Official Trustee in Bankruptcy, in the matter of Lyons [2000] FCA 1428

FEDERAL COURT OF AUSTRALIA

Official Trustee in Bankruptcy, in the matter of Lyons [2000] FCA 1428

BANKRUPTCY – application for a Letter of Request to a foreign court to act in aid of an Australian bankruptcy – whether bankrupt should be notified of the application – whether bankrupt may act to frustrate the administration of the bankrupt estate if notified of the application – whether the application sought enforcement of a judgment, or administrative assistance Bankruptcy Act 1966 s 29(4) Re Doyle (dec'd); Ex parte Brien v Doyle (1993) 112 ALR 653 cited Re Clunies-Ross; Ex parte Totterdell (1988) 82 ALR 475 cited Clunies-Ross v Totterdell (1988) 20 FCR 358 cited Re Ayres; Ex parte Evans (1981) 51 FLR 395 followed Ayres v Evans (1982) 56 FLR 235 cited IN THE MATTER OF SEAN GERARD LYONS OFFICIAL TRUSTEE IN BANKRUPTCY N 7182 OF 2000 TAMBERLIN J SYDNEY 13 OCTOBER 2000

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7812 OF 2000

IN THE MATTER OF SEAN GERARD LYONS

OFFICIAL TRUSTEE IN BANKRUPTCY

APPLICANT

JUDGE: TAMBERLIN J

DATE OF ORDER: 13 OCTOBER 2000

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The applicant is to serve a copy of the application and the draft Letter of Request on Sean Gerard Lyons together with a copy of supporting material and details of the next mention date. 2. The matter be stood over to 9.30 am on 27 October 2000. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7812 OF 2000

IN THE MATTER OF SEAN GERARD LYONS

OFFICIAL TRUSTEE IN BANKRUPTCY

APPLICANT

JUDGE: TAMBERLIN J

DATE: 13 OCTOBER 2000

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 I have directed the applicant Trustee to give notice of the application and I now set out my reasons for adopting that course. 2 This is an application made ex parte by the Official Trustee in Bankruptcy ("the Trustee") for a Letter of Request to issue from the Federal Court of Australia to the High Court of New Zealand for the purpose of administering the bankrupt estate of Sean Gerard Lyons ("Lyons"). 3 The application is made pursuant to s 29 of the Bankruptcy Act 1966 ("the Act") which relevantly provides: "SECTION 29 COURTS TO HELP EACH OTHER 29(1) All Courts have jurisdiction under this Act, the Judges of those Courts and the officers of or under the control of those Courts shall severally act in aid of and be auxiliary to each other in all matters of bankruptcy. 29(2) In all matters of bankruptcy, the Court: (a) shall act in aid of and be auxiliary to the courts of the external Territories, and of prescribed countries, that have jurisdiction in bankruptcy; and (b) may act in aid of and be auxiliary to the courts of other countries that have jurisdiction in bankruptcy. 29(3) Where a letter of request from a court of an external Territory, or of a country other than Australia, requesting aid in a matter of bankruptcy is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction. 29(4) The Court may request a court of an external Territory, or of a country other than Australia, that has jurisdiction in bankruptcy to act in aid of and be auxiliary to it in any matter of bankruptcy. 29(5) In this section, "prescribed country" means: (a) the United Kingdom, Canada and New Zealand; (b) a country prescribed by the regulations for the purposes of this subsection; and (c) a colony, overseas territory or protectorate of a country specified in paragraph (a) or of a country so prescribed." 4 The decision of the Federal Court to make such a request of the High Court of New Zealand under s 29(4) is discretionary. This is to be contrasted to the language of par 29(2)(a) which is concerned with requests to the Federal Court by overseas Courts. Paragraph 29(2)(a) imposes a duty on the Federal Court to act in aid of and be auxiliary to the courts of prescribed countries which include New Zealand. The existence of the discretion in subs 29(4) when a request is sought to be issued by the Federal Court is an important difference in relation to the question of notice because it allows scope for argument as to the matters which are appropriate to be taken into account and the weighting which should be given to them when making a decision whether to issue the Letter of Request. 5 The Draft Letter of Request attached to the Trustee's application is in the following terms: "TO: The Justices of the High Court of New Zealand WHEREAS: 1. Sean Gerard Lyons ("the bankrupt") became a bankrupt on 23 April 1996 upon the making of a Sequestration Order by the Federal Court of Australia under the provisions of the Bankruptcy Act, 1966 and the Official Trustee in Bankruptcy was appointed the Trustee of the estate of Sean Gerard Lyons. 2. It appears from information given to the Official Trustee in Bankruptcy by the bankrupt and on investigation and enquiries by the Official Trustee in Bankruptcy that Sean Gerard Lyons would be or may be, but for his bankruptcy, entitled to certain shares and interest in real and personal property located in New Zealand. 3. It has been represented to this Court that it is necessary for the purpose of justice and the due administration in bankruptcy of the estate of Sean Gerard Lyons under and in accordance with the bankruptcy laws of the Commonwealth of Australia that the property should be made available to the Official Trustee as Trustee of the estate of Sean Gerard Lyons so that it may be dealt with by him under and in accordance with those laws for the purpose of realising it for the benefit of the creditors of Sean Gerard Lyons. 4. It has further been represented to this Court that it is necessary for the purposes of justice and the due administration in bankruptcy of the estate of Sean Gerard Lyons under and in accordance with the bankruptcy laws of the Commonwealth of Australia that the bankrupt may have committed offences within the Commonwealth of Australia evidenced by non-disclosure of assets and the official Trustee in Bankruptcy says that investigations should be available to him in New Zealand as trustee of the property of Sean Gerard Lyons so that any offences can properly be pursued by him in accordance with those laws for the purposes of being able to sufficiently identify and charge the bankrupt with any offences which he may have committed under the Bankruptcy Act, 1966, as amended. 5. In order that the property may be so made available and the investigations completed and dealt with, it is necessary to request the aid of your Honourable Court. I ……………………………………………… as a Judge of the Federal Court of Australia, do hereby request, that for the above reasons and for the assistance of this Federal Court, you, as the Justices of the High Court of New Zealand, or one or more of you:- (a) By vesting in the Official Trustee in Bankruptcy as Trustee of the property of Sean Gerard Lyons, the Trustee appointed under the Bankruptcy Act 1966 (Australia) as the Trustee in Bankruptcy of the estate of Sean Gerard Lyons, the possession and control of the property, real and personal, of the said Sean Gerard Lyons in New Zealand, with liberty to sell and lease the same and receive the proceeds of such sale or leasing with authority to take such steps and do such acts and things as may be necessary for those purposes; (b) grant to the Trustee the power of investigation for the purpose of investigating the property of the bankrupt and any offences which he may have committed; (c) grant such orders on application by the Official Trustee as may be necessary and proper for the purpose of implementing the order in paragraphs (a) and (b) above and ancillary thereto; A letter of request does hereby issue requesting the High Court of New Zealand to act in aid and be auxiliary to this Honourable Court in the following manner: (i) By vesting in the Official Trustee in Bankruptcy as Trustee of the property of Sean Lyons, the Trustee appointed under the Bankruptcy Act, 1966 (Australia) as the Trustee in Bankruptcy of the estate of Sean Gerard Lyons, the possession and control of the property, real and personal, of the said Sean Gerard Lyons in New Zealand, with liberty to sell and lease the same and receive the proceeds of such sale or leasing with authority to take such steps and do such acts and things as may be necessary for those purposes; (ii) To empower the Official Assignee of New Zealand appointed under Section 135 of the New Zealand Insolvency Act, 1967:- (a) to issue and conduct public examinations of persons with respect to the bankrupt or his property pursuant to Section 68 New Zealand Insolvency Act, 1967; (b) to issue pursuant to New Zealand Insolvency Act, 1967 a search and seizure Warrant; (c) to do all things and acts necessary to give effect to the administration of the estate of Sean Gerard Lyons, a bankrupt and to give to the Official Assignee the powers set out in New Zealand Insolvency Act, 1967 and New Zealand Companies Act. 1993; (d) to obtain such advice or assistance as he considers necessary in the discharge of his duties hereunder. (iii) The Court to have such powers to make such orders as required to give full force and effect to the Bankruptcy Act, 1966, as amended (Australia) with respect to the bankrupt estate of Sean Lyons." 6 On the making of a sequestration order all property of the bankrupt wherever situated vests in the Official Trustee: see ss 58(1) and s 116 of the Act. However, the position of property outside Australia may be complicated as a consequence of the provisions of foreign law especially with respect to immovable property and the transfer or vesting thereof: see Re Doyle (dec'd); Ex parte Brien v Doyle (1993) 112 ALR 653 at 657 ff. 7 No notice of this application has been given by the Trustee to Lyons who resides in Australia. When the matter came on for hearing I raised the question of whether such notice should be given to Lyons. It was submitted on behalf of the Trustee that notice was neither necessary nor appropriate having regard to the history of the matter and because there was a reasonable apprehension that Lyons may take steps to either impede or avoid the implementation of the assistance sought from the High Court of New Zealand. 8 An affidavit has been filed by Maria Psomas ("Psomas") dated 31 July 2000. She is the officer in the employ of the Trustee who is responsible for the administration of the bankrupt estate of Lyons. She recounts the history of the matter as follows. Lyons was made bankrupt on 23 April 1996. The earliest act of bankruptcy was 20 October 1995. She annexes a copy of the Statement of Affairs of Lyons. The liabilities in that estate amount to $383,342.60. There was no disclosure of any substantial assets available to unsecured creditors. She recounts the history of Lyon's affairs and refers to various unsatisfactory aspects of his evidence on public examination. No tax return has been lodged by Lyons since 1989. She refers to anomalies in relation to the financial affairs of Lyons in respect of various entries in his bank records. There are a number of supporting documents attached to the affidavit. 9 Psomas summarises the concerns of the Trustee in relation to the affairs of Lyons including his failure to provide information to the Trustee and the obtaining of significant funds from Sealeigh Holdings Limited ("Sealeigh") which have not adequately been explained. The Trustee believes that Lyons is currently operating Sealeigh and is not simply a consultant as asserted. Lyons is said to live with no visible means of support and has failed to provide information promised in his public examination. The Trustee has gathered information that Sealeigh has a substantial development taking place in Auckland and that the interest of Lyons in that company may be of benefit to the creditors in bankruptcy. The Trustee refers to the fact that s 81A Notices have been served on entities associated with Lyons and have not been answered. The Trustee wishes to conduct public examinations of Lyon's brother and to inquire into specified bank accounts held with the Bank of New Zealand. The Trustee also wishes to investigate property registered in the name of Sealeigh or mortgaged or charged by that company. For these purposes the Trustee seeks the assistance of the High Court of New Zealand which has jurisdiction with respect to bankruptcy matters.