Gaynor v Public Trustee
[2023] FedCFamC2G 653
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Gaynor v Public Trustee [2023] FedCFamC2G 653
File number(s): SYG 1157 of 2023 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 21 July 2023 Catchwords: BANKRUPTCY – application by creditor for interlocutory mandatory injunction that the bankrupt’s trustee in bankruptcy file a notice under s 149C of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) objecting to the discharge of the bankrupt by operation of s 149(4) of the Bankruptcy Act – whether the creditor has a good arguable case that the trustee in bankruptcy declined to file a notice of objection because it did not ask itself the correct question – no arguable case – whether even if there were an arguable case any relief would be available – interim and final application for relief dismissed. Legislation: Acts Interpretation Act 1901 (Cth) ss 36(1), 36(2)
Bankruptcy Act 1966 (Cth) ss 81, 149(4), 149A, 149B, 149C, 149D(1), 149G, 264B
Cases cited: Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 Division: General Number of paragraphs: 24 Date of hearing: 21 July 2023 Place: Sydney Counsel for the Applicant: Mr P King, by video Solicitor for the Applicant: Robert Balzola And Associates The First and Second Respondents: No appearance by, or on behalf of, the respondents ORDERS
SYG 1157 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: BERNARD GAYNOR
Applicant
AND: THE PUBLIC TRUSTEE
First Respondent
GARRY BURNS
Second Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
21 July 2023
THE COURT ORDERS THAT:
1.The application for interim relief made by the application filed on 21 July 2023 is dismissed.
2.The application is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
In the afternoon of 21 July 2023 the applicant, Mr Gaynor, by his counsel, applied ex parte for the granting of the following interim relief:
Application pursuant to regulations 5.02 and 4.01 Federal Circuit Court Rules 2001 and section 149B BA the Public Trustee [sic] make urgent application to the Official Receiver before the statutory period of bankruptcy ends being 3 years and one day from [the] date of Bankruptcy being 20 July 2020 (Date of Bankruptcy) to 24 July 2023 (the third year plus one day) on or before close of business on 21 July 2023.
Mr Gaynor applied for this interim relief in aid of the following claim for final relief:
1.This is an application in mandamus pursuant to section 149D Bankruptcy Act 1966 [‘BA’].
2. Writ of mandamus pursuant to ss. 33 Judiciary Act 1903 and 44 Federal Circuit and Family Court of Australia Act 2021, the Public Trustee [sic] to perform its duty by lodgement of objection to the discharge of bankruptcy prior to automatic discharge by operation of section 149 BA of the bankrupt Garry Burns [AFSA Reference NSW 1771/20/7] on statutory grounds prescribed in section 149D BA.
At the conclusion of the hearing I dismissed the application for interim relief, and, at the invitation of Mr Gaynor’s counsel, the application itself, noting that I would publish my reasons later. These are my reasons.
BACKGROUND
On 21 July 2020 the second respondent, Mr Burns, on his own petition, became bankrupt; and the Official Trustee became Mr Burns’ trustee in bankruptcy.
Mr Burns is due to be discharged from his bankruptcy on Monday 24 July 2023 by operation of s 149(4) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), which provides:[1]
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.
[1] Mr Burns is due to be discharged on 24 July 2023 even though the day from which the three years specified in s 149(4) of the Bankruptcy Act is to be calculated is 20 July 2020. That is so because of s 36(1) of the Acts Interpretation Act 1901 (Cth), item 5 of which provides that where a period is expressed to begin from a specified day, the calculation of the period “does not include that day”; and s 36(2) of that Act, which provides that if an Act requires or allows a thing to be done, and the last day for doing the thing is a Saturday, a Sunday, or a holiday, then the thing may be done on the next day that is not a Saturday, a Sunday, or a holiday.
Subsection 149(4) is subject to the power conferred on a bankrupt’s trustee by s 149B of the Bankruptcy Act to file with the Official Receiver a notice of objection to the discharge. Section 149B provides as follows:
(1) Subject to the following provisions of this Subdivision, at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee may file with the Official Receiver a written notice of objection to the discharge.
(2) The trustee of a bankrupt’s estate must file a notice of objection to the discharge if the trustee believes:
(a)that doing so will help make the bankrupt discharge a duty that the bankrupt has not discharged; and
(b) that there is no other way for the trustee to induce the bankrupt to discharge any duties that the bankrupt has not discharged.
Section 149C of the Bankruptcy Act provides that the notice of objection the trustee may give under s 149B must:
(a) set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and
(b) refer to the evidence or other material that, in the opinion of the trustee, establishes that ground or each of those grounds; and
(c)state the reasons of the trustee for objecting to the discharge on that ground or those grounds.
Subsection 149D(1) of the Bankruptcy Act identifies the “grounds of objection that may be set out in a notice of objection”. Relevant to these reasons are the grounds specified in paragraphs (m) and (n):
(m)the bankrupt failed to attend an interview or examination for the purposes of this Act without having given a reasonable explanation to the trustee for the failure;
. . . .
(n)the bankrupt failed, whether intentionally or not, to disclose to the trustee the bankrupt’s beneficial interest in any property.
Under s 149G of the Bankruptcy Act, an objection takes effect at the beginning of the day on which details of the notice of objection are entered in the National Personal Insolvency Index. The consequence of an objection taking effect under s 149G is provided for by s 149A of the Bankruptcy Act, subsection (1) of which provides:
If an objection to the discharge of a bankrupt has taken effect in accordance with section 149G, then, unless the objection is withdrawn or cancelled, the reference in whichever of subsections 149(2), (3) and (4) applies in relation to the bankrupt to the period of 3 years from the date on which the bankrupt filed his or her statement of affairs is taken to be a reference to the prescribed number of years from the prescribed date.
On 14 April 2023, in response to an application Mr Gaynor made pursuant to s 81 of the Bankruptcy Act, a summons was issued requiring Mr Burns to appear before a Registrar of this Court at 10.15 am on 31 May 2023 for the purpose of being examined. The Registrar before whom Mr Burns was required to appear on 31 May 2023 found the summons was served on Mr Burns on or about 15 April 2023. Mr Burns, however, did not appear before the Registrar on 31 May 2023; and the Registrar adjourned the examination to 11 July 2023.
In the meantime, by letter dated 22 June 2023 (which was not tendered in support of the application for interim relief), Mr Gaynor, through his lawyer, Mr Balzola, requested the Official Trustee file an objection to Mr Burns’ discharge from bankruptcy. By letter dated 5 July 2023 a case manager on behalf of the Official Trustee informed Mr Balzola as follows:
The Official Trustee has considered your request and respectfully advises that an objection to discharge will not be lodged at this time as there are no grounds to do so. Mr Burns has been compliant in all requests made by the trustee, and, to date, there is no evidence that the bankrupt has provided false or misleading information to the trustee.
If your client has any further information or evidence of these claims, please provide to the trustee for further investigation.
Mr Burns did not appear before the Registrar on 11 July 2023. After concluding Mr Burns had been given notice that he was required to appear on 11 July 2023, the Registrar adjourned the examination of Mr Burns for mention to 10.15 am on 21 July 2023 (such mention to proceed by web conference on MS Teams); and directed, pursuant to s 264B of the Bankruptcy Act, that a warrant be issued for the apprehension of Mr Burns, but that “it lie in the Registry for a period of 7 days or until further order of the Court”.
On 11 July 2023 Mr Balzola sent a letter to the Official Trustee in which he attached a copy of the order the Registrar made that day; and stated Mr Burns had failed to comply with s 149D(1)(m) of the Bankruptcy Act. Mr Balzola also attached “…as [an] example of falsity of the Bankrupt’s answer is copy of [Mr Burns’] PayPal account not disclosed to you”. Mr Balzola stated that the “examination is required to demonstrate in the RARTA filed on 20 July 2020 the bankrupt intentionally provided false information to you the Trustee in further breaches of section 149D(1)(d), (da), (e) and (ma)”.
At 4:46 pm on 20 July 2023 the Registry of this Court received a letter dated 11 July 2023 from Mr Balzola in which he stated the following:
1.We act for the Applicant in proceedings Bernard Gaynor v Garry Burns [SYG133/2023]
2.This matter is currently before Judicial Registrar Morgan and resumes examination tomorrow, 21 July 2023.
3.Examination reveals there are assets in the possession of the bankrupt that are allegedly not disclosed to the Trustee in Bankruptcy, the Public Trustee [sic].
4.On 11 July 2023 the Judicial Registrar made the attached orders.
5.We attach the Creditors Report of the Public Trustee dated 30 July 2020 indicating the Date of Bankruptcy is 21 July 2020.
6.The Public Trustee notifies by operation of section 149 Bankruptcy Act, the bankruptcy will discharge by operation of law on Saturday, 22 July 2023.
7.On 11 July 2023 we wrote on the applicant's behalf to the Public Trustee the attached letter dated 11 July 2023 alleging inter alia breaches of s.149D BA and calling on the Public Trustee to lodge objection to discharge of bankruptcy under section 149B prior to discharge date of 22 July 2023 (this Saturday).
8.Yesterday, we are notified by telephone call from the Public Trustee it is considering its position to lodge objection but will not be able to make a decision until midday Friday 21 July 2023.
9.This is therefore an urgent application to lodge the application with interim (urgent) application pursuant to regulations 5.02 and 4.10 Federal Circuit Court Rules 2001 for interim order upon the Public Trustee to lodge objection prior to close of business 21 July 2023 (tomorrow).
10.There are three creditors to the bankrupt estate.
11.There is evidence emerging from the examination of significant funds that may lead to a higher dividend distribution for the benefit of the creditors to the bankrupt estate in the vicinity of $13,592.00.
12. There is also emerging evidence from the examination calling into question as expressed in our letter dated 11 July 2023 to the Public Trustee.
13.We therefore move the application and urgent interim orders for hearing tomorrow.
Mr Gaynor, through Mr Balzola, filed an application claiming the interim and final relief to which I refer at the beginning of these reasons. The application and Mr Balzola’s letter came to my attention in the morning of 21 July 2023. At my direction, the application for interim relief was listed before me for hearing at 2.15 pm on 21 July 2023.
Before 2.15 pm on 21 July 2023 the Official Trustee sent the following letter dated 21 July 2023 to Mr Balzola.
I refer to correspondence dated 11 July 2023 where you requested the Official Trustee lodge an objection to Mr Burns' discharge pursuant to section 149D(1)(m) of the Bankruptcy Act 1966 (Cth) (the Act).
The Official Trustee (OT) has considered your request and respectfully advises that the OT will not exercise their discretion and lodge an objection to discharge in the bankrupt estate of Garry Burns at this time.
While it is noted that Mr Burns failed to attend an examination pursuant to section 81 of the Act, Mr Burns has subsequently accounted to the OT for his reasons for that failure, and the OT is satisfied that the excuse is reasonable. As such, there are no grounds on which the OT can lawfully lodge an objection to Mr Burn's discharge from bankruptcy.
As previously advised in letter dated 05 July 2023, Mr Burns has been compliant in all requests made by the trustee, and, to date, there is no evidence that the bankrupt has provided false or misleading information to the trustee.
If your client has any further information or evidence of these claims, please provide to the trustee for further investigation. Alternatively, should you or your client have any information that supports any potential breach of the Act committed by Mr Burns, please provide to the trustee for assessment. A list of offence provisions is available on the AFSA website, and all genuine breaches are referred to AFSA's Enforcement section for investigation.
SUBMISSIONS
At the interlocutory hearing I admitted into evidence an unsworn affidavit of service which Mr Balzola verified after he was sworn as a witness. Mr Balzola also gave evidence of what occurred at the directions hearing before the Registrar in the morning of 21 July 2023. Mr Balzola said that Mr Burns appeared; Mr Burns gave an explanation why he did not appear on the previous occasions; and Mr Burns said that Mr Gaynor’s application to have him examined was a waste of the Court’s resources, because Mr Burns was due to be discharged from his bankruptcy on 24 July 2023.
Counsel for Mr Gaynor submitted that the application for interim relief was to be determined on the basis of the principles that govern the grant of interlocutory injunctions, as stated by the High Court in Australian Broadcasting Corporation v O’Neill.[2] Counsel for Mr Gaynor submitted that the Official Trustee’s letter dated 21 July 2023 shows it asked the wrong question. Counsel submitted that, given Mr Burns’ failure to appear before the Registrar in answer to the summons, the Official Trustee should have asked, but failed to ask, the questions posed by s 149B(2) of the Bankruptcy Act, namely, whether Mr Burns had failed to discharge a duty to appear before a Registrar for the purpose of being examined, and, if so, whether there was no way, other than by filing an objection to Mr Burns’ discharge, to induce Mr Burns to discharge his duty to attend before the Registrar for the purpose of being examined. Counsel also submitted there was an arguable case that Mr Burns had provided false information to the Official Trustee; but after I noted that allegations of dishonesty needed to be stated with precision, counsel did not press this aspect of Mr Gaynor’s case.
[2] Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57
DETERMINATION
It is the case that, when determining whether to file a notice of objection under s 149B of the Bankruptcy Act, a trustee in bankruptcy must consider the matters specified in that section. A trustee’s duty to do so, however, only arises after the preconditions for filing a notice of objection have been satisfied. The preconditions are implied by s 149C of the Bankruptcy Act:
(a)First, the trustee must set out each of the grounds on which the trustee objects, those grounds being one or more of the grounds specified in s 149D(1) of the Bankruptcy Act. That implies the trustee must have formed the opinion that one or more of the grounds specified in s 149D(1) of the Bankruptcy Act has or have been satisfied.
(b)Second, the trustee must refer to evidence or other material which, in the trustee’s opinion, establishes that ground or each of those grounds stated in the notice. That implies the trustee must have formed the opinion referred to in (a) on the basis of evidence.
(c)Third, the trustee must state his or her reasons for objecting on that ground or those grounds. That implies the trustee must have formulated reasons for forming the opinion that one or more of the grounds specified in s 149D(1) of the Bankruptcy Act has or have been satisfied
Before, therefore, Mr Gaynor could claim to have a good arguable case that the Official Trustee failed to ask the question it ought to have asked when deciding whether to exercise the power conferred by s 149B of the Bankruptcy Act, it was necessary that Mr Gaynor show that these preconditions for the exercise of the power were satisfied.
Counsel for Mr Gaynor submitted it was reasonably arguable that the ground stated in s 149D(1)(m) of the Bankruptcy Act was satisfied. I do not accept that submission. The ground stated in s 149D(1)(m) contains two elements: the bankrupt must have failed to attend an interview or examination for the purposes of the Bankruptcy Act; and the bankrupt has not given a reasonable explanation “to the trustee” for that failure. The Official Trustee’s letter dated 21 July 2023 addresses the question s 149D(1)(m) of the Bankruptcy Act required the Official Trustee to address in response to Mr Balzola’s letter dated 11 July 2023. It is apparent from its letter that the Official Trustee sought from Mr Burns his explanation for not attending the examination hearings; Mr Burns gave an excuse for not attending; and the Official Trustee was satisfied the excuse Mr Burns gave was reasonable. Counsel for Mr Gaynor did not point to any matter that could arguably support a claim that the Official Trustee made a jurisdictional error in being satisfied that Mr Burns had given a reasonable excuse for having failed to attend Court for the purpose of being examined.
Thus, Mr Gaynor has no good arguable case that the Official Trustee, in deciding it would not file an objection under s 149C of the Bankruptcy Act in relation to Mr Burns’ bankruptcy, failed to address the question it ought to have addressed and, therefore, made a jurisdictional error in declining to file a notice of objection. It was for this reason that on 21 July 2023 I ordered that the application for interim relief be dismissed.
Even if, however, I were to have concluded Mr Gaynor did have a good arguable case that the Official Trustee made a jurisdictional error in declining to file a notice of objection, I would have explored with counsel for Mr Gaynor whether it was open to the Court to make an order in terms of the interim order Mr Gaynor claimed. The difficulty is that an order to the effect Mr Gaynor sought, if made, would have required the Official Trustee to file a notice of objection by 24 July 2023. Such an order, however, even if made on an interim basis, would have purportedly involved this Court exercising the power s 149B of the Bankruptcy Act confers on a trustee in bankruptcy. This Court does not have jurisdiction to determine the matters s 149B of the Bankruptcy Act vests in a trustee in bankruptcy to determine.
There is another difficulty. Even if, at the conclusion of the hearing on 21 July 2023, I were satisfied Mr Gaynor had a good arguable case the Official Trustee had made a jurisdictional error in declining to file a notice of objection; I listed for final hearing on Monday 24 July 2023 the question whether the Official Trustee did make a jurisdictional error; and, after receiving evidence and hearing submissions on that question, I determined the Official Trustee did make a jurisdictional error in declining to file a notice of objection; the question whether any relief in the nature of mandamus should be issued would have arisen. That is so because there may well have been a real question whether the Official Trustee, as a matter of practicability, could have determined by 24 July 2023 whether to file a notice of objection.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 24 July 2023
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