FEDERAL COURT OF AUSTRALIA

Wangman v Official Receiver, Insolvency & Trustee Service Australia [2006] FCA 202

BANKRUPTCY – statement of affairs – requirements of s 54(1) Bankruptcy Act 1966 (Cth) – whether statement of affairs should be treated as being filed at a time earlier than it was actually filed – s 33A Bankruptcy Act 1966 (Cth) – whether defects in statement of affairs such that document not a ‘statement of affairs’ for purposes of either s 54(1) or s 33A Bankruptcy Act 1966 (Cth)

Bankruptcy Act 1966 (Cth)

Chronis v DS Queen Street Mall Pty Ltd [2004] FMCA 1107

House v R (1936) 55 CLR 499

Nilant v Macchia (2000) 104 FCR 238, 178 ALR 371

Sobey v Duncan [2005] FMCA 1170

LINDSAY JOHN WANGMAN v OFFICIAL RECEIVER, INSOLVENCY & TRUSTEE SERVICE AUSTRALIA

QUD 113 OF 2005

COLLIER J

15 MARCH 2006

BRISBANE

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.                  The appeal be dismissed.

2.                  The appellant pay the respondent’s costs of the appeal.

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

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

REASONS FOR JUDGMENT

1                     This is an appeal from the judgment of Jarrett FM (Wangman v Official Receiver [2005] FMCA 504), delivered 18 April 2005, wherein the learned Magistrate dismissed an application for orders that the statement of affairs of the appellant (‘the appellant’) filed on 2 February 2005 be backdated to 1998, and the Court discharge him from bankruptcy forthwith.

2                     The Federal Court of Australia (‘the Federal Court’) has jurisdiction to hear appeals from decisions of the Federal Magistrates Court exercising original jurisdiction under the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’): s 24(1)(d) Federal Court of Australia Act 1976 (Cth) (‘Federal Court Act’).  The appellate jurisdiction of the Federal Court is exercised by a Full Court unless the Chief Justice considers it is appropriate for the appellate jurisdiction of the Federal Court in relation to the appeal to be exercised by a single judge: s 25(1) and s (1A) Federal Court Act.  The Chief Justice has directed that this appeal be heard by a single judge.

3                     Appeals from Federal Magistrates are appeals by way of rehearing: Low v Commonwealth [2001] FCA 702 at [3]; WAJR v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 204 ALR 624 at 628; George v Deputy Commissioner of Taxation [2004] FCA 1433 at [11].  Accordingly, the parties are able to supplement the evidence before the Court by seeking to adduce additional material which may be admitted into evidence: Low v Commonwealth supra.

BACKGROUND

4                     The facts of this case are outlined clearly and comprehensively in the Reasons for Judgment of the learned Federal Magistrate.  I shall endeavour to summarise the salient points.

5                     The appellant is a plumber by trade, and became bankrupt as a consequence of a sequestration order made against his estate by the Federal Court Queensland District Registry on 2 September 1998.  Messrs Philip Gregory Jefferson and Jay Arscott Stevenson were appointed trustees in bankruptcy of the appellant’s estate.  Mr Stevenson was subsequently replaced by Mr Gerald Collins as trustee in 2000.  Messrs Jefferson and Collins are currently the trustees in bankruptcy of the appellant.  The replacement of Mr Stevenson as trustee by Mr Collins in 2000 is not relevant to the matter before this Court.  Almost all formal communications from the trustees to the appellant were from Mr Jefferson.

6                     A statement of affairs is required to be completed and filed by a bankrupt pursuant to s 54(1) Bankruptcy Act.  This section provides:

‘(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 or she is notified of the bankruptcy:

(a) make out and file with the Official Receiver for the District in which the sequestration order was made a statement of his or her affairs; and

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

Penalty: 5 penalty units’

7                     Section 149 Bankruptcy Act provides that a bankrupt is discharged at the end of the period of three years from the date on which the bankrupt filed his or her statement of affairs.  It therefore follows that it is of utmost importance from the point of view of any bankrupt, including the appellant, for the purposes of facilitating prompt discharge from bankruptcy at the end of three years, that the statement of affairs be filed as soon as possible.

8                     On 8 September 1998 Mr Matthew Joiner attended the appellant at the appellant’s premises in Gumdale in suburban Brisbane.  Subject to the supervision of the trustees, Mr Joiner was responsible for the day to day administration of the appellant’s bankrupt estate.  During the course of the attendance, Mr Joiner delivered to the appellant a bundle of documents including:

(a) a Notice informing the appellant that

(i) he had been made bankrupt by a sequestration order on 2 September 1998;

(ii) Messrs Jefferson and Stevenson were the trustees of his bankrupt estate;

(iii) within 14 days he was required to make out and file a statement of affairs, a copy of which was enclosed with the Notice, with the Official Receiver and to furnish the trustees with a copy of the statement;

(iv) the term of his bankruptcy would commence once the duly completed statement of affairs was lodged with the Official Receiver.  This particular point was emphasised in the Notice, being in bold uppercase lettering at the bottom of the first page of the Notice; and

(v) while it was his responsibility to lodge the statement of affairs, the trustees were prepared to lodge it on his behalf if he wished.

(b) a letter enclosing

(i) a sealed copy of the sequestration order made against his estate,

(ii) a Notice entitled ‘Warning Some Responsibilities of a Bankrupt’ (which noted the time requirements relevant to filing the statement of affairs, and the penalties incurred in default of filing the document),

(iii) requirement for funds to be deposited with the trustees in accordance with s 161B Bankruptcy Act, and

(c) a letter enclosing a number of questionnaires to be completed by the appellant dealing with his personal and financial affairs.

9                     On 14 September 1998 there were two conversations between the appellant and Mr Joiner involving discussions of the administration of the appellant’s bankrupt estate, and the financial affairs of the appellant.  The appellant on that date faxed a letter to Mr Joiner requesting Mr Joiner ‘to apply to the Official Receiver and the Law Courts of Australia for an extension of time regarding the filling (sic) out the Statement of Affairs and any other paper work regarding this matter’.  The appellant stated that he required at least one calendar month to do so from the date of the letter.

10                  Mr Jefferson responded in a letter dated 15 September 1998, advising the appellant, inter alia, that the Bankruptcy Act did not allow the trustee to grant further time to complete the statement of affairs beyond the fourteen days set out in subs 54(1) of the Act.  In the letter, the trustee confirmed the advice of Mr Joiner that the period of bankruptcy would not commence until the statement of affairs was filed with the Official Receiver, and confirmed that the trustee’s office was willing to assist the appellant with promptly completing his statement of affairs and questionnaires, and collating his personal and business books and records.

11                  Mr Joiner attended on the appellant on 21 September 1998 for the purpose of collecting documents including a statement of affairs (the ‘1998 Statement of Affairs’).

12                  The statement of affairs as signed by the appellant, and collected by Mr Joiner on 21 September 1998, was clearly deficient in relation to the information required.

13                  In evidence before this Court, the appellant indicated that he had become frustrated inserting information into the form, and for that reason had chosen not to insert information beyond that he had included in Pt A of the form.  (TS 20)

14                  The trustee caused the 1998 Statement of Affairs signed by the appellant to be delivered to the Official Receiver at the Brisbane office of the Insolvency and Trustee Service Australia (‘ITSA’) on 23 September 1998.

15                  According to Mr Joiner’s evidence, the Official Receiver refused to accept delivery of the 1998 Statement of Affairs on 23 September 1998, and the rejected document was returned to Mr Joiner.  Mr Joiner also gave evidence that the member of his firm’s staff who delivered the appellant’s originally signed statement of affairs informed him that the Official Receiver refused to accept delivery of the statement of affairs on the basis that the statement had not been satisfactorily completed (Affidavit of Matthew Leslie Joiner sworn 18 March 2005, par 18).  Interestingly, this may be compared with evidence of the Deputy Official Receiver sworn by affidavit on 17 March 2005 that ITSA rejected the 1998 Statement of Affairs on 10 February 1999, and returned it to the trustees and did not retain a copy (Affidavit of Robert George Siemon sworn 17 March 2005, par 13).  I shall deal with this point later in the judgment.

16                  The trustees returned the 1998 Statement of Affairs to the appellant by mail on 15 February 1999.  As noted by the learned Federal Magistrate, no explanation for the delay in returning the form to the appellant has been proffered.  The letter from the trustee enclosing the 1998 Statement of Affairs stated simply it had not been accepted by the Official Receiver as it had not been properly completed, and requesting that a further statement of affairs enclosed with the letter be completed and returned to the trustee.  The trustee invited the appellant to contact Mr Joiner if the appellant encountered difficulty properly completing the statement of affairs.

17                  It appears that the appellant did not respond to the letter of 15 February 1999.  The appellant’s postal address was a post office box at Gumdale.  Mr Joiner gave evidence that he rang Gumdale Post Office on 10 May 1999 and confirmed that mail from the appellant’s post office box was being collected daily.

18                  The trustee wrote to the appellant again on 12 May 1999, referring to his letter of 15 February 1999.  The appellant responded by letter dated 17 May 1999, denying receipt of the letter of 15 February 1999, and requesting that any communications with him be by telephone.

19                  The appellant gave evidence both before the Federal Magistrate and before this Court that he had been in dispute with his wife at the relevant time; that his wife also had access to the post office box at Gumdale; and that it is possible that his wife had taken possession of mail addressed to him including correspondence from the trustees.

20                  There appears to have been another telephone conversation between Mr Joiner and the appellant on 30 June 1999 where the 1998 Statement of Affairs was discussed.  This conversation was followed by a letter from the trustee to the appellant on 7 July 1999, asking the appellant to address the issues raised in the trustee’s letter of 15 February 1999, and informing the appellant that, as the Official Receiver had not accepted the 1998 Statement of Affairs in the form executed by the appellant, the three year period of the bankruptcy had yet to commence.  The trustees also enclosed another statement of affairs form for completion by the appellant.  A short telephone conversation took place between Mr Joiner and the appellant on 9 July 1999 where it appears that the appellant was verbally abusive of Mr Joiner.

21                  The trustees wrote again to the appellant at his Gumdale postal address on 30 March 2000, requesting written responses to the information sought in the letters of 15 February 1999 and 7 July 1999, seeking information about earnings of the appellant, and reminding the appellant that, as he had not yet provided a properly completed statement of affairs, the three year period of bankruptcy had not yet commenced.  It appears that there was no response from the appellant.

22                  On 30 March 2001, ITSA wrote to the trustees inquiring about, inter alia, the absence of a filed copy of a statement of affairs completed by the appellant.  The trustees responded to ITSA on 8 May 2001, including summarising the history of correspondence between the trustees and the appellant, and informing ITSA that the trustees continued to hold an incomplete copy of the statement of affairs (namely, the 1998 Statement of Affairs).

23                  On 20 July 2004, the trustees wrote to ITSA informing ITSA that the trustees had been unable to obtain a completed statement of affairs from the bankrupt.  The trustees requested ITSA to execute a Notice pursuant to s 77C(1) Bankruptcy Act to be issued to the appellant, requiring the appellant to attend before the Official Receiver and produce, inter alia, a completed statement of affairs.

24                  A Notice executed pursuant to s 77C(1) Bankruptcy Act was executed by the Deputy Official Receiver on 29 July 2004, requiring the appellant to appear for examination at the offices of the trustees on 17 August 2004.  The notice was not served on the appellant until 12 August 2004, for the reason that the appellant appears to have changed address without advising the trustees of his new address.  The appellant requested a postponement of the examination pursuant to s 77C scheduled for 17 August 2004.  It appears that no consent was given by ITSA to the postponement of the examination, however the appellant did not attend at the scheduled time.

25                  It appears from evidence of the Deputy Official Receiver that another time was set for an examination pursuant to s 77C, however the appellant again indicated that he would not be able to attend, and requested the examination be rescheduled.

26                  The appellant lodged a fresh statement of affairs on 2 February 2005.  This statement of affairs was accepted by ITSA.  It follows from s 149 Bankruptcy Act that the appellant’s bankruptcy commenced 2 February 2005.

THE DECISION OF THE FEDERAL MAGISTRATE

27                  The case before the learned Federal Magistrate turned on the application of s 33A Bankruptcy Act.  This section reads as follows:

‘(1) [Application] This section applies to a statement of affairs that was filed for the purposes of ss 54, 55, 56B 56F of 57 by a bankrupt, or a person who later became a bankrupt.

(2) [Reasonable grounds] If the Court is satisfied that the person believed, on reasonable grounds, that the statement had already been filed at a time before it was actually filed, the Court may order that the statement is to be treated as having been filed at a time before it was actually filed.

(3) [30-day period] The Court cannot make an order that would result in the person being discharged from bankruptcy earlier than 30 days after the order is made.

(4) [Interpretation] In this section:

filed includes presented, lodged or given.’

28                  As noted by the Federal Magistrate, s 33A came into force on 5 May 2003.  The section applies to Statements of Affairs filed at any time, whether before or after commencement of the section (Bankruptcy Legislation Amendment Act 2002 (Cth), Sch 1, cl 204).

29                  The appellant sought two orders from the Federal Magistrates Court.  First, the appellant sought an order that the appellant’s statement of affairs, accepted by ITSA on 2 February 2005, be treated as having been filed on 23 September 1998, that is the day on which the 1998 Statement of Affairs was submitted to (and rejected by) ITSA.  Second, the appellant sought an order that the Court discharge him from bankruptcy forthwith.  The respondent, ITSA, opposed the application.

30                  Jarrett FM dismissed the application.

31                  In summary, his Honour found as follows:

(a)    Section 33A(2) required his Honour to be satisfied that the appellant believed, on reasonable grounds, that the statement of affairs had been filed at a time before it was actually filed.

(b)   In the period between 23 September 1998 and 9 July 1999, the appellant believed, on reasonable grounds, that the 1998 Statement of Affairs had been filed on 23 September 1998.

(c)    After 9 July 1999 the appellant knew that the 1998 Statement of Affairs had not been accepted by ITSA.  Even if the appellant had held that belief, it would not have been reasonable for him to hold that belief.

(d)   The appellant knew that his bankruptcy would not commence until a properly completed statement of affairs had been filed with ITSA.

(e)    As a result, the discretion given to the Court by s 33A(2) was not enlivened.

(f)     Even if the discretion given to the Court were enlivened, the Federal Magistrate held that he would be disinclined to exercise that discretion in favour of the appellant, on the basis that the appellant had been uncooperative.

(g)    The Federal Magistrate was of the view that the appellant would not be prevented carrying on his trade as a plumber by becoming bankrupt, including as an employee.

(h)    Section 306(1) Bankruptcy Act was of no assistance to the appellant, for the reason that the defects in the 1998 Statement of Affairs were so significant that the document could not be said to be a statement of affairs at all.

THE APPEAL

32                  The second further amended notice of appeal (‘notice of appeal’) lists 13 grounds of appeal from the decision of Jarrett FM.  These grounds may be summarised as follows:

(a)    the Federal Magistrate erred in finding that the Official Receiver of ITSA rejected the 1998 Statement of Affairs on 23 September 1998, when the evidence of the Official Receiver is that the 1998 Statement of Affairs was rejected and returned to the trustees on 10 February 1999 (encompassing ground 1 and 7 in the notice of appeal);

(b)   the Federal Magistrate erred in finding that the appellant did not have a reasonable basis after 9 July 1999 for believing that the 1998 Statement of Affairs had been accepted by the Official Receiver, and further that his Honour erred in not finding that the appellant did not know of the non-acceptance of the 1998 Statement of Affairs until the appellant was contacted by ITSA in 2004 (encompassing grounds 2, 3, 4, 5, 6 and 8 in the notice of appeal);

(c)    the Federal Magistrate erred in finding that, in contrast with the appellant’s statement of affairs filed with and accepted by ITSA on 2 February 2005, the defects in the 1998 Statement of Affairs were so significant that the document was not a statement of affairs at all (encompassing grounds 9 and 10 in the notice of appeal); and

(d)   the Federal Magistrate erred in failing to exercise his discretion in favour of the appellant, despite the fact that the Federal Magistrate found that the 1998 Statement of Affairs had been completed to the best of the appellant’s ability, and, in this regard, erred in failing to find that the appellant was unable to obtain a Building Services Authority licence as a plumber while remaining an undischarged bankrupt (encompassing grounds 11, 12 and 13 in the notice of appeal).

GROUND (a): DATE OF REJECTION OF STATEMENT OF AFFAIRS

33                  As discussed earlier in this judgment, Mr Joiner’s evidence was that the Official Receiver refused to accept delivery of the 1998 Statement of Affairs on 23 September 1998, and the rejected document was returned to Mr Joiner.  This is at odds with evidence of the Deputy Official Receiver that ITSA rejected the statement of affairs on 10 February 1999, and returned it to the trustees on that date.

34                  Unfortunately this confusion was not resolved during the appeal.  In light of the fact that the appellant’s bankruptcy would not commence until he had successfully filed a statement of affairs with the Official Receiver of ITSA, it was clearly important that the 1998 Statement of Affairs be dealt with promptly by ITSA.  If, as indicated by Mr Joiner’s affidavit, ITSA had immediately rejected the 1998 Statement of Affairs, it was very important that a rejection of the form have been communicated forthwith to the appellant by the trustees to allow the appellant to immediately re-execute and re-submit a statement of affairs to ITSA.  Either way, a five month delay is not timely in any sense, given the importance of prompt filing of the statement of affairs.

35                  However, two issues are:

(a)    whether on the facts of this case it makes any difference whether the 1998 Statement of Affairs was rejected on 23 September 1998 or on 10 February 1999, and

(b)   whether the failure of the trustees to advise the appellant of the rejection of the 1998 Statement of Affairs until 10 February 1999 is determinative of the outcome of this case, in view of the relevant law and events after 10 February 1999.

The answer to both questions is negative.  The reason is that, both before the learned Federal Magistrate and on appeal before this Court, this case turns on the application of s 33A Bankruptcy Act.  Whether the Official Receiver refused to accept the 1998 Statement of Affairs on 23 September 1998 or on 10 February 1999 is relevant only to the reasonable belief of the appellant, and the exercise of the discretion of the Court.  These issues are considered further in this judgment.

Accordingly, ground (a) of the appeal is rejected.

GROUND (b): REASONABLE BELIEF THAT THE 1998 STATEMENT OF AFFAIRS HAD BEEN ACCEPTED

36                  To enliven the jurisdiction of the Court under s 33A Bankruptcy Act, the Court must find that the person believed, on reasonable grounds, that the statement of affairs had already been filed at a time before it was actually filed.  The Federal Magistrate found that between 23 September 1998 and 9 July 1999, the appellant believed that the 1998 Statement of Affairs had been filed, however after 9 July 1999 the appellant knew that the 1998 Statement of Affairs had not been accepted by ITSA; and that even if the appellant had held that belief after 9 July 1999, it would not have been reasonable for him to hold that belief.

37                  As I noted earlier, s 33A Bankruptcy Act is a relatively recent amendment to the legislation, introduced by the Bankruptcy Legislation Amendment Bill 2002.  The explanatory memorandum is of little assistance in interpreting the section, simply noting in par 78:

‘The effect of this new section is to allow the Court to order that a statement of affairs be treated as having been filed at a time before it was actually filed, provided that the Court is satisfied that the bankrupt believed, on reasonable grounds, that this statement had been filed at a time before it actually was filed.  Proposed subs 33A(3) allows a period of grace of 30 days before the order can take effect to allow the trustee to disengage from the role of trustee.  By transitional provision item 204, the change will apply to statements of affairs filed at any time, whether before or after commencement.’

38                  There are few cases where this section has been discussed.  Counsel for the respondent helpfully referred me to two decisions of the Federal Magistrates Court where s 33A was applied, namely Chronis v DS Queen Street Mall Pty Ltd [2004] FMCA 1107, and Sobey v Duncan [2005] FMCA 1170.  These cases are interesting as examples of fact situations which have practically arisen in relation to filing of Statements of Affairs, where Federal Magistrates applied s 33A to backdate the filing date of a statement of affairs.  In both cases, the bankrupts had reasonably believed that their completed Statements of Affairs had been filed with the Official Receiver at a certain date, and had, on learning that the Statements of Affairs had not been filed at the time they had understood, had sought an order of the Court under s 33A Bankruptcy Act.  In both cases, an order was given altering the filing date of the statement of affairs pursuant to s 33A.

39                  In the absence of communication from the trustees that the 1998 Statement of Affairs had been rejected by ITSA, it was reasonable for the appellant to believe that the 1998 Statement of Affairs had been accepted by ITSA.  However, while there appears to have been some difficulty of communication with the appellant by mail, I am satisfied, as was his Honour, that by no later than 9 July 1999 the appellant knew that the 1998 Statement of Affairs had not been accepted by or filed with ITSA.

40                  Indeed, in my view the conclusion could be drawn that the appellant was aware by 30 June 1999 that the 1998 Statement of Affairs had not been accepted.  It was on this date that Mr Joiner and the appellant engaged in a telephone conversation where it appears that that the appellant was angry primarily because the appellant’s statement of affairs had not been accepted by ITSA.  However I am content not to disturb his Honour’s finding on this issue.

41                  I reject the submissions of the appellant that he had not become aware of the rejection of the statement of affairs until early 2004 when he received a formal notice pursuant to s 77C(1) Bankruptcy Act from ITSA, and that he could have reasonably held the belief after 9 July 1999 that the 1998 Statement of Affairs had been successfully filed with ITSA on 23 August 1998.

42                  On the basis that the learned Federal Magistrate found that the appellant had reasonably believed, until 9 July 1999, that the 1998 Statement of Affairs had been filed, the question remains whether the subsequent sequence of events means that, on the basis of an application to the Federal Magistrates Court made in 2005, it was open to the Court to make an order effectively backdating the filing date of the statement of affairs, executed in 2005, to 1998.

43                  In my view, it was not open.  On the facts of this case as outlined earlier in this judgment, it is clear that several years had passed between the attempted filing of the 1998 Statement of Affairs, and the actual filing of a statement of affairs by the appellant in 2005.  During this time the appellant had no basis on which to reasonably believe, and indeed knew, that the document he had submitted for filing in 1998 had not been accepted by the Official Receiver of ITSA.  In my respectful view, the section does not contemplate a bankrupt being aware for several years that his or her statement of affairs has not been accepted for filing because it was defective, and then claiming that he or she had, temporarily, a reasonable belief several years before making application to the Court, that the statement of affairs had been filed.  In my view, knowledge of this kind does not accord with ‘reasonable belief’ within the meaning of s 33A(2).

44                  On the evidence before me I am satisfied that his Honour was correct in the findings he made at first instance.  Accordingly, ground (b) of the appeal is rejected.

GROUND (c): DEFECTS IN THE 1998 STATEMENT OF AFFAIRS

45                  The result of rejection of ground (b) of the appeal means that the jurisdiction of the Court is not enlivened under s 33A(2).  However, even if the Appellant had sought an order from the Court upon learning that the 1998 Statement of Affairs had been rejected in July 1999, in my view the appellant would not have been assisted by s 33A Bankruptcy Act.  The reason for this is that, as found by the learned Federal Magistrate, the defects in the 1998 Statement of Affairs were so significant that it could not be said that the document was a statement of affairs at all.  Further, his Honour found that the defects could not be described as ‘formal’ or ‘irregularities’ for the purposes of s 306 Bankruptcy Act.

46                  The form and content of a statement of affairs for the purposes of s 54(1) Bankruptcy Act is prescribed by s 6A(2) which states:

‘A reference in a provision of this Act referred to in subs (1) to a statement of affairs is a reference to a statement that:

(a) is in a form approved by the Inspector-General and published in the Gazette; and

(b) includes a statement identifying any creditor who is a related entity of the debtor or bankrupt; and

(c) contains a declaration, signed by the debtor or bankrupt, that, so far as the debtor or bankrupt is aware, the particulars set out in the statement are correct.’

47                  Interestingly, s 54(1) requires the bankrupt to:

‘make out and file with the Official Receiver for the District in which the sequestration order was made a statement of his or her affairs.’

This clearly means a bankrupt is required to:

(a)      make out and file with the Official Receiver a statement of affairs in the form approved by the Inspector-General in Bankruptcy and published in the Commonwealth Gazette from time to time (as required by s 6A), and

(b)      because the required statement is a statement of the bankrupt’s affairs: complete that form with personal information as required by the form.

Obviously, it would not satisfy s 54(1) for a bankrupt to seek to file a blank statement of affairs in the form approved by the Inspector-General without including the personal information required by the form, because then the form would not be a statement of the bankrupt’s personal affairs as required by the section.

48                  The significance of the statement of affairs was explained by Hill J in Nilant v Macchia (2000) 104 FCR 238 at 245, 178 ALR 371 at 377 where his Honour said:

‘The obligation to file a statement of affairs in a public register is intended to make information concerning the bankrupt’s affairs available to creditors and, for that matter, members of the public.  The former may inspect without payment of a fee, the latter only on payment of a fee.  But it is in the interests of the public in the encouragement of morality in trading that the financial situation of a bankrupt debtor be open to inspection.  Because, ordinarily, the administration of the estate and ultimate distribution of dividends from the estate, will be dependent upon the trustee having full details of the trade dealings and debts of a debtor, the statement is to be made available as well to the trustee in bankruptcy.’

49                  The appellant has confined his argument to the finding of his Honour that the document attempted by the appellant was so defective as not to be a ‘statement of affairs’, and has submitted that his Honour was in error in so finding.  The appellant has not submitted that s 306(1) is applicable in relation to the 1998 Statement of Affairs.

50                  Although there are a number of decisions of this Court considering issues raised by defective statements of affairs under s 54(1) Bankruptcy Act, most commonly in this context the Court has been asked to consider the application of s 306(1) Bankruptcy Act to cure irregularities in statements of affairs.  The leading case in this context is Nilant v Macchia, cited earlier, which considered, inter alia, whether failure to comply with s 54(1) gave rise to a ‘proceeding’ under the Bankruptcy Act capable of being brought before the Court.  The appellant before me has not sought to rely on s 306 in this case.  Nonetheless comments by the court in Nilant v Macchia, which deals with both s 54(1) and s 306(1), are, by analogy, apposite to the circumstances of this case.  In particular, Weinberg J at ALR 383-384 noted:

‘Where there has been an attempt to comply with the obligations of s 54(1), whether within the 14-day period specified, or on some occasion thereafter, it is entirely apt to speak of that attempt as being a “proceeding under this Act”, and as being capable of being regarded by the court as ‘not invalidated’ by reason of any formal defect or error….It follows that the bankruptcy will not continue for an unconscionably long period merely because of some relatively minor failure on the part of the bankrupt to comply with the strict requirements of s 54(1)

(384) Regrettably, it seems to me that s 306(1) cannot be invoked in the circumstances of the present case, where no step whatever has been taken by the bankrupt in purported compliance with the requirements of s 54(1)….’ (emphasis added)

51                  An examination of the 1998 Statement of Affairs reveals that very little of the document was genuinely attempted by the appellant.  As noted by the learned Federal Magistrate, the document failed to:

(a)    properly identify the bankrupt;

(b)   provide an overall summary of his assets and liabilities;

(c)    provide details, if any, of any insurance and superannuation policies;

(d)   list any assets of any description owned by him;

(e)    fully identify his unsecured creditors;

(f)     provide complete details of his debts;

(g)    advise his date of birth;

(h)    provide his work and mobile telephone numbers;

(i)      provide his then current residential address;

(j)     provide his driver’s licence details;

(k)   list his addresses (excluding his then current address) in the five years prior to him becoming bankrupt;

(l)      disclose that he had been bankrupt in the 10 years prior to this bankruptcy;

(m)  list all Court actions in which he was then currently involved;

(n)    list all assets worth more than $1000 sold, transferred or given away or otherwise disposed of in the two years prior to him being made bankrupt;

(o)   list any persons or entities who owned or held any assets of which he had contributed moneys for which he had helped to buy or improve in the five years prior to being made bankrupt;

(p)   list all creditors who had been paid over $1000 or seized any of his assets in the past 12 months before becoming bankrupt, as a result of pressure for payment.

52                  On the other hand, it is instructive to identify how much of the form the appellant actually did attempt other than a blanket comment of ‘not applicable’ drawn through large sections of the document.  Of the 20-page 1998 Statement of Affairs, the appellant inserted information relevant to:

(a)      his bank account and investments

(b)      debts owed to him by third parties

(c)      a motor vehicle

(d)      personal chattels (although the appellant answered ‘none’ or ‘nil’ to each category)

(e)      names of creditors to whom he owed money, scant details of the address of one of the creditors, and approximate sums owing

(f)        the names and details of his spouse and children

(g)      the name of the business he had operated and the nature of the business

(h)      the name only of his accountant

(i)        the last year he lodged a tax return, and where he lodged that return.

53                  The prescribed statement of affairs form, requiring input of considerable information from the bankrupt in relation to personal details and asset information, and is detailed for good reason.  In practice it is a document of vital importance to the trustee.  As noted in CCH Australian Insolvency Management Practice pars 8-290,

‘The statement of affairs is the source document from which the trustee administering a bankruptcy draws initial information to commence his administration.  He uses it as a base for understanding investigations into the financial affairs of the bankrupt.’

54                  I also note evidence of Mr Siemon, the Deputy Official Receiver in the Brisbane office of ITSA, in his affidavit sworn 18 March 2005.  Mr Siemon, in commenting on the lack of information contained in the 1998 Statement of Affairs, that:

‘It is of the utmost importance that questions 46, 47 and 48 which are critical for the effectiveness of the clawback provisions in Division 3 of Part VI of the Bankruptcy Act are answered fully by a bankrupt.’

55                  In my view, the lack of information inserted by the appellant into the 1998 Statement of Affairs meant that the document was not a valid statement of affairs within the meaning of s 54(1) Bankruptcy Act.  It was clearly not a statement of the appellant’s affairs.  This is not to say that any omission from a statement of affairs sought to be filed by a bankrupt would render the document so defective as to be invalid for the purposes of the section.  In this case however the 1998 Statement of Affairs was clearly defective because of:

(a)      the quantity of information which had either not been included or not appropriately addressed by the appellant – indeed, as indicated earlier in this judgment in respect of the 1998 Statement of Affairs, most of the information sought by the form, and

(b)      the quality of the information which the appellant had deliberately chosen not to include, including essential (and often basic) information such as his current residential address, his date of birth, his telephone numbers, his gross income for the previous 12 months, and assets he had sold or otherwise disposed of during the previous two years.

56                  To paraphrase Weinberg J in Nilant v Macchia, in refusing to complete the statement of affairs it is clear that no step whatever has been taken by the appellant in purported compliance with the requirements of s 54(1).

57                  Accordingly, ground (c) of the appeal is rejected.

GROUND (d): EXERCISE OF THE COURT’S DISCRETION

58                  The appellant argued that the Federal Magistrate erred in failing to exercise his discretion in favour of the appellant, despite the fact that the Federal Magistrate found that the 1998 Statement of Affairs had been completed to the best of the appellant’s ability.  After finding that the appellant had failed to make out the elements necessary to enliven the discretion given to the Court by s 33A(2) Bankruptcy Act, his Honour continued at par 29:

‘In any event, I would be disinclined to exercise that discretion in favour of the bankrupt in this case.  Had the bankrupt’s statement of affairs been properly completed and lodged as he attempted on 23 September 1998 he would have been discharged from bankruptcy on 24 September 2001.  The rejection of this application by the bankrupt will mean that, subject to any early discharge, he will remain bankrupt until 6 February 2008.  I am satisfied by the material, however, that the bankrupt has been uncooperative with his trustees.  There are large delays in the matter for which there is no explanation on the part of the trustees, but it was not the job of the trustees to ensure that the bankrupt complied with his obligations under the Act.  It was the bankrupt’s responsibility to ensure that he filed with the Official Receiver a properly completed statement of affairs.  He was notified of the refusal of the Official Receiver to accept his statement of affairs in a timely way by his trustees.’

59                  The relevant principles applicable in the case of an appeal against an exercise of discretion are found in the High Court decision in House v R (1936) 55 CLR 499 at 504-505.  There Dixon, Evatt and McTiernan JJ said:

‘It is not enough that the judge composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course.  It must appear that some error has been made in exercising the discretion.  If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise his own discretion in substitution for his if it has the materials for doing so.  It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.  In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.’

60                  As demonstrated both before the learned Federal Magistrate and this Court, a significant proportion of the interaction between the appellant, the trustees and Mr Joiner could be described as attempts by the trustees and Mr Joiner to obtain a statement of affairs in acceptable form from the appellant for filing with ITSA, and what appears to have been on-going resistance by – or at best, genuine lack of appreciation and hence indifference of – the appellant to the obligation of completing a statement of affairs in a proper form.  The appellant indicated to this court the frustration he experienced in attempting to complete the form in 1998.  However, it is clear that the trustees and Mr Joiner made every attempt – at least from February 1999 – to communicate with the appellant and inform him of the importance of completing and filing the statement of affairs, and repeatedly offered him assistance to complete it in a form acceptable to ITSA.

61                  The appellant appeared to take the view before the learned Federal Magistrate, and continued before me to take the view, that once a signed statement of affairs is provided to the trustee or submitted to ITSA by the bankrupt, then, notwithstanding the adequacy or otherwise of the material entered in the form, there is no discretion in the trustee to return the form to the bankrupt, or ITSA to reject it (TS 11, ll 13-21).  To the extent that the appellant has this view, he is mistaken.

62                  Section 19(1)(g) Bankruptcy Act includes in the duties of the trustee of the estate of a bankrupt the obligation to:

‘(take) whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under this Act.’

There is no question that a trustee in bankruptcy is obliged to assist a bankrupt in preparing the statement of affairs, if assistance is necessary.  In this respect I adopt the statement in CCH Australian Insolvency Management Practice pars 8-200:

‘In the case of an involuntary bankruptcy, ie one that results from a sequestration order, it is the duty of the trustee ‘to take whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under the Act’, which include the bankrupt’s responsibilities to prepare a statement of affairs, file it with the Official Receiver, and furnish the trustee with a copy (s 19(1)(g); 54(1)).’

The trustees attempted to file the 1998 Statement of Affairs, and, when it was rejected by ITSA, made considerable efforts to both offer assistance to the appellant to prepare a statement of affairs in a form which would be accepted by ITSA, and to remind the appellant of the serious consequences of failure to file the form.  It was the appellant who chose not to take advantage of repeated offers of assistance from the trustees.

63                  In relation to the obligation on ITSA to accept the 1998 Statement of Affairs, the legislation does not speak in terms of positive obligation on ITSA to accept the form.  Section 54(1) requires a bankrupt to make out and file with the Official Receiver of ITSA a statement of his or her affairs.  If a document attempted to be filed with ITSA is not a statement of the bankrupt’s affairs, there is no obligation on ITSA to accept it.  As explained earlier in this judgment in the discussion of ground (c) of this appeal, the 1998 Statement of Affairs submitted by the appellant to the trustees was so defective as not to be a statement of the appellant’s affairs.  Accordingly, ITSA was under no obligation to accept it in accordance with s 54(1) Bankruptcy Act.

64                  As I noted earlier, before me the appellant indicated his frustration with the process of completing the 1998 Statement of Affairs.  However, as found by the learned Federal Magistrate, the appellant showed little inclination to co-operate with the trustees in providing a statement of affairs, or taking advantage of their offers of assistance in completing the form, which may have resolved this matter years ago.  It was only when the appellant received a notice from ITSA pursuant to s 77C Bankruptcy Act in 2004 that he finally completed a statement of affairs capable of being filed with ITSA on 2 February 2005.

65                  I reject the submission of the appellant that the Federal Magistrate erred in finding that the statement of affairs filed 2 February 2005 contained considerably more detail than the 1998 Statement of Affairs.  Information contained in the 2005 document included:

(a)      personal details including home, fax, mobile phone numbers and email address

(b)      drivers’ licence details

(c)      the address of the appellant’s accountant

(d)      an answer to the question concerning legal actions or disputes in which the appellant was involved

(e)      an answer to the question concerning Proceeds of Crime orders

(f)        an answer to the question concerning the appellant’s income over the previous 12 months

(g)      a summary of his expected income in the following 12 months

(h)      an answer to the question concerning length of unemployment

(i)        an answer to the question concerning superannuation benefits

(j)        an answer to the question concerning other benefits

(k)      an answer to the question concerning motor vehicle benefits

(l)        information about the main causes of the appellant’s insolvency

(m)    answers to questions concerning the history of the appellant’s insolvency

(n)      information about the appellant’s previous history of insolvency

(o)      personal details including the appellant’s previous addresses

(p)      information concerning business assets/tools of trade

(q)      answers to questions concerning superannuation and life insurance policies

(r)       answers to questions concerning real estate ownership

(s)       answers to questions concerning share ownership

(t)        answers to questions concerning investments

(u)      details of money owed to the appellant

(v)      answers to questions concerning deceased estate

(w)    details of assets the appellant had sold in the previous years

(x)      answers to questions concerning assets he owed but in someone else’s possession

(y)      answers to questions concerning assets to which he had contributed or helped purchase

(z)       details of payments he had made to creditors

(aa)                 details of amounts owed to unsecured creditors

(bb)                business details including fixtures and fittings of the appellant’s business

(cc)                 answers to questions concerning the business including stock on consignment

(dd)                answers to questions concerning his interests in corporate or trust entities

66                  I list this evidence because it is illustrative of a number of points – that it was possible for the appellant, if he made a genuine attempt to do so, to complete the form to be filed with ITSA; that there was information which the appellant could have included in the 1998 Statement of Affairs and which he chose not to include at that time for reasons of his own; and that the failure of the appellant to provide this information prior to 2005 with or without the assistance of the trustees suggests a desire to be unco-operative rather than inability.  It seems clear that, despite repeated attempts of the trustees to explain the position to him, the appellant chose to ignore this advice, or obstinately refused to co-operate on the basis that he had already provided the 1998 Statement of Affairs, and he was prepared to do no more.

67                  The appellant also strongly argued that the Federal Magistrate erred in failing to find that, the appellant, while a bankrupt, could not obtain a Building Services Authority licence as a plumber while remaining an undischarged bankrupt.  I understand from statements of the appellant during the appeal hearing that a consequence of the lack of a licence is that he cannot practice as a self-employed plumber, although he can practise his trade as an employee.

68                  Minimal evidence was lead in this regard, although I understand that the Queensland Building Services Authority publishes financial requirements for licensing which must be met by applicants for a licence under the Queensland Building Services Authority Act 1991 (Qld).

69                  Notwithstanding the lack of evidence before me on this issue, it is possible that the appellant is correct in his submission concerning his inability to hold a Building Services Authority licence while he is an undischarged bankrupt.  However, it is also possible that, given the appellant’s current financial situation, he would be unable to satisfy financial requirements necessary to obtain a licence if he were discharged from bankruptcy forthwith.  In the absence of any relevant information before me, I make no finding on this issue.

70                  In my view, whether or not the appellant would be able to obtain a Building Services Authority licence were he to be discharged from bankruptcy forthwith is only relevant in the case before me to the extent that it goes to whether the learned Federal Magistrate should have exercised his discretion under s 33A in the appellant’s favour.

71                  Given the lack of co-operation of the appellant in this matter with the trustees, and his views towards completing a statement of affairs in a form capable of being filed until 2005, no evidence has been lead before me which persuades me that the Federal Magistrate was in error in failing to exercise his discretion in favour of the appellant.  Accordingly, ground (d) of the appeal is rejected.

APPLICATION OF SECTION 33A TO THE FACTS

72                  This is sufficient to dispose of the appeal, except that the respondent raised by Notice of Contention a point of law warranting some attention.  Specifically, the respondent contended that the judgment of the learned Federal Magistrate could be affirmed on grounds other than those relied upon by his Honour, namely:

(a)      that s 33A Bankruptcy Act 1966 on its proper construction, could not apply to either of the documents described as a statement of affairs completed by the appellant on 21 September 1998 nor the statement of affairs filed on 2 February 2005 because neither document was a document which the appellant believed on reasonable grounds had already been filed at a time before it was actually filed; and

(b)      that regardless of the content of the document described as a statement of affairs completed by the appellant on 21 September 1998, there has been no statement of affairs made and filed under s 54(1) if the Official Receiver has not accepted the document and placed it in his or her files.

73                  It is useful at this point to be reminded of the exact terms of s 33A(2) Bankruptcy Act.  The subsection states:

‘If the Court is satisfied that the person believed, on reasonable grounds, that the statement had already been filed at a time before it was actually filed, the Court may order that the statement is to be treated as having been filed at a time before it was actually filed.’

74                  The interpretation of this provision suggested by the respondent is narrow.  In essence, it contemplates application only in circumstances somewhat in accordance with the following hypothetical scenario:

(a)      A bankrupt completes a statement of affairs and delivers it to the trustee to file with the Official Receiver on 1 January 2006

(b)      The trustee fails, through carelessness or otherwise, to file that particular statement of affairs with the Official Receiver on 1 January 2006

(c)      The trustee files that particular statement of  Affairs with the Official Receiver on 1 June 2006

(d)      The trustee subsequently informs the bankrupt that that particular statement of affairs was not filed until 1 June 2006, with the result that the bankrupt’s period of bankruptcy does not commence until 1 June 2006

(e)      The bankrupt applies to court under s 33A for an order that that particular statement of affairs, which was not filed until 1 June 2006, be treated as if it were filed at a time before it was actually filed, namely 1 January 2006.

75                  The respondent submits that, applying this interpretation of s 33A to the facts the subject of this appeal, the section could not apply to the 1998 Statement of Affairs, because the 1998 Statement of Affairs was never filed with the Official Receiver of ITSA.  Further, the statement of affairs filed in 2005 by the appellant was a different document from the 1998 Statement of Affairs, and the appellant never reasonably believed that the 2005 document had been actually filed at an earlier date.

76                  While the submission of the respondent has merit, it is unnecessary for me in the context of this case to rule on it.  However to accord due respect to the respondent, my tentative views on this issue are as follows:

(a)      It is unclear whether s 33A(2), in its reference to ‘the statement’ means a particular statement of affairs signed on a particular date by the bankrupt (as is seemingly contended by the respondent), or, generically, the bankrupt’s statement of affairs eventually filed with ITSA.

(b)      It is very likely that, in the hypothetical scenario I have outlined above, s 33A(2) would apply.

(c)      However, I do not at this stage rule out the potentially broader application of the section.  To do so would, in the circumstances of this case and without full argument, be inappropriate.  It is possible, for example, that a substantially completed statement of affairs, rejected for filing by ITSA, and re-executed subsequently by the bankrupt with further detail and accepted for filing by ITSA at a later date, could be within the contemplation of s 33A.  In such a case the document accepted for filing may not be strictly identifiable as the statement of affairs executed on the earlier date, however the Court may entertain argument that s 33A is applicable.

GENERAL

77                  It is regrettable that the result of this decision and the operation of s 54(1) Bankruptcy Act is that the period of bankruptcy of the appellant will continue for almost another two years.  The process of bankruptcy commenced for the appellant almost eight years ago, and, but for the delays in filing the statement of affairs, the appellant would have been discharged from bankruptcy earlier this decade.  However, as outlined earlier in this judgment, the process of completing and filing the statement of affairs as required by s 54(1) Bankruptcy Act is an important step in the bankruptcy process and cannot be ignored or treated with contempt.  The appellant was repeatedly informed of the law in this respect and offered assistance by the trustees to comply.  It was, ultimately, his decisions not to comply with the law, and not to co-operate with the trustees.

78                  For these reasons the appeal must be dismissed with costs.

Associate:

Dated:              15 March 2006