Case: Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67
Outcome: referred to
As far as the objection provisions in the Act are concerned, although a number of the authorities deal with provisions which have since been amended, it seems the basic principles remain the same. They are as follows: 1. The power to prevent a discharge from bankruptcy by operation of law by filing a notice of objection is "a great power": Van Reesema v Official Trustee in Bankruptcy (1983) 69 FLR 424 at 430-431; 50 ALR 253 at 260; Prentice v Wood [2002] FCAFC 48 ; (2002) 119 FCR 296 at 300 [19] - [21] . 2. In Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67 the Court referred to s 149C as it then was and concluded that to make an objection a trustee would need to have reasons directed to the purposes and objects of the Act and that the existence of a permissible ground supported by sufficient evidence was a threshold and that there must also be reasons justifying the making of the objections in the particular case. Section 149C has since been amended to insert subs (1A) which excludes the sub-group of ten grounds to which I have previously referred from the operation of s 149C(1)(c) (see [21] above). It is not necessary for me to consider whether this amendment might affect the question of whether all the reasoning in Nelson should be applied to the amended provisions because there is no challenge in this case to the respondent's decision to make the objections or the notices of objections themselves. 3. Unlike this case, in Wharton v Official Receiver in Bankruptcy [2001] FCA 96 ; (2001) 107 FCR 28 there was a challenge to a trustee's decision to file a notice of objection and at the time relevant to Weinberg J's decision there were fourteen, not twenty-one, grounds of objection in s 149D(1). Nevertheless, with respect, his Honour's observations at 41 [77] give an insight into the objection procedure: Section 149A is an important provision. It provides a strong incentive to bankrupts to cooperate with their trustees during the administration of their estates. In some circumstances, an incentive of that type is plainly necessary. However, unless the section is construed in a sensible manner, it is capable of operating oppressively. It is reasonable to assume that trustees who make requests for information from bankrupts, including those concerning their income, will make due allowance for what might be regarded as the ordinary exigencies of life. Requests for information are often not met in as timely a manner as they ought to be. Some delays may be regarded as excusable while others will properly give rise to the filing of notices of objection. A bankrupt cannot ignore requests from his or her trustee. A particularly lengthy delay in responding to a request may trigger a notice of objection to discharge which is entirely justifiable. A relatively short delay in answering a request may be a different matter. Section 149D(1)(d) must be construed in the light of the requirement in s 149B(2)(b) that the trustee must believe that the filing of a notice of objection is the only way to induce the bankrupt to discharge his duties under the Act . It is plainly a course of last resort. 4. In Thomas v Donnelly [1997] FCA 1142 , Emmett J considered the trustee's discretionary power under s 149J to consider and make a decision as to whether, in particular circumstances, he should withdraw an objection which he has lodged. His Honour made the point that a trustee is an officer of the Court and that in exercising his powers and functions, he is required to take into account not only the interest of creditors but also the interest of the bankrupt and of the community generally. His Honour also said: In exercising his powers, the trustee should have in mind the object of enforcing careful and moral conduct on the part of the debtor and to uphold the commercial morality of the community. In Macchia , French J cited with approval authority to the effect that trustees are appointed to administer the estates of bankrupts in the interests of creditors and, in so doing, to have regard also to the interests of bankrupts (at 116 [38]). 5. In a case such as the present one where there has been a failure to provide information or material and to pay money and there is no challenge to the decision to make objections on those grounds, a trustee, on being asked to consider a withdrawal of objections, will consider the following: (1) Whether the obligation has now been complied with or, at least, substantially complied with. Literal compliance may not in fact be possible. The ground in s 149D(1)(e) provides an example. The twenty-one day period referred to in s139U(1) is likely to have expired long ago. I will refer to substantial compliance as embracing the concept of compliance in a practical sense with the relevant obligation. It is difficult to see how a trustee could be criticised for refusing to withdraw an objection that had not been substantially complied with. (2) Even if an objection has been substantially complied with, the trustee has a discretion not to withdraw it. That discretion must be exercised having regard to the interests of the bankrupt's creditors and the interest of the bankrupt and the community generally. The discretion should not be exercised to punish the bankrupt. Despite legislative amendments since Nelson the principle that a notice of objection should not be filed to penalise a bankrupt (at 82) remains valid and in the same way a trustee should not refuse to withdraw an objection for the purpose of penalising a bankrupt. The most important consideration in the exercise of the discretion whether to withdraw an objection will be whether there is utility in the administration of the estate continuing. If there is utility in the administration of the estate continuing, then even though a properly based objection has been substantially complied with it may be appropriate for the trustee to refuse to withdraw the objection. In exercising the discretion it is likely that it will be appropriate for a trustee to consider a range of matters. It is not possible to state those matters exhaustively. Some of the matters which seem to me to be relevant are the nature and extent of the benefit which may accrue to the estate if the administration continues, any connection between the ground of objection and delay in the timely administration of the estate, delay by the trustee in the timely administration of the estate for reasons unrelated to the ground of objection and any connection between the ground of objection and a need by the trustee to conduct further inquiries and investigations. It would also be appropriate for the trustee to have regard to the interests of the bankrupt and the overall period of the bankruptcy. In a proper case, it will also be appropriate for the trustee to take into account the fact that he retains certain powers, or is owed certain obligations by a bankrupt, even after the bankrupt's discharge from bankruptcy. Examples are the power to examine and require the production of books in s 81 , and the obligation in s 152 of the Act . Section 152 is in the following terms: s 152 A discharged bankrupt must, even though discharged, give such assistance as the trustee reasonably requires in the realization and distribution of such of his or her property as is vested in the trustee. Penalty: Imprisonment for 6 months. One factor which the respondent advanced as a factor he could rely on to support his decision not to withdraw the objections was the fact that, if not discharged, there will be a further CAP and it was said that that might produce a contribution for the benefit of creditors. The CAPs cease at the end of bankruptcy although an assessment may be made at any time: s 139WA. The discharge of a bankrupt from a bankruptcy does not release the bankrupt from liability to pay an amount to the trustee under s 139ZG(1). In my opinion, the fact that there will be a further CAP is not a factor to be taken into account. It is a consequence of an administration continuing, but not a reason to continue it. I do not think the Full Court of this Court said anything to the contrary in Prentice v Wood [2002] FCAFC 48 ; (2002) 119 FCR 296. 36 I have not been able to find any authority which deals with s 139U of the Act . Two matters, however, should be noted. First, the reference in s 149D(1)(e) to s 139U may only be a reference to the obligation in subs (1)(a) to provide a statement containing certain particulars and other matters and not (in addition) the obligation in subs (1)(b) to provide books. That would seem to follow from the fact that s 149D(1)(e) refers only to a bankrupt's failure to disclose "any particulars of income or expected income as required by ... section 139U". Secondly, there was no debate before me as to whether a bankrupt only complied with s 139U if the statement containing certain particulars and other matters and the books are accurate. That type of issue was discussed by Weinberg J in Wharton in a different context, namely, an objection based on s 149D(1)(d). The important word used in paragraph (d) is "information". For reasons I will give I do not need to consider the issue in the context of s 149D(1)(e) and s 139U.