Re: Graf

[1989] FCA 869

. JUBBUENT No.

CATCHWORDS

BANKRUPTCY - debtor's petition and partnership petition - two bankruptcies - application for annulment of bankruptcy - debtor's petition ought not to have been accepted - did not disclose second bankruptcy proceedings pending against debtor - non-recording in indexes of non-petitioning partner

Bankruptcy Act 1966: ss 55, 56, 149, 154

U Bankruptcy Rules:  21, 24

Re:  HEINZ GRAF

Bankrupt

Ex Parte:  REGISTRAR IN BANKRUPTCY

Applicant

PLACE: Sydney

CORAM: Einfeld J.

DATE:	26 April1989
IN THE FEDERAL COURT OF AUSTRALIA	)
1
GENERAL DIVISION	)  No. W432 of 1986
)
BANKRUPTCY DISTRICT IN TFIE	1 1
STATE OF NEW SOUTH WALES AND THE	1
1
AUSTRALIAN CAPITAL TERRITORY	1

Re:

- AEINZ GRAF

Bankrupt

Ex parte:  REGISTRAR IN BANKRUPTCY

Applicant

CORAM: Einfeld J.
DATE: 26 April 1989

PLACE: Sydney

MImTE OF ORDERS

The bankruptcy which resulted from the acceptance of the

debtor's petition on 24 April 1986, is annulled.

No order as to costs.

NOTE:  Settlement and entry of these orders is dealt with in accordance
with Order 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA

1

GENERAL DIVISION	1	No. W432 of 1986
)
BANKRUPTCY DISTRICT IN TEE	1
)
STATE OF NEW SOUTH WALES AND THE	)
1
AUSTRALIAN CAPITAL TERRITORY	1

Re:  HEINZ GRAF

Bankrupt

Ex parte:  REGISTRAR IN BANKRUPTCY

Applicant

CORAM: Einfeld J.
DATE: 26 April 1989

PLACE: Sydney

REASONS FOR JUDGMENT

In this matter Heinz Graf (the bankrupt) first became a bankrupt on 24

April 1986 upon the acceptance by the Registrar of a debtor's petition filed pursuant to section 55 of the Bankruptcy Act 1966 (the Act) (the first bankruptcy). The bankrupt had presented this petition on 10 February 1986. By application dated 16 March 1989, the Registrar in Bankruptcy (the Registrar) seeks an annulment of this bankruptcy under section 154(l)(a) of the Act. The Official Trustee (the trustee) does not oppose the application nor, as it seems, do any of the bankrupt's

who were notified of the proceedings and did not appear at the hearing
of the application to voice any view.

On 28 April 1986 Mr Graf was made bankrupt a second time (the second bankruptcy), as a consequence of the presentation of a partnership petition pursuant to section 56 of the Act by two other men (the partners) with whom he had engaged in a business partnership. The partnership had been formed initially in early 1983 by the bankrupt and

L/ Peter Hamilton, trading under the business name of "Custom Mouldings". It manufactured architraves, door jambs and built-in wardrobes. In January 1984 Colin Lesley Swanson joined the partnership. By December 1985 the business ceased operation due to financial difficulties resulting in insufficient income to provide the partners with a reasonable wage. The problems were attributed to the poor financial management of the business.

The relevant chronology of the two bankruptcies is:

l. 9 January 1986 - the partners signed a petition pursuant to section 56 (the partnership petition) of the Act.	In this petition the
partners named the bankrupt as a third partner and provided his	address. A statement of affairs was also filed by each of the partners
disclosing a total of 15 unsecured creditors owed a total of $112,193.
2. 24 January 1986 - the partnership petition was presented to the
Registrar.
3.
4 February 1986 - the bankrupt signed his own debtor's petition (the debtor's petition) and completed a statement of affairs disclosing a total of 16 unsecured creditors owed a total of $89.176.78. This included substantially the same debts as those disclosed by the partners. He also disclosed 2 secured debts amounting to $65,432.
4. 10 February 1986 - the debtor's petition was presented to the
Registrar.
5. 15 April 1986 - a Deputy Registrar in Bankruptcy referred the

L partnership petition to the Court pursuant to section 56(6) of the Act.

On the same day notice of this petition was served on the bankrupt pursuant to sub-section (6)(b) of section 56.

6. 24 April 1986 - the debtor's petition was accepted by the Registrar thereby causing the first bankruptcy. This bankruptcy was given the number W432/86.

7. 28 April 1986 - the Court (Jackson J) directed the Registrar to accept the partnership petition. As a result of this acceptance, the

W partners including the bankrupt were made bankrupt. This matter was

given the number W611/1986.

By operation of section 149(1) of the Act, which enacts the automatic	discharge of a bankrupt after a 3 year period provided, as is the case
here, that there is no objection lodged by any creditor or the trustee, the first bankruptcy was due to expire on 24 April 1989. He would thereby become a discharged bankrupt as of 25 April 1989. However, because he has been made bankrupt twice, section 149(3)(b) would operate to prevent his discharge under section 149(1). Section 149(3)b) provides :

A bankrupt is not discharged from bankruptcy by virtue of this section if -

. . . . . . . . . . .

(b) he has, since the date of the bankruptcy, again

become a bankrupt;

The effect of this provision therefore would be to require the bankrupt to make an application pursuant to section 150 of the Act seeking a discharge from both the first and second bankruptcies. These discharges would be in the discretion of the Court.

In order to avoid the need for a section 150 application being made and risk an adverse exercise of the Court's discretion, the Registrar seeks an annulment of the first bankruptcy so that section 149(1) may operate to discharge the bankrupt from his second bankruptcy on 28 April 1989. His automatic discharge from the first bankruptcy would then take effect. It was submitted that an annulment should be granted on the

ii basis that the petition ought not to have been accepted by the Registrar but should have been referred to the Court.

Registry had reflected, as they should have, that at the time of the	The Registrar argued that if the indexes or other records of the
acceptance of the debtor's petition on 24 April 1986, the partnership petition had already been presented and referred to the Court, the debtor's petition would not have been accepted but would also have been referred to the Court at the same time. The evidence discloses that the debtor's petition contains a notation that a search was conducted, but as it is undated, as the original file is missing, and as no one in the Registry can recall the date of this search, it is not possible to say when it was conducted. Rowever, recent search reveals that when the partnership petition was entered in the register, no reference was made to the involvement of this bankrupt, even though acceptance of that petition and the terms of section 56(4)(c) meant that the bankrupt would become bankrupt on that petition by operation of law along with the petitioning partners. Thus even if a search had been conducted at the time, nothing concerning the bankrupt would have been found.
to laying down a mandatory rule for entry. Information about affected	cases. This is the priority matter that should be examined with a view
non-petitioning partners is required by section 56(3), Rule 24(2) and Form 9A to be supplied by petitioning partners but it seems that unless it is entered on the appropriate register of information, this requirement is apparently otherwise unproductive and pointless.
The Registrar gave as the grounds for his contention that this debtor's petition ought not to have been accepted that
(a)

'W

It was pointed out that in relation to creditors8 petitions, an affidavit is required by Rule 21 to be filed stating that the indexes have been searched to ascertain whether any other bankruptcy proceedings are pending against the debtor in the same bankruptcy district. It was suggested that this should also be required in relation to debtors' and partnership petitions before they are accepted and this seems a logical proposition. However, such a rule would not have availed the situation here because it was the non-entry of the bankrupt's name in the indexes that caused this problem, not the absence of a rule or an affidavit.

ii There seems to be no clear requirement that names of non-petitioning

partners be entered, although it is said to be done in some or most

it would have prevented injustice estates especially as the debts were so similar

circumstances represented an abuse of process: Clyne v Deputy
Commissioner of Taxation [l9851 6 FCR 418; Re Crow1 Ex Parte
Kleinwort Benson (Aust) Ltd [l9871 17 FCR 37; on appeal to the presentation and acceptance of a second petition in these Edelsten [Burchett J, unreported, 10 March 1988; on appeal to the Full Federal Court, Lockhart, Wilcox and Pincus JJ unreported 15 March 19891.

While not opposing annulment, the trustee said that he merely consolidated the two bankruptcies and suffered no confusion at all. Be suggested that much of the Registrar's argument here was based on hindsight to cover an erroneous or inappropriate acceptance of the

L	debtor's petition in the first instance. The proposition appears to be that it should have been known , even without adequate indexes, that the
bankrupt's affairs were going to be at least indirectly before the Court 4 days later when the partnership petition was being considered (28
April 1986) and that a second bankruptcy might follow if acceptance of the debtor's petition was not at least delayed if not refused.
However that may be, cases like those mentioned and Re Fitzgerald Ex Parte the Bankrupt, [Pincus J unreported 23 February 19881 and Re Goddard Ex Parte Allen & Ors [Pincus J unreported 14 November 19861,
where there have been two actual or possible bankruptcies, have all been treated by the Court as appropriate for annulment. In my opinion the
same conclusion should apply here. I annul the first bankruptcy. There will be no order as to costs.

I certify that this and the S I X

preceding pages are a true copy of the

Reasons for Judgment herein of hls Honour

,. Justice Einfeld

Solicitors for applicant	Australian Government Solicitor
In person	Official Trustee in Bankruptcy
Date of hearing	18 April 1989
Date of judgment	26 April 1989