Kiem Dang Investment Pty Limited v Mansfield
[2017] FCCA 725
•24 May 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KIEM DANG INVESTMENT PTY LIMITED v MANSFIELD & ANOR | [2017] FCCA 725 |
| Catchwords: BANKRUPTCY – Notice under s.139ZQ of Act – whether a party aggrieved by such a notice should be limited to remedies under the Bankruptcy Act or can also seek relief under the Administrative Decisions Judicial Review Act – where Official Receiver seeks order striking out or dismissing that part of the Applicant’s claim that seeks relief under the Administrative Decisions Judicial Review Act and asserts abuse of process – statutory interpretation – exercise of discretion – whether s.37M Federal Court of Australia Act applies. |
| Legislation: Administrative Decisions (Judicial Review) Act 1997, ss.5, 6, 7,10, 16 Bankruptcy Act 1966, ss.27, 30, 139ZA, 139ZQ, 139ZS, 139ZT Federal Circuit Court of Australia Act 1999, ss.43 |
| Cases cited: Actual Distribution v Australian Energy Regulator [2011] FCA 639 Australian Broadcasting Tribunal v Bond [1990] HCA 33 CK Nominees Australia Pty Limited v Official Receiver (WA) [2007] FCAFC 118 Cole v Quest Software Pty Ltd [2014] FCCA 1251 Cremona v Administrative Appeals Tribunal [2015] FCAFC 72 CSL Australia Pty Limited v Minister for Infrastructure and Transport [2013] FCA 152 Lin v Official Trustee in Bankruptcy (No. 1) [2001] FMCA 106 Lucas v Commissioner of Taxation [2015] FCA 598 Margan v Commonwealth of Australia [2013] FCA 109 Michael Wilson & Partners Ltd v Slater [2014] FCCA 2871 Panganiban v ASIC [2016] FCA 510 Pasmore v Oswaldtwistle Urban District Council [1898] AC 387 Peczalski v Comcare [1999] FCA 366 Polgar v Official Receiver [2015] FCCA 1840 Sampson (Trustee) v Taboada [2017] FCA 79 SPI Electricity Pty Limited v Australian Energy Regulator [2014] FCA 1012 Book: |
| Applicant: | KIEM DANG INVESTMENTS PTY LIMITED |
| First Respondent: | DAVID MANSFIELD |
| Second Respondent: | OFFICIAL RECEIVER |
| File Number: | SYG 570 of 2016 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 13 March 2017 |
| Date of Last Submission: | 13 March 2017 |
| Delivered at: | Wollongong |
| Delivered on: | 24 May 2017 |
REPRESENTATION
| Counsel for the Applicant: Solicitors for the Applicant: | Mr Freeman Than & Co |
| Solicitors for the First Respondent: | Bartels Business Lawyers |
| Counsel for the Second Respondent: | Mr McGrath |
| Solicitors for the Second Respondent: | Lobban McNally & Harney |
ORDERS
Pursuant to Rule 17.02 of the Federal Circuit Court Rules 2001, the Court determine the application of section 10(2)(b)(i) and (ii) Administrative Decisions (Judicial Review) Act 1977 (“ADJR Act”) in the proceedings separately from and prior to all other questions in the proceeding.
Pursuant to section 10(2)(b)(i) and/or (ii) ADJR Act, the Court refuse to grant the application under the ADJR Act that was made to the Court in respect of the decisions of the Second Respondent, in respect of conduct engaged in for the purpose of making a decision by the Second Respondent, or in respect of a failure to make a decision by the Second Respondent, for the reasons:
(a)that the Applicant has sought a review by the Court of that decision, conduct or failure otherwise than under the ADJR Act; or
(b)that adequate provision is made by law other than the ADJR Act under which the Applicant is entitled to seek a review by the Court of those decisions, conduct or failure.
Pursuant to Federal Circuit Court Rule 13.10, the Court strike out claims of abuse of process against the Second Respondent contained in paragraphs 46(b), 48(b) and 77(b) of the Further Amended Statement of Claim.
That the Court strike out the part of the proceeding referring to claims of abuse of process on the part of the Second Respondent and referring to claims under the ADJR Act against the Second Respondent including the following:
(a)paragraphs 1E, 1F, 1G, 1H, 1I, 1J, 1L, 2, 2A, 2B, 3 and 4A of the Further Amended Application filed on 13 September 2016, and
(b)paragraphs 34 to 36 inclusive, 46(b), 48(b), 49 to 55 inclusive, 60, 61, 77(b), 78 to 87 inclusive and internal references to those paragraphs (see for example paragraph 66) of the Amended Statement of Claim filed on 13 September 2016,
on the basis of the decision in respect of Orders 2 and 3 above.
Direct the Applicant, within 21 days from the date of this Order:
(a)to file a Second Further Amended Application not including claims of abuse of process on the part of the Second Respondent and not including claims under the ADJR Act against the Second Respondent, and
(b)to file a Further Amended Statement of Claim not including claims of abuse of process on the part of the Second Respondent and not including claims under the ADJR Act against the Second Respondent.
The matter be adjourned to 17 July 2017 at 9:30am for further directions and consideration of any application as to costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 570 of 2016
| KIEM DANG INVESTMENTS PTY LIMITED |
Applicant
And
| DAVID MANSFIELD |
First Respondent
| OFFICIAL RECEIVER |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain the orders that the Court has made in relation to the Application in a Case filed by the Official Receiver on 14 October 2016 in which orders are sought, in effect, preventing Kiem Dang Investments Pty Limited (“KDI”) from seeking remedies under the Administrative Decisions (Judicial Review) Act 1977 (“ADJR Act”) and striking out claims of abuse of process. KDI opposes the orders sought.
Background
This dispute concerns moneys paid to KDI that the First Respondent Trustee, David Mansfield (“the Trustee”), contends is a voidable preference that should be available to the creditors of the bankrupt estate of Yao Cheng.
The following short chronology is found in the outline of submissions provided on behalf of the Second Respondent Official Receiver:
Date Event 18 Mar 1997 KDI leases supermarket premises at 2 Winnima Way, Berkeley to Jewel Food Stores Pty Ltd 1 Aug 2000 Jewel Food Stores assigns the lease to Mr Xian Fu and Ms Yao Cheng with consent of KDI 27 Nov 2007 KDI commences proceedings in the Supreme Court of New South Wales for (inter alia) failure to pay rent against Jewel Food Stores Pty Limited, Mr Fu and Ms Cheng.
Jewel Food Stores cross-claimed against Mr Fu and Ms Cheng.
04 Jan 2008 and
7 April 2008
Jewel Food Stores Pty Limited obtains asset freezing orders against Mr Fu and Ms Cheng 17 Jun 2008 The Court orders Mr Fu and Ms Cheng to deposit the sum of $400,000 into an account. 18 Jun 2008 Ms Cheng transfers $400,000 into an account in the joint names of the solicitors for the parties to the Supreme Court proceedings. 28 Aug 2009 Judgment is delivered in the Supreme Court proceedings. 10 Sep 2009 Final orders are made in the Supreme Court proceedings, inter alia that the balance of funds in the joint bank account with Westpac Banking Corp[oration in the names of the solicitors of the parties to the proceedings to be paid to the plaintiff 14 Oct 2009 The parties’ solicitors pay the joint account moneys ($412,071.74 including accrued interest) to KDI pursuant to the Court orders. 10 Mar 2010 Mr Fu becomes bankrupt on his own petition 11 Mar 2010 Ms Cheng becomes bankrupt on her own petition 19 Jan 2016 Official Receiver issues 139ZQ Notice to KDI for payment of $402,081.74 25 Jan 2016 139ZQ Notice served on KDI 15 Mar 2016 KDI files application in proceedings SYG 570/2016. 03 May 2016 KDI files Amended Application and Statement of Claim in proceedings SYG 570/2016 21 Jul 2016 Official Receiver issues Amended 139ZQ Notice 21 Jul 2016 Amended 139ZQ Notice served on KDI 05 Sep 2016 Registrar Segal makes order permitting filing of a further amended application and an amended statement of claim. Registrar Segal directs that any further amended application is to fully particularise all allegations including any allegations of abuse of process. 13 Sep 2016 KDI files Further Amended Application and Amended Statement of Claim 14 Oct 2016 Official Receiver files its Application in a Case
The Further Amended Application, and Amended Statement of Claim filed by KDI on 13 September 2016, seeks to set aside the s.139ZQ notice served on KDI. KDI argues that the decision to issue the notice, and then not to revoke it, was an abuse of process on the part of the Official Receiver. Relevantly, in the context of the present application, KDI seeks relief under the ADJR Act, contending that the decision to issue the notice, and then not to revoke the same, were decisions covered by that legislation. This is the major point in contention in this dispute.
On 14 October 2016, the Official Receiver filed an Application in a Case seeking, in effect, that pursuant to the Court’s powers under the ADJR Act, the Court refuse to grant the application under the ADJR Act and, therefore, in effect, dismiss that part of the claim. This would involve striking out certain paragraphs of the Amended Statement of Claim. The Official Receiver also asked the Court to strike out KDI’s claims based on abuse of process. As foreshadowed, KDI opposes the Court so doing.
The relief sought in KDI’s Further Amended Application, and Amended Statement of Claim is not limited to the ADJR Act. It also relies on various provisions contained in the Bankruptcy Act 1966. In effect, KDI’s claim under the ADJR Act, and the Act are in the alternative.
The main issue for the Court to decide, therefore, is whether KDI’s attack on the 139ZQ notice should be allowed to continue on both bases, ie, the ADJR Act, and the Act. KDI contends that it should. The Official Receiver, and the Trustee, both contend that it should not and, indeed, that the remedies available under the Act are more than adequate provision for KDI.
Relevant statutory provisions
Section 10 of the ADJR Act states:
Rights conferred by this Act to be additional to other rights
(1) The rights conferred by sections 5, 6 and 7 on a person to make an application to the Federal Court or the Federal Circuit Court in respect of a decision, in respect of conduct engaged in for the purpose of making a decision or in respect of a failure to make a decision:
(a) are in addition to, and not in derogation of, any other rights that the person has to seek a review, whether by the court, by another court, or by another tribunal, authority or person, of that decision, conduct or failure; and
(b) shall be disregarded for the purposes of the application of subsection 6(3) of the Ombudsman Act 1976 and section 40TF of the Australian Federal Police Act 1979 .
(2) Notwithstanding subsection (1):
(a) the Federal Court or the Federal Circuit Court, or any other court, may, in a proceeding instituted otherwise than under this Act, in its discretion, refuse to grant an application for a review of a decision, conduct engaged in for the purpose of making a decision, or a failure to make a decision, for the reason that an application has been made to the Federal Court or the Federal Circuit Court under section 5, 6 or 7 in respect of that decision, conduct or failure; and
(b) the Federal Court or the Federal Circuit Court may, in its discretion, refuse to grant an application under section 5, 6 or 7 that was made to the court in respect of a decision, in respect of conduct engaged in for the purpose of making a decision, or in respect of a failure to make a decision, for the reason:
(i) that the applicant has sought a review by the court, or by another court, of that decision, conduct or failure otherwise than under this Act; or
(ii) that adequate provision is made by any law other than this Act under which the applicant is entitled to seek a review by the court, by another court, or by another tribunal, authority or person, of that decision, conduct or failure.
(3) In this section, review includes a review by way of reconsideration, re-hearing, appeal, the grant of an injunction or of a prerogative or statutory writ or the making of a declaratory or other order.
Section 16 of the said Act also states:
Powers of the Federal Court and the Federal Circuit Court in respect of applications for order of review
(1) On an application for an order of review in respect of a decision, the Federal Court or the Federal Circuit Court may, in its discretion, make all or any of the following orders:
(a) an order quashing or setting aside the decision, or a part of the decision, with effect from the date of the order or from such earlier or later date as the court specifies;
(b) an order referring the matter to which the decision relates to the person who made the decision for further consideration, subject to such directions as the court thinks fit;
(c) an order declaring the rights of the parties in respect of any matter to which the decision relates;
(d) an order directing any of the parties to do, or to refrain from doing, any act or thing the doing, or the refraining from the doing, of which the court considers necessary to do justice between the parties.
(2) On an application for an order of review in respect of conduct that has been, is being, or is proposed to be, engaged in for the purpose of the making of a decision, the Federal Court or the Federal Circuit Court may, in its discretion, make either or both of the following orders:
(a) an order declaring the rights of the parties in respect of any matter to which the conduct relates;
(b) an order directing any of the parties to do, or to refrain from doing, any act or thing the doing, or the refraining from the doing, of which the court considers necessary to do justice between the parties.
(3) On an application for an order of review in respect of a failure to make a decision, or in respect of a failure to make a decision within the period within which the decision was required to be made, the Federal Court or the Federal Circuit Court may, in its discretion, make all or any of the following orders:
(a) an order directing the making of the decision;
(b) an order declaring the rights of the parties in relation to the making of the decision;
(c) an order directing any of the parties to do, or to refrain from doing, any act or thing the doing, or the refraining from the doing, of which the court considers necessary to do justice between the parties.
(4) The Federal Court or the Federal Circuit Court may at any time, of its own motion or on the application of any party, revoke, vary, or suspend the operation of, any order made by it under this section.
There is no dispute between the parties that the decision to issue the 139ZQ notice to KDI was a decision to which the ADJR Act applied. There is no dispute between the parties about the Court’s jurisdiction to deal with the issues raised in this dispute.
Section 30 of the Act states:
General powers of Courts in bankruptcy
(1) The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
(2) The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.
(3) If in a proceeding before the Federal Court under this Act a question of fact arises that a party desires to have tried before a jury, the Federal Court may, if it thinks fit, direct the trial of that question to be had before a jury, and the trial may be had accordingly in the same manner as if it were the trial of an issue of fact in an action.
(5) Where:
(a) a bankrupt, a debtor or any other person has failed to comply with an order or direction of a Registrar, or with a direction or requirement of an Official Receiver or Trustee, under this Act; or
(b) a Trustee has failed to comply with an order, direction or requirement of a Registrar, or with a requirement or request of the Inspector-General, under this Act;
the Court may, on the application of the Registrar, Official Receiver, Trustee or Inspector-General, as the case requires:
(c) order the person who has failed to comply with the order, direction, requirement or request, as the case may be, to comply with it; or
(d) if it thinks fit, make an immediate order for the committal to prison of that person.
(6) The power conferred on the Court by subsection (5) is in addition to, and not in substitution for, any other right or remedy in respect of the failure to comply with the order, direction, requirement or request, as the case may be.
139ZQ of the Act states:
Official Receiver may require payment
(1) If a person has received any money or property as a result of a transaction that is void against the Trustee of a bankrupt under Division 3, the Official Receiver:
(a) if the Official Trustee is the Trustee--on the initiative of the Official Receiver; or
(b) if a registered Trustee is the Trustee--on application by the Trustee;
may require the person, by written notice given to the person, to pay to the Trustee an amount equal to whichever of the following is applicable:
(c) if:
(i) the transaction is void against the Trustee under section 128B or 128C; and
(ii) the transaction is by way of a contribution to an eligible superannuation plan for the benefit of a person (the beneficiary ) who may or may not be the bankrupt; and
(iii) the beneficiary is a member of the eligible superannuation plan;
whichever is the lesser of the following:
(iv) the money or the value of the property received;
(v) the beneficiary's withdrawal benefit in relation to the eligible superannuation plan;
(d) in any other case--the money or the value of the property received.
(2) The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the Trustee.
(3) The notice may:
(a) require the amount to be paid at a time or within a period set out in the notice; or
(b) require the amount to be paid at such times, and in such instalments, as are set out in the notice.
(4) After the Official Receiver has given a notice to a person under subsection (1), the Official Receiver may at any time, by a further notice given to the person, revoke or amend the first-mentioned notice.
(5) If the Official Receiver gives a notice under this section, the Official Receiver must send a copy of the notice to the bankrupt and, if a registered Trustee is the Trustee, to the Trustee.
(6) A notice to be given under this section to the Commonwealth, a State or a Territory, or to an authority of the Commonwealth, of a State or of a Territory, is taken to be duly given if it is given to a person who, by any law, regulation, appointment or authority, has the function of paying, or in fact pays, money on behalf of a Department of the Commonwealth, of that State or of that Territory, or on behalf of the authority, as the case may be.
(7) If a person is required by a notice under this section to pay to the Trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the Trustee.
(8) An amount payable by a person to the Trustee under this section is recoverable by the Trustee as a debt by action against the person in a court of competent jurisdiction.
(9) For the purposes of subparagraph (1)(c)(ii), disregard a benefit that is payable in the event of the death of a person.
(10) In this section:
contribution " has the same meaning as in Subdivision B of Division 3.
eligible superannuation plan " has the same meaning as in Subdivision B of Division 3.
member " of an eligible superannuation plan has the same meaning as in Subdivision B of Division 3.
withdrawal benefit " has the same meaning as in Subdivision B of Division 3.
The Court’s power to set aside a notice issued under 139ZQ is set out in section 139ZS as follows:
Power of Court to set aside notice
(1) If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice.
(1A) The application must be made:
(a) not later than 60 days after the day the notice under section 139ZQ was given to the applicant; or
(b) if the applicant is another interested person--not later than 60 days after the day the applicant became aware that the notice has been given.
(2) A notice that has been set aside is taken not to have been given.
A failure to comply with a 139ZQ notice has the implications set out in section 139ZT as follows:
Failure to comply with notice
(1) A person who refuses or fails to comply with a notice under section 139ZQ commits an offence punishable upon conviction by imprisonment for a period not exceeding 6 months.
(2) If a person is convicted of an offence against subsection (1) in relation to the refusal or failure of the convicted person or another person to comply with a notice under section 139ZQ, the court that convicted the person may, in addition to imposing a penalty on the convicted person, order that person to pay to the Trustee an amount not exceeding the amount, or the total of the amounts, that the convicted person or the other person, as the case may be, refused or failed to pay to the Trustee in accordance with the notice.
Material before the court
The parties relied on the following material:
a)Outline of Submissions of Official Receiver filed 17 January 2017;
b)Outline of Submissions of Official Receiver filed 6 March 2017;
c)Outline of Submissions of KDI filed 20 February 2017;
d)Outline of Submissions of David Ian Mansfield filed 28 February 2017;
e)Application in a Case filed 14 October 2016;
f)Affidavit of Mark McNally sworn 13 October 2016;
g)Affidavit of Michael Parkinson sworn 14 October 2016;
h)Notice stating grounds of opposition filed 30 October 2016;
i)Affidavit of Ai Trong Than sworn 2 September 2016;
j)Affidavit of Ai Trong Than sworn 28 October 2016;
k)Affidavit of Ai Trong Than sworn 20 February 2017;
l)Affidavit of Ai Trong Than sworn 14 March 2016;
m)Further Amended Application filed 13 September 2016; and
n)Amended Statement of Claim dated 10 September 2016.
Submissions made on behalf of the Official Receiver
The Official Receiver’s application relied on the Court’s power under section 10(2)(b)(i) and (ii) ADJR Act.
There was no dispute between the parties that section 10(2)(b)(i) had been established. KDI had clearly sought a review by this Court of the Official Receiver’s decision to issue the notice. However, the ADJR Act claim was framed in the alternative to claims under sections 30 and 139ZS of the Act.
The Official Receiver’s contention was that the relief available under the Bankruptcy Act made “adequate provision” for the purposes of s.10(2)(b)(ii). Indeed, the Official Receiver’s submission was that the combined effect of sections 30 and 139ZS of the Bankruptcy Act completely “swamp any ADJR rights available to KDI”, and thus more than adequate provision is available to KDI under the Bankruptcy Act.
It was common ground, of course, that section 10(2) ADJR Act gave the Court a discretion to refuse to grant the ADJR Act application. The Court was taken to extensive case law which, according to both the Official Receiver and Trustee, established that the Court should exercise its discretion and refuse to grant the ADJR Act relief when there was such an effective alternative right of review contained within the Bankruptcy Act.
The Official Receiver, and the Trustee, both submitted that the remedies available to KDI under the Bankruptcy Act were more than adequate and that, in effect, as a matter of policy, challenges to 139ZQ notices issued under the Bankruptcy Act, should be dealt with under that legislation, as bankruptcy law is a specialised jurisdiction in respect of which the Courts have exercised a developed supervisory jurisdiction. They both submitted that the potential application of the ADJR Act adds nothing to the width of powers available to the Court under the Bankruptcy Act and, indeed, pursuant to the common law.
The Official Receiver further argued that in circumstances where a statutory right of appeal is granted (section 139ZS of the Bankruptcy Act) such provision should be treated by the Courts as the exclusive remedy for any breach of natural justice. The Official Receiver relied in this regard on the decision of the High Court of Australia in Twist v Randwick Municipal Council (1976) 136 CLR 106. Pursuant to this principle of statutory interpretation, therefore, the statutory scheme created by sections 139ZQ – 139ZT of the Bankruptcy Act should be treated as the exclusive remedy available in this case, thus excluding the ADJR Act remedy.
Submissions made on behalf of KDI
KDI’s main submission appeared to be that the existence of “adequate provision” for the purposes of section 10(2)(b)(ii) had not been established. The first and main limb of this argument was that the case law dealing with when a Court has discretion under section 10(2) ADJR Act all concern alternate relief in a specialist tribunal or a specific appeal procedure which Parliament had established. The secondary argument, which was abandoned in closing submissions, was that there was not in any event “adequate provision” for KDI because the Trustee would have been unable to meet the costs of KDI if it were ultimately successful. As noted, however, this argument was abandoned, quite properly so.
In any event, KDI argued that the Court, in the exercise of its discretion, should refuse relief for a number of reasons. One reason was that the application was premature, as no defence had been filed by the Official Receiver and thus the Court had not been informed of what was actually in dispute between the parties. In any event, given that the failure to comply with a section 139ZQ notice had criminal consequences, the Court should be very wary indeed to deny KDI a viable primary claim under the ADJR Act. KDI submitted that the claims about the 139ZQ notice under both the ADJR Act, and Bankruptcy Act, would be heard in the same Court, at the same time, by the same judge on the same evidence. In this regard, the Court notes it was not submitted on behalf of KDI that the joint claims would take the same amount of the Court’s time if run together, as opposed to hearing only one of the claims.
In any event, KDI submitted that, in effect, the Official Receiver’s claim was for summary dismissal, which should not be granted, because it had not established that the claims under the ADJR Act were unarguable.
In relation to the Official Receiver’s reliance on the High Court’s decision in Twist, Counsel for KDI submitted that this argument was raised with very little notice to KDI, was outside the scope of the Official Receiver’s strike-out application, and was best left for consideration at a final hearing. The Court disagrees with this submission. Leave was sought by the Official Receiver, and granted, to make supplementary submissions which were filed one week before the matter came on for hearing. KDI could have opposed the grant of leave, but did not appear at the mention when this issue was dealt with. In any event, the Court is satisfied that KDI had adequate time to consider, and meet, the claim based on Twist. Moreover, having considered the matter carefully, the Court does not believe that KDI was in any way prejudiced by the Official Receiver’s reliance on the High Court’s decision in Twist. The Court’s discussion of the significance of that authority will make that plain.
The submissions made on behalf of the Trustee
The Trustee embraced the Official Receiver’s submissions. The Trustee was concerned about any delay in hearing of the substantive issues which were essentially between what the Trustee submitted was a preferred creditor, ie, KDI, and the Trustee. The Trustee submitted that the Court would exercise its discretion in a manner that resulted in the substantive issues being litigated with the least delay and/or expense, particularly in circumstances where the Trustee submitted that section 139ZS of the Act provided a fulsome and complete review process specifically tailored to the bankruptcy jurisdiction.
The Trustee joined in with the Official Receiver’s contention that KDI’s abuse of process claim in relation to the issue of the notice should be struck out, given the statutory obligation that both the Official Receiver and Trustee have under the Act, and the total absence of any evidence which suggested that the notice had been issued in any exceptional circumstances, or motivated by an improper motive.
Using the ADJR Act to attack a section 139ZQ notice?
The Court was only referred to one authority in which the ADJR Act was used in the context of a s.139ZQ notice. In Sampson (Trustee) v Taboada [2017] FCA 79 (10 February 2017) Burley J said at [32]:
The respondents submitted that the decision of the delegate to issue the notice based on the information in the schedule was a reviewable decision. Counsel conceded that the availability of such relief in the circumstances of a decision of the Official Receiver was novel and could point to no authority in support of such an approach.
At [51] Burley J recognised that whilst it was not necessary to determine the point nonetheless:
I note that the proposed ADJR Act proceedings are speculative in the sense that they seek to superimpose a judicial review process on the scheme set out in subdivision J of the Bankruptcy Act. The basis for this has not been explained and no authority, direct or analogous, has been cited to support it.
All Counsel in the present matter conceded that His Honour’s comments were obiter. Indeed, it does seem that His Honour was not referred to any of the relevant case law that might have informed his decision. Counsel for the Official Receiver submitted, nonetheless, that Burley J did seem sceptical about the application of the ADJR Act to a 139ZQ notice. Whilst that may well be a fair assessment, the Court agrees with Counsel in this case that the determination of this issue, which seems to be regarded as an important one, should be on the basis of principle, with the legal issues properly placed before the Court.
Section 10 ADJR Act
The focus of argument about section 10(2)(b)(ii) was, quite properly, on how the Court’s discretion should be exercised. Thus, it was clearly accepted that whilst it was important to establish that “adequate provision” was, on the facts of this case, provided by the Bankruptcy Act, even if that were the case, the Court nonetheless had a discretion to decline relief under the ADJR Act.
Counsel for the Official Receiver referred the Court to a number of decisions including: Tuite v Administrative Appeals Tribunal [1993] 40 FCR 483, Peczalski v Comcare [1999] FCA 366, Cremona v Administrative Appeals Tribunal [2015] FCAFC 72, Panganiban v ASIC [2016] FCA 510, Lucas v Commissioner of Taxation [2015] FCA 598, and SPI Electricity Pty Limited v Australian Energy Regulator [2014] FCA 1012. Counsel submitted that these cases cumulatively establish that the purpose and intent of section 10(2)(b)(ii) would incline the Court to require KDI to proceed in accordance with the specific de novo hearing provided by section 139ZS of the Bankruptcy Act, without regard to the ADJR Act process. Counsel emphasised that the remedies available under the Bankruptcy Act were so extensive that it was simply not possible to discern how it did not provide adequate provision to KDI. By invoking the ADJR Act, KDI had drawn the Official Receiver into litigation in which, it was submitted, it had no interest, and no duty to be involved.
Counsel for KDI, however, submitted that the remedy available to it under section 139ZS was, firstly, a non-exclusive remedy and, secondly, was in any event limited to the “alleged facts and circumstances set out in the notice”. He submitted that the non-exclusive nature of the provision had been confirmed in decisions including, for example, Lin v Official Trustee in Bankruptcy (No. 1) [2001] FMCA 106 where Raphael FM said at [13]:
In Halse v Norton [1997] FCA 673; (1997) 76 FCR 389 the Full Bench of the Federal Court (Black CJ, Lee and RD Nicholson JJ) upheld the decision of Carr J reported as Norton v Halse (1996) 137 ALR 593 that the Trustee bore an onus of establishing either that the facts and circumstances alleged in the notice under s 139ZQ and relied upon at the hearing existed, or that other facts or circumstances existed that would bring the transaction, the subject of the notice, within s 120 or 121 of the Act (per Black CJ at 391). At 392 the Chief Justice said:
“Clearly, s 139 ZS is not the exclusive means of challenging a notice under s 139ZQ (see re McLernon at 403), and there may well be cases in which there is good reason for the Trustee to bring what would be in effect a cross application for a declaration that a transaction is void, as in re McLernon: see also Theo v Official Trustee in Bankruptcy [1998] FCA 862; (1996) 70 FCR 317; 34 ATR 404".
With respect, this decision does not assist the Court in the present context. The decision does not leave open the co-existence of the statutory scheme under the Act of which section 139ZQ is one part, and the ADJR Act. In fact, what the decision suggests is the co-existence of the section 139ZQ remedy, with other remedies available under the Act.
Counsel for KDI also submitted that the non-exclusivity of the 139ZQ remedy is confirmed in the Official Receiver’s Practice Statement 7. Indeed, this Practice Statement expressly acknowledges at [1.3] that the Official Receiver’s decision to issue a notice is subject to judicial review under the provisions of both the Act or the ADJR Act. At [10.8] the applicability of the ADJR Act is once again acknowledged. But Counsel for KDI conceded that the Official Receiver’s Practice Statement had no legislative force. Moreover, the Court concludes, the Practice Statement is of no assistance to the Court in determining the question before it, ie, is adequate provision made under the Bankruptcy Act such that discretion should be exercised to refuse to grant ADJR Act relief. In any event, the Court finds the Practice Statement in no way prevents the Official Receiver from advancing the argument that it does in this case.
The more important issue, from the Court’s perspective, is whether the limitation expressed in section 139ZS, ie, “on the basis of the alleged facts and circumstances set out in the notice” means that it does not provide “adequate provision”. Another way of expressing this would be to suggest that the relief available under the ADJR Act is broader than the relief provided by section 139ZS.
In this regard, it becomes important to explore KDI’s complaint as articulated in the Amended Statement of Claim. It is necessary to provide further background facts. The Official Receiver in fact issued a second 139ZQ notice in circumstances where it must reasonably be inferred that it had concerns about the validity of the first 139ZQ notice. One of the key issues raised by KDI is whether the Official Receiver was empowered to issue the second notice in circumstances where the limitation period proclaimed under section 122 of the Bankruptcy Act had, by the time of the issue of the second notice, already expired. Moreover, KDI raised issues about the significance of issuing a second notice in circumstances where KDI had failed to comply with the first notice (and thus had technically committed an offence), and where the second notice did not identify the same debtors as the first one, only one of them, and in any event set out different or new sets of grounds for the issue of the notice. Furthermore, KDI takes contention about the retrospective effect of the second notice.
Just pausing here, it must be acknowledged that all parties in this case recognised the importance of the issues raised. Of course, that is not the point in the present application. The issue is whether all of these issues can be properly explored, without any prejudice to KDI as the substantive applicant, without reference to the ADJR Act? The short answer to this is that KDI has not convinced the Court of this important matter. It has not convinced the Court that any relief available under the ADJR Act is superior to the relief that could be obtained under the Bankruptcy Act. The question in the present context is not whether the ADJR Act offers appropriate relief but, rather, whether “adequate provision” is made under the Bankruptcy Act. Even if something could be made of KDI’s contention that the words in section 139ZS “on the basis of the alleged facts and circumstances set out in the notice” somehow limits the parameters of the Court’s powers under the Bankruptcy Act as compared to under the ADJR Act, the submission ignores the fact that the Court’s powers under the Bankruptcy Act in relation to the notice go beyond section 139ZS, and include, for example, section 30 of the Act (extracted above) and section 15(5) of the Act which states:
The Court may review an act done by an Official Receiver.
KDI was on stronger ground, however, in submitting that the case law interpreting the meaning of “adequate provision” in section 10(2)(b)(ii) have all occurred in the context of Parliament having set up a specific statutory specialist tribunal for dealing with the dispute, rather than pointing to an alternative law, or a separate cause of action. Counsel for KDI submitted that this was apparent from all of the cases relied on by the Official Receiver. Counsel submitted that this must logically be the case because, otherwise, the mere existence of an alternate cause of action which gives a party the same ultimate relief would be sufficient for the purposes of section 10(2)(b)(ii) ADJR Act in every case, thus rendering section 10(1) ADJR Act redundant. Indeed, what is the point in stating in section 10(1) that the rights under the ADJR Act are in addition to, and not in derogation of, any other rights that a person has to seek review, whether by a Court or otherwise, but then to interpret the words “adequate provision” in section 10(2)(b)(ii) in such a way that the alternative remedy would always be preferred?
Counsel for KDI’s analysis of the cases relied on by the Official Receiver is, in fact, correct. Moreover, Counsel advanced other examples such as Actual Distribution v Australian Energy Regulator [2011] FCA 639, CSL Australia Pty Limited v Minister for Infrastructure and Transport [2013] FCA 152, FP Innovation Pty Limited v Registrar of Trade Marks [2013] FCA 826, and Lucas v Commissioner of Taxation [2015] FCA 598. The common thread of these decisions, consistent with those referred to by the Official Receiver, was that the discretion granted under section 10(2) ADJR Act was exercised because a specialist tribunal had been set up or there had been a defined appeal procedure in a separate jurisdiction and thus the exercise of the discretion was consistent with the intention of Parliament. Counsel contended this was clearly not the case here. Counsel contended that Parliament has not evinced an intention to set up a specific regime for the challenge of the 139ZQ notice and thus the Bankruptcy Act was not an “adequate provision” as understood in these authorities. Accordingly, Counsel contended, the Court ought not to refuse to grant relief under the ADJR Act.
The Court, however, does not accept KDI’s contention that Parliament has not evinced an intention to set up a specific regime for the challenge of 139ZQ notices. In this regard, Counsel for the Official Receiver’s submissions are helpful. Counsel contended that the current Bankruptcy Act facilitates the policy of a modern system of bankruptcy law, allowing the appropriation of the assets of the debtor and their equitable distribution amongst creditors, and for the discharge of the debtor from future liability for existing debts. It is clearly legislation with a specific purpose. Counsel contended that bankruptcy law is a specialised jurisdiction with specific features and approaches that serve well the overarching purpose just described. The history of the Court’s control of bankrupts is well established: McIntosh v Shashoua [1931] HCA 56: (1931) 46 CLR 494 at 520.
Counsel for the Official Receiver submitted that the Court’s powers to supervise the administration of bankrupts in Australia is extensive. One clear example is, indeed, section 15(5):
(5) The Court may review an act done by an Official Receiver.
Counsel pointed to the decision of the Full Court of the Federal Court in CK Nominees Australia Pty Limited v Official Receiver (WA) [2007] FCAFC 118 where Gyles J considered the nature of the review conducted under section15(5) in relation to section 77C notices (the power of the Official Receiver to obtain information and evidence), saying at [49]:
As submitted for the appellant, section 15(5) of the Act provides a clear basis for the challenge to the giving of the notices in question by the Official Receiver. There is no warrant for reading section 15(5) down to exclude those acts that are subject to the ADJR Act … the Courts have long had a general supervisory role in bankruptcy …
Section 27 of the Act confers exclusive jurisdiction in bankruptcy on the Federal Court, and the Federal Circuit Court of Australia. Section 30 confers broad powers in furtherance of this jurisdiction. Counsel submitted, quite correctly, that these provisions create “a jurisdiction of great width”. Counsel for the Official Receiver referred to the judgment of Moore J in CK Nominees Australia (above) at [36] where His Honour, in referring to the unconstrained power granted by section 15(5) to review an act done by an Official Receiver, observed that,
“The powers exercised by this Court in such a review is not constrained by limits ordinarily attending judicial review”.
Turning specifically to subdivision J (sections 139ZQ – 139ZT) of the Act, Counsel submitted it was intended that a notice under section 139ZQ of the Act should be an administrative alternative to costly litigation seeking declarations that a transfer is void against a Trustee. The jurisprudence of subdivision J is well settled. Moreover, it is clear that section 139ZQ does not provide for the exercise of judicial power but, rather, is an administrative function.
This Court accepts these submissions and concludes that it is by no means clear that Parliament has not evinced an intention through the creation of subdivision J to set up a specific regime for the challenge of the 139ZQ notices.
Section 16 ADJR Act
The Court was not referred by Counsel to this section, despite its significance. Sections 5, 6 and 7 of the ADJR Act confer rights. Section 10(1) explains that the rights conferred by this Act are additional to other rights. Section 10(2) empowers the Court, notwithstanding subsection (1), to refuse to grant an application under sections 5, 6 or 7 in the circumstances set out in section 10(2)(b)(i) and (ii). In this case, section 10(2)(b)(ii) is being raised, in effect, as a threshold issue. But surely it would be relevant, even in the present context, to examine the Court’s substantive grant of power under the ADJR Act, as set out in section 16. For what would be the point, for example, of declining the Official Receiver’s application to refuse ADJR Act relief at an interlocutory stage of the proceedings, if the relief were merely to be refused at a final hearing?
Of particular interest to the Court are those cases where, in the exercise of section 16 powers, a Court has declined to grant relief as a matter of discretion.
On any reading of section 16(1), (2) and (3), one is struck by the repeated statement that the Court may exercise its powers “in its discretion”. The issue of discretion is enlivened as much in section 16 as it is in section 10(2)(b).
In Kamha v Australian Prudential Regulation Authority [2005] FCAFC 248, the Full Court of the Federal Court consisting of Emmett, Allsop and Grahamm JJ, having observed the discretionary nature of relief under section 16(1) of the ADJR Act at [29] then stated at [87]:
The grant of relief under the ADJR Act is discretionary. That is consistent with the principles concerning the grant of relief under the prerogative writs. There was a discretion for a court to refuse prerogative relief where an alternative remedy was available. That principle is also the origin of the express discretion conferred by s 10(2)(b). Nevertheless, that express discretion does not derogate from the general discretion arising under s 16. Section 16 undoubtedly reserves a discretion to the Court as to whether to grant relief in a particular case. While s 10(2)(b) is directed to the specific circumstance where adequate provision is made by another law for an applicant to seek review of a decision and giving rise to an express discretion to refuse relief, the absence of engagement of that provision does not preclude the exercise of the residual discretion conferred on the Court by s 16.
The facts of the case are not relevant for present purposes. The Full Court set aside the orders of the primary judge, and remitted the proceedings to him for reconsideration. The re-trial of the matter is reported as Kamha v Australian Prudential Regulation Authority [2007] FCA 1422. Gyles J considered at paragraphs [8]-[9] the nature of the judicial discretion under section 16. His Honour states at [8]-[9]:
8. The judicial discretion under s 16 as to whether or not to grant relief is at large, even where a case for relief is made out (Lamb v Moss [1983] FCA 254; (1983) 49 ALR 533, (1983) 76 FLR 296, (1983) 5 ALD 446; Seymour v Attorney-General (Cth) [1984] FCA 329; (1984) 4 FCR 498; Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 per Mason CJ at 338–339, agreed with by Brennan J at 365 and Deane J at 369). There are no mandatory criteria. A factor is only irrelevant to exercise of discretion if it is contrary to the purposes of the section read in its context in the ADJR Act.
9. Full internal and external merits review of a disqualification is available pursuant to s 63 of the Insurance Act. The existence of a suitable alternative remedy is a well established basis for the refusal for administrative law relief, whether under the ADJR Act or at common law. Section 10 of the ADJR Act, particularly s 10(2)(b)(ii) reflects that principle. (Tooth & Co Ltd v Parramatta City Council [1955] HCA 21; (1955) 97 CLR 492 at 497–498 per Dixon CJ; Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 at [5] per Gleeson CJ, [40]–[79] per Gaudron and Gummow JJ, [145]–[150] per Kirby J and [172] per Hayne J; Swan Portland Cement Ltd v Comptroller-General of Customs (1989) 25 FCR 523.) For obvious reasons, full merits review is generally a more suitable remedy than an administrative law challenge except, for example, where there is a clearly identified question of jurisdiction or power or other legal objection that can be decided without significant fact finding and is appropriate for decision by a court (Du Pont (Aust) Ltd v Comptroller-General of Customs (1993) 30 ALD 829, [1993] FCA 187; NAUV v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 79 ALD 149, [2003] FCA 1319 at [49] citing New South Wales Bar Association v Stevens (2003) 52 ATR 602, [2003] NSWCA 95 at [13] per Spigelman CJ; Boral Gas (NSW) Pty Ltd v Magill (1993) 32 NSWLR 501 particularly per Kirby P at 508–509; Stack v Commissioner of Patents (1999) 161 ALR 531 at [12]–[13]). The points argued and decided in this and the related case already (including the point involved in the High Court proceeding) illustrate such questions. As consideration of [79]–[83] of the Full Court judgment (Kamha [2005] FCAFC 248; 147 FCR 516) makes clear, it is only the barest of technicalities which prevented s 10(2)(b)(ii) from being directly applicable. That does not limit the relevance of similar considerations in exercise of the discretion under s 16.
It is important to note His Honour’s observation that a “full merits review is generally a more suitable remedy than an administrative law challenge …”. The Bankruptcy Act provides just that – a full merits review.
What is of particular interest to the Court are the factors that Gyles J took into account at [11] and [12] of his reasons. At [11] he states, “… There is more at stake than the interests of the applicant”. He goes on to refer to the public interest (on the facts of the case before him) in disqualification of unsuitable persons operating in the insurance field. His Honour refers to the “public interest in the timely administration of the Insurance Act 1973” (being the relevant legislation in the matter before him). He goes on to say, “Collateral administrative law challenges have the capacity to seriously interfere with the process”. His Honour concludes paragraph [11] by stating:
11.“The tendency to mount collateral administrative law challenges to decisions where full merits review is available rather than deal with the substance of the case on review is becoming a more common phenomenon (eg: Syngenta Crop Protection Pty Limited v Commissioner of Taxation (2005) 61 ATR 186, [2005] FCA 1646)”.
At paragraph [12] of the reasons, Gyles J states:
12. “There is also a public interest in proper use of the resources of the Court. There is no good reason that those significant public resources should be devoted to hearing the balance of this case, to the disadvantage of other litigants, where the issues are far better determined by the AAT – the body chosen by Parliament to review the substantive decisions in question”.
His Honour concluded at [13] by saying:
13. “All in all, the balance lies firmly in favour of declining relief, whatever the merits of the remaining grounds, and this proceeding should be brought to a halt, leaving the applicant to his statutory rights of review”.
There are many interesting parallels between his Honour’s comments, and the present case. One of KDI’s key submissions was that if the Official Receiver’s application to the Court under section 10(2)(b)(ii) ADJR Act was rejected, the ADJR Act and Bankruptcy Act claims would be heard “in the same Court, at the same time, by the same judge on the same evidence”. The Court has already observed that there was no submission to the effect that hearing both claims would take the same length of hearing time.
Drawing on the reasons of Gyles J on the re-hearing of Kamha, this Court observes that there is more at stake than the interests of KDI. If the case proceeds as presently pleaded, on a bifurcated ADJR and Bankruptcy basis, the Court believes it will inevitably take longer to determine. If this is unnecessarily the case, then KDI’s interest in having its alternative claim properly agitated must sit side by side with the interests of all other litigants in this Court to have their claims properly heard. In other words, the discretion under section 16, indeed under section 10(2) as well, can be exercised by reference to interests beyond those of the applicant. There is a public interest against the unnecessary bifurcation of issues in proceedings, even in the same Court. Whilst this public interest issue of bifurcation is most clearly seen in cases where remedies are sought in different courts or tribunals, the principle nonetheless remains when the ADJR Act challenge runs parallel to the Bankruptcy Act challenge of the notice in the same Court.
In the same way as Gyles J believed that there was a public interest in the timely administration of the Insurance Act 1973, this Court believes there is a public interest in the timely administration of the Bankruptcy Act. Just as Gyles J believed that collateral administrative law challenges had the capacity to seriously interfere with processes under the Insurance Act 1973, this Court holds the same fear in relation to the Bankruptcy Act process. There are clear public interest issues to be considered as part of the exercise of discretion by the Court. Moreover, at paragraph [12] Gyles J raises the issue of the proper use of the resources of the Court. Even if the hearing of the ADJR Act claim parallel to the Bankruptcy claim only added half an hour of extra hearing time, and even if it added only an extra half an hour of judgment-writing time, that is time that is not being applied for the benefit of other cases. Judicial time, whether in Court, or out of Court, is time held in trust for the public. The proper use of the resources of the Court is another significant discretionary factor to be considered under sections 10 and 16.
Gyles J referred to the High Court’s decision in Australian Broadcasting Tribunal v Bond [1990] HCA 33. At paragraph [37] of the reasons, Mason CJ states:
37. I agree with the Full Court in Lamb v. Moss (at p 312; p 550 of ALR) in thinking that the court has a discretion whether to grant or refuse relief by way of judicial review under the ADJR Act. The references in s.16 of the ADJR Act to "in its discretion" are eloquent on that score. Further, I agree that only in most exceptional circumstances would it be appropriate to grant relief in respect of a decision given by a magistrate in committal proceedings: see at p 326; p 564 of ALR. The delays consequent upon fragmentation of the criminal process are so disadvantageous that they should be avoided unless the grant of relief by way of judicial review can clearly be seen to produce a discernible benefit: Yates v. Wilson [1989] HCA 68; (1989) 64 ALJR 140.
The Court’s present interest and focus is on the Chief Justice’s concern about “fragmentation” of process. His Honour’s concern had a specific context – the fragmentation of criminal proceedings that would inevitably occur if criminal committal proceedings were subject to judicial review under the ADJR Act. One wonders, however, whether the concern about fragmentation of process extends beyond that specific context. It could be argued, for example, that bankruptcy processes are fragmented, ie, interfered with or delayed, if the ADJR Act were permitted to inappropriately cause decisions to be reviewed, unnecessarily, outside the parameters of the Act. Again, the Court recognises that that is not the specific issue raised in the case before it, but there is an important principle involved. If the ADJR Act claim in this case is allowed to stand in a case where it is pleaded in the alternative to the bankruptcy remedies, then conceptually at least it would be allowed to stand in its own right. The administration of bankrupt estates could be hindered or delayed through the commencement of ADJR Act proceedings. One wonders whether that could have possibly been the intention of Parliament when it promulgated sections 139ZQ – 139ZT of the Act in 1991?
What this excursion into s.16 of the ADJR Act reveals is the legitimacy of a number of public interest type considerations in the course of exercising the discretion whether to grant relief under the ADJR Act.
Should a statutory right of appeal be treated as the exclusive remedy for any breach of natural justice?
Before considering how to exercise the discretion granted to the Court by the ADJR Act, whether in s.10 or in s.16, it is important to consider the Official Receiver’s submission based on the High Court decision in Twist v Randwick Municipal Council. At the very least, it may guide the exercise of discretion.
Counsel for the Official Receiver submitted that sections 139ZQ - 139ZT provide both for an administrative decision (to issue the notice) and for an appeal de novo against that decision. He contended that such a statutory scheme is not uncommon, but that there is substantial authority to the effect that this structure indicates a legislative intention that the de novo statutory appeal is the exclusive remedy available and that judicial review (of the first decision, pursuant, for example, to the ADJR Act) is excluded. Specifically, Counsel submitted that the principle is applicable to subdivision J of Division 4B of the Act, and has the effect that judicial review of the issue of the section 139ZQ notice under the ADJR Act is excluded.
In Twist v Randwick Municipal Council [1976] HCA 58 the issue was whether an owner of property was entitled to seek judicial review of a decision by the local council to demolish the building because of its dilapidated state. The owner, the applicant in the High Court, had a statutory right of appeal to the District Court, but failed to exercise it in the manner prescribed. The Supreme Court of New South Wales Administrative Law Division declined to intervene. The owner appealed. In substance, his argument on appeal was that the grant by statute of a right of appeal does not exclude the rules of natural justice from the original proceedings.
The High Court unanimously dismissed the appeal. Each of the three judges considered that the appeal to the District Court was the sole remedy for any breach of natural justice and excluded judicial review of the original council decision.
It was common ground that the appeal to the District Court was a hearing de novo.
Barwick CJ at 110 expressed the principle as follows:-
The common law rule that a statutory authority having power to affect the rights of a person is bound to hear him before exercising the power is both fundamental and universal: see Cooper v. Wandsworth Board of Works [6] and R. v. Electricity Commissioners; Ex parte London Electricity Joint Committee Co. (1920) Ltd. [7] . But the legislature may displace the rule and provide for the exercise of such a power without any opportunity being afforded the affected person to oppose its exercise. However, if that is the legislative intention it must be made unambiguously clear. In the event that the legislation does not clearly preclude such a course, the court will, as it were, itself supplement the legislation by insisting that the statutory powers are to be exercised only after an appropriate opportunity has been afforded the subject whose person or property is the subject of the exercise of the statutory power. But, if the legislation has made provision for that opportunity to be given to the subject before his person or property is so affected, the court will not be warranted in supplementing the legislation, even if the legislative provision is not as full and complete as the court might think appropriate. Thus, if the legislature has addressed itself to the question whether an opportunity should be afforded the citizen to be relevantly heard and has either made it clear that no such opportunity is to be given or has, by its legislation, decided what opportunity should be afforded, the court, being bound by the legislation as much as is the citizen, has no warrant to vary the legislative scheme. But, if it appears to the court that the legislature has not addressed itself to the appropriate question, the court in the protection of the citizen and in the provision of natural justice may declare that statutory action affecting the person or property of the citizen without affording the citizen an opportunity to be heard before he or his property is affected is ineffective. The court will approach the construction of the statute with a presumption that the legislature does not intend to deny natural justice to the citizen. Where the legislation is silent on the matter, the court may presume that the legislature has left it to the courts to prescribe and enforce the appropriate procedure to ensure natural justice. In my opinion, this statement of relevant principle is in accord with the authorities, including particularly the case of Wiseman v. Borneman.
Mason J took a slightly different approach. It was clearly significant to him that the appeal to the District Court was a full and comprehensive appeal from the order made by council: “It is a full appeal on facts and on law which the appellant is entitled to call evidence.” (p114). He was, nonetheless, concerned that natural justice had been denied the appellant, notwithstanding the existence of such a right of appeal. Ultimately, he concluded, that the failure to accord natural justice by Council in the first instance, could be cured by according a full and fair hearing subsequently, as was the case here. In effect, the appeal “cured” a defect in natural justice or fairness which occurred at first instance (p116). He concurred with Barwick CJ that the statutory appeal provided the exclusive remedy to the owner who wanted to challenge the validity or correctness of the order made against him.
Jacobs J shared the concerns of Mason J about the denial of natural justice before the order for demolition was made. The obligation to afford natural justice was unaffected by the presence of the right of appeal. That did not make the demolition order invalid, however. In circumstances where the legislature had provided a wide right of appeal to a judicial body “in the fullest sense of that term” (p119) Jacobs J concluded that the legislative intention was that an owner who ignored his statutory rights of appeal could not thereby assert the absolute invalidity of the order that the council had made.
Counsel for the Official Receiver submitted that, in summary, the High Court in Twist held that principles of natural justice applied, but that the statutory appeal was the sole remedy allowed. Thus, on the facts of the present case, the statutory appeal under the Bankruptcy Act was the sole remedy.
Counsel submitted that the sole remedy rule of construction applied even when the consequences for the applicant were drastic such as in Marine Hull & Liability Insurance Co Limited v Hurford and Anor (1986) 10 FCR 476.
Counsel also referred to the decision of the New South Wales Court of Appeal in Hill v Green (1999) 48 NSWLR 161. In that case Fitzgerald AJA considered the authorities at length and concluded at [164]:
In my opinion, the position can be broadly summarised as follows. In the absence of plain words of necessary intendment, an initial decision-maker is required to provide procedural fairness and his or her failure to do so will involve legal error. However, the relief available in respect of such an error is ordinarily confined to any statutory right of appeal, provided that an appeal is adequate to provide the appellant with the procedural fairness to which he or she is entitled. A full appeal on facts and law will ordinarily be adequate for that purpose, even if the appeal involves routine forensic disadvantages compared to a “first instance” re-determination. (There is a discussion of the history and nature of appeals in Fleming v The Queen (1998) 73 ALJR 1 and State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 322ff160 ALR 588 at 609ff.) Nonetheless, the Court retains a discretion to grant other relief if that is justified in the circumstances of the case. For example, a person charged with a disciplinary offence which involves criminal conduct should not be obliged to give evidence and expose himself or herself to the risk of self-incrimination: cf Reid v Howard(1995) 184 CLR 1; ; Vasil v National Australia Bank Limited(1999) 46 NSWLR 207.
The passage was quoted by the New South Wales Court of Appeal in Day v Harness Racing New South Wales [2015] NSWCA 324 where Basten JA (Leeming and Simpson JJA agreeing) stated:-
…In short, these provisions ensure an appeal as of right on fact, law and discretion, by way of a new hearing, to an independent tribunal constituted by a qualified lawyer with the appropriate standing in the legal profession and at least qualified for appointment as a judge.
114.As hinted at by Brennan J in Marks , in the passage cited above, where the Tribunal conducting a fresh hearing makes a decision, it will supersede the decision of the stewards, in accordance with the reasoning in Wishart v Fraser. Where the right of appeal has been invoked, it is not appropriate for the applicants to seek to challenge the original decision in this Court, whilst maintaining an entitlement to have it set aside and replaced by a decision of the Tribunal. Thus, assuming there is a right of judicial review of the decisions of the stewards, the case is at least a proper one, and arguably a necessary one, in which to refuse relief.
Counsel for the Official Receiver submitted that the present case was completely congruent with the decision of the High Court in Twist. Subdivision J of Division 4B of the Act was completely congruent with all the relevant aspects of the Local Government Act considered in Twist. Section 139ZS provided for a hearing de novo, completely and without restriction. Consistent with the High Court’s decision in Vale v Sutherland (2009) 237 CLR 638, a s.139ZS hearing is a hearing de novo at which new facts and, indeed, new legal defences can be introduced. The Court hearing the s.139ZS matter is not bound in any way by the issue of the notice by the Official Receiver. Indeed, Vale v Sutherland established that the Official Receiver’s power to issue the notice is contingent on the existence of the jurisdictional fact of the transaction being void against the Trustee. Moreover, the de novo hearing would take place in front of a Court, and thus KDI would be afforded the highest quality of natural justice in respect of the two part decision making process under subdivision J. Counsel also submitted there were substantial policy advantages in the Twist principle. He submitted that the rule in Twist prevents the “gaming” of the system, and in fact avoids the fragmentation of the hearing by the kind of discovery and privilege arguments that have hindered the case so far. Thus, Counsel submitted, the application of the principle in Twist v Randwick Council requires that the availability of the de novo appeal hearing under s.139ZS, unrestricted as to facts and law, should be construed as limiting the remedy for any breach of natural justice or fairness to the appeal itself. Given that the appeal is before the Court, there is no disadvantage to KDI.
The learned authors of Judicial Review of Administrative Action and Government Liability (Mark Aronson, Matthew Groves and Greg Weeks, 6th ed, Thomson Reuters, 2017) cast doubt on the “idea that a right of appeal, no matter how full, might provide evidence of a legislative intention to exclude natural justice”. (7.340 at page 478). They contend that this idea is untenable, and that the courts have not decisively said as much. The authors point out, for example, that in Day v Harness Racing New South Wales the Court stated at [127] that there was only “force in the proposition” that existence of an appeal could no longer be seen as excluding natural justice at first instance but took it no further. They submit that the existence of appeal rights is more likely to “give rise to discretionary consideration attending judicial review”, a reference to Community Housing Limited v Clarence Valley Council [2015] NSWCA 327 at [32] (per Leeming JA, Basten and Gleeson JJA agreeing). The learned authors conclude: “The various bases of Twist have been undermined so thoroughly that we question the extent to which the case offers useful general guidance.”
It is important to remember that in this case, unlike Twist, the ADJR Act remedy, and the Bankruptcy Act remedy are to be heard in the same court, by the same judge, at the same time.
This Court believes that the safest application of Twist v Randwick Council on the facts of this case is to consider it “as a particular application of the more general discretion of the courts to refuse a remedy where an adequate alternative remedy exists”: (Judicial Review of Administrative Action at 7.350). The case will thus be decided by reference to an exercise of discretion under s.10 informed by how discretion has been exercised under s.16 ADJR Act, rather than as an application of Twist v Randwick Council.
A slight variation to the Official Receiver’s submission about s139ZQ – ZT in connection with the ADJR Act is worth considering in passing, even though it was not argued. The principle in question is one of statutory interpretation and it postulates that where a statute provides a new right together with a remedy for its enforcement, the implication should be drawn that Parliament intended the statutory remedy to be exclusive. The leading authority is an English case, Pasmore v Oswaldtwistle Urban District Council [1898] AC 387. Griffith CJ in Josephson v Walker (1914) 18 CLR 691 at [697] was of the view that Pasmore’s interpretative presumption was “very strong”. Section 139ZS of the Bankruptcy Act was enacted in 1991 whereas s10 of the ADJR Act was enacted in 1977. Should the interpretative principle be applied so as to prevent KDI from resorting to judicial review under the earlier ADJR Act? The learned authors of the Judicial Review of Administrative Action at 17.110 submitted that the principle should rarely be regarded as appropriate to exclude judicial review. Nonetheless, they seem to concede that the applications of the principle on the facts in Pasmore and Josephson reached sensible results. The Court believes the same might be said on the present case, without necessarily addressing the validity of the interpretative principle.
The Exercise of Discretion
If the Court inclines to the view that there is adequate provision for the purposes of s.10(2)(b)(ii) ADJR Act, how should the Court exercise its discretion? In Hagedorn v Department of Social Security [1996] FCA 1028 at [31] Mansfield J stated:-
Clearly the power of the Court under s10(2) is discretionary, and according to Neaves J there is an onus on those seeking to persuade the Court that it should not exercise the jurisdiction conferred on it: Convery v Ziino (1986-87) 70 ALR 383 at 387. The discretion has been exercised from time to time: Brell v Willmot (1989-90) 17 ALD 462; A.E. Bishop & Associates Pty Ltd v Trade Practices Commission (1989) 11 ATPR 50-741. As with any judicial discretion, it is neither possible to list all matters which will be relevant to its exercise for every case nor appropriate to attempt to do so. The category of material factors is never closed and will vary from case to case and the weight to be given to any one factor will depend upon the particular circumstances. It is relevant, generally speaking, to have regard to any unnecessary delay and any increased expense if the alternative suggested remedy is pursued: Mercantile Credits Ltd v Commissioner of Taxation (No 1) (1985) 8 FCR 510. Indeed, any hardship involved in pursuing the alternative remedy will generally be relevant: Du Pont (Australia) v Comptroller-General of Customs [1993] FCA 187; (1993) 30 ALD 829. Consequently, there will be cases where there is clearly involved a matter of law, and where the Court will determine to resolve that matter of law despite adequate alternative review procedures: Kelly v Coats [1981] FCA 58; (1981) 35 ALR 93; AB Scaniainventor v Commissioner of Patents [1981] FCA 84; (1981) 54 FLR 367. It will generally also be relevant to have regard to the Court's need to provide properly for speedy resolution of matters before it where no other avenue of recourse is available: Bragg v Secretary, Department of Employment, Education & Training (1995) 38 ALD 251.
Thus reference to other decided cases is useful, but not necessarily determinative.
Counsel for KDI submitted that the Court should not exercise its discretion and dismiss the ADJR Act claim against the Official Receiver. This was put on a number of bases.
It was submitted that if the discretion was exercised in favour of the Official Receiver this would be both a legally and practically absurd result having regard to the terms of the Official Receivers Practice Statement PS7. The Court is not bound by this document. It has no legal effect. It is irrelevant to the exercise of the Court’s discretion under section 10(2)(b)(ii).
Counsel contended that the discretion ought not to be exercised in favour of the Official Receiver in circumstances where claims under the ADJR Act in respect of applications to set aside a section 139ZQ notice are not uncommon. He referred to two examples: Tsakirakis v Official Receiver [2013] FCCA 106, and Polgar v Official Receiver [2015] FCCA 1840. Whilst both cases are, indeed, examples of the use of the ADJR Act in respect of section 139ZQ notices, neither case provides guidance to the Court as to how it might exercise its discretion in this case. In Tsakirakis, for example, the Court was not asked to exercise its discretion under s.10(2)(b)(ii).
Counsel for KDI further contended that for the Court to exercise its discretion in favour of the Official Receiver, and to deny KDI a viable primary claim under the ADJR Act, would be to prejudice KDI in circumstances where s.139ZQ has criminal consequences for non-compliance. True it is that s.139ZT does prescribe criminal consequences for refusing, or failing to comply with a s.139ZQ notice. However, the answer to this concern is found in s.139ZS which provides to KDI a remedy the adequacy of which is presently being considered. In reality, therefore, the criminal consequences contemplated by s.139ZT only arise in circumstances of a true refusal, or failure to comply with a notice, rather than a case where the recipient of the notice has exercised the clear statutory rights of appeal granted by s.139ZS. Section 139ZS(2) makes it clear that if the Court sets the notice aside it is “taken not to have been given”, thus, completely avoiding any criminal consequences under s.139ZT. The Court does not accept, therefore, that this is a reason to exercise the statutory discretion conferred under s.10(2)(b)(ii) against the Official Receiver.
Counsel for KDI further submitted that one reason not to exercise the discretion to refuse relief under ADJR Act was that the claims would be heard together in the same Court, at the same time, with the same evidence. The submission goes further and asserts that there would be no doubling up of costs. As foreshadowed in these reasons, however, the Court notes the absence of any submission on behalf of KDI that the proceedings would not take longer. Indeed, the Court notes the absence of any submission that the proceedings would not be more complex, if KDI were permitted to seek judicial review under the ADJR Act, as well as the statutory appeal available under the Act. These are matters that concern the Court, which is not only concerned with the appropriate use of its own resources, but the public interest consideration that was discussed earlier in these reasons. So long as the Bankruptcy Act remedies provide adequate provision, there is no prejudice to KDI. The Court does not accept that this submission is a reason to exercise the Court’s discretion in the manner contended.
Next, on behalf of KDI it was submitted that having regard to the stage of the present proceeding the Court should not exercise its discretion and refuse relief, pursuant to s.10(2)(b)(ii). KDI pointed out that it has already been forced to amend its Statement of Claim, and define the lengthy issues in this litigation, because the Official Receiver realised that the first notice was deficient. It points out that it has been put to substantial time and expense in progressing the application.
The question of costs can be dealt with quite separately, and should not be allowed to become the tail that wags the discretionary dog. Counsel referred the Court to the decision of Bromberg J in BMF16 v Minister for Immigration and Border Protection [2016] FCA 1530 at 235. In that case Bromberg J did, in fact, have regard to what appears to have been the quite advanced state of readiness of that litigation. This is clearly a legitimate discretionary factor. By comparison, however, the present litigation does not seem as far advanced as BMF16 v Minister for Immigration and Border Protection.
In written submissions Counsel for KDI had originally contended that a discretionary factor was the fact that if the Official Receiver was excised from these proceeding as a result of an order under s.10(2)(b)(ii), the Trustee would not be able to sustain an order for costs should KDI be successful in the proceedings. As mentioned earlier in these reasons, KDI abandoned this contention in closing oral submissions. In any event, the Court notes that the issues raised in the substantive proceeding about the validity of the second 139ZQ notice may well result in the Official Receiver continuing to be involved in the proceedings, given what appears to be important matters of principle raised. In any event, and irrespective of this, this is not a discretionary factor which supports KDI.
Both the Trustee, and the Official Receiver, also made submissions about how the Court should exercise its discretion. Clearly, one of their most important concerns relevant to the exercise of s. 10(2)(b)(ii) discretion is that the use of an application under the ADJR Act draws the Official Receiver into litigation in which it has no interest and no duty to be involved. In this case it may well be that the potency of this submission is reduced by the possibility that the Official Receiver will continue to be involved in the matter because of the issues of principle involved. That possibility is not something that the court considers an inevitability, and thus will not be a matter that the court takes into account in exercising its discretion. The Official Receiver has a justifiable interest in ensuring that it is not unnecessarily drawn into litigation because of its nominal role in issuing s.139ZQ notices. The court senses that the Official Receiver was concerned about the broader implications of the use of the ADJR Act to attack s.139ZQ notices, thus embroiling it in litigation which it considers to be more appropriately conducted by the relevant Trustee. To the extent that this is a matter of public interest, the court accepts that it is relevant to the exercise of discretion under s.10(2)(b)(ii), but it is only one factor to be considered in the present case.
The Official Receiver submitted the section 10(2)(b) ADJR Act is one of the “civil practice and procedure provisions”, in terms of section s.37M(4) of the Federal Court of Australia Act 1976, because it is a provision made with respect to the practice and procedure of the Court in terms of s.37M(4)(b). Thus, s.37M(3) of that Act requires that the discretion in s.10(2)(b) of the ADJR Act must be exercised the way that best promotes the overarching purpose of civil practice and procedure provisions. Counsel submitted that this provision is worded as an interpretation provision of general application and will be applied to the Federal Circuit Court as well as the Federal Court.
The Court notes that s.43(1) of the Federal Circuit Court of Australia Act 1999 states:
The practice and procedure of the Federal Circuit Court of Australia is to be in accordance with rules of court made under this Act. However, this subsection is subject to any provision made by or under this or any other Act with respect to practice and procedure.
Rule 1.03 of the Federal Circuit Court Rules provides objects for the Court’s rules:
(1) The object of these Rules is to assist the just, efficient and economical resolution of proceedings.
(2) In accordance with the objects of the Act, the Rules aim to help the Court:
·to operate as informally as possible
·to use streamlined processes
·to encourage the use of appropriate dispute resolution procedures.
(3) The Court will apply the Rules in accordance with their objects.
(4) To assist the Court, the parties must:
·avoid undue delay, expense and technicality
·consider options for primary dispute resolution as early as possible.
(5) If appropriate, the Court will help to implement primary dispute resolution.
Rule 1.05 states:
(1) It is intended that the practice and procedure of the Court be governed principally by these Rules.
(2) However, if in a particular case the Rules are insufficient or inappropriate, the Court may apply the Federal Court Rules or the Family Law Rules, in whole or in part and modified or dispensed with, as necessary.
(3) Without limiting subrule (2):
(a) the provisions of the Family Law Rules set out in Part 1 of Schedule 3 apply, with necessary changes, to family law or child support proceedings; and
(b) the provisions of the Federal Court Rules set out in Part 2 of Schedule 3, apply, with necessary changes, to general federal law proceedings.
Note: These Rules have effect subject to any provision made by an Act, or by rules or regulations under an Act, with respect to the practice and procedure in particular matters: see subsection 81(2) of the Act.
It is not apparent how the civil practice and procedure provisions apply to the Court, merely by reference to its rules.
The overarching purpose of the civil practice and procedure provisions is expressed in s.37M subsections (1) and (2) of the Federal Court of Australia Act which states:-
(1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
(2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Court;
(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court's overall caseload;
(d) the disposal of all proceedings in a timely manner;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
Counsel for the Official Receiver submitted that the evident purpose of subdivision J of the Bankruptcy Act is to focus on the just resolution of disputes according to law. He submitted that s.139ZS provides a more than adequate avenue for substantive challenge to the s.139ZQ notice. What s.139ZS does is to focus any challenge on the substantive issue of whether the transaction, the subject of the notice, was, indeed, a void transaction. This is what s.37M(1) and (2) seek to achieve.
Counsel submitted that in seeking to challenge the issue of the notice under the ADJR Act KDI are seeking to avoid the substantive issue of whether there was a voidable preference and focus on procedural points to delay and frustrate resolution of the substantive issue. The Court believes there is a risk of this occurring. Sections 5, 6 and 7 of the ADJR Act focus on the decision to issue the notice, or conduct engaged in for the purpose of making the decision to issue the notice, or the failure to make any relevant decision, in circumstances such as the present case where, in fact, there were two notices. It is, indeed, a focus on process and form, rather than substance. Indeed, it seems the very purpose of s.10(2)(b)(ii) is to give a Court the opportunity to decline an ADJR Act application in circumstances where it was in the interests of justice, both public and private, to focus on substance, rather than form. Once the court is satisfied that section 139ZS has the potential to achieve at least what judicial review under ADJR Act could achieve, it was a matter for the court’s discretion as to whether to refuse ADJR Act review.
Thus, Counsel for the Official Receiver submits, s.37M, and in particular 2(e) (but not necessarily limited to that) are matters to which the Court should have regard in exercising its discretion.
The issue for the Federal Circuit Court of Australia is whether the overarching purpose provisions in s37M apply in circumstances where both the Federal Circuit Court of Australia Act and Rules are silent? The legislation that introduced these provisions – the Access to Justice (Civil Litigation Reforms) Amendment Act 2009 – does not apply to the Federal Circuit Court of Australia. In Matthews v Go Pacific Retail Pty Ltd [2014] FCCA 2362 Nicholls J applied the principles contained in s37M on the basis that this Court was inferior to the Federal Court, and was under a statutory direction to “operate as informally as possible in the exercise of judicial power” and “to use streamlined procedures” referring to s3(2)(a) and (b) of the Federal Circuit Court of Australia Act. In Michael Wilson & Partners Ltd v Slater [2014] FCCA 2871 and Cole v Quest Software Pty Ltd [2014] FCCA 1251, Lloyd-Jones J certainly found s37M persuasive, and applied its principles, without specifically considering the present issue. Lucev J in Faulker v Tidewater Marine Australia Pty Ltd [2014] FCCA 1487 appears to have done the same. In Gardem v Etheridge Shire Council (No.2) [2014] FCCA 28 Jarrett J was of the view that s37M did not apply to this Court. The present Court agrees with Jarrett J. If Parliament had intended that s37M apply to this Court it would have said so. It has not. The Objects reflected in Federal Circuit Court Rule 1.03 do not assist the Official Receiver in the present case.
The clear divergence between the views of the Official Receiver, and KDI, about the litigation becomes, in any event apparent, here. KDI’s view, which the Court will express as the optimistic view, is that the running of claims both under the ADJR Act and the Bankruptcy Act will be heard in the same Court, at the same time, with the same evidence. The Court has already expressed its reservations about this optimistic approach. The Official Receiver, however, pointed to the fact that the dispute is about a payment of approximately $412,000. It submitted that this is a relatively small amount at stake given the nature of the case that KDI is seeking to run. The principle of proportionality requires that the Court should exercise its discretion so as to keep the cost and time proportional to the amount at stake. Clearly the Official Receiver does not share KDI’s optimism. The Court agrees with the Official Receiver in this regard.
The Official Receiver contends that the actual dispute is between the Trustee, and KDI. They are the parties who can benefit or suffer detriment from the substantive issue at stake. The Official Receiver has no economic interest at stake. Yet KDI had sought to avoid the resolution of the substantive issue of voidable preference by bringing proceedings against the Official Receiver under the ADJR Act. The Official Receiver’s evidence is that its practice on those occasions when it is joined to such disputes is to provide a submitting appearance except as to costs and allow the interested parties to litigate the substantive dispute. By exercising the s.10(2)(b)(ii) discretion in favour of the Official Receiver, this will allow that to occur here, eliminating what counsel described as “an expensive sideshow”.
Conclusion About Exercise of Discretion
It is well established that s.10(2)(b)(ii) “requires the Court to consider and weigh all relevant circumstances in determining whether or not to exercise the discretion to dismiss the proceeding.”: Cremona v Administrative Appeals Tribunal (2015) 230 FCR 1 at 13.
On the evidence before it, the Court is satisfied that adequate provision is made under the Bankruptcy Act. There is but one common set of facts in this case. The totality of the matters put before the Court leads it to conclude that the discretion should be exercised in favour of the Official Receiver, against KDI, such that the Court declines to grant relief under the ADJR Act. The Court is mindful not just of KDI’s interests, and that of the Official Receiver, but of the broader public interest in the bankruptcy jurisdiction (see eg Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8 at [40]) as discussed above). It is not, on the facts of this case, appropriate to seek both a judicial review and a statutory appeal. In other circumstances this might be considered an abuse of process, eg, Margan v Commonwealth of Australia [2013] FCA 109, and the cases referred to therein. The ADJR Act claim should be refused. It follows that orders 1 and 2 of the Official Receiver’s application in a case filed 14 October 2016 be made.
The Application to Strike Out Claims of Abuse of Process
The Official Receiver also sought orders in its Application in a Case that the court strike out the claims of abuse of process that KDI makes against it contained in the Further Amended Statement of Claim. In its Statement of Claim KDI asserts that decisions made by the Official Receiver in relation to the s.139ZQ notice was an abuse of process.
The Official Receiver contends that it has a statutory obligation to perform a function under the Bankruptcy Act and did so. It contends that the allegation against it should be fully particularised. A direction to that effect was made on 5 September 2016 by Registrar Segal. It contends that both the Further Amended Application and the Amended Statement of Claim filed on 13 September 2016 fail to particularise the allegations of abuse of process.
The Trustee contends that it would be exceptional, absent any evidence of malice, for a public official such as the Official Receiver, and/or a Trustee discharging their statutory duties, to be found to have abused process. The statutory obligation of both officials is clearly set out in the Bankruptcy Act and includes recovering any and all preferential payments.
KDI contends that the manner in which the Official Receiver exercised its power to issue the s.139ZQ notice constituted an abuse of power, certainly under s5(2)(j) of the ADJR Act, but also, at least implicitly, under the common law.
Nothing was said on behalf of KDI in answer to the submissions made against it that no adequate particulars had been provided in relation to this aspect of the claim. That, of itself, is sufficient to grant the relief sought against KDI. With respect to KDI, paragraph [89] of its submissions miss the point. On 5 September 2016 Registrar Segal clearly ordered that the abuse of process claims be particularised. A comparison of the original and Amended Statement of Claims shows this has not happened.
Putting that aside, however, it is useful to try to understand KDI’s claim of abuse of process.
Counsel for KDI contended that an abuse of process in the context of court processes occurs when:
The processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness: Walton v Gardiner (1993) 177 CLR 378 at 393.
The broad nature of the inquiry was highlighted by the Full Court of the Federal Court in Tyne (Trustee) v UBS AG(No 2) [2017] FCAFC 5. Counsel urged that determining whether there was an abuse of process was not a matter of discretion, but rather an evaluative decision of a subjective nature regarding an issue upon which minds might differ. In these circumstances, he submitted that it would be most unwise to strike out the abuse of process claim except in a patently clear case. In any event, he submitted that an abuse of process might be constituted by an administrator who misconstrues legislation: Sunshine Coast Broadcasters Limited v Duncan (1988) 83 ALR 121 at 130. KDI contends that the Official Receiver misconstrued the relevant provisions of the Bankruptcy Act.
In Jeffrey & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43, the High Court considered the meaning of abuse of process.
The majority consisting of French CJ, and Gummow, Hayne and Crennan JJ stated at paragraphs 27-28:
27.An early statement of the power of any court to prevent abuse of its processes is found in an 1841 case, Cocker v Tempest:
"The power of each Court over its own process is unlimited; it is a power incident to all Courts, inferior as well as superior; were it not so, the Court would be obliged to sit still and see its own process abused for the purpose of injustice."
That statement foreshadowed the contemporary approach in the United Kingdom and Australia which takes no narrow view of what can constitute "abuse of process". Nevertheless, certain categories of conduct attracting the intervention of the courts emerged in the 19th and 20th centuries and included:
"(a) proceedings which involve a deception on the court, or are fictitious or constitute a mere sham;
(b) proceedings where the process of the court is not being fairly or honestly used but is employed for some ulterior or improper purpose or in an improper way;
(c) proceedings which are manifestly groundless or without foundation or which serve no useful purpose;
(d) multiple or successive proceedings which cause or are likely to cause improper vexation or oppression."
28 The term "abuse of process", as used in Australia today, is not limited by the categories mentioned above or those which constitute the tort. It has been said repeatedly in the judgments of this Court that the categories of abuse of process are not closed. In Walton v Gardiner the majority adopted the observation in Hunter v Chief Constable of the West Midlands Police that courts have an inherent power to prevent misuse of their procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be "manifestly unfair to a party to litigation … or would otherwise bring the administration of justice into disrepute among right-thinking people". This does not mean that abuse of process is a term at large or without meaning. Nor does it mean that any conduct of a party or non-party in relation to judicial proceedings is an abuse of process if it can be characterised as in some sense unfair to a party. It is clear, however, that abuse of process extends to proceedings that are "seriously and unfairly burdensome, prejudicial or damaging" or "productive of serious and unjustified trouble and harassment".
Haydon J, in a separate judgment, stated at 56-58:
56.In Hunter v Chief Constable of the West Midlands Police Lord Diplock said that the court had inherent power "to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people." That statement has been approved in this Court by Mason CJ, Deane and Dawson JJ as stating the law "correctly". They also said that abuse of process arises in "all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness." They quoted certain statements by Richardson J pointing to two aspects of the public interest. One was that the "public interest in the due administration of justice necessarily extends to ensuring that the Court's processes are used fairly". The second aspect of the public interest lay "in the maintenance of public confidence in the administration of justice. It is contrary to the public interest to allow that confidence to be eroded by a concern that the Court's processes may lend themselves to oppression and injustice.” "Abuse of process" extends to proceedings that are "seriously and unfairly burdensome, prejudicial or damaging" or "productive of serious and unjustified trouble and harassment." There is a "general principle empowering a court to dismiss or stay proceedings which are … an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case." A stay or dismissal prevents abuse of process: "[t]he counterpart of a court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion."
57 The power of a court to deal with abuse of its process is one aspect of its more general power to control its own process. The exercise of the power to deal with abuse of process "is not restricted to defined and closed categories, but may be exercised as and when the administration of justice demands." Further, the power to control abuse of process by granting a permanent stay "should be seen as a power which is exercisable if the administration of justice so demands, and not one the exercise of which depends on any nice distinction between notions of unfairness or injustice, on the one hand, and abuse of process, on the other hand." There is no reason why any nice distinction of that kind should be drawn in relation to r 42.3(2)(c) either.
58.Words like “unfair", “unjust", “oppressive", “seriously and unfairly burdensome, prejudicial or damaging", “productive of serious and unjustified trouble and harassment" and "bring the administration of justice into disrepute among right-thinking people" are not words of exact meaning. Nor are the words "abuse of process" themselves. That notion is not "very precise". Hence it is not surprising that, as Lord Diplock said, "[t]he circumstances in which abuse of process can arise are very varied". “What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues."
KDI’s failure to provide particulars presents an obstacle to its defence of the strike out claims. For example, it is not possible to easily discern from the terms of the Amended Statement of Claim whether the abuse of process claim is based on s5(2)(j) of the ADJR Act (as contended at [82] of its submissions) or on some other basis. The basis for the claim might have been discernible if the precise facts on which it is based had been better particularised. They are not. The Second Respondent is left to, in effect, guess how this claim is argued. The Court is in no better position. Doing the best the Court can, it seems likely that the same facts that gave rise to the ADJR Act claim are said to give rise to the abuse of process claim, whether under s5(2)(j) or in some other fashion.
To the extent that the abuse of process a case is dependent on the ADJR Act, the Court has already decided that there is adequate provision in the Bankruptcy Act, and the s. 10(2)(b)(ii) discretion ought be exercised in favour of the Official Receiver in this regard. It must logically follow that that part of KDI’s abuse of process claim that is dependent on the ADJR Act be dismissed. It is the inevitable consequence of the Court’s ruling under s.10(2)(b)(ii) ADJR Act. Does that, however, also mean that the claim of abuse of process, insofar it is not dependent on the ADJR Act, should also be summarily dismissed?
The Court believes it should be so dismissed. KDI’s remedy under the Bankruptcy Act is adequate in the circumstances. The reason for dismissing the ADJR Act claim have already been stated. If there were some other basis for alleging abuse of process it should have been particularised. It would be unfairly burdensome on the Official Receiver to have to deal with these aspects of the claim. The Court is most conscious that the cases set a high hurdle for FCCA r 13.10: Jackson v P/T Constructions WA Pty Ltd [2015] FCCA 1014 at [13]-[16]. That hurdle is crossed in this case. It adds nothing to KDI’s case. As particularised it seems to have no reasonable prospects of success. KDI suffers no prejudice by its summary dismissal. The mere fact that a s139ZQ notice was held to be an abuse of process in Tsakirakis v Official Receiver and Anor [2013] FCCA 106 does not assist KDI. The facts of that case are different to the present one. The arguments made in the present case are materially different to those made in that case.
It must therefore follow that the Court makes Orders 3-5 inclusive in the Application in a Case filed 17 October 2016. Once KDI’s pleadings have been amended, the matter will be listed for further mention and directions.
I certify that the preceding one hundred and sixteen (116) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Date: 24 May 2017
Correction
The matter number on the coversheet and first page of reasons changed from “SYC 570 of 2016” to “SYG 570 of 2016”
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