Prentice v Wood

REASONS FOR JUDGMENT THE COURT: 1 The respondent ("Mr Wood") was made bankrupt on 20 August 1996. On 6 September 1996 Mr Wood filed a Statement of Affairs dated 31 August 1996 which recorded a deficiency of almost $500,000. 2 Subject to s 149A of the Bankruptcy Act 1966 (Cth) ("the Act"), Mr Wood would have been discharged from bankruptcy at the end of three years from the date on which he filed his Statement of Affairs, viz 6 September 1999. 3 The appellant ("The Trustee") made the following assessments of contributions which the respondent was liable to make to his bankrupt estate pursuant to ss 139P and 139S of the Act: Date CAP Year Amount Date payable 31.1.97 1996/97 $ 59,751.86 16.5.1997 10.2.98 1997/98 $ 59,688.52 16.5.1998 $119,440.38 4 A letter of 7 December 2000 from the Trustee to Mr Wood's solicitor records the following receipts in the period up to 15 August 1997: Recovery of debtors: $22,424.75 Contributions from Mr Wood: $31,100.00 5 On 31 August 1999 the Trustee wrote to Mr Wood stating that a Notice of Objection to Discharge in relation to his bankruptcy was enclosed with the letter, as well as a notice setting forth the options open to Mr Wood in accordance with s 149F(1)(a) of the Act. The primary judge accepted Mr Wood's evidence that the Notice of Objection was not enclosed. 6 On 2 September 1999 a Notice of Objection to the discharge of the respondent from bankruptcy was filed by the Trustee with the Official Receiver. The Notice was in the following form: "NOTICE OF OBJECTION TO DISCHARGE I, Maxwell William Prentice of Level 15, 25 Bligh Street, Sydney, the Trustee, hereby object to the discharge of Richard H Wood of Manorbrier, Cootamundra in the State of New South Wales from bankruptcy by force of Section 149B of the Bankruptcy Act 1966 on the following grounds: 1. Section 149D(1)(f) 'the Bankrupt failed to pay to the Trustee an amount that the Bankrupt was liable to pay under Section 139ZG'. The Bankrupt has been assessed to pay income contributions that were due and payable on the following dates: Date Due CAP Year Amount $ 17 May, 1997 1996/97 47,751.86 17 May, 1998 1997/98 40,588.52 On 20 August 1999, I received Mr Wood's Cash Flow Report that discloses his income and expenditure for the 1998/99 CAP year. As the two previous assessments remain outstanding, no income assessment has yet been forwarded to Mr Wood for the CAP Year for 1998/99. However, I estimate that Mr Wood's income assessment for the CAP Year for 1998/99 will be comparable to his two previous years. In summary, I have not yet received any of the assessed outstanding income contributions totaling [sic] $88,340.38, nor have I received any income from him for the 1998/99 CAP Year. In my opinion, creditors will directly benefit from my Notice of Objection to Discharge since, if Mr Wood continues to practice as he has done in the past, creditors will be entitled to enjoy a further five (5) assessment periods of Mr Wood's income. Further evidence on all matters is available from my office if required. This objection has the effect of extending the bankruptcy to the 31st day of August 2004. DATED this 31 day of August 1999. M.W. Prentice Trustee" 7 A copy of this notice was faxed to Mr Wood on 2 September 1999 in response to his telephone request. The total of the amounts claimed in the notice is $88,340.88. The Notice of Objection, if valid, had the effect of extending the bankruptcy to 6 September 2004, but nothing turns upon the misstatement in the notice in this respect. 8 On 9 April 2001 Mr Wood sought a declaration that the Notice of Objection to his discharge from bankruptcy was invalid and of no effect. On 3 August 2001 the primary judge gave his reasons for concluding that the Notice of Objection was invalid, and on 24 August 2001 made a declaration that the Notice of Objection to discharge Mr Wood from bankruptcy dated 31 August 1999 filed with the Official Receiver was invalid and of no force and effect. On 28 August 2001 the primary judge declared that Mr Wood was discharged from bankruptcy on 6 September 1999 pursuant to s 149(4) of the Act. 9 Section 149C(1) relevantly provides that a Notice of Objection to the discharge from bankruptcy must: (a) set out the ground of objection, being a ground set out in s 149D(1); (b) refer to the evidence or other material that, in the opinion of the Trustee, establishes the ground; (c) state the reasons of the Trustee for objecting to the discharge on that ground. 10 The grounds of objection set out in s 149D(1) include the following: "(f) The bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG." The amounts which Mr Wood was liable to pay under s 139ZG in the present case, are the assessed contributions referred to in par 3 above. 11 Section 149C(2) of the Act provides as follows: "A notice of objection is not invalid merely because it does not state the ground or grounds of objection precisely as set out in subsection 149D(1) provided that the ground or grounds can reasonably be identified from the terms of the notice." That suggests that a Notice of Objection which otherwise fails to comply with s 149C may be "invalid". So much was accepted by counsel for the Trustee, subject to the possible operation of s 306. 12 The Act provides for review of a decision of the Trustee to file a Notice of Objection by the Inspector-General in Bankruptcy [s 149K], and by the Administrative Appeals Tribunal [s 149Q]. 13 There was a discrepancy between the income contributions in fact assessed by the Trustee, and those described in the notice, as illustrated by the following table: Date due CAP Year Amount Amount in Assessed Notice 17.5.97 1996/97 $ 59,751.86 $47,751.86 17.5.98 1997/98 $ 59,688.52 $40,588.52 $119,440.38 $88,340.38 If credit were given for the sum of $31,100 received from the bankrupt (but not for amounts collected from debtors) then the amount due at the date of issue of the notice was $88,340.38, which equals the total of the sums claimed in the notice. 14 The case for Mr Wood at first instance was that the notice did not comply with the requirements of s 149C(1)(b) and (c). It was also submitted that the requirements of s 149F(1)(a) had not been satisfied, because Mr Wood was not given a copy of the Notice of Objection together with a notice setting out the bankrupt's options as required by that provision and that, as a consequence, the notice was invalid. The primary judge found against Mr Wood on the s 149F point, and that issue was not pursued on appeal.