Cameron v Cole

elfare of her parents. Her parents lived in Lebanon in a house owned by her husband and to secure their continued occupancy of the house he transferred to his wife ownership of the house in Lebanon in return for the half share in the family home in Lidcombe. In November 1994 attempts were made to enforce the judgment debt and, to that end, a Sheriff's Officer entered the home of the applicant to give effect to a writ of execution. At that time a conversation took place between the applicant and the Sheriff's Officer, as a result of which the applicant was led to believe she could best protect her interests by filing a debtor's petition. She deposed to the fact that she is illiterate in both Arabic and English and during the course of her re-examination said she did not understand the contents of the debtor's petition which she signed nor the statement of affairs. This was not challenged. In January 1995 an application was made by the judgment debtor to set aside the judgment entered by default in the local court. When the motion first came on for hearing the solicitor acting for the judgment creditor consented to judgment being set aside. However that arrangement was not given effect to as the Trustee in Bankruptcy refused to consent to the prosecution of the application to set aside the judgment and ultimately the consent of the judgment creditor was withdrawn. Section 153B provides: "153B. If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar, the Court may make an order annulling the bankruptcy." Counsel for the applicant submitted that this was a case where "the petition ... ought not to have been accepted by the Registrar" and, when asked by the Court, indicated this was the ground upon which annulment was sought. The submission was based on the fact that the applicant was acting on the advice of the Sheriff's Officer in lodging the application and, in essence, had no real appreciation of what she was doing. This is particularly so having regard to her limited grasp of English. This submission was based on the premise that the Registrar is assumed to have an understanding of all the circumstances in which the petition is lodged and not merely those apparent from the petition and supporting documentation and could, or perhaps should, refuse to accept the petition having regard to those facts. Counsel for the applicant went on to submit that these circumstances also justify the exercise of the discretion arising under s153B. The judgment creditor submitted that the Registrar was entitled to accept the debtor's petition as, on its face, it was a regular application supported by documentation which disclosed no irregularities that might have prompted the Registrar to refuse the petition. The judgment creditor also submitted that the Court, even if satisfied that the Registrar ought not to have accepted the petition, has a residual discretion whether to annul the bankruptcy. The Court should, in this case, refuse to exercise the discretion in the applicant's favour because the petition was lodged to ensure that the applicant could gain the benefit of protective provisions of the Act and further, that the transfer of her interest in the property was not bona fide and was a fraudulent one. It can be seen from s153B that the expression "ought not to have..." is used in relation to both a debtor's petition and creditor's petition. In relation to the latter it refers to the making of a sequestration order and in relation to the former, the presentation or acceptance of the petition. Generally the acceptance of the debtor's petition and its endorsement by the Registrar results in the debtor becoming a bankrupt: see s55(4). As it concerns the making of a sequestration order upon a creditor's petition, the expression "ought not to have..." has been treated as comprehending circumstances where the Registrar or Judge making the order was not aware of facts that, had they been known, would have resulted in no sequestration order being made: see Cameron v Cole (1944) 68 CLR 571 at 608, Re Bond (1978) 22 ALR 287 at 289, Re Frank; Ex parte Pilisky (1987) 16 FCR 396, Re Raymond; Ex parte Raymond (1992) 36 FCR 424 and Re Gollan; Ex parte Gollan (1992) 40 FCR 38. A similar approach has been adopted to the expression "ought not to have been presented" as it concerns a debtor's petition. That is, if evidence is led that the petitioning debtor was solvent when the debtor's petition was presented, then the bankruptcy can be annulled under s153B: see Re McCormack, unreported, 6 April 1990, Pincus J, Federal Court of Australia and Re Coyle, unreported, 16 April 1993, Drummond J, Federal Court of Australia. However that liberal approach has not been taken to what is comprehended by the expression "ought not to have been accepted by the Registrar" in s153B and its legislative predecessor. In Re Goddard, unreported, 14 November 1986, Federal Court of Australia, Pincus J had to consider the legislative predecessor of s153B, namely s154(1)(a). His Honour took the view that the expression "ought not to have been accepted by the Registrar" concerned cases where the procedural and related requirements in s55(3) and, at the time, s55(4A), had not been met. However having regard to the way the reasons are expressed, that judgment cannot be taken to be an exhaustive consideration of the scope of s154(1)(a). Nevertheless the approach of Pincus J appears to have been approved by Drummond J as it concerned s153B in Re Coyle, supra. The scope of the expression "ought not to have been accepted by the Registrar" has to be considered in the context of what is the Registrar's role when dealing with a debtor's petition. Section 55 relevantly provides: "(1) Subject to this section, a debtor may present to the Registrar a petition against himself or herself. (2) A petition presented by a debtor under this section: (a) shall be in accordance with the prescribed form; and (b) shall be accompanied by a statement of the debtor's affairs and a copy of that statement. (3) Subject to subsection (3A), where a petition is presented under this section, the Registrar shall: (a) if it appears to the Registrar that the petition, and the statement of affairs accompanying the petition, comply with subsection (2) - accept the petition; or (b) in any other case - reject the petition or refer it to the Court for a direction to accept or reject it. (4) ...." It is clear from s55 that the Registrar's capacity to refuse to accept a debtor's petition is limited. The matter is discussed by Northrop J in Re Coote (1993) 47 FCR 492 at 529: "On its face, s55(3)(a) appears to impose a duty on the Registrar to accept the petition if it appears to the Registrar that the petition and the statement of affairs comply with s55(2). In this case, in form they so comply. The use of the words "in any other case" at the beginning of s55(3)(b) is unusual. If it appeared to the Registrar that the petition and the statement of affairs did not comply with s55(2), it would be expected that the Registrar would either suggest to the debtor to provide documents in compliance with the requirements of s55(2) or reject the petition. In the latter case, the decision to reject could be reviewed by the Court under s14(5). The words "in any other case" seem to invoke a wider range of matters than a mere non-compliance with the requirements of s55(2). This view is supported by s55(3)(b). The reference of the petition to the Court is for "a direction to accept or reject it", not a direction that the petition and statement of affairs either comply or fail to comply with s55(2). The reference to the Court is unfettered. The Court, in the exercise of its judicial discretion, is required to give a direction to the Registrar. In exercising its discretion, the Court should take into account any relevant facts. Accordingly, in my opinion, even if it appears to the Registrar that the petition, and each statement of affairs accompanying the petition, comply with s55(2) of the Bankruptcy Act, if the Registrar has any doubt as to whether the petition should be accepted, the Registrar should refer the petition to the Court. The doubt would arise from matters other than the form of the petition and statement of affairs. The only power or duty of the Registrar is to accept, reject or refer the petition to the Court. In the absence of a direction from the Court, the only power of the Registrar to reject the petition is if it does not comply with s55(2). On a reference, the power of the Court is not so limited. The Court is able to consider other facts." If the Registrar is positively satisfied that the petition and statement of affairs complies with subs(2) he or she is obliged to accept the petition. In other cases it may be rejected or referred to the Court. Thus the expression "ought not to have been accepted by the Registrar" has application to circumstances where a debtor's petition was accepted notwithstanding that the conditions precedent in s55(3)(a) to its acceptance were not satisfied. In my opinion the power to annul in s153B is limited to such a situation if the ground for annulment is that the petition ought not to have been accepted. Any other construction of the relevant part of s153B would proceed on the basis that the Registrar has a power to consider other facts or matters when deciding to accept the petition. There is plainly no power to do so. It would be a curious result if it was intended that the power to annul was to be exercised by the Court by reference to the prior exercise of a power by the Registrar that has no legislative foundation. The scope of the expression "ought not to have been presented" and the nature of the inquiry the Court might undertake if that ground is advanced, lends weight to this construction of the expression "ought not to have been accepted". The former would permit a more wide ranging inquiry complementing the narrower inquiry arising from reliance on the ground concerning acceptance. There is no reason why both grounds cannot be relied upon: see Re Coyle, supra, though they were not in this application. Nothing was pointed to by counsel for the applicant which demonstrates that either the petition or the statement of affairs did not comply with s55(2). Accordingly the application to annul the bankruptcy must fail. I dismiss the application with costs.