Re Ansett; ex parte Ansett v Pattison

[1995] FCA 187

CATCHWORDS

BANKRUPTCY - Notice of objection to discharge - whether notice of objection complied with Bankruptcy Act, 1966 (Cth)
s 149C(1)(c) in stating reasons for objecting to discharge of bankrupt - whether notice of objection not effective for purposes of s 149 - declaration that notice of objection ineffective to prevent the discharge of the bankrupt.

Bankruptcy Act, 1966 (Cth), s 149, Part IV Division 4B.

Re Hall 14 ACSR 488.

ROBERT GRAHAM ANSETT Ex Parte ROBERT GRAHAM ANSETT and PAUL ANTHONY PATTISON

VB 1078 of 1990

Olney J
Melbourne
31 March 1995.

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )
BANKRUPTCY DISTRICT OF THE       )
STATE OF VICTORIA                )       No VB 1078 of 1990

Re:           ROBERT GRAHAM ANSETT

A Bankrupt

Ex Parte:     ROBERT GRAHAM ANSETT

Applicant

And:          PAUL ANTHONY PATTISON
              (as trustee of the property of
             Robert Graham Ansett, a bankrupt)

Respondent

Coram:    Olney J

Place:    Melbourne

Date:     31 March 1995

REASONS FOR JUDGMENT

By application filed on 3 November 1994 the applicant sought a variety of orders but the only matter presently before the Court is that referred to in paragraph 5 of the application in which the applicant seeks:

A declaration that the notice of objection to discharge from bankruptcy dated 10 March 1993 filed with the Registrar on that date together with the amended notice of objection to discharge from bankruptcy also dated 10 March 1993 but filed with the Registrar on 25 March 1993 by Paul Anthony Pattison are nullities and ineffective to prevent the discharge from bankruptcy of Robert Graham Ansett pursuant to section 149 of the Act.

The history of the applicant's bankruptcy is long and complex but it is not necessary at this time to enter upon a close examination of all that has transpired.   It is sufficient to record these facts which are not controversial:

(a)The applicant became a bankrupt on his own petition on 6 July 1990;

(b)The respondent was appointed the applicant's trustee in bankruptcy on 6 September 1990;

(c)On 26 June 1992 the respondent entered an objection to the discharge of the bankrupt pursuant to the then current provisions of s 149(3) of the Bankruptcy Act 1966 (the Act);

(d)By reason of subsequent amendments to the Act the applicant will be discharged from bankruptcy on 2 July 1995 unless the bankruptcy is extended by reason of some other provision of the Act;

(e)On 27 October 1992 the respondent, acting pursuant to Division 4B of Part VI of the Act, advised the applicant that he had assessed him to be liable to pay contributions to his estate of $42,346 per annum in respect of the contribution assessment period 1 July 1992 to 30 June 1993 and directed that such sum be paid by 8 equal calendar monthly instalments of $5,293.25 commencing on 15 November 1992;

(f)The applicant paid an instalment of $5,293.25 on 12 November 1992;

(g)On 21 December 1992 the applicant requested the Inspector-General in Bankruptcy to review the respondent's assessment of the applicant's income and contribution;

(h)On 18 February 1993 the Inspector-General set aside the respondent's assessment and assessed the applicant's contribution at $20,871.54.   At the same time the Inspector-General said that the bankrupt should make arrangements with the respondent in relation to how the contribution should be paid.

(i)On 2 March 1993 the respondent wrote to the applicant as follows:

2nd March 1993

Mr R.G. Ansett,
         51 Wilson Street,
         North Carlton  Vic  3053

BY FACSIMILE - 387 8450

Dear Sir,

YOUR BANKRUPT ESTATE
         NO VB 1078 OF 1990

I have a copy of the letter dated 18th February 1993 from the Official Receiver's Office (Melbourne) to your solicitors, J.M. Smith & Emmerton.   This letter sets out the amended assessment, pursuant to which you are liable to contribute the sum of $20,871.54 for the year ending 30th June 1993.

I believe that the reassessment of the Inspector-General is incorrect and that it was delivered out of time.   I have also complained to the Official Receiver's Office that there has been a denial of natural justice.   These matters are set out in my letter of 1st March 1993 to the Official Receiver's Office, a copy of which I have sent to J.M. Smith & Emmerton.

I note that, even on the basis of the amended assessment, your liability to contribute is $20,871.54.   This is $1,739.30 per month.

For the period 1st July 1992 to 28th February 1993 (both inclusive) your total liability to contribute, on the basis of the amended assessment, was $13,914.40.   Of this sum, you have paid $5,293.25, leaving a balance outstanding of $8,621.15.

I hereby demand that you pay that balance to me by 5.00pm on Friday 5th March 1993.

I make this demand without prejudice to my rights generally, including my right to apply to the Administrative Appeals Tribunal to review the decision of the Inspector-General pursuant to Section 139ZF of the Bankruptcy Act 1966 and/or to assert that the decision of the Inspector-General was out of time and consequently, pursuant to sections 139ZE(6) and 139ZD(a), my original assessment stands.

Yours faithfully,

PAUL A. PATTISON
         TRUSTEE

(j)On 10 March 1993 the respondent filed notice of objection to the applicant's discharge pursuant to

s 149B of the Act. The full text of the notice filed in the Court on 10 March 1993 follows:

BANKRUPTCY ACT 1966

NOTICE OF OBJECTION TO DISCHARGE

Bankruptcy District of      )     No.: VB 1078 of 1990
         the State of Victoria       )     Re: Robert Graham Ansett

I, Paul Anthony Pattison, Trustee of the bankrupt estate of Robert Graham Ansett, of Ernst & Young, 120 Collins Street, Melbourne, hereby object to the discharge of Robert Graham Ansett of 51 Wilson Street, North Carlton from bankruptcy by force of Section 149B of the Bankruptcy Act 1966 on the following grounds:

The ground of this objection is contained in paragraph 149D(1)(f) of the Act, in that the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under Section 139ZG.

On 27 October 1992 I issued an assessment pursuant to Section 139W(1) of the Act requiring the bankrupt to pay an amount of $42,346 by instalments of $5,293.25 on the 15th day of each month.

On 12 November 1992 I received an amount of $5,293.25 from the bankrupt.

On 10 December 1992 the bankrupt made a request to the Inspector General in Bankruptcy pursuant to Section 139ZA of the Act to review the assessment.

On 18 March 1993 the Inspector General issued an amended assessment and on 2 March 1993 I advised the bankrupt that pursuant to Section 139ZG an amount of $8,621.15 was due and payable on or before 5.00pm on Friday 5 March 1993.   This amount has not been paid.

This objection has the effect of extending the bankruptcy to the 6th day of July 1998.

Dated this 10th day of March 1993.

PAUL A PATTISON
         Trustee

Note:If you dispute the grounds upon which the objection was lodged you may apply to the Inspector General for a review of the decision to lodge an objection and/or apply to the Administrative Appeals Tribunal for a review of the decision.

(On 10 March 1993 the respondent sent to the applicant a copy of the notice filed in the Federal Court.  There was an
obvious typographical error in the notice in that the date 18 March 1993 appearing in the 6th paragraph could not be correct.   On 25 March 1993 the respondent forwarded to the applicant and the Court an amended notice in which the date previously shown as 18 March 1993 is amended to 18 February 1993.   No issue is taken concerning the amendment of the notice).

Section 149 of the Act provides for the automatic discharge of bankrupts.   Under the provisions of s 149(2)(i), upon the commencement of that section (which occurred on 1 July 1992) the applicant became entitled to be discharged from bankruptcy with effect from 2 July 1992.   At any time before a bankrupt is discharged from bankruptcy the trustee or Official Receiver may file with the Registrar a written notice of objection to the discharge (s 149B).   If an objection to the applicant's discharge was in fact duly filed on 10 March 1993, the objection being made on the ground referred to in s 149D(1)(f) then the bankrupt would not be entitled to be discharged until the expiration of 8 years from the filing of his statement of affairs (s 149A).

Section 149C of the Act provides:

149C(1)   A notice of objection 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 or Official Receiver, establishes that ground or each of those grounds;  and

(c)state the reasons of the trustee or Official Receiver for objecting to the discharge on that ground or those grounds.

(2)   A notice of objection is not invalid merely because it does not state the ground or grounds of objection precisely as set out in subsection 149D(1) provided that the ground or grounds can reasonably be identified from the terms of the notice.

It is common cause that one of the grounds upon which notice of objection may be given is that contained in s 149D(1)(f) of the Act namely that:

the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG;

It is not disputed that the notice of objection filed by the respondent refers to the evidence or other material that, in the opinion of the respondent, established the ground relied upon.   The following paragraphs of the notice namely:

On 27 October 1992 I issued an assessment pursuant to Section 139W(1) of the Act requiring the bankrupt to pay an amount of $42,346 by instalments of $5,293.25 on the 15th day of each month.

On 12 November 1992 I received an amount of $5,293.25 from the bankrupt.

On 10 December 1992 the bankrupt made a request to the Inspector General in Bankruptcy pursuant to Section 139ZA of the Act to review the assessment.

On 18 February 1993 the Inspector General issued an amended assessment and on 2 March 1993 I advised the bankrupt that pursuant to Section 139ZG an amount of $8,621.15 was due and payable on or before 5.00pm on Friday 5 March 1993.   This amount has not been paid.

assert facts which the respondent clearly believed to be true and which in the opinion of the respondent established the ground of objection referred to in the notice. The parties are however at issue on the question of whether the notice of objection complies with s 149C(1)(c) in stating the reasons of the respondent for objecting to the applicant's discharge on that ground. The applicant says that no reasons for
objecting to his discharge are stated in the notice.   On the other hand, the respondent says that the reason for his objection is contained in the sentence:

"This amount has not been paid"

The applicant's failure to pay the amount of a liability under s 139ZG is the ground upon which the respondent gave notice of objection.   Proof of that failure was necessary in order to establish the ground.   The fact that payment had not been made was part of the evidence which established the ground upon which the respondent relied.  Taken at its face value, the notice of objection does no more than set out the ground of objection and refers to the evidence that in the respondent's opinion established that ground.   Clearly
s 149C(1)(a) and (b) were complied with but there is nothing in the notice which can be regarded as a statement of the reasons for objecting to the discharge on the ground relied upon.

The legislative policy seems to be clear enough.   Section 149D(1) sets out some 14 grounds upon which an objection may be based.   The mere existence of an available ground does not automatically give rise to an extension of the bankruptcy.   To achieve that end the trustee must give notice setting out the ground he relies upon, the evidence which establishes that ground and the reason why he objects to the discharge on that ground.   The latter requirement suggests that the trustee must address the relevance of the bankrupt's conduct in relation to the ground of objection in the context of the
administration of the estate and to make a judgment as to whether that conduct provides a basis or reason for the bankruptcy to be extended.   Further, the trustee is required to expose his reasoning in the notice.

A bankrupt is entitled to request the Inspector-General to review the decision of a trustee to file a notice of objection (s 149K) and may apply to the Administrative Appeals Tribunal for the same purpose (s 149Q).

In my opinion the respondent's notice to the applicant of 10 March 1993 does not state the reasons of the respondent for objecting to the applicant's discharge on the ground relied upon. The notice therefore does not comply with one of the mandatory provisions of s 149C(1) of the Act and accordingly the notice was not effective for the purposes of s 149B.

By virtue of s 178 of the Act a bankrupt affected by any act, omission or decision of a trustee may apply to the Court and the Court may make such order in the matter as it thinks just and equitable.   The present applicant is clearly affected by the act of the respondent in filing a purported notice of objection in a form which did not comply with the provisions of s 149C(1) and it is just and equitable that the Court should declare that the notice of objection filed by the respondent does not comply with s 149C(1) and that it is not effective for the purposes of s 149 of the Act.

Whilst I am confident that my conclusions are supported on the proper construction of the Act, I am nonetheless comforted by the following passage from the judgment of Branson J in Re Hall 14 ACSR 488 at pp 493-4:

Section 149C(1)(c) requires that the notice of objection must "state the reasons of the trustee or Official Receiver for objecting to the discharge" on the ground or grounds set out in the notice. Plainly compliance with this paragraph requires more than a mere recitation of a ground or grounds of objection set out in s 149D(1). That is, the legislation assumes an exercise of discretionary judgment by the trustee or Official Receiver. A notice of objection is not intended to be the necessary consequence of the trustee or Official Receiver being able to establish a ground of objection no matter how technical.

The notice of objection here complained of does not, on any reading of it, state in this sense the reasons of the trustee for objecting to the discharge of the applicant on the grounds identified in the notice (see Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500 per Woodward J at 507-8 and Our Town FM Pty Ltd v Australian Broadcasting Tribunal (No 1) (1987) 16 FCR 465; 77 ALR 577 per Wilcox J at FCR 482-4).

The right of any bankrupt to seek a review of the decision of the trustee or Official Receiver to file the notice of objection is significantly undermined by a withholding from him or her of the reasons for the filing of a notice of discharge. The clear intent of s 149C(1)(c) is to ensure that bankrupts are advised of such reasons.

And with respect to Her Honour, I also endorse the following observations at p 494 of the report:

As the Full Court said in Van Reesema v Official Receiver in Bankruptcy the power to prevent a discharge by operation of law is a "great power" (see p 260). In that case the Full Court did not find it necessary to determine whether the then provisions of the Bankruptcy Act called for strict compliance with the requirements of the Act or whether substantial compliance would be sufficient. I similarly find it unnecessary to answer that question with respect to the provisions now in operation. I note, however, that the use of the word "must" in the opening line of s 149C(1) and the terms of subs (2) of the section would appear to convey the need for close compliance with the requirements of paras (b) and (c) of the subs (1).

In my opinion the notice of objection of which complaint is made in this case fails to satisfy the requirements of s 149C(1)(b) and (c) in any substantial way.   I conclude that the notice of objection was and is ineffective to avoid the discharge from bankruptcy of the applicant by operation of law pursuant to s 149 of the Act on 16 February 1993.

The respondent has sought to distinguish the decision in Re Hall on the basis that the ground of objection there relied upon involved the trustee drawing a conclusion as to the nature of the bankrupt's conduct. But be that as it may, insofar as the notice of objection in this case contains no statement of the trustee's reasons sufficient to satisfy the requirement of s 149C(1)(c), the two cases cannot be distinguished.

The applicant is entitled to a declaration that the notice of objection to discharge from bankruptcy filed by the respondent on 10 March 1993 (either in its original or its amended form) does not comply with the provisions of s 149C(1)(c) of the Bankruptcy Act 1966 and is for that reason ineffective to prevent the discharge of the applicant pursuant to s 149 of the Act.

I certify that this and the preceding 9 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate:

Dated:

Heard:       22 March 1995

Place:       Melbourne

Judgment:     31 March 1995

Appearances:

Mr G. Bigmore QC and Mr M. Galvin (instructed by J.M. Smith & Emmerton) appeared for the applicant.

Mr T.P. Murphy (instructed by Cornwall Stodart) appeared for the respondent.