Petrenko and Australian Financial Security Authority - [2024] AATA 448

Petrenko and Australian Financial Security Authority [2024] AATA 448 (15 March 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2021/2828
Re:Yulia Petrenko
APPLICANT

Australian Financial Security AuthorityAnd
RESPONDENT

DECISION
Tribunal:Senior Member Dr N A Manetta
Date:15 March 2024
Place:Adelaide

The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the following directions:
(1)The Committee should allow Ms Petrenko the opportunity to provide updated figures in respect of her ‘relevant employment’ at a senior level for the five years preceding the date of my decision (or any other convenient date decided upon by the Committee);
(2)The Committee should allow Ms Petrenko the opportunity to provide further references and any other further information that she wishes in support of her application; and
(3)The Committee must take into account the fact that Ms Petrenko passed the oral examination the Tribunal administered, and it must then decide in light of all the material before it whether a further examination is needed (bearing in mind especially the Tribunal’s comments about the limitations of the examination the Tribunal administered). If it decides a further examination would assist it, it must administer a written examination, not an oral examination.

......................[sgnd].................................................
Senior Member Dr N A Manetta

BANKRUPTCY – application to be registered as a trustee in bankruptcy – committee found applicant did not have requisite capacity to act as registered trustee under the Bankruptcy Act 1966 (Cth) – applicant failed to pass oral examination – number of hours of ‘relevant employment’ – relatively few hours involving private bankruptcy work – Tribunal asked to administer further oral examination – applicant passed Tribunal examination – Tribunal not satisfied applicant has requisite capacity – observations on whether Tribunal should have been asked to administer oral examination – decision set aside and matter remitted for reconsideration
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Bankruptcy Act 1966 (Cth)
CASES
Esber v The Commonwealth (1992) 174 CLR 430
Frugtniet v ASIC [2019] HCA 16; (2019) 266 CLR 250; (2019) 79 AAR 9
Re Mansfield and A Committee convened under section 20-10 of the Insolvency Practice Schedule (Corporations) [2018] AATA 1510
SECONDARY MATERIALS
Insolvency Practice Rules (Bankruptcy) 2016 (Cth)
REASONS FOR DECISION
Senior Member Dr N A Manetta
15 March 2024

This is an application by Ms Yulia Petrenko seeking a review of a decision of a certain committee convened pursuant to section 20-10 of Schedule 2 of the Bankruptcy Act 1966 (Cth) (‘the Committee’ and ‘the Act’). By its decision, dated 9 April 2021, the Committee declined Ms Petrenko’s application to become a registered trustee in bankruptcy under the Act. She seeks a review of that decision in this Tribunal.[1] She asks the Tribunal to set aside the Committee’s decision and to find her eligible to be registered as a trustee in bankruptcy. At the hearing before me, Ms Walker appeared for Ms Petrenko; Mr Douglas, for the respondent.
[1] Pursuant to section 96-1 of Schedule 2 to the Act.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] AATA 448
Decision Date: 15 March 2024

CaseChat Overview and Summary

This matter concerned an application by Ms Yulia Petrenko for review of a decision by a committee convened under the Bankruptcy Act 1966 (Cth) to refuse her registration as a trustee. The committee's decision was based primarily on its finding that Ms Petrenko had failed an oral examination, which the committee considered necessary to demonstrate her capacity to perform the duties of a registered trustee. The committee also raised concerns about the extent of her experience in personal insolvency administrations, although it ultimately did not consider this a sufficient reason for refusal.

The legal issues before the Tribunal were whether Ms Petrenko had demonstrated the requisite capacity to perform the functions and duties of a registered trustee, as evidenced by her performance in an oral examination, and whether she had satisfied the requirement of undertaking at least 4,000 hours of "relevant employment" in the five years preceding her application. The Tribunal was required to conduct a de novo review of the committee's decision.

The Tribunal considered the regulatory framework governing the registration of trustees, including the requirements for an applicant to possess specific qualifications, experience, knowledge, and abilities, as prescribed by the Insolvency Practice Schedule (Bankruptcy) and associated Rules. While the parties had agreed to the Tribunal administering a further oral examination, the presiding SM expressed reservations about the appropriateness of this approach. The Tribunal ultimately applied the current version of the Rules, noting that an older version, which was in force at the time of the committee's decision, did not offer a more favourable outcome for Ms Petrenko. The parties also agreed that Ms Petrenko had met the 4,000-hour employment requirement.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

I should add that after the examination, Ms Petrenko gave sworn evidence to the Tribunal and was cross-examined. The parties made final submissions on whether Ms Petrenko had passed or failed the oral examination in light of certain model answers that had been given to me, and there were other submissions made in respect of Ms Petrenko’s eligibility to be registered under the Act.REGULATORY BACKGROUND I now explain the essentials of the regulatory background. Schedule 2 of the Act is entitled Insolvency Practice Schedule (Bankruptcy) (‘the Schedule’). Section 20-5(1) of the Schedule permits an individual to apply to the Inspector-General in Bankruptcy to be registered as a trustee. The Inspector-General is entrusted with the general administration of the Act: see section 11(2)(a) of the Act. Section 20-10 of the Schedule permits the Inspector-General to convene a committee of three persons, including himself or herself, to consider the application. He or she must refer an application for registration as a trustee to a committee within two months of receiving it: see section 20-15 of the Schedule. Section 20-20 of the Schedule concerns the duties and responsibilities of a committee to which an application for registration as a trustee is referred. It is in the following terms:20‑20 Committee to consider applicationsCommittee must consider referred applications(1)If an application for registration as a trustee is referred to a committee, the committee must consider the application.(2) For the purposes of considering the application, the committee:(a) must interview the applicant; and(b) may require the applicant to sit for an exam.Decision of committee(3) Within 45 business days after interviewing the applicant, the committee must decide whether the applicant should be registered as a trustee or not.(4) The committee must decide that the applicant should be registered as a trustee if it is satisfied that the applicant:(a) has the qualifications, experience, knowledge and abilities prescribed; and(b) will take out:(i) adequate and appropriate professional indemnity insurance; and(ii) adequate and appropriate fidelity insurance;against the liabilities that the applicant may incur working as a registered trustee; and(c) has not been convicted, within 10 years before making the application, of an offence involving fraud or dishonesty; and(d) is not, and has not been within 10 years before making the application, an insolvent under administration; and(e) has not had his or her registration as a trustee under this Act cancelled within 10 years before making the application, other than in response to a written request by the applicant to have the registration cancelled; and(f) has not had his or her registration as a liquidator under the Corporations Act 2001 cancelled within 10 years before making the application, other than in response to a written request by the applicant to have the registration cancelled; and(g) is not disqualified from managing corporations under Part 2D.6 of the Corporations Act 2001, or under a law of an external Territory or a law of a foreign country; and(h) is otherwise a fit and proper person; and(i) is resident in Australia or in another prescribed country.(5) The committee may decide that the applicant should be registered even if the committee is not satisfied of a matter mentioned in paragraph (4)(a), (e), (f) or (i), provided the applicant would be suitable to be registered as a trustee.Registration may be subject to conditions(6) The committee may decide that the applicant’s registration is to be subject to any conditions specified by the committee.Spent convictions(7) Nothing in this section affects the operation of Part VIIC of the Crimes Act 1914.Note: Part VIIC of the Crimes Act 1914 includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

This is an application by Ms Yulia Petrenko seeking a review of a decision of a certain committee convened pursuant to section 20-10 of Schedule 2 of the Bankruptcy Act 1966 (Cth) (‘the Committee’ and ‘the Act’). By its decision, dated 9 April 2021, the Committee declined Ms Petrenko’s application to become a registered trustee in bankruptcy under the Act. She seeks a review of that decision in this Tribunal.[1] She asks the Tribunal to set aside the Committee’s decision and to find her eligible to be registered as a trustee in bankruptcy. At the hearing before me, Ms Walker appeared for Ms Petrenko; Mr Douglas, for the respondent.[1] Pursuant to section 96-1 of Schedule 2 to the Act.COMMITTEE’S DECISION Ms Petrenko’s application for registration was refused by the Committee because they found, in essence, that she had not passed an oral examination they administered as part of the mandatory interview process required under the Act. In their view, she had not thereby demonstrated a capacity to perform the duties and functions of a registered trustee under the Act. That was the principal issue between the parties before me. The parties asked the Tribunal, in exercise of its de novo jurisdiction, to administer a further oral examination. The Committee also raised doubts about whether Ms Petrenko had satisfied a further requirement; namely, that she should have undertaken at least 4,000 hours of ‘relevant employment’ in the five years immediately preceding her application. The Committee referred in this connection to the ‘small portion of her employment experience in personal insolvency administrations’.[2] It concluded, however, that this should not be a sufficient reason to reject her application.[2] Hearing Book (‘HB’), 10-11. This parties agreed before me that Ms Petrenko did have at least 4,000 hours of ‘relevant employment’ immediately before her application. As part of my review, I have considered that joint position, and offered my own conclusions in respect of it. The relevant regulatory framework is set out below.[3][3] At [13]ff.PRE-HEARING DIRECTIONS IN RELATION TO A FURTHER ORAL EXAMINATION Certain pre-hearing directions were made by another member of the Tribunal on 19 September 2023. These directions appear to have been made by consent. They envisaged that the Tribunal would administer a further oral examination at the hearing. The examination would be of the same type that Ms Petrenko had undertaken, but was found to have failed. I raised my misgivings about the appropriateness of this approach at the outset of the hearing before me. I decided, however, to administer the examination because it had been agreed between the parties in advance, and the parties were quite clear that they wished to proceed in that manner. I shall return to the question of the appropriateness of the Tribunal being asked to administer examinations towards the end of these reasons.ORAL EXAMINATION ADMINISTERED BY THE TRIBUNAL

Ratio Decidendi

Legal Principle Established

Section 20-1 of the Rules is currently in the following terms:20‑1 Qualifications, experience, knowledge and abilities required by applicants for registration(1) This section is made for the purposes of paragraph 20‑20(4)(a) of the Insolvency Practice Schedule (Bankruptcy).(2) A committee to which an application for registration as a trustee is referred under section 20‑15 of the Insolvency Practice Schedule (Bankruptcy) must be satisfied that the applicant has each of the following qualifications, experience, knowledge and abilities:(a) the applicant has completed the academic requirements for the award of a tertiary qualification that includes at least 3 years of full‑time study (or its equivalent) in commercial law and accounting;(b) the applicant has completed the academic requirements for at least 2 course units accredited under the Australian Qualifications Framework Level 8 (or equivalent study) in the practice of external administrators of companies, receivers, receivers and managers, and trustees under the Act;(c) during the 5 years immediately preceding the day on which the application is made, the applicant has been engaged in at least 4,000 hours of relevant employment at senior level;(d) the applicant has demonstrated the capacity to perform satisfactorily the functions and duties of a registered trustee;(e) the applicant is able to satisfy any conditions to be imposed under the Insolvency Practice Schedule (Bankruptcy), if the applicant is registered as a trustee.(3) For the purposes of paragraph (2)(c), relevant employment must include:(a) employment that involves any of the following:(i) assisting a registered trustee in the performance of the registered trustee’s duties as trustee under the Act;(ii) providing advice in relation to matters under the Act; and(b) employment that provides direct or indirect exposure to any of the following:(i) the external administration of companies, receivership or receivership and management;(ii) the restructuring of companies or the giving of advice in relation to the restructuring of companies. In the Hearing Book prepared by the parties,[5] I had an older version of the Rules, the one in force as at the date of the committee’s decision some years ago, and the parties addressed me on that older version. The latest version of the Rules is quoted above, and I believe I should apply it in my de novo review. The older version differs mainly in respect of subsection (3). Subsection (3) of the older version reads as follows:(3) In this section:relevant employment in relation to an applicant, means employment that:(a) involves assisting a registered trustee in the performance of his or her duties as trustee under the Act;(b) involves the providing of advice in relation to matters under the Act; and (c) provides exposure to the external administration of companies and receivership and receivership and management.It does not seem to me, however, that subsection (3) offers a more favourable outcome to Ms Petrenko and I shall refer to the latest version.[6][5] Ibid, 657.[6] Had it been more favourable to Ms Petrenko in some respect, the older provision might have remained applicable in my review, given the decision of the High Court in Esber v The Commonwealth (1992) 174 CLR 430. That issue does not arise for consideration, however.