FEDERAL COURT OF AUSTRALIA

Macchia v Nilant [2000] FCA 353

BANKRUPTCY – sequestration order – statement of affairs – requirements of s 54(1) Bankruptcy Act 1966 (Cth) – whether failure to meet requirements of s 54(1) is a “formal defect” capable of rectification by s 306(1) Bankruptcy Act.

Bankruptcy Act 1966 (Cth) Pt X; ss 30(1)(b), 33, 33(1)(c), 37(2)(a), 54, 54(1), 54(3), 55, 55(3A), 58, 77, 78, 80, 139W, 139ZG, 139ZI(1), 139ZI(3), 149, 149(3), 149A(1), 149A(2)(a)(i), 149A(3), 149B, 149D(1)(d), 149D(1)(f), 149D(1)(n), 149J, 149J(1), 149K(1), 179, 188, 194, 227, 264A, 264B, 265, 269, 272, 306, 306(1), 306(2).

Nilant v Macchia (1997) 78 FCR 419 referred to

Challen v Bendeich [1999] FCA 845 referred to

Re Rohde (1993) 42 FCR 149 referred to

Sofia v Pattison (Federal Court of Australia, Finkelstein J, 20 October 1997, unreported) followed

Re Baker (1994) 29 CBR (3d) (Ont) 10 referred to

Re Wheeler & Reynolds; Ex parte Kerr & Crowe (1988) 20 FCR 185 referred to

Tsingaris v The Official Receiver [1999] FCA 1389 followed

Trihakis v Official Receiver [1999] FCA 1426 considered

Rosenfeldt v Official Trustee in Bankruptcy (1997) 79 FCR 340 referred to

Van-Minnen (nee Huson), Ex parte Harrison [1999] FCA 43 referred to

Nikoglou v Official Receiver in Bankruptcy [2000] FCA 8 followed

Official Trustee in Bankruptcy v Street [2000] FCA 216 followed

Re Rosenboom (1974) 18 CBR (NS) 180 (Ont SC) referred to

Re Ballato; Ex parte Pezzano [1988] FCA 768 referred to

Matthews v Collett [2000] FCA 224 referred to

Re Carew-Reid; Ex parte Buckeridge (Federal Court of Australia, Lee J, 19 March 1997, unreported) referred to

Re Shead; Ex parte Shead (1954) 16 ABC 188 referred to

RE MARIO SILVERIO MACCHIA; EX PARTE MARIO SILVERIO MACCHIA v CHARLES PHILIPPE LOUIS NILANT

WG 7007 OF 1996

LEE J

PERTH

27 MARCH 2000

THE COURT ORDERS THAT:

1.         The statement of affairs signed by the applicant on 4 September 1991 and presented to the Registrar in Bankruptcy on that date be deemed to have been made out and filed in the office of the Registrar, and a copy furnished to the Trustee of the sequestrated estate of the applicant, on 16 September 1991 in compliance with the requirements of s 54(1) of the Bankruptcy Act 1996 (Cth).

2.         The applicant file submissions on costs by 3 April 2000 and the respondent file submissions in reply by 10 April 2000.

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

REASONS FOR JUDGMENT

1                     In this application the applicant, who was made bankrupt by order of this Court on 16 September 1991, seeks an order under s 306 of the Bankruptcy Act 1966 (Cth) (“the Act”) that a “proceeding” under the Act, namely the filing of a statement of affairs under s 54 of the Act, was not invalidated by defect or irregularity. The application is opposed by the respondent (“the Trustee”).

2                     To explain the applicant’s application, it is necessary to set out again the history of this matter.

3                     On 16 May 1991 a creditor of the applicant presented a petition to the Court seeking a sequestration order against the estate of the applicant.

4                     On 16 July 1991 the applicant, and his brother, signed a joint authority under s 188 of the Act authorising the Trustee to take control of their joint and several property and to convene a meeting of their creditors (“the Pt X proceeding”).  The applicant, and his brother, gave the Trustee a statement of their respective affairs and a joint statement of their joint affairs, each statement prepared as at 9 July 1991. The approximate net deficiency in each estate was stated to be as follows: the applicant $89,162; his brother $45,994; applicant and brother jointly $100,000.

5                     The meeting of creditors convened pursuant to s 194 of the Act was conducted as a single meeting of the several and joint creditors of the applicant and his brother. The meeting was advised by report from the Trustee that it was proposed by the debtors that there be a composition of all their debts by assignment of all divisible assets and payment by relatives and friends of a sum of $50,000 by instalments. The meeting of creditors convened on 8 August 1991 was adjourned to allow the debtors to reconsider their offer. On 29 August 1991 the meeting was re-convened and the debtors offered a composition by assignment of all divisible assets and payment of a sum of $70,000. At the re‑convened meeting several and joint guarantees given by the debtors to a bank, for debts due to the bank by a company of which they were directors, were included in the joint debts of the debtors, increasing the deficiency of that estate to approximately $390,000.

6                     The Trustee’s report to creditors recommended that the proposal for composition be accepted. The creditors, however, resolved that the debtors be required to lodge their petitions in bankruptcy within seven days. The creditors were aware that some months earlier a creditor of the applicant had issued a bankruptcy petition against the applicant.

7                     On 4 September 1991 the applicant and his brother presented their respective petitions to the Registrar in Bankruptcy (“the Registrar”). Each petition was accompanied by a statement of affairs verified by affidavit sworn on 4 September 1991.

8                     The petition lodged by the applicant’s brother was accepted and, accordingly, he became bankrupt on 4 September 1991. The Trustee was the trustee appointed to administer that estate. Pursuant to s 55(3A) of the Act, the Registrar was required to refer the applicant’s petition to the Court for a direction whether to accept or reject the petition, there being a pending creditor’s petition.

9                     On 16 September 1991 the referred petition came before me for direction to the Registrar. Counsel for the petitioning creditor, and for the applicant, presented a minute consenting to dismissal of the creditor’s petition and an order directing the Registrar to accept the applicant’s petition.

10                  I declined to make an order in terms of the minute. I formed the view that, on balance, the public interest, and the potential interests of the creditors as a whole, made it appropriate that a sequestration order be made on the creditor’s petition. I noted that the act of bankruptcy relied upon by the petitioning creditor occurred in April 1991 and if a sequestration order were made on the creditor’s petition the relation-back period would extend four months beyond the period that would apply under a bankruptcy created by the applicant’s petition. The Registrar was directed to reject the applicant’s petition and a sequestration order was made on the creditor’s petition. It was ordered that the Trustee be trustee of the applicant’s estate. It was further directed that the estate in bankruptcy of the applicant, and the estate in bankruptcy of his brother, be consolidated for orderly administration of their joint estates.

11                  In the administration of the applicant’s estate nothing turned on the extent of the relation-back period and hindsight reveals that the creditors of the applicant’s estate would have been in the same position and not disadvantaged if the minute tendered to the Court had been given effect and a direction made that the Registrar accept the applicant’s petition.

12                  On 2 October 1991 the Trustee handed to the applicant a letter which informed the applicant that he had been made bankrupt on 16 September 1991. In fact the applicant had been present in Court with his counsel on that day and was aware of the orders made. Enclosed with the letter was a “Questionnaire”, prepared by the Trustee and, presumably, directed to providing the Trustee with further information in respect of the applicant, and a document headed “Effect Of Being Declared A Bankrupt And Responsibilities Of A Bankrupt Under The Bankruptcy Act 1966”. In his letter the Trustee asked the applicant to complete and return to the Trustee a copy of the Questionnaire, and to read the second document, described as a Schedule, and to return it to the Trustee after completing a declaration endorsed thereon that the applicant had read and understood the contents thereof.The letter stated that pursuant to s 77 of the Act the applicant was required to attend to the foregoing within fourteen days.

13                  The Schedule consisted of a collection of extracts of relevant provisions from the Act in the following order: ss 58, 54, 77, 78, 80, 264A, 264B 265, 269, 272 and 227. Relevantly, s 54 of the Act, as it then stood, provided as follows:

“54(1)  Where a sequestration order is made, the person against whose estate it is made shall, within 14 days from the day on which he is notified of the bankruptcy -

(a)       make out and file in the office of the Registrar for the District in which the sequestration order was made a statement of his affairs; and

(b)       furnish a copy of the statement to the trustee.”

14                  The Trustee’s letter did not draw the applicant’s attention to the particular requirements of s 54 of the Act and the letter concluded as follows:

“...

Finally, I request you to deliver to me all of your books and records. These may be delivered to me at the same time as your submission of the Statement of Affairs to me. I require you to telephone [the Trustee] immediately after you receive this letter to arrange a time for a meeting.”

15                  The statement by the Trustee that the applicant was to submit a statement of affairs to the Trustee was inconsistent with the terms of s 54. With regard to the Questionnaire, and Schedule, it appears that both documents were completed and returned to the Trustee as requested and that in early October the applicant met with an employee of the Trustee instructed to assist the Trustee in the administration of the applicant’s estate, and delivered the material sought in the letter.

16                  Section 54 is directed to a statement of affairs being prepared and filed by a bankrupt as soon as practicable after a sequestration order is made, in circumstances where neither the petitioning creditor who has obtained the sequestration order against the bankrupt’s estate, nor the trustee appointed to administer the sequestrated estate, has knowledge of the bankrupt’s affairs and where prompt disclosure by the bankrupt of the bankrupt’s position is necessary. It operates prospectively. (See:  Nilant v Macchia (1997) 78 FCR 419 at 424.) Section 54 is irrelevant to a debtor who becomes bankrupt on a debtor’s petition, the filing of which is accompanied by a statement of affairs completed by the debtor. In the present case, the Trustee, when appointed trustee of the applicant’s bankrupt estate, had detailed knowledge of the applicant’s affairs and of the affairs of the applicant’s brother as trustee of the latter’s bankrupt estate, being the trustee appointed by the applicant and his brother, under Pt X of the Act, to convene a meeting of their creditors and to prepare reports to the creditors advising upon the affairs of the applicant and his brother.

17                  As a result, the Trustee was able to administer the consolidated estates without awaiting a further statement of affairs from the applicant and without receiving a statement of affairs from either bankrupt as to their joint estate.

18                  It may be assumed, and it was not contended to be otherwise, that the contents of the statement of affairs prepared by the applicant on 4 September 1991 set out the circumstances as understood by the Trustee and upon which he had advised creditors at the creditors’ meeting on 29 August 1991, and that the same position obtained on 16 September 1991.

19                  The knowledge the Trustee gained from the individual and joint statements prepared by the applicant and his brother in the Pt X proceeding was sufficient to allow the Trustee to commence due administration of the applicant’s estate as one of the consolidated estates, and to direct particular enquiries to the applicant if, and as, necessary. It has not been suggested that any failure of the applicant to prepare and file a further statement of affairs within fourteen days of 16 September 1991 impeded the Trustee’s administration of the consolidated estates. There was no material of which the Trustee was unaware that would have been revealed in such a statement of affairs.

20                  It appears that the Trustee made no further request to the applicant until 6 October 1992 when the Trustee wrote to the applicant advising that by his letter of 2 October 1991 the Trustee had instructed the applicant to “submit your Statement of Affairs to me” and that the Trustee had not received a copy of the applicant’s statement of affairs as required by s 54 of the Act. The Trustee informed the applicant that pursuant to s 149 of the Act, as amended on 1 July 1992, the applicant would not be discharged from bankruptcy until three years from the filing of a statement of affairs. A blank form of statement of affairs was enclosed with the letter for the applicant to complete, file the original with the Registrar and forward a copy to the Trustee.

21                  Section 149 of the Act dealt with the manner of discharge of a bankrupt from bankruptcy. On 1 July 1992 s 149 was amended to provide, inter alia, that bankruptcies then on foot, or commencing thereafter, would be discharged at the end of three years from the date on which the bankrupt filed a statement of affairs. Before being so amended, any failure to comply with the terms of s 54 of the Act had no consequence under s 149 upon a discharge from bankruptcy. But for the amendment, the applicant would have been discharged from bankruptcy on 17 September 1994 and the present application would have been unnecessary.

22                  On 9 October 1992 the applicant replied to the Trustee that he had provided a statement of affairs on 16 July 1991 (for the Pt X proceeding) and again on 4 September 1991 (in support of the debtor’s petition) and asked that the Trustee obtain a copy of these statements from the Registrar as soon as possible.

23                  On 15 October 1992 the Trustee wrote to the applicant advising that “the office of the Official Receiver in Bankruptcy has no record of ever having received your Statement of Affairs subsequent to your bankruptcy”. The letter instructed the applicant to forward a copy of his statement of affairs to the Trustee’s office “upon lodgment at the Official Receiver’s Office”. Neither the reference to contact with the office of the Official Receiver nor the instruction to “lodge” a statement of affairs at the office of the Official Receiver showed the writer to be conversant with the terms of s 54 of the Act as it then stood.

24                  In a letter to the Trustee dated 23 October 1992, the applicant again referred to his debtor’s petition and the statement of affairs that he had “lodged” with that petition. The applicant enclosed a copy of a letter to him from the Registrar which referred to the debtor’s petition “presented” by the applicant on 4 September 1991. The applicant further informed the Trustee that he was now engaged in employment in a remote part of the State.

25                  The Trustee, by letter dated 28 October 1992, informed the applicant that he had contacted the Registrar who confirmed that it was recorded that the Registrar had received the applicant’s debtor’s petition and statement of affairs on “4 September 1992” (sic) and that the applicant had been made bankrupt by a sequestration order made on a creditor’s petition on “9 September 1991” (sic) and not on his own petition. The Trustee asked the applicant to file a statement of affairs as soon as possible.

26                  In November 1992 solicitors instructed by the applicant contacted the Trustee and on 25 November 1992 the Trustee wrote to that firm forwarding a form of statement of affairs to be completed by the applicant. The letter enclosed copies of the “Pt X Statements of Affairs” and a copy of the statement of affairs of the applicant’s brother. In respect of the latter document, it may be assumed that it was a copy of the document filed by the applicant’s brother in support of the debtor’s petition filed by him on 4 September 1991. On 30 November 1992 the applicant’s solicitors advised the Trustee that the applicant was “in the country” but they would “endeavour to ensure that the Statement of Affairs is provided to [the Trustee] as quickly as possible”.

27                  The Trustee wrote directly to the applicant on 17 March 1993 advising that the applicant had not yet “filed” a statement of affairs “with my office”.

28                  It was the applicant’s evidence that in response to that letter he had completed a statement of affairs which his solicitor forwarded to the Trustee by covering letter dated 6 April 1993. A copy of the solicitor’s letter was exhibited to the affidavit of the applicant. The applicant also exhibited a copy of a statutory declaration sworn by the solicitor handling the applicant’s affairs confirming that the solicitor had caused the letter of 6 April 1993 to be sent to the Trustee enclosing the statement of affairs of the applicant.

29                  In July 1993 the Trustee wrote to the applicant offering assistance to the applicant to complete a statement of affairs advising that there would be no alternative but to take contempt proceedings if the applicant did not comply with the provisions of s 54 of the Act.

30                  On 3 December 1993 the Trustee applied to the Court for an order that the applicant be committed for contempt pursuant to s 54(3) of the Act for failing to file a statement of affairs as required by the Act. The application was made returnable on 24 January 1994. On 21 January 1994 a statement of affairs, completed by the applicant and bearing the date 6 April 1993, was filed with the Registrar. The document forwarded to the Registrar had a “With Compliments” slip of the Trustee’s firm attached which was endorsed as follows:

“Please find attached Statement of Affairs of [the applicant] for lodgement.”

31                  Pursuant to s 149 of the Act, discharge of the applicant from bankruptcy would not occur until 22 January 1997.

32                  The applicant deposed that he was not aware that contempt proceedings had been commenced against him and it was not until some time later that he discovered that such a proceeding had been brought against him and withdrawn by a minute of consent endorsed by solicitors for the Trustee, and by his solicitors in March 1994. He deposed that he was employed at a remote location in the State between October 1992 and June 1994 returning to Perth only for a short period in December 92 and April 1993.

33                  The Trustee in an answering affidavit stated that the applicant’s statement of affairs dated 6 April 1993 was not received by him until January 1994 and further deposed that the applicant “did not file his statement of affairs with the Registrar in Bankruptcy until 21 January 1994”. The Trustee did not provide particulars of the date or of the manner in which the statement of affairs was received by him nor did he answer the assertion that the applicant’s solicitors sent the statement of affairs to the Trustee by letter dated 6 April 1993. Although the Trustee stated that the applicant “did not file his statement of affairs with the Registrar until 21 January 1994” it was, of course, the Trustee who attended to the filing of that document on that day.

34                  In light of the conclusions I reach later in these reasons and the orders made on this application, it is unnecessary to resolve the conflict recited above but it is as likely as not that the applicant’s statement of affairs did reach the Trustee’s office in about April 1993 and that division of responsibility for administration of the applicant’s estate between the Trustee and members of the Trustee’s staff, albeit staff under the Trustee’s supervision, may have been the cause of the document being overlooked for some months.

35                  Pursuant to s 149 of the Act, the applicant’s brother was discharged from bankruptcy on 5 September 1994. On 26 September 1994 the applicant wrote to the Registrar requesting a certificate that he had been discharged from bankruptcy. The Registrar responded on 28 September 1994 that the applicant was not eligible for discharge until 22 January 1997.

36                  By letter dated 26 October 1994, the Trustee delivered to the applicant an Income Assessment Questionnaire in respect of the year ending 30 June 1994 and asked the applicant to complete and return the form. In his letter to the Trustee of 23 October 1992, the applicant had informed the Trustee that he was to be employed for a trial period of three months at a remote aboriginal community at a salary of $27,245 per annum. On 4 November 1994 the applicant returned the form duly completed in which the gross income for the year ended 30 June 1994 was shown as $59,498 and the anticipated income for the year ended 30 June 1995 was $9,000.

37                  By letter dated 15 February 1995, the Trustee purported to make an assessment under s 139W of the Act that the applicant was liable to contribute a sum of $10,677 as a result of income the applicant had earned in the years ending 30 June 1993 and 30 June 1994. The Trustee purported to demand payments of $890 per month from the applicant from 28 February 1995.

38                  It is plain that the Trustee’s purported “assessment” of contributions to be made by the applicant by monthly payments did not comply with the terms of the Act under which it was made (s 139W) and was of no effect. (See:  Challen v Bendeich [1999] FCA 845.)

39                  In August 1995 the applicant’s solicitors wrote to the Registrar referring to the Registrar’s advice to the applicant of 28 September 1994 and stated that as the creditor’s petition and debtor’s petition had been dealt with by the Court at the same time on 16 September 1991 the applicant was eligible for a discharge on “15 September 1994” (sic). On 4 September 1995 the Registrar responded that the statement of affairs filed with the applicant’s debtor’s petition “remains on the debtor’s petition file” and “is not transferred to the bankruptcy administration file”.

40                  In the course of administration of the applicant’s estate, the Trustee asserted that the applicant had succeeded to a one-third share in the estate of his mother who, it was said, died intestate on 21 March 1995. The principal item of property in the estate was real estate (“the North Perth Property”), the value of which was said to be approximately $220,000. Before the death of the applicant’s mother, a caveat had been lodged against the title to the North Perth Property by the applicant’s sister in which the sister gave notice of a claim to the whole of the beneficial interest therein. Subsequently, the Trustee became aware that the applicant’s brother also claimed the whole of the beneficial interest in the property. Either claim, if made out, would leave little or no value in the interest the applicant may have as a prospective beneficiary in the residuary estate of the deceased. The Public Trustee had been appointed administrator of the estate of the deceased and the claims to beneficial interests in the North Perth Property remain unresolved.

41                  On 12 October 1995 the applicant applied to the Court for a declaration that “the Statement of Affairs of the Applicant was filed as at the 16 September 1991” and that pursuant to s 149 of the Act he had been discharged from bankruptcy on 17 September 1994.

42                  On 21 February 1996 the application was amended to seek further orders as follows:

“1.       That the time provided by S149(3) of 3 years from the date of filing of the statement of affairs should be abridged under S33(1)(c) to a period of 2 years and 1 month.

 2.        That the applicant be discharged from bankruptcy pursuant to S149 and S33 of the Act on 21 February 1996.

 …”

43                  The application was opposed by the Trustee. It was listed for hearing on 20 May 1996. On 17 May 1996 the Trustee, pursuant to s 149B of the Act, filed an objection to the discharge of the applicant from bankruptcy. The ground of objection relied upon was s 149D(1)(f) of the Act, namely that the applicant had failed to pay to the Trustee an amount that he was liable to pay under s 139ZG of the Act. Under ss 149A(1) and 149A(2)(a)(i) of the Act, upon an objection being filed by the Trustee the period of bankruptcy was extended from three years to eight years, namely until 22 January 2002.

44                  The hearing was adjourned to allow the applicant to seek a review of the Trustee’s objection. On 12 June 1996, pursuant to s 149K(1) of the Act, the applicant requested the Inspector General to review the decision of the Trustee to file the notice of objection. On 21 June 1996, pursuant to s 149J(1) of the Act, the Trustee filed a withdrawal of the objection. By letter dated 20 June 1996 the Trustee advised the applicant that the Trustee had “decided to reassess” “income contributions” for the “Contribution Assessment Periods” ending 30 June 1993 and 30 June 1994. The effect of the “reassessment” was that the Trustee demanded payment of a sum of $8985 by 28 June 1996. Apart from bearing the deficiencies of the prior assessment already referred to, the notice appeared to fail to comply with s 139ZI(3) of the Act in that it did not stipulate a sufficient period for payment of the sum demanded as required by the Act.

45                  On 8 July 1996the Trustee filed with the Registrar another notice of objection to the applicant’s discharge from bankruptcy based on non-payment of the sum claimed in the “assessment notice” dated 20 June 1996. It is apparent that this notice of objection had less validity than the one it replaced.

46                  On 19 March 1997 the Trustee filed with the Office of the Official Receiver two further objections to discharge from bankruptcy, said to be based on grounds set out in ss 149D(1)(d) and 149D(1)(n) of the Act. In an affidavit sworn by the Trustee on 21 March 1997, the Trustee stated that he had become aware that the objection filed on 8 July 1996 may have been invalid and he “had to consider” whether any other grounds for objection might “ensure” that “the after-acquired asset (being the interest in the North Perth Property) is preserved for the benefit of the bankrupt estate”. It is to be noted, of course, that if the notice of objection filed on 8 July 1996 lacked validity and the bankruptcy terminated on 22 January 1997 pursuant to s 149, the notices filed on 19 March 1997 would have been of no effect.

47                  The application, as amended, came on for hearing on 8 April 1997. The proposed relief sought was an abridgment of the period of time before discharge from bankruptcy provided in s 149 of the Act. On 11 April 1997, being satisfied that such an order may be made consonant with previous decisions of this Court, in particular Re Rohde (1993) 42 FCR 149 and that it was appropriate in all the circumstances to do so, I ordered that “the time limited by s 149(3) of the Bankruptcy Act 1966 (Cth) for the period of bankruptcy in this matter be abridged to 13 months from the date on which the bankrupt filed his statement of affairs”, the period fixed preserving any claim the Trustee may consider he was able to pursue by reason of the “assessment” issued on 15 February 1995.

48                  On 15 September 1997 a Full Court of this Court allowed an appeal from my order, now reported as Nilant v Macchia (supra). The Full Court determined that the law had been incorrectly applied in the decisions followed by me and ordered that my order be set aside and that the matter be remitted for further consideration, making the following observation (at 428):

“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.”

49                  The application remained undetermined on issues other than whether there should be abridgement of the period of bankruptcy provided by s 149 pursuant to the power to abridge time provided by s 33(1)(c) of the Act and whether it could be found as a fact that the applicant had complied with s 54. No reliance had been placed on s 306 of the Act to obtain an order from the Court granting relief from the consequence of a failure to comply with the requirements of s 54. Upon the matter being remitted for further hearing, the applicant had to consider whether the application sufficiently disclosed a basis for further argument or whether amendment of the application was necessary.

50                  After the matter was remitted by the Full Court, for some time the applicant ceased to be represented by solicitors. On 12 March 1999 the applicant appeared in person and was given leave to file a further amended application in which the applicant sought, inter alia, an inquiry into the conduct of the Trustee pursuant to s 179 of the Act, and an order that the Trustee be removed.

51                  The application came on for hearing on 12 October 1999 at which time the applicant was represented by solicitors. At that time the applicant presented a minute of an amended application which sought the following orders:

“1.       The Order of Justice Lee made 16 September 1991 that the estate of the Applicant be sequestrated on the creditor’s petition be varied by providing that the estate of the Applicant be sequestrated on the Applicant’s petition dated 4 September 1991.

 2.        A declaration that the Applicant was discharged from bankruptcy on 16 September 1994.

 3.        In the alternative to Orders 1 and 2:

            3.1       A declaration that the Applicant is not liable to pay any amount to the Respondent in respect of the assessments of income and contribution dated 15 February 1995 and 20 June 1996 by reason that:

                       (a)        The assessments were invalid.

                       (b)        The Trustee did not give to the Applicant written notice of the determinations as required by section 139ZI(1) of the Bankruptcy Act.

                       (c)        Any notice of assessment or particulars of the determination which was given to the Applicant did not specify a time for payment within the period provided by section 139ZI(3) of the Bankruptcy Act.

            3.2       A declaration that the notices of objection to discharge from bankruptcy dated 3 July 1996 and 19 March 1997 are invalid, alternatively are insufficient to extend the period of the Applicant’s bankruptcy.

            3.3       The Court inquires into the conduct of Charles Philippe Louis Nilant pursuant to section 179 of the Bankruptcy Act and:

                       (a)        Remove the Trustee from office.

                       (b)        Make such order as it thinks proper.”

52                  The matter was adjourned part heard and the applicant was given leave to file a further amended application before resumption of the hearing.

53                  The objections to the discharge of the applicant from bankruptcy were withdrawn by the Trustee on 17 December 1999 pursuant to s 149J of the Act. Under s 149A(3) of the Act the objections were taken never to have been made and the bankruptcy ceased, as provided in s 149, on 22 January 1997. Notwithstanding that operation of the Act, the status of the applicant at all times after 22 January 1997 had been that of undischarged bankrupt and remained so until 17 December 1999. As at 17 December 1999 the applicant had been a bankrupt for eight years and three months and had been treated as an undischarged bankrupt for a period of almost three years beyond the date on which bankruptcy actually terminated under the Act.

54                  The hearing resumed on 23 February 2000 at which time the applicant filed, with leave, a further amended application which, in substance, sought orders as follows:

“1.       A declaration that the statement of affairs annexed to the affidavit of the Applicant made 16 July 1991 be deemed to have been filed in the office of the Registrar in Bankruptcy on 17 September 1991.

 2.        In the alternative to Order 1, a declaration that the Applicant’s statement of affairs dated 4 September 1991 be deemed to have been filed in the Office of the Registrar in Bankruptcy on 17 September 1991.

 3.        In the alternative to Orders 1 and 2, a declaration that the Applicant’s statement of affairs dated 6 April 1993 be deemed to have been filed in the office of the Registrar in Bankruptcy on 17 September 1991.”

55                  In effect, the applicant relied upon ss 30(1)(b) and 306 of the Act to seek a declaration that a “proceeding” under the Act had not been invalidated by a formal defect or irregularity. The applicant no longer sought an order that there be an inquiry into the conduct of the Trustee or that the Trustee be removed and conceded that the order sought having the effect of replacing a sequestration order made on a creditor’s petition with an order that the applicant become bankrupt “on the applicant’s petition” could not be made, no doubt having due regard to the terms of s 37(2)(a) of the Act.

56                  The applicant submits that in all the circumstances it is appropriate in this case that an order be made under s 306 of the Act declaring that the statement of affairs required by s 54 of the Act be deemed to have been filed on 16 September 1991.

57                  Section 306 provides as follows:

“306(1)  Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.

 306(2)  A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a deed entered into under this Act does not invalidate an act done by him or her in good faith.”

58                  It is submitted that the filing of the statement of affairs required by s 54 is within the meaning of the word “proceeding” as used in s 306.

59                  In Sofia v Pattison (Federal Court of Australia, Finkelstein J, 20 October 1997, unreported) it was held by his Honour that the relevant context made it clear that the word “proceeding” in s 306 was not confined to curial proceedings and it was accepted that the word was to be given a wide meaning. (See: Re Baker (1994) 29 CBR (3d) (Ont) 10 at 15, 16‑17; Re Wheeler & Reynolds; Ex parte Kerr & Crowe (1988) 20 FCR 185.) His Honour noted that it had been applied to remedy defects in bankruptcy notices. In particular, his Honour was satisfied that s 306 applied to “proceedings” taken under s 54(1).

60                   In Sofia v Pattison a sequestration order had been made in August 1993. In September 1994 a “copy” of an original statement of affairs prepared in November 1993 was “delivered” to the office of the Registrar. His Honour held that the requirements of s 54 were not met by that act. As at October 1997 no original statement of affairs had been filed as required by s 54 and effluxion of the period for qualification for discharge from bankruptcy under s 149 had not commenced. His Honour was satisfied that no injustice would result by making an order under s 306 declaring the statement of affairs to have been filed on 22 September 1994 as required by s 54 of the Act and to relieve the bankrupt of the consequences of non-compliance with that provision of the Act.

61                  In Tsingaris v The Official Receiver [1999] FCA 1389, Weinberg J agreed with the foregoing construction of s 306 and on 1 October 1999 made a declaration thereunder that a “copy” statement of affairs furnished to the Official Trustee on 27 November 1996 be deemed to be a statement of affairs filed in the office of the Official Receiver on 16 December 1996 in compliance with s 54(1) of the Act. The date 16 December 1996 was chosen because it was on that date that s 54 of the Act was amended to provide that the statement of affairs be filed in the office of the Official Receiver instead of the office of the Registrar. Unless such an order was made by his Honour, the period of time required to elapse to qualify the bankrupt for discharge from bankruptcy under s 149 would not have commenced.

62                  In Trihakis v Official Receiver [1999] FCA 1426, Kenny J agreed with the construction of s 306 applied by Finkelstein J in Sofia v Pattison (supra) and agreed with Weinberg J that cases such as Nilant v Macchia (supra), Rosenfeldt v Official Trustee in Bankruptcy (1997) 79 FCR 340 and Van-Minnen (nee Huson), Ex parte Harrison [1999] FCA 43 were clearly distinguishable in that none of those cases discussed or relied upon s 306. Although her Honour would have made an order under s 306 if required, she was satisfied on the evidence before her that a finding of fact could be made that the statement of affairs had been filed as required by s 54.

63                  In Nikoglou v Official Receiver in Bankruptcy [2000] FCA 8, Marshall J agreed with the views expressed by Weinberg J in Tsingaris (supra) as to the proper construction of s 306. On 13 December 1999 his Honour made an order pursuant to s 306 declaring that a statement of affairs of the bankrupt, received by the office of the Official Receiver on 23 September 1996, be deemed to have been filed in the office of the Official Receiver on 16 December 1996 in compliance with s 54(1) of the Act. Again, in this matter as at the date of the order, time had not begun to run under s 149 of the Act and no discharge from bankruptcy could occur by operation of s 149 unless such an order was made.

64                  In Official Trustee in Bankruptcy v Street [2000] FCA 216 Sackville J followed Tsingaris and Nikoglou and made orders under s 306 excusing non-compliance with s 54 of the Act.

65                  I agree with the construction of s 306 applied by their Honours and, in particular, that a defect or irregularity in the filing of a statement of affairs as required by s 54 of the Act may be remedied by an order made under s 306(1).

66                  The question for determination is whether such an order should be made in the present case.

67                  The relevant facts, as recited earlier in these reasons, suggest that it was not surprising that the applicant thought he had supplied a statement of affairs as required by the Act. As at 16 September 1991, when both the creditor’s petition and the applicant’s debtor’s petition were before the Court, the applicant had presented for filing a statement of affairs which would have been “filed” had a direction been made by the Court that the applicant’s petition in bankruptcy be accepted. It was the intention of the applicant that the document be filed. No further step in respect of a statement of affairs would have been required by the applicant had the applicant’s petition been accepted.

68                  In fact, as at 16 September 1991 the Registrar had possession of the statement of affairs presented to him by the applicant and retained possession of it thereafter. The statement of affairs had been placed and recorded on a file maintained by the Registrar in respect of the debtor’s petition presented by the applicant. On 16 September 1991, and at all times thereafter, the statement of affairs presented with that petition remained in the office of the Registrar.

69                  What constitutes a “formal defect or an irregularity” for the purpose of s 306(1) is a matter of fact. (See:  Re Rosenboom (1974) 18 CBR (NS) 180 (Ont SC); Re Ballato; Ex parte Pezzano [1988] FCA 768; Matthews v Collett [2000] FCA 224.) As at 16 September 1991 the obligation to file a statement of affairs was a formal requirement of the Act, not a substantive provision. No right was created or depended upon the filing of the statement. (cf Re Carew-Reid; Ex parte Buckeridge (Federal Court of Australia, Lee J, 19 March 1997, unreported).) Upon the amendment of s 149 on 1 July 1992, the period of the applicant’s bankruptcy did not come to an end automatically pursuant to the provisions of the Act but that did not alter the formal nature of compliance with s 54 of the Act. (See:  Re Shead; Ex parte Shead (1954) 16 ABC 188.) In effect the amendment to s 149 introduced a penal consequence by providing no limit upon the period of bankruptcy until a person made bankrupt by sequestration order complied with the requirements of s 54.

70                  Any “invalidity” flowing from a failure to meet the requirements of s 54 of the Act, in either time or form, was capable of rectification by appropriate order under s 33 enlarging time and an order under s 306(1) declaring the Act to have been complied with. (See:  Sofia v Pattison (supra).) In the particular circumstances of the present case, the requirements of s 54 of the Act were substantially complied with when the statement of affairs prepared by the applicant and presented to the Registrar, was proffered by the applicant on 16 September 1991, for the applicant to be made bankrupt pursuant to s 55 of the Act upon acceptance of the applicant’s petition.

71                  It was not suggested that the statement of affairs prepared by the applicant on 4 September 1991 could not meet the purpose of s 54 if consequent upon the sequestration order made by the Court on the petition of a creditor a further order had been made that the statement of affairs already presented by the bankrupt be received and filed in the proceeding in which the sequestration order was made to comply with the requirements of s 54. As noted earlier, the Trustee already had notice of the applicant’s affairs to be provided to him by a copy statement of affairs furnished to him pursuant to s 54.

72                  In those circumstances there is no reason why an order should not be made under s 306(1) declaring the statement of affairs placed before the Court on 16 September 1991 to be deemed to be a statement of affairs made out and duly filed with the Registrar on that day and to deem a copy to have been furnished to the Trustee as required by s 54 of the Act unless the Court is of the opinion that substantial injustice has been caused by the defect or irregularity that cannot be remedied by further order of the Court.

73                  The only matter to which the Trustee refers in regard to the question of injustice is that such an order under s 306(1) would have the effect of terminating the bankruptcy on 17 September 1994 depriving creditors, it is said, of the opportunity to participate in the collection and distribution of after-acquired property said to have fallen into the applicant’s estate in or about March 1995 and leaving the Trustee to bear costs incurred by him in pursuing a claim to such property.

74                  It is difficult to see how the inability of the Trustee to pursue the uncertain interest the applicant may have in his mother’s estate, is an injustice, substantial or otherwise, caused by the defect or irregularity of formal compliance with s 54 of the Act. But if it is capable of being so regarded, it is not an interest that outweighs other considerations. At its highest, the prospective return to creditors is substantially less than the sum creditors were offered and rejected in the Pt X proceeding and, potentially, there may be little or no return to creditors. Two siblings claim the entire interest in the principal asset of the estate, the North Perth Property. The Trustee was invited to present to the Court advice he sought and received as to the strength of his claim to a right to participate in a distribution of the estate having regard to the claims to the North Perth Property but the Court received no information as to the worth of the Trustee’s claim either in substance or in value and there is scant material on which the Court can conclude that there is any real prospect of any return to creditors, particularly if interests in the estate will be determined only by expensive litigation.

75                  I note that in Nilant v Macchia (supra) (at 429) it was observed that it would be “undesirable for the legal history of an item of real property to be re-written without that factor being given due consideration”. No re-writing of legal history is involved in this case where it is not apparent that an interest in real property has, or will ever, become devolved upon the Trustee. At present the Trustee has no better interest than the applicant, which is a right to have the intestate estate duly administered, and any interest in the net worth of the estate duly distributed after the property constituting the residuary estate has been ascertained and claims created prior to the death of the deceased in property of the deceased have been disposed of or satisfied.

76                  A major part of the debts in the applicant’s bankruptcy were debts also jointly owed in the bankrupt estate of his brother whose bankruptcy terminated on 5 September 1994. The only difference between the administration of the brother’s estate and that of the applicant is that the Trustee “assessed” the applicant as liable to make a contribution from income. As noted earlier, that “assessment” is not supported by the Act. In so far as the Trustee purported to extend the period of bankruptcy by lodging notices of objection to the discharge of the applicant from bankruptcy, the withdrawal of those objections is to be taken under the Act as an acknowledgment of the absence of substance therein. As noted earlier, the delayed withdrawal of the objections meant the applicant was treated as a bankrupt for a period of eight years and for a period at least three years longer than the Act provided. The bankrupt asserts, and I accept, that at all material times since 22 January 1997 he has been severely prejudiced as an undischarged bankrupt in attempting to obtain employment and has suffered financial detriment as a result.

77                  In my reasons of 11 April 1997 I remarked that the applicant had been the author of his own misfortune but that comment was not a statement that the applicant had no entitlement to an order redressing any injustice flowing from a failure to comply with the Act if such an order may be made under s 306(1) of the Act, and it were proper to make such an order having regard to all relevant matters including, inter alia, consideration of the interests of the creditors and of the applicant’s conduct and circumstances.

78                  I am not satisfied that the defect or irregularity in compliance by the applicant with s 54 of the Act, sought to be corrected by an order under s 306(1), has caused substantial injustice to parties with an interest in the applicant’s bankrupt estate to make such an order inappropriate and I will make the declarations sought.

Associate:

Dated: