Thomas, John Robert v Donnelly, Max Christopher (In the Matter of John Robert Thomas)

[1997] FCA 1078

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - Jurisdiction of Court - Decision of the trustee not to withdraw certain notices of opposition to the discharge from bankruptcy - Whether reviewable under section 149 or 178

Bankruptcy Act 1966 (Cth) ss 149, 178

McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547, applied
Re Ellis; Ex parte Jefferson &  Stevenson (unreported, 17 February 1995, Drummond J) referred to

JOHN ROBERT THOMAS  v MAX CHRISTOPHER DONNELLY (IN THE MATTER OF JOHN ROBERT THOMAS)

NG 8028 OF 1997

EMMETT J
SYDNEY
7 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8028  of   1997

IN THE MATTER OF JOHN ROBERT THOMAS

BETWEEN:	JOHN ROBERT THOMAS APPLICANT
AND:	MAX CHRISTOPHER DONNELLY RESPONDENT
JUDGE:		EMMETT J
DATE OF ORDER:		7 OCTOBER 1997
WHERE MADE:		SYDNEY

THE COURT ORDERS THAT:

1. The notice of objection to competency is dismissed.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8028 of 1997

IN THE MATTER OF JOHN ROBERT THOMAS

BETWEEN:	JOHN ROBERT THOMAS APPLICANT
AND:	MAX CHRISTOPHER DONNELLY RESPONDENT

JUDGE	EMMETT J
DATE:	7 OCTOBER 1997
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR: There is before the court an application brought under section 178 of the Bankruptcy Act 1966 (Cth) by John Robert Thomas, a bankrupt. The bankrupt seeks an order setting aside the act, omission or decision of the respondent as trustee of the estate of the applicant not to withdraw certain notices of opposition to the discharge of the applicant from bankruptcy.

When the matter came before me this morning, counsel for the parties indicated that there was a question as to the jurisdiction of the court under section 178 which the parties wished to have determined separately. I embarked on the hearing of the question and in the course of argument the solicitor for the respondent in effect moved ore tenus to strike out the application as being incompetent. I permitted him to take that advice, there being no opposition from counsel for the applicant to the adoption of such a course. Accordingly, I shall consider the question of the jurisdiction of the court under section 178.

It is necessary to consider first the scheme of Division 2 of the Bankruptcy Act which deals with section 149(1). Section 149(1) provides as follows:

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.

Section 149(3) relevantly provides as follows:

If the bankrupt became a bankrupt before the commencement of Section 27 of the Bankruptcy Amendment Act 1991, and subsection (2) does not apply in relation to the bankrupt, the bankrupt is discharged at:

(a) the end of the period of 3 years from the date on which the bankrupt filed his or her statement of affairs; or

(b)the commencement of that section;

whichever is the later.

However, section 149A(1) provides as follows:

If an objection to the discharge of a bankrupt has taken effect... then unless the objection is withdrawn or cancelled, the reference in whichever of subsections 149(2), 149(3) and 149(4) applies in relation to the bankrupt to the period of 3 years... is taken to be a reference to the prescribed number of years from the prescribed date.

Section 149B(1) provides as follows:

...at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee may file with the Official Receiver a written notice of objection to the discharge, or the Official Receiver may file such a notice on the Official Receiver's own initiative.

Section 149J then provides as follows:

(1)If at any time before a bankrupt is discharged the trustee withdraws the objection, the trustee must give the Official Receiver a notice of the withdrawal of the objection and give the bankrupt a copy of the notice.

(2)If at any time before a bankrupt is discharged the Official Receiver withdraws the objection, the Official Receiver must:

(a)       give the bankrupt written notice of the withdrawal; and

(b)if the trustee is a registered trustee - give a copy of the notice to the trustee.

(3)The withdrawal takes effect at the beginning of the day when details of a notice under subsections (1) or (2) are entered in the National Personal Insolvency Index.

On 4 December 1991 the respondent was appointed the trustee in bankruptcy of the estate of the applicant.  On 10 January 1992 the applicant completed a statement of affairs and delivered it to the respondent.  Accordingly, subject to the effect of any notice of objection, the applicant would have been automatically discharged from bankruptcy on 10 January 1995.  However, on 24 November 1994 the respondent, as trustee of the estate of the applicant, filed a notice of objection to discharge on a number of grounds, the details of which are not presently relevant.  A subsequent notice of objection to discharge was also filed on 21 February 1997, although no separate question arises in relation to the second notice of objection to discharge.

On 20 January 1997 a meeting of the creditors of the applicant was held.  At that meeting a resolution was proposed that the trustee be authorised to withdraw his objection to discharge against the bankrupt provided all outstanding contributions are paid.  I should interpose that the meeting also related to the estate of Jill Kathleen Thomas.  The motion was lost.  Creditors in respect of debts of $5,818,855 voted in favour of the motion but creditors in respect of debts totalling $13,305,594 voted against the motion.

On 22 September 1997 the respondent trustee swore an affidavit saying that he believed, based on the voting of the creditors at that meeting and from other correspondence received from creditors, that if a meeting of creditors was held at that date, that is 22 September, to vote upon a motion to withdraw his objection to discharge of the application, the motion would be opposed by creditors totalling approximately $18,337,215 and that the value of votes in favour would be approximately $787,234.

The substantive application before me relates to what is said to be the act, omission or decision of the respondent as trustee not to withdraw the objections to which I have referred. A question may well arise on the hearing of that substantive application as to whether or not there has in fact been an act, omission or decision in the first place. That question is not before me at present. The only question before me is whether, assuming there has been an act, omission or decision, section 178 would confer jurisdiction on the court to deal with that matter.

The legislation appears to me to be somewhat anomalous in relation to this question. Subdivision C of Division 2 of Part VII confers express rights of review in relation to certain decisions. Thus section 149K(1) provides as follows:

The Inspector-General may review a decision of the trustee or Official Receiver to file a notice of objection:

(a)      on the Inspector-General’s own initiative; or

(b)if requested to do so by the bankrupt for reasons that appear to the Inspector-General to be sufficient to justify such a review.

In addition, section 149Q provides as follows:

An application may be made to the Administrative Appeals Tribunal for the review of:

(a)a decision of the trustee or Official Receiver to file a notice of objection; or

(b)a decision of the Inspector-General on the review of such a decision; or

(c)a decision of the Inspector-General refusing a request to review an objection.

Significantly there is no reference to any decision concerning either withdrawal of an objection or failure to withdraw an objection. I do not consider that it is possible to read into either section 149K or section 149Q a right of review in relation to such matters. It would follow that unless section 178 confers such a right of review there is no express statutory right of review in relation to withdrawal of or failure to withdraw an objection.

No suggestion has been made of a rationale for the Parliament intending not to confer such a right of review. It may be that the absence of such a right in Subdivision C is an oversight. Nevertheless, the language of sections 149K and 149Q is sufficiently explicit for no such right of review to be implied. Accordingly, it would follow that, as I have said, if there is any statutory right of review it must be found in section 178.

One anomaly in relation to section 178 is that the section confers a right to apply to the court only in respect of an act, omission or decision of the trustee. It confers no right to make an application in respect of an act, omission or decision of the official receiver. Thus, even if section 178 applies in the present case, there is an anomaly to the extent that there is no statutory right of review in relation to a decision of the official receiver. That anomaly would have led me to conclude that section 178 was not intended to give a right of review in relation to a matter that would otherwise fall within Division 2, although it would be equally anomalous that there would be no right of review at all in relation to withdrawal or failure to withdraw.

However, I have been referred to the decision of McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547, in which the Full Court was concerned with the question of whether or not there was power under section 178 to review a decision of the trustee to lodge an objection. At first instance it had been held that section 178 conferred no such power. However, the Full Court, while it upheld the decision at first instance and concluded that the trustee's decision should not be reviewed, held that section 178 conferred on the Court the power to review a decision of a trustee to enter an objection under section 149 in its form prior to amendment. In doing so the Court, at 556 paragraphs E-F, observed that section 178 applies with respect to a trustee only and not with respect to the other persons mentioned in section 149(3).

Section 149(3), in its original form, provided as follows:

(3) A  bankrupt is not discharged from bankruptcy by virtue of this section if:
           ...

(c)the Registrar, the Inspector-General or the trustee has entered, or a creditor has, with the leave of the Court, entered, an objection... to the discharge of the bankrupt by force of this section and the objection has not been withdrawn or lapsed before the time when the bankrupt would have been so discharged but for this subsection; or

(d)an order of the Court under subsection (12) is in force in relation to the bankrupt.

Section 149(5) provided that, subject to section 149(6) an objection entered under section 149(3)(c) may be withdrawn in the prescribed manner. Section 149(6) provided that an objection entered by a creditor could only be withdrawn with the leave of the court. Thus there was, as the Full Court held, an anomaly insofar as section 178 permitted review of a decision of a trustee but did not permit review of a decision of the Registrar, the Inspector-General or a creditor with the leave of the court to enter an objection. While I am not totally persuaded by the reasoning of the Full Court in McGoldrick, I consider myself bound to follow that reasoning insofar as it is to the effect that section 178 confers a right of review albeit a review, of only the decision of the trustee and not the decision of the official receiver.

I was also referred to the unreported decision of Re Ellis; Ex parte Jefferson & Stevenson (unreported, 17 February 1995, Drummond J).  In Re Ellis, Drummond J was concerned with subdivision G of division 4B of the Act which provides for review procedures in relation to assessment of contributions. In that case it was clear that there was an express statutory right of review by the Tribunal with a limited right of appeal to the Court on a question of law. His Honour concluded that it was unlikely that the Parliament intended that the express right of review would coexist with the power in the court to review the trustee's decision under section 178. Review under section 178 would be on both fact and law whereas the express statutory procedure authorised review by the Court only on a question of law.

If subdivision C provided expressly for review of a decision of the Director General or the Tribunal, I would have accepted the reasoning of Drummond J as applicable to this case. However, it appears to be implicit in what Drummond J said that had there been no express right of review, there would be no reason to read down section 178. That of course seems to be the reasoning which persuaded the Full Court in McGoldrick.

As I have said, that seems to me to be anomalous in the sense that I would have expected that the Parliament intended that any right of review in relation to objection to discharge and withdrawal of objection to discharge should have been subject to the same right of review, being the limited right of review conferred by subdivision C, namely a review on the merits by the Tribunal but no right to have the court review the matter on the merits.  The other anomaly is that the view which I have formed leads to the conclusion that there is no right of review at all in respect of a decision of the official receiver.  Nevertheless, I consider that I should adopt the view expressed by the Full Court in McGoldrick that, notwithstanding such an anomaly, section 178 in its terms confers a right of review in respect of any act, omission or decision of the trustee which would include an act, omission or decision relating to the withdrawal of an objection.

As I have said, I have not considered whether in this case there is an act, omission or decision on which section 178 operates but I hold that there is jurisdiction to entertain an application if it be found that there has been such an act, omission or decision. Accordingly, I would dismiss the respondent's objection to competency.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice  Emmett.

Associate:

Dated:            7 October 1997

Counsel for the Applicant:	V.R. Gray
Solicitor for the Applicant:	Tesoriero Kwan
Counsel for the Respondent:	-
Solicitor for the Respondent:	Dibbs Crowther & Osborne
Date of Hearing:	7 October 1997
Date of Judgment:	7 October 1997