Rosenfeldt, Keith John v The Official Trustee in Bankruptcy

[1997] FCA 1382

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - discharge of bankrupt - debtor’s statement of affairs - whether Court has power to abridge time required to elapse between filing of statement and automatic discharge from bankruptcy - scope of power conferred by s 30(1)(b) Bankruptcy Act 1966 (Cth).

Bankruptcy Act 1966 (Cth) - s 30(1)(b), s 33(1)(c), s 149(4)

Re Rohde (1993) 42 FCR 149 - not followed
Nilant v Macchia (Full Court, Federal Court of Australia, 15 September 1997, unreported) - applied
Clyne v The Deputy Commissioner of Taxation (1984) 154 CLR 589 - applied

KEITH JOHN ROSENFELDT v THE OFFICIAL TRUSTEE IN BANKRUPTCY

NG 8207  of   1997

FOSTER J

14 NOVEMBER 1997

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8207  of   1997

BETWEEN:	KEITH JOHN ROSENFELDT APPLICANT
AND:	THE OFFICIAL TRUSTEE IN BANKRUPTCY RESPONDENT
JUDGE:		FOSTER J
DATE OF ORDER:		14 NOVEMBER 1997
WHERE MADE:		SYDNEY

THE COURT ORDERS THAT:

1. The application be dismissed.

1. There be no order as to costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8207 of 1997

BETWEEN:	KEITH JOHN ROSENFELDT APPLICANT
AND:	THE OFFICIAL TRUSTEE IN BANKRUPTCY RESPONDENT

JUDGE:	FOSTER J
DATE:	14 NOVEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT
(Extempore)

This is an application by Keith John Rosenfeldt for a series of orders intended to effect his discharge from bankruptcy. The sequestration order against his estate was made on 1 August 1994. On 19 September 1994 he signed and lodged a statement of affairs in proper form with the Official Trustee in Bankruptcy (“the Official Trustee”). Unfortunately, due to oversight and mistake, he did not file, nor did anyone file on his behalf, the statement of affairs with the Registrar in Bankruptcy as was then required by s 54 of the Bankruptcy Act 1966 (“the Act”).  It was not until 20 October 1997 that the same statement of affairs was filed with the Registrar.  In fact, on that date the Insolvency and Trustee Service of Australia forwarded a copy to the New South Wales District Registry of this Court. 

Mr Rosenfeldt appeared in person at the hearing of his application.  Ms Nash appeared on behalf of the Official Trustee to offer assistance to the Court.  She advised the Court that Mr Rosenfeldt had co-operated in all respects with the Trustee since the making of the sequestration order.  She supported his application and indeed presented submissions on his behalf to the Court. 

The orders sought in the application are, relevantly:-

1. that the time provided by s 34(1) of the Act for the filing of the statement of affairs be enlarged to a time expiring on 20 October 1997;

2. that the time provided by s 149(4) of the Act be abridged to a period expiring on 20 October 1997;

3. a declaration that the filing of the statement of affairs on 20 October 1997 is an effective filing for the purposes of s 149(4) of the Act; and

4. a declaration that the bankrupt is discharged from his bankruptcy.

These orders are, of course, sought in order to avoid the situation that the period of three years which must elapse after the filing of a statement of affairs with the Registrar before an automatic discharge from bankruptcy will occur under s 149 of the Act, will, unless the orders are made, commence to run from 20 October 1997. 

The orders sought accord with orders made in similar circumstances in the case of Re Rohde (1993) 42 FCR 149, a case which was decided at first instance and has been followed in many first instance decisions thereafter. The fundamental basis of the decision was the acceptance that the Court had power under s 33(1)(c) of the Act to abridge the three year period provided for in s 149 of the Act.  The abridgment of that period enabled the Court to correct the injustice that would otherwise flow from an excusable failure on the part of the bankrupt to lodge his statement of affairs with the Registrar at the appropriate time. 

However, it has now been held by a Full Court of this Court in Nilant v Macchia (unreported, 15 September 1997), that the power of abridgment in s 33(1)(c) does not, as a matter of statutory construction, apply to the three year period prescribed by s 149. I am, of course, bound by that decision and consequently cannot make the second order sought. The Court in Nilant expressed regret that it was obliged to reach its decision.  It repeated the view expressed in Re Rohde that the situation warranted the urgent attention of the legislature. Also, it remitted the case to the trial judge for further consideration, their Honours saying (at 12):-

“It may be that some other basis can be advanced [apart from s 33(1)(c)] for treating one or other of the statement of affairs filed by the respondent as having been duly filed in accordance with the Act.”

Submissions have been made to me by Ms Nash that in the present case I might take power under s 30(1)(b) of the Act to make appropriate orders to ameliorate Mr Rosenfeldt's position.  That section relevantly provides as follows:-

“The Court:

...

(b)may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act ...”

It is submitted by Ms Nash that I might have power under this section, in the circumstances of this case, to make an order discharging Mr Rosenfeldt from bankruptcy or to make an order in effect deeming the statement of affairs lodged with the Registrar on 20 October 1997 to have been so lodged on 19 September 1994, the day on which it was filed with the Official Trustee.  Ms Nash submitted that the broad power to make orders “for the purposes of ... giving effect to this Act” provided by this section was apt to enable me to make such orders in this case.  She submitted that a clear purpose of the Act was to provide to a bankrupt who had comported himself properly in relation to his bankruptcy the right to be free of his creditors at the expiration of the statutory period of three years after lodging his statement of affairs.  Insofar as Mr Rosenfeldt's omission to file his statement with the Registrar was of the most technical kind, she said I would be giving appropriate effect to the Act if I made either of the proposed orders.  I should very much like to accede to this submission but I regret to say that in my view the section does not provide me with the necessary power.

In my opinion, the section does not give me carte blanche to make whatever orders I think proper to do justice in the case.  The only orders I can make are such as have the purpose of carrying out or giving effect to the Act.  In my view, that means that I can only make orders which accord with the essential framework of the Act.  I cannot make orders which depart from or are contrary to that framework.  That this is so appears from the decision of the High Court of Australia in Clyne v The Deputy Commissioner of Taxation (1984) 154 CLR 589. The court was there concerned with the question whether this Court had power to backdate a sequestration order made on a creditor's petition to a prior date upon which an order had been made on a petition presented by the debtor himself, in circumstances where the presentation of the latter petition was an abuse of the Court's process. In the majority judgment of the court it was said (at 597-8):-

“Moreover, the court has, in our opinion, no power to backdate a sequestration order to make it take effect either before, or contemporaneously with, the commencement of the bankruptcy resulting from the acceptance of the debtor's petition. In a number of cases in which a bankruptcy petition was wrongly dismissed and the debtor was thereafter adjudicated bankrupt on his own petition, the appellate court, in allowing an appeal, has directed that the receiving order made against the debtor should be amended as if dated on the day on which the petition was wrongly dismissed, and should be deemed to be made on the creditor's petition: ... The practice established by those cases can be justified by the power that an appellate court has in allowing an appeal to make an order which should have been made in the first instance. However, the Act itself provides when a debtor becomes a bankrupt - either upon the making of a sequestration order (s. 43(2)) or upon the acceptance by the registrar of the debtor's petition: s. 55(3)(b). Apart from the power of an appellate court to put right what was wrongly done in the first instance, no court has power to cause a debtor to become a bankrupt on a date earlier than that for which the Act provides. Neither the general power conferred by s. 30(1)(b) of the Act to make such orders as the court considers necessary for the purpose of carrying out or giving effect to the Act nor the power given to the Federal Court by its rules to antedate its orders (O. 35, r. 3) extends to permit the court to make an order which would bring about a result different from that prescribed by the express provisions of the Act and so serious in its possible consequences.”

The Act makes specific provision in subs 149(4) for the automatic discharge of a bankrupt “at the end of the period of three years from the date on which the bankrupt filed his or her statement of affairs”. Subject to the bankrupt’s making a successful application to the Trustee under the provisions of Subdiv B Div 3 Pt VII of the Act, which provisions I am informed cannot be applied in the present case, there appears to exist no avenue in the present Act which specifically enables reduction of the three year period by order of the Court or determination of the Trustee. 

In these circumstances, in my opinion, there can be no warrant for my ordering under s 30(1)(b) that the date on which the bankrupt filed his statement of affairs for the purpose of s 149(4) be deemed to be any date other than the date on which such filing actually took place. To do so would be to “bring about a result different to that prescribed by the express provisions of the Act”. Accordingly, I must decline to make such an order. Similarly, I can find no basis upon which I can make an order under s 30(1)(b) that the bankrupt be discharged from his bankruptcy. Prior to amendments made to the Act in 1992, the Court had power under s 150 of the Act to make an order for the discharge of a bankrupt at any time upon the bankrupt's own application. This section enabled an order for discharge to be made before the expiration of the three year period required for automatic discharge pursuant to s 149 of the Act. However, s 150 was repealed in toto and this power no longer exists.  The consequent problem was adverted to by Burchett J in circumstances similar to those of the present case in Re Rohde where his Honour said (at 150):-

“It appears that there is no reserve power for an application to be made, in such circumstances, to the court for an order of discharge, rather than to have discharge occur automatically pursuant to s 149.”

It was this perceived absence of such a power that led his Honour to make the orders which, since the decision in Nilant, are no longer available to resolve this problem.  In my opinion, the structure of the Act requires that discharge from bankruptcy occur only in the circumstances provided for in s 149 and Subdiv B Div 3 Pt VII of the Act. The making of an order for discharge under s 30(1)(b) would not give effect to the Act.  On the contrary, it would be ultra vires the Act insofar as s 37(2) expressly forbids the Court from rescinding or discharging a sequestration order.  I must decline to make such an order.  The result is that the application must be dismissed.  In the circumstances, I make no order as to costs. 

I regret having to make this decision as, in my opinion, it will occasion considerable injustice to Mr Rosenfeldt. There would appear to be an urgent need for the legislature to restore to this Court discretionary power to abridge the three year period provided for in s 149 so that it can deal appropriately and justly with persons in the situation of Mr Rosenfeldt. The sooner this is done the sooner Mr Rosenfeldt and others in like position can approach the Court for appropriate remedial orders.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.

Associate:

Dated:             14 November 1997

The Applicant appeared in person.
Ms S Nash, solicitor, instructed by Sally Nash & Co, appeared on behalf of the Respondent.
Date of Hearing:	14 November 1997
Date of Judgment:	14 November 1997