Burke v Inspector-General in Bankruptcy

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FEDERAL COURT OF AUSTRALIA

Burke v Inspector-General in Bankruptcy [2014] FCAFC 112

Citation: Burke v Inspector-General in Bankruptcy [2014] FCAFC 112
Appeal from: Burke v Inspector-General in Bankruptcy [2013] FMCA 2; (2013) 275 FLR 121
Parties: JOHN CHRISTOPHER BURKE v INSPECTOR-GENERAL IN BANKRUPTCY, ROBERT TOM, ROBYN ERSKINE and ANDREW SELLARS
File number: NSD 334 of 2013
Judges: SIOPIS, FOSTER AND NICHOLAS JJ
Date of judgment: 3 September 2014
Catchwords:

APPEAL AND NEW TRIAL – whether appeal should be dismissed because the relief claimed by the appellant is of no utility.

BANKRUPTCY AND INSOLVENCY– whether, upon the true interpretation of s 155H(2) of the Bankruptcy Act, 1966 (Cth) (the Act), the word “convene” when used in respect of the committee referred to therein means “set up, form, appoint, establish or constitute” that committee or simply means “call or gather together” the members of such a committee at some point in time after such committee has already been appointed and established – whether the 60 day period prescribed by reg 8.34 of the Bankruptcy Regulations 1996 (Cth) as the period of time within which a committee appointed pursuant to s 155H(2) of the Act must decide whether a trustee should continue to be registered as a registered trustee under the Act or should cease to be so registered commences to run at the completion of the interview required by reg 8.30 of the Bankruptcy Regulations (or, perhaps, after a reasonable opportunity to attend such an interview has been given to the trustee) or, alternatively, commences to run when the committee contemplated by s 155H(2) of the Act has been appointed and established.

Legislation: Bankruptcy Act, 1966 (Cth) Part VIII esp. ss154A, 155, 155A, 155B, 155E, 155F, 155G, 155H, 155I and 155J
Federal Court of Australia Act, 1976 (Cth) ss 24, 25 and 27
Bankruptcy Regulations 1996 (Cth) regs 8.24, 8.25, 8.27, 8.28, 8.29, 8.30 and 8.34
Cases cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Burke v Inspector-General in Bankruptcy [2013] FMCA 2; [2013] 275 FLR 121
NSX Ltd v Pritchard (2009) 178 FCR 151
Date of hearing: 19 August 2013
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 100
Counsel for the Appellant: Mr JT Johnson
Solicitor for the Appellant: Sally Nash & Co
Counsel for the Respondents: Mr MJ Heath and Ms M Gaven
Counsel for the Respondents: Australian Government Solicitor

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 334 of 2013
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

JOHN CHRISTOPHER BURKE
Appellant
AND:

INSPECTOR-GENERAL IN BANKRUPTCY
First Respondent

ROBERT TOM
Second Respondent

ROBYN ERSKINE
Third Respondent

ANDREW SELLARS
Fourth Respondent

JUDGES:

SIOPIS, FOSTER AND NICHOLAS JJ

DATE OF ORDER:

3 SEPTEMBER 2014

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The appellant pay the respondents’ costs of and incidental to the appeal.

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Details
Case
[2014] FCAFC 112
Decision Date

CaseChat Overview and Summary

The case of Burke v Inspector-General in Bankruptcy involved the appellant, who was a trustee, challenging the actions of the Inspector-General in Bankruptcy and another respondent. The dispute centred on the interpretation of sections of the Bankruptcy Act 1966 (Cth) and the Bankruptcy Regulations 1996 (Cth), particularly regarding the convening of a committee of creditors and the timing of certain decisions related to the registration of trustees. The legal issues before the court included whether the term "convene" in section 155H(2) of the Act meant to form or establish a committee or merely to call its members together, and the timing of the 60-day period within which a committee must decide on a trustee's registration status.

The court found that the appeal was futile because the trustee had voluntarily terminated his registration as a trustee before the appeal was instituted. The court emphasised that the trustee's purpose in filing the application in the Federal Magistrates Court was to maintain his registration status. Once he voluntarily ceased to be registered, there was no point in continuing with the appeal. The court noted that neither the trustee nor the Inspector informed the court of this change in circumstances until after the appeal had begun. The court accepted fresh evidence on appeal, which confirmed that the trustee was no longer registered. Consequently, the court dismissed the appeal and ordered the appellant to pay the respondents' costs.

In summary, the court dismissed the appeal on the grounds that it had become futile when the trustee voluntarily terminated his registration. The court also highlighted the procedural aspect of failing to inform the court of such a significant change in circumstances. The final orders included the dismissal of the appeal and an order for the appellant to pay the respondents' costs.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the respondents’ costs of and incidental to the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Because the trustee had ceased to be registered as a trustee before the appeal was instituted, the appeal was futile from the start.THE CORRECTNESS OF THE FEDERAL MAGISTRATE’S DECISIONThe Trustee’s Claims in the Federal Magistrates Court In his Application in the proceeding below (SYG 1136 of 2012) the trustee claimed:1.A declaration that there has been no valid and effectual act on the part of the First Respondent [the Inspector] to convene a Committee pursuant to the provisions of s. 155H(2) of the Bankruptcy Act 1966 for the purposes of the envisaged meeting of the Committee the subject of notice issued by the [sic] Robert Tom on 9 May 2012 for 30 May 2012.2.A declaration that the notice issued by Mr Robert Tom purporting to be a notice given by him as a member of a Committee appointed by the First Respondent pursuant to the provisions of s. 155H(2) of the Bankruptcy Act 1966 to enquire into the Applicant is of no force or effect for the purposes of Bankruptcy Regulation 8.30. The trustee also sought an order releasing him from an undertaking given to the Federal Magistrates Court on 8 May 2012 in an earlier proceeding between the same parties (SYG 980 of 2012). We have set out the terms of that undertaking at [60] below. In addition, the trustee sought orders restraining all respondents from continuing to proceed with the process of investigation and report under s 155H and s 155I of the Bankruptcy Act which was then under way. He also claimed indemnity costs. A hearing took place before the Federal Magistrate on 17 October 2012 and on 14 December 2012. The Magistrate gave judgment on 8 February 2013. It appears that, when the hearing in the Court below resumed on 14 December 2012, Counsel for the trustee argued that the inescapable conclusion which the Court should reach was that, on 8 or 9 May 2012, the Inspector had validly convened a committee pursuant to s 155H(2) of the Bankruptcy Act for the purpose of considering the trustee’s fitness to continue as a registered trustee. It was then submitted on behalf of the trustee that, in light of that circumstance, two consequences followed:(a)The Inspector’s conduct was a breach of the undertaking given to the Court by her on 8 May 2012; and(b)The committee so convened was, by 14 December 2012, functus officio.(see the Federal Magistrate’s Reasons at [8]). It was upon the basis of these new arguments that the Court below was urged to grant the injunctive relief in the form originally sought by the trustee in his Application. This was a fundamental change from the basis upon which that relief had originally been sought by the trustee. The arguments which we have summarised at [29] and [30] above were founded upon the proposition that a committee had been validly convened whereas the declarations claimed by the trustee in his Application were based upon the exact opposite contention viz that no such committee had been validly convened. It appears that the trustee simply abandoned his claim for declarations in the form set out in his Application in the Court below without taking any steps to regularise this about face by seeking to amend his Application.

Ratio Decidendi

Legal Principle Established

On 27 February 2013, the day before the trustee filed his Notice of Appeal in this Court, the Inspector received a letter from the trustee. On the same day, a delegate of the Inspector sent a letter to the trustee which was in the following terms (omitting formal parts):REQUEST FOR VOLUNTARY TERMINATION OF REGISTRATIONI acknowledge your letter of 27 February 2013 seeking voluntary termination of registration as a registered trustee in bankruptcy.Pursuant to sub-section 155G(2) of the Bankruptcy Act 1966 and under a delegation from the Inspector-General in Bankruptcy, I advise that your request is hereby accepted.Please deliver your certificate of registration to this office within seven days. The delegate’s letter was conveyed to the trustee as an attachment to an email despatched at 5.05 pm on 27 February 2013. There was no suggestion before us that the trustee did not receive and read that email and the letter attached to it at about the time that the email was sent. Under s 155G(1) of the Bankruptcy Act, a registered trustee may give to the Inspector a written request that the person cease to be registered as a trustee. There is no dispute that the trustee gave such a request to the Inspector and that it was received by her on 27 February 2013. Under s 155G(2), a registered trustee who gives such a request to the Inspector ceases to be registered as a trustee when the Inspector accepts the request. Here, the Inspector accepted the trustee’s request on 27 February 2013. Thus, by reason of the matters described at [10] and [11] above, the trustee ceased to be registered as a trustee by no later than 5.05 pm on 27 February 2013. That state of affairs was brought about by his own voluntary act. By 28 February 2013, when the current appeal was instituted, there was no possibility that any substantive relief would be granted to the trustee by this Court even if this Court considered that the Federal Magistrate had erred in his judgment. The trustee’s only purpose in bringing his application in the Federal Magistrates Court was to preserve the trustee’s status as a registered trustee under the Bankruptcy Act. Once he took steps voluntarily to terminate that registration there was no point in continuing with his case by instituting the present appeal. Neither the trustee nor any of his legal representatives informed this Court of the fact that the trustee was no longer registered. Nor did the Inspector or her lawyers do so until one week before the hearing of the appeal. On 13 August 2013, in a Supplementary Written Submission filed on that day, the Inspector informed the Court, for the first time, that the trustee was no longer registered. At the commencement of the hearing of the appeal, Counsel for the Inspector successfully applied to tender fresh evidence on appeal pursuant to s 27 of the Federal Court of Australia Act, 1976 (Cth) (Federal Court Act). That evidence comprised an affidavit affirmed by Mark George Edgar Findlay affirmed on 13 August 2013. By his affidavit, Mr Findlay proved that the trustee was no longer registered as a trustee having ceased to be so registered on 27 February 2013.