1995 IN THE FEDERAL COURT OF AUSTRALIA ) LIMITED DISTRIBUTION WESTERN AUSTRALIA DISTRICT REGISTRY) GENERAL DIVISION ) NO WAG 1465 OF 1993 B E T W E E N: RE: NEIL JAMES DUCKWORTH EX PARTE: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant and NEIL JAMES DUCKWORTH Respondent MINUTE OF ORDER JUDGE MAKING ORDER: R D NICHOLSON J DATE OF ORDER: 20 OCTOBER 1995 WHERE MADE: PERTH THE COURT ORDERS THAT: The application dated 21 August 1995 be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) LIMITED DISTRIBUTION WESTERN AUSTRALIA DISTRICT REGISTRY) GENERAL DIVISION ) NO WAG 1465 OF 1993 B E T W E E N: RE: NEIL JAMES DUCKWORTH EX PARTE: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant and NEIL JAMES DUCKWORTH Respondent CORAM: R D NICHOLSON J DATE: 20 OCTOBER 1995 PLACE: PERTH REASONS FOR JUDGMENT R D NICHOLSON J: This is an application made pursuant to s134(4) of the Bankruptcy Act 1966 ("the Act") which provides that "the trustee may at any time apply to the Court for directions in respect of a matter arising in connexion with the administration of the estate". The matter in respect of which the applicant seeks directions is: "Whether the Applicant should return to Norwich the remaining balance of the sum of $26,014.00 received by the applicant from Norwich on 10 June 1995." "Norwich" is a reference to Norwich Life Australia Limited ("Norwich"). Affidavit evidence establishes that on 4 or 5 October 1992 the respondent signed a Norwich "Proposal for Disability Income Assurance" form ("the Proposal") in which he indicated that his income over the last twelve months was $25,000.00 per month. Norwich requested substantiation of the respondent's income claimed in the Proposal. Chartered Accountants on behalf of the respondent submitted to Norwich's agent a copy of minutes of a meeting of the directors of Gibchell Pty Ltd, held on 30 December 1992 and signed by the respondent as Chairman, which stated that the directors had passed a resolution to pay the respondent a salary of $200,000.00 per annum from 1 January 1993. Norwich issued a Disability Income Insurance Policy ("the Policy") to the respondent based on the Proposal. On 14 July 1993 the respondent completed a Norwich "Disability Income Insurance Claim Form" ("the Claim") in which he declared his average monthly earnings for the past twelve months to be $26,000.00. Pursuant to the Claim, Norwich made payments ("the Payments") totalling $102,319.40 to the respondent and further payments of $40.00 to a bank and $26,014.00 to the applicant on behalf of the respondent. The latter payment was made in response to a notice issued by the applicant under s139ZL of the Act. This was the amount of the respondent's compulsory contributions liability payable to the applicant for the period 9 June 1993 to 8 June 1994. Of the sum of $26,014.00 so received by the applicant a balance of $24,881.50 remains. Norwich has now claimed from the applicant repayment of that balance. Norwich's claim is made on the basis that it avoided the Policy as a result of the respondent incorrectly disclosing his income to Norwich in the Proposal. The avoidance is said to have occurred as a consequence of a letter from Norwich to the solicitors for the respondent dated 31 May 1995. Both Norwich, in that letter, and the applicant, in this application, seek to rely upon what are said to be admissions by the applicant in his public examination on 24 June 1994 that a `nil' tax return was submitted by him for the year ended 30 June 1992 and that his tax return for 1993 was not a true representation of his earnings. The applicant has sworn that the respondent "has never disputed Norwich's avoidance of the Policy". The respondent appeared on this application and from the Bar table sought to dispute some facts including the facts upon which the avoidance was grounded. On being invited to file affidavit evidence and being advised of the consequences of not doing so, the respondent stated that he accepted that this application should be decided without any affidavit being filed by him. In a letter dated 11 July 1995 to the CIB Fraud Squad, Perth, Norwich has complained that the respondent obtained the Payments from it by fraud. The applicant asserts in affidavit evidence both that Norwich maintains a legal entitlement to a reimbursement of all monies paid by it to the respondent under the Policy and further that the applicant has no objection to making such reimbursement. Although served, Norwich has made no appearance on this application. In the application the applicant sought directions on whether certain sums paid by Norwich to or on behalf of the respondent pursuant to the Policy were "income" within s139L of the Act. Further directions were sought on whether all or any of those sums were "divisible property" of the respondent within s116(1) of the Act. At the hearing of the application it was accepted on behalf of the applicant that neither of these matters were appropriate for directions pursuant to s134(4) in that they involved the resolution of legal questions and not simply directions "in connection with the administration of the estate". It may also be arguable that the matter in relation to which directions are sought goes beyond the scope of s134 but as that matter was not argued before me I express no concluded opinion upon it. However, I am of the opinion that the matter before the Court is unsuitable for directions pursuant to s134(4) of the Act. It is well established that there is no general rule that a court is obliged to give directions when a trustee seeks them pursuant to this sub-section and that it is open for a court to decide whether it should give directions: Re: Driller (1972) 21 FLR 159. The unsuitability results, firstly, from the assertion made on behalf of Norwich by the applicant of a legal entitlement and an acquiescence in that entitlement by the applicant without any determination of the correctness of that entitlement at law and without Norwich establishing the claim. In written submissions the applicant identified the legal issues which arise from Norwich's claim as involving the primary question of "Whether there has been a misrepresentation [in the Proposal] which was made fraudulently". It is contended that the relevant representation is the respondent's statement in the Proposal that his monthly income was $25,000.00 per month over the last twelve months. The applicant seeks to rely upon the alleged admissions of the respondent in his public examination to establish that there was a misrepresentation by him. It is then contended that the misrepresentation was made fraudulently so that Norwich was entitled to avoid the policy from its inception. Various authorities are cited in support of this proposition. The very manner in which the argument is advanced evidences that it is redolent with legal issues including both questions of evidence and law. It is entirely inappropriate for directions to be given pursuant to s134(4) upon evidence given on behalf of, but absent, some of the most interested parties including Norwich. Secondly, while the respondent is not prepared to file affidavit evidence on this application, it is clear that he may wish to contest certain facts germane to the determination of the entitlements sought by Norwich. Thirdly, there has been no representation of the creditors or their interests before the Court on this application. For understandable reasons of cost and time the applicant seeks a speedy and uncomplicated mode of resolution of Norwich's claim. In my view, where there are facts which must be proved to establish the legal entitlement asserted, the interests of others and the effect, if any, of the alleged avoidance of the Policy, the matter can only be resolved in an appropriate legal proceeding other than by way of directions under s134(4). It may be that Norwich should seek a declaration of entitlement and join the relevant parties to enable that to occur but the Court does not seek to express any final opinion on the most appropriate way in which the issue should be resolved. It is sufficient for present purposes that the application for directions pursuant to s134(4) should be dismissed. I certify that this and the preceding 4 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson. Associate: Date: APPEARANCES Counsel for the Applicant: Mr F Carles Solicitors for the Applicant: Carles Solicitors The respondent appeared in person. Date of Hearing: 13 October 1995 Date of Judgment: 20 October 1995