Inspector-General in Bankruptcy v Rutherfurd (Bankrupt)

Case [2023] FCAFC 99

FEDERAL COURT OF AUSTRALIA

Inspector-General in Bankruptcy v Rutherfurd (Bankrupt) [2023] FCAFC 99

Appeal from: Rutherfurd (Bankrupt) v Inspector-General in Bankruptcy [2022] FCA 1469
File number(s): QUD 458 of 2022
Judgment of: RARES, ROFE AND DOWNES JJ
Date of judgment: 28 June 2023
Catchwords:

BANKRUPTCY AND INSOLVENCY – where trustee of bankrupt estate made income contribution assessment – where bankrupt requested review of trustee’s decision to make income contribution assessment under s 139ZA of the Bankruptcy Act 1966 (Cth) – where Inspector-General refused request for review – where bankrupt applied for review to the Administrative Appeals Tribunal under s 139ZF(b) – whether Tribunal empowered to make fresh income contribution assessment – whether decision to review the trustee’s assessment forms part of the reviewable decision

ADMINISTRATIVE LAW – scope of Tribunal’s powers on review of a decision under s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) – where there was an intermediate review of the original decision – where intermediate decision was not an affirmation decision – where intermediate decision was a decision to refuse a request for review – whether powers and discretions relevant to decision under review extend to powers and discretions conferred on the original decision-maker – whether “decision” in s 43 refers to the “operative decision” – where scope of powers turns on construction of the Bankruptcy Act 1966 (Cth)
Legislation:

Acts Interpretation Act 1901 (Cth) s 13(1)

Administrative Appeals Tribunal Act 1975 (Cth) ss 41, 43

Bankruptcy Act 1966 (Cth) ss 139J(a), 139K, 139P(1), 139Q(1), 139S, 139W, 139ZA(1), 139ZA(2), 139ZA(3), 139ZA(5), 139ZD, 139ZE, 139ZF

Social Services Act 1947 (Cth) ss 14, 15

Social Security Act 1991 (Cth)
Cases cited:

Commissioner of Taxation v Industrial Equity Ltd (2000) 98 FCR 573; [2000] FCA 420

Frugtniet v Australian Securities and Investments Commission (2019) 266 CLR 250; [2019] HCA 16

Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. (No 3) (2021) 392 ALR 443; [2021] FCAFC 112

Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v PDWL (2021) 284 FCR 1; [2021] FCAFC 48

Quikfund (Australia) Pty Limited v Airmark Consolidators Pty Limited (2014) 222 FCR 13; [2014] FCAFC 70

Re Drs Sullivan, Nicolaides and Partners v Minister for Health, Housing, Local Government and Community Services (1994) 32 ALD 517; [1994] AATA 15

Re Gee v Director-General of Social Services (1981) 58 FLR 347; [1981] AATA 21

Rutherfurd (Bankrupt) v Inspector-General in Bankruptcy [2022] FCA 1469

Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31

Silk Bros Pty Ltd v State Electricity Commission of Victoria (1943) 67 CLR 1; [1943] HCA 2

Walker v Members Equity Bank Ltd (2022) 406 ALR 539; [2022] FCAFC 184

Yolbir v Administrative Appeals Tribunal (1994) 48 FCR 246; [1994] FCA 69
Division: General Division
Registry: Queensland
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 73
Date of hearing: 26 May 2023
Counsel for the Appellant: Mr G Hill SC and Mr…

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Inspector-General in Bankruptcy v Rutherfurd (Bankrupt) [2023] FCAFC 99
Case
[2023] FCAFC 99
Decision Date

CaseChat Overview and Summary

In the case of Inspector-General in Bankruptcy v Rutherfurd (Bankrupt), the central issue was whether the Administrative Appeals Tribunal (AAT) had the power to set aside a decision made by a trustee and make a fresh assessment under s 139W(2) of the Bankruptcy Act 1966 (Cth) when the Inspector-General had already refused a request to review the trustee's decision. The dispute arose when the bankrupt requested the Inspector-General to review the trustee's decision, which was subsequently refused. The bankrupt then applied to the AAT to review the Inspector-General's decision.

The legal issues before the court were twofold: first, whether the AAT had the authority to conduct a fresh assessment under s 139W(2) of the Bankruptcy Act when reviewing the Inspector-General's decision; and second, whether the decision to review the trustee's assessment formed part of the reviewable decision under s 139ZF(b) of the Bankruptcy Act. The court examined the relevant provisions of the Bankruptcy Act and the Administrative Appeals Tribunal Act 1975 (Cth) to determine the scope of the AAT's powers in this context.

The court held that the AAT does not have the power to set aside the trustee's decision and make a fresh assessment when the Inspector-General has already refused to review the decision. The court found that the statutory scheme of the Bankruptcy Act distinguishes between different stages of decision-making, and the AAT's jurisdiction is limited to reviewing the decision of the Inspector-General. The court emphasised that the AAT must address the same question that the primary decision-maker was required to address and cannot take into account considerations that the primary decision-maker was not permitted to consider. The court concluded that the AAT's powers and discretions relevant to the decision under review do not extend to those conferred on the original decision-maker, and the decision to review the trustee's assessment does not form part of the reviewable decision.

The appeal was allowed, and the orders of the primary judge were set aside. The proceedings were dismissed, and costs were awarded to the first respondent.

Orders

Orders of the court

1. The appeal be allowed.

2. In proceeding QUD252/2022, the orders made on 11 November 2022 be set aside and in lieu thereof it be ordered that:

(a) The proceeding be dismissed.

(b) The applicant pay the first respondent’s costs.

3. In proceeding QUD109/2022, the orders made on 11 November 2022 be set aside and in lieu thereof it be ordered that:

(a) The proceeding be dismissed.

(b) The applicant pay the first respondent’s costs.

4. The first respondent pay the appellant’s costs.

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

Background

Background to the litigation

For the following reasons, the appeal will be allowed and the orders of the primary judge in the two proceedings which were before his Honour will be set aside. Costs will follow the event.RELEVANT BACKGROUND Division 4B of Pt VI of the Bankruptcy Act 1966 (Cth) requires bankrupts who earn income during their bankruptcy to pay contributions towards their estate: s 139J(a). A bankrupt must pay these contributions if the income they derive during a “contribution assessment period” exceeds a threshold amount calculated under the Act (the ‘actual income threshold amount’): ss 139K, 139P(1), 139Q(1), 139S. Each contribution assessment period lasts for one year, beginning on the date of the bankruptcy’s commencement, and then every anniversary thereafter: s 139K. As soon as practicable after the commencement of each contribution assessment period, the trustee of the estate of the first respondent (‘trustee’) is to make an assessment of: the income that was derived, or is likely to be derived, by the first respondent during that period; the actual income threshold amount; and the contribution (if any) that the first respondent is liable to pay in respect of that period: s 139W(1). Pursuant to s 139W(2) of the Bankruptcy Act, the trustee is empowered to make a fresh assessment of these matters, whether during or after a contribution assessment period. The first respondent was made bankrupt on 5 April 2017. On 18 September 2020, the trustee issued notices of income contribution assessment to the first respondent. Those notices concerned the income contribution assessments which the trustee had made for the first four years of the first respondent’s bankruptcy. On 13 November 2020, the first respondent requested that the Inspector-General review the trustee’s decision to make an assessment under s 139ZA(1)(b) of the Bankruptcy Act. Section 139ZA(1) relevantly provides that the Inspector-General may review a decision of a trustee to make an assessment:(a)on the Inspector-General’s own initiative; or(b)if requested to do so by the bankrupt for reasons that appear to the Inspector-General to be sufficient to justify such a review. Section 139ZA(5) provides that, when a request is made by a bankrupt to conduct a review, the Inspector-General must, within 60 days after receiving the request:(a)decide whether to review the decision; and(b)if the Inspector-General decides to review the decision–make his or her decision on the review.That is, it is only upon a decision being made to review the decision under (a) that a further decision is required to be made on the review under (b). Section 139ZD provides to the effect that, if the Inspector-General decides to conduct a review of the decision, then, on that review, the Inspector-General has all the powers of the trustee and may either confirm the decision or set aside the decision and make a fresh assessment under s 139W(2). On 12 January 2021, a delegate of the Inspector-General wrote to the first respondent in these terms (and attached reasons):I have decided pursuant to section 139ZA(1)(b) of the Bankruptcy Act 1966 (Cth) not to perform a review of the Trustee’s decision as there are insufficient grounds to justify a review.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Contrary to the findings of the primary judge, there is no reason to depart from giving the word “or” its ordinary disjunctive meaning. That would be the case where the context supported such a reading, including the purpose of the provision: Commissioner of Taxation v Industrial Equity Ltd (2000) 98 FCR 573; [2000] FCA 420 at [19] (Hill, Heerey and Hely JJ). Such a case does not exist here for the reasons already explained.CONCLUSION If the Inspector-General makes a decision refusing a request to review a decision by a trustee to make an assessment, and an application is brought to review that decision under s 139ZF(b) of the Bankruptcy Act, the Tribunal does not have the power to set aside the decision of the trustee and make a fresh assessment under s 139W(2). It follows that, contrary to the conclusion of the primary judge, the Tribunal’s answer to the preliminary question was correct. Accordingly, we will allow the appeal with costs and order that the primary judge’s orders in each of the proceedings be set aside and instead those proceedings be dismissed with costs.

Ratio Decidendi

Legal Principle Established

The central issue on this appeal is whether, if the Inspector-General makes a decision refusing a request to review a decision by a trustee to make an assessment and an application is brought to review that decision under s 139ZF(b) of the Bankruptcy Act, the Tribunal has the power to set aside the decision of the trustee and make a fresh assessment under s 139W(2).CONSIDERATIONIdentification of the decision on review Section 43 of the AAT Act empowers the Tribunal to exercise “all the powers and discretions” conferred on the original decision-maker, provided it does so “[f]or the purpose of reviewing a decision”. In Frugtniet v Australian Securities and Investments Commission (2019) 266 CLR 250; [2019] HCA 16 at [51] (Bell, Gageler, Gordon and Edelman JJ), it was stated that:[Except where altered by some other statute], the jurisdiction conferred on the AAT by ss 25 and 43 of the AAT Act, where application is made to it under an enactment, is to stand in the shoes of the decision-maker whose decision is under review so as to determine for itself on the material before it the decision which can, and which it considers should, be made in the exercise of the power or powers conferred on the primary decision-maker for the purpose of making the decision under review. The AAT exercises the same power or powers as the primary decision-maker, subject to the same constraints. The primary decision, and the statutory question it answers, marks the boundaries of the AAT's review. The AAT must address the same question the primary decision-maker was required to address, and the question raised by statute for decision by the primary decision-maker determines the considerations that must or must not be taken into account by the AAT in reviewing that decision. A consideration which the primary decision-maker must take into account in the exercise of statutory power to make the decision under review must be taken into account by the AAT. Conversely, a consideration which the primary decision-maker must not take into account must not be taken into account by the AAT.(citations omitted.) It is necessary to identify the decision that is the subject of the Tribunal’s review with some precision: Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31 at [133] (Kiefel J, as her Honour then was). In this case, that identification turns upon the proper construction of the Bankruptcy Act. The first respondent submitted that the trustee’s decision was the “primary” or “operative” decision because it affected his rights and it was this decision which was subject to review by the Inspector-General within the meaning of s 139ZA(1). The first respondent also submitted that there are not separate paths of decision-making within the statutory scheme of the Bankruptcy Act but, instead, there is a single process of review of the trustee’s decision which may proceed in different ways as a matter of procedure. However, three situations can arise under the Bankruptcy Act, each of which raises different issues and which have different statutory consequences and constraints.