Re Stephenson, William Lloyd Ex Parte Stephenson, William Lloyd v McNally, Robert

[1997] FCA 225

NOT SUITABLE FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )  
GENERAL DIVISION                 )
BANKRUPTCY DISTRICT OF THE STATE  )    NB 3268 of 1993
OF NEW SOUTH WALES               )

RE:WILLIAM LLOYD STEPHENSON

Bankrupt

EX PARTE:WILLIAM LLOYD STEPHENSON

Bankrupt/Applicant

ROBERT McNALLY, RICHARD ARNOLD,   RICHARD DEVESON, JOHN FERNANDEZ,   RICHARD FITZPATRICK, JOHN GREEN, PAUL   MENTZALIS, LEON ROSENGREN and GEOFF   TAYLOR t/as HALL CHADWICK

First Respondents

RODERICK MACKAY SUTHERLAND

Second Respondent

CORAM:    Burchett J.
PLACE:    Sydney
DATE:     4 April 1997

REASONS FOR JUDGMENT

BURCHETT J.:

As a result of the withdrawal of some aspects of this claim, what is left is that the applicant, Mr Stephenson, seeks a declaration that he has been discharged from his bankruptcy; and if this be really a separate matter, alternatively, a declaration that he be taken to have been discharged upon the principle of estoppel. 

The circumstances are, one hopes, unique, and it may perhaps be said that they probably arise at least in part out of the transition from the previous control of bankruptcy administration, to a significant extent by the Registrar of the Court, to the new system under which that control is divorced from the Court.  It appears that, after the transition date, an electronic record, which had been maintained by the Registrar to enable convenient searching to be done against, in particular, objections to discharge, was handed over to the new administration; but in those early days there seems to have been some breakdown in the smooth and accurate continuation of the electronic record, or at any rate, if there was no defect in the record itself, there was defective utilisation at that point of the record for searching purposes.  However that may be, the fact is that the applicant, who was an undischarged bankrupt nearing the end of the period of three years at the end of which he would, if no objection were lodged, be automatically discharged by virtue of the statute, was misinformed when he made inquiry as to whether or not any objection had been lodged.

The applicant appears to have started his inquiries in December 1996, being uncertain of the precise date at which the three years period would elapse.  It was in fact 9 February 1997.  On 29 January 1997, the applicant's wife was served with documents emanating from his Trustee, and passed them on to him promptly.  Those documents indicated, quite clearly, the intention of the Trustee to lodge an objection, and to seek to have the bankruptcy extended, by virtue of the objection and of the operation of ss. 149, 149A and 149G of the Act, for a further five years.  Indeed, it appears that the intention of the Trustee was carried out within a couple of days, and as at 31 January 1997 the objection became effective.  Evidence of that fact was given by the affidavit of Mr Caddy, to which was annexed an extract from records, and I am quite satisfied that I should act on this extract, particularly in the light of the fact that the other evidence in the case so clearly shows that the actual lodgment of an objection would simply have been the fulfilment of the Trustee's clearly expressed intention.

Notwithstanding the lodgment of the objection, a letter was sent to the applicant from the Insolvency and Trustee Service Australia, commonly known as ITSA, dated February 10, 1997, addressed to Mr Stephenson with reference to his estate and signed on behalf of the Official Receiver, which stated:

"I refer to your undated request and advise that according to the National Personal Insolvency Index, you were discharged from the above bankruptcy on 10 February 1997."

It is Mr Stephenson's case that, upon receipt of this letter, he believed that the Trustee had, to use his word, relented, and had decided not to proceed with the lodgment of the objection.  Consequently, the applicant claims to have believed firmly that he had been discharged from his bankruptcy, and he says that he went out and took the initial steps to purchase a business, paying a deposit of $1,000.

There are a couple of matters that detract somewhat from the definiteness of a case put in those terms.  In the first place, the letter itself is less than completely certain.  It does not absolutely state that the bankrupt was discharged.  What it says is:

"According to the National Personal Insolvency Index, you were discharged ... ."

Furthermore, it is plain from other evidence in the case that Mr Stephenson, having only less than a fortnight before received detailed notice of the Trustee's intention to object, harboured sufficient doubt, or concern, to pursue inquiries at the Insolvency and Trustee Service Australia in order to endeavour to clarify the situation.  At any rate, any misunderstanding was not allowed to persist for very long, for on 19 February 1997 the Insolvency and Trustee Service Australia sent a further letter to Mr Stephenson, also signed on behalf of the Official Receiver and referring to his bankrupt estate, in the following terms:

"I refer to your letter of 12 December 1996 and in response to your request for a certificate of discharge, I advise that according to our records an objection to your discharge was lodged in January this year and consequently I am unable to provide you with the said discharge letter.  Any inquiries regarding the objection should be referred to your Trustee, Mr Sutherland on telephone number 9267-5877."

The evidence indicates that the letter was received on the day following the day of its date.

There is also evidence of an occasion when the applicant called at the office of Insolvency and Trustee Service Australia to make personal inquiry, at around about the same date as the second letter, when the error which led to the first letter seems still to have persisted, and he was inaccurately given to understand that nothing impeded his discharge.  It should be noted that, on this occasion, the applicant did not advise the officer with whom he dealt about the service on him of documents indicating the impending lodgment of an objection.

It is in these circumstances that counsel for the applicant contends I should find an estoppel arises, which would have the effect of estopping the respondent Trustee from maintaining that the applicant has not been discharged.  There is a difficulty at the outset in applying the doctrine of estoppel to circumstances of this kind.  It was not the Trustee who misinformed the applicant, but the Official Receiver and the Insolvency and Trustee Service Australia.  A still more fundamental problem is the difficulty of seeing how an estoppel could affect the operation of the provisions of the statute.

By virtue of the sections to which I have already referred, and in the events which I found occurred, there was an automatic statutory impediment thrown in the way of any discharge, and an automatic statutory prolongation of the period of the bankruptcy.  It seems to me that no estoppel, on ordinary principles, could be permitted to operate in such a way as to deny the effectiveness of the statute itself.  The applicant's discharge is not a matter of the whim of the Trustee, so as to be capable of being affected by an estoppel which could operate against him.  It is rather a matter of the operation of the statute under the particular circumstances, and in the events that have occurred.

Accordingly, it seems to me that the only remedy, so far as discharge is concerned, is the adoption of one of the courses referred to in the legislation itself to enable a decision of this kind to be reviewed.  It may be - and I say nothing at all about this, as it has not been raised before me - it may be that there is also some remedy in damages, if any damages have been suffered by virtue of the misinformation given to the applicant, in respect of the extremely short period during which a misapprehension may have prevailed.  If, for instance, a deposit was not only paid during that period, but proved irrecoverable.  However, that is not the case that is brought, and I express no view on it.  It follows that the application must be dismissed.

The remaining issue is the question of costs.  Counsel for the Trustee seeks costs on an indemnity basis, and seeks to support this on the footing that claims were made extending over a far wider territory than that over which ultimately the  argument roamed at the hearing before me, a far wider territory than that which I have covered in these reasons.  Counsel says I should infer that those claims were utterly baseless, and ought not to have been brought.  I think it would be very unfortunate if a line of authority developed which suggested that whenever a litigant, acting responsibly and realistically, abandoned claims which he had made, on the footing that ultimately he decided he would not succeed on those claims, he should then be subject to an application for a costs order of the kind suggested by counsel.  This would be most counter-productive.  It would be apt to lead to the prolongation of litigation.

Apart from any general question of judicial policy, on the facts of this case as they have been put before me, I do not think I should draw the inference that counsel suggests, and I do not draw it.  I treat the case as, like many other cases, a case in which a party has put forward claims certain of which have ultimately been determined in court; and has failed on those claims.  The traditional and almost invariable consequence is that the court has a judicial discretion to make an order for costs, which should normally follow the event in the litigation, and should normally be measured in accordance with the measure of party and party costs.  I think that is the proper basis on which I should proceed in this case, and accordingly, I order that the application be dismissed with costs.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

Associate:

Date: 10 April 1997

Counsel for the Bankrupt/Applicant:       Mr P. O'Loughlin

Solicitors for the Bankrupt/Applicant: Colin Daley Quinn

Counsel for the 1st Respondents:     Mr R.J. Brender

Solicitors for the 1st Respondents:       Shanahan Tudhope

Counsel for the 2nd Respondent:      Mr M.R. Aldridge

Solicitors for the 2nd Respondent:        Phillips Fox

Date of hearing:  4 April 1997