FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DUNWOODY v OFFICIAL RECEIVER | [2005] FMCA 1634 |
| BANKRUPTCY – Trustee –Application for review of trustee’s refusal to permit bankrupt to travel overseas – relevant factors –discretion of Court – refusal to permit travel. |
| Bankruptcy Act 1966, ss.77, 139ZU, 178, 266, 272, 272(1)(c) |
| Bethune v Newman (1996) 19 ACSR 99 Cummins v Claremont Petroleum NL (1995) 185 CLR 124 El-Maghraby v Patterson [2003] FMCA 103 Grujin v Patteron [2002] FMCA 213 Hicks, Re; ex parte Lamb (1994) 217 ALR 195 Jackson Grose v The Official Receiver [2002] FMCA 239 Jatkar v Rambaldi [2003] FMCA 335 Luna v Pattison [2004] FMCA 237 Macchia v Nilat [2001] FCA 7 Mayger v Prentice [2000] FCA 99 McGoldrick v The Official Trustee in Bankruptcy (1993) 119 ALR 253; (1993) 47 FCR 547 Nguyen v Pattison [2004] FMCA 517 Tyndall, Re; (1977) 30 FLR 6 Wheeler, Re; ex parte Wheeler (1994) 54 FCR 166 Weiss v The Official Trustee (1978) 1 FCR 40 |
| Applicant: | JOHN EARNEST DUNWOODY |
| Respondent: | OFFICIAL RECEIVER |
| File Number: | BRG391 of 2005 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 14 October 2005 |
| Date of Last Submission: | 14 October 2005 |
| Delivered at: | Brisbane |
| Delivered on: | 16 November 2005 |
REPRESENTATION
| Counsel for the Applicant: | In person |
| Solicitors for the Applicant: |
| Counsel for the Respondent: | Mr McLeod |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
That the application be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG391 of 2005
| JOHN EARNEST DUNWOODY |
Applicant
And
| OFFICIAL RECEIVER |
Respondent
REASONS FOR JUDGMENT
This is an application for the review of the respondent trustee’s decision of 26 April 2005 to refuse the applicant bankrupt permission to travel overseas.
Background
The applicant became bankrupt on 9 October 1998.
The applicant, in his outline, sets out that he lodged his statement of affairs at the same time as his debtor's petition. He was publicly examined on 20, 22 & 23 March 2000. Between 9 August 2003 and
8 August 2004 the applicant was incarcerated on a sentence of two years imprisonment for bankruptcy fraud pursuant to s.266 of the Bankruptcy Act 1966.
On 5 January 2005 the applicant requested that the respondent trustee consent to overseas travel on his part for the purpose of visiting his fiancée whom he had not seen since January 2000.
Following that request the trustee sought from the applicant advice as to the measures he would take to pay a contribution assessment liability debt of $48,527.23. The applicant responded stating:
…I will repay … by instalments when I obtain employment that provides me with more subsistence income.
My present carer's pension only provides a bare minimum of subsistence support. My fiancée anticipates paying for the cost of the air plane fare for me to visit her.
A decision was made by the trustee on 26 April 2005, including the trustee’s reasons, as follows:
Whilst the trustee notes your advised present circumstances and offer of future payments, the trustee will consent to your departure only on the condition…
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Details
- Case
- [2005] FMCA 1634
- Decision Date
CaseChat Overview and Summary
Dunwoody v Official Receiver is a case where an applicant sought a review of a decision made by a trustee under section 178 of the Bankruptcy Act 1966 (Cth). The applicant, Dunwoody, claimed that the trustee's decision to not challenge the discharge of a bankrupt was unjust and inequitable. The court was required to determine whether the decision of the trustee was reviewable under the provisions of section 178, and if so, whether the decision was indeed unjust or inequitable.
The court examined the nature of the supervisory jurisdiction conferred upon it by section 178, which allows for broad discretion in making orders that are just and equitable. It was established that the court's power under this section was not limited to cases where the trustee's decision was absurd, unreasonable, or taken in bad faith. However, the court also noted that it should not unduly interfere with the day-to-day administration of a bankrupt's estate by a trustee.
In this case, the court found that the trustee's decision was reasonable and based on the material before them, and there was no evidence of wrongdoing or improper conduct. The court further held that it was not necessary to find that the trustee had done anything wrong in order to enliven its jurisdiction under section 178. Instead, the court's focus was on whether the decision was unjust or inequitable, which in this instance, it was not.
ORDERS:
1. That the application be dismissed.
The court examined the nature of the supervisory jurisdiction conferred upon it by section 178, which allows for broad discretion in making orders that are just and equitable. It was established that the court's power under this section was not limited to cases where the trustee's decision was absurd, unreasonable, or taken in bad faith. However, the court also noted that it should not unduly interfere with the day-to-day administration of a bankrupt's estate by a trustee.
In this case, the court found that the trustee's decision was reasonable and based on the material before them, and there was no evidence of wrongdoing or improper conduct. The court further held that it was not necessary to find that the trustee had done anything wrong in order to enliven its jurisdiction under section 178. Instead, the court's focus was on whether the decision was unjust or inequitable, which in this instance, it was not.
ORDERS:
1. That the application be dismissed.
Orders
Orders of the court
1.
That the application be dismissed.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Pursuant to s.178 of the Act an application may be made to the Court for review of a trustee's decision when administering an estate. Section 178 provides:Appeal to Court against trustee's decision etc.178 (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. On an application for review under s.178 the Court must exercise a broad discretion based upon the relevant facts and circumstances. It is clear that the Court has a very broad supervisory power. The nature of the power provided to the Court under s.178 was discussed in some detail by French J in Macchia v Nilat [2001] FCA 7. In that case his Honour examined the statutory framework for the control of trustees in bankruptcy and discussed the powers of the Court pursuant to s.178, saying:35. Sir Thomas Clyne chaired the Committee appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth which reported in 1962. That report led to the enactment of the 1966 Act. The Committee apparently saw no significant difference between s 148 of the 1924 Act and cl 178 of the Bill scheduled to its Report that became s 178 of the 1966 Act. The report's commentary on the proposed new ss 178 and 179 and associated provisions were brief and appeared at par 253:-"253 The Committee is of opinion that the existing provisions concerning control over trustees (sections 147-149) are generally satisfactory and recommends only minor changes in them, the details of which will appear from a perusal of clauses 177-179".36. In spite of the Clyne Committee's reference to "minor changes" effected by the control provisions of the 1966 Act, the differences in wording between s 148 of the old Act and s 178 of the new were seen as "critical" by Deane J in Re Tyndall (1977) 30 FLR 6 at 9. No longer was it necessary for the applicant for relief to be "aggrieved" by the act, omission or decision complained of albeit that person must be "affected" by it. Nor was the court any more to be confined to considering first whether to "confirm, reverse or modify the act or decision complained of". The wording of s 178 was such "as to confer upon the court the widest possible discretion as to the appropriate order which should be made in the particular case" (10). It was no longer limited to those cases in which the trustee's decision was absurd or unreasonable or taken in bad faith. This expansive approach was moderated by the caveat that the court would follow well established policy under bankruptcy legislation that it "should not unduly interfere with the day-to-day administration of a bankrupt's estate by a trustee" (10). The earlier passing observation of Riley J in Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 267 that s 178 subjected the acts, omissions or decisions of the trustee to the control of the court by way of appeal, seems a little restrictive in the light of Re Tyndall. The width of the section was demonstrated in Re Stelnicki (1982) 62 FLR 430 when Cox J enjoined, for twenty eight days, the sale of property of a bankrupt who had a substantial surplus of assets over liabilities. Although it was not a case in which any error had been shown in the commercial judgment of the trustee, it was "just and equitable that the bankrupt have the opportunity to discharge the relatively small deficiency without further of his stock-in-trade being exposed for sale by auction". 37. The observations of Deane J about the width of the discretion under s 178 were approved by the Full Court in Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478 at 485. Nevertheless the Court emphasised that the powers under s 178, like those under s 30 of the Act are discretionary and:"It should not be thought that the Court will always intervene."The wide view was also approved by the Full Court in McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547 at 552-553. In that case s 178 was invoked to challenge a trustee's decision to lodge a notice of objection under s 149 as it stood prior to the coming into effect of the Bankruptcy Amendment Act 1991 on 1 July 1992. The former s 149 conferred on the bankrupt a right to seek a decrease of the statutory extension of the bankruptcy which was the consequence of lodgment of an objection. It did not provide any basis for challenging the objection itself. The Full Court held that s 178 was available for that purpose for objections lodged prior to 1 July 1992. Sections 149 and 150 amounted to a code in relation to the reduction of the statutory extension, but had nothing to say about review of the decision to make the objection. The new provisions, ss 149K to 149Q on the other hand, specifically covered the issue of reviewing a decision to lodge an objection. As noted earlier in the statutory framework, applications for such review have been able to be made to the Inspector-General or the Administrative Appeals Tribunal since July 1992. Although characterising these provisions also as a code, the Full Court expressly refrained from stating a view on whether there remained any place for s 178 in the review of a decision to object to a bankrupt's discharge (554). 38. Section 178 confers a "supervisory jurisdiction over the conduct of the trustee" - Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133 (Brennan CJ, Gaudron and McHugh JJ). It confers a power to "in substance" review the decision of the trustee - McGoldrick at 556. The power is necessarily judicial - Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 at 170 (Lee J). In the latter case Lee J said that the Court could not, in an application under s 178, be asked to perform the administrative function of a trustee administering an estate in bankruptcy. It is given original jurisdiction, the exercise of which might entail "orders of a supervisory character in so far as the determination of questions of law raised by the application require those orders to be made" (169). The applicant "must show a ground on which the trustee's administration of the affairs of the bankrupt is to be reviewed". That proposition must be read with the generic concept of review in the original jurisdiction of the Court as one which can, according to context, enliven "the jurisdiction of the court in respect of the whole matter" raising issues of either or both law and fact - State of Western Australia v Strickland (2000) 99 FCR 33 at 49-50, citing inter alia, Re Tyndall. Some functions which are administrative in character when exercised by an administrator have the chameleon quality of becoming judicial when exercised by a court - Federal Commissioner of Taxation v Munro (1926) 38 CLR 153 at 175-9 (Isaacs J); R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1971) 123 CLR 361 at 363 (Kitto J); Cominos v Cominos (1972) 127 CLR 588 at 606 (Mason J). In relation to s 178 it is unnecessary, for the purpose of enlivening the court's jurisdiction, to find that the trustee has done anything wrong. His decision may, on the material before him, have been quite correct and reasonable - Gray v Clout (1990) 27 FCR 141 at 144 (Pincus J). On the other hand, it is not to the point that the judge who hears a review application might have acted differently - Healey v Prentice (No 2) [2000] FCA 1598 (Madgwick J). It is not necessary here to discern the outer limits of s 178 but rather to emphasise its importance in providing for wide ranging supervision by the Court of trustees who are appointed to administer the interests of bankrupts in the interests of creditors and, in so doing, to have regard also to the interests of the bankrupts - Haskins v Insolvency and Trustee Service Australia (Full Court, 3 October 1996, unreported).
Ratio Decidendi
Legal Principle Established
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