CATCHWORODS BANKRUPTCY - discharged bankrupt - power of trustee to examine bankrupt and other persons pursuant to 5.81 of the Bankruptcy Act after bankrupt is discharged - relevant considerations. BANKRUPTCY ACT 1966 (Cth) ss.5, 43, 50, 55, 56, 57, 69, 77, 81, 149, 150, 152, 153 and 179. Re: MARYON CATHERINE TODD Ex parte: MARYON CATHERINE TODD Re: MARYON CATHERINE TODD Ex parte: DESMOND ELLIS TODD Re: MARYON CATHERINE TODD Ex parte: CAMERON McDONALD FINLAY Re: MARYON CATHERINE TODD Ex parte: BRIAN RAYMOND GENT OFFICIAL RECEIVER IN BANKPUPTCY Appellant MARYON CATHEPINE TODD, DESMOND ELLIS TODD, CAMERON McDCNALD FINLAY and BFIAN FAYMOND GENT Respondents FISHER, LOCKHART & SPENDER JJ. BRISBANE 24 DECEMBER 1986 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND JUDGES MAKING ORDER WHERE MADE DATE OF ORDER No.G125 of 1986 weve vnr QN APPFAL FPOM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA Re: MARVON CATHERINE TODD Ex parte: MARYON CATHERINE TODD Re: MARYON CATHERINE TODD Ex parte: DESMOND ELLIS TODD Re: MARYON CATHERINE TODD Ex parte: CAMERON McDONALD FINLAY Re: MARYON CATHEPINE TODD Ex parte: BRIAN RAYMOND GENT OFFICIAL RECEIVER IN BANKRUPTCY Appellant MARYON CATHERINE TODD, DESMOND ELLIS TODD, CAMERON McDONALD FINLAY and BRIAN RAYMOND GENT Respondents MINUTE OF ORDER FISHER, LOCKHART & SPENDER JJ. BRISBANE 24 DECEMBER 1986 THE COURT ORDERS THAT: Note: Rule The appeal be allowed The four applications to set aside the summonses be dismissed. The respondents pay the costs of the Official Receiver of the proceedings before the trial Judge and of this appeal the same to be taxed if not agreed. ' N Settlement and entry of order 1s dealt with in 9? aa Bankruptcy IN THE FEDERAL COURT OF AUSTRALIA) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE ) No.Gi25 of 1986 SOUTHERN DISTRICT OF THE STATE OF) QUEENSLAND ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA Re: MARYON CATHERINE TODD Ex parte: MARYON CATHERINE TODD Re: MARYON CATHERINE TODD Ex Parte: DESMOND ELLIS TODD Re: MARYON CATHERINE TODD Ex parte CAMERON McDONALD FINLAY Re: MARYON CATHERINE TODD Ex parte: BRIAN RAYMOND GENT OFFICIAL RECEIVER IN BANKRUPTCY Appellant MARYON CATHERINE TODD, DESMOND ELLIS TODD, CAMERON McDONALD FINLAY and BRIAN RAYMOND GENT Respondents CORAM: Fisher, Lockhart & Spender JJ. 24 December 1986 REASONS FOR JUDGMENT PISHER J. : I have had the opportunity of perusing in draft form the orders which Lockhart J. proposes and his reasons' therefor. 2. Tam fully in agreement with both his conclusions and his reasons. However because I find myself unable, with respect, to agree with the decision of the trial judge it 1s proper that I give some reasons of my own in support of my view of the matter. It 1s unnecessary that I repeat the facts which give rise to this appeal, which facts have been set out fully by Lockhart J. I see a clear distinction in the Bankruptcy Act 1966 ("the Act") between the temporal impact of a sequestration order upon the assets and Jliabilitiss comprising the estate of the bankrupt and upon his) stutus us a bankrupt. As the authors) of Halsbury''s Laws of England 4th ed. vol.3 state ain relation to status 1n paragrapn 201: "When a man becomes bankrupt he becomes subject to certain disqualifications in respect of his civil rights and public offices. Although no longer looked upon aS &@ Crime, aS 1t was once, bankruptcy involves a change of status and carries with 1t quasi-penal consequences rendering the bankrupt liable to prosecution for specific bankruptcy offences." These words echo the dicta of the Full Court of this Court in Re Sarina (1980) 32 A.L.R. 596 at p.599, namely "The bankrupt is disqualified from holding certain offices. Bankruptcy involves a change of status and quasi-penal consequences." The bankrupt generally receives an automatic discharge from this status after three years (5.149) but he is entitled to apply to 3. the Court for an earlier discharge (s.150). This earlier discharge can be granted after the conclusion of his public examination or its deemed conclusion or after the expiration of one year. The period during which a person 1s an undischarged bankrupt may therefore be relatively short, certainly in comparison with the length of time necessarily required to conclude the administration of his estate in bankruptcy. This estate comprising his assets available for distribution among his creditors vests upon bankruptcy in the trustee for the benefit of these creditors whose rights to sue to recover debts are converted anto rignts of proof against the estate in the hands of the trustee. Upon discharge the bankrupt 1s released from his depts subject to certain specified exceptions. The Act does not link temporally the completion of the administration of the bankrupt's estate, and in particular the ascertainment of the assets, their respective whereabouts and their realization and distribution, with the obtaining of a discharge with u1ts consequential change of status and release from debts. Many years may separate the date of discharge of the bankrupt on the one hand and the release of the trustee upon completion of his administration. In these circumstances 1t 15 easy to appreciate the reason for the legislature's enactment of sub.s.152(1), namely - "A discharged bankrupt shall, notwithstanding his discharge, give such assistance as the trustee reasonably requires in the realization and distribution of such of his property as is vested in the trustee." 4. The section goes on to provide that if the discharged bankrupt fails to comply he is guilty of contempt of court and liable to have his discharge rescinded or set aside. In these circumstances the question in this matter arises, namely whether, notwithstanding his discharge, the bankrupt 1s liable to be summoned for examination under s.81, his public examination under s.69 in the ordinary course having been concluded. Likewise the question arises whether other persons can subsequent to the discharge of the bankrupt be summoned under that section to give evidence. The difficulty arises out of the definition of a bankrupt as "a person against whose estate a sequestration order has been made" and sub.s.55(8) which provides "A person who becomes a bankrupt by' force of this section continues to be a bankrupt until (a) he 1s discharged Ly force of section 149, (b) he is discharged by order of the Court; or (c) his bankruptcy 15 annulled under section 74 or 154." Section 81, 1n empowering the summoning of persons for examination, uses the word "bankrupt" on each occasion. In particular 1t does not use the expression "discharged bankrupt" as adopted in sub.s.152(1) thereby raising the question whether the bankrupt and other persons may be summoned notwithstanding the bankrupt's discharge. There are a number of indications in the Act which, 5. supported by consistent authority, satisfy me that s.81 can, in appropriate circumstances, be used to require both the discharged bankrupt and other persons to give evidence. Section 81 forms part of Part V of the Act headed "Control over Persons and Property of Debtors and Bankrupts". Section 77 imposes an obligation on a bankrupt to "discover" his property to his trustee and s.81 1s headed "Discovery of Bankrupt's Property". In this regard 1t 1s apparent that its thrust 1s to ascertain the nature, extent and whereabouts of the property of the bankrupt, in the interests of creditors. Its emphasis on property and its reference to the "trade dealings, property or affairs" of the bankrupt coincides with the power of the Court under s.50 to direct a trustee to take control of the property of a debtor subsequent to presentation of a petition but prior to the making of a sequestration order, Sub-section (2) of this section is virtually in pari materia with s.81 and expressly refers to an examination under that latter section. Each of these two sections, 81 and 50, are available to be used in the administration of the estate in bankruptcy, an administration which may not be completed prior to discharge. They contrast with the public examination of a bankrupt under 3.69, the completion of which 15 in some circumstances a pre- condition to discharge, and the purpose of which is the examination of the bankrupt not only in relation to his "trade dealings, property and affairs" as in $s.81 but also in relation 6. to his "conduct". The scope of a public examination under s.69 1s therefore wider than an examination under s.81. In so far as the word "conduct" 1s included in s.69, Re Smith 19 A.B.C. 13 refers to 1t as contemplating the ascertainment of information "which could or might have something to do with bringing about the bankruptcy of the debtor". In this way it contrasts with the ascertainment of his assets as part of the administration of his estate. It 1s significant that in circumstances where a s.81 examination could ex hygothesi take place subsequent to discharge the matter of a bankrupt's conduct which would have been reviewed in a public examination and taken into account on his discharge was not stated as a matter upon which further evidence could be required to be given. ' ' Te 1s to my mind for practical purposes necessary that a trustee should have at all times whilst he 1s engaged in the administration of a bankrupt's estate power to make effective enquiries concerning pussible assets and their whereabouts. In complex estates and, a fortiorl, 1n circumstances where bankrupts seek to avoid making full disclosure of their activities the time available prior to discharge can be insufficient to complete effective invegtigation. Equally the obligation under s.152 to co-operate after bankruptcy can without more be quite ineffective in the case of a recalcitrant or rogue bankrupt. To my mind the use of the word "bankrupt" ain s.81 should not be construed as limiting the scope of that section to the period prior to discharge, certainly 1n circumstances where the estate is still 7. in the process of administration and the assets still being got in. It could not be suggested that the analogous power of the Court to examine under s5.179(3) a trustee, engaged in the administration of an estate in bankruptcy, was limited to a time prior to discharge of the bankrupt. Likewise an enquiry under sub.s.179(2) by the Registrar, Inspector General or creditor ain relation to a "bankrupt's estate or affairs" must surely be answered by the trustee notwithstanding the fact that the bankrupt has been discharged. It 18 therefore my opinion that a summons may be 1ssued to the bankrupt, whether or not he has been discharged, and to his spouse and any other person who can give information concerning his property or affairs for the purpose of enabling the trustee "to obtain information wnich will enable him to discover and recover assets for distribution to creditors in the bankruptcy" ("See per Walton J. Re Poulson £19761 2 All E.R. 1020 at p.1029). I find support for this view in the dicta of Sir Wilfrid Greene, Master of the Rolls, in In Re a Debtor £1939] Ch.489 at p.501, Morton J. in Re Gardner £19437 Ch.50 at p.57, Goff J. (as he then was) in Re a Debtor £19681 1 W.L.R. 788 at p.801 and Clyne J. in Re Walker (1952) 16 A.B.C. 69 at p.72. I am not aware of any decision, other than that under appeal, which expresses a contrary view. It has been said that the power to examine under s.81 is "extraordinary" and one that 1s to be "carefully exercised" (Re 8. Cside1 (1979) 28 A.L.R. 381. I agree with these two cautions, but frequently extraordinary powers, properly exercised, are necessary 1f the trustee is to get in all assets which should be available for payment of creditors. For these additional reasons I agree with the orders proposed by Lockhart J. I certify that this and the 7 preceding pages are a true copy of the Reasons for Judgment of Mr Justice Fisher. Associate fst lo be Dated: 24 December, 1986 IN THE FEDERAL COURT OF AUSTRALTA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND wee No. G125 of 1986 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALTA Re: MARYON CATHERINE TODD Ex parte: MARYON CATHERINE TODD Re: MARYON CATHERINE TODD Ex parte: DESMOND ELLIS TODD Re: MARYON CATHERINE TODD Ex parte: CAMERON McDONALD FINLAY Re: MARYON CATHERINE TODD Ex parte: BRIAN RAYMOND GENT UFFICTAL PECEIVER IN BANKRUPTCY Appellant MARYON CATHERINE TODD, DESMOND ELLIE TODD, CAMERON McDONALD FINLAY and BRIAN RAYMOND GENT Respondents COURT: FISHER, LOCKHART and SPENDER JJ. DATE: 24 DECEMBER 1986 REASONS FOR JUDGMENT LOCKHART J. There 1s an important question of bankruptcy law in this case. Can a person be examined under s. 81 of the Bankruptcy Act 1966 ("the Act") after the bankrupt has been discharged from bankruptcy? A ae single Judge of this Court (Pincus J.) decided that he could not and 1t 15 from that decision that this appeal is brought. Maryon Catherine Todd became bankrupt on 3 April 1980 following the presentation of her own petition. On 22 July 1981 an order of discharge was made by the Supreme Court of Queensland exercising Federal Jurisdiction in Bankruptcy. On 26 June 1986 the Registrar in Bankruptcy for the Bankruptcy District or the Southern District of the State of Queensland 1 a sued four summonses, at the request of the Official Receiver for that Bankruptcy District pursuant to s. 81 of the Act, requiring the attendance of the bankrupt and three other persons to give evidence before the Registrar. Each of the four versons Brought these proceedings to challenge the issue of the summonses. Sub-section 81(1) of the Act provides: "RIC1) The Sourt or the Registrar may, on the application of a creaitor who has proved his debt and on such terms as to costs as the Court or the Registrar thinks fit fo ampose, or on the application of the Official Peceiver or the trustee, at any time summon - (a) the bankrupt or the spouse of the bankrupt; or (Db) a person who 1s known or suspected to have ain his possession any of the property of the bankrupt, or is supposed to be indebted to the bankrupt or to be able to give information concerning the bankrupt or his trade dealings, property or affairs, to attend, on a date and at a time and place fixed in the summons, before the Court or the Registrar or, if the Court or the Registrar thinks fit, 3. before a magistrate, to give evidence concerning, and produce any books (whether or not in existence at the time the bankrupt became a bankrupt) in his custody or power relating to, the bankrupt or his trade dealings, property or affairs." The power to summons persons for examination in bankruptcy is of long standing; it was originally conferred as long ago as 1542 by 34 & 35 Henry 8 C.4, 5.2. The purpose of this inquisitorial power is to elicit anformation that may be relevant for the proper conduct of the bankruptcy and that may aid the process of finding and recovering assets available for distribution. A person may be discharged from bankruptcy by the operation of s. 149 which provides for automatic discharge upon the expiration of the time appointed by the section (now three years) from the date of bankruptcy subject to certain exceptions or by the Court's order of discharge under s. 150. A discnarge may be granted by the Court subject to conditions and when the bankrupt has fulfilled them the discharge takes effect. The effect of a discharge from bankruptcy is to release the bankrupt from all debts, including secured debts, provable in the bankruptcy. It does not, however, release the bankrupt from certain debts, including debts incurred by means of fraud or fraudulent breach of trust to which the bankrupt was a party or a debt of which he has obtained forbearance by fraud (s. 153). Notwithstanding that a bankrupt has been discharged, the trustee of his estate continues as trustee and such of the property of 4. the bankrupt as remains undistributed continues to be vested in the trustee. The trustee continues to have duties to perform and he can require the assistance of the discharged bankrupt in the realisation and distribution of that property: sub-s. 152(1). If the discharged bankrupt fails to give that assistance he 15 guilty of contempt of Court and the Court may, where the bankrupt was discharged by an order ef a Court, rescind the order or, where he was discharged by force of s. 149, set aside the discharge, but without prejudice to the validity of any sale, disposition or payment duly made or act duly done subsequent to the discharge but before the rescission of the order of discharge or the setting aside of the discharge: sub-ss. 152(2), (3) and (4). As the Master of tne Rolls, Sir Wilfred Greene, said In Re A Debtor £1939] 1 Ch. 489 at p. S01: ".,. the discharge of the bankrupt does not put an end to the bankruptcy regarded as a series of judicial and administrative acts and rights anc powers." See alsc In Re Gardner, Ex parte Official Receiver £19423 1 Ch. 50 at pp. 57 and 58; In Re a Debtor Ex parte The Trustee of the Property of the Bankrupt v. Cleag £1968] 1 WLR 788 per Goff J. at p. 801. In Re Walker (1952) 16 A.B.C. 69 Clyne J. said at p. 72: "Even though a bankrupt has obtained an order of discharge he may continue to be liable to certain obligations which flow from what I may describe as his state of bankruptcy." 5. Tt has been held that an order made under s. 131 for payment of the income of the bankrupt to the trustee for the benefit of the bankrupt's creditors may continue to have effect notwithstanding that an order of discharge has been made: Re Gardner (supra); Re Baker (1945) 14 A.B.C. 37 and Re Walker (supra). The same principles have been held to apply where the bankrupt receives a statutory discharge by force of s. 149: Re Veale (No. 45 of 1967) (a decision of C.A. Sweeney J. unreported). The discharge of the bankrupt does not prevent a creditor who proved after the discharge from obtaining payment out of the undistributed assets of the onpankrupt's estate which vested in the trustee by virtue of the bankruptcy: Re Brealey (1900) 26 V.L.R. 209. It was held In Re Coulson Ex parte Official Receiver 'Truste2) £19341 1 Ch. 45 by the Court of Appeal of England that the power of summons and examination under s. 25(1) (the equivalent of sub-s. 81(1) of tne Act) survived the discharge of the bankrupt and could properly be invoked to assist the trustee in the realisation and distribution of such of the debtor's assets as were vested in the trustee before the discharge. In Re Coulson (supra) Lord Hanworth M.R. said at p. 48: "Now the powers that are given by s. 25 are not limited to any time or to the duration of the bankruptcy from which the debtor obtained his discharge, and it will be observed that by s. 26, sub-s. 9, an indication is given that the powers of s. 25 remains in being. That sub-s. 9 1s as follows: 'A discharged bankrupt shall, 4. notwithstanding his discharge, give such assistance as the trustee may require in the realisation and distribution of such of his property as 1s vested . in the trustee, and, if he fails to ao soa, he shall be guilty of contempt of court.' That clearly indicates the distinction which 1s drawn and effected hetween the discharge of the bankrupt and the duty which still remains in the trustee as to the realisation and distribution of such of his property as 1s vested in the trustee. It would therefore be an unfortunate contraction of the powers given by s. 25 for the Court to hold that they were limited or lost by the discharge of the bankrupt from his bankruptcy. In these circumstances it appears to us that the powers given by s. 25 survive che effective disenarge of the bankrupt, and the case must tnerefore be sent back to Mr. Registrar Mellor to exercise his discretion upon the matter before him." Lawrence and Pomer LJJ. agreed with the reasons for zudgment of the Fe Coulson 'supra: wag Tollowed kv the English 'Tsurt of Appeal ir Clexs = Cage 'sugra' and by Clyne J. in Re Walker «supra. I enow of no cage to the contrary. The use cf the word "leptor", net 'bankruspt", an the relevant provision ain the English Act, 15 tf no teonsequence for present purposes and 15 not a valid -zround of distinction. el In Re Salhorn; Ex parte Balnorn and Official Recelver 11981) 39 A.L.P. 222 I said at p. 225 that I had reservations about the correctness of Coulson (supra) but did not find 1t necessary to decide the question whether the powers of the Court or the Registrar under s. 81 survive a bankrupt's discharge. Sub-section 43(2) of the Act was the source of my reservations. It is in substantially the same terms as sub-s. 55(8) which is the relevant provision in this case where the 7. debtor became bankrupt upon presentation of her own petition. Sub-section 55(8) provides: "RK person who becomes a bankrupt by force of this section continues to be a bankrupt until - (a) he 1s discharged by force of section 149; (b) he is discharged by order of the Court; or (c) his bankruptcy 1s annulled under = section 74 or 154," There are corresponding provisions where debtors become bankrupt upon the making of sequestration orders following the presentation of petitions by creditors (sub-s. 43(2)); or following presentation of their own debtors' petitions where they are members of a partnership (sub-s. 56(16)); or are joint debtors (sub-s. 57(10)). There 18 an initial attraction in the argument of counsel for the respondents that s. 31 is based upon the premise that, because at the time the power of summons and examination ig exercised there must be a person answering the description of "the bankrupt" within the language of sub-s. 81(1), the section cannot apply to a person who has been discharged from bankruptcy since the effect of sub-s. 55/8) 1s that he ceases to pe "a bankrupt" upon discharge. Sub-section 5(1) is the definition section and it defines the word "bankrupt" as meaning: "A person - (a) against whose estate a sequestration order has been made; or (b) who has become a bankrupt by virtue of the presentation of a debtor's petition." The definition applies unless the contrary intention appears: sub-s. 5(1). The definition of "bankrupt" in sub-s. 5(1) is not subject to any temporal constraints. Once a sequestration order has been made against the estate of a person or once a person has become a bankrupt by virtue of the presentation of a debtor's petition, that person fulfills the description required by the statutory definition. The description applies to him as aptly after, as it does before, he 15 discharged from bankruptcy or his bankruptcy is annulled. The power conferred by s. 81 with respect to "the bankrupt" applies therefore to the person who answers the statutory description of "bankrupt" ain the definition section (sub-s. 5:1)) and 1s sufficiently wide ta aincluae a person who has become a bankrupt out has been discharged from bankruptcy or whose bankruptcy has been annulled. Sub-section 55(8) does not qualify the definition of "bankrupt" in sub-s. 5(1) at all. Indeed the words "a bankrupt" in sub-s. 55(8) must bear a different interpretation to their defined sense because, as I said earlier, a person continues to answer the description of a "bankrupt" in the defined sense following discharge from bankruptcy. Yet sub-s. 55(8) speaks of a person continuing to be "a bankrupt" until discharge, a quite different notion which requires a different meaning to be attributed to the expression "a bankrupt" at least where it appears in relation to discharge in sub-s. 55(8). The sub-s. 5(1) definition of the expression "bankrupt" 1s, however, an 9. apt description of a person "who becomes a bankrupt" by force of "s. 55 within the meaning of those words in sub-s. 55(8). On one view of the matter this produces the odd consequence that the one expression "a bankrupt" bears two different meanings in the one sub-section. The answer is that this 1s the necessary consequence of the language adopted by the draftsman. An alternative, and in my view correct, analysis 1s that the words "a bankrupt" have the same meaning throughcut sub-s. 55(8); not the meaning assigned by the statutory definition, but the meaning which I am about to attribute to them. Sub-section 55(8) must be read in the light of the Act as a whole, especially s. 153 which provides for the effect of a discharge from bankruptcy in terms which I have already set out. Properly interpreted the sub-section means that upon a debtor becoming a bankrupt by force of sub-s. 55(3) following presentation of his own petition he becomes subject to bankruptcy "regarded as a series of judicial and administrative acts and rights and powers" to borrow the language of Sir Wilfred Greene M.R. in Re A Debtor (supra). After he 1s discharged from bankruptcy by force of 3. 149 or by order of the Court under s. 150, altnough the bankrupt ceases to be subject to many of the obligations and sanctions which flow from his state of bankruptcy, he nevertheless remains liable to certain of them; a few of which I mentioned earlier. In that sense he no longer continues to be a bankrupt. He is no longer an undischarged bankrupt. He is a discharged bankrupt but he remains a person against whose estate a sequestration order has been made. It is a misconception to regard a discharge from bankruptcy as freeing altogether a person from the 10. whole of his state of bankruptcy. It 1s true that after a person is discharged from bankruptcy a weight is lifted from his shoulders, he may enter into fresh business commitments more freely and generally start a new life. Certain of the stigma attaching to bankruptcy is removed from him and his name. If someone calls him a bankrupt he runs the risk of a defamation action if the words used are understood as meaning an undischarged bankrupt. But these considerations must not be confused with the consequences which flow in law from a discharge from bankruptcy and to which I have already adverted. In Re Walker (supra) Clyne J. expressed much the same conclusion about the equivalent section in the Bankruptcy Act 1924 as I have expressed about sub-s. 55(8) of the Act, though his Honour reached the result by a different path. There are no provisions corresponding to sub-s. 55(8) in the Bankruptcy Act 1914 (Sng.) or the Insolvency Act (1967) (N.Z.), but sub-s. 43(2) has a long lineage in bankruptcy legislation of this country: see for example, the Bankruptcy Act 1924 (Cth), sub-s. 54(2); and the Bankruptcy Act 1898 (N.S.W.), s. 5(2). I have looked at the Insolvency Act 1985 (Eng.) which received Royal Assent on 230 October 1985; but only some of the sections have commenced. Part III concerns "Individual Insolvency" and contains various chapters relating to bankruptcy. None of the sections relevant to the question in issue here have yet commenced; hence the Bankruptcy Act 1914 (Eng.) continues to apply. ll. Section 128(1) of the Insolvency Act 1985 provides that the discharge of a bankrupt: "shall have no effect on the functions (so far as they remain to be carried out) of the trustee of his estate or on the operation, for the purposes of the carrying out of those functions, of the provisions of this Part ..." (i.e. Part III). Section 126(1)(b) of the Insolvency Act 1985 provides: "126(1) The bankruptcy of an individual against whom bankruptcy order has been made - (a) shall commence with the day on which that order 15 made; and (b) shall continue until that individual is discharged from bankruptcy under this Chapter." The Chapter referred to is Chapter ll. A "bankruptcy order" means an order adjudging an individual bankrupt: 3. 211(1). The word "bankruptcy" 1s not defined. The point of interest for present purposes 1s that under s. 126(1), which 1s broadly equivalent to sub-s. 55(8) of the Act, it as "the bankruptcy" that no longer continues upon discharge of the bankrupt and 1t is in that sense that I have interpreted the relevant words of our sub-s. 55(8). Of course, under the Insolvency Act 1985 the bankrupt still remains subject to certain duties and restraints after his discharge as he does here under the Australian Act. 12. Nor does discharge affect the sequestration order. Whether the discharge occurs by operation of s. 149 or by order of the Court under s. 150 the sequestration order is not rescinded, varied or otherwise affected. It is the critical act or event which makes a person a "bankrupt" and unless it is successfully appealed from or rescinded it remains alive; discharge or annulment of bankruptcy says nothing about it. Indeed, after discharge the Court may rescind the order of discharge where the bankrupt was discharged by order of the Court or set aside the discharge where the bankrupt was discharged by force of s. 149 whereupon the bankruptcy which was commenced by the sequestration order revives. Similar considerations apply to sub-s. 43(2) and to sub-ss. 56(16) and 57(190). Sub-section 55(8) properly construed provides no barrier to the exercise of the power conferred by sub-s. 81(1) after the bankrupt 1s discharged from bankruptcy. It may be said that this produces harsh consequences. A person may be discharged from bankruptcy and many years later brought before the Court pursuant to s. 81 to provide itniormation relating to events long past. There is no substance in this argument. A discharged bankrupt is expressly required by s. 152 to give assistance to the trustee in the realisatlon and distribution of such of his property as vested in the trustee upon pain of contempt of court. Since the undistributed property of the bankrupt remains vested in the trustee after discharge there are sound reasons of policy why the machinery of the law and the administration of bankruptcy should continue to be available to the trustee and the creditors to assist the trustee in the performance of his continuing 13. duties of collection, realisation and distribution of such of the bankrupt's assets as are vested in him before the discharge. Section 81 is an important weapon in the trustee's armoury. Also, the person to be examined is protected against any misuse of the power. It is necessary for the trustee or a creditor who seeks to examine the bankrupt to satisfy the Court or the Registrar that the circumstances are appropriate for the issue of a summons under sub-s. 81(1). Where Aa summons is issued by the Registrar 1t 1s subject to review by the Court (sub-s. 14(5)). It 1s well established that the power conferred by s. 81 must be exercised for legitimate purposes to aid the process of finding, cecovering, realising and distributing assets of the bankrupt and not as an instrument of oppression: Re Csidei; Ex parte Andrew (1979) 39 F.L.R. 387 and cases there cited by me. I notice that the expression "bankrupt" is not defined in the Bankruptcy Act 1914 (Enq) or the Insolvency Act 1967 (N.Z.)but nothing turns on this. It 15 also appropriate to mention that in the New zealand Act of 1967 the equivalent section to our s. 81 18 Ss. 68 which expressly provides that the Assignee may "at any time before or after the making of the order of discharge" summon che bankrupt or other person to appear before him and examine him on oath concerning matters of the kind (though not the same) to which our s. 81 ais directed, It may perhaps be wise for our Act to be amended along similar lines to remove any doubt about the matter. I should say something about the relation between ss. 81 and 152. The two sections are complementary to each other. They do not 14, cover the same field, though they do overlap. In particular, s. 152 applies only to a discharged bankrupt, whereas s. 81 applies to the bankrupt and other persons. Section 152, unlike s. 81, confers no power of summons and examination. The scope of s. 152 is confined to "the realization and distribution" of such of the discharged bankrupt's property as 1s vested in the trustee, whereas s. 81 1s in aid of discovering the existence of any property of the bankrupt and the powers which it confers extend to obtaining information respecting the bankrupt or his trade, dealings, property or affairs. The distinction between the two provisions and their complementary nature was recognised in Re Coulson (supra) by Lord Hanworth M.R. at p. 48. I would not be disposed to conclude that the powers which s. 81 confers fall to survive a bankrupt's discharge unless the language of some relevant provision of the Act plainly leads to that conclusion. The only provisions which at first glance may appear to satisfy that description are sub-ss. 43(2), 55(8) and the other sections relating to debtors' petitions; but for the reasons already given those provisions are explicable ona different basis. The history of the section in the bankruptcy legislation of this country, the United Kingdom ana New Zealand support my conclusion. Also, the invocation of the powers conferred by the section obviously facilitates the proper administration of estates in bakruptcy. It would be unfortunate if the operation of the section were to he confined to the period before discharge. A bankrupt may apply for an order of discharge from his bankruptcy as soon as twelve months have expired from the date of the bankruptcy: para. 150(1)(c). Unless 15. sooner discharged he gains an automatic discharge after three years from the date of the bankruptcy except where an objection is entered to the discharge: sub-s. 149(1). Obviously there will be cases where events come to light which call for examination after bankrupts are discharged upon the expiration of those short periods. In addition, 1t would be regrettable if the section 1s given a limited construction which unnecessarily encourages the entry of objections to discharge because of the absence of the powers of examination after discharge. Having the benefit of argument in this case and after my own consideration of the matter the doubts which I expressed in Baihorn have now been dispelled. I would allow the appeal and dismiss the four applications filed in this Court to set aside the summonses. The respondents must pay the costs of the Official Receiver oz and incidental to the proceedings before the trial Judge and of this appeal. ' "* \te C05 ~ . 4 i of N gf vel ' ~ ' n/| | eos t ey nas me IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND Re: Ex parte: Re: Ex parte: Re: Ex parte: Re: mx parte: QLD. PET. G125 of 1986 weve + ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA MARYON CATHERINE TODD MARYON CATHERINE TODD MARYON CATHERINE TODD DESMOND ELLIS TODD MARYON CATHERINE TODD CAMERON McDONALD FINLAY MARYON CATHERINE TODD BRIAN RAYMOND GENT OFFICIAL RECEIVEP IN BANKRUPTY Appellant MARYON CATHERINE TODD, DESMOND ELLIS TODD, CAMERON McDONALD FINLAY and BRIAN RAYMOND GENT Respondents COURT: FISHER, LOCKHART and SPENDER JJ. PLACE: BRISBANE DATE: 24 DECEMBER, 1986 . REASONS FOR JUDGMENT SPENDER J. I have the misfortune to disagree with Fisher and Lockhart JJ. on the fundamental question: "Who is a bankrupt?" In the particular facts of this appeal, the question 13: can a person after his discharge from bankruptcy be compulsorily summoned and examined under s.81 of the Bankruptcy Act 1966? Pincus dU. held at first instance that the power to summon under the proposed s.81 applies only when the person to whose affairs examination relates is, at the time, a "bankrupt", by which is meant an undischarged bankrupt. In my respectful opinion, Pincus J. was right. Section 81(1) "The provides: - Court or the Registrar may, on the application of a creditor who has proved his debt and on such terms ag to costs as the Court or the Registrar thinks fit to impose, or on the application of the Official Receiver or the trustee, at any time summon — fa) tb) the bankrupt or the spouse of the bankrupt; or a person who is known or suspected to have in his possession any of the property of the bankrupt, or is supposed to be indebted to the bankrupt or to be able to give information concerning the bankrupt or his trade dealings, property or affairs, to attend, on a date and at a time and place fixed in the summons, before the Court or the Registrar or, if the Court or the Registrar thinks fit, before a magistrate, to give evidence concerning, and produce any books (whether or not in existence at the time the bankrupt became a bankrupt) in his custody or power relating to, the bankrupt or his trade dealings, property or affairs." The appellant relies on the definition section, s.5(1) of the Act, which relevantly provides:- "In this Act, unless the contrary intention appears - 'bankrupt' means a person - (a) against whose estate a sequestration order has been made; or (b) who has become a hankrupt by virtue of the presentation of a debtor's petition; u The use to be made of a "definition section" was the subject of observation in the joint judgment of Barwick C.J., McTiernan and Taylor JJ. in Gibb v. The Commissioner of Taxation of the Commonwealth of Australia (1966) 118 C.L.R. 628 at 635:- "The function of a definition clause ina statute is merely to indicate that when particular words or expressions the subject of definition, are found in the substantive part of the statute under consideration, they are to be understood in the defined sense - or are to be taken to include certain things which, but for the definition, they would not include. Such clauses are, therefore, no more than an aid to the construction of the statute and do not operate in any other way. As was gaid by Sutherland (Statutes and Statutory Construction, 2nd ed., vol. 2, p. 687), "Such definitions can, in the nature of things, have no effect except in the construction of the statutes themselves' ." The contention of the appellant is "once a bankrupt, always a bankrupt" and, as a consequence, the power conferred by $.81(1) may be exercised at any time subsequent to the making of a sequestration order against a person or after the acceptance of a debtor's petition. In particular, the power may be exercised after the discharge of that person, and at any time after that discharge. Any prejudice that might be engendered by the dilatory or unfair use of this power is said by the appellants to be met by the discretionary power in the Court to set aside a summons which issued in circumstances where obedience to it would be oppressive: Re Csidei; Ex parte Andrew (1979) 39 F.L.R. 387. While one may point to policy considerations in favour of construing s.81(1) in such a way, in my view, there are policy considerations at least as weighty against such a construction. It is no doubt desirable that the divisible property of a bankrupt be located and divided amongst the creditors of the bankrupt, as the Act requires. The existence of a power as contended for by the appellant would promote that object. The divisible property of a bankrupt continues to vest in the trustee for the benefit of the creditors of the bankrupt after the discharge of the bankrupt. Independently of s.81, however, there 1S power in the Bankruptcy Act 1966 ("the Act") directed at the realisation, after discharge, of the property that vests inthe trustee. Section 152 imposes on a person on his discharge from bankruptcy the obligation of cooperating with his trustee. Section 152(1) refers to "a discharged bankrupt" and requires such a person, notwithstanding his discharge, to give such assistance as the trustee reasonably requires in the realisation and distribution of such of his property as is vested in the trustee. Section 152(2) provides that any discharged bankrupt who fails to comply with the requirements of $.152(1) is guilty of contempt of court and the court on such a failure may, on the application of the Registrar or the Trustee in the bankruptcy, rescind the order of discharge if made by a court or, where the bankrupt was discharged by force of 5.149 of this Act, set aside the discharge. On such a rescission or setting aside, the person would revert to the status of a bankrupt, and be liable to be summoned under s.8l. In Ex parte Llynvi_ Coal and Tron Company. In re Hide (1871) L.R. 7 Ch.28, James L.J., speaking in reference to s.23 of the Bankruptcy Act, 1869 (Eng.), which 1s in similar terms to s.82 of the Act, said at p.31:- "Every possible demand, every possible claim, every possible liability, except for personal torts, 15 to be the subject of proof in bankruptcy, and to be ascertained elther by the Court itself or with the aid of a jury. The broad purview of this Act 1s, that the bankrupt is to be a freed man - freed not only from debts, but from contracts, liabilities, engagements, and contingencies of every kind. On the other hand, all the persons from whose claims, and from liability to whom he 1s so freed are to come in with the other creditors and share inthe distribution of the assets." The status of bankruptcy involves a curtailment of rights and abilities and exposes a bankrupt to quasi-penal consequences. It is conducive to the rehabilitative object of the bankruptcy law that, on discharge from his bankruptcy, the former bankrupt be restored to his full and former status without lingering disabilities and with his immunities unattenuated. In my opinion, however, policy considerations of the rival interpretations contended for are in this case quite mischievous. T am content to rest my conclusion on what I see is the plain and ordinary meaning of the words in the Act. Maryon Catherine Todd became bankrupt on her own petition on 3 April 1980. She was unconditionally discharged from her bankruptcy on 22 July 1981. Section 55(8) provides:- "A person who becomes a bankrupt by force of this section continues to be a bankrupt until - (a) he is discharged by force of section 149; (b) he is discharged by order of the Court; or (c) his bankruptcy 1s annulled under section 74 or 154," Section 43(2) is a similar provision in relation to those who become bankrupt pursuant to a sequestration order made on a creditor's petition, and s.56(16) and 57(10) are similar provisions for other types of debtor's petitions. Section 55(3) provides that, where the circumstances prescribed by that subsection have been complied with and the Registrar accepts a petition against a debtor presented by himself, the debtor becomes a bankrupt by virtue of the presentation of the petition. This subsection therefore defines when a person becomes a bankrupt. (Reference may be made to the "relation back" provisions of the Act, s$.115. That section provides for a "deemed commencement" of bankruptcy, both in the circumstance where a person becomes a bankrupt on a creditor's petition and where a person becomes a bankrupt by virtue of the presentation of a debtor's petition. Those deeming provisions do not affect the interpretation of s.55(3).) Sections 43(2), 56(4) and 57(4) define when a person becomes a bankrupt in the analogous situations earlier referred to. Having defined by 5.55(3) when a debtor presenting a single debtor's petition becomes a bankrupt, the Act proceeds, by s.55(8) to define for what period a person continues to bea bankrupt. That period is defined to be the period until any of the three events specified in (a), (b) and (c) of the subsection happen. In my opinion, when one speaks of a state of affairs coming into existence on the happening of one event, and continuing until the happening of one of several other nominated events, the usual and ordinary consequence, as a matter of English, is that on the happening of the later event, the state of affairs ceases. One speaks of a person continuing to be a child until a certain age is reached. Once that age is reached, the person ceases to be a child. If one inserts the statutory definition of bankrupt in s.55(8), (or the other similar provisions), the result is a nonsense. No sensible or coherent meaning can be given to the subsection, in particular, the word "until" performs no function. In its ordinary meaning, "until" means "up to the time when". In the Macquarie Dictionary, "until" is defined as "up to the time that or when; till". In the Shorter Oxford Dictionary, "until" means "onward till (a time specified or indicated); up to the time of (an action, occurrence etc.)." The statutory definition, in my view, can and indeed must be read subject to the provisions in the Act directed specifically at the period during which a person continues to be a bankrupt. Doing this does not violate the ordinary meaning of the words used in the subsection and is consistent with the concept of bankruptcy as a status which begins at a certain time, but which also can be brought to an end. "Bankruptcy", according to the Shorter Oxford Dictionary is, "the state of being, or fact of becoming, bankrupt." This duality of concepts illustrates, felicitously in my opinion, the different objects to which the statutory definition of "bankrupt" in s.5(1) and the definition of the period of bankruptcy in s.55(8) are directed. In my view, the definition of "bankrupt" in s.5(1) is directed at the fact of becoming bankrupt. The statutory definition of "bankrupt" highlights that it requires a curial order, or a registrar's acceptance of a debtor's petition, and it ig this formality which distinguishes a bankrupt from a person who is merely insolvent, or from one who is subject to one of the various arrangements with creditors under Part X of the Act. On the other hand, s.55(8) is directed to the state of being a bankrupt and defines the period during which that state exists. So understood, it is not only possible but necessary that the statutory definition be read subject to the latter sections of the Act. There is power under 3.50(2), (which is in similar terms to 3.81(1)), to summon a debtor after presentation of a creditor's petition and before sequestration, for examination concerning the debtor's trade dealings, property or affairs. There 1s a clear temporal limitation on this power, as the "life" of a creditor's petition is finite: Section 52(4) and (5). In my respectful opinion, it provides no support for the contention that the temporal operation of s.81(1) is limited only by the longevity of a person against whom a sequestration order has at some earlier time been made. Reference was made on the appeal to s.68 of the Insolvency Act 1967 (N.Z.) which provides:- "(1) The Assignee may, at any time before or after the making of the order of discharge, summon to appear before him and examine on oath - (a) The bankrupt; ..." (my emphasis) 10. The term "bankrupt" is not defined in that Act, nor is there any equivalent to $8.55(8), 43(2), 56(16), or 57(10) of the Bankruptcy Act 1966 (Aust.). Such legislative provisions do not assist the appellant. On the contrary, such a provision as s.68 demonstrates that, if it had been the intention of the legislature that a person might be compulsorily examined notwithstanding his discharge, it would have been easy enough to say so. Because the appellant seeks support from In re Coulson. Ex parte Official Receiver (Trustee) £19343 1 Ch. 45, it is necessary to have regard to the scheme of the Bankruptcy Act 1914 (Eng.) and, in particular, to s.25(1). Section 25(1) of that Act provides:- "The court may, on the application of the official receiver or trustee, at any time after a receiving order has been made against a debtor, summon before 1t the debtor ..." The term "debtor", t.e. a person liable to bankruptcy proceedings, 1s not defined in that Act, although s.1(2) extends the application of the term to include a person who, at the time when an act of bankruptcy was done or suffered by him, hada geographical connection with England. Section 1 of that Act commences with the words:- "A debtor commits an act of bankruptcy in each of the following cases:- ..." ' ll. and then sets out the various instances of acts of bankruptcy. Those words are identical with the words with which s.40(1) of the Bankruptcy Act 1966 commences. Under the Bankruptcy Act 1914, s.3 provides that, 1f a debtor commits an act of bankruptcy the court may, on a bankruptcy petition being presented either by a creditor or by the debtor, make a receiving order. By s.13, after the making of a receiving order against the debtor, a general meeting of his creditors is to he held to consider whether a proposal for composition or scheme of arrangement is to be accepted or whether the debtor should be adjudged bankrupt. Section 15(1) provides that: "Where the court makes a receiving order, it shall, save as in this Act provided, hold a public sitting, on a day to be appointed by the court, for the examination of the debtor, and the debtor shall attend thereat, and shall be examined as to his conduct, dealings, and property". The effect of 3.18 is that, after a receiving order is made, then unless a composition or scheme is approved by the creditors within the time specified in that subsection, the court shall adjudge the debtor bankrupt, and thereupon the property of the bankrupt shall become divisible among his creditors and shall vest in a trustee. There i3 no definition of "bankrupt" in the 1914 Act nor any provision analogous to s.55(8) defining the period during which a person is a bankrupt. 'y 12. In In re Coulson, (supra), the debtor was held to be under a duty to give further evidence of a contingency which fell into possession after his discharge. In its terms, s.25(1) concerns "a debtor" and in this context means a debtor who has committed an act of bankruptcy and against whom a receiving order has been made. It is significant, in my opinion, that the word "bankrupt" was not used. By using the term "debtor" in s.25, no temporal limitation 1s incorporated: in particular, there is no limitation to the period between when a person is adjudged bankrupt and when the court makes an order of discharge. This is to he distinguished from the consequence of the use of the term "bankrupt" in 3.81(1) of the Act, and also, it should be said, from the consequence of the use of the term "bankrupt" in $.69(1) of the Act. It is true that in Re Walker (1952) 16 A.B.C. 69, Clyne J. said at 72:- "The Court's powers of examination under s.80" (the equivalent in the Bankruptcy Act 1924 of s.81 in the 1966 Act) "may in certain circumstances still be exercised after a bankrupt has obtained a discharge. See In re Coulson; Ex parte Official Receiver (Trustee) ((1934) Ch.45), where the debtor was held to be under a duty to give further evidence of a contingency which fell into possession after discharge." Notwithstanding this observation, both the ratio and Other dicta in that case, in my respectful view, support the conclusion that the power of examination under s.81 is restricted to the period of a person's bankruptcy. 13. In Re Walker, which was concerned of course with the provisions of the Bankruptcy Act 1924 (Aust.), Clyne J. concluded: - "In my opinion, there must be a public examination of the bankrupt before he can apply for an order of discharge, unless in special circumstances the Court dispenses with such an examination. A public examination of a bankrupt cannot be held or continued if the bankrupt has obtained an order of discharge and such order has not been rescinded. For the reasons I have stated, unless the order of discharge granted to the bankrupt Louis Alexander Walker is rescinded, the Registrar cannot rescind the order concluding the public examination of this bankrupt, and it is an obvious consequence, of course, that the Registrar cannot, as matters now stand, resume the public examination of the bankrupt." He said at p.72:- "The Bankruptcy Act makes it reasonably clear when a debtor becomes a bankrupt and when he ceases to be a bankrupt. Under 5.4 of the Act "Bankrupt" means any person in respect of whose estate a sequestration order has been made. By s.54(2), when a sequestration order has been made, the debtor thereby becomes a bankrupt, and continues a bankrupt until an order of discharge has been issued to him or the sequestration order has been annulled. Section 60(1) enacts that upon sequestration the property of the bankrupt shall vest in the official receiver named in the order, and shall be divisible among the creditors of the bankrupt in accordance with the provisions of the Act. Section 91 places certain property of the bankrupt beyond the reach of his creditors, but enacts that, subject to the Act, the property of a bankrupt divisible amongst his creditors shall 14. include all property which belongs to or is vested in the bankrupt at the commencement of bankruptcy, or is acquired by or devolves on him before his discharge. The order of discharge for which an application is made under s.119, sub-s. (1) of the Bankruptcy Act, is an order of discharge releasing the bankrupt from his debts, but notwithstanding this fact, I think a bankrupt ceases to be a bankrupt when an order of discharge is made in his favour." section 69(1) of the Bankruptcy Act 1966 provides for the public examination of the bankrupt. It is in these terms:- "The Official Receiver or the trustee of the estate of a bankrupt may, at any time, make an application, in writing, to the Registrar for the examination of the bankrupt, on oath, as to the conduct, trade dealings, property and affairs of the bankrupt." Clyne J. decided in Re Walker (supra) that the discharge of a bankrupt, unless rescinded, prevents a public examination of a bankrupt being held or continued. I respectfully agree with that conclusion. When regard is had to the terms of s5s.69(1) and 81(1) and, in particular, the common use of the term "bankrupt" therein, there can be no warrant for concluding that the use of the term "bankrupt" in s.69(1) restricts the application of that section to the period up till discharge, but the use of the same term in s.81(1) does not involve the same temporal limitation. In my opinion, the appeal should be dismissed with costs. I certify that this and tse §3 — preseding pages are a irue cony of 'ra reasons for tuclgment hcrein or His Honour Mr Justice Spender <7 (Mf WJ ) Wen a4 112/2é Associate Dated