Neshmati V Burness and Lane FMCA 884/ Objection to discharge

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Heshmati v Paul Burness and Morgan Lane [2012] FMCA 884 (27 September 2012)

Last Updated: 4 October 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA

HESHMATI v PAUL BURNESS AND MORGAN LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF BIJAN HESHMATI

[2012] FMCA 884

BANKRUPTCY – Application to review objection by trustees to discharge – consideration of whether the limitation period for such an application can be extended by the Court – consideration of whether the Court could review the trustees’ refusal to reconsider the objection. PRACTICE AND PROCEDURE – Consideration of a separate issue, pursuant to Part 17 of the Federal Magistrates Court Rules 2001 (Cth).

Bankruptcy Act 1966 (Cth), ss.31, 33, 149H, 149K, 149Q, 153B, 178, 178B, 306 Corporations Act, ss.459G, 1322 Federal Magistrates Court Rules 2001 (Cth) Workers Compensation Act 1987 (NSW), s.145

Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9;[2008] 232 CLR 314 David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 Liprini v Pascoe [2012] FCA 886 Newman v Bain [2012] FMCA 629 Raniere Nominees Pty Ltd trading as Horizon Motor Lodge v Daly [2006] NSWCA 235;(2006) 67 NSWLR 417  Samootin v Official Trustee in Bankruptcy [2012] FCA 64 Streimer v Tamas [1981] FCA 123; [1981] 54 FLR 253

Applicant:

BIJAN HESHMATI

Respondents:

PAUL BURNESS AND MORGAN LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF BIJAN HESHMATI

File Number:

SYG 1524 of 2012

Judgment of:

Driver FM

Hearing date:

20 September 2012

Delivered at:

Sydney

Delivered on:

20 September 2012

REPRESENTATION

The Applicant appeared in person

Solicitors for the Respondents:

Ms S Nash Sally Nash & Co

INTERLOCUTORY ORDERS

(1) Pursuant to rule 17.02 of the Federal Magistrates Court Rules 2001 (Cth), there be a decision by the Court on the questions raised in the Application in a Case filed on 28 August 2012 as follows:

• (a) Did the applicant commence these proceedings within 60 days after the day upon which the applicant became aware of the respondents’ act, omission or decision complained of by him, either under s.178 or s.149K of the Bankruptcy Act 1966 (Cth)?
• (b) Whether there is an act, omission or decision of the respondents not to stop the period of the extended bankruptcy is a reviewable decision under s.178 of the Bankruptcy Act 1966 (Cth).
• (c) Whether the letter dated 7 June 2012 is a reviewable decision.

(2) The answers to the questions raised in order 1 are:

• (a) (i) in respect of the Notices of Objection to Discharge issued on 19 May 2009 and 14 December 2010, No;

(ii) in respect of the trustees’ refusal to withdraw those notices communicated by letter dated 7 June 2012, Yes.

(b) See the answer to (c).
(c) Yes.
(3) The amended application filed on 20 August 2012 is dismissed.
(4) The applicant is to pay the respondents’ costs and disbursements of and incidental to the proceedings which, if not agreed, shall be taxed in accordance with the Bankruptcy Act 1966(Cth).
(5) The Court notes that the costs incurred by the respondents in these proceedings are costs incurred in the administration of the bankrupt estate.

FEDERAL MAGISTRATES COURT OF AUSTRALIA  AT SYDNEY

SYG 1524 of 2012

BIJAN HESHMATI

Applicant

And

PAUL BURNESS AND MORGAN LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF BIJAN HESHMATI

Respondents

REASONS FOR JUDGMENT

(revised from transcript)

1. The applicant, Bijan Heshmati, is a bankrupt. The respondents are his trustees in bankruptcy. The proceeding before the Court raises important issues of general application which I hesitate to deal with on an interlocutory and ex tempore basis. However, in the context of this matter, I have considered it appropriate to deliver an ex tempore judgment on the interlocutory proceeding before me.
2. The background to this matter is dealt with in two affidavits by Mr Burness. A sequestration order was made on 24 May 2007. Discharge of bankruptcy occurs automatically three years from the date of filing the statement of affairs with the Official Receiver in Bankruptcy, unless an Objection to Discharge is filed. The statement of affairs was filed on 22 June 2007. Notices of Objection to Discharge were filed on 14 September 2007 and 26 May 2009 and 16 December 2010. The first Notice was withdrawn and is not relevant to this proceeding. The latter two notices are relevant. Dr Heshmati is currently due for discharge on 26 June 2015.
3. Dr Heshmati is obliged to make income contributions to the trustees for the benefit of his unsecured creditors. The trustees have corresponded with Dr Heshmati in relation to his income contributions and the trustees’ assessment of Dr Heshmati’s obligation to make income contributions to the trustees in bankruptcy.
4. No review to the Inspector General in Bankruptcy or the Administrative Appeals Tribunal has been made with respect to the income contribution assessments nor Notices of Objection to Discharge.
5. The Official Receiver in Bankruptcy has issued a statutory garnishee notice on Sydney South West Area Health Services for the purpose of being paid income otherwise due to the estate for the benefit of the unsecured creditors.
6. It has been necessary to issue the statutory garnishee notice because Dr Heshmati has not been making the income contributions required of him.
7. The trustees have not yet determined the proofs of debt in the bankruptcy administration.
8. The staff of the trustees have been advised by Dr Heshmati that he proposes to file another ten applications against the trustees in bankruptcy in relation to the bankruptcy administration.
9. Dr Heshmati has been given permission to travel overseas on conditions. He has not met those conditions.
10. On 13 September 2007 an Objection to Discharge for failure to pay income contributions was lodged by the trustees with the Official Receiver in Bankruptcy. Subsequently income contributions were brought up to date by Dr Heshmati and this objection was withdrawn.
11. On 19 May 2009 a further objection to discharge for failure to pay income contributions was lodged with the Official Receiver in Bankruptcy and a copy was provided to Dr Heshmati.
12. Dr Heshmati was aware of his obligation to make income contributions by reason of income contribution assessments issued by the trustees to him.
13. On 12 January 2010, in response to a conversation with Dr Heshmati on 4 December 2009, an email was sent enclosing Notices of Objections to Discharge.
14. On 26 March 2010 a letter was sent to Dr Heshmati reminding him that an Objection to Discharge had been lodged. The letter was forwarded to him in response to his email of 24 March 2010.
15. On 19 October 2010, according to the trustees’ file maintained in the ordinary course of the maintenance and conduct of the bankruptcy administration of Dr Heshmati, a telephone conversation was held with him in relation to his outstanding income contribution liability and objection to discharge from bankruptcy.
16. Subsequently, a further email was sent to Dr Heshmati confirming that upon payment of the outstanding contribution liability the objection to discharge would be withdrawn.
17. On 22 October 2010 a number of emails were exchanged between Dr Heshmati in relation to his liability and the Objection to Discharge.
18. On 25 October 2010, Dr Heshmati advised he was intending to instigate legal action against the trustees.
19. On 14 December 2010, a further objection to discharge was lodged in relation to a voidable transaction and for providing false and misleading information.
20. On 14 April 2011, correspondence was entered into with Adams & Partners representing Dr Heshmati.
21. On 5 June 2012, Dr Heshmati requested a review by the trustees of the Objections to Discharge. By letter dated 7 June 2012 Mr Burness notified Dr Heshmati that he would not withdraw the objections.
22. Dr Heshmati instituted proceedings on 6 December 2011 in matter SYG2784 of 2011 seeking relief pursuant to s.178 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) in respect of a decision by his trustees concerning his request for permission to travel overseas. I dismissed that application with costs on 5 March 2012.
23. On 13 July 2012, Dr Heshmati filed a fresh application. That application was filed on the current proceedings, SYG1524 of 2012. The final orders sought in that application were:
    • 1. [Pursuant] to section 31 of bankruptcy ACT 1966, annulment of the remaining period of the extended bankruptcy of the bankrupt.
    • 2. [Pursuant] to section 178 of bankruptcy ACT 1966, the decision of the [respondent] for imposing conditions on [permission] to overseas travel for employment purposes be reviewed.
    • 3. [Pursuant] to section 178 of bankruptcy Act 1966, the [decision] of the [respondent] for imposing conditions on permission to overseas travel for the marriage purposes be reviewed.
24. The matter came before me from the registrar’s list on 20 August 2012. Having heard from the parties, I formed the view that Dr Heshmati should be given the opportunity to amend the application. It was apparent that his attempt to obtain an annulment of bankruptcy pursuant to s.31 of the Bankruptcy Act was misguided, but that he may wish to make that attempt in accordance with s.153Bof the Bankruptcy Act. He has, to date, not taken that opportunity.
25. It was also apparent that Dr Heshmati did not wish to agitate further the issue of his travel overseas but had other grievances concerning objections to his discharge from bankruptcy, which he did wish to agitate. I therefore made order 2 on 20 August 2012:
    • Leave is granted to the applicant to file and serve on the respondent an amended application seeking review of a decision of the trustee to extend the period of the applicant’s bankruptcy, provided that such amended application is filed by 4pm on 20 August 2012, together with any such further affidavit evidence in support of it as the applicant wishes to rely upon.
26. At that time, I did not give any consideration to the question of the limitation period prescribed in s.178(2) of the Bankruptcy Act. The trustees were, however, alive to that issue, and sought the opportunity to file an application in a case raising the issue of time. Order 5, made by me on 20 August 2012, addressed that concern of the trustees:
    • Leave is granted to the respondent to file an Application in a Case raising any issue relating to s.178(2) of the Bankruptcy Act 1966 (Cth) by 3 September 2012. Such an application, if filed, will be heard in precedence to the substantive application.
27. Dr Heshmati filed an amended application in accordance with my order on 20 August 2012. The final order sought is:
    • [Pursuant] to section 178B of bankruptcy act 1966 to review the decision of the trustee/[respondent] in refusing to stop the remaining period of my extended bankruptcy as advised on the letter dated 07 June 2012.
28. The trustees filed an amended notice stating grounds of opposition to the application as amended:
    • 3. The Application under Section 178 of the Bankruptcy Act is out of time.
    • 4. The letter dated 7 June 2012 is not a reviewable act, omission or decision under Section 178 of the Bankruptcy Act.
    • 5. The decision of the Trustees is appropriate in circumstances where:-
      • a) The bankrupt has not maintained income contributions as directed by the Trustees.
      • b) The bankrupt has not made income contribution assessments as directed by the Trustees.
      • c) The bankruptcy has been extended.
      • d) The bankrupt became aware of the Trustees’ decision more than 60 days before 13 July 2012 which is the date his Application was filed.
    • 6. The purported review of the Notices of Objections is out of time under Section 149K of the Bankruptcy Act.
    • 7. There is no evidence to support the Application formulated under Section 178 of the Bankruptcy Act.

The interlocutory application

29. In addition, the trustees filed an Application in a Case on 28 August 2012 seeking a number of orders:
    • 1. On the basis that the following questions will finally dispose of these proceedings, the Court directs that pursuant to Regulation 17 Federal Magistrates Court Rules, 2001 there be a separate hearing on the questions:-
      • (a) Did the applicant commence these proceedings within 60 days after the day upon which the applicant became aware of the respondents’ act, omission or decision complained of by him, either under s.178 or s.149K of the Bankruptcy Act 1966 (Cth)?
      • (b) Whether there is an act, omission or decision of the respondents not to stop the period of the extended bankruptcy is a reviewable decision under s.178 of theBankruptcy Act 1966 (Cth).
      • (c) Whether the letter dated 7 June 2012 is a reviewable decision.

2. That the Application be dismissed.
3. Costs.
4. Such further or other order as the Court deems necessary.

30. The matter was listed today in order to deal with the Application in a Case. I note that the court listing referred to the matter as being listed for hearing, but the intention was to deal first with the interlocutory issues raised by the trustees.
31. The Application in a Case is supported by the affidavits of Paul Andrew Burness made on 16 August 2012 and 18 September 2012. For his part, Dr Heshmati relies upon his affidavits made on 13 July 2012, 19 August 2012 and 10 September 2012. I received all of the affidavits, subject to relevance, and none of the deponents were required for cross-examination.
32. I accepted in argument in this matter today that the questions raised by the trustees be dealt with as a separate issue pursuant to Part 17 of the Federal Magistrates Court Rules 2001 (Cth) (theFederal Magistrates Court Rules). I ordered, pursuant to rule 17.2, that the questions raised under paragraph 1 of the orders sought be dealt with separately from the other issues in the proceedings. In making that order, I accepted the following submissions by the trustees:
    1. the determination of either of the questions posed in the Application in a Case may well finally determine the outcome of these proceedings and save the parties the expense of the hearing on all of the issues, such that they can be identified from the amended application;
    2. the prospect of an agreed set of facts is remote. The prospect of continued expense of the litigation is unfortunately likely. Dr Heshmati is self-represented;
    100. the determination of the preliminary issue is a question of law and not a factual determination by the Court;
    4. the Federal Magistrates Court Rules grant the Court the power to have a separate issue arising in the proceedings heard separately from other matters;
    5. the power to order a separate hearing is discretionary. The principles governing the exercise of the discretion are well known. They are usefully summarised in the decision of Branson J inReding Australia Pty Ltd v Australian Mutual Providence Society[1], and more recently by Katzmann J in Alexandra Samootin v Official Trustee in Bankruptcy[2];
    6. in the present matter it is suitable for the exercise of the power to order a separate hearing in respect of the identified questions for the following reasons:

1. if the time limitation issue is determined in favour of the trustees then the proceeding might be dismissed. Thus, resolution of the separate hearing might finally determine the proceedings;
2. there is at least a reasonable basis for the contention that the proceedings have been commenced out of time. Although Dr Heshmati refers to a letter dated 7 June 2012 that letter confirms the trustees’ acts which are complained of and which occurred at a significantly earlier point in time than the letter: in particular, each Notice of Objection to Discharge which has been filed with the Official Receiver and which is required to be served on the bankrupt;
3. the issue in relation to the time is essentially a question of law and the construction of the letter rather than one of disputed fact;
4. the resolution of the separate question is unlikely to involve detailed or lengthy evidence.

Consideration

33. The questions raised for determination centre upon the time limit imposed by s.178(2) of the Bankruptcy Act and the correspondence between Dr Heshmati and his trustees in connection with two objections to discharge. Dr Heshmati has no interest in internal review of the trustees’ decisions by the Inspector-General and it is unnecessary for me to deal with the interpretation of s.149K of theBankruptcy Act.
34. I will deal first with the question of the time limit. Section 178 of the Bankruptcy Act states:
    • (1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
    • (2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision.
35. The trustees contend that the 60 day time limit prescribed in s.178(2) is an absolute time limit which cannot be extended by the Court. It does not appear that that question has previously received any authoritative judicial consideration.
36. I have, nevertheless, been assisted by the trustees’ submissions in relation to comparable decisions and other legislation in relation to time limits.
37. In Newman v Bain[3] Lindsay FM refused to extend the time to consider a s.60 application:
    • I should indicate there is another matter that it seems to me is important to take into account, and it is what I take to be the function of the time limit that is in the legislation. The reason it is there is surely because of the need to provide some degree of certainty for persons involved in litigation...
    • The legislation says that a period of 28 days is enough for a trustee in these circumstances to make his election. The period of time is probably inadequate now and it is probably a matter that requires legislative attention. Litigation is much more complex than it used to be, commercial arrangements are much more complex than they used to be, and certainly in more relaxed days in terms of the conduct of litigation 28 days may have been enough. It is highly likely it is an inadequate period of time in modern conditions. But ameliorating that circumstance, of course, is the other matter to which I have adverted and that is that where trustees as here, need to get advice in relation to the prospective merits of the claim that they are inheriting, the opportunity is always available to trustees in those circumstances to come to the Court and seek an extension of time in the nature of a holding order whilst that advice is taken...
    • Ultimately the matter I have regarded of the most significance is the length of the delay and the circumstance that a significant part of the period of that delay is one where the trustees have no adequate explanation for it...
38. In Raniere Nominees Pty Ltd trading as Horizon Motor Lodge v Daly[4], the New South Wales Court of Appeal was concerned with s.145(1) of the Workers Compensation Act 1987(NSW) (the Workers Compensation Act). In Raniere the issue before the New South Wales Court of Appeal was whether an employer served with a s.145(1) notice could make an application to the Workers Compensation Commission for determination of its liability where the time for making such an application had expired. The New South Wales Court of Appeal held that it could not and that, by virtue of the failure, the sum in the notice had become a debt recoverable in a court of competent jurisdiction pursuant to s.145(6) of the Workers Compensation Act. The relevant section states:
    • 145(1) the Nominal Insurer may serve on a person who, in the opinion of the Nominal Insurer was:-
      • (d) A notice requiring that person, within a period specified in the Notice, to reimburse the insurance fund an amount, but being an amount exceeding the amount of the payment made specified in the Notice.
      • (e) A person on whom such a Notice has been served under sub-section (1) in respect of an injured worker may, within the period specified in the Notice, apply to the Commission for a determination as to the person’s liability in respect of the payment concerned.
39. Santow JA, agreeing with Giles JA, found that the time limit could not be extended. His Honour regarded the regime under s.145 of the Workers Compensation Act as being analogous to that of the regime for setting aside of statutory demands under the Corporations Act (the Corporations Act). Section 459G(2) of that Act provides a 21 day period to set aside such demand and it cannot be extended. Per Santow JA at page 431[73]:
    • compliance with a time prescribed by the statute was a condition precedent to, or an essential integer of, entitlement to the relevant relief.
40. It should be noted that prior to Santow JA making the above statement, he expressly warned against:
    • seeking to find by implication of power in the Commission to determine a purported Application” where the language did not warrant such a variation (ibid) of page 431[71].
41. The High Court of Australia in David Grant & Co Pty Ltd v Westpac Banking Corporation[5] considered the application of s.459G of the Corporations Act.
42. The High Court of Australia found that Part 5.4 of the Corporations Act made specific provisions for applications to set aside the statutory demand with specific limitations, ie the Court could only deal with the application, if it was filed and served within the 21 day time limit. Further there was no power for the Court to exercise its general powers under s.1322(4) Corporations Act to extend the statutory 21 day period and that period could not be modified in any way.
43. The High Court of Australia in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited[6] reviewed and accepted the strict timeframe set out in David Grant but importantly considered the bankruptcy decision of Streimer v Tamas[7] which concerned the time for compliance with a bankruptcy notice.
44. Streimer v Tamas was in reality the application of the slip rule whereby an order was not made extending the time for compliance with the bankruptcy notice. It was an error which was not intended to have any consequence. In this matter Dr Heshmati has been on notice of the objections to discharge and has failed to comply with the notices such that they could be withdrawn by the trustees.
45. Clearly the High Court in David Grant was cognisant that there was and is potential for Part 5.4 to operate harshly. The High Court could have determined that s.1322(4) gave the power to extend the time for compliance. Instead it found at [28]:
    • In providing that an application to the court for an order setting aside a statutory demand "may only" be made within the 21 day period there specified and that an application is made in accordance with s.459G only if, within those 21 days, a supporting affidavit is filed and a copy thereof and of the applications are served, sub-ss (2) and (3) of s.459G attach a limitation or condition upon the authority of the court to set aside the demand. In this setting, the use in s.459G(2) of the term "may" does not give rise to the considerations which apply where legislation confers upon a decision-maker an authority of a discretionary kind and the issue is whether "may" is used in a facultative and permissive sense or an imperative sense (13). Here, the phrase "(a)n application may only be made within 21 days" should be read as a whole. The force of the term "may only" is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s.459G. An integer or element of the right created by s.459G is its exercise by application made within the time specified. To adapt what was said by Isaacs J in The Crown v McNeil (14), it is a condition of the gift in sub-s (1) of s.459G that sub-s (2) be observed and, unless this is so, the gift can never take effect. The same is true of sub-s (3).
46. Section 1322 of the Corporations Act is similar to s.306 of the Bankruptcy Act.
47. In Samootin v Official Trustee in Bankruptcy, Katzmann J agreed to address the question of the operation of s.178(2) as a separate issue in the proceedings before her. However, it transpired that it was not necessary to answer the question, because the substantive proceedings were abandoned. In Liprini v Pascoe[8], Jagot J proceeded on the basis that the parties agreed that the 60 day time limit in s.178(2) had expired and there was no continuing right of appeal[9].
48. In my view, s.178(2) on its face discloses a parliamentary intention that the 60 day time limit is an absolute one which cannot be extended by the Court. I note first the imperative language of the section in the use of the word “must”. I note secondly that the limitation period is a long one. Federal statutory limitation periods generally range from a few days to a period of 35 days, as in theMigration Act 1958 (Cth). I note further that the administration of bankrupt estates could be significantly disrupted if there were no certainty in decisions made by trustees in that administration. The opportunity to bring proceedings outside the limitation period of 60 days could create significant uncertainty, including after the bankrupt administration had been completed. In that regard, I note that the limitation period does not commence to run until the person becomes aware of the trustee’s act, omission, or decision.
49. Considering those factors in combination, I am minded to conclude that Parliament intended that the limitation period was not one that could be extended by the Court. It is necessary, however, to consider also the operation of s.33 of the Bankruptcy Act which states:
    • (1) The Court may:
      • (a) upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;
      • (b) at any time allow the amendment of any written process, proceeding or notice under this Act; or
      • (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.
50. On one view, s.33(1)(c) confers on the Court a general power to extend limitation periods in the absence of an express prohibition on doing so. I have considerable doubt, however, that that provision was intended by Parliament to apply to limitation periods for the bringing of proceedings in the Court for the purposes of the Bankruptcy Act. Section 33 deals with the adjournment, amendment of process, and extension or abridgement of times generally in relation to proceedings before the Court. That suggests that the power conferred on the Court is conferred for the effective administration of justice in proceedings which are otherwise properly before the Court.
51. I have doubt that the section was intended to permit the Court to confer on itself jurisdiction that it would not otherwise have because of the expiration of a limitation period for the bringing of proceedings.
52. There is also an awkward distinction in s.33(1)(c) between the extension of a time period before its expiration and the extension of time after its expiration. The limitation on the power to extend time where there is an express provision to the contrary only applies if the time period has expired. In my view, if the Court lacks the power to extend time for the bringing of proceedings, it would make no difference whether the time period had already expired or not. It would also be surprising if Parliament intended that the Court could shorten (abridge) the limitation period in s.178(2).
53. It is not necessary, however, for me to express a concluded view, and it is probably not appropriate that I do so in this interlocutory judgment, because, in my view, s.178(2) expresses a clear parliamentary intention that the time fixed for the bringing of proceedings cannot be extended. To that extent, s.178(2) may be taken to have expressly provided to the contrary, for the purposes ofs.33(1)(c).
54. The question then is whether the present substantive proceedings were commenced within time. Dr Heshmati submitted that his amended application was intended to deal with two objections to his discharge from bankruptcy, which remained current.
55. The first objection was notified on 19 May 2009. The notice of objection appears at page 31 to the second affidavit by Mr Burness. The objection related to the non-payment of income contributions which the trustees had required from Dr Heshmati. It is apparent from the correspondence annexed to Mr Burness’ affidavit that Dr Heshmati became aware of that objection in 2009.
56. The second objection was notified on 14 December 2010. The notice appears at page 44 of the second affidavit by Mr Burness. That objection related to a number of matters: first, a transfer of property that was not an exempt transfer; secondly, that the property was property of the bankrupt; thirdly, that the transfer occurred in the statutory time period set out by the Bankruptcy Act; and, fourthly, that the consideration given for the transfer was under the market value of the property transferred, meaning that no consideration was given for the transfer of funds. The objection also referred to false or misleading information said to have been given by Dr Heshmati.
57. It appears, from the correspondence annexed to Mr Burness’ affidavit, that Dr Heshmati was aware of that objection no later than 14 April 2011. I conclude that in respect of the two objections of discharge, Dr Heshmati was aware of the relevant acts of his trustees more than 60 days before the filing of his amended application (or his original application).
58. The next question is what is the amended application sought to address. After hearing from Dr Heshmati, it is apparent that he has a general concern about the two extant objections to his discharge from bankruptcy. He takes issue with the income contributions, the transfer of property, and the asserted misleading statements. He wrote to Mr Burness by email on 5 June 2012. Relevantly, in that email, he requested a review of the decision by his trustees. As explained by Dr Heshmati today, he intended in that request to obtain a review of the two objections to discharge. The response from Mr Burness appears at page 51 in the annexures to his second affidavit. Relevantly, Mr Burness stated that he disagreed with the proposition put by Dr Heshmati that criminal proceedings concerning the asserted false or misleading statements, which had been resolved partly in Dr Heshmati’s favour, had the effect of removing the grounds of objection to the discharge.
59. Mr Burness stated that he was not prepared to remove the objection at that time. It is apparent that his statement related to both the 2009 and 2010 objections. It is open to argument that, in the circumstances, Dr Heshmati was seeking the withdrawal of the objections to discharge. Section 149H of the Bankruptcy Act confers on a trustee the discretion to withdraw an objection:
    • (1) If at any time before a bankrupt is discharged the trustee ceases to object to the discharge on a particular ground, the trustee must give the Official Receiver a notice specifying the ground and give the bankrupt a copy of the notice.
    • (3) If there is no longer an objection on any ground, the objection ceases to have effect at the beginning of the last day when details of a notice under subsection (1) are entered in the National Personal Insolvency Index.
    • (4) If one or more grounds of objection remain, the objection continues to have effect on the remaining ground or grounds.
60. In my view, the exercise or non-exercise of that discretion is an act or an omission amenable to review by the Court, pursuant to s.178.
61. To the extent that the amended application brought by Dr Heshmati is seeking to challenge the refusal by the trustee to exercise that discretion, he has acted within time. That is because his initial application was filed less than 60 days after notice of the decision was issued, albeit that the application required amendment to effectively raise the right issue. There may be other reasons to dispose summarily of the application insofar as it relates to that matter, which I will return to later. To the extent, however, that Dr Heshmati’s amended application is seeking to agitate his opposition to the objections, of which he received notice between 2009 and 2011, the proceedings are statute barred.
62. The answer to the first question raised in the separate proceedings is therefore, no, to the extent that the proceedings relate to notification of the objections to discharge rather than refusal to withdraw those notices. The answer to the second question requires reference to Mr Burness’ refusal to exercise his discretion to withdraw the objections, which is an act, omission or decision which is reviewable under s.178. It follows that the answer to question (c) is, yes.
63. I raised with the parties whether, if the questions raised in the separate case were answered in terms which did not, in themselves, dispose of the proceedings summarily, the Court could nevertheless summarily dispose of Dr Heshmati’s amended application. The trustees submit that the Court does have the power and should exercise the power. Rule 17.05 of the Federal Magistrates Court Rules deals with the disposal of a proceeding in connection with a separate decision or question:
    • The Court may, in relation to a decision of a question under this Part:
    • (a) dismiss the proceeding or any part of the proceeding; or
    • (b) give judgment, including a declaratory judgment; or
    • (c) make another order.
64. Importantly, the Court is empowered, in relation to a decision of a question under the part, to dismiss the proceeding or any part of the proceeding, or to give judgment, including a declaratory judgment, or to make any other order. Although it is not entirely clear, I am persuaded that the question of summary dismissal of the substantive proceedings is related to the decision on the separate questions. The issue is whether the proceedings, to the extent that they challenge the trustee’s refusal to exercise power under s.149H, are an abuse of process, or are otherwise doomed to fail.
65. I agree with the trustees’ submissions on that issue.
66. Dr Heshmati had the right to seek internal review of the trustees’ decision to file a Notice of Objection to Discharge. No application for review to the Inspector General in Bankruptcy or the Administrative Appeals Tribunal has occurred.
67. Section 149K of the Bankruptcy Act enables a bankrupt to request the Inspector General to review an objection to discharge. The request must be in writing and lodged not later than 60 days after the day on which the bankrupt is notified of the trustees’ objection. No request was made so no such internal review occurred pursuant to s.149Q. A bankrupt has a further right to review the decision in the Administrative Appeals Tribunal but Dr Heshmati did not commence the process that would have enlivened that right.
68. There would seem to be no statutory reason why, as an alternative, the review application cannot be made to the Court to, in effect, review the trustees’ decision to lodge a Notice of Objection to Discharge.
69. As a general principle, however, where there is a specific statutory entitlement, for example, to seek review on the merits by the Inspector General in Bankruptcy or the Administrative Appeals Tribunal, such an application provides a more effective remedy than an application to the Court. The Court would be entitled to refuse relief where a more effective remedy is available.
70. In addition, in my view, it would be an abuse of process for an applicant to seek to use a refusal to withdraw an objection as a backdoor method of reviewing an objection to discharge which could have been dealt with under alternative administrative review procedures, (or by the Court under s.178) and was not dealt with in that manner. Something new should have occurred in order to support a request for the exercise of the discretion under s.149H.
71. The event which triggered Dr Heshmati’s request to the trustee was his acquittal on one of the criminal charges against him for the provision of false or misleading information. That, however, manifestly had no significance in relation to the 2009 objection, and only marginal significance in relation to the 2010 objection. Dr Heshmati conceded in argument that he had been ruminating over some time about the objections, and his grievances in relation to them. While his acquittal, in his mind, provided an opportunity to approach the trustees, his intent in doing so, and his intent in bringing the amended application, was to re-agitate all of the issues in the objections. He conceded to the trustees and conceded in argument today that he did not take the opportunity at the time to seek merits review of the objections. He should not be permitted to further pursue these proceedings under the expedient of a challenge to the refusal to exercise the discretion under s.149H.
72. Even if that challenge did not constitute an abuse of process, it would be doomed to fail. That is because Dr Heshmati has advanced nothing apart from his acquittal on the criminal charge to support his request for the exercise of power under s.149H, which of itself was plainly not sufficient.
73. I have ordered that, pursuant to rule 17.02 of the Federal Magistrates Court Rules, there be a decision by the Court on the questions raised in the Application in a Case filed on 28 August 2012 as follows:
    1. Did the applicant commence these proceedings within 60 days after the day upon which the applicant became aware of the respondents’ act, omission or decision complained of by him, either under s.178 or s.149K of the Bankruptcy Act 1966 (Cth)?
    2. Whether there is an act, omission or decision of the respondents not to stop the period of the extended bankruptcy is a reviewable decision under s.178 of the Bankruptcy Act 1966 (Cth).
    100. Whether the letter dated 7 June 2012 is a reviewable decision.
74. The answers to the questions raised are:
    1. (i) in respect of the Notices of Objection to Discharge issued on 19 May 2009 and 14 December 2010, No;

(ii) in respect of the trustees’ refusal to withdraw those notices communicated by letter dated 7 June 2012, Yes.

2. See the answer to (c).

100. Yes.

75. The amended application filed on 20 August 2012 is dismissed.
76. In consequence of the dismissal of the amended application, the trustees seek an order for costs. Dr Heshmati submitted that his burdens are already great and the additional burden of a costs order should not be added to them. The trustees have incurred costs in dealing with the original and amended applications. It is appropriate that the ordinary principle that costs follow the event should apply.
77. The applicant is to pay the respondents’ costs and disbursements of and incidental to the proceedings which, if not agreed, shall be taxed in accordance with the Bankruptcy Act.
78. I will add a further notation that the costs incurred by the respondents’ are costs incurred in the administration of the bankrupt estate.

I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Driver FM

Date: 27 September 2012

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[1] [1999] 217 ALR 415
[2] [2012] FCA 64
[3] [2012] FMCA 629
[4] [2006] NSWCA 235; (2006) 67 NSWLR 417
[5] [1995] HCA 43; (1995) 184 CLR 265
[6] [2008] HCA 9; [2008] 232 CLR 314
[7] [1981] FCA 123; [1981] 54 FLR 253
[8] [2012] FCA 886
[9] see [21]

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