Nicols v Geekie

Case •

[2007] FMCA 1576

•

19 September 2007

FEDERAL MAGISTRATES COURT OF AUSTRALIA

NICOLS v GEEKIE & ANOR [2007] FMCA 1576
BANKRUPTCY – Application by trustee under s.146 of the Bankruptcy Act1966 – whether bankrupts had ‘failed’ to file statements of affairs where statements were incomplete – whether court should make a declaration that each statement of affairs was filed for the purposes of s.54(1) of the Act – whether s.306 applicable to defects of substance.
Bankruptcy Act 1966 (Cth), ss.6A, 30, 33A, 54, 146, 149 & 306.
Adams v Lambert (2006) 225 ALR 396
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Aussie Airlines Pty Ltd v Australian Airlines (1996) 139 ALR 663
Cable v Pattison [2003] FCA 1499
Charalambous v Erskine [2003] FMCA 352
Forster v Jododex Australia Pty Ltd (1992) 127 CLR 421
Harrison v Del Santo [2007] FMCA 470
Ibeneweka v Egbuna [1964] 1 WLR 219
Nilant v Macchia (2000) 104 FCR 238
Official Receiver v Lockhart [2006] FMCA 942
Official Trustee in Bankruptcy v Halls (2000) 96 FCR 558
Official Trustee in Bankruptcy v Raeffaele [2003] FCA 328
Official Trustee in Bankruptcy v Street [2000] FCA 216
Official Trustee in Bankruptcy v Thor [2006] FMCA 1637
Rambaldi v Thake [2007] FCA 847
Re Bilen; Ex parte Sistrom [1985] FCA 141
Rees (Trustee) in the matter of Stubberfield v Stubberfield (Bankrupt) [1999] FCA 1862
Re Shaw; Ex parte Official Trustee in Bankruptcy [1999] FCA 968
Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649
Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 348
Scott (Trustee) in the matter of Heinrich (Bankrupt) [2005] FCA 1826
Sofia v Pattison [1997] FCA 1586
Sweeney v Skyring [2000] FCA 1126
Trihakis v Official Receiver (Vic) [1999] FCA 1426
Troiani v Peldon & Lane (Trustee) [2005] FCA 842
Tsingaris v Official Trustee in Bankruptcy [1999] FCA 1389
Wangman v Official Receiver [2006] FCA 202
Applicant: STEVEN NICOLS
First and Second Respondents: JANET GEEKIE & ANDREW GEEKIE
File Number: SYG2360 of 2007
Judgment of: Barnes FM
Hearing date: 4 September 2007
Date of Last Submission: 6 September 2007
Delivered at: Sydney
Delivered on: 19 September 2007

REPRESENTATION

Solicitors for the Applicant: Craddock Murray Neumann
Respondents: No appearance

ORDERS

  1. That the application is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG2360 of 2007

STEVEN NICOLS

Applicant

And

JANET GEEKIE AND ANDREW GEEKIE

First and Second Respondents

REASONS FOR JUDGMENT

  1. The applicant, Mr Nicols, as trustee of the bankrupt estates of the respondents Janet M. Geekie and Andrew Geekie, seeks orders under s.146 of the Bankruptcy Act 1966 (Cth) that he be entitled to distribute a dividend to creditors who have proved their debts in each of the bankrupt estates of Ms Geekie and Mr Geekie.

  2. Each of the respondents was served personally with a copy of the application presently before the Court and the affidavit of Mr Nicols sworn on 26 July 2007.  The first return date for these proceedings was stated in the application to be 21 August 2007.  On that date there was no appearance by or for either respondent.  A Registrar of this Court adjourned the application until 10.15am on 4 September 2007 and ordered that the applicant notify the first and second respondents of the details of the time, date and place of the adjourned hearing. 

  3. As attested to in the affidavit of Khalid Metlej sworn on 3 September 2007 and filed in Court, the solicitors for the applicant wrote to each of the respondents on 21 August 2007 advising them of the adjourned hearing date and time.  There was no appearance by or for either respondent today.  In those circumstances I was satisfied that each respondent had been notified of the application and the adjournment and that I should deal with the application despite their absence. 

  4. I also note that, as attested to in his affidavit of 17 August 2007, on 15 August 2007 the applicant caused a circular to be sent by post to the addresses of all known creditors and potential creditors of the bankrupt estates of the first and second respondents advising them that the matter had been listed for hearing on 21 August 2007 and stating that any person wishing to appear should file a notice of appearance in the registry.  There is no record before the Court of any notice of appearance having been filed by any such person or any indication that such a person wished to appear at the hearing. 

  5. In the application of 31 July 2007 Mr Nicols sought the following orders:

    1. The costs, charges and expenses of the administration of the bankruptcy of the First and Second Respondents and a distribution of dividends among creditors who prove their debts in the estate shall proceed in accordance with Part VI, Division 5 of the Bankruptcy Act 1966 as if each of the First and Second Respondents had filed a Statement of Affairs and those creditors had been stated to be creditors in it.

    2. The First and Second Respondent not be entitled to any surplus funds remaining after payment of the costs, charges and expenses of the administration of the bankruptcy and after payment of the dividends to creditors until the First and Second Respondent have lodged a duly completed Statement of Affairs in the required form with the Applicant and the Applicant has dealt with the claims of any further disclosed in the Statement of Affairs. 

    3. The Applicant’s costs of this application be paid from the bankrupt estate of the First and Second Respondents. 

    4. Such further or other orders as this Honourable Court deems fit. 

  6. The primary basis for this application is that an order should be made under s.146 of the Bankruptcy Act 1966 as each respondent had failed to file a statement of affairs. In the alternative, it was submitted that the Court had power to make the orders sought pursuant to s.30(1) of the Act.

  7. Section 146 provides:

    Where a bankrupt has failed to file a statement of his or her affairs as required by this Act, the Court may, on the application of the trustee, upon such terms as it thinks fit, order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with this provision as if the bankrupt had filed a statement of his or her affairs and those creditors had been stated to be creditors in it. 

  8. Section 30(1) relevantly provides that the Court has power to decide all questions, whether of law or of fact, in any case of bankruptcy and may make such orders (including declaratory orders) as it considers necessary for the purposes of carrying out or giving effect to the Act in any such case.

  9. Section 54(1) of the Act provides that where a sequestration order is made, the person against whose estate it is made shall, within 14 days from the date of notification of the bankruptcy:

    (a) make out and file with the Official Receiver for the district in which the sequestration order was made a statement of his or her affairs;  and

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

  10. While each of the bankrupts provided a signed statement of affairs to the Official Receiver, each of those documents is said be incomplete in that certain details are not included and elsewhere “nil”, “unknown” or “TBC” is stated in response to particular questions in the statements of affairs.  It was submitted for the applicant that in light of the Federal Court’s decision in Wangman v Official Receiver [2006] FCA 202 the trustee could not be reasonably satisfied of the validity of the purported statements of affairs filed by each of the respondents and that it could be said that the respondents each had failed to “make out and file” a statement “of his or her affairs” so orders were sought that the trustee was entitled to proceed to distribute a dividend amongst creditors. It was submitted that the Court had the power to make such orders pursuant to s.146 or alternatively under s.30(1) of the Bankruptcy Act.

  11. During the hearing the solicitor for the applicant was asked to clarify the basis on which such orders were sought under s.30. In post-hearing written submissions it was submitted not that the original orders sought could be made under s.30, but rather that if the court was satisfied that the documents filed by the respondents were sufficient to comprise statements of affairs furnished to the Official Receiver but also satisfied that the statements were nonetheless defective (for the reason they were only partially completed) then it should make declarations pursuant to ss.306 and 30(1) of the Act that for the purposes of the administration of each bankruptcy in accordance with Part VI, Division 5 of the Act, each statement of affairs was filed on 25 June 2007 for the purposes of s.54(1).

  12. It was submitted that in making such declarations the Court would be satisfied that defects or irregularities in the statement of affairs could be excused under s.306(1) of the Act which provides that proceedings under the 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.”

Background

  1. On 15 April 2004 a sequestration order was made against the estate of Janet M. Geekie, the first respondent.  Subsequently Mr Nicols was appointed to act as trustee of her bankrupt estate.  I accept that, as attested to in his affidavit of 26 July 2007, thereafter Mr Nicols sought to obtain a completed statement of affairs from Ms Geekie.  On 3 June 2005 Ms Geekie sent to Mr Nicols a facsimile copy of a statement of affairs dated 2 June 2005 and signed by her.  In her accompanying letter she stated that the original had been posted to him that day.  She also apologised for the late reply and indicated that that she knew “there will be other details you require”.  She provided email contact details and authorised her husband Andrew Geekie to act on her behalf.  Mr Nicols did not receive the original statement of affairs.  He requested the “original” by email dated 16 June 2005 and facsimile letter dated 6 July 2005. 

  2. On 27 April 2006, a sequestration order was made against the estate of Andrew Geekie, the second respondent.  Mr Nicols was appointed to act as trustee of the bankrupt estate and sought a statement of affairs from Mr Geekie on a number of occasions.  In particular, on 14 December 2006 Mr Nicols wrote to a Mr Simon Finnegan who had been authorised to act for the respondents in relation to their bankruptcies by letter provided to Mr Nicols dated 23 July 2006.  Mr Finnegan notified the Trustee of his authority on 8 September 2006.  Mr Nicols advised that Ms Geekie had not provided her “original” statement of affairs as at 15 April 2004, that Mr Geekie had not provided a statement of affairs as at 27 April 2006 and that in order for both bankruptcies to begin he required the complete 20 page statements of affairs before they could be lodged with the Insolvency and Trustee Service of Australia (ITSA).  Mr Nicols also provided income questionnaires for completion by the bankrupts and sought copies of relevant business documentation, books and records.  

  3. On 9 February 2007 Mr Nicols wrote to Mr Geekie requiring that he file a statement of affairs in accordance with s.54 and furnish a copy of the statement to him together with all books, papers and documents in his possession as required by s.77 within 14 days. He was advised that otherwise an application would be made for a court order committing him to prison.

  4. On 13 February 2007 Mr Nicols wrote to Mr Geekie and Ms Geekie advising them that they had both failed to comply with his request for provision of a statement of affairs and delivery of records relating to their business operations and that they would be reported to ITSA for possible prosecution.   

  5. On 28 March 2007 Mr Nicols wrote to Mr Robert Manley, whom he believed was the father of the first respondent and assisting her with her bankruptcy, enclosing a blank statement of affairs for completion by Ms Geekie and a list of her creditors.  

  6. On 18 June 2007 Mr Nicols received a statement of affairs for Ms Geekie dated 2 June 2005 under cover of a letter dated 1 June 2007 from Mr Geekie and also a statement of affairs for Mr Geekie dated 30 June 2006.  Mr Geekie stated that he was “again” enclosing copies of the statements of affairs.  He advised that the details had changed since the statements were filled out.  Mr Geekie also provided wages information for the business he and Ms Geekie had operated, provided an explanation for the absence of further paperwork, offered to send copies of bank statements and invoices and to meet officers of the trustee to try to “resurrect” required details and discuss any misunderstandings.  Mr Geekie explained issues that had arisen with the person they had authorised to assist them and provided information as to current employment. 

  7. By letter dated 20 June 2007 Mr Nicols returned the statements of affairs to Mr and Ms Geekie for “proper completion”.  He advised that the statements had not been completed “completely or satisfactorily” for submission to ITSA.  Particular reference was made to questions about past income, current and expected income, vehicles (in relation to Mr Geekie), unsecured creditors and the declaration. 

  8. The letter enclosed current creditor schedules for each estate and noted that Ms Geekie was required to disclose all creditors as at 15 April 2004 and Mr Geekie as at 27 April 2006.  Mr Nicols sought return of the documents by 29 June 2007.  However on 26 July 2007 he attested that each respondent had failed to comply with his request to produce an original and satisfactory statement of affairs on each occasion, a claim that he reiterated as at the date of swearing of his affidavit of 17 August 2007. 

  9. Mr Nicols also attested to those creditors of whom he was aware, including those who had lodged a proof of debt in response to advertisements he had inserted in the Commonwealth Government Gazette and to his investigations in relation to assets of the respondents. He also stated that subject to what may be revealed in any statement of affairs filed by the respondents and save for distribution of a dividend to creditors of the estates of the respondents he believed that the administration of the bankruptcies of the respondents was complete. He explained why he believed that delay in declaring and distributing a dividend to the creditors of the respondents was causing prejudice to creditors. In these circumstances he sought an order from the Court under s.146 of the Bankruptcy Act.

  10. It is relevant to note that on 17 August 2007 Mr Nicols was notified by ITSA that while a summons had been issued against Mr Geekie on 26 June 2007 in relation to a failure to make out and file a statement of affairs with the Official Receiver and furnish a copy to the trustee as required by s.54 of the Bankruptcy Act, it was later discovered that Mr Geekie had filed a statement of affairs on 25 June 2007. As a result no evidence was tendered when the summons went before the Hobart Magistrates Court on 3 August 2007 and the matter was dismissed. I note that, contrary to the suggestion in the affidavit of Mr Metlej, solicitor for the trustee, it is not apparent that Mr Geekie filed his statement of affairs with the Official Receiver “following” the issue of a summons (which is said to have occurred on 26 June 2007). A search of the National Personal Insolvency Index conducted by the solicitor for the trustee revealed that Ms Geekie also filed a statement of affairs with the Official Receiver on 25 June 2007. According to Mr Metlej, despite being requested to do so, neither respondent provided a copy of the filed statement of affairs to the trustee. The copies provided to the trustee’s solicitor by the Official Receiver were said to be identical to the documents previously provided to the trustee on 15 June 2007 and returned to the bankrupts on 20 June 2007.

  11. The primary submission for the trustee is that the information omitted from each of the statements of affairs lodged with the Official Receiver, such as details of unsecured creditors, is essential to the character of a statement of affairs and that the information provided is so incomplete that neither document can be considered a statement of the relevant bankrupt’s affairs.  It is contended that each document fails to meet an essential purpose of a statement of affairs, in that the trustee does not have full details of the trade dealings of the bankrupts and information on the bankrupts’ affairs has not been made available in the public register (see Nilant v Macchia (2000) 104 FCR 238 per Hill J at 245).

  12. It was submitted for the trustee that Ms Geekie’s statement of affairs was incomplete in that it: failed to disclose a summary of income for the last 12 months (it stated that the income was nil), failed to disclose a summary of expected income in the next 12 months (it stated “nil”) or of any current employment income (it stated that the applicant was self-employed and that her net pay was “nil”) or any unsecured creditors.  No unsecured creditors were disclosed, contrary to the results of the trustee’s inquiries. 

  13. Mr Nicols also took issue with Mr Geekie’s statement of affairs, contending in particular that it was incomplete in that it: failed to disclose a summary of income for the last 12 months (it stated that there was nil income except from business and that the income was “TBC”), failed to disclose a summary of expected income in the next 12 months (the word “unknown” was inserted in this part of the form), or any current employment income (Mr Geekie disclosed details of his employer but stated that his net pay was “unknown”) and any unsecured creditors.  The statement of affairs disclosed one unsecured creditor, R.F. Manley, for a loan in the sum of $170,000 in April 2004, but the trustee’s inquiries have identified other creditors.  It appears that issue is also taken with the absence of a response to question 27 in relation to vehicles (although Mr Geekie discloses two vehicles as “other items of value” in response to question 37 and ticked “yes” in response to the question “jointly owned”). 

  14. In support of the contention that a lack of information in a statement of affairs can mean that such document is not a valid statement of affairs within the meaning of s.54(1) of the Act, reliance was placed by the trustee on obiter remarks by Collier J in Wangman v Official Receiver [2006] FCA 202.

  15. Wangman v Official Receiver was an appeal from a judgment of a Federal Magistrate dismissing an application for orders that a statement of affairs of a bankrupt filed in 2005 be backdated to 1998 and that the Court discharge him from bankruptcy. The issue at first instance was whether a statement of affairs should be treated as having been filed at a time earlier than it was actually filed under s.33A of the Act. Section 33A enables the Court to order that a statement “that was filed for the purposes of section 54, 55, 56B, 58F or 57” be treated as having been filed at a time before it was actually filed if satisfied that the person believed on reasonable grounds that the statement had already been filed. There is no such issue before the Court in this case.

  16. Collier J considered a number of grounds of appeal from the decision of Federal Magistrate Jarrett, noting the relevance of these issues to s.149 of the Bankruptcy Act which provides that a bankrupt is discharged at the end of the period of three years from “the date on which the bankrupt filed his or her statement of affairs”. In that case the statement of affairs in issue was said (at [13]) to have included no information beyond that included in Part A of the form which provides for confidential personal details and was described by her Honour as “clearly deficient in relation to the information required” (at [13]).

  1. The statement of affairs, which had been provided to a representative of the trustee and by him to the Official Receiver, had been either rejected by ITSA and returned to the trustees (according to the Deputy Official Receiver) or was such that the Official Receiver had refused to take delivery in September 1998 because it had not been satisfactorily completed and returned to the trustees (according to the representative of the trustee).  Which of these events had occurred was not resolved, but either way it was clear that the statement of affairs was returned by ITSA to the representative of the trustees who had caused it to be delivered to the Official Receiver.  In contrast, in this case there is no suggestion that the Official Receiver refused to accept or sought to return either statement of affairs to the respondents either directly or through the trustee. 

  2. In Wangman the trustees subsequently returned the statement of affairs to the appellant by mail in 1999, stating that it had not been accepted by the Official Receiver as it had not been properly completed.  The trustees requested a further statement of affairs.  Ultimately, the appellant lodged a fresh statement of affairs on 2 February 2005 which was accepted by ITSA.  In the interim the trustees unsuccessfully sought a properly completed statement of affairs.    

  3. The bankrupt brought proceedings under s.33A of the Act seeking that the statement of affairs accepted in 2005 be treated as having been filed in 1998 when the first statement of affairs was submitted to and rejected by ITSA. Jarrett FM dismissed the application. His Honour held that the discretion given to the Court by s.33A(2) had not been enlivened as the bankrupt knew in 1999 that the 1998 statement of affairs had not been accepted by ITSA or had no reasonable basis after that time for a belief that it had been accepted by ITSA as required under s.33A. Jarrett FM went on to state that even if the discretion had been enlivened he would not exercise that discretion. He noted that s.306 was of no assistance.

  4. On appeal Collier J found no error in the Federal Magistrate’s findings in relation to s.33A or in his failure to exercise his discretion under that section in favour of the appellant. As her Honour pointed out, the case turned on the application of s.33A. Collier J agreed that the jurisdiction of the Court was not enlivened under s.33A as the applicant knew in 1999 that his 1998 statement of affairs had not been accepted by or filed with ITSA (at [36] – [41]).

  5. Her Honour then expressed the view that even if the appellant had sought an order from the Court upon learning that the 1998 statement of affairs had been rejected in 1999 (something he had not done) in her view “he would not have been assisted by s.33A Bankruptcy Act” (at [45]). The reason for this was that, as Jarrett FM had found, the defects in the 1998 statement of affairs were so significant that it could not be said that the document was a statement of affairs at all. After referring to the requirements of s.54(1) and to s.6A(2) which prescribes the form and content of a statement of affairs for the purposes of s.54(1), Collier J suggested that the bankrupt was required not only to make out and file a statement of affairs on the approved form but also “because the required statement is a statement of the bankrupt’s affairs: complete that form with personal information as required by the form”. It was in that context that her Honour indicated that it would not satisfy s.54(1) for a bankrupt “to seek to file a blank statement of affairs in the form approved by the Inspector-General without including the personal information required by the form, because then the form would not be a statement of the bankrupt’s personal affairs as required by the section” (at [47]). 

  6. Although the appellant had not sought to rely on s.306 of the Act, Collier J referred to authorities in relation to s.306 and suggested at [50] that the remarks by Weinberg J in Nilant v Macchia (2000) 178 ALR 371 at 384 that s.306 could not be invoked in circumstances where no steps had been taken by the bankrupt in purported compliance with the requirements of s.54 were “apposite to the circumstances” of the case.    

  7. In Nilant the bankrupt had presented a debtor’s petition accompanied by a statement of affairs to the Registrar in Bankruptcy in 1991. However as there was a pending creditor’s petition a sequestration order was made on the creditor’s petition. It was not until 1994 that the applicant filed a statement of affairs. Thereafter he sought a declaration that a statement of affairs had been filed by him in 1991 so that he could be discharged from bankruptcy three years from that date. The trial judge held that the statement of affairs was, by virtue of the operation of s.306, deemed to have been made out and filed in 1991. However on appeal the Full Court of the Federal Court held that as the appellant had not filed any statement of affairs in accordance with the requirements of s.54(1) of the Act (because he had assumed erroneously that the statement previously filed with the Registrar on the debtor’s petition would serve that purpose) there was no act on his part which could be described as even “purported compliance” with the requirements of s.54 (Weinberg J at [54]). Hence there was nothing that could be regarded as a “proceeding” which could “escape invalidity due to formal defect or irregularity” by virtue of s.306 (Carr J at [36]).

  8. It is notable that there is no discussion in Nilant v Macchia of the contents of the statement of affairs.  However in Wangman Collier J observed that very little of the 1998 statement of affairs was “genuinely attempted by the appellant” and that he had failed to identify or properly identify a long list of matters referred to in the form beyond drawing a comment of “not applicable” through large sections of the document.  Her Honour expressed the view (at [55]), that the “lack of information inserted by the appellant into the 1998 Statement of Affairs meant that the document was not a valid statement of affairs within the meaning of s.54(1) of the Bankruptcy Act. It was clearly not a statement of the appellant’s affairs”. 

  9. Her Honour noted however that this was not to say that “any omission” from a statement of affairs would render the document so defective as to be invalid for the purposes of s.54. However the statement of affairs in issue was said to be “clearly defective” because of the quantity of information either not included or not appropriately addressed and the quality of the information which the appellant had “deliberately chosen” not to include (at [55]) including essential and often basic information (such as his address, date of birth, telephone number, gross income for the previous 12 months and assets disposed of in the past 2 years).  On that basis Collier J was satisfied that in “refusing to complete the statement of affairs” it was clear that “no step whatever has been taken by the appellant in purported compliance with the requirements of s.54(1)” (at [56]).  Her Honour rejected a ground of appeal that the Federal Magistrate had erred in finding that the defects in the 1998 statement of affairs were so significant that the document was not a statement of affairs at all. 

  10. On the basis of the reasoning in Wangman I am asked to conclude that the statements of affairs in this case are not valid statements of affairs within the meaning of s.54(1) such that it can be said that each bankrupt has “failed to file a statement of his or her affairs as required by [the Bankruptcy] Act” under s.146 of the Act.

  11. I accept that each of the statements of affairs is incomplete, at least in relation to disclosure of creditors, as subsequently revealed in enquiries conducted by the trustee. I am not, however, persuaded that an order should be made under s.146 in relation to either the first or second respondent in the circumstances of this case.

  12. There are a number of points to note about the trustee’s reliance on Wangman. First the case did not involve the operation of s.146 of the Bankruptcy Act. There are a number of decisions which have applied s.146 but no decision has been brought to my attention in which a filed incomplete statement of affairs was regarded as not having been filed. Rather in each case s.146 was applied where no statement of affairs had been filed by the bankrupt in issue. (See for example Re Shaw; Ex parte Official Trustee in Bankruptcy [1999] FCA 968; Rees (Trustee) in the matter of Stubberfield v Stubberfield (Bankrupt) [1999] FCA 1862; Sweeney v Skyring [2000] FCA 1126; Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649; Official Trustee in Bankruptcy v Raeffaele [2003] FCA 328; Troiani v Peldon & Lane (Trustee) [2005] FCA 842; Scott (Trustee) in the matter of Heinrich (Bankrupt) [2005] FCA 1826; Official Trustee in Bankruptcy v Thor [2006] FMCA 1637; Official Receiver v Lockhart [2006] FMCA 942; Rambaldi v Thake [2007] FCA 847 and Harrison v Del Santo [2007] FMCA 470).

  13. It is relevant to note that in Re Shaw Gyles J observed (at [4]) that the purpose of s.146 was “[t]o give the court the means of ensuring that the absence of a statement of affairs does not prejudice those with an interest in the bankrupt’s affairs” (emphasis added) and that in Re Sturt Sackville J expressed the view that s.146 should be construed to apply where a bankrupt had not filed a statement of affairs (albeit through circumstances beyond his control), the section being “intended to facilitate the distribution of dividends among the creditors of the bankrupt in circumstances where the trustee had not had the benefit of a statement of affairs prepared by the bankrupt” (at [14]).  After considering the legislative history of s.146 and the second reading speech in relation to the introduction of its predecessor, Sackville J stated that it could be seen that the “principal object of the legislation was to overcome difficulties that had been encountered in the winding up of an estate where the bankrupt had not filed a statement of affairs” (at [15]). 

  14. Interestingly as his Honour also pointed out in Re Stuart, s.146 does not refer specifically to s.54 but speaks of a failure to file a statement of affairs “as required by this Act” (at [18]).  Sackville J observed at [18] that “It may be that the scope of s.146 of the Bankruptcy Act, having regard to its object, is not co-extensive with the scope of s.54(1), insofar as the latter imposes criminal sanctions on a bankrupt who does not file a statement of affairs.” 

  15. The applicant’s submissions appear to have proceeded on the basis that the scope of these provisions is co-extensive. The possibility that this is not so was not addressed. However no authority has been brought to my attention in which a filed, albeit incomplete or otherwise unsatisfactory, statement of affairs was regarded as not having been filed. Rather in each case s.146 was applied where no statement of affairs at all had been filed by the bankrupt in issue.

  16. Secondly, the remarks of Collier J relied on by the applicant were obiter and made in the context of a view being expressed about whether the appellant in that case would have been assisted by s.33A of the Act had he sought an order at the time he became aware that the 1998 statement of affairs had been rejected, rather than some years thereafter. Section 33A gives a discretion to the court where a statement of affairs had been filed. It was in that context that her Honour expressed the view that the statement of affairs which was returned by the Official Receiver was such that it could be said that the appellant had “refused” to complete it, so that no step had been taken by him in purported compliance with s.54(1) and that the lack of information meant that it was not a valid statement of affairs within the meaning of s.54(1).

  17. In contrast, this case does not involve the operation of s.33A but rather s.146. Moreover, while the applicant submitted that the mere act of the Official Receiver in accepting a document for filing could not make valid a statement of affairs which would otherwise be invalid (although no authority was cited in support of this proposition) in contrast to the position in Wangman, the statements of affairs which the applicants each filed with the Official Receiver on 25 June 2007 were not rejected by ITSA or returned to the bankrupts by ITSA.  Rather it is the trustee who takes issue with the quality and quantity of information contained in the statements of affairs.

  18. I note that various provisions of the Bankruptcy Act assume that a document may be a statement of affairs albeit that it is deficient in some respects. For example, s.6A of the Act which has effect for the purposes of sections including s.54 of the Act (although there is no reference to s.146), defines a statement of affairs in subsection (2) by reference to a statement that is in an approved form, includes a statement identifying any creditor who is a related entity of the bankrupt and contains a declaration that so far as the bankrupt is aware the particulars set out in the statement are correct. However subsection 6A(3) provides that if the trustee has reasonable grounds to suspect that any particulars in the statement of affairs that has been filed are “false and misleading in a material respect” or that “any material particulars have been omitted from that statement” the trustee may by written notice given to the person in question require provision of specified information or books for the purpose of enabling the trustee to decide whether the particulars in the statement are correct. Other provisions create offences where there is a failure to make proper disclosure to the trustee (see ss.54(1), 77 and more generally s.265). These provisions appear to contemplate that an incomplete and incorrect statement of affairs will nonetheless be “filed” as required by the Bankruptcy Act, at least provided it is accepted by the Official Receiver as occurred in this case.

  19. Moreover, even if the remarks of Collier J in Wangman are applicable to s.146 and a lack of information in a statement of affairs can in some circumstances mean that the document is not a valid statement of affairs or demonstrate that the bankrupt has “refused” to complete the statement of affairs and taken no step in compliance with s.54(1), such that it can be said that he or she has not “filed” a statement as required by the Act, the circumstances are not such as to persuade me that it can be concluded that no statement of affairs was filed by either respondent in this instance.

  20. First, each respondent provided information in each form beyond that required in Part A of the form.  It is the case that neither respondent filed a statement of affairs promptly and that the trustee made several attempts to obtain the statements.  However when the statements of affairs were provided (Ms Geekie’s being “sent again”) under cover of a letter dated 1 June 2007 from Mr Geekie (who wrote on behalf of himself and Ms Geekie) he specifically addressed the possibility of deficiencies in the forms (which were dated 2005 and 2006) in particular in relation to disclosure of earnings, where the responses in the forms are criticised as incomplete in these proceedings  He indicated that details had changed since the forms were filled out, stated that there were limited books of account and that there was an attempt underway to resurrect a set of accurate records.  He also expressed a willingness to discuss the information and provide further assistance to the trustee (after raising concerns about difficulties they had experienced with a person who had offered to provide them expert assistance and also employment to Ms Geekie after their bankruptcies).  In these circumstances it cannot be said that either applicant had “refused” to complete a statement of affairs in the manner which Collier J found to be the case in Wangman v Official Receiver. 

  21. There are omissions from each of the statements of affairs and responses which appear to be incomplete or require clarification.  Of particular concern is the failure to disclose creditors (although I note that the trustee identified a list of creditors and advised the respondents of this).  It has not however been established that the “nil” responses in each statement of affairs are necessarily incorrect or that the “unknown” or “TBC” responses indicated a refusal or unwillingness to complete the form or an absence of a genuine attempt in the sense considered in Wangman. This is not a case in which I am satisfied on the material before the Court that it can be said that either document is so defective in the quantity and quality of information that it can be regarded as invalid for the purposes of s.54 or, more pertinently, such that it can be said that either of the respondents has “failed” to file a statement of his or her affairs. Hence I am not persuaded that an order should be made by the Court under s.146 as the requirement of failure to file a statement of affairs is not been established.

  22. Thus, despite the fact that there is evidence before the Court as to the difficulties which the trustee experienced in obtaining further information from each of the bankrupts, that each bankruptcy administration is all but complete except for the distribution of a dividend to creditors who have proved their debts and that the delay is causing prejudice to creditors, the prerequisite to consideration of whether to make an order under s.146 is not met.

  23. In the alternative it was submitted in post-hearing submissions that if the Court was satisfied that the documents filed by the respondents were sufficient to comprise statements of affairs, the documents were nonetheless defective and irregular for the reason that they were only partially completed and hence they had not been “made out” as required by the terms of s.54(1)(a).

  24. It was submitted that if the Court agreed that the statements of affairs were defective or irregular, it should make orders pursuant to s.306 and s.30(1) of the Act to, in effect, confirm the applicant’s entitlement to proceed to administer the estate in accordance with Part VI of Division 5 of the Bankruptcy Act. On this basis declarations were sought that for the purposes of the administration of each bankruptcy in accordance with Part VI, Division 5 the respective statements of affairs furnished to the Official Receiver were “filed” on 25 June 2007 for the purposes of s.54(1) of the Act. It was contended that this would confirm that the applicant was entitled to proceed with administering the bankruptcies on the basis that the respondents had filed valid statements of affairs.

  25. In the context of this submission it was contended that in making such declarations the Court would be satisfied that defects or irregularities in the statements of affairs could be excused under s.306(1) of the Act. Reference was made to Tsingaris v Official Trustee in Bankruptcy [1999] FCA 1389 in which Weinberg J considered that the provision of a “copy” of a statement of affairs to the Official Receiver was a defect that could be cured by s.306. It was noted that his Honour thought it appropriate to make a declaration deeming that the statement of affairs had been filed in compliance with s.54(1) on the basis that, as Finkelstein J had held in Sofia v Pattison [1997] FCA 1586, the term “proceeding” in s.306 was wide enough to conclude the defective filing of a statement of affairs. It was also pointed out that in Trihakis v Official Receiver (Vic) [1999] FCA 1426 Kenny J had been satisfied on the evidence before her that a statement of affairs had in fact been filed in accordance with s.54(1) of the Act and made a declaration to that effect. These decisions were said to have been approved by the majority of the Full Court in Nilant v Macchia (Weinberg J at [55] – [56] and Carr J at [2]). While in Nilant the Court had declined to apply s.306(1) as it considered that there had been no purported compliance with s.54(1), Weinberg J had commented at [64]:

    Where there has been an attempt to comply with the obligations of s.54(1), whether within the 14 day 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 capable of being regarded by the Court as “not invalidated” by reason of any formal defect or error.

  1. Finally, reference was made to Charalambous v Erskine [2003] FMCA 352 in which McInnis FM commented at [22] that in making a declaration under s.30(1) the Court was: “doing no more than exercising the general powers which the Court undoubtedly had in deciding all questions whether of law or fact in any case of bankruptcy coming within the cognisance of the Court”. 

  2. It was submitted that if the documents could be considered defective but nonetheless validated then “for the sake of certainty” it was desirable for the Court to make orders confirming their validity. 

  3. Section 30(1) of the Bankruptcy Act gives the Court wide powers. As Neaves J stated in Re Bilen; Ex parte Sistrom [1985] FCA 141 it is a “facultative provision giving the Court full power, within the limits of its jurisdiction to be found elsewhere, to make such orders as it considers should be made in order to carry out and give effect to the Act.  The words used are not words of limitation but of ‘extension’”.

  4. However, while the Court does have power under s.30(1) of the Act to make such orders including a declaration as it considers necessary for the purposes of carrying out or giving effect to the Act, I am not persuaded that this is a case in which it is appropriate to make the declarations sought by the applicant. Declaratory relief is discretionary. A declaration must be directed to determining a legal controversy. Mason CJ, Dawson, Toohey and Gaudron JJ stated in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582 that declaratory relief will not be granted if the question in issue is “purely hypothetical, if relief is claimed in relation to circumstances that have not occurred and might never have or if the court’s declaration will produce no foreseeable consequences for the parties.”

  5. As the Privy Council stated in Ibeneweka v Egbuna [1964] 1 WLR 219 at 225:

    the power to grant a declaration should be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be issued unless there are circumstances that call for their making.  Beyond that there is no legal restriction on the award of a declaration.

  6. In Ainsworth it was pointed out in the joint judgment, at [38], that “declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions”.  Brennan J referred at 596 to Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 348 at 448 per Viscount Dunedin suggesting that the characteristics of a real controversy included a requirement the person raising it must have a real interest and “must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought”.  (Also see Forster v Jododex Australia Pty Ltd (1992) 127 CLR 421 per Gibbs J at 437 and Aussie Airlines Pty Ltd v Australian Airlines (1996) 139 ALR 663 per Lockhart J).

  7. In this instance there is no evidence of a relevant legal dispute. The applicant did not identify any contradictor. Rather he sought a declaration as a matter of comfort in the absence of any indication that there was in fact a legal controversy, other than an uncertainty said to arise if the court did not take the view that the respondent’s had each “failed” to file a statement of affairs within s.146.

  8. In that context the applicant proposed that in order to be satisfied that the respondents had made out and filed statements of affairs in accordance with s.54 recourse should be had to s.306 to cure the claimed defects of quality and quantity of information contained in the statements, so that such irregularities or defects would not prevent the making of a declaration as to compliance with s.54(1). There are a number of difficulties with this suggestion.

  9. In particular, the authorities relied on in relation to declarations as to the filing of a statement of affairs and the operation of s.306 to cure defects in that respect are concerned not with inadequacies or a lack of completeness of the kind complained of in this instance but rather with defects in relation to the manner in which or place at which a statement of affairs was filed and whether such defects had the effect that the statement of affairs was not filed in the office of the Official Receiver for the district in which the sequestration order was made (or in the place and manner in which the statement of affairs was required to be filed under the earlier versions of s.54). In other words s.306 has been applied where a statement of affairs was prepared and filed but the formal procedural requirements of s.54(1) were not complied with properly. Thus the filing of a copy rather than an original could be cured under s.306 (see Trihakis, Sofia v Pattison and also Cable v Pattison [2003] FCA 1499), as could a failure to file a statement of affairs with the correct person (see Official Trustee in Bankruptcy v Street [2000] FCA 216), or the fact that a statement of affairs was unsigned and left with ITSA but not filed (Official Trustee in Bankruptcy v Halls (2000) 96 FCR 558, or, as in Tsingaris v Official Receiver (Vic), where a copy of a statement of affairs had been filed with the Official Trustee (not the Official Receiver) but received by a person employed by both, the statement was deemed to have been received by the Official Receiver. However no cases were cited in which ss.30 and 306 were invoked in the manner contended for by the applicant.

  10. In the passage relied on in the judgment of Weinberg J in Nilant v Macchia at [64], his Honour discussed the formal steps required to be taken in relation to the affairs of a person whose estate had been sequestrated and then referred to a construction of s.306(1) that would enable “purely formal defects or irregularities in relation to steps taken under the provisions of the Act to be overcome”. It was in that context that his Honour held that an attempt to comply with the obligations of s.54(1) constituted a “proceeding” under the Act capable of being regarded as not invalidated by reason of any formal defect or error.  This is apparent from the subsequent comment that “The effect of invoking s.306(1) in such a case is to permit the period of bankruptcy to run from the date of 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)” (at [64] emphasis added). 

  11. This is not such a case.  The irregularities complained of do not relate to procedural steps to be taken under the Act. 

  12. The applicant’s argument for a declaration is premised on the assumption that s.306 can and should be used to cure what are said to be defects in the quality and quantity of the information provided in each of the statements of affairs, despite the absence of authority to that effect. However, even if s.306 could apply to a lack of information and to defects in the “quality” of information in a statement of affairs, in this case the suggested inadequacies in information (other than the failure to disclose the existence of creditors attested to in affidavit evidence) have not all been shown to constitute formal defects or irregularities as would be necessary for s.306 to apply. In particular I am not satisfied on the evidence before the Court that the “nil” or “unknown” responses to particular questions can, in the circumstances of each of the bankrupt’s affairs, be characterised as a “formal defect or even an “irregularity” in their respective statements of affairs such that it would be appropriate to “waive” the irregularity in the sense contemplated by s.306 (and see Adams v Lambert (2006) 225 ALR 396 at [18] in relation to defects amenable to cure under s.306). Indeed such an approach would not seem to be consistent with the prospect that a failure to provide information to a trustee might in some circumstances give rise to an offence on the part of a bankrupt or other consequences under the provisions of the Bankruptcy Act. (See for example ss.6A(3) and 265 of the Act).

  13. In effect the Court is being asked to find that the statements of affairs were not “made out” in accordance with s.54(1) of the Act, which requires that the bankrupt “make out and file with the Official Receiver … a statement of his or her affairs” and that s.306 can be used to “cure” deficiencies in the nature or amount of information contained in a statement of affairs. On the evidence before me and in the absence of any authority in support of this proposition (as distinct from the use of s.306 to cure formal defects in relation to filing of such documents) I am not persuaded that it has been established that this is a case in which s.306 is applicable or that it is appropriate to grant the declaratory relief sought by the applicant under s.30.

  14. Moreover, while there was a failure to disclose creditors and arguable inadequacies and shortcomings in the statements of affairs completed by each of the respondents and filed with the Official Receiver, there is no evidence as to the precise circumstances in which the statements were filed with the Official Receiver or as to whether there was any formal defect in the manner in which the documents were filed.  Interestingly however, despite this, if there were such an undisclosed formal defect it would seem to be an unintended consequence of the present application that any such formal defects could be cured of by the declarations sought by the applicant. 

  15. The application must be dismissed. 

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate: 

Date:  19 September 2007

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Cases Cited

24

Statutory Material Cited

1

Wangman v Official Receiver [2006] FCA 202
Nilant v Macchia [2000] FCA 1528
Nilant v Macchia [2000] FCA 1778