Nelson, R.l. v Totterdell, G.F

[1990] FCA 582

C A T C H W O R D S

I	BANKRUPTCY - trustee's objection to statutory discharge -
application to extend for further period - late application - limited evidence - no explanation for delay - factors to be taken into account - prejudice to administration of estate - trustee's bona fide belief that further inquiry warranted - relevance - public interest - commercial morality - residual powers available to trustee - supporting sanctions.
Bankruptcy Act 1966 sub-s.149(1), s.l49(3)(c), s.l49(7)(a)
Bankruptcy Rules r.51A
RE: ROBERT LESLIE NELSON GEOFFREY FRANK TOTTERDELL v ROBERT LESLIE NELSON
P
FRENCH J. PERTH 25 MAY 1990

REGISTRY

RECEIVED

2 3 OCT 1990

FEDERAL COURT OF

AUSTRALIA

PRINCIPAL

IN THE FEDERAL COURT	)
OF AUSTRALIA	1
GENERAL DIVISION	)
BANKRUPTCY DISTRICT	1
OF THE STATE OF	1
WESTERN AUSTRALIA	) NO. 245 of 1985

RE: ROBERT LESLIE NELSON

The Bankrupt

B E T W E E N :  GEOFFREY FRANK TOTTERDELL

Applicant

and

ROBERT LESLIE NELSON

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER: FRENCH J.

DATE OF ORDER:	25 I r i Y 1990
WHERE I4ADE:	PERTH
THE COURT ORDERS THAT:

The application is dismissed.

Note: Settlement and entry of orders 1s dealt with in

Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT	)
OF AUSTRALIA	1
GENERAL DIVISION	)
BANKRUPTCY DISTRICT	)
OF THE STATE OF	)
WESTERN AUSTRALIA	1 No. 245 of 1985 RE: ROBERT LESLIE NELSON

The Bankrupt

B E T W E E N :  GEOFFREY FRANK TOTTERDELL

Applicant

and

ROBERT LESLIE NELSON

Respondent

CORAM:	FRENCH J.
25 1ilAY 1990

EX TEMPORE REASONS FOR JUDGMENT

Robert Leslie Nelson was made bankrupt pursuanc to a sequestration order on 27 May 1985. Geoffrey Frank Totterdell was appointed as his trustee pursuant to that order. In the ordinary course Nelson would have been automatically discharged from bankruptcy in May 1988 under the provisions of sub-s.l49(1) of the Bankruptcy Act 1966. However on 17 March 1987 the trustee lodged

an objection to the statutory d~scharge on the following grounds:

... !

That the conduct of the bankrupt ln respect of	the period before the date of bankruptcy was
unsatisfactory in that:
he has falled to account satisfactorily to the trustee for any loss of, or depreciation of, assets or for a deflclency of assets; and
he departed Australian in an attempt to avoid hls creditors."

I .

2.

The lodgment of t h a t o b j e c t i o n had t h e e f f e c t of e x t e n d i n g t h e

bankrup tcy f o r a f u r t h e r p e r i o d o f two y e a r s from 27 May 1988 by

v i r t u e of s . l 4 9 ( 3 ) ( c ) and s . l 4 9 ( 7 ) ( a ) . That p e r i o d e x p i r e s and i n

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i t h e o r d i n a r y c o u r s e t h e o b j e c t i o n w i l l l a p s e and d i s c h a r g e w i l l be

e f f e c t e d by f o r c e of	t h e s t a t u t e a t midn igh t on 26 may	1990, which
i s tomorrow.

On 7 nay t h e t r u s t e e f i l e d a n a p p l i c a t i o n s e e k i n g o r d e r s

t h a t :

( a ) The respondent n o t be d i s c h a r g e d from

bankruptcy by v i r t u e of sub-s .149(12) of t h e

Bankruptcy Act 1966; and

( b ) Alternatively, an o r d e r t h a t t h e t ime a t which

t h e e x p i r a t i o n o f	t h e objection	daced	17 March
1987	f i l e d h e r e i n w i l l l a p s e be	ex tended	u n t i l

27 1-lay 1991.

The a p p l i c a t i o n whlch came on f o r h e a r i n g t o d a y i s suppor t ed by

two	a f f i d a v i t s f l l e d on	7 and	22	May	and one	s h o r t a f f i d a v i t f i l e d
25 May.	Most	of	t h e	f l r s t a f f i d a v i t i s i n a d m i s s i b l e	and h a s	been

r e j e c t e d . The bulk of t h e a p p l i c a n t ' s e v l d e n c e i s i n t h e second

i a f f i d a v i t . I t does n o t r e q u l r e any d e t a l l e d a n a l y s i s of t h e

:

m a t e r i a l t o obse rve t h a t t h e a f f l d a v l t s a r e i n l a r g e p a r t d i r e c t e d

t o p r o v i n g t h a t t h e t r u s t e e b e l i e v e s on information made a v a i l a b l e

t o him f rom s o u r c e s which he i s e n t i t l e d t o t a k e seriously, t h a t

t h e r e a r e a s s e t s of t h e respondent which have n o t been d i s c l o s e d

and which f u r t h e r e n q u i r y and investigation may uncover . And on

t h a t e v i d e n c e 1 a c c e p t t h a t t h l s i s t h e c a s e . ~ u e x c e p t t i n

c e r t a l n p e r i p h e r a l	a r e a s t h e	ev idence	1s	n o t	probative	of	t h e
l i k e l y o r	a c t u a l	e x i s t e n c e	of	u n d i s c l o s e d a s s e t s	nor	of	t h e

conduct of the bankrupt or his co-operation in the administration of the estate. Nor does the evidence explain why, after some five years, the investigations have only reached their present inchoate state. It may be that there is a perfectly good explanation, but it was not made available to the Court.

a

In considering an application under either sub-s.149(8) or sub-s.149(12), the Court is required to take into account the matters referred to in r.51A of the Bankruptcy Rules. Generally speaking there is little, if anything, the evidence has to say about any of those matters apart from that in 51A(b) namely:

"Whether the discharge of the bankrupt would

prejudice the admlnistration of the estate."

I am left in a position in relation to the other matters

prescribed that I can make no assumption adverse to the bankrupr in relation to any of them. The question whether the discharge would prejudice the administration of the estate is one in

l	relation to whlch I can have regard to the trustee's bona fide and
!	reasonably grounded belief that there are significant additional

.j	matters to be investigated. In taking into account that factor, I
distribution to the creditors. That spills over to the question purposes of the Act and the need to get in all the assets for am bound to have regard to the public interest as reflected in the
of commercial morality and while no flnding of relevant misconduct is open, the trustee's belief if vindicated, is material in that respect as well.

I
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Against the public interest factor to which I have referred, is the consideration that the administration of estates should be expeditious and the courts not seen to encourage last minute approaches of this kind. Reference has also been made to the powers of the trustee under s.152 of the Act, which continue after discharge. Relevantly that section provides:

"152(1) A discharged bankrupt shall, notwithstanding hls discharge, give such assistance as the trustee reasonably requlres in the realization and distrlbutlon of such of his property as is vested in the trustee.

(2) A discharged bankrupt who falls to comply

with sub-section (l), is gullty of contempt of
court.

(3) Where a dlscharged bankrupt fails to comply wlth sub-section (l), the Courc may, IE it chinks fit, on the application of the Registrar or the trustee in the bankruptcy -

(a) where the bankrupt was discharged by an order of a court - rescind the order, or

I (b) where the bankrupt was discharged by force of section 149 - set aside the discharge."

Sub-section (4) 1s not material for present purposes.

j	Counsel for the trustee refers to the powers of the
.	.

trustee exerclseable durlng the currency of the bankruptcy whlch

are set out in s.77 of the Act and the offence provisions in	s.263.
In the end in thls case, I am confronted wlth a balancing exercise and in embarking upon that exercise I am bound to have regard to the evldence before me and not to speculate

)	about the conduct or morality of the bankrupt to which there is considerable reference in evidence of reports made by third parties to the trustee. In my opinion the prejudice to the administration of the estate flowing from automatic discharge in this case is not sufficient to justify the extension now sought. The trustee has residual powers and the right to seek rescission of the discharge under s.152 of the Act. The availability of those powers and the sanctions to which the trustee may resort in
1
the case of a failure of CO-operation on the part of the bankrupt are adequate in my oplnion to protect the publlc inrerest. ~t would not be served in the present case by accedlng to this last minute application on evidence which fails to explain the delay and substanrially addresses only one of the factors to which the Court is required to have regard. For these reasons che application wlll be dlsmlssed.

I certify char this and the
preceding four (4) pages

are a true copy of the

Ex Tempore Reasons for

Judgment of hls Honour

Justlce French.

Assoclate:

Date:  / q Y O

' ( . ... 1 8 . .

6.

f

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Counsel for the Applicant: Mr S. Archer

Solicltors for the Applicant: Dwyer Durack

Counsel for the Respondent: Mr K.L. Christensen
Solicitors for the Respondent: Philllps Fox

Date of Hearing: 25 May 1990 Date of Judgment: 25 May 1990