Re Kotses

[1995] FCA 865

CATCHWORDS

Bankruptcy - discharge - objection to discharge withdrawn during the extended period of the bankruptcy - date of discharge - whether the discharge occurs on the date when the objection is withdrawn - construction of ss 149, 149A of the Bankruptcy Act 1966.

Bankruptcy Act 1966 (Cth) ss 149, 149A

Matter No. SB 447 of 1992
Re GEORGE KOTSES, a discharged bankrupt

von Doussa J
Adelaide
18 October 1995

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
SOUTH AUSTRALIA DISTRICT REGISTRY  )
  )     No. SB 447 of 1992
GENERAL DIVISION                  )
  )
BANKRUPTCY DISTRICT OF THE STATE   )
  )
OF SOUTH AUSTRALIA                )

RE:THE BANKRUPTCY ACT 1966

and

GEORGE KOTSES A DISCHARGED
  BANKRUPT

MINUTES OF ORDER

JUDGE MAKING ORDER          :    VON DOUSSA J.

DATE OF ORDER               :    18 OCTOBER 1995

WHERE MADE                  :    ADELAIDE

THE COURT ORDERS THAT:

The application be dismissed.

Note:     Settlement and entry of order is dealt with in Bankruptcy Rule 124.

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
SOUTH AUSTRALIA DISTRICT REGISTRY  )
  )     No. SB 447 of 1992
GENERAL DIVISION                  )
  )
BANKRUPTCY DISTRICT OF THE STATE   )
  )
OF SOUTH AUSTRALIA                )

RE:THE BANKRUPTCY ACT 1966

and

GEORGE KOTSES A DISCHARGED
  BANKRUPT

REASONS FOR JUDGMENT

CORAM:  von Doussa J.
PLACE:  Adelaide

DATE :  18 October 1995  

This is an application for review of a decision of the District Registrar brought under s. 14(5) of the Bankruptcy Act 1966 ("the Act"). The issue raised concerns the interpretation of ss.149 and 149A of the Act.

Mr Kotses became a bankrupt on 23 March 1992. He filed his statement of affairs on 19 May 1992. In the ordinary course he would have obtained an automatic discharge from bankruptcy on 19 May 1995 pursuant to sub-ss.149(1) and 149(3)(a). However on 18 May 1995 his trustee filed an objection to his discharge which took effect that day in accordance with s.149G. By force of s.149A(1) an objection, unless withdrawn or cancelled, has the effect of extending the period of the bankruptcy from 3 years to 5 or 8 years from the date on which the bankrupt filed his statement of affairs, depending on the grounds of the objection. In this case it
would have been extended to 19 May 2000.

On 15 June 1995, after negotiations between the trustee and Mr Kotses, the objection was withdrawn.  The Registrar thereupon caused to be entered in the Record of the Court that Mr Kotses was discharged from bankruptcy on that day, and issued a Certificate of Discharge to that effect.

Senior Counsel for Mr Kotses contends that on the proper construction of ss.149 and 149A the discharge is deemed to have occurred on 19 May 1995, and the application now before the Court seeks rectification of the Record. The application has been served on the Registrar, but on no other person. As it is plain that discharge has occurred on one or other of the dates service on the trustee does not seem necessary, and it is appropriate that the review take place without the application being served on any other party.

Section 149(1) provides:

"Subject to section 149A, a bankrupt is, by force of this subsection, unless sooner discharged in accordance with Division 3, discharged from bankruptcy in accordance with this section."

The section goes on to provide a scheme for automatic discharge after the effluxion of specified periods of time, and for the entry of the discharge in the Record without the need for any application by the bankrupt or the trustee.

Section 149A deals with the situation where an objection to automatic discharge is filed, and as noted above, makes provision for the extension of the period of bankruptcy. Relevantly the section also provides for the situation where the objection is withdrawn or cancelled before the extended period expires in sub-section (3) which reads:

"149A(3) If the objection is withdrawn or cancelled:

(a)the objection is taken never to have been made; and

(b)if:

(i)the period specified in whichever of subsections 149(2), (3) and (4) applies in relation to the bankrupt has ended; and

(ii)no other objection against the discharge of the bankrupt is in effect; and

(iii)the bankrupt has not been discharged in accordance with Division 3;

the bankrupt is taken to be discharged under section 149 immediately the objection is withdrawn or cancelled."

It is contended that the extended period of the bankruptcy only operates whilst the objection remains on foot; once it is withdrawn it is as if the objection had never been made (see para.149A(1)(a)); and the application of the concluding words of paragraph 149A(3)(b) - "the bankrupt is taken to be discharged under section 149 immediately the objection is withdrawn or cancelled" - means that the discharge is deemed to have occurred at the expiration of the unextended period that would apply in the absence of an objection under s.149. This contention involves the application of both paragraphs of subsection 149A(3) to the circumstances of this case.

I am unable to accept this construction of the sections. The applicants argument does not give due weight to the opening words of s.149. The times at which an automatic discharge takes effect under that section are "subject to section 149A". In light of this qualification, in a case covered by the operation of s.149A, it could be expected that the date when discharge occurs would be specified in that section.

An objection may be withdrawn or cancelled either whilst the period of bankruptcy that would otherwise apply is still running, or after that period has expired. In my opinion it is to these two separate situations that paragraphs (a) and (b) of s.149A(3) are respectively directed. Paragraph (a) provides for the case where the objection is withdrawn before the ordinary s.149 period has expired. Then the s.149 time applies in the ordinary way as if the objection had never been made. But if the ordinary s.149 time has expired, then sub-paragraph (b)(i) attracts the provisions of paragraph (b). Where sub-paragraphs (ii) and (iii) are fulfilled, as they were here, then the concluding words of paragraph (b) apply so that "the bankrupt is taken to be discharged under section 149 immediately the objection is withdrawn or cancelled".

Counsel for the applicant argues that s.149A(3) should not be read in this way because paragraphs (a) and (b) are joined conjunctively by the word "and", and this interpretation treats the two paragraphs as disjunctive. In my opinion the word "and" is used here in the sense described by Blackburn J in Re Licensing Ordinance (1968) 13 FLR 143 at 147 when he said "and " may have the effect of "or" in a category of case:

"...in which there was a list of items, the items being joined by 'and' and the list being governed or affected by words which showed that the list was a list of alternatives.  In such a case, the word 'and' which is used to join the items in the list, is truly cumulative; it links the members of a class and its function is to indicate that the whole class is to be considered together. Governing the words which enumerate the members of the class are other words which categorize the class, as a whole, as a class of alternatives."

Here there are no governing words which indicate that paragraphs (a) and (b) are alternatives, such as appeared in the section of the Police Offences Act 1928-1954 (Vict.) considered in Associated Newspapers Ltd v Wavish (1956) 96 CLR 526 (where the dispersive effect was given by the word "includes"). But the dispersive effect may nevertheless be given by the context in which the section appears, as was the situation in Gillespie & Others v Ford & Anor (1978) 19 ALR 102 at 107.

In s.149A, paragraphs (a) and (b) together cover the situations that may arise, and in my opinion they are alternative in their application.

If the applicant's argument were correct, paragraph (b) would be unnecessary; the end which the argument seeks to achieve would occur simply by force of the words of paragraph (a).

The applicant's counsel sought to draw an analogy between a case where an objection is withdrawn or cancelled, and one where there is some irregularity in the objection that renders it void. In that type of case, upon the objection being declared to be void, if that happens after the expiry of the ordinary s.149 period, the discharge operates from the date provided in s.149. See Re Hall (1994) 14 ACSR 488 and Re Karounos; ex parte The Official Trustee in Bankruptcy (1989) 89 ALR 580 at 585. That result is readily understandable as there never was a valid objection that could have the effect of extending the period of the bankruptcy. In the present situation however the objection was valid and operated throughout the period until it was withdrawn.

As the Registrar pointed out in the reasons that he gave for recording the discharge as having occurred on 15 June 1995, the applicant's construction would not give recognition after discharge to the facts which before the withdrawal of the objection justified it, eg a failure by the bankrupt to sign a document that was required by law to be signed (see s.149D(1)(k)). If the bankrupt had committed an offence under the Act during the extended period, it is anything but clear whether that conduct would be viewed as unlawful after the withdrawal or cancellation of the objection, and the Act makes no provision to cover this situation.

Moreover the Act makes no provision to preserve the validity of acts of the trustee performed in the extended period before the withdrawal or cancellation of the objection. This would be a surprising omission in light of the detailed sections that deal with the validity of the acts of trustees where a deed of arrangement or compromise is declared void. See also s.252C.

These difficulties do not arise on the interpretation which I consider to be the correct one.

In my opinion the application should be dismissed.

I certify that this and the
  preceding pages are a true
  copy of the Reasons for
  Judgment of Justice von Doussa

Associate:

Dated:

Counsel for the applicant    : Mr J Sulan QC with
   Mr A Fairbank

Solicitor for the applicant  : Phillips Fox

Date of hearing             : 13 and 16 October 1995