PHILLIPS and INSPECTOR-GENERAL IN BANKRUPTCY
[2011] AATA 288
•3 May 2011
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2010/0557
GENERAL ADMINISTRATIVE DIVISION )Re:STEVE PHILLIPS
Applicant
And:INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
CORRIGENDUM TO DECISION [2011] AATA 288
The Tribunal amends its decision of 3 May 2011 as follows:
1.In paragraph 26 by deleting “10 December 2010” and substituting “8 February 2010.”
S A Forgie
Deputy President
BANKRUPTCY – review by Inspector-General on own initiative of two decisions by trustee to file notices of objection to discharge to bankruptcy – whether single decision of Inspector-General reviewing two decisions to file notices of objection is decision under review – effectively two decisions by Inspector-General and only one under review.
PRACTICE AND PROCEDURE – identifying decision under review – effect of confirmation of a decision.
Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 94 ALR 11
Director-General of Social Service v Chaney [1980] FCA 87; (1980) 3 ALD 161
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60; 24 ALR 577
Re Gee and Director-General of Social Services (1981) 3 ALD 132; 58 FLR 347
Re Phillips and Inspector-General in Bankruptcy [2011] AATA 25
Administrative Appeals Tribunal Act 1975 ss 25, 25(1), (3) and (4) and (4A), 29, 37
Bankruptcy Act 1966 ss 149, 149(4), 149A, 149A(1), (2)(a), (3)(a) and (b) and (4), 149B(2), 149C, 149D, 149D(1), 149D(1)(b), (da), (i) and (ia), 149F, 149G, 149H(1), 149J(1) and (3), 149K, 149K(1)(a) and (b), (2), (3)(a) and (b), (4) and (5), 149N(1A)(a), (b) and (c), (2)(a) and (b) and (3), 149P(6), 156A,
Corporations Act 2001 ss 206A, 206A(1A) and (1B), 206F(1)-(4), 206G, 206G(1) and (3)
Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
DECISION AND REASONS FOR DECISION [2011] AATA 288
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2010/0557
GENERAL ADMINISTRATIVE DIVISION )
Re:STEVE PHILLIPS
Applicant
And:INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Place: Melbourne
Date: 3 May 2011
Decision:The Tribunal decides:
1.the decision under review in these proceedings is the decision of the respondent dated 21 January 2010 to confirm the trustee’s decision to file a notice of objection on 4 September 2009; and
2.that review extends to a review of both grounds of objection set out in the notice i.e. the grounds under ss 149D(1)(b) and (da) of the Bankruptcy Act 1966.
S A Forgie
Deputy President
REASONS FOR DECISION
Mr Phillips applied for review of a decision of the Inspector-General in Bankruptcy (Inspector-General) regarding objections to his bankruptcy filed by the trustee of his bankrupt estate. In an earlier decision, I authorised the District Registrar of the Melbourne Registry of the Tribunal and the Deputy Registrars to refuse to issue the summonses addressed to a firm of solicitors, Blake Dawson, and the other to an association of accounting, audit and advisory firms known as Pitcher Partners.[1] In reaching my decision, I needed to identify the decisions under review. That proved to be a task to which I needed to turn to the parties for assistance. They have made further submissions on the matter and I have decided that the decision under review in these proceedings is the Inspector-General’s decision to confirm the trustee’s decision to file a notice of objection on 4 September 2009. That review extends to both grounds of objection set out in the notice i.e. the grounds under both ss 149D(1)(b) and (da).
BACKGROUND
Bankruptcy: consequences, term and discharge
[1] Re Phillips and Inspector-General in Bankruptcy [2011] AATA 25
To set the context of the matter once more, I will refer to the legislative background against which the Inspector-General made his decisions. Once a person becomes bankrupt,[2] he or she immediately loses control of much of his or her property and of any legal proceedings in which he or she is engaged. Although subject to some exceptions, the bankrupt’s property generally vests in the Official Trustee or in a registered trustee who has consented to act as such under s 156A and legal proceedings are stayed until the trustee makes an election to continue or discontinue the action.[3] In accordance with Part V of the Bankruptcy Act, the trustee continues to have control over the person and property of the bankrupt and administers the property in accordance with Part VI.
[2] A bankrupt is a person against whose estate a sequestration order has been made (as in the case of Mr Phillips) or a person who has become bankrupt by virtue of the presentation of a debtor’s petition: Bankruptcy Act 1966 (Bankruptcy Act), s 5(1).
[3] See Bankruptcy Act, Part IV, Division 4 generally
This continues to be the case until the person is discharged from bankruptcy or the bankruptcy is annulled. For those who have become bankrupt since 1991, bankruptcy continues for a period of three years after the bankrupt files a statement of affairs[4] but that period may be extended. Extension comes about when, before the bankrupt is discharged from bankruptcy, a trustee files with the Official Receiver a written notice of objection to the discharge. The trustee does so under s 149B and must comply with s 149C, in so far as the form of notice is concerned, and s 149F, in so far as a copy of the notice is given to the bankrupt. He or she must do so in the circumstances prescribed in s 149B(2).[5] The grounds on which he or she may do so are those set out in s 149D.
[4] Bankruptcy Act, s 149(4)
[5] “The trustee of a bankrupt’s estate must file a notice of objection to the discharge if a trustee believes:
(a)that doing so will help make the bankrupt discharge a duty that the bankrupt has not discharged; and
(b)that there is no other way for the trustee to induce the bankrupt to discharge any duties that the bankrupt has not discharged.”
The date on which the objection takes effect is the date on which details of the notice of objection are entered in the National Personal Insolvency Index.[6] The period for which bankruptcy is extended is provided for in s 149A. Applying it to Mr Phillips’ circumstances, s 149A(1) provides that the period of three years referred to in s 149(4) as the period of bankruptcy is taken to be a reference to the prescribed number of years from the prescribed date. The prescribed number of years and the prescribed date is determined by reference to s 149A(2)(a) which, in so far as it is relevant, provides:
[6] Bankruptcy Act, s 149G
“For the purposes of subsection (1):
(a)the prescribed number of years is:
(i)if the objection was made on a ground, or on grounds that included a ground, referred to in paragraph 149D(1)(ab), (ac), (ad), (d), (da), (e), (f), (g), (h), (ia), (k) or (ma) – 8 years; or
(ii)in any other case – 5 years; and
(b)the prescribed date is:
(i)…
(ii)in any other case – the date on which the bankrupt filed his or her statement of affairs.”
If the objection is withdrawn or cancelled and the period of bankruptcy specified in the relevant provision of s 149 has ended, the bankrupt is taken to be discharged from bankruptcy immediately.[7] The objection is taken never to have been made.[8]
[7] Bankruptcy Act, s 149A(3)(b)
[8] Bankruptcy Act, s 149A(3)(a)
Bankruptcy: three grounds of objection
Three of the grounds on which a trustee might object to a bankrupt’s discharge from bankruptcy and the three chosen by one of Mr Phillips’ trustees, Mr Andrew Yeo of Pitcher Partners,[9] are:
[9] Mr Yeo and Mr Gess Rambaldi are Joint and Several Trustees of Mr Phillips’ bankrupt estate.
“The grounds of objection that may be set out in a notice of objection are as follows:
…
(b)after the date of the bankruptcy, the bankrupt contravened section 206A of the Corporations Act 2001 (disqualification from managing corporations);
…
(da)after the date of the bankruptcy, the bankrupt intentionally provided false or misleading information to the trustee;
…
(i)the bankrupt has failed, whether intentionally or not, to disclose to the trustee a liability of the bankrupt that existed at the date of the bankruptcy;
...”[10]
[10] Bankruptcy Act, s 149D(1)
Section 206A of the Corporations Act 2001 (Corporations Act), to which the ground of objection in s 149D(1)(b) refers, creates an offence of strict liability[11] to which there is only one defence. Section 206A(1) provides:
“A person who is disqualified from managing corporations under this Part commits an offence if:
(a)they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(b)they exercise the capacity to affect significantly the corporation’s financial standing; or
(c)they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:
(i)knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or
(ii)intending that the directors will act in accordance with those instructions or wishes.”
[11] Corporations Act, s 206A(1A)
The sole defence to a contravention of s 206A(1) rests on the person’s having “… permission to manage the corporation under either section 206F or 206G and their conduct was within the terms of that permission.”[12] Section 206F provides that the Australian Securities and Investments Commission (ASIC) may disqualify a person from managing corporations in various circumstances.[13] Section 206F(5), however, provides some amelioration of the disqualification provisions. It provides:
“ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.”
[12] Corporations Act, s 206A(1B)
[13] Corporations Act, ss 206F(1)-(4)
Section 206G confers power on the Court to grant leave to a person disqualified from managing corporations if the person was not disqualified by ASIC. A disqualification of that sort might arise by operation of ss 206B, 206BA or s 206EA of the Corporations Act or by order of the Court under ss 206C, 206D, 206E or 206EAA. Under s 206G, the Court may give leave to such a person to manage corporations, a particular class of corporations or a particular corporation and to impose such exceptions and conditions as it determines.[14]
Trustee has three grounds of objection but files only two notices of objection
[14] Corporations Act, ss 206G(1) and (3)
A.The first objection dated 22 June 2009: one ground of objection
under s 149D(1)(i)
The first notice of objection was filed on 22 June 2009 on the ground that:
“… the bankrupt has failed, whether intentionally or not, to disclose to the trustee a liability of the bankrupt that existed at the date of the bankruptcy”.[15]
[15] Bankruptcy Act, s 149D(1)(i) and see T documents at 738-739
That notice advised Mr Phillips that the objection had the effect of extending the period of his bankruptcy to 21 September 2014 unless the objection was cancelled or withdrawn before that date. I do not understand how that could be so for the ground of objection was that in s 149D(1)(i). That is not a ground referred to in
s 149A(2) as a ground that has the effect of making the prescribed number of years to be eight. If I am correct, that would mean that the effect of the trustee’s filing the notice of objection was to extend Mr Phillips’ bankruptcy to 21 September 2011 i.e. a period of five years from the date on which Mr Phillips filed his statement of affairs[16] as provided for by s 149A(2)(a)(ii).
[16] I noted in my earlier decision that there is some doubt about the date on which Mr Phillips filed his statement of affairs but it would seem that, at least at the time he filed the notice, the trustee regarded him as having done so on 21 September 2006 rather than 28 September 2006; see [2011] AATA 25 at [22]
The reason given by Mr Yeo for filing his objection was this:
“The bankrupt has not fully disclosed the liabilities which were outstanding to Bankwest in respect of a Bankwest Mastercard as at the date of his bankruptcy and accordingly, my investigations into his examinable affairs have been protracted.”[17]
B.The second objection dated 4 September 2009: two grounds of objection under ss 149D(1)(b) and 149D(1)(da)
[17] T documents at 738
On 4 September 2009, Mr Yeo filed a further notice of objection based on two grounds.[18] The first ground is found in s 149D(1)(b):
“after the date of the bankruptcy, the bankrupt contravened section 206A of the Corporations Act 2001 (disqualification from managing corporations)”.
[18] T documents at 766-770
After referring to the evidence in 13 separate paragraphs, Mr Yeo stated his reasons for filing an objection under s 149D(1)(b):
“The investigations of the bankrupt’s conduct and examinable affairs indicate that the bankrupt has continued to act as a director of Phoenix after the date of the bankruptcy and notwithstanding his resignation as director.
I believe that these objections may help make the bankrupt discharge duties that the bankrupt has previously failed to discharge. I have limited means available to me to induce the bankrupt to discharge these duties.”[19]
[19] T documents at 769
The third ground overall but the second in Mr Yeo’s second objection was that:
“after the date of the bankruptcy, the bankrupt intentionally provided false or misleading information to the trustee”.
This is set out in s 149D(1)(da) of the Bankruptcy Act.[20] Although, by virtue of s 149C(1A), he was not required to give reasons for filing a notice of objection, Mr Yeo did so. His reasons were those I have set out in the previous paragraph.
[20] T documents at 768
As the notice of objection included an objection made under s 149D(da), it had the effect of extending Mr Phillips’ bankruptcy to 21 September 2014 unless the objection was cancelled or withdrawn before that date.[21]
[21] Bankruptcy Act, s 149A(2)(a)(i)
Provision made for Inspector-General’s review trustee’s decision to file a notice of objection
Apart from review on his own initiative[22] and at the request of the Ombudsman,[23] “the Inspector-General may review a decision of a trustee to file a notice of objection” if requested by the bankrupt for sufficient reason.[24] A bankrupt may make a request for review by lodging a written request no later than 60 days after being “notified of the trustee’s objection”.[25] That request must be accompanied by a copy of the notice of objection and any documents relied upon in support of the request.[26] The Official Receiver must endorse the date of lodgement on the request and send it and its accompanying documents to the Inspector-General.[27]
[22] Bankruptcy Act, s 149K(1)(a)
[23] Bankruptcy Act, s 149K(2)
[24] Bankruptcy Act, s 149K(1)(b)
[25] Bankruptcy Act, s 149K(3)(a)
[26] Bankruptcy Act, s 149K(3)(b)
[27] Bankruptcy Act, s 149K(4)
Within 60 days of lodgement of the request, the Inspector-General must decide whether to review the decision. If the decision is to review, the Inspector-General must also come to a decision within that period.[28] If the Inspector-General does not give a bankrupt written notice of a decision within 60 days of “… lodgment of a request by a bankrupt for the review of the trustee’s decision to file a notice of objection …”, s 149P(6) provides that “… the Inspector-General is taken to have reviewed the decision and confirmed it under subsection 149N(3).”
[28] Bankruptcy Act, s 149K(5)
The Inspector-General’s powers on review are those set out in s 149N. Section 149N(1) provides:
“On a review of a decision, if the Inspector-General is satisfied that:
(a)the ground or grounds on which the objection was made was not a ground or were not grounds specified in subsection 149D(1); or
(b)there is insufficient evidence to support the existence of the ground or grounds of objection; or
(c)the reasons given for objecting on that ground or those grounds do not justify the making of the objection; or
(d)a previous objection that was made on that ground or those grounds, or on grounds that included that ground or those grounds, was cancelled;
the Inspector-General must cancel the objection.”
If the Inspector-General is not satisfied of one or more of these matters, he or she must confirm the decision.[29]
[29] Bankruptcy Act, s 149N(3)
Section 149N(1A) provides:
“An objection must not be cancelled under subsection (1) if:
(a)the objection specifies at least one special ground; and
(b)there is sufficient evidence to support the existence of at least one special ground specified in the objection; and
(c)the bankrupt fails to establish that the bankrupt had a reasonable excuse for the conduct or failure that constituted the special ground.
For this purpose, special ground means a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (k) or (ma).”
In applying s 149N(1A), s 149N(1B) provides that “… no notice is to be taken of any conduct of the bankrupt after the time when the ground concerned first commenced to exist.”
Section 149N(2) provides for the time at which a cancellation takes effect. At the earliest, it does not take effect until the end of the period within which an application may be made to this Tribunal for review of the decision. If an application is made to the Tribunal for review, it does not take effect until the Tribunal’s decision is made.[30]
Mr Phillips requested the Inspector-General to review the trustee’s decisions to file notices of objection
[30] Bankruptcy Act, s 149N(2)(a) and (b)
In my previous reasons, I set out the course of events when Mr Phillips
sought review:
“34. In a letter dated 21 August 2009, Mr Hone wrote to the Official Receiver on behalf of Mr Phillips. He stated that he acted for Mr Phillips and that he was instructed to request review of the trustee’s decision. He attached the notice of objection dated 22 June 2009 and two supporting documents.[31] I note that the letter was addressed to the Official Receiver for the attention of a particular officer in Insolvency and Trustee Services Australia (ITSA). It was addressed to a facsimile number and there is no reason to question the accuracy of that number.
35. In a letter dated 25 September 2009, Mr Phillips also wrote to the Official Receiver and the Inspector-General at ITSA’s street address and marked it for the attention of the same officer. He referred to the request previously submitted on 21 August 2009 on his behalf and to a letter he had received from Pitcher Partners on 7 September 2009 and yet dated 4 August 2009.[32] From the context of the letter, it appears that he was referring to the notice of objection dated 4 September 2009 and filed on that day. The letter took the form of a statutory declaration.
36. On 9 November 2009, Mr Phillips wrote again to the Official Receiver and the Inspector-General. He concluded by noting that he had heard nothing since he had written his two earlier letters and, in view of that, considered that he had done his time and was therefore discharged from bankruptcy.[33]
37. On 16 November 2009, a delegate of the Inspector-General wrote to Mr Phillips. She first noted that Mr Yeo had filed two notices of objection and that Mr Phillips’ request for review dated 9 November 2009 was out of time. The delegate did not receive the earlier requests.[34] She went on to say that the Inspector-General was, however, “… prepared to review the trustees [sic] decision to lodge an objection … providing you [Mr Phillips] submit a copy of the notice of objections and any documents on which you rely to support the request.” No mention is made in the letter of the Inspector-General’s power to extend the time within which a bankrupt may request a review. There would appear to be no such power in the Bankruptcy Act. It would seem, however, that the delegate was not intending to suggest that there was any for the Inspector-General’s power to review on his own initiative is not subject to a time limit. That she was relying on this power becomes apparent when regard is had to her further letter dated 21 January 2010 setting out the decision on the review.[35]”[36]
[31] T documents at 758-763
[32] T documents at 820-829
[33] T documents at 835-892
[34] Respondent’s Statement of Facts, Reasons and Contentions at [23]
[35] T documents at 3
[36] [2011] AATA 25 at [34]-[37]
The Inspector-General’s decisions on review
In a letter dated 21 January 2010, the Inspector-General referred to three grounds of objection specified in two notices of objection. The letter described Mr Phillips’ request for a review as “… a request for a review of the Trustee’s decision to lodge the Objections …”.[37] In summary, the Inspector-General’s decision was:
“… to confirm the Trustee’s Objection under the ground in section 149D(1)(b) and to cancel the grounds in Section 149D(1)(da) and (i). …”
The delegate went on to say that the effect of the decision was that Mr Phillips would be discharged from bankruptcy on 28 September 2011.[38]
[37] T documents at 3
[38] The Inspector-General would seem to have regarded Mr Phillips as having filed his statement of affairs on 28 September 2006.
The reasons do not separate the grounds by reference to the individual notices of objection. Instead, they have been considered as “Grounds for Objection” and referred to as Grounds 1, 2 and 3.
Application for review to the Tribunal
An application may be made to this Tribunal in two circumstances but only one is relevant. It is provided for in s 149Q(a):
“An application may be made to the Administrative Appeals Tribunal for the review of:
(a)a decision of the Inspector-General on the review of a decision of the trustee to file a notice of objection;
(b)…”
Mr Phillips lodged an application for review of the Inspector-General’s decision. When asked for a description of the decision, he wrote “As Attached” and attached a copy of the letter dated 21 January 2010 that he had received from the Inspector-General. When asked for his reasons for seeking review, he wrote “Please See Attached”. He attached a letter dated 10 December 2010.
I will digress for a moment to mention that Mr Phillips’ letter is a document that should be included in the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (AAT Act) (T documents). Its proper place in the T documents that have been filed is at T1 where copies of his application and the Inspector-General’s decision were placed. His letter is just as much a part of his application for review as the Inspector-General’s decision for Mr Phillips specifically referred to both in completing the application form and sent all three documents together. Instead of finding it at T1, I have located at T161 Mr Phillips’ letter setting out his reasons for making his application. It appears in the index as “Letter of Steve Phillips in response to ITSA’s[[39]] decision on review of Notice of Objection to Discharge”. At one level, that description is correct for it is a letter that is addressed to the Inspector-General and could be regarded as a response to his decision. It is, however, a description that ignores the fact that Mr Phillips clearly intended it to be read as part of his application and would, it is to be hoped, have been sent by the Tribunal’s Registry to the Inspector-General when it notified him of the application under s 29 of the AAT Act.
[39] Insolvency and Trustee Service Australia
I understand that the preparation of the T documents can be a burdensome task. Those who prepare them should be recognised for the effort and care that is involved for I cannot overstate their importance in the review of a decision and the importance of presenting all documents in the decision-maker’s possession or control and that are relevant to the Tribunal’s review. The order in which T documents are presented is also relevant. It must be an order that reflects their place in the order of events that have occurred. In some cases, that may be achieved by presenting them in a chronological order. In others, it may not or it may be that reference needs to be made to it in more than one place in the T documents. This is such a case. It was a document that had two purposes. It belonged with the application at T1 as well as at T161 as a letter to the Inspector-General.
Inspector-General’s review conducted on his own initiative and not on Mr Phillips’ request
As I understood him, Mr Phillips was concerned that I found in my previous decision that he had not lodged his request to the Inspector-General to review the two notices of objection in accordance with s 149K. While I can understand that he feels that he has done everything properly, I do not propose to revisit that matter. If I were to do so and were to change my mind, I note that I would have to conclude that the Inspector-General would have to be taken to have confirmed both decisions of the trustee to file a notice of objection. That would follow from the fact that, if the requests for review complied with s 149K, the Inspector-General would be deemed to have confirmed them as he had made no decision on them within 60 days of the date on which they were lodged i.e. on or about 21 August 2009 and
25 September 2009. That is the effect of s 149P(6) which provides:
“If, within 60 days after lodgement of a request by a bankrupt for the review of the trustee’s decision to file a notice of objection, the Inspector-General has not given written notice to the bankrupt of his or her decision in accordance with subsection (1), the Inspector-General is taken to have reviewed the decision and confirmed it under subsection 149N(3).”
IDENTIFICATION OF THE DECISION(S) UNDER REVIEW
The reason for my being concerned to identify the decision or decisions under review arises from the fact that the Tribunal’s duty to review the decision, the scope of that review and the outcome of any decision may differ according to whether there is one decision or two.
If the Tribunal is reviewing only one decision, the effect of Mr Phillips’ application to the Tribunal is that it must review it in its entirety. Mr Phillips cannot quarantine those parts of it that were in his favour. That is to say, he cannot quarantine the Inspector-General’s decision to cancel the grounds of objection under ss 149D(1)(da) and (i) and have reviewed only that part of the decision that was not favourable to him i.e. to confirm the ground of objection under s 149D(1)(b).
If there are two decisions, there is a question whether he applied for review of both. If he did, then the Tribunal’s duty remains the same but it relates to each as a separate decision.
If Mr Phillips applied only for review of the decision that confirmed the objection under s 149D(1)(b), the Tribunal’s duty will be to review the decision that did that. That will draw in the objection under s 149D(1)(da) for both objections were dealt with in the one decision to file a notice of objection. What will not be in issue and subject to review will be the decision to file the notice of objection on the ground referred to in s 149D(1)(i)[40] for it is the subject of the trustee’s first notice of objection and not a decision of which Mr Phillips sought review.[41]
[40] Notice of objection to discharge dated 4 September 2009; T documents at 766-770
[41] Notice of objection to discharge dated 22 June 2009; T documents at 738-739
The respondent’s submissions
On behalf of the Inspector-General, Ms Spencer submitted that it does not follow that a bankrupt must, in all circumstances, lodge a separate request for review of each decision of a trustee to file a notice of objection. I do not need to explore that issue either for I am proceeding on the basis that the Inspector-General reviewed the trustee’s decisions on his own initiative in accordance with s 149K(1)(a) of the Bankruptcy Act.
Ms Spencer submitted:
“… There is no limit on the number of objections that the Inspector-General may decide to review on his own initiative. Nor is there any constraint on the Inspector-General as to whether he need conduct a separate review of each notice, or a combined review of multiple notices. There is no reason why, if the Inspector-General chooses to review more than one notice of objection and comes to a decision on that review, that decision is necessarily a composition of decisions rather than one decision.
That different consequences flow from cancellation of grounds depending on whether the notice has a single ground or more than a single ground of objection, and depending on whether the ground is a special ground or an ordinary ground, (in terms of the period by which the bankruptcy will be extended) is the reason why each notice must be separately considered against the matters in s 149N. But it is no reason why the Inspector-General, having conducted the review, should not make one decision ‘in globo’ about cancellation or confirmation of the notices which will then have a single overall effect of extension for a defined period, or discharge, of the bankrupt’s bankruptcy.
This analysis of the Inspector-General’s review powers is supported by consideration of the Tribunal’s jurisdiction on review.
…
In accordance with s 25(1) of the AAT Act, section 149Q of the Act provides that an application may be made to the Tribunal for review of ‘a decision of the Inspector-General on review of a decision of the trustee to file a notice of objection’.
The decision under review is the respondent’s decision to confirm the trustee’s second objection to discharge on one of the two grounds relied on by the trustees and to cancel the first objection to discharge. This was the ultimate and operative determination of the overall self-initiated review conducted by the Inspector-General. The effect of the decision was to reduce the period of extension of the applicant’s bankruptcy from 28 September 2014 to 28 September 2011.
One ‘decision’ of the Inspector-General on review made pursuant to s 149N of the Act can be made up of two or more separate determinations each derived from distinct consideration and application of the relevant statutory provisions. It can consist of a number of constituent parts such as:
(a)determination of the sufficiency of evidence to support the existence of grounds of objection;
(b)determination of the adequacy of reasons given for the making of the objection;
(c)determination of whether or not an objection or objections are to be cancelled or confirmed;
with the overall result of the decision being either immediate discharge from bankruptcy or discharge on a future date.
That the Inspector-General undertook review of two notices of objection does not affect the fact that the Inspector-General made only one decision within the meaning of ss 25(4) and 3(3) AAT Act. He did not make a series of individual decisions with respect to each notice of objection, but one indivisible determination following self-initiated review. ”[42]
[42] Respondent’s submissions at [11]-[20]
The Tribunal’s power to review
The starting point in unravelling the problem of identification of a reviewable decision starts with s 25 of the AAT Act. This is a section to which Ms Spencer properly drew my attention and it begins, in so far as it is relevant in this case, with the proposition that:
“An enactment may provide that applications may be made to the Tribunal:
(a)for review of decisions made in the exercise of powers conferred by that enactment;
(b)…”[43]
Where it does so, the enactment:
“(a) shall specify the person or persons to whose decisions the provision applies;
(b)may be expressed to apply to all decisions of a person, or to a class of such decisions; and
(c)may specify conditions subject to which applications may be made.”[44]
[43] AAT Act, s 25(1)
[44] AAT Act, s 25(3)
It is one thing to provide for the review of a decision and another to confer power on a body to review it. The latter function is performed by s 25(4) when it provides that “The Tribunal has power to review any decision in respect of which application is made to it under any enactment.” Section 25(4A) provides:
“The Tribunal may determine the scope of the review of a decision by limiting the questions of fact, the evidence and the issues that it considers.”
This provision is not relevant in my search for the decision that is under review. Determining the scope of the review of a decision does not equate with identifying the decision that is under review.
A provision of the sort identified in s 25(1) of the AAT Act is found in s 149Q of the Bankruptcy Act. In so far as it is relevant, it provides:
“An application may be made to the Administrative Appeals Tribunal for the review of:
(a)a decision of the Inspector-General on the review of a decision of the trustee to file a notice of objection: or
(b)…”
As Ms Spencer submits, the decision referred to in s 25(1)(a) must be the final or operative decision and not simply an interim or procedural decision made along the path to making that decision.[45]
[45] See Director-General of Social Service v Chaney [1980] FCA 87; (1980) 3 ALD 161 at 181 per Deane J, with whom Fisher J agreed (Northrop J dissenting) in considering the meaning of the word “decision” under s 44 of the AAT and Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 94 ALR 11 (Mason CJ, Brennan, Deane, Toohey and Gaudron JJ) at 337-338; 23-24per Mason CJ
Identifying the decision under review
The Inspector-General would have it that I look to the decision that he has made and find that is the decision I must review. The effect of the submissions made on his behalf is that the scope of the Tribunal’s powers on review and the review itself would be circumscribed by the terms of the Inspector-General’s decision. That approach has the attraction of being a simple solution. Certainly, the decision of the Inspector-General appears to be a decision that meets the criterion in s 149Q(a) of the Bankruptcy Act in so far as it is a decision of the Inspector-General and it is a decision reviewing a decision of the trustee to file a notice of objection. It is a decision that meets the criteria in s 25(1)(a) and is a final or operative decision. Therefore, it is a decision that the Tribunal can review if an application is made to it in accordance with the AAT Act.
What the simple approach overlooks is that, just as the Tribunal must exercise its powers within certain limits, so too must the Inspector-General. Limits are imposed on both by the terms of the Bankruptcy Act and further limits are imposed on the Tribunal by the AAT Act. They must not only be observed when exercising the power of review but must be recognised when unravelling and identifying the decision that is under review.
Therefore, the starting point in identifying the decision or decisions that the Tribunal must review is found in the words of s 149Q(a) i.e. the decision the Tribunal may review is the “… decision of the Inspector-General on the review of a decision of the trustee to file a notice of objection …”. It is immediately apparent that the Inspector-General’s decision is to review the decision “to file a notice of objection”. It is not a decision to object. It is not a decision to object on a number of grounds. It is a decision to file a notice of objection. Filing a notice of objection is an act separate from the decision regarding the grounds that may be set out in the notice. Filing of the notice with the Official Receiver is provided for in s 149B and its form in s 149C. A copy of the notice is given to the bankrupt under s 149F and, under s 149G, “An objection takes effect at the beginning of the day on which details of the notice of objection are entered on the National Personal Insolvency Index.” If the trustee withdraws the objection before the bankrupt is discharged, the withdrawal takes effect when the details of a notice of the withdrawal of the objection is given under s 149J(1).[46]
[46] Bankruptcy Act, s 149J(3)
Certainly, s 149C requires the trustee to set out the ground or each ground of objection, refer to evidence or material supporting the ground and stating reasons for objecting to the discharge on that ground or those grounds. The grounds on which an objection may be made are the subject of s 149D. If the trustee ceases to object to the bankrupt’s discharge on a particular ground, the trustee must give the Official Receiver a notice specifying the ground and give another to the bankrupt.[47] The effect of the trustee’s ceasing to object on a particular ground or grounds is set out in ss 149H(3) and (4):
“(3) If there is no longer an objection on any ground, the objection ceases to have effect at the beginning of the last day when details of a notice under subsection (1) are entered on the National Personal Insolvency Index.
(4) If one or more grounds of objection remain, the objection continues to have effect on the remaining ground or grounds.”
[47] Bankruptcy Act, s 149H(1)
It is apparent from the provisions of the Bankruptcy Act relating to the deferral of discharge from bankruptcy that an “objection”, “ground of objection” and “notice of objection” have three different things. The word “objection” is used to signify the trustee’s act of objecting to, and so disapproving of, the bankrupt’s automatic discharge from bankruptcy under s 149G.[48] A “ground of objection” is a ground on which the trustee is permitted to object under s 149D. A “notice of objection” is the means by which the trustee notifies his or her disapproval of the bankrupt’s automatic discharge from bankruptcy. It is the means by which that notification is given to the Official Receiver when it is filed with that officer, and so the wider world through the National Personal Insolvency Index, and to the bankrupt. It may be given on the basis of one objection or more than one. This is apparent in the provisions relating to the criteria that a notice of objection must meet. They are set out in s 149C. Section 149C(1)(a) begins: “A notice of objection must: (a) set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; …”. In summary, each objection made by a trustee must be made on one ground of objection set out in s 149D and may be made on more than one such ground and notice of that objection must be given to the Official Receiver and to the bankrupt.
[48] See generally the meanings of “objection” and “object”: Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
The decision that the Inspector-General may review on his own initiative is not the trustee’s objection and it is not the trustee’s decision to choose one ground of objection rather than another or to choose any at all. It is the “decision of the trustee to file a notice of objection”.[49]
[49] Bankruptcy Act, s 149K(1)(a)
The decisions that the Inspector-General may make when reviewing a decision to file a notice of objection are either to “cancel the objection” under
s 149N(1) having regard to ss 149N(1A) and (1B), or to “confirm the decision” under s 149N(3). As the decision that the Inspector-General has reviewed on his own initiative is the decision of the trustee to file a notice of objection, the trustee’s decision to file that notice must be the decision that is confirmed.
Confirmation of the decision must follow if the Inspector-General is satisfied of any one or more of the matters set out in s 149N(1). Section 149N(1) reads:
“On a review of a decision, if the Inspector-General is satisfied that:
(a)the ground or grounds on which an objection was made was not a ground or were not grounds specified in subsection 149D(1); or
(b)there is insufficient evidence to support the existence of the ground or grounds of objection; or
(c) the reasons given for objecting on that ground or those grounds do not justify the making of the objection; or
(d)a previous objection that was made on that ground or those grounds, or on grounds that included that ground or those grounds, was cancelled;
the Inspector-General must cancel the objection.”
In practical terms and putting to one side the qualification introduced by s 149N(1A) if the objection specifies at least one special ground,[50] s 149N(1) means that an objection will not be cancelled if the Inspector-General finds that there is one ground of objection that is a ground specified in s 149D(1), there is sufficient evidence to support it, the reasons given for objecting on that ground justify making the objection and a previous objection, which has been cancelled, was not made on that ground. Provided he finds there to be one such ground, the objection is not cancelled and remains on foot. It matters not that he is satisfied that the other grounds that the trustee might have specified in the notice of objection come within one of the four criteria set out in s 149N(1) and that he would, if they stood alone, be required to cancel the objection. The Inspector-General is required to consider the grounds of objection when reviewing the trustee’s decision and to be satisfied or not satisfied of certain matters in relation to them as the case may be but he has no power to set aside particular grounds of objection. His powers hinge upon the objection to the discharge of a bankrupt from bankruptcy and the decision to file a notice of objection. It does not focus upon the grounds of objection that are set out in the notice of objection.
[50] The second objection dated 4 September 2009 specified one special ground being that in s 149D(1)(da). When an objection specifies one or more special grounds of objection, s 149N(1A) does not qualify the criteria specified in s 149N(1)(a), (c) or (d) but it does qualify that in s 149N(1A)(b). It qualifies it to the extent that the fact that there is insufficient evidence to support the existence of the ground or grounds of objection is not enough to require the Inspector-General to cancel the objection. The bankrupt must also establish that he or she had a reasonable excuse for the conduct or failure that constituted the special ground. This follows from the requirement in s 149N(1A)(c) that “An objection must not be cancelled under subsection (1) if: … (c) the bankrupt fails to establish that the bankrupt had a reasonable excuse for the conduct or failure that constituted the special ground.”
It follows that the application that can be made to the Tribunal under s 149Q must be made in respect of either a decision to confirm the decision of the trustee to file a notice of objection or a decision to cancel the objection. They are the only two decisions that the Inspector-General may make when reviewing a decision of the trustee to file a notice of objection but they cannot both be made. They are separate and alternate decisions made after reviewing a decision of the trustee to file a notice of objection.
The Bankruptcy Act does not specifically deal with the situation in which the Inspector-General reviews two or more decisions of a trustee to file a notice of objection in relation to a particular bankrupt. The review provisions, however, make it clear that the rights of review are given in relation to each of the trustee’s decisions to file a notice of objection. The Inspector-General’s decision on review must relate back to the particular decision to file a notice of objection under review. He cannot roll them together even if he chooses to review two or more at the same time. If he could, he could deny a bankrupt the favourable outcome that follows a decision to cancel an objection.
It is to be expected that an application to review a decision by the Inspector-General to cancel an objection will usually be made by a trustee rather than a bankrupt. If the trustee does, the Tribunal’s review will extend to all of the matters that gave rise to the cancellation decision for it must decide whether cancellation was the correct decision.[51] That means that all of the matters referred to in s 149N(1) will be in issue in relation to all of the grounds of objection specified in the trustee’s notice of objection.
[51] “ The function of the Tribunal is … an administrative one. It is to review the administrative decision that is under attack before it. In that review, the Tribunal is not restricted to consideration of the questions which are relevant to a judicial determination of whether a discretionary power allowed by statute has been validly exercised. …
A bankrupt will be the person who seeks review of a decision by the Inspector-General to confirm the trustee’s decision to file a notice of objection. It is not the decision to confirm the decision to file a notice of objection that is under review but of the decision to file the notice of objection. To do otherwise would be to omit to review the operative decision that affects a bankrupt’s rights by extending the period of bankruptcy. The reasoning to support this conclusion is found in the judgment of the Tribunal in Re Gee and Director-General of Social Services:[52]
“ It was put by Mr Conwell [for the respondent] that the decision under review by the Administrative Appeals Tribunal in its social security jurisdiction is not the operative decision but rather the decision which on appeal or review has reconsidered the operative decision. … It is a necessary inference from the Administrative Appeals Tribunal Act that the function of the Tribunal is to review on the merits decisions which affect a person’s interest. See Bowen CJ and Deane J in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 68, and Smithers J in Collector of Customs (New South Wales) v Brian Lawlor Automotive Pty Ltd (1979) 2 ALD 1 at 23. It is inconsistent with the tenor of the Act that the Tribunal should concern itself not with an operative decision which affects a person’s rights but merely with a decision which has simply affirmed or varied the operative decision. Moreover, if the respondent’s arguments were correct, the Administrative Appeals Tribunal would not be able effectively to use the power conferred by s 43 of its Act to set aside the decision under review and to remit the matter for reconsideration in accordance with any directions or recommendations of the Tribunal. If the only decision which could be set aside were a decision under ss 14 or 15 of the Social Services Act, an applicant to this Tribunal would be precluded from again coming to the Tribunal should he or she be dissatisfied with the decision made after remission. That decision would not, under current practice, be considered by a Social Security Appeals Tribunal or be subject to appeal pursuant to s 15. Nor, if the respondent’s contention be correct, could the Tribunal exercise its power under s 41 of the Administrative Appeals Tribunal Act to suspend the operation of the subject decision for, in that event, the decision under review would not be the operative decision.”[53]
[52] (1981) 3 ALD 132; 58 FLR 347 (Davies J, President and Mr Cusack and Mr Prowse, Members)
[53] (1981) 3 ALD 132; 58 FLR 347 at 141-142; 357
The Inspector-General’s decisions
In summary, the Inspector-General’s decision dated 21 January 2010 was:
“… to confirm the Trustee’s Objection under the ground in section 149D(1)(b) and to cancel the grounds in Section 149D(1)(da) and (i). …”[54]
This was not a decision within the Inspector-General’s power to make. For the reasons I have given, he could not treat the two decisions to file a notice of objection as one decision or as one objection. They had to be treated separately even if considered together.
[54] T documents at 920
This may be a matter of form or expression rather than an intention to act outside power. A substantive effect of the Inspector-General’s decision is that he has found that the trustee’s reasons with regard to the ground of objection set out in s 49D(1)(i) and specified in the notice of objection filed on 22 June 2009 do not justify the making of the objection within the meaning of s 149N(1)(c). As that was the only ground of objection, the Inspector-General was required to cancel the trustee’s objection, of which he filed notice on 22 June 2009.
A second substantive effect of the Inspector-General’s decision was that he confirmed the trustee’s decision to file a notice of objection on 4 September 2009. Even though he “cancelled ” one of the grounds in that notice – that under s 149D(1)(da) – he did not “cancel” that under s 149D(1)(b). That meant that he had no choice but to confirm the decision. Any review of that decision is a review of the substantive decision to file the notice of objection in the first place. Consequently, on review, it raises the grounds of objection under each of ss 149D(1)(b) and (da) even though the Inspector-General found in Mr Phillips’ favour in respect of the ground of objection under s 149D(1)(da).
What was the scope of Mr Phillips’ application for review?
Having read Mr Phillips’ application as a whole, I have decided that he applied for review of that part of the Inspector-General’s decision that did not “cancel” the trustee’s objection on the ground of objection under s 149D(1)(b) i.e. that after the date of bankruptcy, he contravened s 206A of the Corporations Act by managing a corporation. His reasons for his application focus on his dealings with and activities related to two companies. These matters can relate only to matters raised by s 149D(1)(b) rather than those raised by ss 149D(1)(da) or (i). In view of that, I have come to the conclusion that Mr Phillips applied for review of only one of the Inspector-General’s decisions. That is the decision to confirm the trustee’s decision to file a notice of objection on 4 September 2009. For the reasons I have given, the review may extend to both grounds of objection set out in that notice i.e. the grounds under both ss 149D(1)(b) and (da) even though the Inspector-General would have “cancelled” that ground of objection under s 149D(da).
I certify that the fifty five preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: .......................................................................
Leah Berardi, Associate
Date of Hearing 31 January 2011
Date of Decision 3 May 2011
ApplicantMr S Phillips
Solicitor for the Respondent Ms F Spencer,
Blake Dawson
The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal. …”: Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60; 24 ALR 577 at 68; 589 per Bowen CJ and Deane J
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