Rasmussen and Inspector-General in Bankruptcy

[2018] AATA 3468

Rasmussen and Inspector-General in Bankruptcy [2018] AATA 3468 (13 September 2018)

Division:General Division

File Number:           2018/3319

Re:Paul Rasmussen

APPLICANT

AndInspector-General in Bankruptcy

RESPONDENT

DECISION

Tribunal:Deputy President S A Forgie

Date:13 September 2018

Place:Melbourne

The Tribunal decides:

to refuse the applicant’s application for an extension of time under s 29(7) of the Administrative Appeals Tribunal Act 1975 within which to lodge an application for review of a decision made by a delegate of the respondent dated 4 June 2013 in relation to the remuneration of the trustee of the applicant’s bankrupt estate.

[sgd]
S A FORGIE
Deputy President

PRACTICE AND PROCEDURE – application to extend time within which to lodge application for review – no jurisdiction to review decision of which review sought – application refused

Administrative Appeals Tribunal Act 1975 ss 25(1), 25(4), 29(1), 29(1)(d), 29(7) and 29(8)

Bankruptcy Act 1966 ss 4A, 5-15(a), 60-5, 60-5(1), 60-5(2), 60-11(1), (2) and (3), 60-12, 90-21(1) and (2), 90-22(b), 161B, 162(4), 162(4A), 163, 167, 167(1), 167(2) and 167(6)
Bankruptcy Regulations 1996 rr 8.09, 8.10, 8.11, 8.12C, 8.12C(1)(a) and (b), 8.12C(4)(a) and (b), 8.12C(5), 8.12D, 8.12E(1), 8.12E(2), 8.12E(3), 8.12E(4), 8.12E(5), 8.12E(6), 8.12F(1), 8.12F(2), 8.12F(3), 8.12G, 8.12I(1), 8.12I(2), 8.12I(3) to 8.12I(7) and 8.12J to 8.12O
Insolvency Law Reform Act 2016 s 129
Insolvency Practice Rules (Bankruptcy) 2016 ss 60-5, 60-15, 90-5(4) and 90-5(5)
Insolvency Practice Schedule (Bankruptcy) ss 90-21(3) and 90‑22
Tribunals Amalgamation Act 2015 s 3 and Schedule 1, Item 40

Re Benjamin and Commissioner of Taxation [2017] AATA 39

REASONS FOR DECISION

Deputy President S A Forgie

1. Mr Rasmussen became bankrupt on 24 January 2012. As a consequence, his property vested in a registered trustee who was appointed as the trustee of Mr Rasmussen’s bankrupt estate. In a Remuneration Claim Notice dated 22 March 2013, the trustee claimed remuneration in the sum of $39,000 plus Goods and Services Tax (GST) for the period 24 January 2012 to 21 March 2013. Mr Rasmussen asked the Inspector-General to review the claim alleging that the remuneration claimed was excessive and that the trustee had acted fraudulently. A delegate of the Inspector-General reviewed the claim acting under s 167 of the Bankruptcy Act 1966 (Bankruptcy Act) and rr 8.12K to 8.12O of the Bankruptcy Regulations 1996 (Bankruptcy Regulations).  He advised Mr Rasmussen of his decision in a letter dated 4 June 2013.  The delegate found that the trustee had not acted fraudulently.  He did, however, reduce some amounts where he considered the amount claimed to be unreasonably high, that work had been performed improperly or unnecessarily or that work claimed to have been done was not supported by contemporaneous notes or records maintained by the trustee.   The delegate substituted a determination in the amount of $30,611.32, not including GST. 

1. Mr Rasmussen applied to the Tribunal on 15 June 2018 for review of the delegate’s decision and for an extension of time within which to lodge that application.  He followed it with an application for review lodged on 29 June 2018.[1]  I need consider his application for an extension of time only if he is entitled to lodge an application in the Tribunal for review of the decision made by the delegate of the Tribunal at all.  As I have decided that he is not entitled to lodge an application for review, the Tribunal has no power to review the decision.  Therefore, his application for an extension of time within which to lodge it becomes futile.  I have set out my reasons below and have looked at the matter having regard both to the law as it was in force at the time in 2013 and currently.

   [1] Although an applicant for an extension of time within which to lodge an application for review of a decision may often lodge the application for an extension and a substantive application together, there is no requirement to do so. Section 29(7) provides that the Tribunal may extend the time for making the application for review even though the time specified for making the substantive application has passed (AAT Act; s 29(8)). Section 29(7) does not impose any requirement regarding lodgement of the substantive application.

TRIBUNAL’S POWER TO EXTEND TIME WITHIN WHICH TO LODGE APPLICATION

1. Section 29(1) of the Administrative Appeals Tribunal Act 1975 (AAT Act) sets out the way in which an application for review of a decision may be made to the Tribunal. As the decision of which Mr Rasmussen seeks review was made in writing, s 29(1)(d) required him to lodge the application within the prescribed time. That prescribed time was the 28^th day after the day on which Mr Pizarro was given a document setting out the terms of the decision of which he seeks review.  That date would have been shortly after 4 June 2013.

1. Although some five years have passed since Mr Rasmussen was given notice of the decision, s 29(7) provides that:

   “The Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for review of a decision (including a decision made before the commencement of this section) if the Tribunal is satisfied that it is reasonable in all the circumstances to do so.”

1. Various cases consider principles that are relevant in considering whether it is reasonable to extend time.  I summarised the principles that they establish in Re Benjamin and Commissioner of Taxation.[2]  In the context of this case, only one principle is relevant.  It is that the merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted.  Again in the context of this case, the merits will turn on whether the Tribunal has the jurisdiction to apply for review of the decision at all.

[2] [2017] AATA 39 at [73]-[80]

THE TRIBUNAL’S POWER TO REVIEW DECISIONS RELATING TO REMUNERATION

1. A person may apply to the Tribunal for review of an administrative decision if an enactment has provided that an application may be made for review of that decision. That is the effect of s 25(1) of the AAT Act. Before its repeal by the Tribunals Amalgamation Act 2015,[3] s 25(4) expressly stated that “The Tribunal has power to review any decision in respect of which application is made to it under any enactment.”  The AAT Act no longer expressly states the Tribunal has power to review any decision in respect of which an application is made to it under an enactment.  That power remains implicit in the fact that an application may be made to the Tribunal and in the powers the AAT Act gives it once an application has been made.

   [3] s 3 and Schedule 1, Item 40

1. In view of s 25(1), the next step is to find a provision in the Bankruptcy Act that permits Mr Rasmussen to apply for review of the Inspector-General’s decision. This task is slightly complicated in this case by the fact that the Bankruptcy Act was amended with effect from 1 March 2017 by the Insolvency Law Reform Act 2016 (ILR Act). I will begin with the relevant provisions of the Bankruptcy Act before 1 March 2017 followed by a summary of them after those amendments.

Relevant provisions before 1 March 2017

1. Section 162(4) provided that, if the trustee’s remuneration had not been fixed by creditors or by the committee of inspection,[4] the trustee was entitled to apply to the Inspector‑General to decide his or her remuneration. There were two qualifications to the general statement. The first was that the trustee could only make such an application in the circumstances prescribed by the regulations and the second was that the application had to be made in accordance with the regulations. Regulation 8.09 of the Bankruptcy Regulations provided for the former and r 8.10 with the latter. Once a trustee had made an application, s 162(4A) provided that “If an application is made to the Inspector‑General under subsection (4), the Inspector‑General must, by writing, decide the trustee’s remuneration, having regard to the matters prescribed by the regulations.” Those matters are prescribed in r 8.11:

   [4] There is no suggestion in the material that the creditors had fixed the trustee’s remuneration in this case.

   “For subsection 162 (4A) of the Act, the Inspector‑General must have regard to the following matters when deciding the trustee’s remuneration:

   (a)    whether the trustee has followed the procedure in section 64U of the Act for estimating remuneration, including whether the trustee has adequately described to creditors the work performed or to be performed;

   (b)    whether the trustee has given the bankrupt and creditors the notices required to be given under these Regulations;

   (c)    whether the trustee has explained why the work already performed was necessary;

   (d)    whether the trustee has explained why the work proposed to be performed will be necessary;

   (e)    whether, taking into account the nature and complexity of the work, the proposed remuneration is commensurate with:

   (i)    the work already performed; or

   (ii)    the work proposed to be performed;

   (f)    any other relevant matters.

   Note   A decision on the application is made under subsection 162 (4A) of the Act.  The Inspector‑General must advise the trustee and the bankrupt and creditors of the decision in accordance with subsection 162 (4B) of the Act.”

1. The amount of remuneration was also qualified by s 161B of the Bankruptcy Act. It provided:

   “(1)  If the total remuneration payable to the trustee under section 162 would be less than the following amount (the statutory minimum):

   (a)  $5,000;

   (b)  if another amount is prescribed by the regulations for the purposes of this paragraph—that other amount;

   the trustee is entitled to be paid, from the funds in the bankrupt’s estate, additional remuneration equal to the shortfall.

   (1A)  The statutory minimum is increased by 8.4% if the trustee’s remuneration is consideration for a taxable supply (within the meaning of the A New Tax System (Goods and Services Tax) Act 1999).”

2. When the Inspector-General has decided the amount of the trustee’s remuneration or the amount has been fixed by the creditors, the trustee must give the bankrupt and creditors a notice when the remuneration he or she claims reaches that amount.[5]  The notice must include details of the total remuneration claimed as well as details of the work performed for which the remuneration was claimed, the names of the person who performed the work and the number of hours charged by, or in relation to each person for the work together with the hourly rate of those persons.[6]  The notice must also “… include a statement advising the bankrupt and the creditors that they may, within 28 days after receiving the notice, request the Inspector‑General to review the amount of remuneration claimed by the trustee.”[7]

[5] Bankruptcy Regulations; rr 8.12C(1)(a) and (b)

[6] Bankruptcy Regulations; rr 8.12C(4)(a) and (b)

[7] Bankruptcy Regulations; r 8.12C(5)

1. Section 167(1) of the Bankruptcy Act provided for review of decisions made by the Inspector-General in relation to the trustee’s remuneration:

   “The regulations may make provision for and in relation to:

   (a)  the Inspector‑General reviewing decisions of the trustee of the estate of a bankrupt to withdraw, or to propose to withdraw, funds from the estate for payment of the trustee’s remuneration; and

   (b)  the bankrupt or a creditor of the bankrupt applying for the review.”

1. Regulation 8.12D acknowledges that 167(1) of the Act provided for the Inspector‑General to review decisions about the trustee’s remuneration on application by a bankrupt or a creditor of the bankrupt. Consistently with that, r 8.12E(1) of the Bankruptcy Regulations provided that a bankrupt or a creditor of the bankrupt may apply to the Inspector-General for a review of the amount of remuneration claimed by the trustee. The application must be made within 28 days after the day the applicant receives notification under r 8.12C.[8]  The Inspector-General may extend that 28 day time limit in the circumstances set out in r 8.12E(3) and for the time delineated by r 8.12E(4).

   [8] Bankruptcy Regulations; r 8.12E(2)

1. The Bankruptcy Regulations provide for a bankrupt or a creditor to make an application for review of the Inspector-General’s decision should he or she decide to refuse to extend the time and by the trustee if the Inspector-General should decide to extend it.[9]  The application must be made to the Tribunal.

   [9] Bankruptcy Regulations; rr 8.12E(5) and (6)

1. Even if an application is made within time, the Inspector-General must refuse to accept it in the circumstances set out in s 8.12F(1). He or she must refuse to accept an application unless satisfied on reasonable grounds that the trustee’s remuneration may have been fixed in a manner that is inconsistent with the requirements of the Bankruptcy Act or the Bankruptcy Regulations, the trustee may have acted improperly or without due care and diligence in the administration of the estate or the applicant does not have interest in the outcome of the review, has not adequately particularised the issue or the application is frivolous or vexatious. These grounds of refusal are set out in r 8.12F(1). Regulations 8.12F(2) and (3) set out grounds on which the Inspector-General may accept an application or decline to accept it. If the Inspector-General refuses to accept an application, he or she must give the bankrupt or creditor who has made the application and the trustee written notice of the refusal including reasons for the refusal.[10]

   [10] Bankruptcy Act; s 8.12G

1. The regulations may also make provision for and in relation to the Inspector‑General’s reviewing a bill of costs for services provided by a person (the third party) in relation to the administration of a bankrupt’s estate as well as for the trustee of the estate’s applying for the review.[11]  Regulation 8.12I(1) provides that the trustee of the bankrupt’s estate may apply to the Inspector‑General to review a bill of costs for services provided by a third party in relation to the administration of the bankrupt’s estate.  The application must be made in writing and within 28 days of receiving the bill of costs.[12]  Regulations 8.12I(3) to (7) are concerned with extending the time within which the application may be made to the Inspector-General.  They provide for the trustee to make an application to the Inspector‑General for review of his or her decision refusing to extend time for making an application and for the third party to make an application for review of a decision extending time.

   [11] Bankruptcy Act; s 167(2)

   [12] Bankruptcy Regulations; rr 8.12I(2) and (3)

1. I have referred to s 167(1) of the Bankruptcy Act at [11] above but repeat that it provided that the regulations might make provision for and in relation to the Inspector-General’s reviewing the trustee’s decisions to withdraw, or to propose to withdraw, funds from the estate for payment of the trustee’s remuneration. Provision may be made for applications to be made by the bankrupt or a creditor of the bankrupt. Section 167(2) provides that the regulations may make provision for and in relation to the Inspector‑General’s reviewing a bill of costs for services provided by a third party in relation to the administration of a bankrupt’s estate and for the trustee to apply for that review.

1. Regulations 8.12J to 8.12O are the regulations prescribing those matters. None of them is concerned with review of the Inspector-General’s decision made on an application for review of the trustee’s decision on these matters. That follows from the fact that s 167 of the Bankruptcy Act does not state that the regulations may provide for review. How s 167 dealt with review was to provide in s 167(6) that:

   “The trustee, the bankrupt or a creditor of the bankrupt may appeal to the Court from a decision of the Inspector‑General in relation to the review.  In addition, if the review is of the kind mentioned in subsection (2), the third party may also appeal to the Court from a decision of the Inspector‑General in relation to the review.” 

1. In light of s 167(6) and the absence of any provision stating that an application may be made to the Tribunal for review of a decision made by the Inspector-General in relation to the trustee’s remuneration, a bankrupt does not have the right or an entitlement to make an application to the Tribunal. In the absence of any right or entitlement, the Tribunal may not review a decision made by the Inspector-General in that regard. The Tribunal’s power to review a decision is limited to the extension of the 28 day time period within which to lodge an application under rr 8.12E(5) and (6) of the Bankruptcy Regulations.

Relevant provisions after 1 March 2017

1. Since the enactment of the ILR Act, s 163 of the Bankruptcy Act has provided that:

   “(1)      The Official Trustee is to be remunerated as determined by the Minister by legislative instrument.

   (2)An amount equal to each amount of remuneration received by the Official Trustee shall be paid to the Commonwealth.

   Note: The remuneration may be in respect of work the Official Trustee does as trustee of the estate of a bankrupt or in respect of work done in any other situation under this Act (such as where the Official Trustee acts as a trustee as a result of a personal insolvency agreement).”

1. Schedule 2 to the Bankruptcy Act is described as the “Insolvency Practice Schedule (Bankruptcy)”[13] (Insolvency Practice Schedule). Division 60 of Schedule 2 is concerned with the remuneration and other benefits received by the trustee. The trustee of a regulated debtor’s estate[14] is entitled to receive remuneration for necessary work properly performed by the trustee in relation to the administration of that estate in accordance with any remuneration determinations.[15]  If no remuneration determination has been made in relation to necessary work properly performed by a trustee in relation to the administration of a regulated debtor’s estate, a trustee is entitled to receive reasonable remuneration for the work.[16]  In prescribed circumstances, the Inspector-General may make a determination specifying remuneration that a trustee of a regulated debtor’s estate is entitled to receive for necessary work properly performed by the trustee in relation to the administration of the estate.  The Inspector-General may have regard to any matter prescribed in a determination which may provide for matters set out in s 60-12 and any other matter.[17]

   [13] Bankruptcy Act; s 4A

   [14] A “regulated debtor” includes a bankrupt: Bankruptcy Act; Schedule 2; s 5-15(a)

   [15] Bankruptcy Act; Schedule 2; s 60-5(1)

   [16] Bankruptcy Act; Schedule 2; s 60-5(2)

   [17] Bankruptcy Act; Schedule 2; ss 60-11(2) and (3)

1. The determination is known as the Insolvency Practice Rules (Bankruptcy) 2016 (Insolvency Practice Rules).[18]  Division 60 of Part 3 is headed “Remuneration and other benefits received by the trustee”.  It sets out the circumstances in which the Inspector‑General may make a determination specifying remuneration that a trustee of a regulated debtor’s estate is entitled to receive for necessary work properly performed by the trustee in relation to the administration of the estate.[19] Section 60-15 provides for the matters to which the Inspector-General must have regard.

   [18] Bankruptcy Act; Schedule 2; ss 60-11(1), (2) and (3)

   [19] Insolvency Practice Rules; s 60-5

1. Division 90 of the Insolvency Practice Schedule provides for review of the administration of a regulated debtor’s estate. Subdivision C provides for review by the Inspector-General of remuneration received by the trustee for services performed in relation to the administration of the estate.[20]  Section 9-22 of the Insolvency Practice Schedule provides that the Insolvency Practice Rules may provide for, and in relation to, reviews carried under Subdivision C.  Among the matters, for which provision may be made, are those relating to the powers and duties of the Inspector-General in carrying out the review.[21] 

   [20] Bankruptcy Act; Schedule 2; ss 90-21(1) and (2)

   [21] Bankruptcy Act; Schedule 2; s 90-22(b)

1. Section 90-21(3) of the Insolvency Practice Schedule provides that:

   “The trustee, the regulated debtor or a creditor of the regulated debtor may apply to the Court for an order in relation to a decision of the Inspector-General in relation to the review.”

   No mention is made of any right to apply to the Tribunal for review of a decision made by the Inspector-General in relation to a decision made by the Inspector-General under Subdivision C. Mention is made in s 90-5 of the of review by the Tribunal in Division 90 of the Insolvency Practice Rules but it does so in very limited circumstances. Sections 90‑5(4) and (5) provide for review of decisions made by the Inspector-General either to refuse to extend, or to extend, the time within which an application may be made to the Inspector-General for review of the trustee’s remuneration. The Insolvency Practice Rules do not provide for an application to be made to the Tribunal for review of the Inspector-General’s decision after reviewing the trustee’s remuneration.

1. The upshot is that, although s 167 was repealed by the ILR Act, the review rights provided by the Insolvency Practice Schedule and the Insolvency Practice Rules is, in substance, the same as the rights that were provided under s 167 before its repeal with effect from 1 March 2017. That is to say, review of the Inspector-General’s determinations regarding the remuneration to which the trustee is entitled may only be reviewed by the Court.

Transitional provisions

1. Section 129 of the ILR Act provides:

   “Old Act continues to apply in relation to remuneration for trustees already appointed

   Despite the repeal of sections 161B and 162 of the old Act by this Schedule, those sections (other than subsections 162(5A), (6) and (6A)) continue to apply in relation to the remuneration of a trustee of an estate of a bankrupt who is appointed, or who consents to act, before the commencement day.”

1. The Inspector-General’s review of decisions under Subdivision C of Division 90 of Schedule 2 of the Bankruptcy Act may be carried out whether or not the remuneration is paid or payable, the cost or expense is incurred or paid or the funds were withdrawn or proposed to be withdrawn before, on or after the commencement day i.e. 1 March 2017.

CONSIDERATION

1. My examination of the legislative provisions reveals that Parliament has not made any provision for a bankrupt person to apply for review of a decision made by the Inspector‑General regarding the remuneration paid by the trustee of that bankrupt person’s estate.  The only avenue of review open to Mr Rasmussen is by application to the Court.  That was the case both before the ILR Act amendments came into effect on 1 March 2017 and after.  Whether that avenue remains open five years after the Inspector-General’s delegate made the decision in June 2013 would be a matter for the Court were Mr Rasmussen to choose to take it there. 

1. As I have decided that the Tribunal does not have jurisdiction to review the Inspector‑General’s decision dated 4 June 2013 in relation to the remuneration of the trustee of the applicant’s bankrupt estate, there is no point in extending the time within which Mr Rasmussen may apply for review of that decision.  Any application that he could make as a result of that extension would necessarily be without reasonable prospects of success for the Tribunal would not have jurisdiction to review it.  Therefore, I have decided not to grant Mr Rasmussen’s application for an extension of time within which to lodge his application.

I certify that the preceding twenty eight (28) paragraphs are a true copy of the reasons for the decision herein of Deputy President S A  Forgie

...........[sgd]......................................................

Personal Assistant

Dated:   13 September 2018

Date of interlocutory hearing:	17 July 2018
Self-represented Applicant:	Mr Paul Rasmussen
Representative for the Respondent:	Mr Mark Findlay Australian Financial Security Authority