Re Deputy Commissioner of Taxation Ex Parte Duffy
[1989] TASSC 16
•27 April 1989
Serial No 9/1989
List "A"
CITATION: Re Deputy Commissioner of Taxation Ex Parte Duffy [1989] TASSC 16; A9/1989
PARTIES:RE DEPUTY COMMISSIONER OF TAXATION Ex Parte
DUFFY, Graeme Patrick
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 251/1985
DELIVERED ON: 27 April 1989
JUDGMENT OF: Green CJ
Judgment Number: A9/1989
Number of paragraphs: 11
Serial No 9/1989
List "A"
File No 251/1985
RE DEPUTY COMMISSIONER OF TAXATION
Ex Parte GRAEME PATRICK DUFFY
REASONS FOR JUDGMENT GREEN CJ
27 April 1989
This is an application by the abovenamed creditor made pursuant to s149(3)(c) of the Bankruptcy Act for leave to enter an objection to the discharge of the bankrupt by force of that section on the ground that "he is able and or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate". The material Parts of s149 are:—
"(1) Subject to this section, a person who becomes a bankrupt after the commencement of this section is, by force of this section, unless sooner discharged in accordance with section 150, discharged from bankruptcy upon the expiration of 3 years from the date of the bankruptcy.
(2) Subject to this section, a person who was an undischarged bankrupt immediately before the commencement of this section is, by force of this section, discharged from bankruptcy—
(a)in a case where the bankrupt became a bankrupt more than 3 years before the commencement of this section – upon the commencement of this section; or
(b)in any other case, unless sooner discharged in accordance with section 150 – upon the expiration of 3 years from the date of the bankruptcy.
(3) A bankrupt is not discharged from bankruptcy by virtue of this section if—
(a)at the time when he would have been so discharged but for this sub–section, he is still undischarged from an earlier bankruptcy;
(b)he has, since the date of the bankruptcy, again become a bankrupt;
(c)the Registrar, the Inspector–General or the trustee has entered, or a creditor has, with the leave of the Court, entered, an objection, in accordance with the prescribed form and in the prescribed manner, to the discharge of the bankrupt by force of this section and the objection has not been withdrawn or lapsed before the time when the bankrupt would have been so discharged but for this sub–section; or
(d)an order of the Court under sub–section (12) is in force in relation to the bankrupt.
(4) An objection shall not be entered under paragraph (3)(c) otherwise than on one or more of the following grounds:
(a)that the bankrupt is able, or is likely within 5 years from the date of the bankruptcy to be able, to make a significant contribution to his estate;
(b)that the discharge of the bankrupt by force of this section would prejudice the administration of his estate;
(c)that the bankrupt has failed to co–operate in the administration of his estate;
(d)that the conduct of the bankrupt, either in respect of the period before or the period after the date of the bankruptcy, has been unsatisfactory."
The respondent became bankrupt on 6 November 1985. On 4 November 1988 pursuant to s149(3)(c) the Trustee of the bankrupt's estate entered an objection to the bankrupt's discharge which would otherwise have taken place on 6 November 1988. That objection has not lapsed or been withdrawn but the Trustee has indicated that he proposes withdrawing it.
The respondent has made an initial submission that the application should be dismissed on the ground that a creditor may only apply for leave to enter an objection pursuant to s149(3)(c) within three years of the bankruptcy.
In Van Reesema v Official Receiver in Bankruptcy (1983) 50 ALR 253 the Federal Court of Australia had to consider whether a defective objection could be amended after the three year period had expired. Sweeney J held that the objection should not have been amended on the ground, in essence, that the power to amend should not be exercised so as to produce "the effect that a bankrupt who has been discharged by operation of s149(2)(b) should revert to the status of being undischarged". Sheppard J also held that the objection should not have been amended on the ground that, as the appellant had been discharged by operation of law, amending the objection would have achieved nothing. At p263 Sheppard J referred to s149(3)(c) and said:—
"It is to be observed that the paragraph does not expressly say that the objection must be entered before the expiration of the period of three years for which ss 149(1) and (2) provide; but the general framework of the section and the latter words of the paragraph which speak of the withdrawal or lapse of the objection before the expiry of the relevant period lead to the conclusion that the objection must be entered before the period has expired."
Although I agree with respect with the conclusion reached by Sheppard J, I think that that expression of opinion about the time within which an objection must be lodged should be read in the light of the circumstances with which the court was concerned in that particular case and cannot be taken to have been intended to extend to cases such as the present where by virtue of the operation of the section a bankrupt has not been discharged at the expiration of the three year period.
In Re Brown; Ex Parte Dai–Ichi Kangyo Australia Ltd (1986) 66 ALR 519 Toohey J observed at p521:–
"It seems to me that once the trustee entered an objection and so long as that objection remained in force, it was open to a creditor to seek the leave of the court to enter its own objection. There is nothing in pare (c) of s 149(3) that precludes more than one objection or that requires a second objection to be lodged before the expiration of three years from the bankruptcy, so long of course as there has been no discharge."
I recognise that in that case the creditor's application was made ex parte and the observations I have quoted were obiter dicta and I do not overlook the fact that Toohey J expressed the view that "the position is not free from doubt". However, with respect I agree with the observations of Toohey J It is obvious that in the great majority of cases objections would necessarily have to be filed within the three year period as otherwise there would be nothing to object to and the section should not be permitted to or cannot operate so as to retrospectively revoke an automatic discharge. However there is nothing in the section which expressly precludes the lodging of an objection outside the three year period where a bankrupt has not been automatically discharged and I cannot see anything in the Act which would justify my importing such a time limitation into the section when Parliament has not chosen to do so. I hold that it is open to me to entertain the application for leave to enter the objection.
The applicant who is the principal creditor lodged a proof of debt in the sum of $388,581.74. A meeting of creditors held on 31 January 1986 approved a budget and various arrangements whereby the respondent would be employed by GP Duffy Pty Ltd and which provided for the payment of various outgoings, contributions to the bankrupt's estate, a salary to the bankrupt and contributions to a superannuation fund for the bankrupt's benefit. Since then the trustee and the bankrupt have conducted their affairs in accordance with the arrangements made at that meeting. The bankrupt has made a net contribution to his estate of $128,802.00. $277,474.60 remains owing to the applicant.
The respondent, a neurosurgeon, is aged 58 years. During the period of his bankruptcy he has worked on each day of the week for very long hours. He has a daughter whom I infer is about 15 years of age who is dependent upon him. The applicant is not in good health and after referring to various disabilities from which he is suffering his physician expressed the opinion that:
"13A man of Mr Duffy's fifty eight years of age, with the ailments that Mr Duffy has, ought to be retired.
14He certainly should not be expected to be employed in a job that requires physical effort let alone one that involves standing for many hours at an operating table.
15With Mr Duffy's physical ailments and the pace at which he works, his hours of work are manifestly excessive.
16If Mr Duffy continues to work as he is at the moment he will do irreparable damage to his health and substantially reduce his life expectancy."
The bankrupt is continuing to work long hours and save for saying that "I cannot continue working as I have" he has not indicated that he proposes curtailing his working hours or retiring in the near future. On 5 November 1988 the respondent ceased making the regular contributions to his estate which he had been making since January 1986, although on 2 March 1989 he did pay an amount of $26,847 which represented the company's surplus profits which, pursuant to the January 1986 agreement, were to be "recorded as bonuses" to the respondent but which the respondent was obliged to contribute to his estate. If the respondent were to retire now he would be entitled to be paid from the superannuation fund to which I have referred a lump sum amounting to about $254,000 and if he were to retire at the age of 65 he would be entitled to be paid a lump sum of over $1,000,000.
I am required to determine whether the case is a proper one for the granting of leave to the applicant to enter the objection. I would, with respect, adopt the following statement made by Toohey J in Re Brown (supra) at p522 that:—
"This requires that the court be satisfied, inter alia, that the applicant is in truth a creditor of the bankrupt', that the bankrupt has not been discharged from bankruptcy and that there is material to support the ground of objection upon which the creditor relies. It may be that a prima facie case is required: see Re Palenkas; Ex parte Raymor (Brisbane) Pty Ltd (1982) 66 FLR 115 at 118. It may be that the matter can be put more broadly in terms that the court must be satisfied, on the material before it, that it is proper to allow an objection and that the application is not merely frivolous."
On the evidence before me I am satisfied that whichever test I applied it would be proper to grant leave. I cannot make a precise assessment of what the respondent's financial position will be between now and 6 November 1990, but a precise assessment is not required. What I am satisfied of is that the respondent has ceased making the regular contributions to his estate which he had previously been making and to that extent he is better off financially now than he was, that he is continuing to receive an income and that he has it in his power to take a step at any time which would entitle him to be paid a lump sum the size of which I infer will increase as time passes. I am satisfied that even if the respondent curtails his working hours it is probable that he is able or is likely during the period between now and 6 November 1990 to be able to make a contribution to his estate. I cannot assess how much that contribution will be but I am satisfied that it would be significant.
Counsel for the respondent submitted that as well as being satisfied that the applicant has established a prima facie case that the ground of his objection is well founded I should also be satisfied that having regard to all the circumstances of the bankruptcy and the bankrupt it would be just and reasonable to grant leave and to that end he referred to the bankruptcy, the respondent's conduct during his bankruptcy, the broad policy of the Act and the possible consequences to the respondent if leave were granted. I am not satisfied that the determination of this application involves the exercise of a broad discretion of that kind: no authorities supporting counsel's submission were cited, there are no words in s149 which invest such a broad discretion in the court and when Parliament does require the court to take into account general matters of the kind referred to by counsel in other applications under s149 it has done so expressly – see ss149(10) and 149(13). It may be that in special circumstances the court would have a residual discretion to refuse an application for leave notwithstanding that it is satisfied that a creditor has established a prima facie case that one of the grounds in s149(4) has been made out. However, I do not find it necessary to express a concluded view as nothing put to me persuades me that any such circumstances exist in the present case.
The evidence and an admitted fact establish that the respondent believes that he would not have worked as he has worked during his bankruptcy had the arrangements as to the terms of his employment and the superannuation payments which were to be made for his benefit not been accepted by his creditors at the meeting held on 31 January 1986. I reject counsel's submission that these circumstances in some way preclude or estop the applicant from making this application. The evidence establishes no more than that at the meeting the creditors agreed that the proposed budget and the arrangements were reasonable. The evidence does not establish that the creditors agreed or did or said anything which could be construed as a representation to the respondent that if the respondent adhered to the arrangement they would not exercise their statutory rights under s149 or any other section.
I grant the applicant leave to enter an objection in accordance with the prescribed form and in the prescribed manner to the discharge of the bankrupt by force of s149 of the Act.
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