Re Hatch, S.M. v Ex parte Hatch, S.M

[1989] FCA 408

Re: SHAYNE MICHAEL HATCH
Ex parte: SHAYNE MICHAEL HATCH
No. 377 of 1987
FED No. 408
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
French J.(1)

CATCHWORDS

Bankruptcy - annulment - payment of debts and official fees in full - court's discretion - relevant considerations - conduct of bankrupt - relevance of delay - 2 years from sequestration to payment of debts - voluntary contribution - applicant of limited means - annulment order made.

Bankruptcy Act 1966 s.154(1)(b)

Bankruptcy Rules r.57(3)

Re Beer (1903) 1 KB 628

Re Lawson (1939) 11 ABC 137

Re Taylor (1901) 1 KB 744

Re Keet (1905) 2 KB 666

Re Gray (1960) 19 ABC 29

Delph Sing v Wood (1918) 25 CLR 497

Ex parte Maxwell 3 MD and D 708

Marek v Tregenza (1963) 109 CLR 1

HEARING

PERTH

#DATE 25:7:1989

Counsel for the Applicant : Mr A. Kaminickas

Solicitors for the Applicant: Scott & Kaminickas

Mr J. Busher appeared for the Official Receiver

ORDER

The bankruptcy be annulled.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

Shayne Michael Hatch became a bankrupt on presentation of a debtors petition on 25 May 1987. He now applies for an order annulling the bankruptcy under para.154(1)(b) of the Bankruptcy Act 1966 on the ground that his unsecured debts, being debts proved in the bankruptcy, have been paid in full.

1. When he became a bankrupt, Hatch was single, aged 26, without dependents and unemployed. He was in receipt of benefits amounting to $178 per fortnight and paid $35 per week rental. Between 1981 and June 1986 he had been a deckhand on a prawn trawler working for A. Raptis and Sons of Cairns, Queensland. This employment was seasonal for 8 months of the year and in the off season he would return to Western Australia for holidays. He was paid a percentage of the catch, but failed to make any provision for tax payable on his earnings. In June 1986, after returning to Western Australia, he commenced work as a steel fixer for B. & B. Reinforcement. In October of the year he and three other employees were asked to complete a contact on Garden Island from which the firm had been dismissed. According to Hatch, he entered into a verbal partnership with the other employees and completed work on the site in January 1987. Profits from the contract were distributed evenly amongst the four workers and, according to Hatch, he paid 15% tax on his share of the profits. He was unemployed from March 1987 until August 1987 and since then has been employed as a deckhand by Stirling Marine Services in the North West of Western Australia.

2. The Australian Taxation Office raised an assessment against him in the sum of $9,929.04. The Official Receiver's report does not disclose in response of precisely what earnings this assessment was raised and it is not material for present purposes. Not having made provision for taxation, Hatch was unable to pay it and filed his petition on 25 May 1987. His statement of affairs disclosed total assets of $530 and liabilities of $9,929, being the amount of the taxation assessment. In the event, a proof of debt in the sum of $7,610 was received from the Deputy Commissioner of Taxation and admitted to rank for dividend. Hatch subsequently contributed $9,844 enabling two dividends totalling 100 cents in the dollar to be paid. All official fees and costs of administration have been paid in full. Although represented by counsel, the applicant was not present in Court and did not give evidence. The Official Receiver has filed a report pursuant to r.57(3) of the Bankruptcy Rules and that is not contested. In that report he notes there has been no question of any unsatisfactory conduct on the part of the bankrupt and that no offences have been proved to have been committed by him.

3. Section 154 of the Act provides inter alia:
   

"154(1) Where the Court is satisfied -

(a) that a sequestrian order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar; or

(b) that the unsecured debts of the bankrupt, being debts that have been proved in the bankruptcy, have been paid in full or the bankrupt has obtained a legal acquittance of them,

the court may make an order annulling the bankruptcy."

1. The discretion conferred on the Court by para.154(1)(b) of the Act is to be exercised with regard not only to the interests of the creditors but also the public interest and considerations of commercial morality. The application is not determined by a finding that the bankrupt has paid his debts and the costs of administering his estate in full - Re Beer (1903) 1 KB 628, 633 (Clyne J). The conduct of the bankrupt must be considered and if it is shown to be such as to disentitle him to discharge then, in the absence of special circumstances, he should not be granted an annulment - Re Taylor (1901) 1 KB 744, 746 (Wright J., Darling J. agreeing); Re Keet (1905) 2 KB 666, 677 (Stirling LJ); Re Gray (1960) 19 ABC 29, 31 (Clyne J.). Delay in bringing the application for annulment may be a relevant factor - Delph Sing v Wood (1918) 25 CLR 497, 499 (Street CJ); Ex parte Maxwell 3 MD and D 708, 713 (Knight Bruce VC). But delay must be put in its proper perspective. A significant delay may mean that the bankrupt has had the benefit of the statutory shelter and with it extra time to pay his debts. And although they may have been paid in full, the time gained is often a benefit enjoyed at the expense of the creditors. On the other hand, where the payment has been made through a voluntary contribution on the part of the bankrupt not forming part of the estate vested in the trustee, the delay factor will diminish in importance. The intention of para.154(1)(b) is that "the fulfilment of the condition is sufficient reason for restoring the bankrupt to his former condition (so far as that can be done without invalidating acts done by the Court or by bankruptcy officials in the meantime: see sub-s.(2)) unless in the circumstances of the case, and speaking generally that means the conduct of the bankrupt, there is to be seen a reason to the contrary, being a reason relevant to the purposes of the Act". - Marek v Tregenza (1963) 109 CLR 1 at 4 (Kitto and Menzies JJ).

2. In this case there has been a delay of some 2 years in the payment out of the only debt proved against the bankrupt. On the other hand, he is a person of limited means who has evidently made voluntary contributions to that end and it seems unlikely that the debt could have been paid any earlier had he not become a bankrupt. There is no misconduct suggested that would weigh against the exercise of the Court's discretion in his favour. There is no opposition to the application and apart from the delay, no question of public interest or commercial morality arises. The section of necessity contemplates the lapse of some time between sequestration and annulment. The discretion is not extinguished by the mere passage of time.

3. I am satisfied in all the circumstances of this case, that the bankrupt, having voluntarily contributed to the extent necessary to pay his creditor and official fees in full and being guilty of no misconduct, should receive the benefit of the section. I will order that the bankruptcy be annulled.