P Ss 720 K BANKRUPTCY - date of discharge - interlocutory order extending date for statutory discharge pending determination of substantive application - order under' sub-s.149(12) - doubtful power - voidable not void - treated as valid - no power to rescind as operation terminated on dismissal of substantive application - further interlocutory order extending creditor's objection under sub~s.149(8) ~- interlocutory order "set aside" by final order - whether equivalent to rescission of order under s.37 - "set aside" - meaning - retroactive in effect - order rescinded ab initio - directions as to date of discharge - observation on prosecution of bankrupt based on technical issues. Bankruptcy Act 1966 Re: Ronald Frederick Heelan Ex Parte: The Official Trustee in Bankruptcy, the trustee of the roperty of Ronald Frederick Heelan, a bankrupt. No. WAG 124 of 1971 ' FRENCH J. 28 APRIL 1987 PERTH FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTAY IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA NO. WAG 124 of 1971 RE: RONALD FREDERICK HEELAN EX PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY, the trustee of the property of Ronald Frederick Heelan, a bankrupt Applicant MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 28 APRIL 1987 WHERE MADE: Perth THE COURT ORDERS THAT: l. It is declared that the bankrupt was discharged from bankruptcy pursuant to the provisions of s.149 of the Bankruptcy Act 1966 on 15 April 1986. 2. Each party to bear their own costs. Note: Settlement and entry of orders 1s dealt with in Rule 124 of the Bankrupty Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA NO. WAG 124 of 1971 wwe ews we we RE: RONALD FREDERICK HEELAN EX PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY, the trustee of the property of Ronald Frederick Heelan, a bankrupt Applicant CORAM: FRENCH J. 28 April 1987 REASONS FOR JUDGMENT Like Dante in the opening verse of the Divine Comedy, Ronald Frederick Heelan could well complain that he has found himself "in a gloomy wood astray, gone from the path direct". His first step into the shade was taken on 11 June 1971 when he became bankrupt upon his own petition pursuant to sub-s.57(3) of the Bankruptcy Act 1966. : As the Act then stood he could have expected automatic discharge after 5 years pursuant to sub-s.149(1). However on 3 March 1976 the Deputy Commissioner of Taxation moved him off "the path direct" by lodging a Notice of Objection to his discharge dated 27 February 1976 on the stated ground that:- 2. "Subsequent to the sequestration of his Estate, the Bankrupt has failed to pay tax on income derived during the years ended 30 June 1972 to 1974 inclusive. It is considered that his conduct at this time is unsatisfactory." The lodgment of that objection had the effect, by force of sub-s.149(3), of preventing automatic discharge pursuant to sub-s.149(1). Under the Act as it then stood discharge could not be obtained except by order of the Court under s.150 or by automatic discharge upon withdrawal of the objection and lapse of the 5 year statutory waiting period. In 1980 the objection was still in force and no application for discharge had been made under s.150. That year saw the enactment of extensive amendments to the Bankruptcy Act 1966. In particular s.149 was altered so that the period for automatic discharge was reduced from 5 to 3 years. Where previously an objection to discharge could remain in force indefinitely, the amendments provided that objections would lapse at the expiry of 5 years from the date of bankruptcy or such period as the Court might order (s.149(7), (8) and (9)). 3. Where an objection lapsed and the minimum period of 3 years from bankruptcy had expired automatic discharge would follow by virtue of sub-section 149(14). The impact of the amendment upon existing objections was covered by the transitional provision, s.72(2) of the Bankruptcy Amendment Act 1980 which provided:- ~~ "(2) Where - (a) the Registrar, the trustee or a creditor has, before the commencement of this section, entered an 1 objection under paragraph 149(3)(b) of the Principal Act to the discharge of a bankrupt by force of section 149 of the Principal Act; (b) the objection has not been withdrawn before the commencement of this section; and (c) the bankruptcy has not been discharged under section 150 of the Principal Act before the commencement of this section, section 149 of the Principal Act as amended by sub-section (1) of this section applies in relation to the objection as if - (d) the objection had been entered by the Registrar, | the trustee or the creditor, as the case may be, under paragraph 149(3)(c) of the Principal Act as so amended; (e) sub-section 149(4) of the Principal Act as so amended were omitted: and (f) the references in sub-sections 149(7), (8) and (9) of the Principal Act as so amended to the date of the bankruptcy were read as references to the date of commencement of this section." The effect of that provision was that the objection would lapse at the expiry of 5 years from the date of commencement ; of the section which was 1 February 1981. 4. Mr Heelan could therefore look forward to automatic discharge on 1 February 1986 pursuant to sub-s.149(14). However on 2 January 1986 the Official Receiver filed an application for an order that, pursuant to sub-s.149(12) the bankrupt be not discharged. Sub-section 149(12) of the Bankruptcy Act 1966 provides:- "The Court may, at any time before the discharge of a bankrupt, on the application of the Registrar, the Inspector-General, the Trustee or a creditor, direct that the bankrupt shall not be discharged from bankruptcy by virtue of this section." In his supporting affidavit the Official Receiver referred to the deficiency of $50,134.00 shown on the bankrupt's statement of affairs and the realisation of $620.78 on his estate. There had been, he said, no contribution by the bankrupt and his conduct had not been satisfactory. It is not necessary for present purposes to explore the merits of those contentions. Because there were difficulties with service the Official Receiver filed a further application on 8 January 1987 seeking an order for substituted service and an interim order preventing discharge. 5. Both applications came before Toohey J. on 13 January. His Honour then adjourned the hearing of the substantive application of 2 January to a date to be fixed by the District Registrar. He also made an interlocutory order in the following terms:- "The Respondent be not discharged from bankruptcy by virtue of the provisions of s.149 of the Bankruptcy Act 1966 until the determination of the Application or until further order." The Official Receiver subsequently received advice that this interlocutory order was beyond the power of the Court. He therefore filed two further applications dated 22 and 23 January 1986 respectively. The application of 22 January sought an order that pursuant to the provisions of sub-s.149(8) of the Bankruptcy Act the objection to the discharge of the bankrupt lodged by the Deputy Commissioner of Taxation do not lapse for a period of 10 years from the commencement of the bankruptcy of the bankrupt. This was an odd request to make as the bankruptcy had commenced on 11 June 1971. 6. By the application dated 23 January he sought interlocutory order as follows:~ "That pursuant to the provisions of Section 149(8) of the Bankruptcy Act 1966 the objection to discharge of the bankrupt herein lodged by the Deputy Commissioner of Taxation and dated 27 day of February 1976 do not lapse until further order or determination of the application made 22 January 1986." an On 30 January 1986 Muirhead J. adjourned the application of 22 January until 15 April and ordered that:- "Pursuant to the provisions of s.149(8) of the Bankruptcy Act 1966 the Objection to the Discharge of the Respondent lodged by the Deputy Commissioner of Taxation and dated 27 day of February 1976 do not lapse until 30 day of April 1986." On 15 April 1986 the two substantive applications, those of 2 January and 22 January were dismissed by consent. follows:- The orders made by his Honour on that occasion were as "1. The order made the 30th day of January, 1986 that pursuant to the provisions of Section 149(8) of the Bankruptcy Act, 1966 the objection to the discharge of the Respondent lodged by the Deputy Commissioner of Taxation dated the 27th day of February, 1976 do not lapse until the 30th day of April, 1986 be set aside. 2. The Applications of the Applicant dated the 2nd day of January, 1986 and filed the 2nd day of January 1986 and the application dated the 23rd day of January, 1986 and filed the 24th day of January, 1986 be dismissed. ee ee ee TT ee 7. 3. There be no order as to costs." Subsequently the Official Receiver requested the Registrar in Bankruptcy to give a certificate under his hand pursuant to paragraph 260(1)(a)(i11) of the Act in relation to the discharge. That certificate has not issued there being between the Official Receiver and the Registrar, some doubt as to when the bankrupt was discharged. The official Receiver now seeks the following directions:- "1. By reason of the Order of this Honourable Court made on the 15th day of April 1986 on what date (as appears hereunder) was the bankrupt discharged from bankruptcy pursuant to the provisions of Section 149 of the Bankruptcy Act being either: (1) the lst day of February 1986; or (ii) the 15th day of April 1986 2. Such other directions in such matters relating to the administration of the estate as the Court sees fit." pe The directions are sought pursuant to sub-s.134(4) which provides:- "The Trustee may at any time apply to the Court for directions in respect of a matter arising in connexion with the administration of the estate." 8. In the absence of any order of the Court the bankrupt would have been discharged by operation of law on 1 February 1986. The order of Toohey J. dated 13 January and apparently made pursuant to sub-s.149(12) extended the date for statutory discharge to the determination of the application dated 8 January or until further order. In Re Moore; Ex parte Nominal Defendant (1985) 61 ALR 217 at 219 Pincus J. was of the view that such an order could not be made:- "The question then becomes whether s.149(12) should be read as if it said: "....direct that the bankrupt shall not be discharged from bankruptcy by virtue of this section until the date specified in the direction." The submissions made by Miss Wadley would have me so read it. Mr Carrick's contention, on the other hand, is that the provision should be read quite literally: that I may make a direction under it only if the consequence is intended that s.149 have no operation henceforth. I have not been referred to any authority with respect to the point just mentioned but I have come to the conclusion that the contention made by Mr Carrick is correct, and that I cannot make what might be called a holding order under s.149(12), although I would, as I have indicated, do it if I had the power. Other suggestions were made, more faintly, as to sources of power. The only one which I should mention is that attention was drawn to s.30(1){b), which permits the court to make orders of an interlocutory kind. In my view, the provision does not assist here, because the order sought could not be described as one, "necessary for the purposes of carrying out or giving effect to this Act...". It would rather be one designed to circumvent the effect of s.149(1) which, as I have mentioned, achieves the result that there is an automatic discharge unless an order is made under the later sub-sections. I cannot read that provision - that is, s.149(1) - as subject also to a power to extend the 9. period of bankruptcy for a short or long time under s.30. It may be that there is a lacuna in the Act, but I do not think the method of meeting the difficulty suggested by the applicant 1s correct, nor have I been able to see that any other provision of the Act allows me to make an order extending the period of bankruptcy for a short time, pending the hearing of the application for leave to enter an objection." If 1t be the case that the approach taken by Pincus J. was correct then the order made by Toohey J. was beyond power. That is not to say that 1t was legally ineffective. An order of a Superior Court even when in excess of jurisdiction is voidable, not void, and is valid until set aside - Wilde -v- Australian Trade Equipment Co. Pty. Ltd. (1981) 145 CLR 590 AT 602, Posner ~-v- Collector for Inter-State Destitute Persons (Vic.) (1946) 74 CLR 461 at 489, Cameron -v- Cole (1944) 68 CLR 571 at 590. Regardless, therefor, of whether it was in excess of jurisdiction the order of Toohey J. is to be treated for all intents and purposes as a valid order. The Court has power under s.37 of the Bankruptcy Act to rescind, vary or discharge its own orders. I am not invited to take that step with respect to the order of Toohey J. And even if I were to be so invited I have grave doubts as to the applicability of the section. The order, in accordance with its own terms, ceased to operate upon the dismissal of the substantive application. 10. I do not consider that I am otherwise empowered to review or pass upon the guestion whether the order was within power. As at 1 February 1986 and independently of the order made by Toohey J. Mr Heelan was denied his statutory discharge because of the further interlocutory order made by Muirhead J. on 30 January. His Honour''s power to make that order derives from sub-section 149(8) and does not seem to be in dispute. In Re Moore (supra) Pincus J. at 218 seemed to accept the validity of such an application of the sub-section. Of importance for the present case is the effect of the later order made by Muirhead J. on 15 April setting aside that of 30 January. That effect must be gauged from the terms of the order which are to be read in the light of the statutory power which is its source. The Court has an express power under s.37 in the following terms:- ~ amare = rp noo we ee ape ry a mqeyee- ll. "37(1) Subject to sub-sections (2) and (3), the Court May rescind, vary or discharge an order made by it under this Act or suspend the operation of such an order. (2) The Court shall not, after a sequestration order has been signed and sealed as provided by the Rules, rescind or suspend the operation of the order. (3) The Court shall not, after an order for the administration of the estate of a deceased person under Part XI has been signed and sealed as provided by the Rules, rescind or suspend the operation of the order." His Honour did not, on 15 April, use the language of rescission, variation or discharge. Instead he "set aside" the earlier order. The term "set aside" in the relevant sense as defined in the Shorter Oxford English Dictionary means:- "(a) To put on one side. (b) To discontinue the performance or practice of. (c) To dismiss from one's mind, abandon the consideration of. (d) To reject or throw over as being of no value, cogency or pertinence; to overrule. (e}) To discard or reject from use or service, in favour of another. (£) To annul, quash, render void or nugatory. Chiefly law." The term has appeared in many statutory contexts particularly in relation to the power of appeal courts to quote "quash" or "set aside" convictions. In Commissioner for Railways (NSW) -v- Cavanough (1935) a 53 CLR 220, 225, Rich, Dixon, Evatt and McTiernan JJ. described - the effect of quashing and setting aside a conviction upon a statutory appeal:- ee Om 12. "The conviction is avoided ab initio. 'The judgment reversed is the same as no judgment'. {Per Coleridge J., R.V. Drury (1849) 3 Car. and K. at 199". In Lynch -v- Hargrave (1971) VR 99 McInerney J. considered the effect of an order setting aside certain traffic convictions for which the offender's licence had been cancelled. At issue period of was his liability to conviction for driving during the cancellation. The Court concluded that the order setting aside the conviction had the result that there was no order cancelling the licence and that therefore the information for driving under cancellation had been rightly dismissed by the Magistrate at first instance. following aside" :- In the course of the judgment His Honour made the general comments at page 105 concerning the term "set "The phrase 'to set aside' is a phrase which occurs ina great variety of legal contexts, e.g. setting aside awards of arbitrators, setting aside bankruptcy notices, setting aside conveyances or other transactions proved to have been induced by misrepresentation and so on. It 1s a phrase also used in connexion with setting aside judgments given in default of appearance or pleading or given in excess of jurisdiction. Although in some instances the transaction ultimately set aside is in the eyes of the law valid, though defeasible, until set aside, it is, when set aside, of no effect whatever." In my opinion His Honour's choice of the phrase "set aside" discloses an intention to annul his earlier order. 13. His power to do that derives from the power conferred on the Court by s.37 to "rescind" an earlier order. The term "rescind" 1s defined in the relevant sense in the shorter Oxford English Dictionary as:- "to abrogate, annul, repeal." The order had the effect that the extension of the life of the objection of the Commissioner for Taxation beyond 1 February 1986 was annulled. That is to say, the order was retro- active in its operation. On that basis the only bar to the bankrupt's discharge at 1 February was the order of Toohey J. made on 13 January. That order' was never rescinded. Its operation terminated on 15 April with the dismissal of the substantive application. Notwithstanding the question as to whether his Honour had power to make that order, it was and remains a valid order unless and until avoided. In the circumstances therefore and by way of direction to the Official Trustee I will declare that the bankrupt was discharged from his bankruptcy pursuant to s.149 of the Bankruptcy Act 1966 on 15 April 1986. 14. There is one other matter on which I should comment. In his affidavit in support of the present application the Official Receiver said at paragraph 14:- "Purther, I have received complaints from various persons relating to the actions and conduct of the Bankrupt between the period of the lst day of February 1986 to the 15th day of April 1986 which if proved would mean that the bankrupt had committed offences under s.269 of the Act should he not have been discharged until the 15th day of April 1986." I take it from that paragraph that the bankrupt may be liable to criminal prosecution for offences whose commission depends upon his continuing status as a bankrupt during the period which has been in issue in this case. The question whether or not the case is an appropriate one for the institution of criminal proceedings is one for the relevant prosecuting authorities. However, the bankrupt could be excused a sense of grievance 1f his exposure to prosecution were to depend upon the determination of the rather technical issues that underlie the determination of his status as a bankrupt between 1 February 1986 and 15 April 1986. That sense of grievance would I think be reinforced by the 'knowledge that the determination rested in part upon the validity of an interlocutory order which was arguably beyond power. 15. I certify that the preceding fourteen (14) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice French Associate: Cligebeth be nrcliterc Date: 2S Elyarc4 / 7f 7 Counsel: efor the Official Trustee: Mr L. Christensen instructed by Phillips Fox -for the Bankrupt: Mr R.G.S. Harrison instructed by Warren McDonald French & Harrison Date of Hearing: 26 February 1987 Date of Judgment: 28 April 1987