IN THE MATTER OF VAIMOMOANA VAU (AKA VAIMOMOANA ATU, FAASAVALU)

FEDERAL CIRCUIT COURT OF AUSTRALIA

IN THE MATTER OF VAIMOMOANA VAU (AKA VAIMOMOANA ATU, FAASAVALU)

[2016] FCCA 2038

Catchwords:
BANKRUPTCY – Whether the Court should exercise its power to dispense with the requirements under the Bankruptcy Rules 2016 – whether debt agreement should be declared void – whether the relevant documents were served on the Official Receiver in accordance with the legislation – whether the notice to creditors was properly served in accordance with the legislation – whether a general provision permits the Court to depart from requirements – application dismissed.

Legislation:

Bankruptcy Act 1966, ss.27, 30, 40(1)(hc), 40(1)(hd), 185EC, 185ED, 185F 185H, 185I, 185T, 185P, 185Q, 185QA, 185U

Federal Circuit Court (Bankruptcy) Rules 2016, rr.1.04, 9.03, 9.04

Applicant:

VAIMOMOANA VAU (AKA VAIMOMOANA ATU, FAASAVALU)

File Number:

SYG 2104 of 2016

Judgment of:

Judge Street

Hearing date:

9 August 2016

Date of Last Submission:

9 August 2016

Delivered at:

Sydney

Delivered on:

9 August 2016

REPRESENTATION

Solicitors for the Applicant:

Ms W Bure
Grace Lawyers

ORDERS

The application for dispensation with requirements under r.9.03 and r.9.04 of the Federal Circuit Court (Bankruptcy) Rules 2016 is dismissed.
The application is dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2104 of 2016

VAIMOMOANA VAU (AKA VAIMOMOANA ATU, FAASAVALU)

Applicant

REASONS FOR JUDGMENT

This is an application within the Court’s jurisdiction under s.27 of the Bankruptcy Act 1966. On 5 August 2016 the applicant moved for an order under s.185T of the Bankruptcy Act 1966 declaring a debt agreement that was accepted by a resolution of creditors of 10 February 2016 as being null and void. The applicant was the debtor party to the debt agreement and the application did not join any respondent and was not served on any other party and sought expedition.
The application was not the subject of a request for immediate referral to the duty judge and was listed as returnable before this Court at 3 pm on 8 August 2016, two days before the automatic termination of the debt agreement in the present case under s.185QA.
Section 185T provides as follows:
Applying for an order declaring a debt agreement void
Persons who may apply for an order
(1) The debtor (or the debtor's personal representative if the debtor has died), a creditor or the Official Receiver may apply to the Court for an order declaring that all, or a specified part, of a debt agreement is void.
Grounds for applying for an order
(2) A person mentioned in subsection (1) may apply for an order only if:
(a) there is doubt on a specific ground that all or part of the debt agreement was not made in accordance with this Part or does not comply with this Part; or
(b) the statement of affairs lodged with the debt agreement was deficient because it omitted a material particular or because it was incorrect in a material particular.
Time limit on applying for an order
(3) A person cannot apply for an order declaring a debt agreement void after all the obligations created by the agreement have been discharged.
Simultaneous application for a sequestration order
(4) A creditor may include an application for a sequestration order in an application for an order declaring all or part of a debt agreement void.
Effect of applying for a sequestration order
(5) For the purposes of this Act, making an application for a sequestration order under subsection (4) is taken to be presenting a creditor's petition against the debtor, but subsection 43(1), sections 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to the application.
Section 185U provides as follows:
Making an order declaring a debt agreement void
Power to make order
(1) On an application under section 185T, the Court may make an order declaring a debt agreement void.
Limit on declaring debt agreement void on grounds of non-compliance with this Part
(2) The Court must not declare all or part of a debt agreement void on the ground that it does not comply with this Part if the agreement or part of the agreement complies substantially with this Part.
Declaring a debt agreement void on grounds of deficient statement of affairs
(3) The Court must not declare all or part of a debt agreement void on the ground that the statement of affairs lodged with the debt agreement was deficient, unless the Court is satisfied that it is in the creditors' interests to declare the agreement or part of the agreement void.
Sequestration order
(4) If the Court makes an order declaring all of a debt agreement void, the Court may also make a sequestration order if a creditor applied for the sequestration order.
Ancillary orders
(5) If the Court makes an order declaring all or part of a debt agreement void, the Court may make such other orders as the Court thinks fit.
(6) An order under subsection (5) may be an order directing a person to pay another person compensation of such amount as is specified in the order. This subsection does not limit subsection (5).
The requirements for the making of a debt agreement are identified in s.185H. The parties are identified by s.185I as being the debtor and the creditors to whom the debtor owed provable debts. The Bankruptcy Act 1966 provides a procedure for the acceptance of a debt agreement proposal. Section 185EC identifies the requirements for acceptance of a debt agreement.
Section 185ED provides as follows:
Cancellation of acceptance of debt agreement proposal for processing
Scope
(1) This section applies if:
(a) the Official Receiver has accepted a debt agreement proposal for processing; and
(b) the applicable deadline has not arrived.
Cancellation
(2) The Official Receiver may cancel the acceptance of the debt agreement proposal for processing if:
(a) the Official Receiver becomes aware that one or more affected creditors were not disclosed in the debtor's statement of affairs; or
(b) the Official Receiver becomes aware that:
(i) the debtor's statement of affairs; or
(ii) the debtor's subsection 185C(2B) statement;
was deficient because it omitted a material particular or because it was incorrect in a material particular; or
(c) the Official Receiver becomes aware of a material change in the debtor's circumstances that:
(i) was not foreshadowed in the debtor's subsection 185C(2B) statement or the debtor's statement of affairs; and
(ii) in the opinion of the Official Receiver, is capable of affecting an affected creditor's decision whether or not to accept the proposal; or
(d) the Official Receiver becomes aware of a matter that, if it had been known to the Official Receiver at the time of acceptance of the debt agreement proposal for processing, would have resulted in a refusal of acceptance on the grounds that subsection 185C(4) had not been complied with.
Notification of cancellation
(3) If the Official Receiver cancels the acceptance of a debt agreement proposal for processing, the Official Receiver must give written notice of the cancellation, and the reasons for it, to:
(a) the debtor; and
(b) affected creditors who are known to the Official Receiver.
Review
(4) If the Official Receiver decides to cancel the acceptance of a debt agreement proposal for processing, the debtor may apply to the Administrative Appeals Tribunal for review of the decision.
The effect of accepting the debt agreement is identified in s.185F.
In the present case the evidence suggests that prior to the acceptance of the debt agreement proposal on 20 January, the debtor instructed an agent that she wished to withdraw the debt agreement proposal because her husband would assist her in paying debts. The agent did not communicate that to the Official Receiver, and the creditors met and resolved to accept the debt agreement proposal.
The affidavit evidence suggested that by oversight the agent should have requested, in accordance with s.185ED, prior to the acceptance the discretionary cancelling of the debt agreement proposal by the Official Receiver.
Precisely when the applicant became aware of the absence of any communication to the Official Receiver is not apparent on the affidavit evidence before the Court, nor is it apparent when the alleged oversight became the subject of attention by the agent.
The Federal Circuit Court (Bankruptcy) Rules 2016 identify the requirements for an application under s.185T of the Bankruptcy Act 1966. Part of those requirements include ensuring that the application and supporting affidavit are served on the Official Receiver five days before the date fixed for hearing in accordance with r.9.03 and notice to creditors in accordance with form B13 at least five days before the fixed hearing in accordance with r.9.04.
The breach of a debt agreement is an act of bankruptcy under s.40(1)(hc). If the agreement is terminated under s.185T, this does not give rise to an act of bankruptcy as would occur if there was a termination of the agreement under ss.185P, 185Q and 185QA as identified in s.40(1)(hd).
There was evidence adduced by the applicant referring to an email communication sent to the Official Receiver raising the issue of an oversight alleged in relation to the debt agreement. The statutory declaration that was annexed to that email asserted that the applicant had given instructions that she wished to withdraw the debt agreement proposal prior to the acceptance by the creditors.
The representative on behalf of the Official Receiver relevantly said in an email dated 2 August:
We do not consider that the official receiver has administrative power under the Bankruptcy Act to treat the debt agreement as withdrawn, terminated or void. However, the official receiver would not oppose an application to the court by your client or the debtor and would abide any decision the court may make, including amending the national personal insolvency index if required.
It was in those circumstances that the applicant sought dispensation under r.1.04 of the Federal Circuit Court (Bankruptcy) Rules 2016 in relation to compliance with the requirements of r.9.03. In relation to the requirements of r.9.04, the applicant also sought dispensation. The only creditor with a debt over the amount of $5000 was the Commonwealth Bank.
The Court has been provided been an email sent at 12:17 pm today advising an officer of the Commonwealth Bank that the proceedings were returnable before the Court at 2:15 pm today, in relation to an application of s.185T of the Bankruptcy Act 1966.
When the matter first came before the Court at 3:00 pm on 8 August 2016, the Court raised with the applicant the provisions of the Federal Circuit Court (Bankruptcy) Rules 2016 and also raised issues concerning whether or not the facts supported the enlivening of the Court’s powers under s.185T(2) of the Bankruptcy Act 1966. The applicant sought an adjournment until 2:15 pm today which was granted by the Court, together with a direction requiring notification to the Commonwealth Bank of the applicant returnable today.
The Court does have a power to dispense with the requirements of the Federal Circuit Court (Bankruptcy) Rules 2016. On the evidence before the Court, if the Court was otherwise satisfied of the merits of the substantive application, the Court would have dispensed with the requirements of r.9.03. The notification to the Commonwealth Bank, however, is less satisfactory, as, effectively, less than two hours’ notice has been given to the Commonwealth Bank of the return of this application when the Rules provide at least five days. Again, the substantive merits of the application would impact on whether or not the Court should dispense with requirements of r.9.04 in a particular case.
In the present case, the solicitor for the applicant, Ms Bure, accepts that the application under s.185T(2) of the Bankruptcy Act 1966 must be based on the first limb in respect of para.(a). Relevantly, that there is doubt on a specific ground that all or part of the debt agreement was not made in accordance with this Part, or does not comply with this Part. It was the second limb of non-compliance with this Part that was the subject of argument by the solicitor by the applicant.
On the face of the evidence before the Court, there is no reason to doubt that the debt agreement was made in accordance with Part IX of the Bankruptcy Act 1966. The argument developed by the solicitor on behalf of the applicant as to non-compliance with the Part was in substance based on the proposition that the debt agreement could have been cancelled under s.185ED. That provision provides a discretion to the Official Receiver and does not give rise to an automatic cancellation.
Where the receiver has not received any request for cancellation, it cannot be said that there has been any non-compliance with Part IX of the Act. The error or mistake of the applicant, or the applicant’s agent in the present case, does not give rise to any doubt as to whether has been compliance with Part IX of the Bankruptcy Act 1966.
In order to obtain an order declaring the debt agreement void under s.185T, the applicant must satisfy the requirements of s.185T(2). On the evidence before this Court, I am not satisfied that the requirements of s.185T(2) are made out. The uncommunicated desires of the applicant or the error by the applicant’s agent are not grounds that of themselves give rise to doubt as to compliance with Part IX. The Court is not satisfied that the merits of the application warrant any dispensation of the requirements in the present case of r.9.04 of the Federal Circuit Court (Bankruptcy) Rules 1966. Further, on the merits of the application, the application under s.185T of the Bankruptcy Act 1966 must fail.
The solicitor for the applicant sought to support the making of the order claimed in the present case on the grounds of s.30 and submitted that it was necessary for the purpose of carrying out or giving effect to the Bankruptcy Act 1966 in the present matter to make an order declaring the debt agreement void.
While s.30 is a provision of wide scope and importance for the exercise of the bankruptcy jurisdiction, conferred by the Bankruptcy Act 1966, it is a general provision and does not permit as a matter of construction departure from requirements of specific provisions where those specific provisions confer powers on the Court. The powers conferred on the Court in relation to the termination of a debt agreement and the powers conferred in relation to the declaring void of a debt agreement are specific provisions. As a matter of statutory construction, the specific provisions exclude application of the general provision.
Accordingly, the Court is not satisfied that s.30 is capable of having application to the kind of relief sought in the present case. In any event, even if s.30 were to be held to have application in the present case, the Court is not satisfied that the making of the order sought in the application is “necessary for the purpose of carrying out, or giving effect to, the Bankruptcy Act 1966” in this matter.
The omission or failure by the applicant and the applicant’s agent in the present case does not constitute circumstances that make it necessary for the purposes of carrying out or giving effect to the provisions of the Bankruptcy Act 1966 concerning debt agreements to make the order sought. Further, if a debt agreement were to be subject to a declaration that it was void based on an uncommunicated, subjective view of the applicant debtor, that would materially undermine the scheme of debt agreements identified under Part IX.
The evidence before the Court does not satisfy the Court that the making of any order as sought by the applicant is necessary for the purpose of carrying out or giving effect to the Bankruptcy Act 1966 in this matter. Accordingly, the application for dispensation with requirements of rr.9.03 and 9.04 of the Federal Circuit Court (Bankruptcy) Rules 2016 is dismissed. The application is dismissed.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 25 August 2016

[2016] FCCA 2038

9 August 2016

Key Legal Topics

Areas of Law

Immigration

Legal Concepts

Judicial Review

Procedural Fairness

Jurisdiction

Natural Justice