FEDERAL COURT OF AUSTRALIA O'Brien v Sheahan [2004] FCA 608 BANKRUPTCY – trustee – validity of appointment of registered trustee – consent to act – registered trustee filed Notice of Objection to discharge – whether at time of objection, registered trustee was in law trustee of bankrupt estate – certificate of appointment issued – registered trustee not notified in writing of appointment – whether registered trustee informed Official Receiver within 10 days of appointment of acceptance to act – whether formal defect invalidated appointment. Bankruptcy Act 1966 (Cth) Nilant v Macchia (2000) 104 FCR 238 cited Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 cited CHRISTOPHER JOHN O'BRIEN v JOHN SHEAHAN S 7006 of 2003 LANDER J ADELAIDE 14 MAY 2004 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 7006 OF 2003 BETWEEN: CHRISTOPHER JOHN O'BRIEN APPLICANT AND: JOHN SHEAHAN RESPONDENT JUDGE: LANDER J DATE OF ORDER: 14 MAY 2004 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The application is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 7006 OF 2003 BETWEEN: CHRISTOPHER JOHN O'BRIEN APPLICANT AND: JOHN SHEAHAN RESPONDENT JUDGE: LANDER J DATE: 14 MAY 2004 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 The application in this matter was heard simultaneously with a similar application in action number S7005 of 2003, Birdseye v Sheahan [2004] FCA 609. 2 The resolution of this matter will largely resolve the matters in dispute in the matter of Birdseye v Sheahan. 3 The applicant seeks: '1. A declaration that as at 3 December 1999 the Respondent was not the Trustee of the Applicant's estate. 2. A declaration that as at 6 December 1999 the Respondent was not the Trustee of the Applicant's estate. 3. A declaration that no valid Notice of Objection was served on the Applicant. 4. A declaration that no valid Notice of Objection was filed by the Official Receiver. 5. A declaration that as at 3 December 1999 there was not in existence a valid Certificate of Appointment in favour of the Respondent in relation to the Applicant's estate. 6. A declaration that the Certificate of Appointment in favour of John Sheahan dated 6 December 1999 is void and/or of no effect. 7. A declaration that the Respondent is not the Trustee in Bankruptcy of the Applicant's bankrupt estate. 8. A permanent injunction restraining the Respondent from further acting or purporting to act as the Trustee in Bankruptcy of the Applicant's bankrupt estate. 9. A declaration from Mr John Sheahan is deemed to have declined the appointment as the Trustee in Bankruptcy of the Respondent's bankrupt estate.' 4 The applicant filed a debtor's petition dated 25 October 1996. On 5 November 1996, on the petition of the Deputy Commissioner of Taxation, Mansfield J made a sequestration order in relation to the estate of the applicant. On the same day, again on the petition of the Deputy Commissioner of Taxation, a sequestration order was made in relation to the estate of the applicant's wife, Deborah Anne O'Brien. The Official Trustee was appointed trustee of both the applicant's estate and that of his wife. 5 On 6 December 1996 the applicant and his wife provided a Statement of Affairs to the Official Trustee. 6 In the ordinary course of events, in the absence of a valid notice of objection, both the applicant and his wife would have been discharged from bankruptcy at the end of a period of three years from the date on which they filed their Statement of Affairs: s 149(4) of the Bankruptcy Act 1966 (Cth) (the Act). The parties agreed that, in the absence of any objection, the applicant and his wife would have been discharged from bankruptcy at 12 midnight on 6 December 1999. 7 On 16 November 1999 the Deputy Official Receiver wrote to the respondent, Mr John Sheahan, a registered trustee in bankruptcy, in relation to the applicant's and his wife's estates. The letter makes it clear that there had been a telephone conversation between the Official Receiver's office and Mr Sheahan's office concerning the administration of the estates of the applicant and his wife, and that Mr Sheahan had indicated through his office that he was prepared to take over the administration of the estates. The Deputy Official Receiver wrote: 'I confirm instructions for you to call a meeting of creditors as agent for the Official Trustee and until the meeting of creditors is held appoint you as my agent to assist in the investigations of the affairs of the bankrupt, identify assets and in consultation with me, safeguard same.' 8 The Deputy Official Receiver advised Mr Sheahan that the bankrupts had lodged their Statements of Affairs on 6 December 1996 and 'would be due for discharge on 7 December 1999 unless an objection to discharge was lodged'. The Deputy Official Receiver advised Mr Sheahan that he believed that grounds existed to lodge an objection to discharge of the applicant and he enclosed a proforma for Mr Sheahan's assistance. 9 The Deputy Official Receiver suggested that a meeting of creditors should be held to consider the transfer of the administration to Mr Sheahan. The Deputy Official Receiver wrote: 'Unless you feel that in this instance I should attend the meeting I am content for you or a member of your staff to chair the meeting which can be held in your office. Please advise who you intend to chair the meeting so that I can issue a separate authority to represent the Official Trustee. As I don't intend to attend the meeting I am content for the notice to creditors to include a statement that I recommend your appointment as trustee.' 10 In a letter dated 12 November, the respondent confirmed that he wished to take over administration of the estates of both the applicant and the applicant's wife. He accepted the terms of the agency detailed in the earlier letter. 11 On 25 November 1999 Sheahan Coope, a firm of which the respondent is a partner, circulated a notice to creditors of the bankrupt estates of the applicant and his wife calling a meeting of creditors in their estates for 11.00 am on 2 December 1999. The purpose of the meeting was to enable the relevant creditors to consider appointing Mr Sheahan as trustee of the estates of the applicant and his wife. 12 In that notice, Mr Sheahan drew to the creditors' attention that the bankrupts had filed their Statements of Affairs on 6 December 1996. He detailed the liabilities of each of the bankrupts as at that date. The creditors were advised that, unless an objection was entered, both bankrupts would be due for discharge on 7 December 1999. 13 On 1 December 1999 the Deputy Official Receiver appointed Mr Lock, one of Mr Sheahan's partners, to represent the Official Trustee at the meeting to be held on 2 December 1999. 14 On 1 December 1999 Mr Sheahan executed a Consent to Act as Trustee of the joint and separate estates of Christopher John O'Brien and Deborah Anne O'Brien. The consent appears to contemplate that his appointment was made pursuant to s 156A of the Act whereas, in fact, the impugned appointment was purportedly made under s 157. 15 The creditors meeting was held on 2 December 1999 and a resolution was carried that 'John Sheahan be appointed as trustee of the bankruptcy of Christopher John O'Brien and Deborah Anne O'Brien in place of the Official Trustee'. 16 On 3 December 1999 the respondent wrote to the applicant advising him that, at the meeting held on 2 December 1999, it was resolved that the respondent be appointed trustee of the applicant's estate in place of the Official Trustee. 17 The respondent wrote: 'As you are probably aware, you are due to be automatically discharged from bankruptcy on 7 December 1999. I have formally objected to your discharge on this date and have enclosed a copy of the "Notice of Objection to Discharge" that I filed with the Official Receiver.' 18 I set out the notice in its entirety: 'Bankruptcy Act 1966 NOTICE OF OBJECTION TO DISCHARGE Bankrupt District of the ) No: A11/2167/96/7 State of South Australia ) I, John Sheahan, trustee of the bankrupt estate of Christopher John and Deborah Anne O'Brien, object to the discharge of Christopher John O'Brien of 54 Dutton Terrace, Medindie, South Australia from bankruptcy pursuant to Section 149B of the Bankruptcy Act, 1966. 1. I object on the grounds that: a) Mr O'Brien may be managing a company whilst a bankrupt b) Mr O'Brien has not complied with certain requests for information. c) Mr O'Brien has not made full and proper disclosure of his income, assets and liabilities in his Statement of Affairs. 2. I rely on the following evidence: a) The Australian Securities & Investments Commission are currently investigating the affairs of Mr O'Brien and various associated parties, including Celmesia Pty Ltd, the Celmesia Trust and Architectural Engineering Pty Ltd. b) Mr O'Brien owns the following assets that were discussed at a meeting with a representative from the Official Trustee's office that don't appear to have been realised nor disclosed on the Statement of Affairs:- ▪ property at 8 Nelson Street, Stepney ▪ two more properties at Nelson Street, Stepney ▪ 1,7 and 9 Lewis Street, Stepney (Apparently these properties are all mortgaged to IOOF. The properties were worth $800,00 - $900,000 and only $600,000 was due to IOOF) ▪ Overdraft account with the National Australia Bank Limited ▪ Shareholdings in various companies ▪ Furniture and effects c) Mr O'Brien has failed to comply with requests from the Official Trustee that he provide details in relation to his income and other assets. The following attached correspondence has been sent to Mr O'Brien without reply:- ▪ letter dated 30 January 1998 requiring details in relation to Mr O'Brien's income. ▪ letter dated 27 May 1998 asking for a reply to the letter of 30 January 1998. ▪ letter dated 13 May 1999 again requiring details in relation to Mr O'Brien's income. This letter also requires details in relation to related parties Celmesia Pty Ltd and the Celmesia Trust. ▪ letter dated 4 August 1999 asking for a reply to the letter of 13 May 1999. This letter also requests details in relation to another related party Architectural Engineering Pty Ltd. 3. The reason for this objection is to enable me to properly investigate and report on the matters detailed above and further investigate the possibility of recovering assets for the benefit of creditors. If this objection is upheld, it will have the effect of extending the bankruptcy to 7 December 2000. DATED this day of December 1999. (signed) JOHN SHEAHAN Trustee NOTE: If you dispute the grounds upon which the objection was lodged you may apply to the Inspector General for a review of the decision to lodge an objection and/or apply to the Administrative Appeals Tribunal for a review of the decision.' 19 The respondent could only have objected to the applicant's discharge on 3 December 1999 if the respondent was then the trustee of the applicant's estate. He could only have been the trustee of the applicant's estate if he had been appointed in conformity with s 157 of the Act. 20 The applicant claims in an affidavit sworn by him that: '16. I have been informed by my solicitor that he caused the official file of my bankrupt estate held by ITSA to be searched in relation to the letter and Notice of Objection dated 3 December 1999. No letter or Notice of Objection dated 3 December 1999 appears to have been lodged with the Official Receiver. There are no documents which comply with section 157(1) or 157(2). Consequently, there appears to be no Certificate of Appointment by the Official Receiver as a result of such steps having been taken. 17. I have been further informed by my solicitor, Richard Dunstone Townsend, that a search of the Official Trustee's file reveals that on 6 December 1999 a facsimile was sent to the Official Receiver's office at 11.57 am. The facsimile contained a document entitled "Notice of Objection to Discharge" and was dated 6 December 1999. The date of extension was shown as being 7 December 2001. A copy of the letter is annexed hereto and marked "CJOB12".' 21 The document exhibited to the applicant's affidavit as 'CJOB12', which is a Notice of Objection to Discharge, is again in the same form as the previous document, except in this case it is dated 6 December 1999 and the last paragraph reads: 'If this objection is upheld, it will have the effect of extending the bankruptcy to 7 December 2001.' 22 The applicant's affidavit continues: '18. There was a further facsimile sent to the Official Receiver on 6 December 1999. The further facsimile was sent at 14.11pm on that day. The fax had annexed to it a document entitled "Consent to Act as Trustee" bearing the date 1 December 1999. A copy of that facsimile and annexure is annexed hereto and marked "CJOB13".' 23 The document exhibited to the applicant's affidavit and marked 'CJOB13' consists of a communication from Anthony Lehmann said to have been sent at 2.15 pm, but with a facsimile header which shows that it was sent at '14:11' with a document entitled 'Consent to Act as Trustee'. 24 That document is dated 1 December 1999. It is apparently signed by Mr Sheahan and purports to register his consent to be the trustee of 'the joint and separate estates of those persons [referring to the applicant and his wife], being a successive trustee under section 158 of the Act'. That is a copy of the document to which I referred earlier. I infer from the facsimile header that on 6 December 1999 the respondent's office sent to the Official Receiver a copy of the Consent to Act as Trustee dated 1 December 1999. 25 The facsimile, which enclosed the notice, stated: 'The amended notice is to follow later today. Any problems with the consent please advise me.' 26 There is no doubt that the amended notice, which was to follow later that day, was the amended Notice of Objection. 27 The Official Receiver's file shows that a further 'Notice of Objection to Discharge' was received at 14:35 pm on 6 December 1999. That Notice of Objection was accompanied by a facsimile which read: 'Amended objection, as requested'. 28 The document is in the same form as the previous document sent on 3 December 1999 but this time is dated 6 December 1999 and, in this case, the last paragraph reads: 'If this objection is upheld, it will have the effect of extending the bankruptcy to 7 December 2004.' 29 On 6 December 1999 the Official Receiver issued a Certificate of Appointment of John Sheahan as the registered trustee of the estate of Christopher John O'Brien recording his appointment on 2 December 1999. 30 The respondent tendered an extract from the National Personal Insolvency Index, which shows that the date the Notice of Objection was filed and recorded was 6 December 1999. 31 On 7 December 1999, Sheahan Coope wrote to the applicant in the following terms: 'I refer to my letter of 3 December 1999. Please find enclosed an amended Notice of Objection to Discharge. You will note that the only amendment to this objection is that the date for extending the bankruptcy is now 7 December 2004. A copy of this amendment has been filed with the Official Receiver.' 32 Section 157 of the Act provides for the appointment of a registered trustee in substitution for the Official Trustee. Relevantly, it provides: '157(1) Where a debtor becomes a bankrupt, the creditors may, if the Official Trustee is the trustee of the estate of the bankrupt, by resolution, at a meeting of creditors, appoint a registered trustee to the office of trustee of the estate of the bankrupt in place of the Official Trustee. 157(2) The person (in this section referred to as the "relevant trustee") who is the trustee of the estate of a bankrupt at the time of an appointment, under subsection (1), of a registered trustee as the trustee, or as one of the trustees, of the estate shall, as early as practicable, notify the registered trustee, in writing, that he or she has been so appointed. 157(3) If the registered trustee appointed under subsection (1) informs the relevant trustee in writing, within 10 days after he or she is notified by the relevant trustee of his or her appointment, that he or she accepts the office, the Official Receiver shall issue to him or her a certificate of appointment. 157(4) The appointment of a trustee under subsection (1) takes effect from and including the date of the certificate of appointment issued by the Official Receiver. 157(5) If the registered trustee appointed under subsection (1) does not so inform the relevant trustee within 10 days after he or she is notified by the relevant trustee of his or her appointment, he or she shall be deemed to have declined the appointment, and the relevant trustee shall, unless the resolution of creditors has made provision for the contingency, convene another meeting of creditors as soon as practicable for the purpose of appointing, under subsection (1), another registered trustee to the office of trustee.' 33 In this case, Mr Sheahan executed a Consent to Act as Trustee of the joint and separate estates of the applicant and his wife on 1 December 1999 before the creditors' meeting which was held on 2 December 1999. The Official Trustee (the 'relevant trustee') did not notify Mr Sheahan (the 'registered trustee') in writing that he had been appointed to act as trustee. 34 More importantly, it is the applicant's contention that Mr Sheahan did not inform the relevant trustee in writing within 10 days after his appointment that he would accept the office. 35 Shortly put, it is the applicant's contention that, because the registered trustee (Mr Sheahan) did not inform the relevant trustee within 10 days after he had been notified by the relevant trustee of his appointment, s 157(5) applies and Mr Sheahan 'shall be deemed to have declined the appointment'. 36 It was argued that, as at 6 and 7 December 1999, because Mr Sheahan had not by then accepted the appointment, the Official Trustee remained trustee and it was only the Official Trustee who could then have objected to the applicant's discharge from bankruptcy. 37 Because the Official Trustee had not objected to the applicant's discharge from bankruptcy before 7 December 1999, it was said that the applicant was discharged from bankruptcy on 7 December 1999. 38 As part of those contentions, the applicant argued that the Certificate of Appointment, which issued on 6 December 1999, was a nullity and not effective to constitute Mr Sheahan as the trustee in bankruptcy of the applicant's estate. 39 The procedure which the Official Receiver and Mr Sheahan adopted was not as a result of any mistake on either party's part. 40 In a letter dated 5 June 2003 and sent to the applicant's solicitor, the Official Receiver for the district of South Australia wrote: '4. The practice of this office in notifying a trustee of their appointment as trustee under the provisions of the Bankruptcy Act, 1966 is through a "Certificate of Appointment". In this instance, that certificate was dated 7 July 2000. This document is on the public register and can be obtained for the requisite fee. 5. The practice of this office in having an administration transferred to another trustee is to obtain the consent of registered trustee who is willing to become the trustee and then engage them to act as the Official Trustee's agent in the calling of a meeting of creditors for this purpose. In this instance the "Consent to Act as Trustee" was dated 26 April 2000. 6. Upon being formally advised that the meeting has been held and resolution passed, a "Certificate of Appointment" is then issued.' 41 That was precisely the procedure which was adopted in this case. 42 The applicant argues that the Official Trustee and the respondent failed to do the following: 1. The Official Trustee failed to notify Mr Sheahan in writing that he had been appointed, contrary to s 157(2). 2. Mr Sheahan failed to inform the Official Trustee in writing within 10 days after he had been notified of his appointment that he accepted the office, contrary to s 157(3). 43 The applicant argued that the requirements in s 157 are not merely procedural but are substantive. That is because of the operation of s 157(5) which deems the consequence of failure of the appointed registered trustee to respond to the Official Receiver's notice to be declining the appointment. 44 In my opinion, the applicant's contention that the respondent did not accept the office within 10 days fails on the facts. 45 The respondent signed a Consent to Act as Trustee of the joint and separate estates of the applicant and his wife on 1 December 1999. That was before the resolution passed appointing him as trustee. Assuming that the Consent to Act as Trustee was ineffective when signed on 1 December 1999 because the creditors had not then resolved to appoint the respondent as trustee, it was cured in my opinion when the respondent's office sent a copy of the consent to the Official Receiver on 3 December 1999. That constituted the communication in writing within 10 days of the respondent's acceptance of the office: s 157(3). If that is right, the applicant must rely on some other default, on the part of the Official Receiver or the respondent, to argue that the Certificate of Appointment could not issue because the respondent was not validly appointed. 46 The applicant argued that the other default was the failure of the Official Receiver to verify in writing to the respondent that he had been appointed: s 157(2). 47 When a court makes a sequestration order against a debtor's estate, the property of the bankrupt vests forthwith in the Official Receiver or, if at the time of the bankruptcy, in a registered trustee, if that registered trustee becomes the trustee of the estate by virtue of s 156A of the Act: s 58. 48 Division 1 of Part VIII of the Act provides for a procedure for the registration of persons as registered trustees. 49 Section 156A provides for a procedure for registered trustees to consent to act as the trustee of the estate of a debtor in the event that the debtor becomes bankrupt: s 156A(1)(a). A similar procedure exists for a registered trustee to become the trustee of the estate of joint debtors if they become bankrupt: s 156A(1)(b). 50 Section 156A(3) provides: 'Where: (a) at the time when a debtor becomes a bankrupt, a registered trustee has, under subsection (1), consented to act as the trustee of the estate of the debtor and the consent has not been revoked, the registered trustee becomes, at that time, by force of this subsection, the trustee of the estate of the bankrupt; and (b) at the time when 2 or more debtors, being members of a partnership or joint debtors who are not in partnership with one another, become bankrupts, a registered trustee has, under subsection (1), consented to act as the trustee of the joint and separate estates of those debtors and the consent has not been revoked, the registered trustee becomes, at that time, by force of this subsection, the trustee of the joint and separate estates of those bankrupts.' 51 There is a procedure under s 156A whereby a creditor may challenge the appointment of a registered trustee as trustee of the estate of a bankrupt (s 156A(4)), but there is no procedure which allows the bankrupt to mount a challenge to that appointment. If the creditor successfully challenges the registered trustee's appointment, the Court can remove the trustee from office and appoint another person as trustee: s 156A(5). That appointment takes effect from the date of the appointment: s 156A(7). 52 The combined effect of s 58 and s 156A is that, on the making of a sequestration order, a bankrupt's estate either vests in the Official Trustee or, if a registered trustee has consented to act as trustee prior to the sequestration order, in that registered trustee. The effect of s 156A(3) is that if a registered trustee has consented to act as trustee of the debtor's estate and the consent has not been revoked, the registered trustee must become the trustee of the debtor's estate. 53 Upon the making of the sequestration order, the trustee must forthwith take possession of all of the bankrupt's property which is capable of manual delivery: s 129. The trustee may apply to the Court for the issue of a warrant if the trustee has reasonable grounds for believing that a bankrupt's property is in premises: s 130. 54 The scheme of the Act is to ensure that there will always be in place a trustee of the bankrupt's estate once a sequestration order is made and until the bankrupt is discharged from his or her bankruptcy,. 55 Whether it will be the Official Trustee or a registered trustee depends upon whether a registered trustee has signed and filed a Consent to Act with the Official Receiver. 56 Section 160 provides that, if at any time there is no registered trustee of the estate of the bankrupt, the Official Trustee, by virtue of s 160 itself, is the trustee of the estate. 57 A registered trustee may cease to hold office and, in those circumstances, the creditors are empowered to appoint a trustee in succession to the previous registered trustee: s 158(2). Moreover, creditors are empowered by s 159 to fill any vacancy in the office of trustee. However, if the registered trustee ceases to hold office for any reason, the Official Trustee, by force of s 160, becomes the trustee of the estate until the creditors exercise their powers under s 158 or s 159 to fill the vacancy. 58 Thus, there is in place a scheme which accommodates a situation where a registered trustee who has consented to assuming office under s 156A subsequently needs to be replaced. 59 As I have stated, if no registered trustee has consented to act as trustee pursuant to s 156A, then the Official Trustee becomes the trustee of the estate of the bankrupt upon the sequestration order being made. 60 Section 157 provides the procedure for the appointment of a registered trustee in lieu of the Official Trustee. 61 Section 157 only applies in circumstances where the Official Trustee has assumed office when the sequestration order has been made and has not been replaced as trustee by a registered trustee. It has no application where a registered trustee becomes the trustee by operation of s 156A. 62 Section 159 applies where a registered trustee has at some time become trustee of the estate of the bankrupt and the office has become vacant. Notwithstanding that the Official Trustee becomes trustee by virtue of s 160, the procedure then to be adopted by the creditors is that in s 159. 63 For that reason, as I have already said, s 157 only applies in circumstances where the Official Trustee first became trustee by virtue of s 58 of the Act. 64 Section 157 empowers the creditors, if the Official Trustee is the trustee of the estate of the bankrupt, to resolve to appoint a registered trustee in lieu of the Official Trustee: s 157(1). Section 157(1) is the substantive subsection of that provision. The subsections that follow provide for the steps to be taken after the creditors have exercised the right given by s 157(1). The conditions precedent to the creditors' exercise of the right given by s 157(1) are that the debtor is a bankrupt and the Official Trustee must have been appointed trustee of the bankrupt's estate by virtue of s 58 of the Act or become trustee by force of s 160 of the Act. If those conditions are met, the creditors can exercise the right given them by s 157. They do that by holding a properly convened meeting and resolving to appoint a registered trustee in the office of trustee of the estate of the bankrupt in place of the Official Trustee. The subsections that follow provide for the machinery to implement that resolution. The power of appointment is given to the creditors at a duly convened meeting. The steps which are taken after the exercise of the power do not involve the subsequent exercise of any power. 65 For some reason, which I confess escapes me, the draftsperson has redefined the Official Trustee to be the 'relevant trustee' in s 157(2). 66 In any event, that subsection requires the Official Trustee to notify the registered trustee that he or she has been appointed by a resolution of the meeting of creditors as the trustee of the estate of the bankrupt: s 157(2). 67 Section 157(2) can be contrasted with the procedure in s 156A. Section 157(2) does not contemplate that the registered trustee will indicate that he or she consents to an appointment before the meeting of creditors. Indeed, s 157(2) contemplates that the registered trustee may not be advised of his or her impending appointment prior to the resolution of the meeting of creditors. 68 It seems to me, however, that the procedural implications in s 157(2) do not mean that a registered trustee could not indicate to the Official Trustee or the creditors, prior to the meeting of creditors being held, that he or she consented to the meeting resolving to appoint him or her to the office of trustee of the bankrupt's estate. Indeed, I would have thought, that usually, that would be the practical way to approach the appointment of a registered trustee in place of the Official Trustee. It would be unusual that the creditors would meet and appoint a person as registered trustee without first ascertaining the availability of that person to act as trustee of the estate of the bankrupt. 69 Section 157(2) is in its form in case the meeting of creditors resolves to appoint a registered trustee to act as trustee of the estate of the bankrupt in circumstances where the creditors have not first ascertained the availability of that person to so act. 70 In my opinion, the Official Trustee would not need to comply with s 157(2) if, in fact, the registered trustee had previously consented to the appointment and was aware of the resolution of the meeting of creditors or was present at that meeting. The obligation to give that notice under s 157(2) only arises where the Official Trustee believes it is necessary to give notice to the person whom the creditors have resolved to appoint as trustee. 71 For those reasons, the applicant's alternative contention that the Official Receiver failed to comply with the Official Receiver's obligations under s 157(2), and therefore the respondent has not been regularly appointed, must fail. 72 Indeed, that would be enough to dispose of this matter. However, in case I am wrong about that, I should also consider the applicant's alternative contention, which assumed that the sending of the Consent to Act as Trustee to the Official Trustee on 3 December 1999 did not satisfy the requirements of s 157(3). 73 Section 157(3) permits the Official Receiver to issue a Certificate of Appointment if the registered trustee, who has been appointed under subsection (1), has informed the Official Trustee in writing, within 10 days after the appointment, that the registered trustee will accept the office. 74 The obligation is upon the registered trustee to inform the Official Trustee of his or her acceptance of the office and to do so within 10 days. If that occurs, the Official Receiver is then obliged to issue a Certificate of Appointment. 75 It goes without saying, that the Official Trustee and the Official Receiver perform quite separate functions under the Act, although the Official Receiver for a district may exercise the powers and functions of the Official Trustee: s 18(8). 76 However, it must not be overlooked that the positions are quite separate, and the functions which they perform and the powers which they exercise are quite different. 77 Section 157(3), therefore, contemplates some notification by the Official Trustee to the Official Receiver of the acceptance by the registered trustee of his or her appointment. If there is no such communication, then the Official Receiver could not know whether to issue the Certificate of Appointment. 78 It was argued by the applicant that s 157(3) had to be complied with in its form otherwise a Certificate of Appointment could not issue. The applicant contended, therefore, that Mr Sheahan needed to inform the Official Trustee in writing, within 10 days, that he had accepted the office. The applicant contended that, if there was no such notification in writing within that time, then, the Official Receiver could not issue the Certificate of Appointment. 79 The applicant contended that that was the proper construction of s 157(3) because that is literally what it said and because of the provisions of s 157(5). 80 On the other hand, the respondent argued that, if the Official Receiver was aware that the registered trustee was prepared to accept his or her appointment, the Official Receiver could issue a Certificate of Appointment under s 157(3) which would take effect from the date of the Certificate under s 157(4). The respondent argued that s 157(5) only applied in circumstances where the registered trustee was not aware of his or her impending appointment and where, following notice by the Official Trustee under s 157(2), the registered trustee had not replied and indicated that he or she assented to the appointment. 81 There is no authority which assists in deciding between the two arguments. This matter involves a construction of s 157, to be determined by the terms of the section, its purpose within the Act and the Act itself. 82 The applicant's contention requires a strict compliance with the literal terms of the section. The respondent's contention allows for the issue by the Official Receiver of a Certificate of Appointment where the Official Receiver is otherwise satisfied that the registered trustee is prepared to accept the appointment resolved upon by the meeting of creditors. 83 The purpose of the subsections which follow s 157(1) is to provide a machinery for the orderly transfer of the responsibilities of trustee from the Official Trustee to a registered trustee. They do that by ensuring that there is no period where the Official Trustee is unsure whether he or she has the responsibility of trustee, or where the registered trustee might be unsure as to whether he or she has been appointed. 84 The subsections provide the machinery by which the registered trustee may be appointed and receive his or her Certificate of Appointment, at the latest, 10 days after the resolution of the meeting of creditors. 85 The subsections ensure that the resolution of the meeting of creditors will be acted upon within a specified time frame, ensuring the creditors are not left in a state of uncertainty. 86 Section 157 is in its form to empower the bankrupt's creditors. It provides the creditors with the right to choose their own trustee for the bankrupt's estate. The purpose of the subsections which follow is to ensure that creditors' wishes are not frustrated by the inaction of the Official Trustee or, more particularly, the proposed registered trustee. 87 In those circumstances, the respondent's contention that the Certificate of Appointment may issue, even where there has not been strict compliance with the terms of s 157, has some attraction. Of course, as the respondent conceded, the argument could never apply where a registered trustee did not indicate one way or the other, within the period of 10 days, whether the registered trustee accepted the appointment. 88 Another matter that suggests that the applicant's contention gives rise to too narrow a construction of the Act arises from the terms of s 157(5). 89 Section 157(5) does not refer back to s 157(3), which is important because s 157(5) only deems the registered trustee to have declined the appointment if the registered trustee does not advise the Official Trustee within 10 days after he or she has been notified by the Official Trustee of his or her appointment. Section 157(5) would not then operate if the registered trustee had advised the Official Trustee within 10 days orally that he or she accepted the appointment. On the other hand, an oral acceptance would not be sufficient under s 157(3). 90 I think that suggests that strict compliance with s 157(3) is not required and that a registered trustee could make it known orally to the Official Trustee that he or she accepted the appointment. If there were an oral communication of that kind, s 157(5) would not operate to deem the registered trustee to have declined the appointment because it only operates as a deeming provision in its own terms. 91 I think the respondent's contention is correct. I think s 157 provides a machinery and a procedure for the orderly transition of the office of trustee of the estate of the bankrupt from the Official Trustee to the registered trustee, but it does not require a strict compliance by either the Official Trustee or the registered trustee with the terms of the section before the Official Receiver can issue to the registered trustee a Certificate of Appointment. 92 Subsection 157(5) is in its terms in case the proposed registered trustee simply does nothing. It empowers the creditors, if they have not provided for the contingency of appointing another registered trustee as trustee of the bankrupt's estate in case the first registered trustee declines the appointment, to call another meeting and resolve to appoint some other registered trustee as trustee of the bankrupt's estate in the place of the Official Trustee. 93 I agree with the respondent's contention that the subsections that follow s 157(1) are facultative. The deeming provision in s 157(5) is to provide a state of certainty to allow the creditors to proceed to a further resolution. The purpose of s 157(5) is not to frustrate, but rather to further, the creditors' wishes. To construe s 157(5) in the way propounded by the applicant would be contrary to the purpose of the section as a whole. 94 The respondent contended, in the alternative, that if I accepted the applicant's argument on the construction of s 157, s 306 would apply to validate the proceeding. Section 306 provides: '306(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court. 306(2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a deed entered into under this Act does not invalidate an act done by him or her in good faith.' 95 Because I have rejected the applicant's contentions I, strictly, do not need to consider this alternative contention. 96 However, in case the matter needs to be reconsidered, I should shortly state my opinion. 97 'Proceedings' in s 306 is not confined to a court proceeding: Nilant v Macchia (2000) 104 FCR 238. The question is whether it applies to s 157 and validates an appointment of a registered trustee which would otherwise be invalid by reason of a formal defect or irregularity. 98 I think that, even if the applicant's contentions as to the construction of s 157 are right, subject to the question of substantial injustice, s 306 could apply to a proceeding under s 157. The proceeding under s 157 is the resolution of the creditors appointing the registered trustee a trustee of the bankrupt's estate in place of the Official Receiver. The formal defects in the implementation of that resolution are the failure by the Official Trustee to comply with s 157(2) and the failure by the registered trustee to comply with s 157(3). The formal defects or irregularities are the failure by those two persons to comply with the strict terms of the subsections even though they both intended to implement the resolution of the creditors. It must be remembered that their functions are to put in place the resolution of the creditors. Their functions are facultative. Section 306 applies to validate those formal defects subject, of course, to the question of substantial injustice: Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71. 99 The applicant argued that if his construction of s 157 were correct, and s 306 could otherwise validate formal defects, the applicant has suffered a 'substantial injustice … by the defect or irregularity and … the injustice cannot be remedied by an order of [the] court'. 100 In my view, that argument is misconceived. The substantial injustice must be caused by the defect or irregularity. The applicant assumed that Mr Sheahan had been appointed his trustee in place of the Official Trustee. He therefore suffered no injustice at all by reason of the assumed defect or irregularity. If the creditors' resolution had been acted upon in accordance with the literal obligations in ss 157(2) and (3), Mr Sheahan would have been appointed as trustee of the applicant's estate. He thereafter would have done exactly what he did. The applicant can show no injustice at all. 101 For those reasons, even if I accepted the applicant's argument in relation to s 157, I would hold that s 306 applies to validate the formal defects and irregularities caused by the failure both of the Official Trustee and Mr Sheahan to strictly comply with s 157. 102 The application is dismissed. I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate: Dated: 14 May 2004 Counsel for the Applicant: M Abbott QC Solicitor for the Applicant: Townsends Counsel for the Respondent: P McNamara QC Solicitor for the Respondent: William Christie Date of Hearing: 17, 18 November 2003 Date of Judgment: 14 May 2004