FEDERAL COURT OF AUSTRALIA

Lal v Worrell [1999] FCA 1122

BANKRUPTCY – objection to discharge – validity of notice of objection – trustee’s refusal to consent to bankrupt leaving Australia – pending criminal charges – bail condition requiring bankrupt to report to local police station

Bankruptcy Act 1966 ss 149C(1), 178

Bethune v Newman (1996) 19 ACSR 99 applied

Re Ellis; Ex parte Ellis v Jefferson (Federal Court of Australia, Drummond J,

      17 February 1995, unreported) considered

Re Hall (1994) 14 ACSR 488 applied

CHHAGAN LAL v IVOR WORRELL

N 7570 OF 1999

JUDGE:          WHITLAM J

DATE:            18 AUGUST 1999

PLACE:          SYDNEY

IN THE MATTER OF CHHAGAN LAL

THE COURT ORDERS THAT:

1.                  The application is dismissed.

2.                  The applicant pay the respondent’s costs.

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

IN THE MATTER OF CHHAGAN LAL

REASONS FOR JUDGMENT

1                     The applicant is a bankrupt.  The respondent is the trustee of his bankrupt estate.  In this proceeding the applicant challenges the respondent’s notice of objection to his discharge from bankruptcy and the respondent’s refusal to consent to his leaving Australia and to return his passport.

2                     The relevant sequestration order was made on 22 April 1998.  Two days later, on 24 April, the respondent wrote to notify the applicant of the order and of his responsibilities.  In that letter the respondent asked for the applicant’s books and records in relation to any business and his personal affairs.  The applicant did not receive that letter until mid-June 1998.  (In the meantime he had travelled overseas between 19 and 20 May 1998.)  The applicant signed a statement of his affairs on 27 June 1998.

3                     In that statement the applicant did not disclose the ownership of shares, which he sold after he became bankrupt.  He also failed to disclose details of past directorships and shareholdings.

4                     The respondent wrote again to the applicant, requesting specified books and records in the applicant’s possession on 8 October 1998, 16 October 1998 and 1 December 1998.  The respondent received only four statements in respect of one bank account.  However, the applicant’s statement of affairs disclosed liabilities totalling $906,937.31 in respect of many named creditors.

5                     On 15 December 1998 the respondent filed with the Official Receiver the notice of objection to discharge that is the subject of the present challenge.  Section 149C(1) of Bankruptcy Act 1966 (“the Act”) provides:

“149C. (1)      A notice of objection must:

(a)                set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and

(b)               refer to the evidence or other material that, in the opinion of the trustee or Official Receiver, establishes that ground or each of those grounds; and

(c)               state the reasons of the trustee or Official Receiver for objecting to the discharge on that ground or those grounds.”

6                     The instant notice relevantly states:

“GROUNDS

Section 149D(1)(d) Bankruptcy Act 1966 – the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request.

EVIDENCE

During the administration of the bankrupt estate, the bankrupt has been requested to provide written information about his property, income or expected income as follows:

·        Letter forwarded to bankrupt dated 8th October 1998.  Letter requested that he deliver all books and records within seven (7) days.

·        Letter forwarded to bankrupt dated 16th October 1998.  Letter requested that the bankrupt provide details of his business dealings and assets by Friday 23rd October 1998.

·        Letter forwarded to bankrupt dated 1st December 1998.  Letter once again requested that he deliver all books and records to my office.

REASONS

The failure of the bankrupt to provide written information about his property, income or expected income has hindered the efficient and effective administration of the bankrupt estate.  Objecting to the discharge may assist in making the bankrupt comply with his duties.”

This notice was given to the applicant on 15 February 1999.

7                     On 7 April the applicant’s solicitors wrote to the respondent requesting the return of their client’s passport so that he might travel to India for religious purposes.  Correspondence ensued, in which the respondent referred to the applicant’s failure to furnish books and records grounding the objection to discharge.  On 22 April 1999 the applicant’s solicitors wrote to the respondent that they had been instructed to request the Inspector-General to review the decision to file the notice of objection.  On 23 April 1999 the respondent acknowledged that letter and declined to return the passport.

8                     The applicant did not request a review by the Inspector-General (or, for that matter, by the Administrative Appeals Tribunal).  Instead, he commenced this proceeding on 24 May 1999.  The relief sought in the application included an order that the notice of objection to discharge be set aside.  However, under Subdivision C of Division 2 of Part VII of the Act, the power to “cancel” an objection is conferred on the Inspector-General and the Administrative Appeals Tribunal.  Counsel for the applicant submits that the Court still has jurisdiction under s 30(1)(b) of the Act to grant a declaration that the notice of objection is invalid and of no effect.  He relied on Re Ellis; Ex parte Ellis v Jefferson (Federal Court of Australia, 17 February 1995, unreported), where Drummond J held that Subdivision G of Division 4B of Part VI of the Act, which provides for review of a trustee’s decision in relation to contribution assessments by the Inspector-General and the Administrative Appeals Tribunal, does not show any clear intention to exclude the Court’s declaratory jurisdiction under s 30(1) of the Act.  Counsel for the respondent does not contend otherwise, and I accept that such a jurisdiction exists.

9                     The requirements of s 149C(1) have been explained by Branson J in Re Hall (1994) 14 ACSR 488.  Her Honour referred to s 149N of the Act which provides that, on a review of a decision to file a notice of objection, the Inspector-General must cancel the objection if satisfied that:

“(a)     the ground or grounds on which the objection was made was not a ground or were not grounds specified in subsection 149D(1); or

(b)       there is insufficient evidence to support the existence of the ground or grounds of objection; or

(c)        the reasons given for objecting on that ground or those grounds do not justify the making of the objection;”

She said (at 491): “The link between those matters and the matters required by s 149C to be contained in the notice of objection is plain.”  Her Honour referred to the requirement for reasons in administrative decision-making and continued (at 491):

“I consider that s 149C is intended to give a bankrupt a comparable entitlement to be fully informed by a notice of objection to discharge from bankruptcy as to the bases upon which such notice has been filed.  He or she must determine whether to take the matter further, and if so whether to make representations to the trustee or Official Receiver, seek an internal review by the Inspector-General or an external review by the Administrative Appeals Tribunal or proceed in the appropriate court of law.”

10                  Branson J considered that par (b) of s 149C(1) required “the evidence or other material” to be identified in an unambiguous way.  She said (at 492):

“The notice of objection should put the bankrupt in a position where he or she can identify, and if necessary search out, the evidence or other material relied upon for the purpose of the objection.  Only if the bankrupt is in a position to do this can he or she sensibly determine:

(a)               whether to make representations to the party who filed the notice of objection concerning such evidence or the use made of it;

(b)               whether it would be appropriate to seek a review to allow the accuracy of such evidence or other material to be challenged;

(c)               whether, on any review, the weight accorded to such evidence or other material should be questioned;

(d)               whether there may be answering evidence or material which might fruitfully be sought out for the purposes of any review.”

11                  Concerning par (c) of s 149C(1), her Honour said (at 493):

“Plainly compliance with this paragraph requires more than a mere recitation of a ground or grounds of objection set out in s 149D(1).  That is, the legislation assumes an exercise of discretionary judgment by the trustee or Official Receiver.  A notice of objection is not intended to be the necessary consequence of the trustee or Official Receiver being able to establish a ground of objection no matter how technical.”

12                  Applying those observations in the present case, I consider that the subject notice complies with s 149C(1) of the Act.  The ground of objection in par (d) of ss 149D(1) is set out in terms.  The notice unambiguously identifies the three letters upon which the respondent relies to establish both the request and the failure to comply.  It is not to the point that the applicant disputes the accuracy of the statements in those letters.  Those are the very matters that the applicant may take up on a review in order to dispute the existence of the ground of objection.  The respondent has also, in my opinion, stated his reasons.  It may be that the respondent has not given a notice under s 77C of the Act and that the respondent has not sought to examine the applicant under s 81 of the Act, but those considerations do not affect the validity of the notice.  The respondent has indicated why he has made his decision, and it is open to the applicant to contend on a review that his reasons do not justify the making of the objection.  The respondent has not said that he was obliged to file a notice of objection by virtue of s 149B(2) of the Act and, contrary to the faint submission of counsel for the applicant, I could not infer that he misconstrued that provision.  The challenge to validity of the notice of objection fails.

13                  This leaves for consideration the respondent’s refusal to consent to the applicant’s leaving Australia.  It is common ground that the respondent has not made an assessment under s 139P or s 139Q of the Act.  This is accordingly not an application for an order under s 139ZU of the Act and the restrictions imposed on the grant of permission to leave Australia under s 139ZU are not applicable: Bethune v Newman (1996) 19 ACSR 99 at 102.  Instead, the Court has to exercise the broad discretion given by s 178 of the Act.

14                  The applicant says that he wishes to leave Australia in order to maintain his “spirituality and beliefs”.  However, he failed to mention pending criminal charges against him.  The applicant has been committed for trial at Brisbane District Court on three counts of cheque fraud.  A preliminary hearing has yet to be fixed for numerous other charges of passing valueless cheques, fraud, forgery and uttering.  The applicant has been remanded on bail, a condition of which is that he reports three times a week to a police station near his residence.  The applicant acknowledged this condition in cross-examination.  These matters should all have been volunteered by the applicant in his supporting affidavit.  It is apparent that the subject matter of the criminal charges relates to his examinable affairs.  No basis whatsoever has been shown for reviewing the exercise of the respondent’s discretion.

15                  The application will be dismissed with costs.

Associate:

Dated:              18 August 1999