FEDERAL COURT OF AUSTRALIA Shah v Global Financial Management Services Pty Limited [2004] FCA 626 BANKRUPTCY – annulment – discharge – no particular principles involved Bankruptcy Act 1966 (Cth) ABDUL KALIK SHAH AND MAZREEN FAIREEN SHAH v GLOBAL FINANCIAL MANAGEMENT SERVICES PTY LIMITED N 1617 OF 2001 CONTI J 18 MAY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1617 OF 2001 BETWEEN: ABDUL KALIK SHAH AND MAZREEN FAIREEN SHAH APPLICANTS AND: GLOBAL FINANCIAL MANAGEMENT SERVICES PTY LIMITED RESPONDENT JUDGE: CONTI J DATE OF ORDER: 18 MAY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Proceedings be stood over with liberty to restore on 7 days notice to the Associate of Conti J. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1617 OF 2001 BETWEEN: ABDUL KALIK SHAH AND MAZREEN FAIREEN SHAH APPLICANTS AND: GLOBAL FINANCIAL MANAGEMENT SERVICES PTY LIMITED RESPONDENT JUDGE: CONTI J DATE: 18 MAY 2004 PLACE: SYDNEY REASONS FOR INTERLOCUTORY JUDGMENT 1 The applicants in these proceedings, who are unrepresented, have applied to the Court by notice of motion of 4 March 2004 '… to set aside judgment for the claims made on 27 November 2001 and discharge them both from bankruptcy'. The matter was listed for at least a preliminary hearing on 19 March 2004. Before filing that notice of motion in the Court Registry, a form of purported notice of motion dated 2 March 2004 had been presented to the Registry, though apparently not formally accepted for filing, headed 'To Discharge from Bankruptcy', the same containing the following orders thereby sought (some corrections made): '[1] The appellants, Mr Abdul Khalik Shah and Mrs Nazreen Shah moves the above motion to the court, to set aside Judgement for the Claims made on the 27 November 2001 and discharge them from Bankruptcy. [2] The appellants have paid all the past creditors and the company Global Financial Services to whom money owed has been deregistered by the ASIC with effect from 18th February 2002. [3] The appellants previous payments to the Global Financial Services are attached. [4] The appellants pray to the Honourable Court to Please Discharge them from the Bankruptcy.' 2 The applicants were made bankrupt on 27 November 2001 by order of Federal Magistrate Driver, apparently at the instance of Global Financial Management Services Limited ('Global'), the above purported respondent. Application for early discharge of the applicants from bankruptcy had previously been made to the Official Receiver, and the applicants had received in response a letter dated 8 May 2003 from the Insolvency and Trustee Service Australia, New South Wales Branch, which omitting formal parts, reads as follows: 'Re: Your Bankruptcy Estate – NSW 6515/1/9 (A50) I note that you have repaid the creditors listed in the attached listing. Could you please clarify the transactions by advising the trustee the following: 1. The date when each of the creditor was paid; and 2. The method of payment (eg. By cheque, cash, direct deposit). Please forward copies of the receipt for each of the payment. Your response within fourteen (14) days would be appreciated. Should you have any queries, please do not hesitate to contact me on the number below.' 3 The annexure to that letter was a document headed 'List of Paid Creditors', reading as follows: 'LIST OF PAID PAST CREDITORS NO NAME OF CREDITORS DATE OF LOAN AMOUNT REMARKS 1 Advance/St George Bank 1994 $150,000.00 Paid off 2 National Bank 1992 $4,000.00 Paid off 3 Avco Finance 1994 $30,000.00 Paid off 4 Asanda Finance 1994 $20,000.00 Paid off 5 FAI Home Insurance 1995 $1,600.00 Paid off 6 Commonwealth Bank 1996 $2,000.00 Paid off 7 Citibank 1996 $4,000.00 Paid off 8 Radio rental 1997 $163.00 Paid off TOTAL AMOUNT PAID $211,763.00 9 ONLY CREDITOR 1998 $24,000.00 Amount disputed' REMAINING Global Finance 4 Later on 23 May 2002, Mr Shah wrote to the Official Receiver on 26 May 2003, in the following terms (some corrections made): 'This memorandum confirms our discussions between Joyce and Mr Abdul Khalik Shah of 13/5/2003. regarding the estate of Mr & Mrs A.K. Shah. I had stated to you that we had appealed against the decision of the Federal court (magistrate) and because our main Creditor Global Financial Services Ltd was Deregistered on the 18/02/2002. the Appeal has been indefinitely suspended. The following are the sequences of events that led to this legal confrontation, because when a Company gets Deregistered the debt owed by us "DIES WITH IT". This therefore automatically removes here from the burden as at the 27/11/2001. At the moment undue hardship has been placed upon us both regarding the status of our reputations in the community. We always believe that our contributions to the Australian society would be better understood once this misunderstanding and ALLEGED fraud by Global Financial Management Services is Brought to the proper Justice. The following documents from ASIC will assist you in assessing our problems because this clearly shows that the company had ceased it's operation in Australia 14 months before the 14/11/2001. Oue intentions now are to place before the Fedral Court a motion to reinstate the appeal. This may take a few more weeks. The following receipts are attached for your sightings and if there is anything else you would like to know please do not hesitate to ask. I am forwarding this letters to you through the Fax. If it is not clear let us know. Once again thank you very much.' 5 There has been no response from the Official Receiver placed before the Court. Subsequently by letter dated 23 May 2002, Mr Shah wrote to Australian Securities and Investments Commission on 23 May 2002 reading as follows: 'I visited your office on the 08/05/02 at level 8, 55 Market St Sydney regarding the Bussiness Registration of a Company, GLOBAL FINANCIAL MANAGEMENT SERVICES PTY LTD CAN 078497097 and obtained a detailed Company Extract. This extract was an important document which I presented to the Federal Court on the 20/05/2002. The background to the case is as follows. The company Global Financial Management Services Pty Ltd took out a bankruptcy proceedings against myself and my wife, and the petition was held on the 27/11/2001. Part of our defence was we had paid a lot of the money to the Company which was never deducted from the original loan of $13,286.00 given to us on the 08/06/1997. We also became suspicious when the Solicitors for the company were asked to show us the proper accounting details of all the payments we had made. We could not provide any form of evidence apart from the receipts we had kept. A Sequestration order was made against us on the 27/11/2001. We appealed to Federal Court Judge Conti that Because Global Financial Management Services Pty Ltd is no longer a registered company, they have been REMOVED form the Appeal process and that the Appeal to commence at later date to be decided. The Federal Judge Conti also requested that I obtain a detailed information on section 501 AB section 1 and why the company was deregistered under section 2. I have all the court documents available and humbly request for your sympathetic considerations. Please.' 6 Mr Shah has indicated to the Court that the response of ASIC was verbally to the effect as follows: 'Mr Zeke advised me that once a company gets deregistered their debts owing also dies with it. He feels that I am not asking him correctly what the court needs and has therefore humbly requested that if clear outline as to what is expected of the ASIC and what sort of assistance can Mr Shah be given.' 7 Tendered also by Mr Shah to the Court is an 'Official Company Extract' relating to Global Management Services Pty Ltd, which records that the company was deregistered on 18 February 2002, following 'strike-off action in progress', and that its principal place of business had ceased on 18 February 2002. The present dilemma facing Mr and Mrs Shah is the nature of the process available whereby they can be freed from their status of bankruptcy, in the context of the events which have happened. Upon the basis of the circumstances which they have placed before me, it is apparent that annulment of their respective bankruptcies would not be open to them to seek, because they acknowledge the existence of a number of creditors as at the time the sequestration order was made on 27 November 2001, other than the Respondent Global Financial Management Services Pty Ltd ('Global'), whose claim to indebtedness they dispute (whether wholly or partially is unclear). In that latter regard, the applicants have been unable to obtain an acquittance of any kind or to any extent from Global Finance. The fact that all those other creditors have been paid since the sequestration order in bankruptcy was made would not seem to provide per se a sufficiently viable course for annulment of bankruptcy, since payments appear to have been made after sequestration took place. Relief by way of annulment may be sought incidentally directly from the Court – see sections 153A, 153B and 154 of the Bankruptcy Act 1966 (Cth) ('the Act'), but annulment would not appear to be a viable course open to the applicants, because of the circumstances of significant indebtedness existing at the time the sequestration order in bankruptcy was made. 8 The only other course open to the applicants would therefore seem to be for them to apply for the early discharge of their bankruptcy by whatever appropriate process is open to them to that end, pursuant to Part VIII of the Act. By s 149(4) of the Act, a person who became bankrupt after 1991 is discharged at the end of the period of 3 years from the date when that person filed his or her statement of affairs. Given that such course has not apparently been undertaken, by reason of the events of 2003 which I have recorded, the s 149(3) course does not presently provide a viable means to the applicants to overcome their present dilemma. Accordingly the would seem to have no alternative but to seek the early discharge of their bankruptcy, pursuant to Division 3 of Part VII of the Act, before that may ultimately occur by effluxion of time. 9 By s 149ZF of the Act, the trustee in bankruptcy may determine that a bankrupt is eligible to apply for a discharge from bankruptcy if there are no disqualifying factors of the kind addressed by ss 149X to 149ZE of the Act. There is no evidence of any such disqualifying factors presently before me, but it is for the trustee in bankruptcy, at least in the first place, to determine the existence of the statutory factors of ineligibility, and this does not seem to have yet occurred. Sections 149ZF and 149ZG of the Act stipulate the procedures to be implemented following the application for discharge, being procedures which also do not appear to have yet been invoked, or at least adequately so. If those procedures are to be set in train, and the trustee's response to the application turns out to be unfavourable to Mr and Mrs Shah, the avenues of review would appear to be firstly a determination by the Inspector-General pursuant to sections 149ZH to 149ZL of the Act, and secondly an application to the Administrative Appeals Tribunal pursuant to s 149ZM. Only after those processes of review have been implemented would it appear that the jurisdiction of the Court could be invoked by Mr and Mrs Shah, subject to the possible qualification below. 10 That qualification would be declaratory relief initiated by Mr and Mrs Shah to the effect that in the events which have happened, namely the removal of Global from the corporate register, the indebtedness of the applicants to Global no longer exists, or else is no longer enforceable. There is some evidence already affirmatively available as to an absence of any enforceable debts of Mr and Mrs Shah, to which I have already referred. However before I could entertain the grant of any such declaratory relief, the applicants would need to provide the following to the Court: (i) up-to-date evidence that no steps have since been made to reverse the de-registration of Global which occurred on 18 February 2002, purportedly pursuant to s 601AB of the applicable companies legislation then in force; (ii) details of the names and addresses of the directors of Global Management last officially recorded; and (iii) evidence of notice having been given to those directors of the intention of the applicants to obtain their discharge from bankruptcy; of course any responses to such notices would need to be furnished. 11 The only declaratory relief which the Court would seem to be competent to grant would be to the effect that any alleged indebtedness of the applicants to Global is not provable in bankruptcy, by reason of the events which have happened since the indebtedness was incurred (to the extent of course that there is any conceded indebtedness). 12 Copies of these reasons should be furnished to Ms Joyce Fu of the Official Receiver's office, so that the Official Receiver may appear in the present proceedings, in the context in particular of any declaratory relief which might be hereafter sought by Mr and Mrs Shah. I would add that the applicants' interests would be best served by retaining a solicitor who practices in bankruptcy matters, and who can represent them in any further proceedings. There are limits to which the Court can reasonably and responsibly assist unrepresented litigants, where the interests of other persons or entities are actually or potentially or conceivably involved, irrespective of the hardship to which unrepresented litigants may be exposed. I make that observation in the light of the difficulties and dilemmas which the applicants have been apparently encountering. 13 A copy of these reasons should be provided forthwith to the Official Receiver. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 18 May 2004 Applicants appeared in person Date of Hearing: 25 March 2004 Date of Judgment: 18 May 2004