Official Receiver of the Bankruptcy District of Victoria v Walia, Allan Davinder

[1997] FCA 1190

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - debtor’s petition - reference to the Court by the Official Receiver - circumstances in which a reference may be made

Bankruptcy Act1966 (Cth) s 55

R v Davison (1954) 90 CLR 353 mentioned
Re Coote (1993) 47 FCR 522 discussed
Re Sawers; Ex parte Blain [1879] 12 Ch D 522 discussed
Re Bond [1888] 21 QBD 17 mentioned
Re Betts;  Ex parte Official Receiver [1901] 2 KB 39 mentioned
Re A Debtor Ex parte Debtor v Allen [1967] Ch 590 mentioned
Re Mottee; Ex parte Mottee & Anor (1977) 29 FLR 406 considered

OFFICIAL RECEIVER OF THE BANKRUPTCY DISTRICT
OF VICTORIA v ALLAN DAVINDER WALIA
VG7582 OF 1997

FINKELSTEIN J
MELBOURNE
5 NOVEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7582 of   1997

BETWEEN:	OFFICIAL RECEIVER OF THE BANKRUPTCY DISTRICT OF VICTORIA Applicant
AND:	ALLAN DAVINDER WALIA Respondent
JUDGE:		FINKELSTEIN J
DATE OF ORDER:		5 NOVEMBER 1997
WHERE MADE:		MELBOURNE

THE COURT ORDERS THAT:

The application for directions is dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7582 of 1997

BETWEEN:	OFFICIAL RECEIVER OF THE BANKRUPTCY DISTRICT OF VICTORIA Applicant
AND:	ALLAN DAVINDER WALIA Respondent

JUDGE:	FINKELSTEIN J
DATE:	5 NOVEMBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

HIS HONOUR: The Official Receiver asks the Court for a direction whether or not to reject a petition presented by the respondent against himself. The petition was presented to the Official Receiver pursuant to s 55(1) of the Bankruptcy Act 1966 (Cth).  The concern of the Official Receiver which gives rise to this application is that the petition shows the debtor to be a resident of New Zealand and the statement of affairs that accompanied the petition shows him to be a citizen of that country.  Accordingly, there is doubt whether the petition should be accepted. 

In fact two questions arise on this application.  One is whether the Official Receiver should be directed to accept or reject the petition.  The second, but logically anterior, question is whether the Official Receiver is entitled to seek such a direction from the Court.  It will be seen that the answer to the second question will also provide the answer to the first.

The right to present a debtor’s petition is found in Division 3 of Part IV of the Bankruptcy Act. Section 55(1) provides that a debtor may present a petition against himself or herself. Section 56A(1) allows a debtor’s petition to be presented against a partnership by either all of the partners or a majority of the partners if they are resident in Australia. Section 57(1) permits joint debtors to present a petition jointly against themselves. In each case the petition is to be presented to the Official Receiver. In each case if the petition is not rejected or if the Official Receiver is not directed by the Court to reject it, the Official Receiver is required to endorse the petition and, upon that endorsement being made, the petitioning debtor or the partnership to whom the petition is directed or the peitioning joint debtors (as the case requires) will become bankrupt: see ss 55(4A), 56E and 57(5). No judicial act is involved as the act of endorsement is purely administrative in character. Indeed no judicial power can be conferred on the Official Receiver. The reason is that it would be unconstitutional for the Commonwealth Parliament to do so: see R v Davison (1954) 90 CLR 353. The judicial power of the Commonwealth can only be vested in a court constituted under sections 71 and 72 of the Constitution. Thus it is that the Official Receiver has no adjudicative role to play in connection with the presentation or acceptance of a debtor’s petition.

I now turn to s 55 which concerns the presentation of a petition by a debtor against himself or herself. It will not be necessary for me to consider separately the provisions relating to a debtor’s petition presented against a partnership or the presentation of a petition by joint debtors. The provisions which deal with those petitions are in all relevant respects similar to those found in s 55 so that the comments that I make about a debtor’s petition under s 55 have application to those other petitions.

If a debtor wishes to present a petition to the Official Receiver against himself or herself that petition must be in the approved form and must be accompanied by a statement of affairs: 
s 55(2). The Official Receiver may reject a debtor’s petition if the petition does not substantially comply with the approved form or is not accompanied by an adequate statement of affairs: s 55(3). In one circumstance the Official Receiver is directed to refer a debtor’s petition to the Court for a direction to accept it or reject it. That circumstance is where a creditor’s petition has been presented against a group of debtors and the debtors’ petition has been presented by one member of that group: see s 55(3B). By s 55(4) the Official Receiver must accept a debtor’s petition unless the Official Receiver rejects it under sub-section (3) or is directed by the Court to reject it. Further, there are three categories of debtor who are not entitled to present a petition without the permission of the Court. Section 55(5A), (6), and (6A), describe those categories. If a petition is presented by a debtor who is not entitled to do so no bankruptcy will result: see s 55(7).

The scheme of s 55 establishes that any debtor other than a debtor described in sub-sections 55(5A), (6) or (6A), may present a petition. There is no jurisdictional fact that needs to be satisfied or complied with other than the requirement that the petition is in a proper form and that there is an adequate statement of affairs. It is true that, generally speaking, bankruptcy laws only apply to a person who has some connection with Australia. In Re Coote (1993) 47 FCR 522 at 524 Northrop J said, “The Bankruptcy Act could not normally apply, say, to a citizen of Iceland who had never been present in Australia, was not a resident in Australia, had no place of business or place of residence in Australia or was not carrying on business in Australia.” This statement was based on the judgment of Cotton LJ in Re Sawers; Ex parte Blain [1879] 12 Ch D 522. In that case Cotton LJ said at 532 in relation to the English Bankruptcy Act: “As regards foreigners, there is prima facie no right to bind them if they are not here. I think, therefore, that the true interpretation of the general word ‘debtor’ in the Bankruptcy Act 1869 (UK) is, a debtor subject to the English bankruptcy law.” Jurisdictional requirements are imposed by the Bankruptcy Act in the case of a creditor’s petition: they are found in s 43(1).  These requirements are imposed so that the Bankruptcy Act does not affect the rights of a person who has no connection with Australia.  An enactment that purports to have that effect may be unconstitutional.  But no such issue can arise in the case of a debtor’s petition.  The presentation of a petition by a debtor is the voluntary act of the debtor that takes place within Australia.

The conclusion that any debtor can present his or her own petition even if that debtor has no connection with Australia is reinforced by the limited circumstances in which the Official Receiver can reject a petition. As I have said those circumstances are confined to the case where the petition or statement of affairs is defective in form or when a direction to reject it has been given by the Court. Further, s 55 only contemplates one circumstance when a debtor’s petition will be brought before the Court for the purposes of determining whether the Official Receiver should be directed to reject it. That is the circumstance that is described in
s 55(3B). It follows, in my opinion, that apart from a reference to the Court pursuant to
s 55(3B) the Official Receiver should not refer a petition to the Court for its consideration.

The opposite position was the case before s 55 was amended by Act No. 44 of 1996. Before those amendments a debtor’s petition was presented to the Registrar in Bankruptcy. The petition was required to be in accordance with the prescribed form and had to be accompanied by a statement of affairs: see the former s 55(2). By the former s 55(3) where a petition was presented to the Registrar and it appeared to the Registrar that the petition and the statement of affairs accompanying the petition were in proper form he was required to accept the petition. In any other case the Registrar could reject the petition or refer it to the Court for a direction to accept it or reject it. Although s 55(3) empowered the Registrar to seek the direction of the Court in any case of doubt it is by no means clear in what circumstances the Court might have directed the Registrar to reject a petition. I am inclined to the view that a Court could give such a direction in two circumstances, viz. if the Registrar was doubtful whether the petition and the statement of affairs complied with s 55(2) but the Court was of the view that there was no sufficient compliance or if the presentation of the petition was an abuse of process; as to the circumstances where a debtor’s petition might be an abuse of process see Halsbury’s Laws of England (4th ed) vol 3(2) para 185.

In the event, I decline to give any direction to the Official Receiver for the reason that the Official Receiver should not have referred the respondent’s petition to the Court for its consideration.  It follows that s 54(5) of the Bankruptcy Act now requires the Official Receiver to accept the respondent’s petition because the Official Receiver has not rejected it for failure to comply with s 55(2) and the Court has not directed the Official Receiver to reject the petition on a reference under s 55(3B). The act of acceptance will not be in pursuance of a direction by the Court.

The result arrived at in this case might seem unsatisfactory for the reason that the Court has declined to assist the Official Receiver when the Court has been approached for that assistance. However, it would be a mistake to think that this outcome is unsatisfactory. If a debtor’s petition complies with the requirements of s 55(2) and is not the subject of a reference under s 55(3B) the debtor is entitled to be made a bankrupt and no question can arise that requires the consideration of the Court. If the presentation of the petition is an abuse of process the Court has power to annul the bankruptcy: compare Re Bond [1888] 21 QBD 17; Re Betts;  Ex parte Official Receiver [1901] 2 KB 39; Re A Debtor Ex parte Debtor v Allen [1967] Ch 590. I appreciate that these cases concern an annulment of a bankruptcy for an abuse of the court’s processes and therefore have no direct application to the recission of a bankruptcy brought about by the act of the Official Receiver who is not part of the Court. Nevertheless the principles established by those cases can be applied, by way of analogy, to a bankruptcy brought about by a debtor’s petition in my opinion: see Re Mottee; Ex parte Mottee & Anor (1977) 29 FLR 406 where the power of annulment was assumed to exist.

Finally, I wish to make it clear that it should not be inferred from what I have said in these reasons that the Official Receiver is unable to bring to the attention of the Court a debtor’s petition that the Official Receiver suspects may have been presented in abuse of the procedures of the Bankruptcy Act.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein

Associate:

Dated:             5 November 1997

Solicitor for the Applicant:	Australian Government Solicitor
No appearance by the Respondent
Date of Hearing:	20 October 1997
Date of Judgment:	5 November 1997