RE: MARIO SILVERIO MACCHIA EX PARTE; MARIO SILVERIO MACCHIA v CHARLES PHILIPPE LOUIS NILANT as Trustee of the Bankrupt Estate of MARIO SILVERIO MACCHIA

Federal Court of Australia|1997-02-07|Before: Lindgren J, Lee J

On 19 July 1991 Mr Macchia and his brother signed authorities under s188 of the Act (the PtX proceeding) authorizing the respondent ("the Trustee") to take control of their joint and several property and to convene a meeting of their respective creditors. Pursuant to sub-para188(2)(c)(i) of the Act Mr Macchia gave the Trustee a statement of his affairs and a joint statement of the affairs of Mr Macchia and his brother as joint debtors, each statement prepared as at 9 July 1991. The notice convening the meeting of creditors pursuant to s194 of the Act advised the joint and several creditors of the debtors that it was proposed by the debtors that there be a composition of their debts by the payment to the creditors of a sum of $50,000. At the meeting of the creditors held on 8 and 29 August 1991 the composition proposal was rejected and it was resolved by the creditors that the debtors lodge their petitions in bankruptcy within 7 days. Mr Macchia's brother lodged a petition and became bankrupt on 4 September 1991. Mr Macchia presented his own petition on the same day but by operation of sub-s55(3A) of the Act the Registrar was required to refer the petition to the Court for a direction to accept or direct it. On 16 September 1991 I directed the Registrar to reject Mr Macchia's petition and ordered that the estate of Mr Macchia be sequestrated on the creditors' petition. I further ordered that the estates in bankruptcy of Mr Macchia and his brother be consolidated. At the time the order was made Mr Macchia had prepared a statement of his affairs, and a joint statement of affairs with his brother, as at 9 July 1991 and a further statement of his affairs to support the petition presented by him to the Court on 4 September 1991. It does not appear that after my order of 16 September 1991 any further joint statement of affairs was prepared by the joint bankrupts. Pursuant to the order made on 16 September 1991 the property of Mr Macchia became vested in the Trustee who was also the Trustee of the bankrupt estate of Mr Macchia's brother. On 2 October 1991 the Trustee handed to Mr Macchia a letter advising Mr Macchia that he had been made bankrupt on 16 September 1991 and enclosed an "explanatory document" in which the relevant provisions of s54 were set out, namely, that a person against whom a sequestration order is made must file a statement of affairs with the District Registry within 14 days from the day on which he is notified of the bankruptcy and must furnish a copy to the Trustee.

On 6 October 1992 the Trustee advised Mr Macchia that he had not received a copy of Mr Macchia's statement of affairs as required by s54 of the Act and informed Mr Macchia that pursuant to s149 of the Act discharge from bankruptcy would not occur until 3 years from the filing of the statement of affairs. On 9 October 1992 Mr Macchia replied to the Trustee that he had provided a statement of affairs on 16 July 1991 and again on 4 September 1991 and asked that the Trustee obtain a copy of these statements from the Registrar as soon as possible. In a letter to the Trustee dated 23 October 1992 Mr Macchia again referred to his debtor's petition and the statement of affairs that he had "lodged" with that petition. In the same letter Mr Macchia informed the Trustee that he had obtained employment in a remote part of the State. By letter dated 28 October 1992 the Trustee informed Mr Macchia that he had been made bankrupt on a creditors' petition (an incorrect date of bankruptcy of 9 September 1991 being stated) and not on the debtor's petition with which a statement of affairs had been supplied. The Trustee asked Mr Macchia to file a statement of affairs.

On 3 December 1993 the Trustee applied to the Court for an order that Mr Macchia be committed for contempt pursuant to sub-s54(3) of the Act for failure to file a statement of affairs as required by para54(1)(a). Before the application came on for hearing Mr Macchia filed a statement of affairs on 21 January 1994. Pursuant to s149 of the Act discharge from bankruptcy would occur on 22 January 1997 if the period of bankruptcy were not extended by an objection lodged by the Trustee. By letter dated 26 October 1994 the Trustee delivered to Mr Macchia an Income Assessment Questionnaire in respect of the year ending 30 June 1994 and asked that it be completed by Mr Macchia and returned. On 4 November 1994 Mr Macchia returned the form duly completed in which the gross income for the year ended 30 June 1994 was shown as $59,498. The anticipated income for the year ended 30 June 1995 was $9,000. By a letter dated 15 February 1995 the Trustee purported to make an assessment under s139W of the Act that Mr Macchia was liable to contribute to his estate from his income a sum of $10,677 arising out of the income derived in the years ended 30 June 1993 and 30 June 1994. The Trustee stated that Mr Macchia was to make payments of $890 per month from 28 February 1995. No payments have been made. It may be noted that pursuant to s139W of the Act, as soon as practicable after the start of "each contribution assessment period" the Trustee was required to make an assessment of the income likely to be derived by the bankrupt during that period; of "the actual income threshold amount" applicable to the bankrupt; and of the contribution (if any) that the bankrupt is liable to pay under s139S of the Act in respect of that period. As defined in s139K of the Act the "contribution assessment period" of Mr Macchia's estate commenced on 1 July 1992 and on 1 July in each year thereafter. The Trustee was provided with sufficient information by Mr Macchia in October 1992 for an assessment to be made pursuant to sub-s139W(4) and for the Trustee to give to Mr Macchia written notice setting out particulars of that assessment. It is to be noted that the obligation to make an assessment, or to provide notice thereof, under s139W is not made dependent on the Trustee's belief that a contribution is payable. On 12 October 1995 Mr Macchia filed this application. The application was opposed by the Trustee. It was listed for hearing on 20 May 1996. On 17 May 1996 the Trustee, pursuant to s149B of the Act, filed an objection to the discharge of Mr Macchia from bankruptcy. The ground of objection relied upon was para149D(1)(f) of the Act, namely, that Mr Macchia had failed to pay to the Trustee an amount that he was liable to pay under s139ZG of the Act. It may be noted that the reference to s139ZG in s149D(1)(f) appears to be inapt given that s138ZG is concerned with the manner of payment and not liability for payment. It is sub-s139P(1) or sub-s139Q(1) that creates the liability to pay a sum to which s139ZG refers. The hearing was adjourned to allow Mr Macchia to seek a review of the Trustee's objection. On 12 June 1996 pursuant to sub-s149K(1) of the Act Mr Macchia requested the Inspector-General to review the decision of the Trustee to file the notice of objection. On 18 June 1996, pursuant to s149J of the Act, the Trustee withdrew the objection. By letter dated 20 June 1996 the Trustee advised Mr Macchia that the Trustee had "re-assessed" "income contributions" for the contribution assessment period ending 30 June 1993 and 30 June 1994. The effect of the "re-assessment" was that no amount was payable as a contribution by Mr Macchia for the period ending 30 June 1993, the amount previously demanded being $1,289, and $8,985 was said to be payable as a contribution for the period ending 30 June 1994 in place of the sum previously demanded, $9,388. The Trustee directed that the sum set out in the notice be paid by 28 June 1996. On 3 July 1996 the Trustee lodged a notice of objection to Mr Macchia's discharge from bankruptcy based on non-payment of the sum claimed in the assessment notice dated 20 June 1996. Apparently Mr Macchia requested the Inspector-General to review the decision of the Trustee to file the notice of objection filed on 3 July 1996 and on 19 September 1996 the Inspector-General confirmed the Trustee's decision. Under s149A of the Act the effect of the objection filed by the Trustee was to extend the period of bankruptcy from 3 to 8 years from 21 January 1994, that is, to 21 January 2002. On 19 March 1997 the Trustee filed another notice of objection to discharge, the ground for which was said to be s149D(1)(n) of the Act, namely, the failure of Mr Macchia, whether intentionally or not, to disclose to the Trustee a beneficial interest in property. It was claimed by the Trustee that Mr Macchia had succeeded to a share in the estate of his deceased mother who, the Trustee claims, died intestate on 21 March 1995. The principal property of the estate was real estate. Before Mrs Macchia died a caveat was lodged against the title to that property by a sister of Mr Macchia. In the that caveat Mr Macchia's sister claimed the whole of the beneficial interest in the land. Paragraph 33(1)(c) of the Act provides as follows:

"33(1) ... (c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time." It has been accepted in decisions of several Judges of this Court that the Court may make an order under para33(1)(c) of the Act that the time provided by s149 of the Act be abridged where the circumstances of the case justify such an order. (See: Re: Rohde (1993) 42 FCR 149; Re Ghee Siang Khoo, Unreported (Federal Court of Australia, Lindgren J, 16 August 1994); Re Morgan, Unreported (Federal Court of Australia, Lindgren J, 21 March 1995); Re Jacobs, Unreported (Federal Court of Australia, Lindgren J, 7 February 1997.) No doubt for the circumstances to be regarded as sufficient to justify the use of the power to abridge a period of time expressly stated in s149 it is likely that they will have some special characteristic, although it is not a requirement of the paragraph that the power be exercised only in special or extraordinary circumstances. In the present case the bankrupt has been the author of his own misfortune in that he continued to maintain, in the face of the Trustee's advice that he was obliged to file a further statement of affairs, that he had complied with the requirements of the Act when he presented his own petition and by declining to comply with the Trustee's request that he do so. I do not accept that the requirements of sub-s54(1) were met by the act of presentation of the petition by Mr Macchia on 4 September 1991. Sub-section 54(1) reads as follows: "54(1) Where a sequestration order is made, the person against whose estate it is made shall, within 14 days from the day on which is is notified of the bankruptcy: (a) make out and file in the office of the Registrar for the District in which the sequestration order was made a statement of his affairs; and (b) furnish a copy of the statement to the trustee." It was submitted that a statement was filed within 14 days of the sequestration order made on 16 September 1991 when the debtor's petition was presented on 4 September 1991. The terms of the sub-section indicate that the obligation to file a statement of affairs arises when the sequestration order is made and to comply with that obligation a bankrupt must act within 14 days of the obligation arising. It is plain that the provision takes effect prospectively. The Act is concerned that the statement of affairs of a bankrupt be established on or immediately after the bankruptcy. Furthermore, in the present case the statement of affairs of Mr Macchia was not "filed" in the bankruptcy matter in which the sequestration order was made. Indeed, given the terms of the order made by the Court pursuant to sub-s55(3) of the Act directing the Registrar to reject the petition presented by Mr Macchia, it is arguable that the statement was not "filed" in the Registry at all. However, there remains a significance in the preparation of the statement of affairs that accompanied the petition presented to the Registrar by Mr Macchia, particularly when put in context with an earlier statement of affairs prepared by Mr Macchia and filed as part of the PtX proceeding some weeks earlier. The Trustee was the Trustee authorized by Mr Macchia and his brother in the PtX proceeding. He was nominated by Mr Macchia's brother as the Trustee in the brother's bankruptcy and by the petitioning creditor in Mr Macchia's bankruptcy. At this point it is appropriate to note that when Mr Macchia presented his own petition the petitioning creditor did not seek a sequestration order on its petition and was content to consent to an order that the Registrar be directed to accept Mr Macchia's petition. If that direction had been made, no question could have arisen under s54 of the Act of the bankrupt filing another statement of affairs. In directing the Registrar to reject the petition presented by Mr Macchia I had regard to the public interest, and the interest of creditors, in the relation-back period not being abridged as would occur if Mr Macchia became bankrupt on his own petition. As events have transpired it does not appear to be the case that any prejudice would have been suffered by the creditors if the Registrar had been directed to accept the petition presented by Mr Macchia. Furthermore, no suggestion has been raised that any change took place in the affairs of Mr Macchia between 9 July 1991, 4 September 1991 and 16 September 1991. The knowledge that the Trustee had gained from the joint and several statements prepared by Mr Macchia and his brother in the PtX proceeding was sufficient to allow him to commence due administration of Mr Macchia's estate and to direct enquiries to Mr Macchia if any further information was required. The Trustee was prepared to accept the joint statements of Mr Macchia and his brother prepared for the PtX proceeding as sufficient for dealing with their joint debts in the consolidated estates of Mr Macchia and his brother. As far as the administration of Mr Macchia's estate has been concerned it has not been suggested that the default in filing a further statement of affairs within 14 days of 16 September 1991 impeded the Trustee in any way. The circumstances suggest that there was no material of which the Trustee was unaware that would have been revealed in that period or was revealed almost 2˝ years later. On the other hand, consideration must be given to the fact that Mr Macchia did not comply with the terms of the Act for a considerable period, albeit for reasons of mistaken belief as to his compliance with the Act. In the end it is a matter of discretion where the period of bankruptcy should end. If not abridged it will run for at least 6 years and if the Trustee's objection to discharge is allowed to take effect the period of bankruptcy will be 11 years. I am satisfied that in all the circumstances of the case it is appropriate that the period of bankruptcy be abridged. In particular, I have had regard to the fact that this would have been a matter in which Mr Macchia would have been discharged from bankruptcy in September 1994 but for the order directing the Registrar to reject his petition. A reasonable abridgement will not deny the Trustee the opportunity to duly administer the estate.

The Trustee has submitted that if an order is made abridging the period of bankruptcy it should not have the effect of excluding the prospect of the Trustee obtaining the benefit of after-acquired property that may vest in the Trustee upon the death of Mr Macchia's mother in March 1995. I am not persuaded that such a possibility is a proper matter to be considered. The starting point of this application is to look at the circumstances relevant to the failure to file a statement of affairs as required by the Act and, after having regard to those matters, and the consequences thereof, to determine whether any order of abridgement is appropriate. It would not be proper to fail to abridge the period to a period that is a proper period for the administration of the bankrupt estate by considering that to do so may deny creditors an extended period of bankruptcy that may enhance the prospect of after-acquired property falling into the estate. The interests of creditors with whom debts were incurred by a bankrupt some years beforehand have to give way to the interests of others at some point in time and the Act has declared that in usual circumstances the appropriate period will be 3 years. It is a question of what is a reasonable period of bankruptcy in the circumstances, not whether the bankruptcy should be prolonged to improve the prospects of recovery of creditors. The assessment of "income contributions" and the liability of Mr Macchia to pay the sum assessed raises a different question. I express no opinion on whether the assessment of which notice was given in February 1995 has been made and notified as required by the Act. Nor do I express any opinion on the consequence of the "subsequent assessment" made in June 1996 and the "substituted" liability that arose under s139Q of the Act. It is appropriate to consider that if the original assessment has any effect under the Act it relates to events within the period of bankruptcy even if the period is abridged. If, however, the time at which the assessment was made is not within the abridged period such an abridgement may work an injustice on creditors. On the other hand there is no evidence that Mr Macchia has any ability to pay from present income the sum demanded in the original assessment. Having regard to all of these matters I conclude that an appropriate order in this case is that the period of bankruptcy limited by s149 of the Act be abridged from 3 years to 1 year and 1 month from the date of filing of the statement of affairs. As a result Mr Macchia will be discharged from bankruptcy as at 22 February 1995, a period of bankruptcy of 3 years and 5 months. I certify that the preceding fifteen (15) pages are a true copy of the Reasons for Judgment of his Honour Justice Lee. Associate: Date:

APPEARANCES Counsel for the Applicant: D J A Hockton Solicitors for the Applicant: Wojtowicz Kelly Counsel for the Respondent: A F Carles Solicitors for the Respondent: Carles Solicitors Date of Hearing : 8 April 1997 Date of Judgment : 11 April 1997

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