Doherty v Inspector-General in Bankruptcy

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FEDERAL COURT OF AUSTRALIA

Doherty v Inspector-General in Bankruptcy [2013] FCA 1122

Citation: Doherty v Inspector-General in Bankruptcy [2013] FCA 1122
Appeal from: Doherty and Inspector-General in Bankruptcy [2012] AATA 635
Parties: PETER JOHN DOHERTY v INSPECTOR-GENERAL IN BANKRUPTCY and ADMINISTRATIVE APPEALS TRIBUNAL
File number: NSD 1611 of 2012
Judge: COWDROY J
Date of judgment: 4 November 2013
Catchwords: ADMINISTRATIVE LAW – whether the Administrative Appeals Tribunal misconceived evidence before it – whether the alleged misconception amounted to an error of law – whether the decision of the Tribunal is tainted with Wednesbury unreasonableness – whether the decision was illogical – whether the applicant was afforded procedural fairness – whether adequate reasons were provided for the decision
Legislation: Bankruptcy Act 1966 (Cth) ss 185C, 185E, 186Q
Bankruptcy Regulations 1996 (Cth)
Cases cited: Kentucky Fried Chicken Pty Ltd v Gantidis (1979) 140 CLR 675
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
ReMinister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 198 ALR 59
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Teuila v Minister for Immigration and Citizenship (2012) 59 AAR 98
Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 49
Counsel for the Applicant: Mr J Ireland QC
Counsel for the First Respondent: Mr P Fary
Solicitor for the First Respondent: Australian Government Solicitor
Solicitor for the Second Respondent: The Second Respondent did not appear

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1611 of 2012
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN:

PETER JOHN DOHERTY
Applicant
AND:

INSPECTOR-GENERAL IN BANKRUPTCY
First Respondent

ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent

JUDGE:

COWDROY J

DATE OF ORDER:

4 NOVEMBER 2013

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The application be dismissed.

2.The Applicant pay the costs of the First Respondent.

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1611 of 2012
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN:

PETER JOHN DOHERTY
Applicant
AND:

INSPECTOR-GENERAL IN BANKRUPTCY
First Respondent

ADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent

JUDGE:

COWDROY J

DATE:

4 NOVEMBER 2013

PLACE:

SYDNEY

REASONS FOR JUDGMENT

  1. The applicant (‘Mr Doherty’), a former solicitor, applies for prerogative relief in respect of a decision of the Administrative Appeals Tribunal (‘the Tribunal’) delivered on 21 September 2012. In that decision, a Tribunal member found that Mr Doherty did not have the ability to satisfactorily perform the duties of a Registered Debt Agreement Administrator (‘RDAA’) and was therefore ineligible for an appointment, pursuant to s 186C of the Bankruptcy Act 1966 (Cth) (‘the Act’), as a RDAA: Peter Doherty v Inspector General in Bankruptcy [2012] AATA 635 (‘the decision’).

    FACTS

  2. A Debt Agreement Administrator (‘DAA’) is one who assists a debtor who is the subject of a debt agreement scheme. Such a…

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Details
Case
[2013] FCA 1122
Decision Date

CaseChat Overview and Summary

Doherty applied for judicial review of a decision of the Administrative Appeals Tribunal which found that he did not have the ability to perform the duties of a Registered Debt Agreement Administrator and was therefore ineligible for appointment. Doherty argued that the Tribunal had misconceived the evidence before it, that the decision was Wednesbury unreasonable, that the Tribunal had not afforded him procedural fairness and that the decision was not adequately reasoned. The Inspector-General submitted that the Tribunal's conclusion was not infected by error of law.

The court considered the evidence and found that the Tribunal had a clear understanding of the recommendations made by Doherty's witness, Mr Richardson. While Doherty claimed to have implemented all of the recommendations, he conceded that he had not implemented the second recommendation. The Tribunal member concluded that she was not confident that Doherty would adopt all of the recommendations and therefore found that he did not have the requisite ability to be a Registered Debt Agreement Administrator. The court held that the Tribunal's decision was adequately reasoned and that the Tribunal had not misconceived the evidence before it.

The court dismissed the application and ordered that Doherty pay the costs of the Inspector-General.

Orders

Orders of the court

1. The application be dismissed.

2. The Applicant pay the costs of the First Respondent.

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

Background

Background to the litigation

The applicant (‘Mr Doherty’), a former solicitor, applies for prerogative relief in respect of a decision of the Administrative Appeals Tribunal (‘the Tribunal’) delivered on 21 September 2012. In that decision, a Tribunal member found that Mr Doherty did not have the ability to satisfactorily perform the duties of a Registered Debt Agreement Administrator (‘RDAA’) and was therefore ineligible for an appointment, pursuant to s 186C of the Bankruptcy Act 1966 (Cth) (‘the Act’), as a RDAA: Peter Doherty v Inspector General in Bankruptcy [2012] AATA 635 (‘the decision’).FACTS A Debt Agreement Administrator (‘DAA’) is one who assists a debtor who is the subject of a debt agreement scheme. Such a scheme is a form of insolvency administration outside bankruptcy, and is applicable to a debtor who has low levels of debt, few assets and low income: see Part IX of the Act. The role of a DAA is to assist the debtor in the preparation of documents (including a debt agreement proposal, explanatory statement and statement of affairs) which are required to be lodged with the regulator, namely the Insolvency and Trustee Service Australia (as it then was known) (‘ITSA’). ITSA is responsible for obtaining the approval of creditors to a debt agreement scheme. If a majority in value of creditors accept a debt agreement proposal, the DAA is authorised by the agreement to deal with the debtor’s property. The DAA is required to pay all money received from debtors under the agreement to a trust account held by the DAA for the benefit of the debtor and the creditors. The DAA must also maintain payment and reporting systems for inspection by ITSA and the DAA has a duty to inform creditors if a debtor fails to comply with certain terms of the agreement. It is permissible for a person to act as an unregistered DAA but only in respect of a maximum of five active agreements: s 185E of the Act. In contrast, a RDAA may administer an unlimited number of agreements. Mr Doherty has been an unregistered DAA since 2009, trading under the business name ‘The Debt Genie’. On 26 September 2011 he filed an application to become a RDAA. That application was refused on 28 November 2011 and as a result he applied to the Tribunal for a review of that decision. Some time prior to acting as an unregistered DAA, Mr Doherty was admitted to practise as a legal practitioner in New South Wales. Due to proceedings instituted by the Law Society of NSW, his practising certificate was suspended. Following an appeal in the Court of Appeal of New South Wales (‘the appeal proceeding’), Mr Doherty became eligible to practise again. LEGISLATIVE FRAMEWORK Division 8 of Part IX of the Act regulates, inter alia, the registration and deregistration of DAAs. Section 186C(2) of the Act relevantly provides:Approval of application made by an individual(2) If:(a)the applicant is an individual; and(b)the application is not by way of renewal;the Inspector‑General must approve the application if the Inspector‑General is satisfied that the applicant:(c)passes the basic eligibility test; and(d)has the ability (including the knowledge) to satisfactorily perform the duties of an administrator in relation to debt agreements; and(e)has such qualifications and experience (if any) as are prescribed by the regulations.Otherwise the Inspector-General must refuse to approve the application.

Evidence

Evidence Before The Court

Mr Doherty submits that the decision of the Tribunal is infected by legal error. The questions of law so relied upon may be summarised as follows:1.Whether the Tribunal’s conclusion that Mr Doherty did not have the ability, including the knowledge, to perform the duties of a RDAA was unreasonable in the Wednesbury sense; 2.Whether the Tribunal’s conclusion that Mr Doherty did not have the ability, including the knowledge, to perform the duties of a RDAA ‘involved seriously irrational or illogical fact finding’; 3.Whether the Tribunal’s findings that Mr Doherty had not adopted certain recommendations to change his existing system involved substantive unfairness in view of the conduct of the hearing;4.Whether the Tribunal provided adequate reasons for its conclusion that Mr Doherty did not have the relevant ability to perform the duties of a RDAA.THE EVIDENCE The Tribunal held a hearing which extended over five days, during which both parties adduced evidence. The Inspector-General called four witnesses, each of whom was extensively cross-examined by Mr Doherty. Representing himself at the Tribunal, Mr Doherty called one witness, namely Mr Robert Richardson, a part time real estate agent and property teacher who, inter alia, taught trust accounting at TAFE. Mr Richardson provided a report which expressed his opinion that the trust account records maintained by Mr Doherty as a DAA complied with the necessary requirements. The report contained three recommendations, namely:(i) The Cash Book balance should be brought down at the end of each month and then brought forward to begin the Cash Book receipts for the new month;(ii) If this Trust Account becomes larger then thought should be given to providing each Client’s Ledger with an identifying number so that it could be noted in the corresponding Cash Book entry and then a space on the Client Ledger to note the page number of the Cash Book where the original entry was made before being posted to that Ledger;(iii) Some new templates be designed and used for the Cash Book, Ledgers, Trial Balance and Bank Reconciliation so that consistency of entry, balancing and notation is maintained throughout the month. Mr Richardson provided his evidence before the Tribunal on 18 April 2012. At the conclusion of the hearing on that day, the proceeding was adjourned until 5 July 2012. On 6 July 2012, Mr Doherty tendered a supplementary statement of Mr Richardson. The supplementary statement relevantly stated:1.I have found the completed books of account to be presented in a way that generally conforms to established bookkeeping principles. This is not to say that the way in which Mr Doherty previously completed and presented the monthly accounts was wrong, especially given the lack of direction by both the Bankruptcy Act 1966 and the Inspector General’s Guidelines.2.I have ascertained that both the credit and debit entries contained in the Bank Statement have been correctly and accurately reported in the Trust Cash Book Receipts and Payments (I have not sighted the individual client ledgers).3.As demonstrated in my Key to understanding the April books of account and evidenced by the books themselves, the Trust Account of the Debt Genie balances for the month of April 2012.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The Inspector-General submits that any such misconception claimed by Mr Doherty does not constitute an error of law. This is in part because the Tribunal member did not ignore the evidence nor misinterpret it; rather the Tribunal member had regard to evidence of Mr Richardson. Further, it is submitted that even if the Tribunal did ignore or misconceive the evidence as claimed, this does not constitute an error of law for the purposes of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth).CONSIDERATION The evidence on the issue of implementation of the recommendations is confusing. On 5 July 2012, Mr Doherty unequivocally told the Tribunal that Mr Richardson’s recommendations had been implemented. Yet the following day, Mr Doherty conceded that he had not implemented the second recommendation, as it only required him to give thought to providing ‘each client’s ledger with an identifying number…’ which he would do when his business expanded: see [16] above. The Inspector-General did not dispute before this Court the assertion that Mr Doherty had implemented the first and third recommendations. The scope of the second recommendation was explained by Mr Richardson in cross-examination before the Tribunal. He stated that ‘my second recommendation was to just set up some templates for the trial balance and the bank reconciliation so that they are in better order’. Mr Richardson explained to the Tribunal that the templates would adopt the proper and established methods of bookkeeping relating to bank reconciliation adjustments; cashbook adjustments; comparing the client ledgers to the cashbook; and separating the sum of unpresented cheques from the trial balance. The decision of the Tribunal at [104]–[107] demonstrates that the Tribunal had a clear understanding of each of the recommendations made by Mr Richardson. In particular, at [112] the Tribunal member referred to the fact that Mr Richardson had recommended that if the trust account becomes larger ‘then thought should be given to providing each client’s ledger with an identifying number’ to enable the corresponding entry to be made in the cash book with a cross-reference in substance to the client ledger. Mr Doherty acknowledged that such recommendation had not yet been implemented. Having considered these matters in detail, the Tribunal member then concluded at [121] that she was not ‘confident that [Mr Doherty] would adopt the recommendations of Mr Richardson’. Upon judicial review, a court must consider the whole of the reasons of an administrative decision-maker rather than focus on isolated sentences or statements. The Tribunal decision, the relevant portions of which have been extracted above, makes clear that the Tribunal member did not believe that Mr Doherty had the requisite ability, as required by s 186C(2)(d) of the Act, to be a RDAA for numerous reasons, including the fact that Mr Doherty had not adopted all of the recommendations of Mr Richardson. In reviewing the reasons of the Tribunal, the Court is mindful of the statement in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 272 where Brennan CJ, Toohey, McHugh and Gummow JJ said:[T]he reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed.[Reference omitted]