Asuzu v The Council of NSW Bar Association
[2015] FCCA 210
•20 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ASUZU v THE COUNCIL OF NSW BAR ASSOCIATION & ANOR | [2015] FCCA 210 |
| Catchwords: BANKRUPTCY – Failure to file Statement of Affairs – Court’s power to abridge time from date of filing – power to grant automatic discharge – annulment of bankruptcy. |
| Legislation: Bankruptcy Act 1966, ss.33(1)(c), 33A(2), 54(1), 149, 153B, 178, 181A, 306 |
| Colgate-Palmolive Co v Cussons Pty Ltd (1996) 46 FCR 225 Frost v Sheehan [2009] FCAFC 20 Nilant v Macchia [2000] FCA 1528 |
| Applicant: | IGNATIUS NWAFOR ASUZU |
| First Respondent: | THE COUNCIL OF NSW BAR ASSOCIATION |
| Second Respondent: | HUGH CHARLES THOMAS |
| File Number: | SYG 3086 of 2014 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 8 December 2014 |
| Date of Last Submission: | 8 December 2014 |
| Delivered at: | Sydney |
| Delivered on: | 20 February 2015 |
REPRESENTATION
| The Applicant appeared in person |
| Solicitors for the First Respondent: | Hickson's Lawyers |
| Solicitors for the Second Respondent: | Sally Nash & Co |
ORDERS
The Application filed 6 November 2014 be dismissed.
The Applicant pay the costs of the Respondents.
THE COURT NOTES THAT:
A.Hugh Charles Thomas is entitled to be indemnified from the bankrupt estate of the Applicant for his remuneration and these costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3086 of 2014
| IGNATIUS NWAFOR ASUZU |
Applicant
And
| THE COUNCIL OF NSW BAR ASSOCIATION |
First Respondent
| HUGH CHARLES THOMAS |
Second Respondent
REASONS FOR JUDGMENT
Introduction
By way of an Application filed 6 November 2014, the Applicant sought the following Orders:
1. An Order pursuant to Section 33(1)(c) of the Bankruptcy Act 1966 (as amended), abridging the time from the date of filing by the bankrupt (Bankruptcy date: 27/01/2009) of his Statement of Affairs with the Official Receiver, to the date of his entitlement to an automatic discharge from bankruptcy be abridged from 3 years to nil, pursuant to Section 149(4) of the Bankruptcy Act, or to such other time as the Court thinks fit.
2.In the alternative to Order 1 above, an Order abridging the time in which the bankrupt may apply to the Trustee for an automatic discharge from his bankruptcy pursuant to Section 149(4) of the Bankruptcy Act 1966 (as amended), be abridged from 3 years to nil or to such other time as the Court thinks fit of proper.
3.In the alternative, if applicable, an Order annulling the existing Order declaring the applicant to be bankrupt.
4.Such further and other Orders as the Court thinks fit.
His application was supported by an affidavit sworn 4 November 2014.
By way of Notice stating grounds of opposition to application filed 9 November 2014, the Respondent Trustee in the Applicant’s bankruptcy intended to oppose the application on the following grounds:
1.Section 33 does not apply to Statements of Affairs.
2.In Macchia v Nilant (Trustee) [2006] FCA 213 at paragraph 40, the Federal Court considered the issue.
3.The notation on the NPII search is not conducted by the Respondent Trustee in Bankruptcy but by the Official Received in Bankruptcy pursuant to the Bankruptcy Regulations to maintain the NPII.
4.The Respondent Trustee in Bankruptcy does not accept the Applicant’s Statement of Affairs. It is lodged by the Applicant with the Official Receiver who decides whether or not to accept or reject it.
5.The Bankruptcy Act puts that onus entirely on the bankrupt and the Official Receiver in Bankruptcy with respect to the Statement of Affairs.
6.The Applicant left Australia during his bankruptcy and has only recently returned.
7.The Applicant’s Statement of Affairs was filed by the Applicant on 13 October 2014 with the Official Receiver and noted on the NPII.
8.The position in relation to the Applicant’s Statement of Affairs has no bearing on the conduct of his Trustee in Bankruptcy and therefore his Application is misconceived in its entirety and should be dismissed with indemnity costs.
The Respondent relies on affidavits sworn 19 November 2014 by Christie Boyd and 5 December 2014 by the Respondent Trustee in bankruptcy.
The Application names the Council of NSW Bar Association as the First Respondent, and the Trustee as the Second Respondent. The former was the petitioning creditor.
Background
The Applicant is a bankrupt legal practitioner. Federal Magistrate Raphael (as he then was) made the sequestration order on 27 January 2009, noting that the act of bankruptcy was 20 March 2008. The Creditor’s Petition records that the bankrupt owed the First Respondent $17,658.28 in respect of judgment debt and interest in matter 8455/07 in the Local Court of NSW. The bankrupt participated in the Creditor’s Petition proceedings and the Creditor’s Petition was adjourned several times. Ultimately however, the sequestration order was made in his absence. Indeed it is common ground that the bankrupt left Australia in December 2008, travelled to Nigeria, and did not return until 10 March 2011. It is further common ground that the Applicant did not file a Statement of Affairs until 13 October 2014. The first trustee was in fact the Official Trustee in Bankruptcy. The current trustee was appointed on 25 December 2009 pursuant to s.181A of the Bankruptcy Act 1966 (hereafter referred to as ‘the Act’).
Applicant’s contentions
Doing the best the Court can to understand the Applicant’s case, he contends that he did not know that he had to file a Statement of Affairs, and its significance in terms of an automatic discharge from bankruptcy. He contends that the Trustee could have, and should have communicated with him by email in Nigeria to inform him of the need to file a Statement of Affairs, but unreasonably failed to do so. He contends that he would be greatly prejudiced in resuming employment as a legal practitioner if he now needs to wait until October 2017 to be automatically discharged.
Respondent’s contentions
The Respondents contend that, as a legal practitioner at the time of his bankruptcy, the Applicant either knew or should have known about the requirement to file a Statement of Affairs. In any event, the Trustee sought to communicate with the Applicant in Nigeria, and at his last known address in Australia, and in fact succeeded in speaking with him by telephone on 17 March 2009, such that the bankrupt was aware of the requirement to file. The Trustee contends he was not aware of the Applicant’s email address.
Applicable law
The obligation to file a Statement of Affairs is created by s.54(1) of the Act:
(1) Where a sequestration order is made, the person against whose estate it is made shall, within 14 days from the day on which he or she is notified of the bankruptcy:
(a) make out and file with the Official Receiver a statement of his or her affairs; and
(b) furnish a copy of the statement to the trustee.
Penalty: 25 penalty units.
The significance of the Statement of Affairs was explained by Justice Hill in Nilant v Macchia [2000] FCA 1528 at 245:
The obligation to file a statement of affairs in a public register is intended to make information concerning the bankrupt’s affairs available to creditors and, for that matter, members of the public. The former may inspect without payment of a fee, the latter only on payment of a fee. But it is in the interests of the public in the encouragement of morality in trading that the financial situation of a bankrupt debtor be open to inspection. Because, ordinarily, the administration of the estate and ultimate distribution of dividends from the estate, will be dependent upon the trustee having full details of the trade dealings and debts of a debtor, the statement is to be made available as well to the trustee in bankruptcy.
The Statement of Affairs thus has an important purpose. A clear obligation is created on the bankrupt. The recipient of the Statement is the Official Receiver, not the bankrupt’s trustee, though it is not unusual for the trustee to often act as the conduit for the transmission of the Statement from the bankrupt to the Official Receiver.
The Applicant relies on s.33(1)(c) of the Act in conjunction with s.149. Section 33 states:
(1) The Court may:
(a) upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;
(b) at any time allow the amendment of any written process, proceeding or notice under this Act; or
(c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.
Section 149 provides as follows:
(1) Subject to section 149A, a bankrupt is, by force of this subsection, discharged from bankruptcy in accordance with this section.
(2) If:
(a) the bankrupt became a bankrupt before the commencement of section 27 of the Bankruptcy Amendment Act 1991 ; and
(b) immediately before the commencement of that section, either:
(i) paragraph 149(3)(c) of the Bankruptcy Act 1966 as amended applied in relation to the bankrupt; or
(ii) an order under subsection 149(8) or (12) of the Bankruptcy Act 1966 as amended was in force in relation to the bankrupt;
the bankrupt is discharged at the end of the period of 3 years from:
(c) the date on which the bankrupt filed his or her statement of affairs; or
(d) the date of commencement of that section;
whichever is the later.
(3) If the bankrupt became a bankrupt before the commencement of section 27 of the Bankruptcy Amendment Act 1991 , and subsection (2) does not apply in relation to the bankrupt, the bankrupt is discharged at:
(a) the end of the period of 3 years from the date on which the bankrupt filed his or her statement of affairs; or
(b) the commencement of that section;
whichever is the later.
(4) If the bankrupt becomes a bankrupt after the commencement of section 27 of the Bankruptcy Amendment Act 1991 , the bankrupt is discharged at the end of the period of 3 years from the date on which the bankrupt filed his or her statement of affairs.
There is no question in this case that the bankrupt would become automatically discharged at the end of 3 years from the date on which he filed his Statement of Affairs.
It is clear law that s.33(1)(c) does not give the Court the power to abridge the time limited by s.149(3) of the Act: Nilant v Macchia (1997) 18 FCR 419.
There was some reference in submissions to the potential application of s.306 of the Act, which states:
(1) 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 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.
(2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.
The Court could not discern how this section could apply on the facts of the present case. In any event, the Full Court in Nilant v Macchia [2000] FCA 1528 held that s.306(1) is not available to a person who has made no attempt to comply with s.54(1).
During submissions, the Applicant contended that s.33A(2) of the Act applied. Section 33A states:
(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 the 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.
As the evidence did not disclose anything to suggest that the Applicant “believed, on reasonable grounds, that the statement had already been filed before it was actually filed” on 13 October 2014, there is no basis for the application of this section.
In the alternative, the Applicant sought annulment of the bankruptcy. In this regard, s.153B provides:
(1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.
(2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented.
(3) The trustee must, before the end of the period of 2 days beginning on the day the trustee becomes aware of the order, give to the Official Receiver a written certificate setting out the former bankrupt's name and bankruptcy number and the date of the annulment.
Penalty: 5 penalty units.
Note: See also section 277B (about infringement notices).
(4) Subsection (3) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code .
The Applicant leads no evidence in support of annulment and so this part of his case fails.
Section 178 of the Act was also mentioned in submissions: This section states:
(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
(2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision.
Again, it is not possible to discern how s.178 might apply to the facts of this case. The requirement to file a Statement of Affairs is a statutory requirement. There is no evidence to suggest that there is any conduct of the Trustee that needs to be supervised (Frost v Sheehan [2009] FCAFC 20).
Discussion
Were it not for the fact that the Applicant is a legal practitioner eager to return to practice, one might have a degree of sympathy for him, and his contention that he did not know that he was required to file a Statement of Affairs, and the relevance of this to automatic discharge. The fact is that he is a legal practitioner who participated in his bankruptcy proceedings, but departed for overseas shortly before his estate was sequestrated. Even if he did not know of the existence and significance of ss.54(1) and 149 of the Act, he certainly should have known or made enquiry, whether he was overseas or in Australia. His complaint that the Trustee did not tell him of his obligation or communicate with him by email is inconsistent with the documentary evidence. The parties were given the opportunity to cross-examine the deponents of affidavits relied on in their case, but declined. The Applicant could have sought to adduce email or other correspondence with the Trustee or Official Receiver corroborating his contention that they could have communicated by email with him, but he did not do so. One wonders whether this evidence would have made the slightest difference to his case, given the clear provisions of the Act. Given that s.33(1)(c) does not give the Court the power to abridge the time prescribed by s.149(4), there is no power to grant the application sought.
Orders
The Respondents sought Orders for dismissal of the application, as well as indemnity costs. The case for indemnity costs is not made out in accordance with the well-known authorities: Colgate-Palmolive Co v Cussons Pty Ltd (1996) 46 FCR 225. The usual Order for costs will be made.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 20 February 2015
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