Re Cook and Secretary, Department of Employment and Workplace Relations
[2007] AATA 1690
•24 August 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1690
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q 200500730
GENERAL ADMINISTRATIVE DIVISION ) Re BARRY COOK Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Deputy President P E Hack SC Date24 August 2007
PlaceBrisbane
Decision The Tribunal dismisses the application for review pursuant to s 42A(4) of the Administrative Appeals Tribunal Act 1975.
...............Signed...............
Deputy President
CATCHWORDS
INSOLVENCY AND BANKRUPTCY – standing to prosecute an application in the Tribunal – applicant has no interest in debt or a possible refund - the applicant, as a bankrupt, lacks standing – whether the proceedings are stayed by operation of s 60(2) of the Bankruptcy Act 1966 - proceedings stayed - the question of whether debt incurred by means of fraud not answered – application dismissed for want of jurisdiction
Administrative Appeals Tribunal Act 1975 (Cth.) – ss 27(1), 30, 31, 32, 33, 35, 35A, 40, 42A(4)
Social Security Act 1991 (Cth.) – ss 1230C(1)(a), s 1237AAD
Social Security (Administration) Act 1991 (Cth.) – s 142(1)
Bankruptcy Act 1966 (Cth.) – ss 5, 58(1), 60(2),(4),(5), 134(1)(j), 153(2)(b)
Cummings v Claremont Petroleum NL (1996) 185 CLR 124
McCallum v Commissioner of Taxation (1997) 75 FCR 458
Robertson v Commissioner of Taxation (2004) 137 FCR 513
Case X 18 90 ATC 219
Case 2/94 94 ATC 106
Re A and Commissioner of Taxation (1997) 46 ALD 715
Griffiths v Civil Aviation Authority (1996) 67 FCR 301
Re Civitareale and Secretary, Department of Family and Community Services (1999) 57 ALD 451
Owens v Comlaw (2006) 201 FLR 275
Secretary, Department of Social Security v Southcott (1998) 82 FCR 100
REASONS FOR DECISION
24 August 2007 Deputy President P E Hack SC 1.This is an application by Mr Barry Cook to review decisions made by Centrelink to raise and recover debts totalling $8,035.38 said to have arisen when Mr Cook was paid more disability support pension than he was entitled to receive. That overpayment arose, it is said, because Mr Cook failed to inform Centrelink of the fact and amounts of income of his then de facto spouse, Ms Gini Hough.
2.There are four decisions in issue, made at different times and relating to different periods. They are:
(a)a decision made on 27 February 2001 in relation to a debt of $356.40 in the period 19 July 2000 to 10 October 2000;
(b)a decision made on 2 May 2002 in relation to a debt of $1,187.84 for the period 8 November 2000 to 11 September 2001;
(c)a decision made on 30 April 2003 in relation to a debt of $6,191.17 for the period 26 June 1998 to 4 July 2000; and
(d)a decision made on 12 May 2003 in relation to a debt of $299.97 for the period 12 September 2001 to 9 October 2001.
3.These decisions were affirmed on internal review on 28 June 2002 and 1 August 2005 and by the Social Security Appeals Tribunal on 31 October 2005.
Mr Cook’s Bankruptcy
4.Before dealing with the merits of the case, it is necessary to deal with the consequences of Mr Cook having become bankrupt on 20 January 2006 upon the acceptance of his debtor’s petition. That occurred after Mr Cook had commenced the proceedings in this Tribunal. I was informed by Mr Clark, counsel for the Secretary, Department of Employment and Workplace Relations, that, as a result of deductions made from social security payments[1] to Mr Cook, an amount of $6,629.84 remained outstanding at the commencement of Mr Cook’s bankruptcy.
[1] See s 1230C(1)(a) of the Social Security Act 1991 (Cth.).
5.The question that arises is whether it is competent for Mr Cook to prosecute the proceedings having regard to the fact of his bankruptcy. It is, as the High Court re-affirmed in Cummings v Claremont Petroleum NL[2],
“… fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts.”
[2] (1996) 185 CLR 124 at p. 138.
6.The divesting of the bankrupt’s interest in property is achieved by s 58 of the Bankruptcy Act 1966 (Cth.). That section vests the property of the bankrupt in the trustee of the estate. Section 153 of that Act provides that, with certain exceptions, when a bankrupt is discharged from bankruptcy the discharge operates as a release from all debts provable in the bankruptcy. It is material in the present case to note the exception provided in s 153(2)(b) of the Bankruptcy Act,
“a debt incurred by means of fraud.”
That paragraph is relevant here because the Secretary contends that Mr Cook’s overpayment debts were incurred by means of fraud and thus s 153 of the Bankruptcy Act, the Secretary says, will not operate to release Mr Cook from the balance of the debt.
7.Given the bankruptcy, the first issue is whether Mr Cook has standing to prosecute these proceedings. There is considerable binding authority for the proposition that upon bankruptcy an applicant in this Tribunal will generally be unable to be described as a person “dissatisfied” with an objection decision of the Commissioner of Taxation and thus will lack standing to prosecute an application for a review of that decision[3]. Those decisions are based upon the language of s 14ZZ of the Taxation Administration Act 1953 (Cth.), which confers the right to seek a review of an objection decision upon a person dissatisfied with the Commissioner’s objection decision. The gravamen of the decisions appears from the judgement of Whitlam J in McCallum[4] :
“The fundamental principle embodied in the Bankruptcy Act must also affect the applicant’s right to apply to the Tribunal for review of the respondent’s objection decision, since the applicant is no longer liable for the taxation debt. His locus standi cannot depend upon whether, under par 14ZZ(a) of the Administration Act, he ‘applies’ to the Tribunal or ‘appeals’ to the Court. Such a distinction would not be logical. In either case he can have no interest to minimize his liabilities. The trustee, on the other hand, plainly does have such an interest. (Section 177 of the Assessment Act affects the trustee to the same extent as the bankrupt.) Whatever may be the correct characterisation of a taxation objection for the purposes of s 134(1)(j) of the Bankruptcy Act (a question which was not argued in the present appeal), I agree with Lehane J for the reasons he gives that a review of an objection decision under Pt IVC of the Administration Act is a “legal proceeding” that the trustee is empowered to institute.”
[3]McCallum v Commissioner of Taxation (1997) 75 FCR 458; Robertson v Commissioner of Taxation (2004) 137 FCR 513.
[4] 75 FCR 458 at 470-1.
8.The legislation in issue here, the Social Security (Administration) Act 1999 (Cth.), confers the right to seek a review by the Social Security Appeals Tribunal of a decision upon a person “whose interests are affected by the decision”.[5] Where a decision has been reviewed by that Tribunal, application may be made to this Tribunal to review the decision but the right to seek review is not conferred by that Act upon any particular person or class of persons. Seemingly, that task is performed by s 27(1) of the Administrative Appeals Tribunal Act 1975 (Cth.) which provides:
“Where this Act or any other enactment … provides that an application may be made to the Tribunal for a review of a decision, the application may be made by or on behalf of any person or persons … whose interests are affected by the decision”.
[5] See s 142(1) Social Security (Administration) Act 1991 (Cth.)
9.Before his bankruptcy, Mr Cook was a person whose interests were affected by the decision but is that the case after his bankruptcy? In the ordinary case, Mr Cook would have no interest in the proceedings because he would be released from any debt that remained regardless of this Tribunal’s decision.
10.The question that then arises is whether the reduction of the debt by deductions from payments to Mr Cook makes Mr Cook a person whose interests are affected by the decision. I think the answer to that is no.
11.If it be assumed for the purposes of the argument that the proceedings were decided favourably to Mr Cook, that is, it was decided that there was no debt, the result would be that, prima facie, Mr Cook would be entitled to have refunded the amount of $1,405.54 already deducted. But his interest in the amounts deducted answers the description of “property” in s 5 of the Bankruptcy Act which, by virtue of s 58 of that Act, is vested in the Official Trustee upon bankruptcy.
12.But does a different result flow where the Secretary contends that Mr Cook would not be released from the debt? Does the existence of that contention give Mr Cook standing as a person affected by the decision sought to be reviewed? It seems to me that the fact that the Secretary advances this contention does not alter the prima facie position that Mr Cook lacks standing.
13.That is so by reference to the decisions in issue in these proceedings. These were decisions to raise and recover debts unaffected by any consideration of Mr Cook’s bankruptcy. They were not decisions that Mr Cook remains liable for the debt, despite a discharge from bankruptcy, because the debts in question were debts incurred by fraud. The time for making that decision has not yet arrived. If, after Mr Cook is discharged from bankruptcy, a decision is made by the Secretary that Mr Cook remains liable for the debt, that decision will be a decision that records the debt as a debit in the accounting records of Centrelink[6] and will be capable of being reviewed internally and externally.
[6]The language comes from Secretary, Department of Social Security v Alvaro (1994) 50 FCR 213 at 218.
14.Thus, as it seems to me, Mr Cook has no interest in either the debt or the possibility of any refund.
15.There is a further reason why the bankruptcy presents insurmountable procedural difficulties for Mr Cook and that is s 60(2) of the Bankruptcy Act. It provides:
“An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.”
The term “action” is defined in s 60(5) of the Bankruptcy Act as “any civil proceeding, whether at law or in equity”.
16.There are conflicting decisions of the Tribunal on the question whether an application in the Tribunal is an “action” as defined.
17.In Case X18[7], Senior Member Roach concluded that an application for a review of an objection decision by the Commissioner of Taxation was an “action” as defined. Then, in Case 2/94[8], Senior Member Fayle reached the opposite conclusion by reference to the meaning to be given to “action”. Then, in Re A and Commissioner of Taxation[9], Deputy President McDonald considered the two earlier decisions and concluded that the right to seek a review of an objection decision by the Commissioner amounted to a proprietary right that vested in the trustee of a deed pursuant to Part X of the Bankruptcy Act. In reaching that conclusion, the Deputy President considered the decision of the Full Court of the Federal Court in Griffiths v Civil Aviation Authority[10]. That case decided that the right to appeal to the Federal Court from the decision of the Tribunal affirming a decision by the Authority to impose conditions on the pilot’s licences held by Mr Griffiths was not property that vested in Mr Griffiths’ trustee in bankruptcy.
[7] 90 ATC 219.
[8] 94 ATC 106.
[9] (1997) 46 ALD 715.
[10] (1996) 67 FCR 301.
18.Griffiths is of significance because of the distinction drawn by all members of the Court between property that passed to a trustee and property that did not. That distinction appears from the reasons for decision of Cooper J[11]:
“In my view, ‘property’ in s 5(1) of the Act does not include a statutory right in the nature of an appeal under s 44 of the AAT Act nor an appeal pursuant to s 19 of the Federal Court Act, with which we are here concerned. The statutory right does not affect any property which forms part of the bankrupt’s estate and which vests in the trustee as property of the bankrupt. Nor will the institution and prosecution of the proceedings by Mr Griffiths delay the administration of the estate or expose it to any adverse order for costs. If Mr Griffiths fails in the proceedings against the respondent CAA, any order for costs against him is not provable in his estate because it would be a debt which arose after the date of the sequestration order (Re British Gold Fields of West Africa [1899] 2 Ch 7 (CA) at 11-12; Re Davis: Ex parte National Australia Bank Ltd v Official Trustee in Bankruptcy (unreported, Federal Court, Burchett J, 11 October 1989) at p 10.”
[11] 67 FCR 301 at 325.
19.Then, in Re Civitareale and Secretary, Department of Family and Community Services[12], Deputy President Forgie dealt with a matter similar to the present case. The applicant in that case was seeking a review of a decision to raise and recover a compensation debt. After the proceedings had been commenced in the Tribunal, but before hearing, the applicant (and a joined party) had become a bankrupt. The Deputy President expressed her conclusion in this way[13]:
“Once Mr Civitareale had become bankrupt, I have considered whether his application was stayed by virtue of s 60(2) of the Bankruptcy Act. Applying the reasoning of Pincus J in Re Brown; Ex parte Taylor v Queensland Electricity Commission (1988) 19 FCR 180; 83 ALR 141, I have concluded that, while an application in this tribunal is a “proceeding” for some purposes, it is not a “civil proceeding, whether at law or in equity” (emphasis added) and so not an “action”: see (70) above. As it is not an action, it is not automatically stayed by virtue of s 60(2).”
[12] (1999) 57 ALD 451.
[13]57 ALD 451 at 467 para.[78].
20.The Deputy President’s reasoning for this conclusion appears from this passage[14]:
“It appears from these cases[[15]] that, in considering whether or not a proceeding is to be regarded as an action within the meaning of s 60(2), I must have regard to such matters as the nature of the application and the venue in which it was made, the remedies sought and whether or not property can be affected (either by diminution or otherwise) by the proceedings. Apart from Case 2/94, however, none of these cases considered whether a proceeding in a tribunal could be regarded as an ‘action’ within the meaning of s 60(2) and (3).”
[14] 57 ALD 451 at 464, para. [66].
[15] Re Brown; Ex parte Taylor v Queensland Electricity Commission (1988) 19 FCR 180; Case 2/94 (1993) 94 ATC 106; Daemar v Industrial Commission of NSW (1988) 12 NSWLR 45; Cummings v Claremont Petroleum NL (1996) 185 CLR 124.
21.A related issue was dealt with in McCallum v Commissioner of Taxation[16] where the Court considered the question of whether proceedings in the Tribunal for the review of an objection decision by the Commissioner of Taxation was a “legal proceeding” for the purposes of s 134(1)(j) of the Bankruptcy Act which gives a trustee the power to “bring, institute or defend any action or legal proceeding relating to the administration of the estate”. Lehane J, with whom Whitlam J agreed, noted[17] that authority did not compel a construction of “legal proceeding” that would limit the phrase to proceedings in a court. His Honour concluded[18] that an application to the Tribunal under s 14ZZ of the Taxation Administration Act was a legal proceeding and was one that related to the estate.
[16] (1997) 75 FCR 458.
[17] 75 FCR 458 at 472.
[18] 75 FCR 458 at 474.
22.It is significant that the attention of Deputy President Forgie was not drawn to the decisions in Case X18 or Re A and the Commissioner of Taxation. That seems to me to have lead her, with respect, to a too narrow view of the meaning to be given to the expression “any civil proceeding, whether at law or in equity”.
23.Recently, the Victorian Court of Appeal undertook a survey of the authorities in Owens v Comlaw[19]. The applicant in that case was the trustee in bankruptcy of a solicitor, Owens, who had commenced an appeal against a decision relating to a dispute over the terms of a retainer between the solicitor and a former client, Comlaw, for work done prior to the bankruptcy. Ashley JA, with whom Redlich JA agreed, set out the following propositions regarding s 58(1) and s 60(2) of the Bankruptcy Act[20]:
[19] (2006) 201 FLR 275.
[20] 201 FLR 275 at 285.
(1)“By s 58(1)(b) of the Act, the after acquired property of a bankrupt vests in the trustee. By operation of Division 4B of Part VI of the Act, the income derived by the bankrupt during bankruptcy - which includes income earned before, but received after, sequestration – is not after- acquired income. Nonetheless, the trustee may require the bankrupt to make contributions towards the estate out of such income.
(2)Section 60(2) operates to stay an action which is on foot at the time when a person is made bankrupt until the trustee makes an election to prosecute or discontinue the same within the period made relevant by the giving of notice under subs (3). That is so where the proceeding is an "action" within the meaning of subs (5), provided always that it is not an action excluded from the operation of subs (2) by subs (4).
(3)‘Action’ is apt to include an appeal.
(4)The question whether an action is one to which s 60(2) applies, assuming that it fits the description in subs (5), and is not excluded by operation of subs (4), is not necessarily dependent upon the action or its subject matter being "property" which vested in the trustee under s 58(1). There may nonetheless be such a connection between the action and the estate as to make s 60(2) applicable. This case is an illustration of such a connection.
(5)Thus, one could expect that a consequence of a successful appeal would be that the quantum of professional costs recoverable by Ms Owens from the respondents would be the greater. That could be expected to bear upon the quantum of required contributions, and in turn bear upon the size of the estate divisible amongst creditors.
(6)Again, a likely consequence of a successful appeal would be that the costs order made against Ms Owens at first instance would be reversed. Such an outcome would benefit the estate – at least by reducing the quantum of claims provable against it.
(7)Further, the success of the appeal might have favourable implications for the quantum of disbursements recoverable from the respondents. Disbursements, when recovered, should probably be described as after-acquired property. But whether or not that be so, the larger the amount of recoverable disbursements, the better for Ms Owens’ creditors.
(8)All in all, even if none of the favourable consequences of a successful appeal should be characterised as "property", it is evident that successful prosecution of the appeal would be likely to have favourable consequences for creditors – I except the respondents. That shows a connection between the action and the estate which, in my opinion, is quite sufficient to give s 60(2) application.
(9)The nature of the action is not one which could call s 60(4) into play.
(10)So far as - qualifying proposition (2) - there may be cases where s 60(2) does not operate although the action falls within the subs (5) definition, and is not excluded by subs (4), this action is not akin to the kinds of matters mentioned by Cooper, J in Griffiths, or hinted by Kirby P in Daemar.
(11)Questions which have arisen where an action was commenced after bankruptcy – whether the action or its subject matter was properly within s 58(1), and, if not, whether the bankrupt nonetheless had standing to pursue such action - have not arisen in the context to which s 60(2) applies. The factual situations are quite different, and one could not safely extrapolate from the former to the latter.”
24.The present proceedings are not excluded from the operation of s 60(2) of the Bankruptcy Act by s 60(4) of that Act because they are not proceedings in respect of any personal injury or wrong done to Mr Cook. But the nature of the issue in these proceedings is such that there is a close connection between the proceedings and Mr Cook’s estate. The essential questions that arise in these proceedings are whether there is a debt owed by Mr Cook, the amount of that debt, and whether it ought be waived. Were I to conclude that there was no debt, the trustee in Mr Cook’s bankruptcy would be entitled to receive any refund on behalf of the estate. The proceedings are intimately concerned with Mr Cook’s debts, property, and his estate. Thus, in my view, the present proceedings are caught by s 60(2) of the Bankruptcy Act so long as the proceedings in the Tribunal can be described as “an action”.
25.The term “action” has a technical meaning, but for present purposes it is defined as “any civil proceedings, whether at law or in equity”. The adjective “civil” seems to me to have been used in contradistinction to “criminal”. If that be correct, the requirement of “civil” is satisfied. And, as it seems to me, matters within this Tribunal are properly described as “proceedings”. The Administrative Appeals Tribunal Act 1975 uses that term throughout[21]. The qualification “whether at law or in equity” does not limit the width of the expression “any civil proceedings”; it emphasises its width.
[21] See for example, ss 30, 31, 32, 33, 35, 35A and 40.
26.In my view, the present proceedings come within s 60(2) of the Bankruptcy Act and are stayed. Further, I consider that Mr Cook lacks standing to continue the proceedings. If the proceedings are to be continued it should be by, and in the name of, the trustee in bankruptcy.
27.I would propose to give effect to these conclusions by dismissing the proceedings pursuant to s 42A(4) of the Administrative Appeals Tribunal Act 1975.
28.Mr Cook may regard that as an unsatisfactory outcome however it seems to me to be the inevitable conclusion, given his bankruptcy. During the course of the hearing I raised the question of whether it was appropriate for the Tribunal to seek the consent of the Official Trustee to be made a party to the proceedings. However, on reflection, I do not propose to adopt that course.
29.In a practical sense, it seems to me that Mr Cook is not disadvantaged by my conclusions. Given that the debts are provable debts in Mr Cook’s bankruptcy, s 58(3) of the Bankruptcy Act has the effect that it would not be competent for the Secretary to enforce any remedy against Mr Cook’s property in respect of those debts. The decision of North J in Secretary, Department of Social Security v Southcott[22] is authority for the proposition that the remedies of the Secretary under s 1230C of the Social Security Act are not exercisable during bankruptcy because there is no debt due to the Commonwealth; that debt having been converted by the bankruptcy into the right to prove in the bankruptcy.
[22] (1998) 82 FCR 100.
30.Against the possibility that my conclusion might be held to be erroneous, I should briefly discuss the other factual issues that arise.
31.On the evidence there is no reason to doubt the existence, prior to bankruptcy, of the various debts arising from Mr Cook having received amounts to which he was not entitled. Were it to have been necessary for me to consider the matter, I would not have regarded Mr Cook’s circumstances as being “special”, such as would warrant the exercise of the discretion to waive, found in s 1237AAD of the Social Security Act. Mr Cook’s health is not good but that is so of many who find themselves owing a debt of this nature. I note, in any event, that North J in Secretary, Department of Social Security v Southcott[23] concluded that there was no power to waive or write-off a debt during bankruptcy.
[23] 82 FCR 100 at 111.
32.What remains is the Secretary’s contention that Mr Cook’s debt will not be discharged by operation of law when Mr Cook is discharged from bankruptcy. I do not propose to deal with that issue.
33.First, it is entirely academic given my conclusions about Mr Cook’s standing and the fate of this proceeding. Next, there is no decision concerning the question, either by Centrelink or the Social Security Appeals Tribunal, given that the bankruptcy occurred after the decision had been made and affirmed. Finally, the question has a further level of detachment because Mr Cook has not been discharged from bankruptcy. The Secretary’s contention seeks to have me answer a hypothetical question about the operation of the Bankruptcy Act at a time in the future when Mr Cook is discharged from bankruptcy. I do not propose to answer that question.
34.As it seems to me, if, when Mr Cook is discharged from bankruptcy, the Secretary takes the view that the debt was not discharged, effect can be given to that view by adopting one of the mechanisms in the Social Security Act to recover the debt. Presumably the Secretary would seek to make deductions from any social security payments then being made to Mr Cook. If Mr Cook is dissatisfied with that decision, he may seek internal and external review and the question can be decided by reference to fact and evidence rather than hypothesis and conjecture.
35.I should not want to be thought by this to be encouraging the Secretary to make such a decision when the time arises. A finding of fraud is a serious matter which ought be made only in the clearest of cases. Whether it can or should be made will depend upon the evidence then available. I propose to say nothing further about the matter.
36.I should finally record my thanks to Mr Coulsen of counsel who acted as amicus curiae and rendered considerable assistance with the difficult bankruptcy issues that arise in this case.
37.In the result, I would dismiss the application pursuant to s 42A(4) of the Administrative Appeals Tribunal Act.
I certify that the 37 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC
Signed: ..................Signed….............................................
Eleanor O’Gorman, AssociateDate of Hearing 25 July 2007
Date of Decision 24 August 2007
The applicant appeared in person
Counsel for the Respondent Mr C Clarke
Solicitor for the Respondent Sparke HelmoreCounsel, amicus curiae Mr C D Coulsen
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