Official Trustee in Bankruptcy, in the matter of Halls v Halls

REASONS FOR JUDGMENT 1 The applicant, the Official Trustee in Bankruptcy, by an amended application filed on 24 February 2000 seeks a declaration that the respondent was discharged from bankruptcy on 8 July 1996. The applicant has brought the matter before the Court adopting a substantially neutral (but benevolently neutral) position. The applicant submits that the order might appropriately be made, and has made submissions as to the proper basis for such an order. The order sought will, of course, benefit the respondent and his counsel has carried the principal burden of making submissions in support of the application. 2 The circumstances may be described very briefly, by reference to a chronology prepared by the respondent. The respondent, Jason Halls, was declared bankrupt on 2 May 1995. So was his sister, Simone Halls; and other members of his family were made bankrupt on 18 July 1995. Common to the circumstances of Mr Halls and each of the other members of his family to whom I have referred was that their statements of affairs were not, as s 54 of the Bankruptcy Act 1966 (Cth) then required, filed in the office of the Registrar. Instead, in each case two original copies of the statement of affairs were delivered to an officer of Insolvency and Trustee Services (which I shall refer to as ITSA). 3 A question arose whether the other members of the Halls family had, by the passage of time, been automatically discharged from bankruptcy pursuant to s 149 of the Bankruptcy Act. Sackville J, in reasons for judgment delivered on 1 March 2000, held that they had. He held, in essence, that s 306(1) of the Bankruptcy Act applied so as to enable him to treat the circumstance that on 16 December 1996 the statements of affairs were in the hands of ITSA as amounting substantially to a filing of those statements, on that day, with the Official Receiver: on 16 December 1996, the Bankruptcy Legislation Amendment Act 1996 (Cth) came into force and, by virtue of that Act, on and from that day statements of affairs were to be filed with the Official Receiver rather than the Registrar. 4 The situation of Mr Halls, however, is rather different. He applied for, under s 149S of the Bankruptcy Act, and was granted an early discharge from bankruptcy before the amending legislation came into force. His certificate as to his early discharge is dated 8 July 1996. Consequently, it cannot be said that, at the time he applied for or was granted his early discharge, he had filed a statement of affairs with the Registrar, as the Act then required. 5 Section 149S of the Bankruptcy Act provides that, at any time after six months from the date on which a bankrupt filed his or her statement of affairs, the bankrupt may apply in writing to the Trustee for early discharge. Mr Halls had, more than six months before he applied for his early discharge, delivered two copies of his statement of affairs (unsigned) to an officer of ITSA. But he had not filed it. 6 Section 149T sets out the requirements which must be met in order that a bankrupt be eligible for early discharge. Subsequent sections elaborate certain of the criteria and provide additional criteria, both positive and negative. In Mr Halls' case, the Trustee may be taken to have considered the various criteria with reference, at least in part, to the statement of affairs which had been delivered to ITSA and to have decided that the criteria were met. 7 The question which then arises is whether the requirement of s 149S - that an application for early discharge may only be made at any time after six months from the date of filing of a statement of affairs - is to be regarded as an essential condition of eligibility for early discharge or an essential precondition to the exercise by the Trustee of its power to grant an early discharge. If, and only if, it is not to be regarded as such an essential condition, it may be open to the Court to apply 306(1) of the Bankruptcy Act to make a declaration of the kind sought, on the basis that the application for and grant of an early discharge is a proceeding under the Bankruptcy Act which (provided that no injustice results) is not invalidated by formal defects or irregularities. 8 It is, I think, clear that the application for and grant of an early discharge is to be regarded as a proceeding under the Bankruptcy Act. "Proceeding" for this purpose is a term which encompasses more than judicial proceeding: see Sofia v Pattison (Finkelstein J, 20 October 1997, unreported), in which his Honour considered the earlier authorities. 9 I turn, then, to the question whether the requirement that the application only be made six months after the filing of a statement of affairs is essential. It seems to me that it is permissible and appropriate to consider the apparent purpose of the requirement. It may, I think, be taken, as counsel submitted, that Parliament considered it appropriate that, at least to some extent, a bankrupt "serve his time". However, the fact that the period of six months commences on the date on which the statement of affairs is filed suggests an intention that the time was to run from a date on which the Trustee had information on the basis of which the investigation and administration of a bankrupt's affairs could properly start. If one looks at the matter in that light, and in that light considers what is essential for the purpose of an early discharge, it may be concluded that what is essential is, first, that the specified statutory criteria of eligibility in fact be met and, secondly, that the Trustee should have had an appropriate opportunity to examine the bankrupt's affairs and satisfy itself as to the various criteria. It is not easy to identify any other reason why the filing of the statement of affairs might be regarded as a particularly significant event for these purposes. That being so, I think it is open to me to hold, and I do, that although s 149S of the Bankruptcy Act requires that an application for early discharge be made only after the expiry of the specified period, nevertheless strict compliance with that provision is not what is sometimes described in other contexts as an essential requirement of the Act, but rather is one to which s 306 may apply. 10 The question, then, is whether in this case it is appropriate to treat the proceedings, culminating in the grant of an early discharge, as not invalidated by the irregularity constituted by the failure to file the statement of affairs with the Registrar as s 54(1) of the Bankruptcy Act then required. In circumstances where a statement of affairs was delivered to ITSA and was accordingly in the hands of the Trustee throughout a period of more than six months ending on the date when early discharge was applied for, and in circumstances where the Trustee has thought it appropriate, having regard to the criteria, to issue a certificate of early discharge, in my view this is a proper case, having regard to s 306, to make a declaration to the effect that the early discharge is valid as from its date. 11 In reaching that conclusion, I say nothing about the way in which s 306 might apply in any circumstances other than those before the Court. It is, after all, of the essence of the section that it has regard to the effect of the defect or irregularity in the circumstances of individual cases. 12 For the reasons I have given, I make the following declaration: "Notwithstanding the failure of the respondent to file a statement of affairs in compliance with s 54(1) of the Bankruptcy Act 1966 (Cth), the respondent was discharged from bankruptcy on 8 July 1996 by reason of the determination by the applicant on that date to grant an application by the respondent under s 149S of the said Act for early discharge from his bankruptcy." I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.