Wood v Prentice

REASONS FOR JUDGMENT 1 By application filed on 9 April 2001, Mr Wood seeks a declaration that the notice of objection to his discharge from bankruptcy dated 31 August 1999, filed with the Official Receiver is invalid and is of no force and effect and an order that it be set aside. 2 Mr Wood is a barrister practising in New South Wales. He was admitted as a Barrister of the Supreme Court in 1963. He was made bankrupt on 20 August 1996 and he filed a statement of affairs dated 31 August 1996. The statement of affairs shows assets of $7,875.89 and liabilities of $505,607.33. But for the notice of objection he would have been discharged from bankruptcy on 31 August 1999. 3 Mr Wood gave evidence that on or about 31 August 1999 he received a letter from Prentice Parbery Barilla ("PPB") enclosing a notice of objection to discharge from bankruptcy by the trustee, Mr M Prentice. The letter stated that there was also enclosed a notice setting out Mr Wood's options relating to the objection notice in accordance with s 149F(1)(a) of the Bankruptcy Act 1966 (Cth)("the Act"). Mr Wood says that, although he received the options notice at that time, he does not recollect receiving the notice of objection to discharge with the letter. He says that on 2 September 1999, he telephoned Mr D Rose of PPB and informed him of this. He then received a facsimile dated 2 September 1999, which is a copy of the notice of objection. That document, which is the subject of this application, states: "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" 4 Mr Wood says that he did not receive a copy of the notice of objection until 2 September 1999, when he received the facsimile. He says that he never received a letter enclosing both the notice of objection and a document setting out his options relating to the trustee's objection to discharge. I accept this evidence. It is not in dispute that he received both documents. However, Mr Wood's case on this aspect is that he did not receive the two documents together as required by s 149F of the Act. 5 The notice of objection to the discharge dated 31 August 1999 was filed with the Official Receiver in Bankruptcy on 2 September 1999. 6 Section 149 of the Act provides for automatic discharge of a bankrupt from bankruptcy at the end of a three year period from the date on which the bankrupt files his or her statement of affairs. Under s 149B the trustee is empowered, before a bankrupt is discharged from bankruptcy, to file with the Official Receiver a written notice of objection to the discharge. Section 149C imposes requirements in relation to this notice. It provides: "149C Form of notice of objection (1) A notice of objection must: (a) set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and (b) refer to the evidence or other material that, in the opinion of the trustee or Official Receiver, establishes that ground or each of those grounds; and (c) state the reasons of the trustee or Official Receiver for objecting to the discharge on that ground or those grounds." 7 Section 149D sets out the grounds of objection. The relevant ground is as follows: "149D Grounds of objection (1) The grounds of objection that may be set out in a notice of objection are as follows: …. (f) the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG; …" 8 Section 149F(1) provides: "149F Copy of notice of objection to be given to bankrupt (1) As soon as practicable after a notice of objection is filed by the trustee or Official Receiver: (a) the trustee or Official Receiver must give a copy of the notice to the bankrupt together with a notice to the effect that the bankrupt may do either or both of the following: (i) request the Inspector-General to review the decision of the trustee or Official Receiver to file the notice of objection; (ii) subject to the Administrative Appeals Tribunal Act 1975, make an application to the Administrative Appeals Tribunal for a review of the decision of the trustee or Official Receiver to file the notice of objection; and … (3) A contravention of this section does not affect the validity of the objection. (Emphasis added) 149G Date of effect of objection An objection takes effect at the beginning of the day on which details of the notice of objection are entered in the National Personal Insolvency Index. 9 Section 139P(1) of the Act provides that if the income that a bankrupt is likely to derive during a contribution assessment period, as assessed by the trustee under an original assessment, exceeds the actual income threshold amount applicable in relation to the bankrupt at the time the assessment is made, the bankrupt is liable to pay the trustee a contribution in respect of that period. Section 139ZG provides that the contribution that a person is liable to pay under section 139P(1) is payable at such time as the trustee determines. 10 The case for Mr Wood is essentially that the notice does not comply with the requirements of s 149C(1)(b) and (c). It is also submitted that the requirements of s 149F(1)(a) have 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 in invalid.