McKinnon v Pattison

REASONS FOR JUDGMENT 1 This is an appeal brought by the appellants against orders made in April 2010 by a Federal Magistrate. Each of the appellants was made bankrupt on 26 August 2005. On that date the respondent was appointed trustee. 2 It is apparent from the notice of appeal that the appellants seek to appeal against orders made by Federal Magistrate Hartnett on 13 April 2010. An order was made by her Honour on that date under s 78(1)(f) of the Bankruptcy Act 1966 (Cth) (the Act). It provided for the issue of warrants for the arrest of the appellants and their committal to gaol until further order. Other orders made by her Honour stayed the execution of the warrants until 10.00am on 27 April 2010 and provided that if the appellants complied in full with relevant parts of the orders made on 6 April 2010 by 10.00 am on 27 April 2010, then the order for the issue of the warrants for the arrest of the appellants would be discharged. 3 The orders of 6 April 2010 referred to in her Honour's orders of 13 April 2010 were also made by her Honour. Pursuant to those orders, the appellants were ordered to file with the Official Receiver in Bankruptcy for the District of Victoria and serve on their trustee a properly completed statement of affairs in compliance with s 54 of the Act including, without limitation, completed part D (liabilities), question 15 (superannuation) and, in the case of the first appellant, question 12 (employment). The order required that this be done by 4.00pm on 12 April 2010. It was also ordered that if either of the appellants failed to comply with that order then they were to appear personally before the Federal Magistrates Court of Australia at 10.00am on 13 April 2010. 4 At the hearing of the appeal the appellants (who appeared on their own behalf) informed me that they were also seeking to appeal the orders made on 6 April 2010. Counsel for the respondent informed me that he understood the appeal to be against the orders of 6 April 2010 as well as the orders of 13 April 2010. 5 The orders of 6 April 2010 were preceded by earlier orders designed to ensure that the appellants lodged statements of affairs. On 22 March 2010 Federal Magistrate Riethmuller ordered that the appellants file statements of affairs within 14 days, and if they failed to do so, they were to attend Court personally at 10.00am on 6 April 2010. On the morning of 6 April 2010 the appellants filed statements of affairs that were materially incomplete. When the proceeding came before Federal Magistrate Hartnett later that morning, her Honour was informed by counsel for the respondent that the statements of affairs had been filed but that they were deficient in respects identified in her Honour's orders of that date. Among other things, the documents lodged by the appellants did not disclose the existence of any creditors and made no response to questions 12 and 15 of the approved form. At the hearing of the appeal the appellants said that the latter omissions were an oversight, but there was no sworn evidence to that effect. 6 The 14 days within which the appellants were required to file their statements of affairs pursuant to the orders of 22 March 2010 expired on 5 April 2010, which happened to be a public holiday. The appellants relied upon this in support of an argument that they had until the following day to lodge the statements of affairs. 7 As I understand it, this argument turns on whether Rule 3.04(4) of the Federal Magistrates Court Rules 2001 (Cth) has application. It provides that if the last day for taking action that requires attendance at a registry is a day when the registry is closed, then the action may be taken on the next day when the registry is open. Rule 3.04(4) is concerned with action requiring attendance at a registry of the Federal Magistrates Court. So I doubt it applies to the orders of 6 April 2010 which required the appellants to file their statements of affairs with the Official Receiver in Bankruptcy. 8 In any event, if the question is whether it was open to the learned Federal Magistrate to make the orders that she made on 6 April 2010, I am satisfied that it was. I think the die was cast early on the morning of 6 April 2010 when the appellants lodged statements of affairs that were materially incomplete. There is no suggestion that the appellants were then intending to make further efforts to comply with the orders of 22 March 2010 either on 6 April 2010 or thereafter. 9 In my opinion, it was open to her Honour to make the orders of 6 April 2010 and I am not satisfied that she made any appealable error in doing so. The evidence before her Honour showed that the appellants were being generally uncooperative with their trustee who had been making efforts to have them file statements of affairs for some years. The documents lodged by them did not disclose the existence of any creditors. As the Federal Magistrate noted, it was an established fact that there were creditors. In this regard, I accept that her Honour's reasons refer to "secured creditors" and that this may be a slip. If it was a slip, it had no bearing on her Honour's reasoning. 10 A further point that the appellants raised was that because the statement of affairs lodged on the morning of 6 April 2010 was accepted for filing on behalf of the Official Receiver in Bankruptcy, it was not open to the learned Federal Magistrate to make another order requiring either of the appellants to file another statement of affairs containing the additional information specified in her Honour's order. 11 I do not think this argument is correct. The Court has power under the Act to decide whether or not a document purporting to be a statement of affairs prepared by a bankrupt is sufficient for the purposes of s 54 of the Act: see Wangman v Official Receiver, Insolvency & Trustee Service Australia [2006] FCA 202 (Collier J) at [55] and s 30(1)(a) of the Act. And it also has power to make an order requiring that another document be prepared in the event that the former contains material deficiencies: see s 30(1)(b) of the Act. Section 30(1) "is intended to give the Court wide powers to give effect to and carry out the Act": Tyler v Thomas (2006) 150 FCR 357 at [13] per Branson J. 12 I turn now to the orders of 13 April 2010. There is no doubt that the Federal Magistrate had power to make the orders that she made on that date. Section 78(1)(f) of the Act provides: (1) Where it is made to appear to the Court: … (f) that a bankrupt has, without good cause shown, neglected or failed to comply with an order of the Court or with any other obligation under this Act; the Court may issue a warrant for the arrest of the debtor or bankrupt, as the case may be, and his or her committal to such gaol as the Court appoints until the Court otherwise orders and may, by the same warrant, order that any property and books in the possession of the debtor or bankrupt be seized and delivered into the custody of such person as the Court appoints. 13 It cannot be doubted that the appellants failed to comply with her Honour's orders of 6 April 2010. They were still in default when her Honour came to make the orders of 13 April 2010. The appellants' real point seems to be that the orders of 6 April 2010 should not have been made. But those orders were made and they were never set aside or stayed. Even if the appellants thought that the orders of 6 April 2010 should not have been made, they were not entitled to simply ignore them. In any event, for reasons which I have already stated, I think it was open to her Honour to make the orders of 6 April 2010. 14 The obligation to file a statement of affairs created by s 54 of the Act is an important one. The learned Federal Magistrate referred in her reasons for judgment to the decision of Hill J in Nilant v Macchia (2000) 104 FCR 238 at 245 where the policy behind s 54 is discussed. 15 Of course, her Honour's orders of 13 April 2010 still allowed the appellants a further opportunity in which to comply with the orders of 6 April 2010 and thereby avoid gaol. As I have already mentioned, they allowed for a stay of the execution of the warrants on terms which provided for discharge of the order for the issue of the warrants in the event that the appellants complied with the orders of 6 April 2010 by 10.00am on 27 April 2010. As it happened, the appellants complied before that date. So the warrants were never executed and the order providing for their issue was discharged. 16 The appeal will be dismissed. The costs of the appeal will be the trustee's costs in the administration of the appellants' bankruptcies. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.