Re Daf, B.L. & Anor Ex parte Daff, B.L. & Anor

[1985] FCA 448

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Bankruptcv - applications for discharge - observations cancernlng degree of particularity to be expected of trustee's report -

whether matters under s.150(6) established	- discretion	of the
Court under 6.150.
Bankruptcv Act 1966 ss. 149, 150

Re: B R I M LEONARD DAFF and ANNE ELIZABETH DAFF - Bankrupts

Ex Parte: BRIAN LEONARD DAFF and ANNE ELIZABETH DAFF - Applicants

No. 379 of 1982

TOOHEY J.

PERTH

9 SEPTEMBER 1985

IN THE FEDERAL COURT l

OF AUSTRALIA i

GENERAL	DIVISION	)	No. 3 7 5 of 1982
BANKRUPTCY DISTRICT	i
OF THE STATE OF	)
WESTERN AUSTRALIA	i
RE :	BRIAN LEONARD DAFF and ANNE ELIZABETH DAFF

Bankrupts

M PARTE: BRIAN LEONARD DAFF and

ANNE ELIZABETH DAFF

Applicants

MINUTE OF ORDER

JUDGE MAKING ORDER: TOOHEY J.

DATE OF ORDER:	9 September 1985
WHERE MADE:	Perth
THE COURT ORDERS THAT:

1. BRIAN LEONARD DAFF and ANNE ELIZABETH DAFF each be discharged

from bankruptcy but that in each case the discharge be

suspended until 19 January 1986.

Note: Settlement and entry of orders is dealt

with in Order 36 of the Federal Court Rules.

No. 379 of 1982

RE :

BRIAN LEONARD DAFF and

ANNE ELIZABETH DAFF

Bankrupts

M PARTE: BRIAN LEONARD DAFF and

ANNE ELIZABECH DAFF

Applicants

m:

TOOHEY J.

9 September 1985

REASONS FOR JUDGMENT

On 19 August 1982 Brian Leonard Daff and Anne Elizabeth

Daff became bankrupt on their own petition. They now seek

discharge from bankruptcy. On the hearing of their applications

Mr. and Mrs. Daff appeared in person. The Official Receiver also

appeared as did Umberto Procopio, a creditor who opposed the

applications on the ground that "The Bankrupts have paid	no
dividend in reduction of the debts proved".

In the ordinary course of events Mr. and Mrs. Daff

would, by reason of sUb-s.149(1) of the Bankruptcy Act 1966, have

been discharged from bankruptcy at midnight on 19 August 1985.

However in each case the Official Receiver, exercising his power

under para.l49(3)(c), entered an objection to discharge. In

consequence the statutory discharge date was prolonged by 2 years.

In the case of Mr. h f f , the Offlclal Receiver's

objection was on the ground that his conduct "both In respect of

the period before and the period after the date of bankruptcy has

been unsatlsfactory". In the case of Mrs. Daff, the objection was

that "the bankrupt has failed to co-operate in the administration

of her estate". While the lodging of an objection pursuant to

sub-s.149(3) prolongs the period of bankruptcy, it does not

prevent the bankrupt from applying to the Court for an order of

discharge. The matters pecified in sub-s.150(6) which, if

established, preclude the Court from making an order of discharge

or requlre the Court to suspend any order of discharge made, are

different from the grounds specified in sub-s.149(4) on which an

objection may be entered, though some of the grounds in

sub-s.149(4) are wide enough to include conduct specified in

suh-s.150(6). Nevertheless the direct consequence of entering an

objection under sub-6.149(3) is simply to prolong the statutory

period. If there is then an application for discharge, it is only

the establishment of one of the matters specified in sub-6.150(6)

that ties the hands of the Court In dealing with the application.

But, even if no such matter is established, sub-s.150(9) confers

on the Court a wide discretion to refuse to make an order of

discharge, to make an order, or to make an order but suspend its

operation either unconditionally or conditionally.

In the present case the report of the Officlal Receiver

specifies a number of matters under sub-s.150(6). By reason of

sub-S. 150 ,(12) the report is prima facie evldence of the statements

contained ~n it. The matters specified are as follows:

"(a) that the bankrupts have omitted to keep and

preserve such books, accounts or records, as

sufficiently disclose their business transactions

and ilnanclal position withln the perlod of five

years immediately preceding	the date on which they
became bankrupt;

(h) that the bankrupts have after knowing themselves to

be insolvent, continued to trade or obtained credit

to the amount of $100 or upwards;

(c)	That the bankrupts have contracted a debt provable
in the bankruptcy without having at the tlme of

contracting it any reasonable or probable grounds of expectation (proof of which lies on them) of

being able to pay it after taking into

consideration their other liabilities at the time;

(d) that he bankrupts have failed to account

satisfactorily to the trustee for any loss of, or

depreciation of, assets or for a deficiency of

assets. l'

The Official Receiver said that he did not wish to

pursue the matter mentioned in para.(d). I infer that, in the

Official Receiver's opinion, the bankrupts have now accounted satisfactorily for any loss of, or depreciation of, assets or any deficiency therein. Because of the operation of sub-s.150(12) and

because Mr. and Mrs. Daff were unrepresented, I invited Mr. Daff

to give evidence in relation to the matters mentioned in

paras.(a), (h) and (c) of para.18 of the Official Receiver's

report. In this regard it seems to me highly desirable that a

trustee's report made pursuant to sub-s.150(3) do more than echo

the language of sub-s.150(6). It should specify with some

particularity the conduct said to fall within the subsection. The

bankrupt is then alerted to the matters he has ta meet and the

Court is forewarned nf the likely areas of contention. Lack of

particularity in a trustee's report may mean that while the Court

is precluded from urantinu an Immediate dlscharqe it does not have

the materla1 to determine an appropriate period of suspension and

the nature of the	conditions, if	any, to be	attached to the
suspension.

Mr. Daff gave evidence without the aid of any source

material and, inevitably, his testimony lacked etail. It

appeared from the Official Receiver's report that Mr. and Mrs.

Daff formerly carried on business as haulage contractors. In the

financial year 1978-1979 they made a substantial loss from that

business. They also lost some $60,000 in a motel venture in

Harvey and $40,000 on the purchase and sale of cattle.

As to sub-para.(a) of the Official Receiver's report,

Mr. Daff said that until 1981 the partnership employed a full-time

accountant who maintained the ordinary books of business.

Thereafter they seem to have operated with a minimum of records -

cheque books, receipts and bank statements. Mr. Daff said that he

had given to the Official Receiver all business records, at least

those relating to the period until December 1981.

As to sub-para.(b), his answer was the not uncommon e

that the partnership tried to trade out of its precarious

financial position but was unsuccessful in doing so. The

allegations in sub-para.(b) appear to relate to debts incurred in

connection with the maintenance and repair of vehicles in the

haulage business.

AS to sub-para.(c), the gravamen of this complaint was

that Mr. and Mrs. Daff, with no hope of paying later debts,

continued ko c o n t r a c C them. Mr. Daff'r; answer was largely the one

he gave in respect of sub-para.(b).

On the evidence available, scanty though it is, Mr. and

Mrs. Daff have not answered the prima facie case raised by the

Official Receiver's report.

This is a case in which no dividend has been paid and

there is no prospect of any dividend. Mr. and Mrs. Daff have

three young children and Mrs. Daff is engaged in home

duties. Mr. Daff is employed by the Pearson Family Trust, a trust

of which the three children are the beneficiaries. Again the

evidence was unsatisfactory but it seems that the trust owns an old truck which is used to carry out cartage contracts. The trust

employs Mr. Daff and pays him $185 net a week. According

to Mr. Daff, the money earned by the trust is applied to the

school fees of the children. There has been a public examination

of Mr. Daff and I assume that if the Official Receiver thought

that there was anything in Mr. Daff's evidence to the Court

regarding the Pearson Family Trust that was open to challenge, it

would have been made the subject of cross-examination. The

position remains that Mr. and Mrs. Daff are unable to make any

contribution to their creditors and	are unlikely to	be in a
position to do SO.

Mr. Procopio is a credltor of the Daffs for an amount of

$2,000 or thereabouts plus legal costs incurred in prosecuting h s

claim In the Local Court. As I understand the position, he was a

bricklayer engaged for the building of the motel to which

Mr. and Mrs. Daff have been bankrupt now for more

than 3 years. There 1 s nothinq to be gained, s o far as the

creditors are concerned, from prolonging their bankruptcies.

While the matters referred to in the Official Receiver's report preclude me from granting an immediate discharge, I am of the

opinion that a discharge 1 s appropriate in all the circumstances.

Any order for discharge must be suspended hut I see no purpose in

attaching conditions to the suspension. However to reflect the

unsatisfactory aspects of these bankruptcies, in each case the

discharge will be suspended until 19 January 1986.

Since writing these reasons I have read the decision of

Woodward J. in Re Maher (unreported decision, delivered 21 August 1985)-in which reference is made to my own decision in Re Benda

(unreported decision, delivered 26 April 1985). Both decisions

were concerned with applications for discharge made before the

statutory three year period had expired. For that reason neither

decision is directly in point in the present case. Nevertheless

each emphasises the breadth of the discretion conferred on the

Court by sub-s.l50(9), even when sub-s.150(6) does not apply.

There is nothing in either decision inconsistent with the reasons

that have led me to the order made in the present case.

I certify that this and the five preceding pages

are a true CODV of the Reasons for Judgment herein

of his Honour'hr. Justice Toohey

Associate

Dated: 7 %&c&, '?is--