Re Mijo Dugac and Mario Dugac

[1984] FCA 436

Re: MIJO DUGAC
Ex Parte: MARIO DUGAC
No. 508 of 1975
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Lockhart J.

CATCHWORDS

Bankruptcy - application for discharge in absence of consent by Official Trustee - sequestration order made in 1975 - whether discharge by operation of law - whether Official Trustee's objections invalid - matters relevant to Court's discretion in discharge applications.

Bankruptcy Act 1966, s. 149.

Bankruptcy Amendment Act 1980, s. 72.

HEARING

SYDNEY

#DATE 9:11:1984

ORDER

1. There be an order of discharge in each case;

2. The bankrupts pay the costs of the Official Trustee of these
   

applications including reserved costs and the costs of the proceedings before the Court on 5 November and today.

JUDGE1

There are two applications for discharge from bankruptcy by Mijo Dugac and Mario Dugac - his son. Sequestration orders were made against their estates on 9 December 1975. The applicants came to Australia from Yugoslavia in July 1970. They had no assets upon their arrival here and were employed as carpenters until 1972 when they formed a partnership which carried on the business of formwork contractors under the name of M. & M. Formwork. The business traded successfully at first but, due to reasons which I need not mention, losses were incurred. Bankruptcy ensued.

1. Seven creditors have lodged proofs of debt in the joint estate of the applicants and they have been admitted to rank for dividend for a total sum of $46,522. One creditor who was disclosed in the statement of affairs as a joint creditor for a sum of a little over $1000 has not lodged a proof. No proofs have been lodged in the separate estates of the applicants.

2. Substantial sums are required to pay the fees of administration ($6370) and the petitioning creditor's costs of the petition ($912). No dividends have been paid to creditors.

3. Before turning to the other facts that are relevant to the applications, I shall deal with a preliminary point that was taken by counsel for the applicants. It was submitted that the application for discharge was really unnecessary because the applicants were discharged from bankruptcy by operation of law on 1 February 1981. This was said to result from the following circumstances. The sequestration orders were made on 9 December 1975 and an objection to the discharge of each applicant was entered by the Official Receiver on 28 November 1978 (rule 49). It is common ground that the relevant provision of the Bankruptcy Amendment Act 1980 (s. 72) commenced on 1 February 1981. Section 72 repealed s. 149 of the Bankruptcy Act 1966 and substituted a new s. 149 in its stead. That new section provides, so far as is presently relevant, that, subject to that section, a person who was an undischarged bankrupt immediately prior to 1 February 1981 is by force of the new section discharged from bankruptcy from the date of commencement of the section. However, sub-s. 149(3) provides that a bankrupt is not discharged from bankruptcy by virtue of s. 149 if the Official Receiver or the Trustee has entered an objection to the discharge of the bankrupt by force of the section, and the objection has not been withdrawn or lapsed before the time when the bankrupt could have been so discharged but for sub-s. 149(3).

4. Paragraph 149(7)(a) of the new section provides that an objection entered under para. 149(3)(c) lapses at the expiration of the period of five years from the date of the bankruptcy. The objection was said therefore to have lapsed on 9 December 1980 (assuming that the expression in para. 149(7)(a) "the date of the bankruptcy" means the date of the making of the sequestration order). Hence sub-s. 149(3) presented no bar to the automatic discharge from bankruptcy of the applicants on 1 February 1981 when the new s. 149 commenced. So runs the argument on behalf of the applicants.

5. Counsel for the Official Trustee submitted that this argument was unsound because it failed to take into consideration sub-s. 72(2) of the Bankruptcy Amendment Act 1980 which - so far as is presently relevant - provided that where the trustee has before 1 February 1981 entered an objection under para. 149(3)(b) of the Principal Act to the discharge of a bankrupt and the objection has not been withdrawn before 1 February 1981 and the bankrupt has not been discharged under s. 150 of the Principal Act before 1 February 1981, then s. 149 of the Principal Act, as amended by sub-s. 72(1) of the Bankruptcy Amendment Act 1980 applies in relation to the objection as if the objection had been entered by the Trustee under para. 149(3)(c) of the Principal Act as so amended (the emphasis is mine) and the reference in sub-s. 149(7) of the Principal Act as so amended to the date of the bankruptcy were read as a reference to 1 February 1981 (being the date of commencement of s. 72). It was submitted by counsel for the Official Trustee that in those circumstances the objections to the discharge from bankruptcy had not lapsed so that the applicants remain bankrupt.

6. In my opinion the argument of counsel for the Official Trustee is correct. The key to the argument advanced on behalf of the applicants is that the objections lapsed upon the expiration of five years from 9 December 1975: see para. 149(7)(a). The provisions of sub-s. 72(2) of the Bankruptcy Amendment Act 1980, especially para. 72(2)(f), lead, however, to the conclusion that the objections have not lapsed. Counsel for the applicants submitted in the alternative that the objections were invalid because they stated as the ground of the objection in each case that "the bankrupt has left his last known address and his whereabouts are unknown" and this was not - so it was asserted - an available ground of objection. I reject this argument. At the time the objections were entered it was necessary that they be entered in the prescribed manner (see para. 149(3)(b)), but there was no requirement under the law as it then stood that a ground of objection be specified. This requirement was introduced by sub-s. 72(1) of the Bankruptcy Amendment Act 1980.

7. A further argument was put in the alternative by counsel for the applicant relating to the objections namely, that they were in effect de minimis or of so little significance that they could not constitute valid objections. In any event, so it was asserted, the facts did not accord with the objections at the time it was entered. I reject those arguments. The grounds of objection echo, though not in precise language, nevertheless, the substance of sub-s. 80(1) of the Act which renders it an offence for a bankrupt not to forthwith notify the Registrar and the Trustee in writing of any change in his address that occurs during his bankruptcy. This is in substance what the objections have done and it is not trivial especially as the offence is accompanied by a monetary penalty or imprisonment for six months. So far as the facts are concerned, there is nothing before me to suggest that at the time of the entering of the objections, or indeed, at any other material time, the facts related in the grounds of objection were not true. Accordingly, the preliminary objection is overruled. I now turn to the facts for the purpose of dealing with the applications for discharge on their merits.

8. I do not propose to analyse all the facts in detail. They are stated fully in the report and the two supplementary reports of the Official Trustee and in affidavits filed in the matter, including affidavits filed by the applicants.

9. There is some question as to the extent to which the applicants have a proprietary interest in a house property at 28 Brentwood Street, Sans Souci, and as to what happened to rentals received from that property. The position is not entirely satisfactory; but I am not satisfied on the material before me that the applicants have derived financial benefit since their bankruptcies commenced from the letting of the premises except to the slight extent mentioned in the evidence.

10. The applicants have been publicly examined over a number of days and other people have also been examined with respect to the dealings, property and affairs of the applicants.

11. Some question arises as to the interest of the applicants in a company Marijan Constructions Pty. Limited, in particular with respect to loan accounts. I do not propose to traverse the material in relation to those except to say that I am left with a somewhat unsatisfactory feeling at the end of the evidence that the whole position has not been placed before the Court; but I do not think the evidence establishes that the applicants have behaved in relation to that company in an untoward or questionable fashion. Nor on the other hand am I satisfied that they have not. I simply do not know.

12. The Official Trustee has brought to the Court's attention certain matters relating to a caravan, registered in the name of Mario Dugac, and a Honda motor cycle. I do not propose to traverse the evidence on that. It has been ventilated and I do not think that material emerges from it which would operate to adversely affect the applicants' case for a discharge.

13. The applicants have however not surrendered their Yugoslav passports to the Official Trustee as required by law. Indeed, years ago they were reminded of their obligations in this regard and they were requested specifically to surrender those passports late last year, but they did not do so. They offer an explanation in relation to this which in substance is that they thought that they could not be obliged to surrender their passports other than with the consent of the Yugoslav Government or Embassy.

14. I suppose with people who have not been born in this country, and having arrived here in about 1970, whose English - I am told - is not good and who come from a country with very different traditions to this country, the explanation offered for not surrendering the passports deserves some degree of sympathy. But it does not in my view excuse the failure to surrender passports to the Official Receiver, and I must take that into account in relation to the application for discharge. On the other hand, Mario Dugac has sworn that he is prepared to obey the order of the Court and produce his passport to the Court.

15. The Official Trustee has very properly, I think, raised a number of matters which bear upon the applications for discharge. He does not oppose the discharges from bankruptcy, but he does not consent to them. He has brought the matters to which I have referred, and other matters which are embodied in his reports and the evidence, to the attention of the Court in accordance with his duty and they have been of assistance in resolving these applications.

16. No creditors have appeared to support or oppose the applications for discharge.

17. The applicants have been bankrupt for a long time, almost nine years. They will be discharged from bankruptcy by operation of law in February 1986, a little over twelve months hence. I could take the course of dismissing these applications and letting the law take its course then. Indeed, I have given careful thought to adopting that course. But, on the other hand, the passage of time since the making of the sequestration orders, the fact that Mario Dugac was a young man at the time of his bankruptcy, the family commitments of the applicants, the fact that the debts that led to bankruptcy were not incurred in circumstances attracting moral censure, and the fact that the objections were lodged a long time ago, are some of the matters that I take into account in favour of granting the applications for discharge today.

18. I also take into account what seems to me to be a matter of considerable importance, namely that I really do not think that there is any useful purpose to be served, or that it is in anybody's interests to continue these bankruptcies. Nor do I think that the interests of the public will be offended if discharges are granted in the circumstances of this case, some nine years after the sequestration orders were made.

19. However, by granting an early discharge I hope that the applicants realise that the Court puts some trust in them that they will in the future observe the laws of the land and proper standards of behaviour.

20. Accordingly I make orders of discharge.

21. That leaves the question of costs. The proper order for costs in the circumtances is that the applicants should pay the Official Trustee's costs of this application, including reserved costs, and the costs of the hearing before me of Monday 5 November 1984 as well as today. The Trustee has properly brought certain matters to the Court's attention and has assisted me in dealing with the applications. I therefore make that order for costs.