Soloman v Official Receiver in Bankruptcy, in the matter of Soloman

Evidence 2 Mr Soloman relies upon the following affidavits: (1) his own sworn on 31 May 2023; (2) Edmond El Khoury, solicitor, sworn on 6 June 2023; and (3) Lewis Van Mai,solicitor, affirmed on 14 November 2023. 3 Mr Van Mai is Mr Soloman's solicitor. Mr Khoury is a solicitor who previously acted for Mr Soloman. During the hearing on 23 November 2023, Mr Van Mai gave oral evidence and provided three documents which were tendered on this application. The oral evidence of Mr Van Mai was directed to addressing certain deficiencies in the evidence in relation to notification of the application, to the only known creditor of Mr Soloman at the time he was made bankrupt. There was no cross examination. 4 Mr Soloman also relies on written submissions dated 1 November 2023, prepared by Mr Wood SC. 5 The respondent is the Official Receiver in Bankruptcy. The Official Trustee in Bankruptcy is a corporation sole created by s 18 of the Bankruptcy Act, with any act or things done on behalf of the Official Trustee by any Official Receiver is deemed to have been done by the Official Trustee: s 18(8A). The Inspector-General has general administration of the Bankruptcy Act and may exercise any of the powers of an Official Receiver: s 11. The Australian Financial Security Authority (AFSA) is a listed entity which includes the Inspector-General and the purpose of AFSA includes the functions of the Inspector-General: s 13. References to AFSA in the evidence are references to AFSA exercising the function of the Official Trustee. The respondent recently informed the Court that having considered the evidence and submissions filed by Mr Soloman, that it did not oppose Mr Soloman's application. The respondent appeared at the hearing and confirmed that it did not oppose the grant of relief.

Background 6 Mr Soloman is 62 years old. He migrated to Australia from Egypt in 1996. English is his second language, a language he learnt after his move to Australia and which he has never formally studied. He is a bankrupt, having become so as a result of a sequestration order made by the Federal Circuit Court of Australia (as it then was) on 26 March 2020. 7 The precursor to Mr Soloman's bankruptcy was a default judgment entered in debt recovery proceedings in the District Court. The judgment in the debt was of sum $60,000 plus interest and costs. The judgment creditor was Robin Barry Savage. It is not necessary for the purpose of this application to recount the evidence in relation to the circumstances in which default judgment was entered. Mr Khoury was Mr Soloman's solicitor at this time.

First Statement of Affairs 8 On 7 April 2020, Mr Soloman emailed Kevin Tran, a Senior Insolvency Services Officer of the AFSA advising that he would be seeking a review of the sequestration order. Again, for the purpose of this application, it suffices to note that the review was not successful. 9 On 15 April 2020, Mr Soloman received a reply email from Mr Tran advising that as Mr Soloman was bankrupt he was required to complete and return "the bankruptcy form". 10 On 15 April 2020, Mr Soloman contacted Mr Khoury, the solicitor who had acted for him in the debt recovery proceedings in the Bega District Court that preceded his bankruptcy, for assistance in witnessing his bankruptcy form. Mr Khoury attended Mr Soloman's home and assisted him in completing the bankruptcy form. Mr Khoury also witnessed the bankruptcy form and watched Mr Soloman scan his "identification documents, financial documents and the application" and emailed it to Mr Tran by way of reply. Mr Khoury requested Mr Soloman provide him with a copy of the bankruptcy form which he did. Mr Khoury annexes a copy of that document to his affidavit. The bankruptcy form is titled "Bankruptcy Form". It appears to be an AFSA form. It includes a statement as follows: This form incorporates Debtor's Petition… and Statement of Affairs… as approved under the Bankruptcy Act 1966. 11 On its face, the form appears to be signed by Mr Soloman and dated 15 April 2020 and witnessed by Mr Khoury and also dated by him on 15 April 2020. Mr Soloman annexes a copy of his email to Mr Tran sent 15 April 2020 at 6:35pm to his affidavit. Mr Soloman received a letter dated 31 July 2020 from AFSA which was a notice to complete a statement of affairs form. Mr Soloman states that he was confused and agitated upon seeing the letter and was struggling with his emotional state and injuries. 12 Mr Soloman says that he received a phone call on or about 4 August 2020 from Dorling Kee from AFSA who in effect informed Mr Soloman that she was conducting an investigation and that Mr Soloman needed to submit documents to the Official Trustee urgently or he could suffer criminal consequences.

Second Statement of Affairs 13 On 11 August 2020, Mr Soloman contacted Mr Khoury by phone and requested his assistance. Mr Soloman attended Mr Khoury's office. Mr Khoury downloaded a statement of affairs form from the AFSA website and assisted Mr Soloman in completing the form. Mr Khoury witnessed Mr Soloman signing the form. Mr Khoury advised Mr Soloman that he should send the form to AFSA by post. Post had been identified in the 11 August 2020 AFSA letter as one of the means of responding to the letter. Mr Khoury assisted Mr Soloman in making a copy of the form and packaging the form for postage and witnessed Mr Soloman place the envelope in an Australia Post box. Later that afternoon, upon his return home, Mr Soloman made a scan of the copy of the form and emailed it to Mr Tran. A copy of that email is annexed to Mr Soloman's affidavit. The form is different to the form completed by Mr Soloman on 15 April 2020. It is titled "Statement of Affairs" and bears indications that it is a standard form prepared by AFSA. 14 Mr Soloman deposes to his belief that he had completed all that was required as he did not receive any further communications from AFSA and that since 11 August 2020 he held the belief that he had filed the statement of affairs because he had sent it by post and email. 15 In around March 2023, Mr Soloman submitted a bankruptcy discharge form online. In around April 2023, Mr Soloman received a phone call from AFSA and was informed that AFSA could not locate a bankruptcy form on the file. Mr Soloman said he had already provided the form to AFSA. Mr Soloman was asked to resend the form which he said he had provided to AFSA. On 17 April 2023, Mr Soloman again sent by email, in the form of an attachment, a copy of his email dated 15 April 2020. 16 Further correspondence with AFSA by email, phone and post ensued. Mr Soloman was informed that no record of any bankruptcy form or statement of affairs was located on file and that his three-year bankruptcy period would commence from 17 April 2023, being the date on which he had forwarded his email dated 15 April 2023.

Legal Principles 17 Section 33A of the Bankruptcy Act provides as follows: 33A Alteration of filing date for statement of affairs (1) This section applies to a statement of affairs that was filed for the purposes of section 54, 55, 56B, 56F or 57 by a bankrupt, or by a person who later became a bankrupt. (2) If the Court is satisfied that the person believed, on reasonable grounds, that the statement had already been filed at a time before it was actually filed, the Court may order that the statement is to be treated as having been filed at a time before it was actually filed. (3) The Court cannot make an order that would result in the person being discharged from bankruptcy earlier than 30 days after the order is made. (4) In this section: filed includes presented, lodged or given. 18 In order to make an order under s 33A, I must be satisfied that: (1) Mr Soloman has filed a statement of affairs; (2) Mr Soloman believed that the statement of affairs he filed had already been filed at a time before it was actually filed; and (3) Mr Soloman's belief is based on reasonable grounds. 19 Consideration is therefore required of the provisions relating to the filing of the statement of affairs. In short: (1) a person against whose estate a sequestration order is made is required to file with the Official Receiver a statement of their affairs within 14 days of being notified of the bankruptcy: Bankruptcy Act s 54(1); and (2) a bankrupt is discharged for their bankruptcy after three years from the date on which they filed their statement affairs: Bankruptcy Act s 149(4). 20 In Talent v Official Receiver in Bankruptcy [2020] FCA 1294 Flick J relevantly observed in relation to the discretion conferred by s 33A that (at [6]): (1) the section confers a discretion upon the Court, namely that "the Court may order…"; (2) the discretion conferred is subject to a condition precedent, namely that the Court must be "satisfied that the person believed, on reasonable grounds, that the statement had already been filed"; and (3) the term "filed" is expressly defined for the purposes of the section in a non-exhaustive manner in terms "includ[ing] presented, lodged or given". 21 Hi Honour stated (at [6]): "the extended definition of the term "filed" stands in contrast to the more formal requirements otherwise imposed by the definition of the term "file" in r 16.02 of the Bankruptcy Regulations 1966 (Cth). The definition should not be construed in any narrow or pedantic manner but in a manner which gives full effect to the remedial purpose sought to be achieved by s 33A." 22 Additional relevant considerations to the exercise of the discretion under s 33A are set out by his Honour at [7] of Talent as follows: Although the discretion is conferred in otherwise unconfined terms, it nevertheless remains a discretion to be exercised in a manner which promotes the objects and purposes of the Bankruptcy Act as a whole. Informed in that manner, the Court's discretion is to be exercised in a manner which recognises or takes into account: • the importance of the statutory requirement imposed by s 54(1) of the Bankruptcy Act to file a statement of affairs "within 14 days from the day on which he or she is notified of the bankruptcy"; • the public interest in there being available for inspection a document which discloses the property of a bankrupt, it being said that "it is in the interests of the public in the encouragement of morality in trading that the financial situation of a bankrupt be open to inspection" (Nilant v Macchia [2000] FCA 1528 at [29], (2000) 104 FCR 238 at 245 per Hill J); • the fact that non-compliance with s 54 "is not a formal defect, or a mere irregularity" but a requirement which attracts a statutory penalty (Cable v Pattison [2003] FCA 1499 at [17] per Hely J. See also: Nilant v Macchia [2000] FCA at [29], (2000) 104 FCR at 245 per Hill J). Section 54 does not "operate solely for the benefit of a petitioning creditor" (de Robillard v Carver [2007] FCAFC 73 at [129], (2007) 159 FCR 38 at 61 per Buchanan J (Moore and Conti JJ agreeing). See also: Scott v de Varda [2015] FCA 239 at [13] per Flick J); • the importance of making available to creditors of a bankrupt the property disclosed in the statement of affairs; • the statutory context in which a bankrupt is normally discharged from bankruptcy pursuant to s 149 of the Bankruptcy Act three years from the date upon which the statement of affairs was filed; • the fact that the "bringing forward" of the date upon which a statement of affairs is "treated as having been filed" necessarily brings forward the date upon which a bankrupt would otherwise be discharged; • the utility in continuing a bankruptcy and outstanding matters that remain to be administered; and • the attitude of the office of the Official Receiver, that being an office which can be expected to provide a fairly objective view as to what is perceived to be in the public interest, the interests of creditors and the bankrupt. The statutory context, however, also includes: • the conferral upon this Court of a discretionary power and a power available to be exercised in an appropriate case. 23 I adopt and apply the principles identified in Talent.

Pre-conditions 24 The conditions relevant to the discretion under s 33A being enlivened are as follows:

Issue 1 - Has Mr Soloman filed a statement of affairs? 25 I am satisfied based on the correspondence passing between Mr Soloman and AFSA in April 2023, that Mr Soloman has filed, consistently with the expansive definition of that word, given by s 33A. which includes "given", a statement of affairs on 17 April 2023. That occurred by reason of Mr Soloman's email which attached a copy of his statement of affairs dated 15 April 2020, which had earlier been provided by email to Mr Tran on 15 April 2020. The communication from AFSA by which Mr Soloman was informed that his three-year bankruptcy period would commence on 17 April 2023 reflects that AFSA accepted that the statement of affairs was filed on that date.

Issue 2 - Did Mr Soloman believe that the statement of affairs he filed had already been filed at a time before it was actually filed? 26 I am satisfied that, at latest, Mr Soloman believed he had filed his statement of affairs by around mid-August 2020, being shortly after the document was posted to AFSA. I note that Mr Soloman also emailed his statement of affairs to AFSA on 11 August 2020.

Issue 3 - Was Mr Soloman's belief based on reasonable grounds? 27 I am satisfied that Mr Soloman's belief was based on reasonable grounds. I accept his evidence that after he posted and emailed his statement of affairs to AFSA on 11 August 2020 his belief was as follows: 19 I received no further communication about the statement of affairs to the best of my knowledge. I genuinely believed I had completed all that was required from me because I completed the forms and sent them to AFSA, and because I was not pursued further. At all times since 11 August 2020, I held the belief that I filed a statement of affairs because I sent it by post and e-mail. 28 Given the steps that Mr Soloman took in August 2020, under the guidance of Mr Khoury, his former solicitor, I am satisfied the Mr Soloman believed that he had filed his statement of affairs at that time. His belief was no doubt cemented by the fact that unlike his experience with his first attempt to file his statement of affairs he did not receive any communication from AFSA suggesting that his statement of affairs had not been filed. Mr Khoury has filed an affidavit in support of Mr Soloman's application which corroborates the critical events on which Mr Soloman's belief as the statement of affairs being filed at an earlier dated are based.

Should the Court make an order under s 33A of the Bankruptcy Act? 29 I am satisfied that the discretion to make an order under s 33A of the Bankruptcy Act is enlivened. 30 In Mr Van Mai's affidavit, he deposes to providing a copy of the originating application as further amended by Court order on 6 October 2023 to Mr Savage by way of email and post. As a consequence of the further evidence given by Mr Van Mai orally during the hearing, I am satisfied that the applicant has taken reasonable efforts to bring this application to the attention of Mr Savage. No response has been received from Mr Savage to the communications sent by Mr Van Mai. Mr Van Mai has not communicated to Mr Savage the date of today's hearing. Notwithstanding this, I am satisfied that reasonable steps have been taken to give Mr Savage notice of the proceeding. 31 Counsel for the applicant, "in the spirit of an ex parte application", informed the Court that there had been a substantial partial payment of the debt owed to Mr Savage by Mr Soloman which could potentially found a preference claim. Counsel for the applicant acknowledged that such a preference claim would unlikely to be productive where Mr Savage was the sole debtor of Mr Soloman. The respondent confirmed that AFSA had considered all of the evidence filed by the applicant and that AFSA did not oppose the applicant's application. In these circumstances, I accept that there is an absence of utility in continuing the bankruptcy. 32 As at the date of this application, Mr Soloman had been bankrupt for a period of three years, 7 months and 28 days. Mr Soloman deposes as to his deteriorating health and his continued distress occasioned by the course his bankruptcy has taken. There is no challenge to that evidence. 33 Accordingly, taking all of the above into consideration, I was satisfied on balance that the discretion conferred by s 33A(2) should be exercised in favour of granting relief. I framed the order so as to comply with s 33A(3). The effect will be that Mr Soloman's statement of affairs will be treated as having been filed on 22 December 2020. I also made orders that Mr Soloman notify Mr Savage of the orders I made today. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.