Burke v Inspector-General in Bankruptcy - [2013] FMCA 2

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BURKE v INSPECTOR-GENERAL IN BANKRUPTCY & ORS

[2013] FMCA 2

BANKRUPTCY – Possible de-registration of a registered trustee – formation of a committee to consider de-registration – whether the committee had been convened for that purpose considered – when a committee can be convened for that purpose considered.

WORDS AND PHRASES – “Convened”.

Bankruptcy Act 1966, s.155H
Bankruptcy Regulations 1966 (Cth)
Evidence Act 1995 (Cth), ss.166, 167

Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
NSX v Pritchard & Ors [2009] FCA 584
Zaccardi v Caunt [2008] NSWCA 202; (2008) 15 BPR 28

Applicant:

JOHN CHRISTOPHER BURKE

First Respondent:

INSPECTOR-GENERAL IN BANKRUPTCY

Second Respondent:

ROBERT TOM

Third Respondent:

ROBYN ERSKINE

Fourth Respondent:

ANDREW SELLARS

File Number:

SYG 1136 of 2012

Judgment of:

Driver FM

Hearing dates:

17 October and 14 December 2012

Date of last submission:

15 January 2013

Delivered at:

Sydney

Delivered on:

8 February 2013

REPRESENTATION

Counsel for the Applicant:

Mr J Johnson

Solicitors for the Applicant:

Sally Nash & Co

Counsel for the Respondents:

Mr Heath

Solicitors for the Respondents:

Australian Government Solicitor

ORDERS

The application filed on 25 May 2012 is dismissed with costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1136 of 2012

JOHN CHRISTOPHER BURKE

Applicant

And

INSPECTOR-GENERAL IN BANKRUPTCY

First Respondent

ROBERT TOM

Second Respondent

ROBYN ERSKINE

Third Respondent

ANDREW SELLARS

Fourth Respondent

REASONS FOR JUDGMENT

Introduction and background

The applicant (Mr Burke) is a registered trustee under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). He is concerned about action being taken against him by the Inspector-General in Bankruptcy (the Inspector-General) which may result in his deregistration.
The following facts have been agreed between the parties.
a)The applicant is a registered trustee.
b)By letter dated 26 July 2011 and pursuant to s.155H(1) of the Bankruptcy Act the Inspector-General (by her delegate Mr Findlay) (the delegate) asked Mr Burke for a written explanation why Mr Burke should continue to be registered (the show cause letter).
c)The delegate was not satisfied by the explanation provided by Mr Burke in response to the show cause letter.
d)Because the delegate was not satisfied by the explanation provided by Mr Burke in response to the show cause letter, pursuant to s.155H(2) of the Bankruptcy Act and reported that fact to the Inspector-General, the Inspector-General was required to convene a committee to consider whether Mr Burke should continue to be registered.
e)The committee consisted of:
i)Mr Robert Tom, a delegate of the Inspector-General;
ii)Mr Andrew Sellars, an Australian Public Service employee; and
iii)Ms Robyn Erskine, a registered trustee chosen by the Insolvency Practitioners’ Association of Australia (ACN 002 472 362.
f)Pursuant to regulation 8.30(2) of the Bankruptcy Regulations 1966 (Cth) (the Regulations), because the Inspector-General was required to convene a committee to consider whether Mr Burke should continue to be registered for the purposes of s.155H(2), the committee after consultation between themselves[1] was required to interview Mr Burke.
[1] regulation 8.30(1)
g)Mr Burke was given notice of an interview scheduled to take place on Wednesday, 9 May 2012 in Sydney.
h)Prior to 9 May 2012, Mr Burke applied to this Court (proceedings SYG980 of 2012) on an urgent basis; in substance he asserted he was denied procedural fairness in relation to the proposed interview on 9 May 2012 (the first application).
i)The first application was returnable on 8 May 2012 and resolved by consent. The terms of that resolution of the first application were:
1.The proceedings are dismissed with no order as to costs with the intent that each party pay their own costs of the proceedings.
2.The respondents undertake not to convene a committee pursuant to s.155H(2) of the Bankruptcy Act 1966 (Cth) (“the Act”) to consider whether the applicant should continue to be registered before 22 May 2012.
3.The applicant and the respondents acknowledge and accept that no committee pursuant to s.155H(2) of the Act has yet convened to consider whether the applicant should continue to be registered.
4.The applicant undertakes to the Court not to challenge or impugn any committee member of any committee to be convened in relation to the applicant pursuant to s.155H(2) of the Act that consists of Mr Robert Tom, Mr Andrew Sellars and Ms Robyn Erskine.
j)Following the resolution of the first application on 8 May 2012, Adam Toma sent exhibit R1. That was an email to Mr Tom which confirmed the establishment of the committee with Mr Tom as chair.
k)Mr Tom, the relevant delegate of the Inspector-General, emailed Mr Burke on 9 May 2012 in the following terms:
Good afternoon Mr Burke
With reference to the Order made by Federal Magistrate Driver yesterday I would like to reschedule the Committee’s meeting with you to Wednesday 30 May 2012. The proposed time and place will remain as originally scheduled.
Would you please advise if this is not suitable to you.
If I have not heard from you by close of business Wednesday 16 May 2012 I will confirm that date with the other committee members.
Please contact me if you have any questions.
l)A dispute arose about whether Mr Tom was entitled to send the email of 9 May 2012 rescheduling the interview with Mr Burke.
m)On Friday 25 May 2012, Mr Burke filed proceedings SYG1136 of 2012 returnable on Monday, 28 May 2012, being the proceedings presently before the Court (the second application).

Issues

In the second application:
a)Mr Burke seeks a declaration that there was no valid or effectual act to convene a committee for the purposes of s.155H(2) of the Bankruptcy Act (Prayer 1). Therefore, the first issue is whether there has been a valid and effectual act to convene a committee within the meaning of s.155H(2) of the Bankruptcy Act.
b)Mr Burke seeks a declaration that the email sent by Mr Tom on 9 May 2012 rescheduling the interview with Mr Burke for 30 May 2012 is of no force and effect (Prayer 2). Therefore, the second issue is whether Mr Tom’s email of 9 May 2012 was valid notice of a proposed interview with Mr Burke or served in breach of any undertaking given by Mr Tom to the Court on 8 May 2012.
c)Mr Burke seeks to be released from the undertaking he gave to the Court on 8 May 2012 (Prayer 3). Therefore, the third issue is whether there is any basis upon which Mr Burke could or should be released from the undertaking he gave.
d)The application seeks injunctive relief consequential upon the making of the declaration sought in Prayer 2. The effect of the consequential relief sought is to:
i)restrain Mr Tom from being a member of the committee; and
ii)prevent any committee consideration of Mr Burke’s trustee status to a date 60 days after the determination by the Federal Court of other proceedings, namely Coshott v Burke NSD 1208 of 2009.
Therefore, the fourth issue is whether there is any basis upon which to make any of the injunctive orders sought.

The evidence and submissions

Mr Burke relies upon the evidence filed by all parties in the earlier proceedings and the orders and undertakings made by or given to the Court in those proceedings. Mr Burke further relies upon the following evidence produced in these present proceedings:
a)affidavit of Christie Boyd sworn 25 May 2012;
b)bundle of documents entitled “section 181A(6) certificates” filed 16 July 2012 (exhibit A3);
c)bundle of documents entitled “Index of Coshott Documents” (exhibit A2);
d)affidavit of Christie Boyd sworn 4 May 2012 in proceedings SYG980 of 2012 subject to the same rulings in respect of that affidavit set out in the transcript of the hearing on 8 May 2012 (exhibit A1);
e)affidavit of Christie Boyd sworn 30 November 2012 and documents produced by the respondents;
f)orders made by Buchanan J in proceedings NSD1208 of 2009 (marked MFI A4 as judicial notice of orders to the extent relevant);
g)order made on 8 May 2012 in proceedings SYG980 of 2012 as a matter of public record.
The respondents rely upon the following evidence:
a)affidavit of Mark George Edgar Findlay sworn 25 June 2012;
b)affidavit of Mark George Edgar Findlay sworn 7 May 2012 in proceedings SYG980 of 2012 subject to objections and rulings set out in the transcript of the evidence on 8 May 2012;
c)affidavit of Robert Tom sworn 25 June 2012;
d)affidavit of Donna Boyce sworn 25 June 2012.
Mr Tom and Mr Findlay were cross-examined on their affidavits. I also received the affidavit of Christie Boyd made on 13 December 2012. She was not required for cross-examination. Mr Adam Toma gave oral evidence by telephone.
Both parties have made written and oral submissions. Mr Burke contends that, by reference to the earlier proceedings and the undertaking and orders made on 8 May 2012 it is clear that:
a)there was agreement between all of the relevant parties that no committee had been constituted at the time of those orders being made; and
b)undertakings were given by the Inspector-General in Bankruptcy and each of the other respondents to the Court not to convene a committee before 22 May 2012.
Mr Burke further contends that, on the evidence now available to the Court, both documentary and oral, the inescapable conclusion is that the committee convened on the evening of 8 May 2012 or the evening of 9 May 2012 prior to Mr Burke being notified of the date of, time, and place for his interview before the committee. Mr Burke contends that this convening was in breach of the undertaking given to the Court in the earlier proceedings and that, by reason of his conduct, Mr Robert Tom should be restrained from further participating as a member of the committee. Further, Mr Burke contends that, in any event, the committee is now functus officio as it was required by the legislation to complete its deliberations within 60 days.
The respondents’ contentions have advanced somewhat over the course of these proceedings. Initially, the respondents contended that the committee had not yet convened and that the available evidence did not disclose that it had convened. The final position adopted by the respondents is that the committee could not convene until it had interviewed Mr Burke.

Consideration

There is no dispute that on 9 May 2012 at 3.30pm Robert Tom, acting as a delegate for the Inspector-General, communicated with Mr Burke in an email entitled “Committee formed by the Inspector-General”[2]:
[2] This is relied on by Mr Burke in support of the proposition that the committee had been convened for relevant purposes
Good afternoon Mr Burke
With reference to the Order made by Federal Magistrate Driver yesterday I would like to reschedule the Committee’s meeting with you to Wednesday 30 May 2012. The proposed time and place will remain as originally scheduled.
Would you please advise if this is not suitable to you.
If I have not heard from you by close of business Wednesday 16 May 2012 I will confirm that date with the other committee members.
Please contact me if you have any questions.
There can be no doubt, having regard to the terms of the email referred to above that a “committee” had been “formed by the Inspector-General” and that Robert Tom was the person acting as delegate for the Inspector-General in communicating a new date for the interview between Mr Burke and the committee, which had been “formed” by the Inspector-General. Mr Burke asserts that this was in substantial breach of the undertaking set out in paragraph 2 of the orders made on 8 May 2012, not 24 hours before the communication. He asserts that the convening of the committee could only have occurred after the orders and undertakings had been given on 8 May 2012.
When the present proceedings were first listed for hearing, Mr Tom was cross-examined. At that time of the document being an email from Mr Adam Toma was disclosed and became exhibit R1.
On 14 December 2012 at the adjourned hearing Mr Tom was further cross-examined and Mr Adam Toma and Mr Findlay were cross‑examined.
No evidence was led by the respondents from either Ms Erskine or Mr Sellars – persons who are parties and who were persons appointed by the Inspector-General (by her delegate) or nominated by the Insolvency Practitioners Association to be on a committee formed for the purposes of s.155H(2) of the Bankruptcy Act.
Communications in addition to exhibit R1 subsequently became available as a consequence of the service of notices to produce upon the respondents[3] and were tendered at the hearing without objection.
[3] Affidavit of Christie Boyd, 20 November 2012
The absence of evidence from either Ms Erskine or Mr Sellars on the specific question of convening is said to be conspicuous. A request was made under the provisions of s.166 and s.167 of the Evidence Act 1995 (Cth) that each be available for cross-examination. In those circumstances it is submitted by Mr Burke that the inference arises that their evidence would not have assisted the case of the respondents[4]. However, as the matter has progressed, in my view, even if the inference contended for by Mr Burke is available, it is of no significance. That is because, if the committee could not convene before interviewing Mr Burke, any evidence by members of the committee about whether they thought it had convened would be irrelevant.
[4] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389; Zaccardi v Caunt [2008] NSWCA 202; (2008) 15 BPR 28, 403 at NSWCA [27] per Campbell JA with whom Allsop P and Barr J agreed
Central to the matters the subject of the present proceedings is the operation and effect of s.155H(2) of the Bankruptcy Act which provides:
If the Inspector-General does not receive an explanation within a reasonable time, or is not satisfied by the explanation, the Inspector-General must convene a committee to consider whether the trustee should continue to be registered.
There is no question in the present proceeding that the requirement to convene a committee under the section is mandatory – this is apparent from the use of the words “must convene” in the section.
It does not appear that the meaning of the word convene in the context of s.155H(2) of the Bankruptcy Act has previously been considered. The word is not defined in the legislation. It would certainly assist the interpretation of the section if it were defined. The ordinary English meaning of the word convene is “to come together or assemble, usually for some public purpose”[5]. This is consistent with the dictionary definition of the word adopted by Lindgren J in NSX Ltd v Pritchard & Ors[6] at [20], albeit in a different statutory context.
[5] Macquarie Dictionary, 3^rd edition
[6] [2009] FCA 584
The respondents contend that the meaning of the word convene in its legislative context is conditioned by the purpose for which it is convened, namely to consider whether the trustee should continue to be registered. This contention requires consideration of the terms of regulation 8.30 which provides:
(1) If the Inspector-General is required under subsection 155H(2) of the Act to convene a committee to consider whether a trustee should continue to be registered, the Inspector-General or authorised employee on the committee must, after consultation with the other members of the committee:
(a) fix a date, time and place for the interview; and
(b) give written notice of that date, time and place to the trustee and the other members of the committee.
(2)The committee must interview the trustee as soon as practicable and, for that purpose:
(a) any member of the committee may participate in the interview by telephone; and
(b)the trustee may participate in the interview by telephone.
(3) A member, or trustee, who participates in an interview in accordance with paragraph (1)(a) or (b) is taken to be present at the interview.
(4) If the trustee fails to attend, or participate by telephone in, the interview and does not, within 7 days, give the committee a reasonable excuse for that failure, the committee may proceed with its consideration of the matter.
(5) If an trustee who fails to attend, or participate by telephone in, an interview gives the committee, within 7 days, a reasonable excuse for that failure, the committee must arrange another interview date, time and place.
The respondents contend that the holding of an interview pursuant to regulation 8.30 is the condition precedent for the convening of the committee for the purposes of s.155H(2) of the Bankruptcy Act.
The construction contended for by the respondents is an awkward one. The regulation would be invalid if inconsistent with the Bankruptcy Act. Section 155H(1) deals with a request by the Inspector-General to a registered trustee for a written explanation why the trustee should continue to be registered. The convening of the committee is mandatory if the Inspector-General does not receive an explanation within a reasonable time or is not satisfied with it. The committee must already exist in order to perform the interview function required by regulation 8.30. It follows that the respondents’ contention is that, whilst the committee in the present case has been constituted for the purposes of regulation 8.30, it has not been convened for the purposes of s.155H(2). There is nevertheless some practical logic to this interpretation because it would be difficult for the committee to complete its work within the prescribed deadline of 60 days if that timetable included the obligation to interview the trustee[7].
[7] see regulation 8.34
The evidence discloses some confusion among the members of the committee as to whether the committee had been convened or not. There is no doubt that the committee had been constituted by the appointment of its members. There is no doubt the committee had engaged in some communication. There is also no doubt that the committee had invited Mr Burke to attend the interview as required by regulation 8.30.
The competing interpretations of the legislation and the practicality of their operation present me with a dilemma. If the respondents are right, then regulation 8.30 may be invalid as inconsistent with s.155H(2) of the Bankruptcy Act. The Regulations cannot impose a condition precedent for the convening of a committee which the Inspector-General is obliged to convene by the Bankruptcy Act if he does not receive a satisfactory explanation from the registered trustee pursuant to s.155H(1). It is, however, unnecessary for me to rule on that issue in these proceedings and it would be inappropriate to do so in the absence of argument on the issue.
On the other hand, if Mr Burke is right, then the committee is either convened when its members are appointed or at some indeterminate date between then and the conduct of the required interview. It would be difficult, if not impossible, for the committee to perform its function in a procedurally fair way, consistently with regulations 8.27 and 8.30 within the 60 day time limit stipulated by regulation 8.34.
With considerable hesitation, I have decided to adopt the interpretation contended for by the respondents. A committee may be convened after it has been constituted. Procedural fairness requires that the committee must conduct the interview required by regulation 8.30 with an open mind. That would be questionable if the committee had already commenced considering whether the trustee should continue to be registered. While not expressed in either the Bankruptcy Act or the Regulations, the practical operation of the de-registration provisions requires a two step process. First, if after requesting the written explanation pursuant to s.155H(1), the Inspector-General is dissatisfied with (or does not receive in the required time) the trustee’s response, the Inspector-General must constitute the committee for the purpose of possible future deregistration of the trustee. Secondly, if after the interview opportunity required by regulation 8.30 the Inspector-General remains dissatisfied, then the Inspector-General must convene the committee for the purposes of s.155H(2). It is from that point that the 60 day time limit runs.

Conclusion

I conclude that on the best interpretation of the legislative provisions available to me, and regardless of what the parties may have previously thought, the committee has not yet convened and cannot convene until Mr Burke is given a fair opportunity to attend an interview pursuant to regulation 8.30.
It follows that the application should be dismissed with costs and I will so order.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Driver FM

Date: 8 February 2013