Hill and Official Receiver
[2007] AATA 1420
•8 June 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1420
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/683
GENERAL ADMINISTRATIVE DIVISION ) Re OWEN ROWLAND HILL Applicant
And
OFFICIAL RECEIVER
Respondent
DECISION
Tribunal Dr KS Levy, RFD Senior Member Date8 June 2007
PlaceBrisbane
Decision The decision under review is affirmed.
.................[Sgd].............................
Senior Member
CATCHWORDS
BANKRUPTCY – Debt Agreement Proposal submitted – Official Receiver rejected proposal – whether Debt Agreement Proposal should have been accepted – whether the applicant’s alterations to the Debt Agreement Proposal form affect the respondent’s ability to accept proposal – whether the applicant’s failure to complete all sections of the Debt Agreement Proposal affect the respondent’s ability to accept the proposal – decision affirmed
Administrative Appeals Tribunal Act 1975 (Cth) ss 29, 37
Bankruptcy Act 1966 (Cth) ss 185C, 185D, 185E, Part IX, Part X
Bankruptcy Regulations 1996 (Cth) regs 13.03, 13.04, 13.06, Part 13
Privacy Act 1988 (Cth) s 18F
Bankruptcy Legislation Amendment Act 1996 (Cth)
Bankruptcy Legislation Amendment Bill 1996 (Cth) EM para 135.16
Bankruptcy Legislation Amendment (Debt Agreements) Bill 2007 (Cth)REASONS FOR DECISION
8 June 2007 Dr KS Levy, RFD Senior Member Introduction
1. This is an application under s 29(1) of the Administrative Appeals Tribunal Act 1975 for a review of a decision of the Official Receiver, the Delegate of the Inspector-General of the Insolvency and Trustee Service Australia (Queensland Branch). That decision arises from an application by Mr Hill dated 14 August 2006, who, through his agents DR Capital Pty Ltd, sought to have a Debt Agreement Proposal accepted by the Official Receiver under part IX of the Bankruptcy Act 1966 (Cth) (“the Act”). That application was considered but on 6 September 2006, the Official Receiver determined not to accept that Debt Agreement Proposal for processing. Mr Hill then appealed to the Administrative Appeals Tribunal on 27 September 2006.
2. Mr Hill’s advocates argue that the proposal form should have been accepted, and that similar applications had been accepted by the Official Receiver on many other previous occasions. The Official Receiver’s advocate has informed the Tribunal that it is not obliged to accept such proposals and that over time, the system has developed, become more focused, and the policy pertaining to acceptance of Debt Agreement Proposals has now been modified.
3. The Official Receiver rejected the Debt Agreement Proposal by letter dated 6 September 2006 under s 185E(3) of the Act, on the basis that the creditors’ interests would be better served by not accepting the proposal for processing. In reliance on this provision, the Official Receiver pointed to question 7 where Mr Hill had deleted an acknowledgement certificate that the information in relation to Mr Hill would, if accepted, be included in the National Personal Insolvency Index (NPII). Also, the Official Receiver referred to the failure of Mr Hill to complete question 5 (Label B) by failing to insert the fees, expenses and disbursements of the administrator which are integral to the information required by the Official Receiver.
4. Mr Hill was represented by three representatives of DR Capital Pty Ltd – Mr Colin Pope, Mr David McGrath and Mr Richard Symes. The Official Receiver was represented by the Australian Government Solicitors’ representative, Ms Sarah Oliver.
Issues
5. The Tribunal must determine whether the Debt Agreement Proposal as submitted by Mr Hill should have been accepted by the Official Receiver. Put another way, the Tribunal must determine whether the Official Receiver should have rejected the proposal as being not in the best interests of the creditors.
Legislation
· Bankruptcy Act 1966
“Sect 185C
Giving a debt agreement proposal to the Official Receiver
Giving a debt agreement proposal
(1) A debtor may give the Official Receiver a written proposal for a debt agreement.
Requirements for a debt agreement proposal
(2) A debt agreement proposal must:
(a) identify the debtor's property that is to be dealt with under the agreement; and
(b) specify how the property is to be dealt with; and
(c) authorise a specified person (being the Official Trustee, a registered trustee or another person) to deal with the identified property in the way specified.
What a debt agreement proposal may include
(3) A debt agreement proposal may provide for any matter relating to the debtor's financial affairs.
If the person specified under paragraph (2)(c) is not the Official Trustee, the proposal may also provide for the remuneration of that person.
Sect 185D
Statement of affairs to be given with a debt agreement proposal
(1) A debtor who gives the Official Receiver a debt agreement proposal must give the Official Receiver a statement of the debtor's affairs with the proposal.
Note: Section 6A sets out requirements for statements of affairs.
(2) The debtor may, without fee and either personally or by an agent:
(a) inspect the statement of affairs; and
(b) obtain a copy of, or make extracts from, the statement of affairs.
Sect 185E
Accepting a debt agreement proposal for processing
(1) Before accepting a debt agreement proposal for processing, the Official Receiver must give the debtor the information prescribed by the regulations.
(2) If a debtor gives the Official Receiver a debt agreement proposal, the Official Receiver may accept the proposal for processing if the Official Receiver thinks that subsections 185C(2) and (4) have been complied with and the statement of affairs accompanying the proposal is in order.
(2A) The Official Receiver must refuse to accept a debt agreement proposal for processing if the person nominated as administrator is ineligible, in accordance with the regulations, to act as an administrator.
(3) The Official Receiver must not accept a debt agreement proposal for processing if the Official Receiver thinks that the creditors' interests would be better served by not accepting the proposal for processing.”
· Bankruptcy Regulations 1996
“Reg 13.03
What information is to be entered on the Index?
(1) Subject to this regulation, the following information is to be entered on the Index:
(a) in respect of each creditor’s petition, bankruptcy, debt agreement under Part IX of the Act, personal insolvency agreement, administration under Part XI of the Act or order under section 253E of the Act, occurring or made on or after the commencement date — information of the kind specified in Schedule 8, to the extent applicable;
Reg 13.04
Application for certain information not to be on the Index
(1) Subject to subregulation (4), a person who is a debtor or bankrupt may apply in writing to the Inspector‑General for information in respect of the person:
(a) not to be entered on the Index, on the ground that the entry of the information would jeopardise, or be likely to jeopardise, the person’s safety; or
(b) on the Index to be removed on the ground that:
(i) its inclusion jeopardises, or is likely to jeopardise, the person’s safety; or
(ii) it is inaccurate or misleading; or
(c) on the Index to be corrected on the ground that it is inaccurate or misleading.
Note Under subregulation (4), an application cannot be made for the removal of information in respect of a person’s name or date of birth.
(2) The application must specify the ground relied and contain, or have with it, full particulars in support of the ground.
Example
A person may rely on a court order (such as a domestic violence order) to show that publication of the information in question would jeopardise, or be likely to jeopardise, the person’s safety.
(3) The Inspector‑General must, without delay:
(a) decide an application; and
(b) give notice in writing to the applicant of:
(i) the decision and the reasons for it; and
(ii) the applicant’s right, if aggrieved by the decision, to apply under regulation 13.05 to the Administrative Appeals Tribunal for review of the decision.
(4) An application or a decision must not be made under this regulation to remove from the Index any of the following items of information in respect of a person:
(a) the person’s name;
(b) the person’s date of birth.
Reg 13.06
Inspection of the Index
(1) A person may, by application in writing, ask an Official Receiver to inspect material in the Index and give an extract of material specified in the application.”
Evidence
6. The following documents were admitted into evidence:
·Exhibit 1 Mr Hill’s Statement of Facts and Contentions (with attachments)
·Exhibit 2 T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975
·Exhibit 3 Official Receiver’s Statement of Facts and Contentions
7. The evidence showed that Mr Hill had lodged, through his agent (and advocates at this hearing) DR Capital Pty Ltd, a Debt Agreement Statement of Affairs and Proposal. The Statement of Affairs shows
a.Mr Hill was a construction worker and was not involved in any legal proceedings in relation to his outstanding debts.
b.The cause of the financial difficulties has been “unemployment or loss of income” and “excessive use of credit facilities including losses on repossessions, high interest payments and pressure selling“.
c.He had been provided with information about bankruptcy and alternative mechanisms but not by any Insolvency and Trustee Service Australia (ITSA) financial counsellors or by other material in the form of pamphlets or website information.
d.He also had had no advice from an accountant or a solicitor.
e.At the date of the completion of the form, Mr Hill had debts amounting to $34,427.00, and total income or anticipated income of $32,292.00 for the 12 months following the completion of the Debt Agreement Statement of Affairs.
8. Some of the anticipated income included financial support provided by his partner. In addition however, a form was attached headed “Debt Agreement Statement of Affairs and Debt Agreement Proposal Additional Information”. That form endeavoured to have the Statement of Affairs and the Debt Agreement Proposal submitted on a conditional basis. It stated, inter alia:
“I/we am also putting this Debt Agreement Proposal on the following conditions:
(i)That this Proposal or Debt Agreement, is not a Bankruptcy Order.
(ii)If requested, consent is to be provided that all judgments to be set aside or a notice of discontinuance of action be provided to the debtor or administrator.
(iii)That the details of this agreement and personal information be maintained between the parties and in accordance with the National Privacy Principles as per the Privacy Act 1988.
(iv)That any specific written [or] verbal agreement with any credit provider to disclose information to a credit reporting agency, or another credit provider, be removed.”
9. The above form which included the certificate quoted above, is endorsed in the footnotes to that form “© Copyright D.R. Administration 2005”.
10. The Debt Agreement Proposal showed an analysis of income and expenditure and with a resultant available income of $160.00 per week to repay the outstanding debts of $34,427.00. It was proposed in question 4 that the debt be repaid by 260 instalments (5 years of instalments) of $128.00 per week. This would mean a repayment from Mr Hill’s property of $33,280.00 against the debt of $34,427.00 at the date of completion of the Debt Agreement Proposal. The amount of $33,280.00 is included in question 4 as Label A “Total value of property/payments be dealt with under the proposal”.
11. In question 5 two further labels are provided for provision of information. The first further item of information (Label B) refers to the total fees, expenses and disbursements of the administrator. This question was left blank with no information provided by Mr Hill. Also in that question, the second item of information (Label C) shows the total amount to be paid to creditors, and a total of $29,645.00 was shown in that respect. A further label was shown total of B and C in question 5 to agree with A in question 4, to which the amount of $33,280.00 was shown.
12. Further, at paragraph 7 in that Agreement Proposal, Mr Hill is asked to list all assets that are owned outright and which are intended to be retained (excluding normal household furniture and personal effects). Underneath the provision of that information are two statements which the debtor is required to acknowledge by placing an “X” in a “Yes” box to the side of each statement and then to sign underneath those statements. One of the statements is as follows:
“I understand that proposing a debt agreement will be permanently recorded on the National Personal Insolvency Index (NPII) and that the NPII data including my name (including previous names and aliases) and address (including the business address and previous addresses) will be made available to private credit reference agencies which maintain records of a person’s credit worthiness for up to seven years.”
13. The words following “(NPII)” where it first appears in the above certificate, were deleted by Mr Hill, although the check box was marked and the signature block was completed.
Consideration
14. Mr Hill’s advocates objected to the rejection of the application on a number of grounds which will be traversed below, but also, they argued that as his creditors had not been given the opportunity to decide whether the proposal is in their best interests, and that they should be in a position to make such an assessment as they were large credit agencies. The advocates also maintained that providing for information in the NPII to be given to private credit providers was in conflict with s 18F of the Privacy Act 1988.
15. In addition, Mr Hill’s advocates have contended, in their letter dated 20 January 2006, that the rejection of their proposal by the Official Receiver was on the basis that “the Debt Agreement Proposal is a form approved by the Inspector-General in Bankruptcy and any amendments cannot be accepted”. The advocates, in their letter dated 20 January 2006 to the Inspector-General in Bankruptcy responded to this saying “[t]his is an obtuse explanation as by the nature of the Debt Agreement Proposal form it has to be altered and varied to complete an application.” I consider this objection by Mr Hill’s advocates is simply unsustainable. The response from the Inspector-General must be taken to mean in its ordinary sense, that one cannot alter pre-printed information on the form such as endeavouring to alter the Certificate set out in question 7 (see T documents, folio 26). It is apparent that the Official Receiver’s objection to Mr Hill’s amendment was seen as being an endeavour to overcome a statutory or regulatory provision, which, neither Mr Hill nor the Official Receiver has power to do.
16. Section 185E(2) gives authority to the Official Receiver to accept a Debt Agreement Proposal. But it is not mandatory. There is a discretion to accept the proposal only where the Official Receiver believes that s 185C(2) and (4) have been complied with and where the Statement of Affairs accompanying the proposal is in order. For the purpose of the present application, s 185C(4) is not relevant. The Official Receiver regarded s 185C(2) as not having been complied with and that the form headed “Additional Information” provided by DR Administration, clearly conflicts with the regulations.
17. If Mr Hill wished to have certain information not included on the NPII, provision exists for an application to be made to the Inspector-General under regulation 13.04. However, while the Inspector-General has a discretion to consider and allow certain exclusions, regulation 13.04(4) precludes an application from being entertained and a decision being made, in respect of a person’s name or a person’s date of birth. Clearly, the provision of the form “Additional Information” is in conflict with a regulatory instrument. But in any event, the problem in considering that aspect of the application does not end there. In the Debt Agreement Proposal, the certificate in question 7 acknowledging that the Debt Agreement will be permanently recorded in the NPII has been amended. It shows an intention that Mr Hill does not agree to be bound by the requirements of that certificate, which of course are based on a regulatory authority (part 13 of the Bankruptcy Regulations 1996).
18. The deletion of part of the certificate in question 7 of the Debt Agreement Proposal and the provision of the “Additional Information” form by DR Administration (presumably related to Mr Hill’s advocates DR Capital Pty Ltd) evinces an intention not to comply with or be willing to comply with, the statutory requirements. Therefore, it fails to comply with s 185E(2) in that the Official Receiver could not be satisfied that s 185C(2) has been complied with. On that basis, the Official Receiver was entitled to exercise his discretion not to accept the Debt Agreement Proposal for processing.
19. It is also contended that the Official Receiver’s decision to reject the Debt Agreement Proposal on the basis that it was not in the creditors’ interests is said to be related to s 185C(2)(b) in that there is a mandatory requirement that the Debt Agreement Proposal specify how the property is to be dealt with. The Official Receiver has argued that by failing to complete Label B in question 5 of the Debt Agreement Proposal i.e., to detail the fees and expenses and disbursements by the Administrator, it had the intention of not revealing how much of the income or property is to be paid to the Administrator, and therefore does not allow the Official Receiver to determine the requirements of s 185C(2)(b). It has been suggested that that did not form part of the reasons for the Official Receiver’s decision to reject the Debt Agreement Proposal. However, I note in the Official Receiver’s letter to Mr Hill dated 6 September 2006 (T 3, Folio 11) that after discussing Labels A, B and C requiring various financial information, the Official Receiver informed Mr Hill as follows: “The proposal does not specify how the property is to be dealt with and therefore has not been accepted for processing.” If this did not form part of the reasons for objection, at least expressly, then that sentence at least impliedly constitutes part of the reasons for rejecting it.
20. In oral evidence, it was suggested by Mr Hill’s advocates that the mere omission of the information at Label B would not prevent the Official Receiver from making a decision. It was suggested that a simple algebraic calculation where there are two pieces of information would allow a third numerical value to be found quite easily. On the face of it, that argument has a good deal of logic. However, one has to wonder about the motivation for excluding such information, particularly when it is completed by the agent to whom that information specifically relates. On the one hand, it could be regarded as though the Official Receiver would have been negligent if his office agreed to accept the proposal merely because one might be able to calculate a numerical value, when an omission of such critical information would intuitively invite confirmation or further information. This is particularly so if the purpose of the legislation is likely to be defeated where the statutory responsibility on the Official Receiver is to be satisfied of the reasonableness of the administrator’s fees or their priority or timing of payment, and to guard against other creditors not ultimately being paid.
21. I also think in the circumstances that the information provided seems to assume that no further debt would be incurred for a period of five years (the longest period of debt and for the largest creditor) while the administrator and two smaller creditors would be paid in a relatively short period of time. The information provided seems to also assume that Mr Hill would have no further credit (or personal debt) for the next five years, when his statement of affairs declares that one of the reasons for his present situation has been the excessive use of credit facilities.
22. I find that it was a responsible attitude for the Official Receiver to seek further information or clarification in the ordinary course of his official duties, prior to accepting the Debt Agreement Proposal for processing. The Inspector-General’s reason was that the creditors may be misinformed because they may interpret the information on the Debt Agreement Proposal as being that the information would be recorded on the NPII but would be excluded from other private credit agencies.
23. I have taken note of DR Capital’s letter of 20 January 2006 where it refers to Debt Agreements being made between debtors and creditors by mutual consent. It also says “[i]t is our opinion [that] the role of ITSA is to facilitate such agreements, not to dictate the terms of such agreements…” While I accept this in principle, one must be careful to ensure that such principle is interpreted subject to the overriding obligation of the Inspector-General to protect the public interest as prescribed by the statutory enactment and subordinate regulations. Equally, it is not the role of Mr Hill or Mr Hill’s advocates to seek to amend the regulatory requirements but rather, to ensure that those requirements are satisfied.
24. In passing, I note that the issues in dispute might well have been resolved more speedily or more amicably had the parties discussed the outstanding requirements and endeavoured to find ways to satisfy the requirements. The Official Receiver argued that “[t]he applicant’s real dispute appears to be with the credit reporting agencies who, on the applicant’s contentions, are improperly utilising information on the NPII in making credit reports” (para 12, Exhibit 3). That is not a question this Tribunal can resolve. Likewise, Mr Hill’s advocates’ arguments about conflict with privacy principles, are questions for other forums. However, in the latter respect, I note that the Privacy Act 1988 preceded the present provisions of the Bankruptcy Act 1966 and in the ordinary application of principles of statutory construction, the latter provisions, could be regarded as prevailing over the earlier provisions.
25. In forming a view as to whether the debt proposal should be accepted, I find that the Debt Agreement Proposal submitted by Mr Hill did not comply with s 185C(2)(b) and therefore, the Official-Receiver correctly exercised the discretion not to accept the proposal under s 185E(2). While the provisions of part IX of the Act were introduced by the Bankruptcy Legislation Amendment Act 1996 in order to simplify insolvency administration, these provisions were clearly intended to ensure that the Official Receiver performed an effective role in vetting such proposals and ensuring that “… where a person is clearly able to enter into a Part X administration, or the person’s liabilities are such that only the more rigorous regime of bankruptcy would be appropriate, the person in fact enters a Part X administration or becomes a bankrupt”. (Explanatory Memorandum to the Bankruptcy Legislation Amendment Bill 1996 at para 135.16).
26. I note also in passing that these provisions have not been entirely successful. They were designed to allow people with relatively low levels of debt and who could not afford the bankruptcy provisions of Part X of the Act to have a simpler mechanism outside bankruptcy. However, at the time of writing this decision, the Bankruptcy Legislation Amendment (Debt Agreements) Bill 2007 has been introduced into the Federal Parliament. The amendments covered by that Bill specifically relate to Part IX of the Bankruptcy Act 1966 which was introduced in 1996. There is reference in the material accompanying the Bill to a relatively high failure rate of Debt Agreement Proposals and that the amendments are designed to overcome situations where the cost of administrators is high. The proposed law is clearly intended to invoke a system of regulating persons who will be recognised as capable administrators and who can assist debtors and provide an effective service for creditors. The Bill implies that the amount of money available to creditors has not always been as high as it should have been. This reflects clearly the independent role which the Inspector-General in Bankruptcy is to perform under the legislation.
27. In the present case, that independent role seems to have been performed in determining whether the Debt Agreement Proposal was in the best interest of creditors and has in my opinion, been performed in this case according to law. There was also an argument raised by the Official Receiver, and opposed by Mr Hill’s advocates, that it is now not timely to accept the proposal originally submitted as time and the applicant’s financial circumstances may have changed. While there is much force in that argument (and it is noted that the Bill presently before Parliament will require a strict timeline for these proposals to be assessed by the Inspector-General), it is unnecessary to consider that argument further given that I found that the Debt Agreement Proposal submitted did not comply with the legislative requirements.
28. In all the circumstances and for the reasons stated, the decision under review is affirmed.
I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, RFD Senior Member
Signed: .....................................................................................
F. Kamst, Legal Research OfficerDate/s of Hearing 30 March 2007
Date of Decision 8 June 2007
Advocates for Mr Hill Mr D McGrath, Mr R Symes, Mr C Pope
Solicitor for the Official Receiver Ms S Oliver, Australian Government Solicitor
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