CATCHWORODS BANKRUPTCY - both accepted debtor's petition and sequestration order - effect of erroneous acceptance of former ~- annulment - whether deemed discharge. Bankruptcy Act, 1966 ss.55; 149, 154(1); 156A(1) Re: Ian Geoffrey Goddard Ex parte: The Bankrupt QLD E197 of 1982 PINCUS J. BRISBANE 14 NOVEMBER 1986 a i rn 4 LO mene hee a gaan roms MES Tey wy eon oof sie err wee IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ) QLD £197 of 1982 RE: IAN GEOFFREY GODDARD EX PARTE: THE BANKRUPT MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 14 NOVEMBER 1986 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The bankruptcy constituted by acceptance of the debtor's petition on 16 March 1982 be annulled. 2. It be declared that the applicant Mr. Goddard is deemed to have been discharged on 27 May 1985 and that he is no longer a bankrupt. Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. aete ct t steer Ty ne IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ) QLD E197 of 1982 RE: IAN GEOFFREY GODDARD EX PARTE: THE BANKRUPT PINCUS J. 14 NOVEMBER 1986 REASONS FOR JUDGMENT This is an application by Mr. I1.G. Goddard relating to discharge from his bankruptcy. In a practical sense and procedurally, the application has become connected with an application made by the Deputy Registrar in respect of the trustees of the estate of the applicant, Mr. Goddard, in which judgment is also being given today. On 10 February 1982, Mr. J.W. Ahern, a registered trustee, signed a consent to act as trustee of the estate of the applicant under the Bankruptcy Act 1966, and that consent was filed on 26 February 1982, with a creditor's petition. Although the consent did not say so, it seems right to read it as relating only to the proceedings then instituted. or qe eee sey ee ae en we = On 16 March 1982, the applicant signed his own petition under s.55 of the Bankruptcy Act, and on the same day that was endorsed as having been accepted by the Registrar. On 20 April 1982, Mr. D.W. Knight, also a registered trustee, consented to act as trustee of the estate of Mr. Goddard in the event that he became a bankrupt. On 28 April 1982, a sequestration order was made on the creditor's petition. On 6 May 1982, the debtor's petition was endorsed as having been filed on that date, and on the same date a similar endorsement was made on the consent of Mr. Knight to act as trustee. Considerable confusion arose with respect to roles of the two trustees, but it is not necessary to deal with that subject in these reasons. On 23 November 1982, and again on 2 October, 1982, the Registrar lodged objections to the discharge of the applicant, but those objections were withdrawn on 27 May 1985. On 3 July 1985, the applicant made this application, which has been adjourned from time to time. Counsel for the applicant, in the course of his submission, varied the application which had been made by asking for an annulment under s.154 of the Act of the bankruptcy consequent upon acceptance of the debtor's petition which, as I have said, took place on 16 March 1982. The application was not formally amended, but no objection was taken on that ground. Poe ee oe ee ate age v4 Pes at Aa te ee re ve vie re ~ se > rene = ve v aD a pe ; TT ee ee . . aL, ira te -¢ =, It is desirable to note that amendments to the legislation affecting the present matter were made by the Bankruptcy Act Amendment Act 1985, No. 21 of 1985, which came into force on 19 May 1986; those amendments, therefore, do not affect the present application, whose central point is the restraint on the Registrar's power to accept debtors' petitions formerly imposed by s.55(4A); that provision was repealed by the Bankruptcy Act Amendment Act of 1985 and 1s further discussed below. In what follows, the Act will be spoken of in the form which 1t had prior to the 1985 Amendment Act, but using the present tense. Section 55(1) empowers a debtor to present his own petition, and under s.55(3): "Subject to sub-section (4A), where it appears to the Registrar that a petition presented to him under this section 15 in accordance with the prescribed form and that the statement of affairs accompanying the petition is also in accordance with the prescribed form or the Court directs, under sub-section (4), the Registrar to accept the petition - (a) the petition shall be accepted by the Registrar, who shall endorse it accordingly; and (b) thereupon, by force of this sub-section, the debtor becomes a bankrupt by virtue of the presentation of the petition." It was argued by counsel for the applicant that if the petition was wrongly accepted by the Registrar, then para.(b) just quoted did not apply; that is, it was said that the debtor did not become bankrupt at ail. That result was said to follow in the Sy ge ne Pate + a wey OO nr perce con ene orc aa ee are eowtee rn ve ot present case because of the breach of s.55(4A), which reads in part as follows: "The Registrar shall not, under sub-section (3), accept a petition presented to him under this section, being a petition other than a petition in relation to which a direction under sub-section (4) as in force, and the Court shall not, under sub-section (4), direct the Registrar to accept such a petition, unless - (a) a registered trustee has, under sub-section 156A(1), consented to act as the trustee of the estate of the debtor; or There follows specification of another condition which need be described only in a general way: if para.(a) does not apply, and it appears to the Registrar that the divisible property of the debtor is worth less than $10,000 or the Registrar is satisfied that the debtor cannot obtain a private trustee. Counsel argued that at the date of the purported acceptance (16 March 1982), there was no such consent to act as mentioned in s.55(4A). He said and I agree that that was so because there had been no proper consent to act. Under s.156A(1), a registered trustee may consent to act "by instrument signed by him and filed with the Registrar". The consent of Mr. Knight was neither signed nor filed at the time of the purported acceptance of the debtor's petition. It is true that there was a consent on the file at that time, namely that of Mr. Ahern. However, for the reason I have mentioned, that should not be construed as relating to a bankruptcy on the applicant's own petition. Sates a otetaniiaianiind wes The Registrar should therefore not have purported to accept the applicant's petition on 16 March 1982, Acceptance was forbidden by s.55(4A). It seems probable that the error came about because the Deputy Registrar concentrated his attention on the requirements of the former Rule 24AA, which did not take into account s.55(4A). Counsel for the applicant, Mr. Trotter, and Mr. Robin Q.C., senior counsel for Mr. Knight, who appeared on the application for discharge, placed before me argument as_ to the effect of non-compliance with the prohibition in s.55(4A). It was pointed out that s.55(7) says: "Where a petition 1s presented by a debtor against himself in contravention of sub-section (6) or (6A), the debtor does not become a bankrupt by virtue of its presentation." Sub-sections 6 and 6A contain express restrictions on the right to present one's own petition; their language is "a debtor who has ... is not, except with the leave of the Court, entitled to present a petition against himself". The draftsman of s.55(7) may have thought that the wording of those provisions, might leave it unclear whether a petition presented in violation of them had any effect. T do not think that s.55(7) implies that an infringement of any other provision in s.55 is innocuous. Section 154(1), under which the application ultimately argued was made, reads in part as follows: have been accepted by the Registrar". it to apply only to instances where it does not appear the "Where the Court is satisfied - (a) that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar; or (b) that the unsecured debts of the bankrupt, being debts that have been proved in the bankruptcy, have been paid in full or the bankrupt has obtained a legal acquittance of them, the Court may make an order annulling the bankruptcy. 154(2) Where a bankruptcy is annulled under this section, all sales and dispositions of property and payments duly made, and alli acts done, by the trustee or any person acting under the authority of the trustee or the Court before the annulment, shall be deemed to have been validly made or done but, subject to sub-section (3), the property of the bankrupt still vested in the trustee vests in such person as the Court appoints or, in default of such an appointment, reverts to the bankrupt for all his estate or interest in it, on such terms and subject to such conditions, if any, as the Court orders." as Some effect must be given to the words "ought not to That can be done by taking in which s.55(3) is breached - i.e. that the petition is "in accordance with prescribed form" and that the statement of affairs accompanying the petition is also "in accordance with the prescribed form". The alternative is to read s.154(1)(a) applying to wrong acceptance for any reason. as i ve em ITT BES Toe rpewersn eg oe a oe . mye ee oe "eee wa The words of 3.55(4A) are strong, and it is certainly a possible view, as it was contended before me, that the Registrar simply has no power to accept such a petition as is mentioned in that provision, and that if he purports to do so, his action is of no effect from the outset. If that contention were accepted, it appears to me the proper course would be to make a declaration that there never was a bankruptcy on the applicant's own petition. The difference between such a declaration and an order of annuiment under s.154(1) is that the latter course is appropriate only if there is, in truth, a bankruptcy although one (as to the cases dealt with in para.(a) of s.154(1)) affected by some invalidity. Here, the choice makes a practical difference because, if there never was a bankruptcy, then Mr. Knight never was a_ trustee, and that may have significant consequences. On the other hand, an order for annulment preserves acts done by the trustee before the annulment and can appropriately be made only if a bankruptcy has occurred. I reject the contention that there never was a bankruptcy on the debtor's petition, despite the strong language of s8.55(4A), for two reasons. The first is that the natural construction of the words "or ought not to have been accepted by the Registrar" in s.154(1)(a) is such as to include an acceptance prohibited by s.55(4A). The second is that it would be inconvenient to have a breach of 3.55(4A) treated as utterly annihilating, particularly as one of the conditions on which that sub-section is excluded depends upon matters appearing to the Se a nn nen paren Se es etree oe hee 7 . as - Registrar or the Registrar being satisfied of certain matters - conditions about the existence of which there might well be room for argument. In the result, I am satisfied that I have power to act under 5.154(1) and should do so. There will be an order annulling the bankruptcy of 16 March 1982. To turn now to the relevant discharge provisions, s.149(1), which it is not necessary to set out, would, considered in isolation, have discharged the applicant by its own force three years from the date of his bankruptcy - i.e. three years from 28 April 1982. However, on that date, there were still two current objections by the Registrar entered under s.149(3)(c), which it is also unnecessary to set out. Section 149(14) has the effect, in the present case (leaving aside the consequences of acceptance of the debtor's petition), that the bankrupt would have been discharged on the withdrawal of the objections - i.e. 6 May 1985. Section 149(3) reads in part: "A bankrupt is not discharged from bankruptcy by virtue of this section if - (a) at the time when he would have been so discharged but for this sub-section, he is still undischarged from an earlier bankruptcy; (b) he has, since the date of the bankruptcy, again become a bankrupt;". If it had not been for the apparent bankruptcy of 16 March 1982, these provisions could have had no application. It was argued ann Sat en em ane cts rye See Leeann Gantt haae oe . . that on the annulment of the bankruptcy of 16 March 1982, that bankruptcy 1s deemed, subject to s.154(2), never to have occurred, and the bankrupt is therefore deemed to have been discharged on withdrawal of the objection - i.e. on 27 May 1985. It may be that the views of the High Court in Cameron v. Cole (1944) 68 C.L.R. 571 bear upon the question, but I do not regard that decision as providing an answer. In my opinion, it is a proper implication from s.154(2) that, at least in general, an annulled bankruptcy is deemed never to have taken place for all purposes other than those mentioned in s.154(2) - i.e. saving acts of the trustee done during the bankruptcy. I therefore accept the argument that the proper consequence of the annulment is that a declaration should be made that the applicant is deemed to have been discharged on 27 May 1985. It should be mentioned that there is a considerable body of material before me concerning the course of the bankruptcy and the reasons for it. It seems clear, however, that those matters have, in the particular circumstances, nothing to do with the operation of the sections I have been considering. The orders will therefore be that: 1. The bankruptcy constituted by acceptance of the debtor's petition on 16 March 1982 be annulled. 2. It be declared that the applicant Mr. Goddard is deemed to have been discharged on 27 May 1985 and that he is no longer a bankrupt. i certify tRat this andthe & precedin Pages are a true copy of the reasons for judgment herein of His Honour ry Mr. Justice Pincus fo Od Gers Dated 4% Verse Leer (986 Associat: tae eeyne fi — feotscte ey ny nee . ee ates - ran) -* "oy