Cable v Pattison [2003] FCA 1499 (17 December 2003)

Last Updated: 17 December 2003

FEDERAL COURT OF AUSTRALIA

Cable v Pattison [2003] FCA 1499

Bankruptcy Act 1966 (Cth) s 19, 33, 33(1)(c), 33A, 33A(3), 54, 77C, 149(3), 149(4), 149A, 149G, 306, 306(1)

Bankruptcy Regulations 13.03, 16.02 Part 13, Item 3 Schedule 8

David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 cited

Re: Ex parte D R Trease [1995] FCA 494 (unreported, Tamberlin J, 14 July 1995) referred to

Nilant v Macchia (1997) 78 FCR 419 cited

Nilant v Macchia [2000] FCA 1528; (2000) 104 FCR 238 applied

Sofia v Pattison (1997) FCA 1586 (20 October 1997) referred to

PAUL CABLE v PAUL PATTISON & ANOR (IN THE MATTER OF PAUL CABLE)

N 7262 OF 2003

HELY J

17 DECEMBER 2003

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7262 OF 2003

BETWEEN:	PAUL CABLE APPLICANT
AND:	PAUL PATTISON FIRST RESPONDENT OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA SECOND RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	17 DECEMBER 2003
WHERE MADE:	SYDNEY

THE COURT DECLARES THAT:

1. The filing of the Statement of Affairs of the applicant dated 13 December 1999 with the second respondent on 17 December 1999 was not invalidated by reason of the fact that a copy only of the Statement of Affairs was then provided to the second respondent.

2. The applicant was discharged from bankruptcy pursuant to s 149 of the Bankruptcy Act 1966 (Cth) on 17 December 2002.

THE COURT ORDERS THAT:

3. The applicant pay the second respondent's costs of these proceedings. Otherwise, no order as to costs.

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 7262 OF 2003

BETWEEN:	PAUL CABLE APPLICANT
AND:	PAUL PATTISON FIRST RESPONDENT OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA SECOND RESPONDENT

JUDGE:	HELY J
DATE:	17 DECEMBER 2003
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 A sequestration order was made against the estate of the applicant on 24 February 1998. The applicant then resided at 95 Bulimba Street, Bulimba, Queensland. The first respondent was appointed as trustee of the estate of the applicant. It is the trustee who has the primary duty of investigating a bankrupt's examinable affairs. The trustees duties in that respect include the matters specified in s 19 of the Bankruptcy Act 1966 (Cth) (`the Act').

2 Under s 54(1) of the Act, within 14 days from the day on which the applicant was notified of his bankruptcy, the applicant was obliged:

(a) to make out and file with the Official Receiver for the District in which the sequestration order was made, a statement of the applicant's affairs; and

(b) to furnish a copy of the statement to the trustee.

3 The evidence does not disclose when the applicant first received actual notification of his bankruptcy. The trustee prepared a letter to the applicant (at the address nominated in the sequestration order) informing the applicant of the trustee's appointment. Included with this letter were various documents (eg. Statement of Affairs, personal and business questionnaires, and the like) (`the bankruptcy package') which the letter requested the applicant to complete and return to the trustee within 14 days. The bankruptcy package was forwarded by registered post to the applicant on 12 March 1998 and again on 26 June 1998, but on each occasion it was returned to the trustee marked `unclaimed'. Unsuccessful attempts were made by the trustee's staff to contact the applicant by telephone on 12 May 1998. On 22 April 1999 a member of the trustee's staff attended at the address given by the applicant as his residence. The property appeared to be occupied, although the applicant was not there when the member of the trustee's staff called. A further copy of the bankruptcy package was left on the property at the front door (between the security and front doors), but there is no evidence as to whether or not the applicant received the bankruptcy package left for him on this occasion.

4 In an affidavit filed in support of this application, the applicant says that in October/November 1999 he `had reason to believe' that he might be bankrupt. He contacted the Insolvency Trustee Service Australia (`ITSA') in Melbourne to enquire whether this was so and was told that he was bankrupt. ITSA is a name under which the second respondent performs its functions as Official Receiver. How it came to pass that the applicant had `reason to believe' that he might be bankrupt in October/November 1999, as opposed to some earlier point in time, does not appear.

5 There is evidence from a psychiatrist, Dr Eastwell, which I accept, that the applicant first consulted him on 6 October 1998 and was diagnosed as suffering from a moderately-severe case of depression. Although Dr Eastwell was first consulted on 6 October 1998, in his opinion there may have been a prodromal period when the applicant was ill where he had not yet sought treatment. The Doctor continued to treat the applicant throughout the balance of 1998 and 1999. In the Doctor's opinion it is likely that the applicant could not face day-to-day tasks at this time and could be tardy about collecting and sorting mail from the letterbox.

6 On 10 November 1999 the applicant contacted the trustee and provided his new residential address at 3/37 Victoria Terrace, Gordon Park, Queensland. On 12 November 1999 the trustee forwarded a further bankruptcy package to the applicant at his new residential address. On 18 November 1999 the applicant advised the trustee by telephone that he would complete and forward his Statement of Affairs both to the trustee and to ITSA. On 7 December 1999 the trustee wrote to the applicant requesting that he immediately complete and forward his Statement of Affairs, under threat of action under s 77C of the Act.

7 On 13 December 1999 the applicant made out and signed a Statement of Affairs. The applicant says that he recalls posting two signed Statements of Affairs to two different places as directed in the correspondence which he received around the time of completion of the Statement of Affairs.

8 The second respondent maintains a file, No 687/98/61V in relation to the applicant. The following documents are included on that file:

* a copy of a signed Statement of Affairs dated 13 December 1999 marked `received 17 Dec 1999 Insolvency and Trustee Service Australia' and with original writing of numbers 687/98 on the top righthand corner of the front page. That writing was placed on the document by an officer of the second respondent;

* an original of a signed Statement of Affairs dated 13 December 1999 with three original stamps on the front page as follows:

- `received 24 January 2000 Insolvency and Trustee Service Australia';

- `Official Receiver Bankruptcy District of the State of Victoria 24 January 2000'; and

- `17 Dec 1999'.

In addition the numbers 687/98 appear on the top righthand corner of the first page and were probably written by an officer of the second respondent.

9 Based on the evidence of the second respondent as to its ordinary practices at this time, I conclude that:

* a copy of the Statement of Affairs was received by the second respondent on 17 December 1999. It was not recorded as filed on that date because the document received was a copy. That is to say there was no original signature on the document; rather it was a photocopy of a signed original; and

* the original of the Statement of Affairs was received by the trustee on 17 December 1999 (the stamp `17 Dec 1999' appears to be the trustee's stamp) and was transmitted by the trustee to the second respondent on 24 January 2000. As the document was an original (ie, one containing an original of the applicant's signature) it was stamped by the second respondent as `filed' on 24 January 2000.

10 ITSA maintains a National Personal Insolvency Index (`NPII') under Part 13 of the Bankruptcy Regulations. This is an electronic index which is generally accessible subject to payment of a fee. The NPII records the Statement of Affairs as having been filed on 24 January 2000. The date on which a Statement of Affairs is filed is required to be included in the NPII pursuant to Regulation 13.03 and Item 3 of Schedule 8.

11 Section 149(4) of the Act provides for the automatic discharge of a bankrupt at the end of a period of three years from the date on which the bankrupt files his Statement of Affairs, unless prior to that date; the details of a notice of objection to discharge are entered in the NPII: s 149A; s 149G.

12 On 23 January 2003 the trustee filed a notice of objection to the discharge of the applicant from bankruptcy, the details of which were recorded in the NPII on 24 January 2003. That objection, if effective, extended the date for the applicant's automatic discharge from bankruptcy to 24 January 2008. Whether the notice of objection was effective to achieve that result depends upon whether the objection was entered in the NPII before the time when the applicant was discharged from bankruptcy by operation of the Act. That in turn depends upon whether the applicant's Statement of Affairs was `filed' with the second respondent on 17 December 1999, rather than on 24 January 2000. If it was filed on the earlier of those dates, then the applicant was discharged from bankruptcy before the objection was entered, hence the entry of the objection in the NPII could not operate to extend the date for discharge.

13 A summary of the trustee's grounds for objection as set out in the notice of objection to discharge is as follows:

`1. Pursuant to Section 149D(1)(j) of the Bankruptcy Act, 1966 the bankrupt failed to comply with sub-section 80(1) of the Act in that he changed his address on several occasions during the bankruptcy period without notifying the trustee;

2. Pursuant to Section 149D(1)(i) of the Bankruptcy Act, 1966 the bankrupt failed, whether intentionally or not, to disclose a liability to the trustee that existed at the date of the bankruptcy;

3. Pursuant to s 149D(1)(d) of the Bankruptcy Act, 1966 the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt's property, income or expected income, failed to comply with the request;

4. Pursuant to Section 206B(3) of the Corporations Act, the bankrupt remained as a director of a corporation and did not resign his position.'

14 The applicant learned of the objection to his discharge in March 2003. On 1 May 2003 the applicant's solicitors wrote to the trustee asserting that the objection was ineffective, as the Statement of Affairs was filed with the second respondent on 17 December 1999. Withdrawal of the objection was requested. By letter dated 9 October 2003 the trustee advised the applicant's solicitors that he neither consented to nor opposed the orders sought by the applicant in these proceedings. However, the trustee declined to withdraw his objection to the automatic discharge of the applicant from bankruptcy.

15 These proceedings were instituted by an application filed on 3 September 2003 made under s  306 of the Act. The applicant claims a declaration that the Statement of Affairs of the applicant be deemed to have been filed in compliance with s 54 of the Act on 17 December 1999, and that the applicant was discharged from bankruptcy pursuant to s 149 of the Act on 17 December 2002. In the applicant's written submissions the applicant also invokes s 33(1)(c) of the Act to seek an extension of time for filing of a Statement of Affairs from 10 March 1998 (14 days after the making of a sequestration order on 24 February 1998) to 17 December 1999.

16 Section 306(1) of the Act provides as follows:

`Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the Court before which the objection on that ground is made is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that Court.'

17 The failure to lodge a Statement of Affairs prior to 17 December 1999 is not a formal defect, or a mere irregularity. It is a serious non-compliance with the provisions of s 54 of the Act for which a maximum punishment of five penalty units is specified. Nor has sufficient cause been shown for extending the time for compliance with s 54 up until 17 December 1999. Whilst the applicant may well have suffered a depressive illness for part, if not all of that period, I am not satisfied on the evidence before me that it excuses the non-compliance with s 54 throughout the period in question. In particular, no evidence is proffered as to how it came to pass that the sequestration order was made on 24 February 1998, but that it was not until October/November 1999, that the applicant had `reason to believe' that he might be bankrupt.

18 It is not, however, necessary for the applicant to secure an extension of the time for filing of the Statement of Affairs from 10 March 1998 to 17 December 1999 in order for the applicant to obtain the relief claimed in the application. A Statement of Affairs may be filed within time or out of time. Late filing of a Statement of Affairs may attract a penalty, but the late filing is nonetheless a filing of a Statement of Affairs for the purposes of the Act. Here there was an attempt to file a Statement of Affairs with the second respondent on 17 December 1999 (albeit outside the 14 day period specified in s 54) which miscarried, because a copy of the signed Statement of Affairs was presented to the second respondent rather than the original. In Nilant v Macchia [2000] FCA 1528; (2000) 104 FCR 238 at [64] Weinberg J said:

`Where there has been an attempt to comply with the obligations of s 54(1), whether within the 14 days period specified, or on some occasion thereafter, it is entirely apt to speak of that attempt as being a "proceeding under this Act", and as being capable of being regarded by the Court as "not invalidated" by reason of any formal defect or error. The effect of invoking s 306(1) in such a case is to permit the period of bankruptcy to run from the date of the purported compliance with the Act, or perhaps some later date. It follows that the bankruptcy will not continue for an unconscionably long period merely because of some relatively minor failure on the part of the bankrupt to comply with the strict requirements of s 54(1).'

Carr J also concluded where there has been an attempt to comply with s 54 of the Act, but in the course of such an attempt there is a formal defect or an irregularity occurs, then, subject to the conditions expressed in s 306(1), the proceedings (making out and filing the Statement of Affairs) will not be invalidated. Hill J was of a different opinion. In his Honour's view, s 306 of the Act did not empower the Court to treat a bankrupt's failure to comply with s 54 as in some way a compliance.

19 In Sofia v Pattison [1997] FCA 1586 (20 October 1997), Finkelstein J held that `filed' in the context of s 54(1) refers to an act to be performed by the bankrupt, rather than to the placing of the document on the file by officers of the second respondent. For the purposes of s 54(1), Bankruptcy Regulation 16.02 allows inter alia, a Statement of Affairs to be posted to the office of the Official Receiver. The posting of a copy of the signed Statement of Affairs rather than the original, to the second respondent is a `proceeding under this Act' for the purposes of s 306 of the Act. Consistently with the decision in Sofia (which was specifically endorsed by at least Weinberg J in Nilant v Macchia (supra)) it is also a `formal defect or irregularity' which does not invalidate the filing if substantial injustice has not been caused to any person as a result of the presentation of a copy of the Statement of Affairs, rather than the original. In Sofia (supra) Finkelstein J came to the conclusion that no an injustice would be caused by the filing of a copy, rather than an original Statement of Affairs with the registry. But whether this is so or not is a question of fact which was not the subject of extensive consideration in Sofia.

20 The solicitor for the second respondent stated from the bar table, without objection, that upon his instructions, if a creditor sought to inspect a Statement of Affairs in the office of the second respondent which had been recorded as received, but not as `filed' by reason of its status as a copy, that inspection of the copy document would nonetheless be permitted. It may be that a creditor who searched the NPII prior to 24 January 2000 may have come to believe that the applicant had not presented a Statement of Affairs to the second respondent prior to that date, but is hard to see how any injustice could flow from that matter even assuming that a creditor was induced to hold that belief. The trustee had the original, or at least an original, of the Statement of Affairs on 17 December 1999, hence no injustice could accrue to the trustee from the fact that it was only a copy of the Statement of Affairs which was presented to the second respondent for filing on that occasion. It is at least theoretically possible that the trustee could be prejudiced if the Statement of Affairs is regarded as having been filed when it was presented to the second respondent on 17 December 1999, if the trustee abstained from lodging an objection to discharge until 23 January 2003 upon the faith of an entry in the NPII which recorded the Statement of Affairs as having been filed on 24 January 2000. But the trustee has chosen not to take part in these proceedings. He has not asserted, even in correspondence, that any particular prejudice would accrue to him if the relief which the applicant seeks is granted. Whilst the trustee does not consent to the orders sought being made, it does not oppose them. The onus of showing `substantial injustice' lies upon the person who asserts it, and it must be the irregularity which occasions the substantial injustice.

21 In these circumstances, I am satisfied that substantial injustice has not been caused by the defect or irregularity constituted by the presentation by the applicant to the second respondent for filing on 17 December 1999 of a copy of the signed Statement of Affairs, rather than the original. Section 306 is a self-executing provision if the conditions which enliven its operation are satisfied. Once a judgment is made by a Court that those conditions are satisfied, there is no residual discretion in the Court to deny what would otherwise be the operation of the section. In Re: Ex parte D R Trease [1995] FCA 494 (unreported, Tamberlin J, 14 July 1995) the fact that a notice of objection had been lodged by the trustee was regarded as relevant to an application for abridgment under s 33 of the Act of the three year period fixed by s 149(3) of the Act. It was later established that the Court does not have power to abridge that time: Nilant v Macchia (1997) 78 FCR 419. Tamberlin J's observations were made in a context different from the operation of s 306 of the Act.

22 However, it is not appropriate that I should make a declaration in the terms sought, that the Statement of Affairs of the applicant is deemed to have been filed in compliance with s 54 of the Act on 17 December 1999 firstly, because the filing of a Statement of Affairs on that date would not be a compliance with s 54 of the Act because it was out of time, and secondly, because s 306 validates a proceeding which might otherwise have been invalidated by a formal defect or irregularity. Section 306 is not, in terms, a `deeming' provision, although that may be its effect. Accordingly, the appropriate declarations are:

1. a declaration that the filing of the Statement of Affairs of the applicant dated 13 December 1999 with the second respondent on 17 December 1999 was not invalidated by reason of the fact that a copy only of the Statement of Affairs was then provided to the second respondent; and

2. a declaration that the applicant was discharged from bankruptcy pursuant to s 149 of the Bankruptcy Act 1966 (Cth) on 17 December 2002.

23 My attention was drawn by the solicitor for the second respondent to the provisions of s 33A of the Act which commenced operation on 5 May 2003. Section 33A provides as follows:

`Section 33A Alteration of Filing Date for Statement of Affairs

(1) This section applies to a Statement of Affairs that was filed for the purposes of section 54, 55, 56B, 56F or 57 by a bankrupt, or by a person who later became a bankrupt.

(2) If the Court is satisfied that a person believed, on reasonable grounds, that the statement had already been filed at a time before it was actually filed, the Court may order that the statement is to be treated as having been filed at a time before it was actually filed.

(3) The Court cannot make an order that would result in the person being discharged from bankruptcy earlier than 30 days after the order is made.

(4) In this section: "filed" includes presented, lodged or given.'

24 The applicant's solicitor specifically abjured reliance on s 33A in support of this application, hence there is no need for me to consider whether that section has any potential for operation in the circumstances of a case such as the present. The solicitor for the second respondent submitted that `it may be' that s 33A now codifies the power of the Court to deal with situations contemplated by the section, such that s 306 and other remedial provisions in the Act cannot apply to situations where there is an incorrect or incomplete filing of a Statement of Affairs. No authority was cited in support of this proposition, nor were any detailed submissions put in support of it. There are, of course, cases in which general remedial provisions have been held to be of no application in relation to specific statutory enactments: see eg David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265. The proposition that s 33A operates to the exclusion of s 306 is not one which I would be prepared to accept absent convincing argument. When s 306 is applied in the manner referred to by Finkelstein J in Sofia and by Weinberg J in Nilant, the act of a party (filing) is regarded as effective notwithstanding a formal defect (provision of a copy). That is not the same processes as is envisaged by s 33A. The application of s 306 in the present case produces the result that the applicant was discharged from bankruptcy on 17 December 2002. That is not a result which could be achieved by the application of s 33A having regard to the provisions of s 33A(3).

25 A problem with the notion that `filing' in s 54 refers to an act of a party, and with the use of s 306 to overcome the problem caused by the fact that only a copy of the Statement of Affairs was presented to the second respondent, when the original was required is uncertainty as to the date on which the Statement of Affairs is `filed' for the purposes of the Act. That uncertainty may suggest that the dissenting views expressed by Hill J in Nilant have added force, but I am bound to apply the decision of the majority. The second respondent cannot authoritatively determine the application of s 306 to, for example, the presentment of a copy of the Statement of Affairs, and the second respondent would be justified in entering the date on which the original Statement of Affairs is filed with the second respondent in the NPII, even though a Court may later determine by the application of s 306 that the document was filed at an earlier date, albeit by provision of a copy.

26 The applicant originally sought an order for costs against the trustee and against the second respondent. During the course of submissions, the claim for costs against the second respondent was abandoned. The root cause of the problem which ultimately confronted the applicant was his own failure to comply with the provisions of s 54 of the Act and the need for him to call in aid the provisions of s 306 of the Act in order to overcome defects or irregularities which were of his own making. In those circumstances, it is not appropriate for an order to be made that the costs of the application should be paid by the trustee, who did not play any part in the proceedings.

27 The second respondent appeared because it was named as a respondent, although no relief was sought against it. The second respondent properly confined its submissions to matters of general application, and in particular on the importance which the filing of a Statement of Affairs in the office of the second respondent has for the purposes of the bankruptcy administration. The solicitor for the second respondent provided helpful assistance, as the applicant's solicitor ultimately properly acknowledged in the resolution of the application. In the circumstances, it is appropriate that the applicant should pay the second respondent's costs of the application.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate:

Dated: 17 December 2003

Solicitor for the Applicant:	Levitt Robinson Solicitors
Solicitor for the Second Respondent:	Australian Government Solicitor
Date of Hearing:	9 December 2003
Date of Judgment:	17 December 2003