Nugawela, Bankrupt and Commissioner of Taxation
[2018] AATA 979
•12 March 2018
Nugawela, Bankrupt and Commissioner of Taxation [2018] AATA 979 (12 March 2018)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2016/0648-0649, 2017/3323-3326
Re:Patrick Allan Nugawela, Bankrupt
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal: Deputy President S Boyle
Date:12 March 2018
Place:Perth
The Tribunal dismisses the applications.
..........[sgd]..............................................................
Deputy President S Boyle
CATCHWORDS
PRACTICE AND PROCEDURE – applicant bankrupt – standing to progress applications – abandonment of application – dismissal of application – power of Tribunal if a proceeding is frivolous, vexatious etc.
LEGISLATION
Administrative Appeals Tribunal 1975 (Cth) – ss 42A(1A) – ss 42B(1)
Bankruptcy Act 1966 (Cth) – s 5 – ss 43(2) – ss 58(1) – ss 60(2) – ss 60(3) – ss 153(1)
CASES
Cummins v Claremont Petroleum NL (1996) 185 CLR 124
Clark and Anor and Australia Community Pharmacy Authority [2011] AAT 246
McCallum v Federal Commissioner of Taxation (1997) 75 FCR 458
Primelife Corporation Limited v Bufalo [2008] FCA 1742
Robertson and Deputy Commissioner of Taxation [2001] AATA 563
Robertson v Deputy Commissioner of Taxation [2003] FCA 944
Singh and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 720REASONS FOR DECISION
12 March 2018
THE APPLICATION
This is an application by the Respondent to dismiss the six applications lodged by the Applicant. All six applications seek review of the Respondent’s decisions on objections to tax assessments lodged by the Applicant for income years ended 30 June 2005 to 30 June 2010.
The Respondent submits that the applications should be dismissed on the basis that the Applicant:
(a)is bankrupt;
(b)has no standing to progress the applications; and
(c)cannot progress the applications once he is discharged from bankruptcy.
BACKGROUND
The Applicant failed to lodge his income tax returns for the income years ended 30 June 2001 to 30 June 2010 when they were due (T4, p32).
On 3 November 2011, after an audit in respect of his taxation affairs (T4, p32), the Respondent informed the Applicant that the Respondent would raise default assessments for the income years ended 30 June 2005 to 30 June 2010 (T5, p36).
On 7 and 8 December 2011 the Respondent raised notices of assessment of penalty and default assessments for the income years ended 30 June 2005 to 30 June 2010 including assessments for the income years ended 30 June 2007 (T6, p43 and T8, 47) and 30 June 2008 (T7, p45 and T9, p49).
On 9 December 2014 the Respondent commenced Supreme Court proceedings to recover the assessed amounts and penalties. On 19 August 2015 the Respondent obtained a judgment for those amounts.
On 12 August 2015 the Applicant lodged with the Respondent amended income tax returns for the income years ended 30 June 2007 and 30 June 2008 (T12) and schedules of rental property forms for the income years ended 30 June 2007 and 30 June 2008 (T11 and T13).
By a notice of objection dated 20 August 2015, (T14) the Applicant objected to the notice of assessment in respect of income tax for the year ended 30 June 2007 and 30 June 2008 (T9). On 9 December 2015 the Respondent issued a notice of objection decision in respect of the Applicant’s objection of 20 August 2015 (T19).
On 15 December 2015 the Respondent issued notices of amended assessment for the income years ended 30 June 2007 (T20) and 30 June 2008 (T21).
On 18 January 2016 the Respondent caused a bankruptcy notice to issue for the judgment debt less the amount credited for the partially amended assessments.
On 8 February 2016 the Applicant applied to the Tribunal (T1) for a review of the Respondent’s objection decision, dated 9 December 2015 (T2).
In February 2016 and March 2016 the Applicant commenced applications in the Federal Court to set aside or extend the bankruptcy notice. In April 2016 the Applicant commenced an appeal from the original judgment in the WA Supreme Court, Court of Appeal. He also sought adjournments and stays pending completion of the present applications. All of those actions and applications were unsuccessful.
On 16 March 2016 the Respondent commenced a creditor’s petition for the sequestration of the Applicant’s estate.
Notices of objection to the Respondent’s assessments in respect of income years 2005, 2006, 2009 and 2010 were lodged by the Applicant on 4 November and 15 November 2016.
On 13 February 2017 the Respondent disallowed the Applicant’s objections to the assessment in respect of income years 2005, 2006, 2009 and 2010.
It is, unfortunately, not clear on the papers before the Tribunal but it seems that there was correspondence between the Applicant and the Respondent following the Respondent’s decision of 13 February 2017 on the Applicant’s objections to the assessment for income years 2005, 2006, 2009 and 2010 culminating in a letter from the Respondent dated 12 April 2017. The opening paragraphs of that letter are as follows:
Your request lodged on 30 March 2017 against us not allowing an extension of time to lodge your 2005; 2006; 2009 and 2010 tax returns not valid (sic). This is because:
·The law doesn’t allow for an objection in respect of the decision of a prior objection (sic)
As explained to your tax agent on the telephone today the next step to take if you disagree with an objection decision is to apply for a review of the decision by the Administrative Appeals Tribunal (AAT)…
It is not clear whether the subject of the Respondent’s letter of 12 April 2017 is an apparent refusal by the Respondent to allow the Applicant to lodge tax returns out of time, as suggested by the first sentence, or as suggested by the words that appear after the colon in the letter, an ‘objection’ to the Respondent’s decisions on objections to assessments.
Whatever the meaning or effect of the Respondent’s letter of 12 April 2017, on 6 June 2017 the Applicant lodged a further application in the Tribunal citing the decision to be reviewed as the Respondent’s letter of 12 April 2017. That application is treated as four applications in the Tribunal because the decision appears to cover four separate income tax years. These four applications are 2017/3323, 2017/3324, 2017/3325, 2017/3326.
On 21 February 2017 the Federal Circuit Court of Australia made a sequestration order against the estate of the Applicant (Affidavit of Ms Andrea John Jennings sworn 22 September 2017, Attachment “A”).
The sequestration order included a term that there be a stay of proceedings under the sequestration order until 14 March 2017 (Affidavit of Ms Jennings sworn 22 September 2017, Attachment “B”) pending an application to the High Court of Australia to appeal the original judgment. On 14 March 2017 that stay was extended to allow the Federal Circuit Court to consider the Applicant’s application for a stay pending an application to review the sequestration order.
The stay was lifted on 19 June 2017 (Affidavit of Ms Jennings sworn 22 September 2017, Attachment “C”) after the Applicant’s application for special leave to appeal the Supreme Court judgment to the High Court was refused and the Federal Circuit Court of Australia refused the Applicant’s application to stay the sequestration pending the review of the decision to order the sequestration.
On 9 August 2017, the Federal Circuit Court of Australia refused the Applicant’s application to review the sequestration order and refused his renewed stay application (Affidavit of Ms Jennings sworn 22 September 2017, Attachment “D”).
By notice dated 9 August 2017, pursuant to subsection 60(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), the Respondent required the Applicant’s trustee in bankruptcy to elect whether to progress or to abandon Administrative Appeals Tribunal (AAT) proceedings 2016/0648, 2016/0649 and 2017/3323 (Affidavit of Ms Jennings sworn 22 September 2017, Attachment “E”).
On 31 August 2017 the Respondent provided a copy of the section 60(3) notice mentioned in paragraph 23 of this decision and dated 9 August 2017 to the trustee in bankruptcy (Affidavit of Ms Jennings sworn 22 September 2017, Attachment “G”).
By an email dated 1 September 2017 the Applicant’s trustee in bankruptcy advised his intention to allow the time limit in the notice to expire and for the proceedings to be abandoned (Affidavit of Ms Jennings sworn 22 September 2017, Attachment “G”).
On 1 September 2017 the Respondent provided a copy of the section 60(3) notice mentioned in paragraph 23 of this decision and dated 9 August 2017 to the Applicant.
On 6 September 2017 the Honourable Justice Barker of the Federal Court of Australia heard the Applicant’s application for a stay of the sequestration order.
On 21 September 2017 the Justice Barker dismissed the Applicant’s application for the stay of the sequestration order.
By notice dated 2 October 2017, pursuant to subsection 60(3) of the Bankruptcy Act, the Respondent required the Applicant’s trustee in bankruptcy to elect whether to progress or to abandon AAT proceedings: 2017/3324, 2017/3325, 2017/3326 (Affidavit of Ms Jennings sworn 21 November 2017, Attachment “L”). No response was received to that notice and at the hearing on 18 December 2017, the trustee in bankruptcy (who appeared by telephone) confirmed that he had not elected to proceed with the applications.
THE EVIDENCE
The Respondent’s application for dismissal of the six applications was heard on 18 December 2017. The Respondent was represented by counsel, Mr Craig Slater. The Applicant’s trustee in bankruptcy, Mr Gregory Dudley appeared by telephone. There was no appearance by the Applicant. The Tribunal tried to contact the Applicant by telephone at the commencement of the hearing, however, could only speak to the receptionist at the Applicant’s medical practice. The receptionist advised that she was unable to locate the Applicant.
Extensive submissions were provided by both the Applicant (27 pages) and the Respondent on the morning of the hearing. In addition the Tribunal had received the following material from the parties relevant to this application to dismiss:
(a)Affidavit of Andrea Joan Jennings employed in the Respondent’s Legal Services Branch, sworn 22 September 2017 including six attachments;
(b)The Applicant’s response to the affidavit of Ms Jennings (incorrectly described by the Applicant as an affidavit dated 21 September 2017), dated 30 October 2017 comprising 17 pages of submissions and 15 pages of annexures (FR1-FR6);
(c)126 pages of T Documents;
(d)Second affidavit of Ms Jennings sworn 21 November 2017;
(e)The Respondent’s list of authorities (six cases cited); and
(f)Notice of objection decisions in respect of income tax for the years ended 30 June 2005, 30 June 2006, 30 June 2009 and 30 June 2010.
At the hearing on 18 December 2017 Mr Dudley confirmed receipt of the two section 60(3) Bankruptcy Act notices (referred to in paragraphs 23 and 24 above) and that it was not his intention to proceed with the applications. Mr Dudley advised that there were no funds in the bankruptcy and that the Applicant had refused to cooperate in matters relating to the bankruptcy. Mr Dudley stated that the Applicant had still failed to provide a Statement of Affairs at the time of the hearing. In this regard, the Tribunal notes paragraph 12 of the affidavit of Ms Jennings sworn 22 September 2017 and Attachment I to that affidavit. Attachment I to Ms Jennings’ affidavit which is an email from Mr Tony Drayton of the trustee in bankruptcy’s office. Attachment I confirms that as of 5 September 2017 the Applicant had failed to provide the Statement of Affairs and that that failure had been “referred to The Australian Financial Security Authority (AFSA) for firmer action.”
LEGISLATIVE FRAMEWORK
Section 5 of the Bankruptcy Act provides as follows:
"bankrupt " means a person:
(a)against whose estate a sequestration order has been made; or
(b)who has become a bankrupt by virtue of the presentation of a debtor's petition.
Subsection 43(2) of the Bankruptcy Act provides:
Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt, and continues to be a bankrupt until:
(a)he or she is discharged by force of subsection 149(1); or
(b)his or her bankruptcy is annulled by force of subsection 74(1) or 153A(1) or under section 153B.
Subsection 58(1) of the Bankruptcy Act provides:
Subject to this Act, where a debtor becomes a bankrupt:
(a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee…
Subsections 60(2) and 60(3) of the Bankruptcy Act provide:
(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
Subsection 153(1) of the Bankruptcy Act provides:
(1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally…
Subsection 42A(1A) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) provides:
A person who has made an application to the Tribunal for review of a decision may, in writing lodged with the Tribunal, at any time notify the Tribunal to the effect that the application is discontinued or withdrawn.
Subsection 42B(1) of the AAT Act provides:
Power of Tribunal if a proceeding is frivolous, vexatious etc.
(1) The Tribunal may dismiss an application for the review of a decision, at any stage of the proceeding, if the Tribunal is satisfied that the application:
(c)is frivolous, vexatious, misconceived or lacking in substance; or
(d)has no reasonable prospect of success; or
(e)is otherwise an abuse of the process of the Tribunal.
ISSUES FOR DETERMINATION
As noted above, this is an application by the Respondent to dismiss the six applications lodged by the Applicant for review of the Respondent’s decisions in relation to objections made by the Applicant to tax assessments issued by the Respondent.
The Respondent’s submissions as to the basis upon which he seeks the dismissal of the applications are not altogether clear. Paragraph 2 of the Respondent’s submissions of 18 December 2017 submit as follows:
The applicant:
(a)is bankrupt;
(b)has no standing to progress the applications;
(c)cannot progress the applications once he is discharged from bankruptcy.
The Respondent’s submissions however, do not expand on why any or all of those identified circumstances should cause the dismissal of the applications.
The Respondent’s submissions also refer to there being an automatic stay of the applications by operation of subsection 60(3) of the Bankruptcy Act (paragraph 47). That is not correct. The automatic stay of proceedings arises by operation of subsection 60(2) of the Bankruptcy Act, not subsection 60(3). Subsection 60(3) of the Bankruptcy Act deems an action to be abandoned if the trustee does not elect to proceed within 28 days of receipt of a notice requiring an election to be made (see paragraph 36 above).
Although the Respondent’s submissions do not specifically raise abandonment of the applications by operation of subsection 60(3) of the Bankruptcy Act as being the basis for the dismissal of the applications, the Tribunal notes that that argument was raised, at least in relation to applications 2016/0648, 2016/0649 and 2017/3323, in paragraph 16 of the affidavit of Ms Jennings sworn 22 September 2017. The Tribunal notes that subsequent to that affidavit of Ms Jennings, further notices were issued under subsection 60(3) of the Bankruptcy Act in relation to the other three applications (2017/3324, 2017/3325 and 2107/3326) and that no election was made by the trustee to proceed with those applications. As noted above, that was confirmed by the trustee at the hearing on 18 December 2017.
The Tribunal will, in any event, treat the potential abandonment of the applications by operation of subsection 60(3) of the Bankruptcy Act as an issue for determination.
The Respondent’s submissions also did not address the issue of the Tribunal’s power to dismiss the applications, in particular whether the Tribunal has power to dismiss the applications under section 42B of the AAT Act or possibly section 42A of the AAT Act as has been done in previous similar matters to which the Tribunal will refer in the consideration below.
CONSIDERATION
The Applicant’s response to the affidavit of Ms Jennings sworn on 22 September 2017 dated 30 October 2017 and the Applicant’s submissions filed on 18 December 2017 canvass a wide range of issues most of which are irrelevant to the application to dismiss. These included:
(a)“Jurisdictional error” (30 October 2017 response Part 1) which appears largely to be based on a misunderstanding of the operation of subsection 60(3) of the Bankruptcy Act, claimed factual errors or omissions in the affidavit of Ms Jennings sworn on 22 September 2017 (none of which is correct or relevant), bad faith by the Respondent and the Respondent “acting in chorus with the Australian Government Solicitor”,
(b)Failure by the Respondent to conduct itself as a “Model Litigant” (30 October 2017 response Part 2) which misunderstands the status of the Legal Services Direction. In any event, the Tribunal does not consider that any of the Respondent’s conduct identified by the Applicant is contrary to that direction.
(c)“Supremacy of Part IV C” (30 October 2017 response Part 3). This appears to proceed on a misconception of the operation of the law and the Bankruptcy Act and the role of this Tribunal in reviewing decisions.
(d)“Currency of AAT determination” (30 October 2017 response Part 4). This appears to proceed on a misunderstanding of the role to be played by a Respondent (decision maker) in an application in this Tribunal and the effect of a bankruptcy on the standing of an applicant to continue prosecuting an application under the AAT Act.
(e)The standing of the Applicant as a “dissatisfied person” and the effect of subsection 60(3) of the Bankruptcy Act, the Respondent’s status as a major creditor in the Applicant’s bankruptcy and the conduct of the Respondent and having the applications adjourned or held in abeyance while various other court proceedings proposed by the Applicant are determined (Applicant’s submissions of 18 December 2017).
The Respondent’s submissions of 18 December 2017 are relevantly, as follows:
…(b) Standing to progress or manage the applications
33. The High Court in Cummins v Claremont (1996) 185 CLR 124 at 137 – 138, by Brennan CJ, Gaudron J, McHugh J said:
“the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts (see Heath v Tang [1993] 1 WLR 1421 at 1427; [1993] 4 All ER 694 at 701). … A bankrupt’s contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights (see Rochfort v Battersby (1849) 2 HLC 388 at 408, 409 [9 ER 1139 at 1147]) and, that being so, it cannot give him an interest to appeal to minimise liabilities.”
34. Dawson J and Toohey J at 148 preferred the proposition as described by Hoffmann J in Heath v Tang (see [1993] 1 WLR 1421 at 1421; [1993] 4 All ER 694 at 701):
‘in principle a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate vested in his trustee.’’
35. See also McCallum v Federal Commissioner of Taxation (1997) ATC 4509 at 4522; Robertson Jnr v Deputy Commissioner of Taxation (2004) ATC 4209 at [22]; Deputy Commissioner of Taxation v Hanselmann [2017] NSWCA 80 at [12], [13] and Stone v Permanent Custodians Ltd [2016] WASCA 200 at [22], [23].
(c) Standing to progress the applications after discharge
36. The discharge of a bankrupt does not cause any assets that have vested in the Official Trustee to revert to the bankrupt; the property vested in the Official Trustee remains vested in the Official Trustee: Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178, 185; Samootin v Shea [2010] NSWCA 371 [94], [95], Stone v Permanent Custodians Ltd [2016] WASCA 200 at [23].
Consideration
37. The applicant’s interest in these applications ceased upon the sequestratio order being made.
38. The applicant lacks standing to make submissions addressing the progress management or disposal of the applications.
39. The applicant’s main complaint is that the respondent obtained a sequestration order on 21 February 2017 affecting the ability to progress these proceedings.
40. The automatic stay of these proceedings was the result of the operation o s60(3) of the Bankruptcy Act 1966 (Cth) which operated by reason of the Federal Circuit Court of Australia’s sequestration order.
41. The decision to sequestrate the applicant’s estate and appoint a trustee was not made by the respondent it was a decision of the Federal Circuit Court of Australia
42. Even if there was a relevant prior decision by the respondent to institute or
progress the creditor’s petition:
(a) that relevant prior decision is not the subject of the review application before the tribunal and a review of that decision is not permitted by any relevant legislation;
(b) the court hearing the creditor’s petition and the courts hearing each court application and appeal by the applicant, after due process and having given an opportunity to the applicant to make his case, dismissed the applicant’s claims; and
(c) the applicant applied for adjournments and stays of court proceedings and those applications were refused.
43. In each case the respondent did not decide the outcome, the courts decided the outcome. The outcome of each court proceeding dismissed the applicant’s claims as being either of no merit or not supported by persuasive evidence.
44. The issue of non-compliance with a Legal Services Direction may not be raised in any proceeding (whether in a court, tribunal or other body) except by, or on behalf of, the Commonwealth: subsection 55ZG(3). Further, compliance with a Legal Services Direction is not enforceable except by, or upon the application of, the Attorney-General. It follows that the Applicant is unable to raise any allegations of breach of the model litigant guidelines in this proceeding and, in addition to lacking standing due to his bankruptcy, also has no standing to seek orders in respect of any alleged non-compliance with the model litigant guidelines.
45. In any event, the respondent notes that the decisions of the courts granting the orders of the respondent indicated that the respondent’s claims were appropriately enforced and the applicant’s claims, after due hearing and process, were not supported or did not have merit.
46. The applicant has indicated he has commenced an application to the Federal Court (WAD528/2017) to review of the trustee in bankruptcy’s decision to abandon the AAT proceedings. There is no evidence on which to assess the strength of the review or the time period in which it will be determined. There is no evidence on which to assess the relative cost, time and efficiency merits of an adjudication in this tribunal as against an adjudication of claims within the usual processes of administering the bankrupt estate of the applicant pursuant to the Bankruptcy Act 1966 (Cth) and its regulations.
47. The absence of that information or even the period in which the review will be completed make it impossible for the AAT to assess the assertions of standing if the review was successful.
48. The applicant indicates a desire to progress these applications once his bankruptcy has concluded. The claims by creditors are released at the completion of the bankruptcy and the claims against creditors remain the property of the trustee in bankruptcy. The discharge from bankruptcy will not permit the applicant to pursue these applications...
Subject to the observations above that are relevant to the operation of subsections 60(2) and 60(3) of the Bankruptcy Act, the Tribunal agrees with the Respondent’s submissions.
A very similar factual scenario was considered by this Tribunal in the matter of Robertson and Deputy Commissioner of Taxation [2001] AATA 563. That matter, like this one, involved an application by a taxpayer for review of the Deputy Commissioner of Taxation’s decisions under s 14ZZ of the Taxation Administration Act 1953 (Cth) in relation to objections lodged by the taxpayer against tax assessments issued by the Deputy Commissioner of Taxation. In that matter Senior Member Fayle determined that:
…by reason of the applicant having entered into voluntary bankruptcy on 26 May 2000 and the appointment on that day of a trustee in bankruptcy for the applicant’s estate, the applicant lost standing on that day to continue those applications, that standing having been vested in the applicant’s trustee in bankruptcy by operation of law.
That decision, which relied significantly on the cases of McCallum v Federal Commissioner of Taxation (1997) 75 FCR 458 (the McCallum decision) and Cummins v Claremont Petroleum NL (1996) 185 CLR 124 (the Cummings decision) went on appeal to the Federal Court (Robertson v Deputy Commissioner of Taxation [2003] FCA 944) and then on appeal to the Full Court of the Federal Court.
The Full Court affirmed the approach taken by the Courts in the McCallum decision and the Cummings decision. The Court said:
[22] McCallum v Commissioner of Taxation is, unless successfully challenged, authority for the proposition that the principle laid down in Cummings v Claremont Petroleum NL is applicable to the determination of whether a bankrupt has standing to apply to the Tribunal for review of an objection decision. As is mentioned above, the appellant did not challenge the authority of McCallum v Commissioner of Taxation. Nor did he contend that the fact that he had made his application to the Tribunal before he became bankrupt rendered McCallum v Commissioner of Taxation distinguishable. It follows inexorably, in our view, that the contention that he was entitled to maintain his application to the Tribunal under s 14ZZ because, absent any liability to the Commissioner, his estate would have been more than adequate to pay his remaining creditors must fail.
Carr J at first instance, affirmed by the Full Court, observed:
[23]…It is quite clear form the High Court’s decision in Cummings and the majority judgments in McCallum that the reason why the bankrupt loses standing is because the debt concerned is payable solely out of the bankrupt’s estate, and is no longer otherwise recoverable from the debtor. It makes no difference that the success in an appeal (Cummings at 138) or any review might result in a surplus (McCallum at 475).
The other case that provides clear direction in the current application is the decision of Deputy President Forgie in Dya Singh and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 720. That case also dealt with the effect of section 60 of the Bankruptcy Act and the consequences thereof on an application for review of a decision lodged with this Tribunal. Deputy President Forgie, having reviewed relevant authorities, including the Cummings decision, the McCallum decision and Robertson v Deputy Commissioner of Taxation [2003] FCA 944, put it as follows:
[107] It seems to me that the authorities require me to ask myself the following questions and apply the following principles when considering the effect of a person’s bankruptcy on an application that person has previously lodged in the Tribunal or on an application that person wishes to make:
1Determine the date on which the person became bankrupt.
2Determine whether or not the person has an existing application in the Tribunal for review of a decision on that date.
3If the person has an existing application for review on the day of bankruptcy:
(a)in general terms, an application in the Tribunal for review of a decision is a “civil proceeding … at law” within the meaning of s 60(5) and so an “action” for the purposes of s 60(2) of the Bankruptcy Act in the same way that an appeal to the Federal Court from the Tribunal’s decision on that application is an action;
(b)decide whether the application is an action of the sort that is stayed by the person’s bankruptcy:
(i) it will not be stayed if it is an action in respect of compensation payments of the type payable under the Safety, Rehabilitation and Compensation Act 1988;
(ii) it will be stayed if there is a connection between the application for review and the person’s bankrupt estate;
(iii) the connection exists if the subject matter of the application may affect the property divisible among the creditors or the amount of provable debts;
(iv) examples of circumstances in which the connection does not exist arise if the application for review concerns:
• an entitlement or licence to undertake an activity;
• an entitlement to payment of an amount, such as a social security payment, that is inalienable and cannot form part of a bankrupt’s divisible property;
• the amount sought to be recovered is not a provable debt e.g. certain student loans under Student Assistance Act 1973;
(v) examples of circumstances in which the connection does exist arise if the application for review concerns:
• a decision to recover an amount that is a provable debt in the bankruptcy e.g. tax debts and overpayments of many, but not all, amounts paid under social security legislation;
• would affect the amount of property vested in the trustee under s 58(1) and divisible among creditors;
(c)if the application for review is not stayed under s 60 of the Bankruptcy Act, it proceeds in the normal way;
(d)if the application for review is stayed, decide how to deal with it:
(i) notify the trustee of the application;
(ii) if the trustee elects:
• to proceed with the application, do so;
• to discontinue the application, dismiss the application under s 42B of the AAT Act;
(4) If the person does not have an existing application for review on the day of bankruptcy …
Applying that approach suggested by Deputy President Forgie, an approach with which this Tribunal agrees, to the present case, it is the Tribunal’s view that the applications commenced by the Applicant fall within the category of actions identified in paragraph 3(b)(ii) of Deputy President Forgie’s above analysis and are actions which are stayed by operation of subsection 60(2) of the Bankruptcy Act. The question then is whether, in accordance with point 3(d) of Deputy President Forgie’s approach, the trustee has elected to proceed with the applications. It is clear that not only has the trustee not elected to proceed with the applications, but that the applications have been deemed to have been abandoned by operation of subsection 60(3) of the Bankruptcy Act.
In Primelife Corporation Limited v Bufalo [2008] FCA 1742, when considering the treatment of deemed abandonment by operation of subsection 60(3) of the Bankruptcy Act, Jessup J noted:
35 As I understand it, the appellants’ case in this respect is that, the trustee having abandoned the Supreme Court proceeding (pursuant to the admitted operation of s 60(3) of the Bankruptcy Act), there could, as a matter of law, have been no outcome other than that the proceeding be dismissed…. It follows, in my view that the abandonment of such a proceeding under subs (3) should, as a matter of law, be regarded as bringing it to an end finally, without any prospect of revival…
In the present case the trustee has not elected to discontinue those applications, however, by not electing to proceed with the applications when served with the notices under subsection 60(3) of the Bankruptcy Act, he is deemed to have abandoned the applications.
That being the case the only question is whether the applications should be dismissed under subsection 42A(1A) of the AAT Act on the basis that the deemed abandonment is tantamount to the person who made the applications discontinuing or withdrawing them, or whether they should be dismissed under section 42B(1) of the AAT Act. In Singh and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 720 (the Singh decision), the approach taken by Deputy President Forgie, again an approach with which this Tribunal agrees, was that in cases such as the present one, the applications should be dismissed under subsection 42B(1) on the basis that as the actions (applications) have been deemed to be abandoned under subsection 60(3) of the Bankruptcy Act and that they are therefore frivolous or vexatious in a technical sense. In this regard the learned Deputy President states in footnote 119:
119. Section 42B provides that the Tribunal may dismiss the application if it is satisfied that the application is frivolous or vexatious. As Gray J explained in Pitt v OneSteel Reinforcing Pty Limited [2008] FCA 923, “the word ‘frivolous’, especially when coupled with ‘vexatious’, is a technical legal term, in substance meaning the absence of a cause of action.” (at [9]). Graham J explained in JF Keir Pty Limited v Sparks [2008] FCA 611 that “An action can be stayed as vexatious ‘if it can really lead to no possible good’.” (at [62]). The limits of such a power given to the courts were considered by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (N .S.W.) [1964] HCA 69; (1964) 112 CLR 125; 38 ALJR 253 at [8]–[10]; 128–130; 254–255:
“The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion … [the] cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action — if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal — is clearly demonstrated. The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”.
…
Principles of this sort underpin the Tribunal’s exercise of the power given to it by s 42B(1) of the AAT Act. The Tribunal’s reasons for decision in Re Williams and Australian Electoral Commission and The Greens (party joined) [1995] AATA 160 ; (1995) 38 ALD 366; 21 AAR 467 at [30]–[31]; 372; 473–474 set out the following general principles governing the exercise of the power:
“(30) The power for peremptory dismissal of proceedings is to be exercised cautiously and sparingly: per Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1965] ALR 636 ; (1964) 112 CLR 125. The mere fact that a proceeding is shown to have no foundation in fact is insufficient to justify a finding that it was commenced vexatiously or without reasonable cause: Per von Doussa J in Hatchett v Bowater Tutt Industries Pty Ltd (No 2) (1991) 28 FCR 324 .
(31) The manifest untenability of a proceeding provides one ground for finding that the proceeding is a vexatious one … ” (at 372).
An application that has been stayed by operation of s 60(2) of the Bankruptcy Act and that the applicant’s trustee has discontinued is an application in which the applicant cannot succeed. There might have been reasonable prospects of success when it was lodged but those prospects count for nought when s 60 of the Bankruptcy Act takes effect.
Further, based on the legal position that the Applicant no longer has locus standi to prosecute the applications on the principles spelt out in Cummings decision, McCallum decision and Robertson v Deputy Commissioner of Taxation [2003] FCA 944, the applications could also now be considered to be frivolous or vexatious, have no reasonable prospects of success or are otherwise be an abuse of process of the Tribunal.
DECISION
For the reasons set out above, the Tribunal finds that:
(a)The Applicant has no standing to progress the applications; and
(b)The applications have been deemed to be abandoned by operation of s 60(3) of the Bankruptcy Act; and
(c)Accordingly, the applications:
(i)are frivolous or vexatious for the purposes of s 42B(1)(a) of the AAT Act; and/or
(ii)have no reasonable prospect of success for the purposes of s 42B(1)(b) of the AAT Act; and/or
(iii)are otherwise an abuse of process of the Tribunal for the purposes of s 42B(1)(c) of the AAT Act.
Accordingly, the applications are dismissed under s 42B(1) of the AAT Act.
I certify that the preceding 60 (sixty) paragraphs are a true copy of the reasons for the decision herein of Deputy President S Boyle
.......... [sgd]..........................................................
Administrative Assistant - Legal
Dated: 12 March 2018
Date of hearing: 18 December 2017 Applicant: In person Counsel for the Respondent Craig Slater Representative for the Respondent: Chelsea Quirk Solicitors for the Respondent: Jackson McDonald
2
17
0