Federal Magistrates Act 1999 s.104

Re Steer [1945] 13 ABC 216

Demostine Nominees Pty Ltd v Raymond Theodore Osborne [2002] FMCA 235 Deputy Commissioner of Taxation v Clyne (1984) FCR 156

Symons v Bateman (1999) FCA 658

Re Gollan; Ex parte Gollan [1992] FCA 606; (1992) 40 FCR 38

Re Anasis; Ex parte Total Australia Ltd [1985] FCA 458; (1985) 11 FCR 127

Re Williams (1968) 13 FLR 10

In addition to the Orders made by the Court on 9 December 2002

(1) That the Trustee be granted leave to make an oral application for annulment of the bankruptcy of Karen Raschilla this day.

(2) That compliance with Order 77, rules 42 and 44 of the Federal Court Rules be dispensed with and that otherwise so much of the Rules of the Court be dispensed with that would prevent the Trustee's application for annulment being heard this day.

(3) That the bankruptcy of Karen Raschilla under the sequestration order made on 7 November 2002 be annulled.

(4) The Respondent shall pay the costs of the Trustee of and incidental to the hearing pursuant to the Federal Court Rules.

(5) Liberty to apply is granted to the parties in relation to any matters arising out of these orders.

1. In this matter the Applicant Creditor Ivanhoe Grammar School ("the Creditor") had filed a Creditor's petition on 24 September 2002 relying upon what was said to be a failure by Karen Raschilla the respondent Debtor ("the Debtor") to comply with a bankruptcy notice number VN613/02 based upon a judgment and order made in the Magistrates Court of Victoria at Melbourne on 24 January 2002.

2. At the same time the petition was filed the Creditor also filed a consent to act as trustee dated 3 July 2002 completed by Paul Anthony Pattison (the Trustee).

3. The usual affidavits of search and service and proof of debt were filed with the Court and on 7 November 2002 a sequestration order was made against the estate of the Debtor and an order was made that she pay the costs of and incidental to the petition including reserved costs to be taxed and paid in accordance with the Statute.

4. The Debtor filed an application for review on 28 November 2002 seeking to set aside the sequestration order made 7 November 2002 and further seeking an order that "petition number MZ975 of 2002 be dismissed."

5. In support of the application for review the Debtor filed and served an affidavit sworn by her on 4 December 2002. In that affidavit the deponent stated that she first became aware that she had been made bankrupt upon receipt of correspondence from the Trustee on or about 11 November 2002. Although aware that proceedings had been commenced against her by the Creditor she claimed to have made arrangements to allocate funds to pay the outstanding fee and did so having been served with the bankruptcy notice. Whilst recalling that she had received the Creditor's petition she claimed to have failed to take any action and she did not appreciate the significance or implications. She did not attend the hearing of the petition on

7 November 2002 and the sequestration order was therefore made in her absence. Upon becoming aware that a sequestration order had been made the Debtor attended an interview with staff of the Trustee indicating she had sufficient funds to pay the debt and was told it was too late.

6. In her affidavit the Debtor attaches financial information which is capable of supporting the conclusion that at the time she was solvent. It perhaps should be noted that the total amount of the debt claimed to have been owed to the Creditor was $8722.

7. When the application for review was considered by the Court on

9 December 2002 it was made clear by counsel representing the Creditor and the Debtor that the differences between the parties had been resolved. Counsel for the Creditor advised the Court however that the Trustee had submitted a tax invoice for costs to date and was seeking to make an application for an order in relation to that matter. On that occasion there was no appearance for the Trustee though quite properly it was indicated that the Trustee would seek to be heard on the issue of expenses incurred in the administration of the estate. Counsel for the Debtor opposed any order that the Trustee be permitted to argue that there was some basis upon which the Court should proceed to hear an application to make further orders including an order that the Trustee's expenses in the administration of the bankrupt estate be paid by the Debtor. Counsel for the Debtor specifically submitted that there is no authority or power in the Bankruptcy Act 1966 ("the Bankruptcy Act") which would allow the Court to make an order directing the payment of remuneration and expenses in the circumstances of this case. It is submitted that setting aside a sequestration order is quite distinct from an annulment application.

8. At the hearing before me the Trustee was represented by a solicitor,

Mr Fice, and the Debtor by Mr Evans. There was some discussion about the orders which had been made by the Court on 9 December 2002. It is relevant to set out those orders as follows:-

(1) The application filed 28 November 2002 for review be allowed;

(2) The orders made on 7 November 2002 be set aside.

(3) That any application by the Trustee, Paul Anthony Pattison for leave to be heard in relation to the issue of the trustee's remuneration and expenses shall be listed for hearing on

9. Although the application for review had sought orders setting aside the sequestration order and dismissing the petition it is clear that no order dismissing the petition was made by the Court on 9 December 2002. It was simply indicated that I could rely upon, as I did, the affidavit evidence and submissions that the issues between the Creditor and Debtor had been resolved. I did not deliver formal reasons for decision when I made the orders to which I have now referred. It was suggested during the course of argument before me by the counsel for the Debtor that an order may have been made on 9 December 2002 dismissing the Creditor's petition. I have had the opportunity of perusing the transcript of those proceedings and it is clear that order was not made and therefore the orders to which I have already referred made by the Court on 9 December 2002 are accurate.

10. The question of whether or not an order was made dismissing the Creditor's petition became significant as it had an impact it was argued by both the representatives of the Trustee and the Debtor to the extent that the petition remained at least potentially active. In the absence of an annulment order it was further agreed that at least from the date of the sequestration order to the date when that order was set aside, the status of the Debtor was that of a bankrupt and there was indeed a bankrupt estate and the Trustee was properly engaged in the task of administering the estate according to the obligations the Trustee has under the Bankruptcy Act.

11. In any event during the course of submissions the representative of the Trustee acknowledged that it would be preferable for the petition to be dismissed but further argued that the Court should proceed to make an order for annulment. It was submitted that an annulment order by the Court pursuant to s.153B of the Bankruptcy Act was appropriate. It was noted again during the course of submissions that a Trustee is a person capable of pursuing an application for annulment of the bankruptcy (see Re Steer [1945] 13 ABC 216). In the circumstances the Trustee's representative ultimately sought the leave of the Court to make an oral application for annulment of the bankruptcy of the Debtor and if I granted leave then that application should be dealt with nunc pro tunc and that I should further dispense with the requirements of the rules which relate to service upon the Creditors and filing of a report by the Trustee.

12. It was argued for and on behalf of the Trustee that the Court in any event in the alternative has power to make an order that the Debtor should pay the Trustee's costs, charges and expenses of the administration of the bankruptcy including the remuneration and expenses of the Trustee in the same manner as is provided by s.154(1)(b) of the Bankruptcy Act.

13. It was submitted on behalf of the Trustee that in the event that the Court does not have power to entertain an application for payment of the Trustee's costs, charges and expenses as indicated then in the alternative the Court should proceed to make an order for annulment which would then obviate the need for a formal order as s.154(1)(b) would apply or in the alternative if there is no longer property of the former bankrupt still vested in the Trustee then sub-s.154(2) of the Bankruptcy Act would apply.

14. Counsel for the Debtor submitted that by making an order setting aside on review the sequestration order made by the Registrar that the Court does not then have power to entertain any application by the Trustee for any order whereby the Debtor is to pay the Trustee's costs charges and expenses of the administration of the bankruptcy. It was frankly acknowledged that if that be the case then there would be a clear hiatus in the procedure whereby on the one hand if an annulment order was made the Trustee would have the rights to pursue the costs, charges and expenses pursuant to s.154(1)(b) of the Bankruptcy Act but where those expenses have been incurred between the date of a sequestration order and the date when that order was set aside upon review the Trustee would have no remedy at all. Despite that apparent anomaly, as it was submitted on behalf of the Debtor, that if the legislature intended to provide relief for the Trustee in these circumstances then it could easily have done so by a specific provision of a kind similar to that set out in s.154(1)(b) of the Bankruptcy Act.

15. Section 43:

(2) Upon the making of a sequestration order against the estate of a Debtor, the Debtor becomes a bankrupt, and continues to be a bankrupt until:

(a) he or she is discharged by force of subsection 149(1) or in accordance with Division 3 of Part VII; or

(b) his or her bankruptcy is annulled by force of subsection 74(5) or 153A(1) or under section 153B.

16. Section 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 Official Receiver, the Court may make an order annulling the bankruptcy.

17. Section 154:

(1) If the bankruptcy of a person (in this section called the "former bankrupt") is annulled under this Division:

(b) the trustee may apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee; and

(c) subject to subsections (3), (6) and (7), the remainder (if any) of the property of the former bankrupt still vested in the trustee reverts to the bankrupt.

(2) If the property of the former bankrupt referred to in paragraph (1)(b) is insufficient to meet the costs, charges and expenses referred to in that paragraph, the amount of the deficiency is a debt due by the former bankrupt to the trustee and is recoverable by the trustee by action against the former bankrupt in a court of competent jurisdiction.

18. Passing reference was made to s.37 of the Bankruptcy Act which provides that the Court does not have power to rescind or discharge or to suspend the operation of a sequestration order. However it seemed to be acknowledged by the parties that upon the hearing of an application for review of a Registrar's decision, the Court is entitled to make appropriate orders including setting aside any sequestration order (see Demostine Nominees Pty Ltd v Raymond Theodore Osborne [2002] FMCA 235 at par 27). If Parliament intended to limit the power of a Court on review then it could easily do so by amendment. The Explanatory Memorandum of the Bankruptcy Law Amendment Bill 1992 which inserted s.37 clearly states that the purpose of the amendment was to address problems arising from the Court's power to rescind a sequestration order. However in the absence of an express provision limiting the Court's power on review I am satisfied that the Court in reviewing a Registrar's decision has power to set aside all orders including sequestration orders. The alternative would mean that review of Registrars' decisions may become meaningless as a significant order for sequestration would not be subject to the power to set aside by the reviewing Court despite obvious error.

19. The significance of setting aside a sequestration order was considered by the Full Court of the Federal Court of Australia in Deputy Commissioner of Taxation v Clyne [1984] FCA 345; (1984) 4 FCR 156. The Court dealt with the issue of whether the making of a sequestration order on a Creditor's petition within 12 months of the date of presentation of the petition would prevent a petition from lapsing under s.52(4) of the Bankruptcy Act even if that sequestration order is subsequently set aside as beyond power by order of a superior Court of record. In that case the High Court set aside a sequestration order as being beyond power. It was held that the setting aside does not mean that the sequestration order was a nullity but merely voidable.

20. Reference was also made to the decision of French J in Symons v Bateman (1999) FCA 658. In that case sequestration orders were made against two Debtors. At the time the orders were made applications were pending in the Full Court of the Supreme Court of Western Australia seeking review of a Master's decision refusing leave to appeal against a judgment and for an extension of time within which to appeal. The Debtor's representative asserted that there was to be an "armistice" pending the outcome of the Full Court's decision. This understanding was reached in discussions with a representative of one of the Creditors. After becoming aware that sequestration orders were made the Debtor's representatives corresponded with the representative of the Creditor asserting breach of agreement. The Creditor's representative was invited to consent to an order setting aside the sequestration order. When the matter was before the Court it was informed that an agreement had been reached for the making of a consent order setting aside the sequestration orders pursuant to Order 35, rule 7(2) of the Federal Court Rules. The petition, by consent, was to be adjourned with the question of whether the petition proceeds to be determined by the outcome of the Full Court's decision. A Trustee however sought orders preserving his entitlement to remuneration and costs and submitted that a preferable order might be an order annulling the bankruptcy under s.153B of the Bankruptcy Act.

21. The application in any event, to the Court by the Debtor was brought under Order 35, rule 7 of the Federal Court Rules which provides for the Full Court to vary or set aside a judgment or order before it has been entered. French J in that case stated that:

"8. ... It would have been open to them to bring an application for annulment of the bankruptcy under s.153B...

9. In such a case, where the administration of the estate has commenced there are protective provisions in respect of steps taken by the Trustee which are found in s.154..."

22. French J noted in Symons case that there is no similar provision to s.154(1)(b) which would apply to the setting aside of a sequestration order pursuant to Order 35, rule 7. It is relevant to set out the following passages from His Honour's decision: -

"10. There is no such provision attaching to the setting aside of a sequestration order pursuant to O 35, r 7. In this case the Trustee suggests that if the order sought by the Symons and Mr Bateman is made then there should be ancillary orders made which have the effect of s.154 in relation to the position of the Trustee and such steps as the Trustee has taken.

11. I have serious reservations about the power of the Court to make orders of the kind that the Trustee proposes as an incident of an order under Order rule 7. This throws up the issue addressed in passing by Emmett J in Daskalovski v The Austral Brick Company Pty Ltd (unrep, Fed Court, 23 June 1998). In that case His Honour heard and determined an application for an order for that a sequestration order be set aside pursuant to O 35, r 7. The basis of the application before his Honour was that the petition had not been served personally on the Debtor. He was satisfied that was the case and that the sequestration order ought not to have been made. However instead of setting aside the sequestration order under O 35, r 7 his Honour made an order pursuant to s.153B annulling the bankruptcy. In doing so he observed:

'I should add that I would have been satisfied that the Court has jurisdiction and power pursuant to Order 35, rule 7 to make an order setting aside the sequestration order made in the absence of the Debtor in circumstances where the Debtor was not served with the petition. However it seems to me inappropriate to make an order under that rule where the estate has already been administered in bankruptcy, as is the case here.

The Act, and the rules made under the Act which have now been incorporated into the Federal Court Rules, provide for the protection of Creditors in the event of an order being made under s.153B. There is no similar regime applicable specifically for the setting aside of an order or a judgment pursuant to Order 35, Rule 7. That is not to say that in an appropriate, the power contained in Order 35, Rule 7 ought not to be exercised. However, such a power would normally be exercised in circumstances where the matter comes before the Court very soon after the order has been made and before there has been any administration in bankruptcy pursuant to a sequestration order.'

12. I agree, with respect, with his Honour's observations.

I could not conclude on the materials before me at the moment that the Trustee was obliged by the notice given by Mr and Mrs Symons to hold his hand in relation to the administration of the estate. There is no evidence of the extent to which the trustee has actually undertaken work on the administration of the estate and the extent to which there may be a need for the application of s.154. However on the basis of the Trustee's contention and until that matter of fact is resolved, I do not think it appropriate to make the consent orders which are sought. I would need to be persuaded that an order under O 35, r 7 would be appropriate where the estate had been administered. In the circumstances I propose to adjourn this matter to an early date to be fixed to enable the parties to consider their position and whether some other form of order perhaps relying on s.153B can be agreed."

23. In the present case there is evidence before the Court by way of affidavit sworn by Paul Anthony Pattison on 20 January 2003 that the total claim for remuneration and costs amounts to $13,329.53 which are costs incurred from the time of appointment of Mr Pattison as Trustee on 7 November 2002 up to and including 6 December 2002 together with costs and expenses in relation to the Debtor's application for review of the Registrar's decision in making the sequestration order. Hence unlike the facts and circumstances in Symons case there has been a significant effluxion of time from the date of the sequestration order to the date of setting aside that order and there is evidence of expenses actually said to have been incurred by the Trustee. I should add that counsel for the Debtor did not take issue with the Trustee having standing to intervene in this matter. Therefore in the absence of a submission to the contrary I am prepared to accept that the Trustee in circumstances of this kind does have standing either to make an oral application or otherwise be granted leave to make application for annulment and/or to be heard on the form of orders to be made whereby the parties, that is the Creditor and Debtor, seek by consent to set aside a sequestration order. The right to be heard by the Trustee is similar to an outside Creditor of the Debtor who seeks to intervene as an interested party.

24. I was further referred to the decision of the Federal Court in the matter of Re Gollan; Ex parte Gollan [1992] FCA 606; (1992) 40 FCR 38. In that case, Spender J considered an application on behalf of a Debtor to review or reconsider a sequestration order against the estate made by a Registrar. An order was sought that the sequestration order be set aside and that the Creditor's petition be dismissed. In the alternative application was made for an order for the annulment of the sequestration order on the ground that the sequestration order ought not to have been made. Although the facts in that matter were said by His Honour to be somewhat unusual there is a degree of similarity between that case and the present case. In the Gollan case it appeared that the Debtor suggested that he thought when the petition was served on him that if the matter was to be taken further it would be by normal debt collection procedures including seizure of assets or moneys owing to him. He therefore did not attend the hearing of the Creditor's petition and at the first hearing the application was simply adjourned to a second date where the sequestration order was made again in the absence of the Debtor, who it was claimed, did not receive notice of the adjourned hearing date. The Court in that case was satisfied that at the time of making the sequestration order the Debtor was solvent. There are other facts which I do not need to recite. In the light of those facts

"There are a number of matters thrown up by the application. The first concerns the repeal of s 37 of the Bankruptcy Act 1966 (Cth) (the Act) and the substitution of a new s 37 by the Bankruptcy Amendment Act 1991 (Cth) (Act No 9 of 1992). As a consequence of the new s 37 the court, subject to s 37(2), may rescind, vary or discharge an order made by it under the Act, or may suspend the operation of such an order. But by s 37(2), the court does not have power to rescind or discharge or to suspend the operation of, inter alia, a sequestration order.

There would, therefore, be no power to rescind the making of the sequestration order of 11 November 1992 if that order had been made by the court. The order was made by the District Registrar in consequence of powers delegated to him pursuant to s 31A. It seems to me that the effect of s 37 is to abolish rescission as a means of bringing bankruptcy to end, so that discharge and annulment are the only methods of terminating a bankruptcy. However, my view is there still remains power in the court, that there still remains power in the court, pursuant to s 14(5) to review a sequestration order made by a Registrar under the powers delegated pursuant to s 31A and that it would be competent on summary application, to set aside the sequestration order made on a Creditor's petition, and to dismiss the petition."

25. It should be noted that in the Gollan case an undertaking was provided to the Court by the Debtor to pay the costs of the Creditor before the Registrar and of the application on review and to pay the costs of the Official Trustee reasonably incurred in the administration of the estate pursuant to the sequestration order and further the costs of the Official Trustee on the application. In the light of that undertaking, Spender J states the following:

"It seems to me that I ought to exercise the review powers under s 14(5) and order that the order for the sequestration of the estate of Darryl Gollan made by District Registrar Ramsey on 11 November 1992 be set aside and in lieu thereof the petition be dismissed. I should indicate that if I were not minded to make those orders, I would have dispensed with compliance with requirements of r 57 in relation to service on the Creditors and the requirement for a report by the trustee and made an order pursuant to s 153B annulling the bankruptcy of Mr Gollan.

However, it is preferable to proceed on the basis that, had the material relating to solvency been before the District Registrar, the appropriate course would have been to dismiss the petition and on the summary review, provided by s 14(5), it seems to me that I ought to make orders setting aside the order sequestrating the estate of Mr Gollan on 11 November 1992 and in lieu thereof, dismiss the petition."

26. It was submitted on behalf of the Trustee that there is a clear interest which the Trustee would have in the circumstances of the present case where the Creditor and Debtor, by consent, seek orders setting aside a sequestration order and where no application is made for annulment. The preferable course to be followed in the light of the authorities to which I have referred would be to allow the Trustee to make application for annulment and to effectively make orders of the kind foreshadowed by Spender J in the Gollan case. It should be inferred by this Court according to the Trustee's representative that had the undertakings not been given by the Debtor's Counsel to Spender J then he would have proceeded to make an order annulling the bankruptcy pursuant to s.153B of the Bankruptcy Act.

27. It appeared to be conceded by Counsel for the Trustee that there is a different test to be applied by the Court in considering whether to make an order for annulment compared with those considerations which may be relevant in deciding to exercise the powers the Court undoubtedly had under the now repealed s.14(5) of the Bankruptcy Act. The powers of this Court are found in s.104(3) of the Federal Magistrates Act 1999 (Cth) ("the FMA") which provides that upon review of the Registrar's exercise of delegated powers (including sequestration power) the Court "may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised." The different options are certainly highlighted by the decision of Spender J in the Gollan case and particularly highlighted by Emmett J in Daskalovski cited with approval by French J in the decision of Symons v Bateman.

28. It was submitted by the Trustee's representative that in the present case having regard to those authorities, that I should likewise make an order for annulment which would thereby provide appropriate protection to the Trustee as a consequence of the operation of s.154 of the Bankruptcy Act.

29. Counsel for the Debtor submitted that the Court does not have power to make an order in favour of the Trustee simply as a consequence of setting aside by consent the sequestration order and/or even if the Court were minded to dismiss the Creditor's petition. Had an order been made dismissing the Creditor's petition then it is the submission of the Debtor that the Court is `functus officio'. In the present case that argument in my view cannot be sustained as the Court has not formally proceeded to dismiss the Creditor's petition. I should add however that in the circumstances where leave has been granted to a Trustee to be heard and make submissions in relation to costs and expenses it is clear by inference that allowing the Trustee to be heard includes allowing the Trustee to make such other applications as may be available to him in open Court, including an application for leave to make oral application for annulment and consequential orders dispensing with service requirements or indeed any other requirements under the rules or regulations.

30. It is however further submitted that in the present case that a Court should not permit the Trustee to make application for annulment and/or if it does permit the application to be made, should not allow that application or make any order as it would be inappropriate to do so in circumstances where the Creditor and the Debtor have, by consent, only sought to set aside the sequestration order, albeit with some doubt as to whether or not the order sought in the application for review to dismiss the Creditor's petition ought now to be made. As I understood the submissions on behalf of the Debtor, it was now considered appropriate that the Creditor's petition should be dismissed. It was not suggested by the Debtor at any stage that the Trustee would not have a right to seek to make an application for annulment pursuant to s.153B of the Bankruptcy Act but rather that in the circumstances any such application should be refused as annulment has not been sought by the Debtor and it would not achieve a result that would be appropriate in the circumstances. It was acknowledged however that in the absence of annulment the setting aside of a sequestration order would alter the current status of the Debtor who would no longer be a bankrupt though it would not alter the Debtor's status in the period between the date of the original sequestration order and the date when that order was set aside.

31. For the sake of completeness, although reference was made to s.162 of the Bankruptcy Act it would appear that in the present case there is no suggestion of remuneration of a Trustee being fixed by resolution of Creditors and nor as far as I can tell would s.162(4) provide on adequate remedy. Likewise the Bankruptcy Regulations, in particular Regulation 8, which sets out that prescribed rates for remuneration does not provide a right to that remuneration in the circumstances of the present case.

32. In my view, whilst it is evident from the authorities to which I have referred and in particular the decision of French J in Symons v Bateman and the decision of Spender J in the Gollan case the Court does still have a power to make an order setting aside a sequestration order on application for review of a Registrar's decision. As stated earlier the Court has power to review a Registrar's decision pursuant to s.104(2) of the FMA which relates to the exercise of any powers of the Federal Magistrates Court under appropriate delegation. There is no issue that the Registrars have delegated power to make a sequestration order. Hence although it may be more desirable in certain circumstances to make an annulment order there does not seem to be any restriction and/or prohibition on a Court making an order by consent or otherwise setting aside a sequestration order and/or dismissing a Creditor's petition.

33. However, where the Court is minded to make an order simply setting aside a sequestration order and/or dismissing the Creditor's petition it is appropriate that Creditors and, as in the present case, a Trustee in bankruptcy should have the right to be heard in relation to any further orders that may be appropriate in the circumstances. It is of course possible for a Court to set aside a sequestration order and then dismiss the Creditor's petition and further consider making an order if thought appropriate to grant an application for annulment. Obviously, an order for annulment could be made in the absence of the other orders but if an annulment order is not made and the sequestration order simply set aside with the Debtor's petition being dismissed, then that does not bring to an end the bankruptcy.

34. In the absence of a specific statutory provision similar to s.154 of the Bankruptcy Act I am not satisfied that merely setting aside a sequestration order, albeit in circumstances where since the date of that order expenses have been incurred by the Trustee acting properly in accordance with his duties, that the Court would have power to make an order of the kind similar to the relief provided in s.154(1)(b) of the Bankruptcy Act. That is, that had the legislature regarded action short of annulment as justifying an entitlement by the Trustee to the costs, charges and expenses of the administration of the bankruptcy then clearly a provision would appear in the legislation.

35. I note that during the course of submissions I referred to the decision of the Federal Court in Re Anasis; Ex parte Total Australia Ltd [1985] FCA 458; (1985) 11 FCR 127. In that case the Court was dealing with the issue of a Debtor not receiving a notice of adjourned hearing thereby being denied an opportunity of presenting his case and the Court held that it had an inherent jurisdiction to set aside a sequestration order made in the absence of a Debtor and order a rehearing of the petition even though the sequestration order had been signed and sealed. In that case the Court held that in addition to setting aside the sequestration order and ordering a rehearing the appropriate remedy in order to put an end to the bankruptcy was an order for annulment pursuant to the old s.154 of the Bankruptcy Act. Consideration was given to the effect in that case of s.37 as it then applied prior to the 1992 amendment of that section. Prior to the 1992 amendment, s.37(2) read:

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.

36. The current s.37(2) of the Bankruptcy Act provides:

A court does not have power to rescind or discharge or to suspend the operation of:

(b) an order for the administration of the estate of a deceased person under Part XI.

37. In the Anasis case the Court in reaching its decision that it had an inherent jurisdiction to set aside the sequestration order and at the same time order a rehearing of the petition noted that whether such order should be made depends upon the exercise of a discretion. The Court referred to concepts out of "defence on the merits" and "denial of natural justice." It then stated the following:

It remains to be considered whether the appropriate orders, in the exercise of inherent jurisdiction, include an order of annulment. This was the form of order actually made in Cameron v Cole, though Starke J seemed to prefer the alternative of rescission or discharge.

The sequestration order, though voidable, is not void: Deputy Commissioner of Taxation v Clyne [1984] FCA 345; (1984) 4 FCR 156 at 158. Once a sequestration order has been made, s 43(2) provides that the Debtor not only becomes a bankrupt but continues to be a bankrupt until he is discharged by s 149, he is discharged by order of the Court, or his bankruptcy is annulled under s 74 or 154. Accordingly it has been held that a rescission under s 37 would "not put an end to the bankruptcy" (Re Deriu (1970) 16 FLR 420 at 422), and that where a sequestration ought not to have been made, because in truth the debt upon which it was based did not exist or because the bankruptcy notice and petition had not been served, the proper way of getting rid of the order is by annulment under s 154: Re Deriu (supra); Re Bond [1978] FCA 42; (1978) 36 FLR 131; Clyne v Deputy Commissioner of Taxation (No 3) [1984] HCA 44; (1984) 58 ALJR 398 at 400 and 401-402.

38. In my view, whilst some assistance is to be gained from decisions where the Court considered either the old or new version of s.37 and the appropriateness of making orders setting aside a sequestration order which had been entered, those cases do not necessarily assist the present application. In the present case, the application is by way of review of the Registrar's decision and accordingly the Court retains, as indicated earlier, the powers to make appropriate orders on a hearing de novo that it wishes to make based on the material placed before the Court upon the hearing of the application for review.

39. In the circumstances, whilst I have little doubt that there is power vested in the Court upon application to review to set aside the order made by the Registrar and further dismiss the Creditor's petition, I am not satisfied that this Court has power to then entertain an application by the Trustee for an order in relation to costs of a kind otherwise provided on annulment by operation of s.154(1)(b) of the Bankruptcy Act. As indicated earlier, had Parliament wished to make provision for payment of the Trustee's costs and expenses it could easily have done so by amending the legislation.

40. However that does not mean that in the present case there is no remedy available to a Trustee. I have already indicated that in my view a Trustee upon becoming aware that an application for review has been lodged and that it may be subject to consent orders between the Creditor and Debtor retains rights to at least urge the Court to consider making an order for annulment. The Trustee in the present case on the material before me has acted with due diligence in accordance with his obligations and duties under the Bankruptcy Act. He has clearly incurred, on the affidavit evidence before the Court, expenses of the kind which at least prima facie may be considered reasonable in the administration of the estate. It is therefore appropriate that the Court give consideration to making orders which will otherwise provide that the Trustee who has incurred the costs and expenses should be given the opportunity to be reimbursed. In the present case there is no issue taken in relation to any obligation of the Creditor and instead it is suggested that the liability to pay the Trustee's costs and expenses should be assumed by the Debtor. This would appear to be consistent with the operation of s.154(1)(b) upon annulment although it is possible to contemplate circumstances where the responsibility for the Trustee's costs and expenses should be borne by a Creditor.

41. I had raised during the course of submissions the issue of the different tests to be applied by the Court in considering whether on the one hand to set aside a sequestration order and/or dismiss the petition and the factors to be taken into account when considering whether to allow the Trustee to make application for annulment and then whether to proceed to make an order for annulment.

42. It should be noted that the mere fact that the Court may, as in the case of Gollan, receive an undertaking through the Debtor's counsel to pay the Trustee's costs reasonably incurred by him in the administration of the estate does not mean the Court would otherwise have power to make an order in those terms. Undertakings may be given in a wide range of cases for various reasons of which one may involve avoidance of further proceedings. For example an undertaking may be given in that case in circumstances where the Debtor would be aware that if orders are simply made or to set aside the sequestration order that the Trustee may still then subsequently file an application for annulment.

43. In the present case, as indicated, it is important to distinguish between the basis upon which the Court may set aside a sequestration order compared with the factors to be taken into account in considering an annulment. It is noted that in the Gollan case to which I have referred the Court deemed it preferable to proceed with the setting aside of the sequestration order "on the basis that had the material relating to solvency been before the District Registrar the appropriate course would have been to dismiss the petition."

44. The Court in Gollan decided that on a summary review it should make orders setting aside the order for sequestration and in lieu thereof dismiss the petition. It is interesting to note that in the Gollan case having received the undertaking the Court nevertheless then proceeded to further make an order that the Applicant pay the costs of the Official Trustee and the reasonable costs of the administration undertaken by the Trustee of the estate to be taxed if not agreed. It may be reasonable to infer that although the Court seemed to place reliance upon the undertaking it nevertheless felt it had the power in any event to make an order. It is not clear however from the judgment that the Court would have made the order in the absence of an undertaking and there is no direct authority to assist me in this regard. Hence I remain of the view that the Court does not have power to make the order in the absence of an undertaking of a kind given in the Gollan case.

45. It remains to consider the alternative basis upon which the Court will consider the issue of annulment. In my view, it is clearly desirable in the interests of the administration of justice and in the interest of administering the Bankruptcy Act that the Court should avoid the unnecessary expense of the Trustee being required to file and serve a fresh application for annulment. I am satisfied it is appropriate to grant leave to the Trustee to make an oral application for annulment and for the Court to otherwise dispense with compliance with the requirements of rule 57 in relation to service on the Creditors and the requirement for a report by the Trustee.

46. In considering whether to make an order for annulment it is clear that there are two matters which arise from the interpretation of s.153B. First, the Court needs to consider whether it is satisfied that a sequestration order ought not to have been made and then to consider in the exercise of its discretion whether the sequestration order should be annulled. (See Re Deriu (1970) 16 FLR 421 and Re Williams (1968) 13 FLR 10 at p.23.)

47. In the present case had the information been available to the Court at the time the sequestration order was made as to solvency and/or the reason for non attendance of the Debtor at the sequestration hearing, then I am satisfied I can find that the sequestration order ought not to have been made. On the material before me I am further satisfied that there is no reason why indeed that sequestration order should not be annulled. There is no evidence of other Creditors and nor is there any evidence of misconduct by the Debtor which would otherwise persuade the Court not to annul the sequestration order. There is sufficient protection available to the Trustee in relation to costs and expenses pursuant to s.154 of the Bankruptcy Act. In my view, it is not necessary to make an order in relation to those costs and expenses covered by that section. The issue of the Trustee's legal costs in appearing before this Court will be the subject of further submissions. It is sufficient to indicate that the orders which I propose making in addition to those made on 9 December 2002 will be as follows: -

(1) That the Trustee be granted leave to make an oral application for annulment of the bankruptcy of Karen Raschilla this day.

(2) That compliance with Order 77, rules 42 and 44 of the Federal Court Rules be dispensed with and that otherwise so much of the Rules of the Court be dispensed with that would prevent the Trustee's application for annulment being heard this day.

(3) That the bankruptcy of Karen Raschilla under the sequestration order made on 7 November 2002 be annulled.

48. Upon application by the Trustee for costs it is further ordered as follows:

(4) The Respondent shall pay the costs of the Trustee of and incidental to the hearing pursuant to the Federal Court Rules.

(5) Liberty to apply is granted to the parties in relation to any matters arising out of these orders.

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of McInnis FM