Re Finnie, J.A. & S.T. v The Official Trustee in Bankruptcy

[1989] FCA 188

Re: JUDITH ANNE FINNIE and SYDNEY THOMAS FINNIE
And: THE OFFICIAL TRUSTEE IN BANKRUPTCY
No. W657 of 1985
FED No. 188
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND AUSTRALIAN CAPITAL TERRITORY
Foster J.(1)

CATCHWORDS

Bankruptcy - validity and effectiveness of Official Trustee's notice of objection to discharge pursuant to s 149(4)(d) - whether grounds set out in the notice of objection ambiguous.

Bankruptcy Act 1966 s 149(4)(d); s 149(7)

Companies (New South Wales) Code s 227; s 238(10)

Van Reesema v Official Receiver in Bankruptcy (1983) 50 ALR 253

HEARING

SYDNEY

#DATE 21:3:1989

Bankrupts/Applicants: J. R. Chippendall Esq.

Respondent: M. R. Aldridge Esq.

ORDER

Each of the applications be dismissed with costs.

JUDGE1

The court has before it two applications in the same terms. The applications are brought by Sydney Thomas Finnie and Judith Anne Finnie, his wife. The two applicants were on 19 July 1985 declared bankrupt on their own petition, the official trustee becoming the trustee of their estates.

1. It appears from their affidavits that each was examined under s 69 of the Bankruptcy Act, the examinations being held on 3, 28 and 29 April 1986. Mrs Finnie's examination has been stood over to a date to be fixed since the last examination was held. As the sequestration occurred on 19 July 1985 each of the applicants in the ordinary course of events would have been discharged from bankruptcy by force of s 149(1) at the expiration of three years from that date namely 19 July 1988. However on 14 July 1988 the official trustee in bankruptcy, the respondent to these applications filed notice of objection to discharge in respect of each estate pursuant to s 149(4)(d).

2. The effect of the filing of these notices of objection, if the notices are valid, is to extend the period required for discharge for a further two years (s 149(7)). It has been argued on behalf of the applicants that the notice of objection lodged in respect of each of the estates is not a valid and effective notice. The applications seek a declaration in respect of each notice that they be declared "void and of no effect" and a consequential declaration that the applicant has been discharged from bankruptcy at the expiration of the relevant period of three years which has now elapsed. The ground relied upon in the notice is the ground set forth in s 149(4)(d). That section reads as follows:
   

"An objection shall not be entered under paragraph 3(c) otherwise than on one or more of the following grounds: (d) that the conduct of the bankrupt, either in respect of the period before or the period after the date of bankruptcy, has been unsatisfactory."

1. The ground set forth in the notice of objection in purported compliance with s 149(4)(d) reads as follows:
   

"That the conduct of the bankrupt in respect of the period after the date of bankruptcy has been unsatisfactory in that he has continued as a director of the undermentioned companies after the date of bankruptcy without leave of the court."

1. In each case the companies referred to are then set out in the notice. The submission of the applicants is that the ground as so set out in the notices is ambiguous and that this ambiguity necessarily results in the invalidity of the notice. This submission is sought to be supported by reference to the case of Van Reesema v Official Receiver in Bankruptcy (1983) 50 ALR 253. It is unnecessary to set out the facts of that case in these reasons. I will content myself with setting out a passage from the judgment of Sheppard J who with Sweeney J formed the majority in the case.

2. His Honour, after considering the question of the compliance of the stated grounds of an objection given under s 149 with the wording of the section itself, said (at page 267) as follows:
   

"All I need to say is that it is enough in my opinion if there be a substantial compliance. But I would reject the notion that there can be a valid objection entered, even though there has been no compliance with the section at all. For reasons earlier given the entry of an objection will fundamentally effect the change in the status of a person which would come about but for its entry. Only if an objector shows that he has addressed his mind to the right question should an objection be allowed to stand. In my opinion this view of the legislation is supported by the emphatic words with which s 149(4) opens, namely: 'an objection shall not be entered ..... otherwise than on one or more of the following grounds'."

1. Mr Chippendall on behalf of the applicants submits that the statement of the ground of objection in the notices indicates that there has not been within the words of the passage cited, a proper application of the mind of the objector to the objection. He points to the words "has continued as a director" as indicating ambiguity which in itself would point to a failure on the part of the objector properly to address his mind to the nature of the objection. He supports this submission by reference to s 227 of the Companies (New South Wales) Code. That section provides:
   

"A person who is an insolvent under administration shall not be a director or promoter of ....... a corporation without the leave of the court."

1. He puts that the effect of that section is to cause a vacation of the office of director held by the applicants in the companies concerned on and from their insolvency.

2. I am unable to accept this submission. The section clearly is directed to the creation of an offence and not to effecting the result in law of the vacation of office referred to by Mr Chippendall. The section in my view must be read with s 238(10) of the Code. That section (inter alia) provides for the Corporate Affairs Commission of the state providing a certificate specifying whether a person was a director at any time specified in the certificate of a corporation.

3. That certificate is received a prima facie evidence of the facts and any person appearing to be a director "shall be deemed to continue as such".

4. In my view, having regard to the wording of these sections and having regard to the fact proved in evidence that relevant certificates had been obtained by the Official Receiver which indicated that so far as returns lodged with the Commission were concerned, the applicants remained directors of the relevant corporations after the sequestration order, the words, "has continued as a director", do no more than indicate a contention that a breach of s 227 has occurred. The breach consists of being "a director of the relevant corporations". The use of the words, "has continued as a director", does no more in my view than take up the wording of s 238(10) and apply it to the allegation in the notice that a relevant breach of s 227 has occurred. So read, I do not observe any ambiguity in the notice and I am of the view that it is a valid and effective notice.

5. Accordingly, I dismiss each of the applications with costs.