Re Singh and Secretary, Department of Education, Employment and Workplace Relations

[2010] AATA 720

CATCHWORDS – SOCIAL SECURITY – NEWSTART ALLOWANCE – meaning of “unemployed” – failure of one business but continuation of another – underemployed but not unemployed.

PRACTICE AND PROCEDURE – application dismissed for applicant’s failure to appear at a proceeding – reinstated – effect of reinstatement – continuation of application.

PRACTICE AND PROCEDURE – applicant bankrupt after dismissal but before reinstatement – effect of bankruptcy on application – considerations differ according to whether bankrupt before or after application commenced – application not stayed by bankruptcy.

Bankruptcy Act 1966, ss 5(1), 58(1)(a), 58(5), 58(5A), 60(1)(b), 60(2), 60(5), 82(1A), 82(2), 82(3), 83, 108, 116(1), 116(2), 129(1), 139P, 139S, 153(1)(b)
Income Tax Assessment Act 1936, s 177(1)
Social Security (Administration) Act 1999, ss 60(1), 60(2), 60(2)(a), 60(2)(b), 238, 1231, 1234

Social Security Act 1991, ss 23(1), 593(1)(a)(i), 593(1)(b), 595(1), 603(3), 608, 643, 1068-G1, 1068-G7AL, 1068-G8, 1234(2)
Taxation Administration Act 1953, ss 14ZZ, 14ZZ(a)

Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board [2007] HCA 23; (2007) 231 CLR 350; 234 ALR 618; 81 ALJR 1155; 95 ALD 220
Allan v Transurban City Link Ltd [2001] HCA 58; 208 CLR 167; 75 ALJR 1551; 183 ALR 380
Baker v Sheridan & Anor [2005] NSWCA 408
Baulkham Hills Shire Council v Stankovic [2009] NSWCA 281
Bourne v Norwich Crematorium Ltd: [1967] 1 WLR 691; 2 All ER 576
Case 2/94 (1994) 94 ATC 106
Case X18 (1990) 90 ATC 219
Cheney v Spooner (1929) 41 CLR 532; [1929] ALR 173; (1929) 3 ALJR 30
Cummings v Petroleum NL [1996] HCA 19; (1996) 185 CLR 124; 137 ALR 1; 70 ALJR 616
Director-General of Social Services v Thomson [1981] FCA 209; (1981) 38 ALR 624; 53 FLR 356
Dudley (Lord) v Dudley (Lady) (1705) Prec. Ch. 241
Federal Commissioner of Taxation v Official Receiver (1956) 95 CLR 300; [1956] ALR 643; (1956) 30 ALJR 143
Fuller v Beach Petroleum NL [1993] FCA 453; (1993) 43 FCR 60; 117 ALR 235
Griffiths v Civil Aviation Safety Authority [1996] FCA 1502; 67 FCR 301; 137 ALR 521; 41 ALD 50
Heath v Tang [1993] 1 WLR 1421; [1993] 4 All ER 694
Lofthouse (In the matter of Guss) [2001] FCA 25; (2001) 107 FCR 151
McAuliffe v Secretary, Department of Social Security [1991] FCA 268; 13 AAR 462; 23 ALD 284
McCallum v Commissioner of Taxation (1997) 75 FCR 458; 145 ALR 446; 36 ATR 256
McKellar v Container Terminal Management Services Ltd (No 4) [2002] FCA 185
McMahon v Block [2010] FCA 947
Owens v Comlaw [2006] VSCA 151; (2006) 201 FLR 275
Randall v Deputy Commissioner of Taxation [2008] FCA 1939; (2008) 174 FCR 441; 74 ATR 188; 110 ALD 41
Re A and Commissioner of Taxation (1997) 46 ALD 715
Re Cook and Secretary, Department of Employment and Workplace Relations [2007] AATA 1690
Re Hawkins; Ex parte Official Receiver (1892) 1 QB 890
Re Robson and Secretary, Department of Social Security [1992] AATA 157
Re Rouf and Secretary, Department of Family and Community Services [2004] AATA 838; (2004) 83 ALD 357
Re Te Velde and Director-General of Social Services [1981] AATA 87; (1981) 3 ALN N111
Re Vassal Pty Ltd [1983] 2 Qd R 769
Re Waller and Secretary, Department of Social Security (1985) 8 ALD 26
Robertson v Deputy Commissioner of Taxation [2003] FCA 944; (2003) 2003 ATC 4878
Secretary, Department of Employment and Workplace Relations v Joss [2006] FCA 884; (2006) 152 FCR 541; 92 ALD 60
Secretary, Department of Social Security v Southcott [1998] FCA 323; (1998) 82 FCR 100; 50 ALD 162
Spirakos v Deputy Federal Commissioner of Taxation [2005] FCA 1068; (2005) 2005 ATC 4826
Taylor v Secretary to the Department of Social Security (1988) 18 FCR 322; 79 ALR 327; 14 ALD 655
Transurban City Link Ltd v Allan [1999] FCA 1723; (1999) 95 FCR 553; 168 ALR 687; 57 ALD 583; 105 LGERA 427; 30 AAR 304

DECISION AND REASONS FOR DECISION [2010] AATA 720

ADMINISTRATIVE APPEALS TRIBUNAL     )

)   2009/6002
GENERAL ADMINISTRATIVE DIVISION     )  

Re:DYA SINGH

Applicant

And:SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal:                  Deputy President S A Forgie
Date:  22 September 2010
Place:  Melbourne

Decision:The Tribunal:

affirms the decision of the Social Security Appeals Tribunal dated 28 October 2009.

S A Forgie

Deputy President

REASONS FOR DECISION

Mr Singh challenged the decision made by the Social Security Appeals Tribunal (SSAT) affirming a decision that he was not entitled to Newstart Allowance.  It did so on the basis that Mr Singh was not unemployed.  After Mr Singh had lodged his application in the Tribunal and after it had been dismissed but before it had been reinstated, the Federal Magistrates Court made a sequestration order against Mr Singh.  Neither
Mr Noonan, representing the Secretary of the Department of Education, Employment and Workplace Relations (Secretary), nor I was aware of the order until the day of the hearing of Mr Singh’s application. Neither Mr Singh nor Mr Noonan was in a position to make submissions and did not seek an opportunity to make them at a later date. The issue was left for me to decide. I have decided that Mr Singh’s bankruptcy is not stayed by the operation of s 60(2) of the Bankruptcy Act 1966 (Bankruptcy Act).

2.  With regard to the second issue, I have decided that Mr Singh was not unemployed at the time he lodged his claim for a Newstart Allowance or in the period following lodgement.  As Mr Singh will only qualify for a Newstart Allowance if he is both unemployed in the relevant period and meets the activity test in that same period, I have not considered whether he has satisfied the activity test.  In deciding that he is not unemployed,
I have considered the meaning of the word “unemployed” as it is used in s 593(1)(a)(i) when establishing it as one of the criterion for qualification for a Newstart Allowance. I have also considered whether I should exercise the discretion conferred by s 595(1) to treat Mr Singh as unemployed in circumstances in which I consider he is not unemployed. After considering the purpose of the payment of a Newstart Allowance and criterion established by Parliament regulating a person’s qualification for the payment, I decided that I should not exercise the discretion.

BACKGROUND

3.  On the basis of Mr Singh’s evidence and that of his daughter, Ms Jamel Dhillon, I find that he formerly owned an independent fuel business and “servo” in Morwell in Victoria.  He began operating that business in January 2004.  On the basis of his letter dated 18 February 2009, I find that he attempted to sell his business as a going concern.  Due to the volatility of the fuel business and recent bushfires in the area, he had been unsuccessful.  In October 2008, his fuel supplier, SA Farmers’ Union, closed its business operations in Victoria.  Mr Singh was no longer able to service the loans with which he had purchased the business and that he had secured with mortgages over the property from which he operated the business and his house in Adelaide.  As he could not meet his debts and make repayments on his loans, he has lost his assets including his house.  He and his wife left Morwell and now live with one of their married daughters.

4.  For the last 20 years, Mr Singh has also worked as a musician.  Mr Singh’s music is spiritual in nature and he both composes and performs it.  It has its basis in Sikh spiritual music but Mr Singh is also known as an interpreter of traditional Sikh hymns who draws his inspiration from sources both inside and outside the traditional sources.  In 1992, he formed a group called the Dya Singh World Music Group.  Over the years, he has performed both at Sikh religious events as well as at more mainstream events such as the Woodford Folk Festival and the Adelaide Fringe Festival.  He and his group have travelled extensively overseas.  He has recorded his music and it is available for sale.  Mr Singh maintains a website explaining and promoting his music and his work.

5.  Mr Singh’s advice is also sought worldwide as a spiritual consultant for youth.  He conducts workshops and classes for Sikh youth throughout the world.  During 2008,

Mr Singh performed or conducted workshops at the following venues and, after expenses, received payments of $8,357.  Mr Singh’s airfares, food and accommodation were met by those who invited him to perform:

Month	Performance	Payment	Expenses	Net payment
February 2008	Footscray Music Festival Multicultural Arts – Federation Square	$300 $300	$300 $300
March 2008	Adelaide Fringe Festival	$400	$120 - fuel	$280
May 2008	Penang World Music Festival	$1,500
September/October 2008	USA/Canada/India tour	$4,500	$408 -insurance $315 -USA visa	$3,777
November 2008	Rye Multifaith Festival	$200
December 2008	Woodford Music Festival	$2,000

6.   In his income tax return for the year ending 30 June 2008, Mr Singh’s taxable income was shown as $17,251 being made up of gross income of $22,250 less expenses totalling $4,999.  His income was shown as being derived from business that was not primary production.  At P3, the number of his business activities was shown as “1”.  He described his main business activity as “Musicians and entertainers” and by reference to the Industry Code of 90021.  The business name of his main business was shown as the “DYA SINGH THE GROUP”.  The Notice of Assessment issued by the Commissioner of Taxation showed
Mr Singh’s taxable income as $17,251.[1]

[1] T documents at 10

7.  Mr Singh became very downhearted about the loss of his business and the foreclosure of his mortgage resulting ultimately in the loss of his house in Adelaide.[2]  Early in 2009, he realised that he had to start looking for a full time job.  He was not able to work as a musician at the pace he had set for himself over the previous 15 years or so.  He was completely disillusioned.

[2] Order for possession made on 12 January 2009: T documents at 32-33.  A civil claim was filed on 28 January 2009 for the recovery of outstanding local council rates payable on the property: T documents at 34-35.

8.  Mr Singh approached Centrelink on 5 February 2009 for assistance.  He understood that he could either apply for an Invalid Pension if he felt that he was not well enough to work full-time or apply for Jobstart and start looking for a full-time job.  He was given the address of IPA Personnel Pty Ltd and given the name of a person whom he should contact.  He went immediately to IPA where he was told that he could use their computers to search for job vacancies, which they had listed.  Until they received notification from Centrelink, they told him, they could not assist him further.  On 16 February 2009, Mr Singh lodged a Customer Declaration Form in relation to his claim for Newstart Allowance.[3]

[3] T documents at 36-39

9.  I accept Mr Singh’s oral evidence that each morning for three months he walked the streets knocking on the doors of businesses in the Dandenong and Springvale area looking for work.  Many years before, he had trained as an accountant but his knowledge and skills are out of date and he could not look for that sort of work.  He looked instead for bookkeeping and clerical work, work as a musician and as an interpreter as well as any form of manual work such as cleaning.  He was unsuccessful.  Mr Singh also prepared a letter to which he attached a brief resumé.  He distributed it in Dandenong and also sent it to approximately 200 companies.  He approached various people whom he knew in Melbourne and in other States seeking employment but they were unable to find funding to engage him at the time.  They advised him that funding for the music industry had been cut to the barest minimum.  As far as work in Adelaide was concerned, Mr Keith Preston of Artbeat Management advised him in a letter dated 17 February 2009 that there were casual jobs but nothing that would justify his moving there.  In a letter dated 4 March 2009, Mr Peter Mousaferiadis of Pan International Creative Services advised Mr Singh that he welcomed him as an artiste on their books and would endeavour to get him as many gigs as he could.  Budgetary considerations, however, prevented him from offering Mr Singh employment just as they prevented the Wesley Mission from doing so.  Mr Singh had acted as a voluntary guide for the Wesley Mission for a period of two or three years.

10.                  In July 2009, Mr Singh’s job seeking activities came to an end because he contracted shingles and suffered from them for almost three months.

11.                  Mr Singh’s undated application to the Australia-India Council for $20,000 to enable the Dya Singh World Music Group tour to India was unsuccessful.  Mr Singh had hoped to promote a cross cultural exchange between Australia and India by presenting Australian-Indian world music and dance.  He also approached other bodies such as the Australia Council and Multicultural Arts Victoria for funding.

12.                  Advertisingh Management is a business name used by Ms Jamel Dhillon and uses the website address On 30 March 2010, Ms Dhillon wrote on its letterhead advising her father that his income for events booked through Advertisingh between March and December 2009 was:

Month	Performance or event	Payment
8 March 2009	Goolwa River and Boat Festival	$250
27-29 March 2009	Apollo Bay Festival	$300
13 April 2009	National Folk Festival	$600
22 November 2009	World Music EXPO	$1,000
28 November 2009	Walking Humbly	$500
3-9 December 2009	POWR	N/P
15 December 2009	Lalor Primary School talk	$300

13.                  In addition to these activities, Mr Singh visited Malaysia from 12 May to
31 May 2009 in order to undertake a walk of some 200 kilometres from Kuala Lumpur to Malacca.  The purpose of the walk was to encourage Malaysians to exercise more and to reduce litter.  He undertook a similar walk in each of the two preceding years.  His fares and expenses for each were met by Sikh organisations and sponsors as they are when he attends Malaysia to undertake religious programmes.  He is a Sikh religious ambassador especially at multifaith conferences.[4]

[4]

14.                  Mr Singh’s income tax return for the year ending 30 June 2009 showed a net taxable income of $17,406.  Again, that income was described as having been derived otherwise than from primary production.  The number of business activities he conducted was recorded as “1” and the description of his main business activity was the same: “Musicians and entertainers” allotted the Industry Code of 90021.  Mr Singh had business income of $22,100 and expenses totalling $4,694 leaving his net income of $17,406.  No Notice of Assessment is available for this year.

15.                  Mr Singh and the Dya Singh World Music Group performed at the Parliament of World Religions held in Melbourne from 3 to 9 December 2009.  They shared the stage with the Dalai Lama.  Mr Singh participated in an AMES Volunteer Tutor Training Course to assist him in assisting culturally and linguistically diverse learners in his community.  It was a ten week course and the work he does as a result is voluntary.  Each month, he makes a presentation in a school.  The presentations are designed to expose school students to issues relating to racial intolerance in the school yard.  He receives $180 for each presentation.[5]

[5] My finding that the presentations are paid presentations and the performances at the Parliament of World Religions were not is supported by the letter dated 1 December 2009 and signed by Mr Peter Mousaferiadis, Founder and CEO of PAN International Creative Services.

16.                  In a letter dated 19 May 2009, Centrelink advised Mr Singh that he could not be paid Newstart Allowance because he was self-employed.[6]  The decision was affirmed by the Authorised Review Officer on 10 July 2009[7] and by the Social Security Appeals Tribunal (SSAT) on 28 October 2009.[8]

BANKRUPTCY

[6] T documents at 83

[7] T documents at 89-102

[8] T documents at 2-9

Some of the consequences of bankruptcy

17.                  Once Mr Singh became bankrupt, the general position is that his “… property …, not being after-acquired property, vests forthwith in … [the] registered trustee” appointed as trustee of his estate.[9]  The expression “the property of the bankrupt” as used in that context:

[9] Bankruptcy Act, s 58(1)(a)

“… in relation to a bankrupt, means:

(a)…

(i)the property divisible among the creditor’s; and

(ii)any rights or powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become bankrupt; …”[10]

The word “property” means:

“… real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property.”[11]

[10] Bankruptcy Act, s 5(1)

[11] Bankruptcy Act, s 5(1)

18.                  Not all real or personal property that is property within this definition is property divisible among the bankrupt’s creditors.  Among the property of a bankrupt that is divisible among creditors is:

“Subject to this Act:

(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and

(b)the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her  own benefit at the commencement of the bankruptcy and before his or her discharge; and

(c)-(g)…;

is property divisible amongst the creditors of the bankrupt.”[12]

[12] Bankruptcy Act, s 116(1)

19. Section 116(2) sets out several types of property that do not come within the description of “divisible property”. None is relevant in this case but the Bankruptcy Act is not the only legislation that is relevant. Section 60 of the Social Security (Administration) Act 1999 (SSA Act) provides that, subject to sections specified in s 60(2):

“A social security payment is absolutely inalienable, whether by way of, or in consequence of, … bankruptcy or otherwise.”

A “social security payment” includes a “social security pension” and a “social security benefit” and so includes payments such as a Newstart Allowance or Disability Support Pension payable under the Social Security Act 1991 (Social Security Act).[13]

[13] Social Security Act, s 23(1). The definition in the Social Security Act applies because, in the absence of any contrary intention, an expression used in the Social Security Act has the same meaning in the SSA Act: SSA Act, s 3(2).

20. The inalienability provision in s 60(1) has effect subject to those provisions set out in s 60(2). They relate to deductions at the request of the recipient of the social security payment,[14] certain payments to the Commissioner of Taxation,[15] the income management regime established by Part 3B of the SSA Act, the recoverability of debts listed in s 1231(1) by way of deductions from social security payments[16] and deductions under s 1234A by consent from a social security payment of a person who is not a debtor.[17]

[14] SSA Act, ss 60(2)(a) and 61

[15] SSA Act, ss 60(2)(a) and 238

[16] SSA Act, ss 60(2)(b) and 1231

[17] SSA Act, ss 60(2)(b) and 1234A

21.                  A bankrupt’s trustee immediately takes possession of all of his or her property that is divisible among his or her creditors.[18] The trustee must administer the property according to Part VI of the Bankruptcy Act. Unless a debt is given priority, all debts proved in bankruptcy rank equally. If the bankrupt’s property is insufficient to meet them in full, the proved debts are paid proportionately.[19] 

[18] Bankruptcy Act, s 129(1)

[19] Bankruptcy Act, s 108

22. Although the bankrupt loses control of property under s 58(1), the bankrupt also acquires some protections. Subject to certain qualifications, s 58(3) provides that the property of the bankrupt is protected from any attempt by a creditor to enforce a remedy against that property or against the bankrupt’s person in respect of the provable debt. The protection potentially extends to all of the bankrupt’s property because the wider definition of the expression “the property of the bankrupt” that is applicable in reading s 58(1) does not apply to ss 58(3) and (4).[20]  Excluded from the protection afforded by s 58(3) are attempts by a secured creditor to realise or otherwise deal with a security.[21]  Also excluded are actions by creditors in respect of any liability of the bankrupt under a maintenance agreement or order.[22]

[20] Definition of “the property of the bankrupt”: Bankruptcy Act, s 5(1)

[21] Bankruptcy Act, s 58(5)

[22] Bankruptcy Act, s 58(5A)

23. Other protections may be available if a Court makes an order under s 60 of the Bankruptcy Act to discharge an order made against the person or property of a debtor, against whom a petition has been presented,[23] under any law relating to the imprisonment of fraudulent debtors and, if the debtor is imprisoned, to discharge the debtor out of custody.[24]  Section 60 also gives the Court power to:

“stay any legal process, whether civil or criminal … against the person or property of the debtor:

(i)in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or

(ii)in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;

…”[25]

[23] A creditor’s petition is presented under Division 2 of Part IV of the Bankruptcy Act. Presentation of the creditor’s petition does not mean that the debtor is bankrupt. Bankruptcy only follows if the Court makes a sequestration order under s 52 of the Bankruptcy Act.

[24]

[25] Bankruptcy Act, s 60(1)(b)

24.                  A “provable debt” is “… a debt or liability that is, under this Act, provable in bankruptcy.”[26]  Section 82(1) provides:

“Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.”

[26] Bankruptcy Act, s 5(1)

Some debts are expressly included[27] and others expressly excluded.  Among the latter are demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust[28] and penalties or fines imposed by a court.[29] Enactments other than the Bankruptcy Act may also provide that amounts that would otherwise be characterised as debts are not debts. The effect of s 12ZW of the Student Assistance Act 1973, for example, is that a student loan agreed to before a student becomes bankrupt is not a provable debt in bankruptcy.

[27] Bankruptcy Act, s 82(1A)

[28] Bankruptcy Act, s 82(2)

[29] Bankruptcy Act, s 82(3)

25.                  A creditor must lodge a proof of debt in accordance with ss 84 or 85 before the debt will be taken to have been proved.[30]

[30] Bankruptcy Act, s 83

26. A bankrupt who derives income during the bankruptcy may be required to pay contributions towards his or her bankrupt estate under Division 4B of Part VI of the Bankruptcy Act.[31]  The contribution payable by the bankrupt is worked out by taking the amount of the actual income threshold amount applicable to the bankrupt from the bankrupt’s assessed income and dividing the remaining amount by two.[32]  The “income” that is assessed is defined in s 139L to have its ordinary meaning but subject to certain qualifications that are not relevant in this case.

[31] Bankruptcy Act, s 139P

[32] Bankruptcy Act, s 139S

27.                  The contribution provisions come about because a bankrupt’s earnings are not regarded as “property” within the meaning of s 5(1) and so do not come within the property that vests in the trustee on bankruptcy or during bankruptcy. The reason for their not doing so is this:

“The reason why an undischarged bankrupt is entitled to retain his personal earnings is, that he must be allowed to support himself and those whom it is his legal duty to support, and that he cannot be converted into a mere slave or personal chattel of his creditors.”[33]

[33] Re Hawkins; Ex parte Official Receiver (1892) 1 QB 890, at p 893 per Vaughan Williams J approved in Re Reilly; Ex Parte the Debtor [1979] FCA 2; (1979) 36 FLR 268 at [73]; 280 per Lockhart J

28.                  Earnings that retain their character as earnings remain earnings even if they are not paid forthwith or at the time at which they are usually paid according to the bankrupt’s terms of engagement.  The case of Federal Commissioner of Taxation v Official Receiver[34] provides an example.  A bankrupt’s employer deducted income tax from his wages and remitted them to the Commissioner of Taxation (Commissioner).  When the bankrupt’s income tax for the relevant year was assessed, it was found to be £44 6s 3d less than the amount deducted during the year.  Under the Income Tax and Social Security Assessment Act 1936, the bankrupt was entitled to be paid by the Commissioner the amount of the overpayment but the Official Receiver claimed it.  The High Court decided that “… It is a refund of part of the earnings of the bankrupt and money which he is entitled to retain in the absence of an order under s. 101 of the Act.  When he receives the refund and not before he will become for the first time in actual receipt of this part of his earnings. …”[35]  The question to be decided was: “does that ‘debt’, in substance and in reality, represent personal earnings of the bankrupt, or does it represent some other and different thing?”[36]

[34] (1956) 95 CLR 300

[35] (1956) 95 CLR 300 at 316 per Williams J with whom Dixon CJ agreed.

[36] (1956) 95 CLR 300 at 321 per Fullagar J with whom Dixon CJ also agreed

29.                  A bankrupt may be involved in an action, and so a “civil proceeding, whether at law or in equity”.[37]  Section 60(2) 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.”

[37] Bankruptcy Act, s 60(5)

30.                  Should the trustee choose to do nothing, the action would remain stayed indefinitely.  This may not be satisfactory to a party to the action other than the bankrupt.  Therefore, s 60(3) provides that a bankrupt is deemed to have abandoned the action if the trustee does not make an election under s 60(2) within 28 days of receiving a notice of the action from another party to the action.

31. The provisions in ss 60(2) and (3) are qualified by s 60(4) when it provides:

“Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:

(a)any personal injury or wrong done to the bankrupt, his or her spouse or a member of his or her family; or

(b)the death of his or her spouse or de facto partner or of a member of his or her family.”

32.                  The Bankruptcy Act does not specifically deal with actions that a bankrupt might want to commence after bankruptcy.  His or her entitlement to do so is the subject of some of the authorities to which I refer later in these reasons.[38]

[38] See [45]-[62] below

33. When a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally. That is the effect of s 153(1) of the Bankruptcy Act but it is subject to exceptions in the remainder of the provision. Among those exceptions are debts incurred by means of fraud[39] or because they are not provable in bankruptcy.  

[39] Bankruptcy Act, s 153(1)(b)

What is a civil proceeding: the authorities

34.                  On the face of s 60(2), whether Mr Singh’s application to the Tribunal for review of the SSAT’s decision is an action within the meaning of s 60(2) depends on whether it is a “civil proceeding, whether at law or in equity”.  The ordinary rules of statutory interpretation would suggest that taking the words individually in this way is an inappropriate approach.  As Stamp J said in Bourne v Norwich Crematorium Ltd:[40]

“Sentences are not mere collections of words to be taken out of the sentence, defined separately by reference to the dictionary or decided cases, and then put back again into the sentence with the meaning which you have assigned to them as separate words, so as to give the sentence or phrase a meaning which as a sentence or phrase it cannot bear without distortion of the English language.”[41]

[40] [1967] 1 WLR 691; 2 All ER 576

[41] [1967] 1 WLR 691; 2 All ER 576 at 696; 578

At the risk of breaking that rule, I will consider first the meaning of the expressions “civil proceeding”, “law” and “equity” separately in order better to understand them. 

35.                  Although the “law” and its origins and underpinning principles have been the subject of a considerable amount of academic debate, it is enough to note that:

“A law is an obligatory rule of conduct.  The commands of him or them that have coercive power (Hobbes).  A law is a rule of conduct imposed and enforced by the Sovereign (Austin).  But the law is the body of principles recognised and applied by the State in the administration of justice (Salmond). …”[42]

[42] A Concise Law Dictionary, 5^th edition, PG Osborn, 1964

36.                  “Equity” is the term used to describe the principles that originally guided the Court of Chancery in Mediaeval England in attempting to remedy some of the defects that followed the strict application of the law.  The principles were originally based on conscience, reason and good faith but developed in the same way that the law, other than statutory law, developed.  That is, it was developed by the application of the principles it identified to individual cases.  Principles applied in one case were applied to another if its facts could not be distinguished.  Equity applied where the law did not but, if the law did apply, equity gave way for all practical purposes for, as it was said, equity followed the law.  Where the law did not apply, the Court of Chancery crafted new rights and remedies after looking to sources, such as Roman law and canon law, beyond the Lord Chancellors’ own consciences and experiences.   As Lord Cowper, Lord Chancellor in 1705 said:

“         Now equity is no part of the law, but a moral virtue, which qualifies, moderates, and reforms the rigour, hardness, and edge of the law, and is an universal truth; it does also assist the law where it is defective and weak in the constitution (which is the life of the law) and defends the law from crafty evasions, delusions and new subtilties [sic], invented and contrived to evade and delude the common law, whereby such as have undoubted right are made remediless; and this is the office of equity, to support and protect the common law from shifts and crafty contrivances against the justice of the law.  Equity therefore does not destroy the law, nor create it, but assist it.”[43]

[43] Dudley (Lord) v Dudley (Lady) (1705) Prec. Ch. 241 at 244

37.                  There is, therefore, a distinction between law and equity and actions have been brought in different ways in each.  In enacting s 60(2), Parliament has been very clear that no distinction is to be drawn between them when a person becomes bankrupt.  Both are stayed until the trustee makes an election to go ahead with the action or to discontinue it.

38.                  Proceedings in the Tribunal are clearly not proceedings in equity but are they a “civil proceeding”?  In the law, the word “civil” distinguishes the proceeding from a criminal proceeding.  It relates to “… cases about individual rights, etc, not criminal cases. …”.[44]  Is it a “proceeding at law”?  A “proceeding” has acquired a broad meaning although not without its limitations.  Its ordinary meanings include:

“… 4 A particular action or course of action; a piece of conduct or behaviour.  In pl…, doings, actions; the business transacted by a court, assembly, or society; esp. a published record of papers delivered at a meeting of a learned society or a conference …”[45]

“… 1. a particular action or course of action. 2. action, course of action or conduct. 3. the act of one who or that which proceeds. 4. (pl.) records of the doings of a society. 5. Law a. the instituting or carrying on of an action at law. b. a legal step or measure: to institute proceedings against a person.”[46]

[44] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

[45] The New Shorter Oxford English Dictionary, 3^rd edition, 1993

[46] The Macquarie Dictionary, 2nd edition, 1991

39.                  On its ordinary meanings, therefore, a “civil proceeding” is an action relating to the rights and duties and the like of an individual and not to whether an individual has transgressed the acceptable norms of behaviour as determined according to the criminal law. It could be said that matters in the Tribunal do not come within the ordinary meaning of a civil proceeding for it does not relate to rights and duties in the sense of settling disputes about existing rights and duties or enforcing its decisions. They are the actions of a court in a civil proceeding. The Tribunal is not a court and, under the doctrine of separation of powers applying in the Commonwealth Constitution, cannot be a court or exercise judicial power.[47] It exercises administrative or executive power and, under the same doctrine, a court cannot exercise administrative or executive power. An exercise of administrative or executive power leads to the creation of rights and entitlements. The fact that it does so means that corresponding or correlative duties or obligations are imposed on the decision-maker. So, for example, the Tribunal’s decision that a person is entitled to an age pension under the Social Security Act gives that person a right to the age pension and imposes a correlative duty on the Secretary to pay it according to the terms of the enactment.

[47] See generally, Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board [2007] HCA 23; (2007) 231 CLR 350; 234 ALR 618; 81 ALJR 1155; 95 ALD 220

40.                  Has the term “civil proceeding” been considered in the context of a proceeding of the sort conducted by the Tribunal? It has been considered in the context of s 16 of the Service and Execution of Process Act 1901 (Cth). Section 16 provides, in part, that, if a summons has been issued by any Court or Judge in any State, requiring any person to appear to give evidence or to produce documents in any “civil proceeding”, that summons may be served in any other part of the Commonwealth.  Isaacs and Gavan Duffy JJ said in Cheney
 v Spooner:[48]

“… A ‘proceeding’, used broadly as it is in section 16 of the Federal Service and Execution of Process Act, is merely some method permitted by law for moving a Court or judicial officer to some authorized act, or some act of the Court or judicial officer.”[49]

[48] (1929) 41 CLR 532

[49] (1929) 41 CLR 532 at 536-537

The emphasis in Cheney v Spooner is upon the judicial be it the court or the officer.  For the reasons I have given earlier, the Tribunal is not judicial.

41.                  An arbitration is conducted by a person who is not acting in the exercise of judicial power but who may well be acting under and according to an enactment.  It has been held to be a civil proceeding in the context of the Companies (Queensland) Code as it was then in force.  Kelly J did so in Re Vassal Pty Ltd[50] (Vassal) when his Honour said:

[50] [1983] 2 Qd R 769; (1983) 8 ACLR 683; 2 ACLC 53

“The primary question raised by the originating summons is whether arbitration is a ‘civil proceeding’ within the meaning of s. 371(2) of the Code.  If it is such a proceeding, leave under that subsection is required to commence it whereas, if it is not, no such leave is necessary.  …

The matter appears to be free of any direct authority, although there are a number of judicial pronouncements on the meaning of the word ‘proceeding’ in this and other contexts.

In

In re International Pulp and Paper Co. (1867) 3 Ch.D. 594, at p.599, Jessel M.R. held that the words ‘action, suit, or other proceeding’ in s. 87 of the Companies Act 1862 ought to be read generally and that there was no reason to limit them except that the Court had no power to enforce its order. The question which there arose was whether the Court had power to restrain proceedings commenced in the Irish Courts against a company which had been ordered to be wound up and the Master of the Rolls held that it had power to do so. In Haupiri Courts Limited (in Liquidation)

v. Piako Construction Limited [1969] N.Z.L.R. 401 Perry J. in considering the provisions of the New Zealand legislation which correspond to s. 371(2) of the Code, after referring to In re International Pulp and Paper Co. (supra) observed, at p. 404, ‘It would seem clear that the word “proceeding” is a word which must be given a wide meaning and, I think, a wider meaning than the word “action”.’  The learned judge also referred to some authorities dealing with other legislation to the effect that the words ‘action or proceeding’ meant a proceeding in which a lis was instituted or was ‘between parties’.  In R. v. Westminster (City) London Borough Council Rent Officer, Ex parte Rendall [1973] 1 Q.B. 959, at p.974, Lord Denning M.R. referring to the word ‘proceedings’ in the Rent Act 1968 took the view that it covered any proceedings of a legal nature, even though they did not take place in a court of law.

In Alliance Petroleum Australian (N.L.) v. Australian Gas Light Co. (1983) 48 A.L.R. 69 the South Australian Full Court considered the question whether the phrase ‘in any … proceeding’ in s. 16 of the Service and Execution of Process Act 1901 (C’wealth) applied to arbitral proceedings founded upon a ‘submission’ within the meaning of the Arbitration Act 1891 (S.A.). King C.J. and Wells J. held that the phrase did so apply whilst Zelling J., who dissented, took the view that the arbitration in the instant case did not consist of justiciable issue triable civilly and was not a proceeding taken from the ordinary courts and as the contemplated arbitration there had been no resemblance to a curial arbitration it was therefore outside the ambit of s. 16. King C.J. said, at p. 73:

‘Arbitration is a regular procedure recognised by statute for the resolution of legal claims, differences or disputes between parties. Rules of law are prescribed by statute for the conduct of arbitrations. Statutory powers are conferred on arbitrators. The jurisdiction of the courts is invoked in aid of the arbitration procedure. Attendance of witnesses may be compelled, witnesses may be sworn and wilfully false evidence before an arbitrator constitutes the crime of perjury. The procedure results in an award which is enforceable at law. Arbitration is clearly recognized by the statute as a method of resolving legal disputes alternative to litigation in the courts. I think that in the ordinary use of language such a procedure would be included in the description “civil proceedings”. There is no authority to the contrary.’

A much narrower view of the meaning of the word ‘proceeding’ in the section of the Companies Act 1948 (U.K.) which corresponds broadly to s. 367(6) of the Code was taken by Lord Simon of Glaisdale in Herbert Berry Associates Ltd. V. Inland Revenue Commissioners [1978] 1 All E.R. 161, at p. 170, where the learned Law Lord said:

‘The Companies Act 1948 is a statute dealing with technical matters; and one would expect the words therein to be used in their primary sense as terms of legal art. The primary sense of “action” as a term of legal art is the invocation of the jurisdiction of a court by writ; “proceeding” the invocation of the jurisdiction of a court by process other than writ.’

A question had been raised in the courts below as to whether a distress was a ‘proceeding’ within the meaning of the section but the matter was not argued on the appeal to the House of Lords and Lord Simon of Glaisdale considered that it would be appropriate in the circumstances to express a concluded opinion. The passage which I have set out and on which counsel for the applicant relies is clearly obiter and although, of course, great respect must be accorded to the view which it expresses it does appear to stand alone.

On consideration of all the authorities to which I have referred and in particular the passage in the judgment of King C.J. in Alliance Petroleum Australia (N.L.) v. Australian Gas Light Co. (supra) I am of the opinion that ‘civil proceeding’ in s. 371(2) of the Code includes an arbitration.  The proceedings are between the parties and have the characteristics to which King C.J. refers.   I can see no warrant for limiting the term to proceedings taking place in a court.  I am therefore not prepared to make the declaration sought and I hold that leave is required to commence the arbitration which is the subject of the originating summons.”[51]

[51] [1983] 2 Qd R 769; (1983) 8 ACLR 633 at 770-772; 684. See also Alliance Petroleum Australia (NL) and Others v Australian Gas Light Co (1982) 44 ALR 124 (Bollen J) and TNT Bulkships Ltd v Interstate Construction Pty Ltd (1985) 35 NTR 15 (O’Leary J).

42.                  The principles in Vassal are not directly applicable to a proceeding in the Tribunal.  While the role of the Tribunal and its powers are defined by Parliament and those of an arbitrator may well be, there is an important difference in their roles.  The Tribunal creates rights and entitlements but an arbitrator resolves legal claims, differences or disputes between parties and, in doing so, determines their respective rights and duties and the like.  Recognition of arbitration as a civil proceeding is understandable but, given the essential differences in the nature of the outcome of the task[52] it undertakes, it may be that a Tribunal proceeding falls outside the meaning of a “civil proceeding” on the authorities relating to matters other than the Bankruptcy Act.

[52] I emphasise that the difference lies in the nature of the outcome of the task for the task that is undertaken by a court considering a civil matter is one part of the task that faces the Tribunal.  The task of a court is to consider the pleadings, consider the issues raised by those pleadings, consider the evidence, make findings of fact and come to a decision on the matter.  The Tribunal must consider the enactment, consider the issues it raises regardless of whether the parties have raised them, consider the evidence and whether it requires more, make findings of fact, determine the correct decision and, if there is more than one correct decision, determine the factors that it must take into account in exercising its discretion to choose one and come to a decision.  Both a court and the Tribunal must apply the law and must act with procedural fairness.

43.                  I have referred to the traditional distinction between matters that are at law and those in equity but it may be that the traditional distinction is not that which is intended in
s 60(5) of the Bankruptcy Act. The expression “at law may simply mean “according to law”.[53] If that is the correct interpretation, it may be that an application under s 27 of the Administrative Appeals Tribunal Act 1975 (AAT Act) for review of a decision that it is given power to review under an enactment may be described as a proceeding according to law. It is made according to law in the sense that it is made in accordance with law made by Parliament. 

[53] Black’s Law Dictionary, 5^th edition, 1979

44.                  This would seem to be the interpretation adopted by Lehane J, with whom Whitlam J agreed, in McCallum v Commissioner of Taxation[54] (McCallum). Section 14ZZ(a) of the Taxation Administration Act 1953 (TA Act) provides that a person dissatisfied with the Commissioner’s reviewable objection decision may apply to the Tribunal for review of that decision.  Lehane J, with whom Whitlam J agreed, said that “… an application for review under s 14ZZ of the Administration Act is a ‘legal proceeding’ … [and] is a legal proceeding which relates to the administration of the estate …”[55] of the bankrupt.  In McMahon
v Block,[56] Katzmann J noted that the Commissioner did not dispute, for the purposes of the proceeding, that proceedings in the Tribunal are civil proceedings within the meaning of
s 60(5).

[54] (1997) 75 FCR 458; 145 ALR 446; 36 ATR 256

[55] (1997) 75 FCR 458; 145 ALR 446; 36 ATR 256 at 474; 460; 269

[56] [2010] FCA 947

Authorities relating to rights to commence proceedings after becoming bankrupt

45.                  Although slightly constrained in its effect by the later case of Griffiths v Civil Aviation Safety Authority[57] (Griffiths) I will begin with the case of Fuller v Beach Petroleum NL[58] (Fuller). While waiting for a judgment that had been reserved in the Federal Court, another Judge of that Court made a sequestration order against Mr Fuller. Judgment was then entered against Mr Fuller and others holding them liable in tort for conspiracy to do unlawful acts including acts in breach of their fiduciary duties as directors. Mr Fuller lodged a notice of appeal against the judgment. In so far as the judgment debt related to the breach of fiduciary duties, it was a provable debt under s 82(2) of the Bankruptcy Act but not otherwise. Section 60(2) was not relevant as it applies only to actions that have already been begun and are on foot when a person becomes bankrupt.

[57] [1996] FCA 1502; (1996) 67 FCR 301; 137 ALR 521; 41 ALD 50; Spender, Einfeld and Cooper JJ

[58] [1993] FCA 453; (1993) 43 FCR 60; 117 ALR 235; Gummow, Hill and Whitlam JJ

46. The majority took as their premiss the proposition that the statutory right of appeal under s 24 of the Federal Court of Australia Act 1976 (FCA Act), for example, to a party against whom judgment has been entered comes within the meaning of “property” as defined in s 5(1) of the Bankruptcy Act and so is vested in the trustee under s 58(1).[59]  They then moved to their conclusion that Mr Fuller could not proceed with his appeal on the following basis adding:

“         It is consistent with the policy of the Act that after sequestration of the estates of unsuccessful litigants the successful party not be put at the risk of sustaining further costs of appellate litigation.  The respondent to the appeal should not be left to seek what may turn out to be an inadequate order for security for costs.  It is also in the interests of the orderly administration of the estate of the bankrupt that it be for the trustee to decide whether appeals of the nature involved here be instituted or continued.  We say nothing as to facility that the Act may offer to test, within the administration, any decision so made by the trustee; cf s. 178 of the Act.”[60]

[59] [1993] FCA 453; (1993) 43 FCR 60; 117 ALR 235 at [30]; 67; 242 per Gummow and Whitlam JJ

[60] [1993] FCA 453; (1993) 43 FCR 60; 117 ALR 235 at [34]; 68; 243

47. In dissent, Hill J concluded that a right to appeal against a judgment where damages had been awarded against the appellant and there is no cross-claim is not property divisible among the creditors vesting in the trustee under s 58(1).[61]  His Honour said:

“         I do not think that the fact the appeal, if successful, may carry with it an order for costs makes any difference.  Actions for damages for personal injury etc also carry with them the potential for costs but it was not suggested for that reason that they should be treated as property divisible among creditors in the United Kingdom legislation, or for that matter apportioned into that which is divisible on the one hand and that which is not on the other. All the right to costs amounts to is a right to have the Court exercise a judicial discretion in favour of the winning party. That, however, in my view is not a right of property. It is not itself assignable, nor does it have the indicia of property, to which reference has already been made.”[62]

[61] [1993] FCA 453; (1993) 43 FCR 60; 117 ALR 235 at [43]; 77; 252

[62] [1993] FCA 453; (1993) 43 FCR 60; 117 ALR 235 at [31]; 75; 249

48.                  The appeal in Fuller was heard with that of Mr Cummings: Cummings
v Petroleum NL[63] (Cummings).  Before the High Court heard that appeal, a differently constituted Full Court of the Federal Court heard the case of Griffiths.  That Full Court delivered its judgment shortly before the High Court delivered its in Cummings. 

[63] [1996] HCA 19; (1996) 185 CLR 124; 137 ALR 1; 70 ALJR 616; Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ

49.                  Griffiths also concerned a right of appeal that arose after Mr Griffiths had become bankrupt.[64]  It was an appeal from the Tribunal’s decision to affirm a decision by the then Civil Aviation Authority to impose conditions on two aviation licences held by

Mr Griffiths.  Spender J characterised the issue in this way:

“… If those licences are not ‘property’, the right to take proceedings to appeal a decision affirming restrictions on those licences is not ‘property divisible among the creditors of the bankrupt’ and, as a consequence, did not vest in the trustee when the right of appeal arose.”[65]

[64] Consequently, s 60(2) did not apply.

[65] [1996] FCA 1502; 67 FCR 301; 137 ALR 521; 41 ALD 50 at 305; 524 ; 52

50.                  His Honour answered the issue:

“18. In my opinion, a licence to drive a motor vehicle is not ‘property divisible amongst the creditors’ within s 116(1)(a) of the Act because such a licence is not property. It follows further that a capacity to exercise or to take proceedings for exercising all such powers in, over or in respect of a driving licence is also not property divisible amongst the creditors of the bankrupt, within s 116(1)(b) of the Act.

19.      Similarly, in my opinion, neither a commercial pilot (aeroplane) licence nor a commercial pilot (helicopter) licence is ‘property’ that belonged to or was vested in the bankrupt at the commencement of his bankruptcy and therefore is not to be characterised as ‘property to be divisible amongst the creditors of the bankrupt’ and, as a consequence, is not property which vested on bankruptcy in the trustee.

20.      Further, the capacity to exercise and to take proceedings for exercising all such powers in, over or in respect of either of those licences, as might have been exercised by the bankrupt for his own benefit at any time after the commencement of the bankruptcy and before his discharge, is not property divisible amongst the creditors of the bankrupt, because the capacity to exercise and take proceedings for exercising powers over or in respect of those licences is not the capacity to exercise or to take proceedings for exercising powers over or in respect of ‘property’.

21.      The consequence is that the right to bring proceedings pursuant to s 44(1) of the AAT Act to challenge a decision of the Tribunal made in respect of the two licences of Mr Griffiths did not vest in the trustee when the Tribunal’s decision was given on 31 May 1994, and Mr Griffiths was competent to bring those proceedings in this Court.

22.       The contrary conclusion runs into a further difficulty, in that s 44(1) of the AAT Act provides that ‘a party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law from any decision of the Tribunal in that proceeding’.  The terms of s 44(1) would seem to preclude the trustee from appealing to the Federal Court of Australia from the decision concerning Mr Griffiths’ licence.”[66]

[66] [1996] FCA 1502; 67 FCR 301; 137 ALR 521; 41 ALD 50 at 306; 525-526; 53

51.                  Cooper J expressly disagreed with the conclusion of the majority in Fuller that any right of appeal under the FCA Act, including a bare right of action personal to the bankrupt, is property within the meaning of s 5(1) of the Bankruptcy Act.[67]  His Honour continued:

[67] [1996] FCA 1502; 67 FCR 301; 137 ALR 521; 41 ALD 50 at 321; 539; 66 and see also Einfeld J at 318; 536; 63-64

“ 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 Griffithsfails 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; In re Davis; Ex parte National Australia Bank Ltd v Official Trustee in Bankruptcy (unreported, Federal Court of Australia, 11 October 1989, Burchett J at p 10).

The question of the possibility of any adverse cost orders being made against Mr Griffithsif he fails in his appeal, and his ability to satisfy those orders is, in my view, a question separate and distinct from the proper construction of ss 5, 58, 60 and 116 of the Act.  In this respect I agree with Hill J inFuller(43 FCR at 76). The general rule is that poverty is no bar to a natural person to litigate a right of action and the power to require security for costs ought not to be used to bar the poor from the courts (

Cowell v Taylor (1885) 31 ChD 34 at 38). However, in appropriate circumstances security for costs may be ordered against an undischarged bankrupt; the decisions in Barton v Minister for Foreign Affairs (1984) 2 FCR 463 and Skase

v Abbott and Sun Newspapers (unreported, Federal Court of Australia, 30 July 1992, Cooper J) are examples of such orders being made. Further, the existence of the exception in s 60(4) and s 116 (2)(g) for causes of action for personal injury indicate that the question of costs in respect of that litigation which the bankrupt is entitled to institute or continue was not for the Parliament in passing the Act either a concern of the Act or of the administration of the estates of the bankrupts.

There is a unity of object and purpose in the operation of ss 58, 60 and 116 of the Act if it is recognised that the consistent focus of attention is upon rights which the trustee can turn to advantage for the benefit of creditors or upon rights the exercise of which will adversely affect or delay the administration of the estate.  It is these rights which fall within the definition of ‘property’ in s 5 and the enforcement of which by action are stayed by s 60(2) upon a person becoming bankrupt.  To interpret ‘property’ for the purposes of s 5 in this way avoids the injustice of denying to the bankrupt the power to exercise a right in which the trustee has no interest and the exercise of which cannot operate adversely on the property of the bankrupt or the administration of the bankrupt’s estate.

The right of MrGriffithsto appeal to this court from the decision of the Tribunal and his right to appeal from the judgment of Kiefel J are such rights and did not vest in the Official Trustee upon acquisition by MrGriffiths. Neither Mr Griffiths’ appeal from the Tribunal to the original jurisdiction of this court, nor his appeal from the order of Kiefel J to the Full Court is incompetent in consequence of his bankruptcy.”[68]

[68] [1996] FCA 1502; 67 FCR 301; 137 ALR 521; 41 ALD 50 at 325-326; 542-543; 69-70

52.                  In Cummings, all of the Judges concluded that Mr Cummings and Mr Fuller had not had locus standi to institute the appeals but they did not agree on their reasons for reaching that conclusion.  The essence of the reasons of the majority, Brennan CJ, Gaudron and McHugh JJ was that:

“         So far as a judgment entered in an action against a bankrupt creates or evidences a provable debt, we respectfully agree that the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment.  That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts …

Of course, a money judgment entered against a bankrupt has the effect of increasing the amount of the debts provable in his estate.  But it is immaterial that, if an appeal against the judgment were successful, there would or might be a surplus in the estate after the remaining creditors were paid.  A bankrupt’s contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights …and, that being so, it cannot give him an interest to minimise liabilities. …”[69]

[69] [1996] HCA 19; (1996) 185 CLR 124; 137 ALR 1; 70 ALJR 616 at [13]-[14]; 137-138; 8-9; 622 (citations omitted)

53.                  Dawson and Toohey JJ decided that the right of appeal held by each of

Mr Cummings and Mr Fuller vested in the trustee.  It is the nature of the appeal that is important rather than what a potential appellant would hope to achieve by the appeal.  Their Honours adopted a passage from Heath v Tang,[70] in which it had been said that:

“in principle a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate of his trustee.”[71]

[70] [1993] 1 WLR 1421; [1993] 4 All ER 694 at 1425; 700

[71] [1996] HCA 19; (1996) 185 CLR 124; 137 ALR 1; 70 ALJR 616 at [28]; 148; 16; 628

They concluded that “The judgment is a judgment for a sum of money which cannot be pursued against the appellants save through the machinery of the Act.”[72]

[72] [1996] HCA 19; (1996) 185 CLR 124; 137 ALR 1; 70 ALJR 616 at [29]; 148; 17, 628

54.                  In McCallum, Mr McCallum was a bankrupt well before he sought to apply to the Tribunal for review of the Commissioner’s objection decision. Lehane J looked to the assessment which, under s 177(1) of the Income Tax Assessment Act 1936 (ITAA36) is conclusive evidence of the due making of the assessment and, except in proceedings for review or appeal under Part IVC of the TA Act, is conclusive evidence that all of the particulars of the assessment are correct.  He compared it with a judgment debt:

“         It is true that, as a result of s 177 of the Assessment Act, there is a very important difference between a debt due under the assessment and other provable debts: the trustee cannot reject a proof for a tax debt on the ground that the assessment is excessive.  There is also a significant difference between the debt due under the assessment and a judgment debt: the latter, unlike the former, results from a process in which the creditor has established, to the satisfaction of a court, both the existence and amount of the debt.  But if the question is, from the standpoint of the principle for which cases such as Cummings v Claremont Petroleum NL … and Heath v Tang … are authority, is there a relevant distinction in principle between the right to seek review of an objection decision and the right to prosecute an appeal against a judgment for debt, it is difficult to see why the answer is not, there is no difference. …”[73]

[73] (1997) 75 FCR 458: 145 ALR 446 at 471-472; 458-459

55. Lehane J took the view that he should first decide if the trustee had standing to apply for a review of the objection decision. He decided that the trustee did have standing on the basis that an application for review under s 14ZZ of the TA Act is a “legal proceeding” relating to the administration of the estate. Therefore, the trustee could exercise power under s 134(1)(j) of the Bankruptcy Act to “bring, institute or defend any action or other legal proceedings relating to the administration of the estate.”  Any suggestion that the right to apply for review was personal to the taxpayer was not seen as a difficulty in Cummings or in Heath v Tang, Lehane J said.

56.                  Mr McCallum did not necessarily lack standing but, whether he did, depended on whether he was a person dissatisfied with the decision.  The same test applies where a party to proceedings is adversely affected by a final judgment or order and an appeal lies from the judgment or order.  In those circumstances:

“… It is not altogether easy to see that a test of dissatisfaction with a decision is likely to confer standing on a taxpayer to a more generous extent than a right of appeal does on a party to litigation adversely affected by an order made in it.  Thus, with great respect, I am unable to see any firm basis on which the principle laid down in Cummings should be held not to be applicable here.  If, in the one case, standing is lost because the debt concerned is payable solely out of the bankrupt estate, and is no longer otherwise recoverable from the debtor, I can see no reason why that is not equally so in the other case; and if, in the one case, it makes no difference that the success of the appeal may result in a surplus in the estate (Cummings at 138) I cannot see why it does not equally make no difference in the other case, where a successful review may equally result in a surplus.”[74]

[74] (1997) 75 FCR 458; 145 ALR 446 at 475; 461-462

57.                  I note that, in Baulkham Hills Shire Council v Stankovic[75] (Stankovic), Beazley JA summarised Cummings as:

“… authority for the proposition that insofar as a judgment against a bankrupt results in a judgment debt provable in the bankruptcy, the bankrupt does not have a financial interest in the appeal so as to confer locus standi to appeal in his or her own name against the judgment.  The majority, Brennan CJ, Gaudron and McHugh JJ, rejected the proposition that a right to appeal was property of the bankrupt so as itself to be vested in the trustee.”[76]

[75] [2009] NSWCA 281

[76] [2009] NSWCA 281 at [13]

58.                  The final case to which I will refer in this section is that of Randall v Deputy Commissioner of Taxation[77] decided by Lander J.  A sequestration order had been made against Mr Randall in September 2007 and a few months before he accepted an offer of employment with the Australian Taxation Office (ATO).  It was a condition of his employment that he was on probation for the first three months of his engagement.  A delegate of the Commissioner terminated his employment at the end of his probation period.  Mr Randall sought judicial review of the Commissioner’s decision and orders that the decision was null and void and requiring the Commissioner to do all things necessary to enable him to resume his duties as on ongoing employee with the ATO and to receive his salary. 

[77] [2008] FCA 1939; (2008) 174 FCR 441; 74 ATR 188; 110 ALD 41

59.                  The Commissioner objected to the competency of Mr Randall’s application on the basis that he lacked standing due to his bankruptcy.  Lander J reviewed a number of authorities including Cummings and Griffiths.  He noted that:

“         Property which is not divisible amongst the bankrupts’ creditors is not property of the bankrupt which vests in the bankrupt’s trustee.

A bankrupt’s personal earnings after bankruptcy or income do not vest in the bankrupt’s trustee.  They are not property of the bankrupt.  In Nette v Howarth (1935) 53 CLR 55 at 65, Dixon J said, after referring to authorities in England and Australia:

… the rule long established in bankruptcy, [is] that the personal earnings of a bankrupt do not pass to his trustee except to the extent that they are not required for the support of himself and his family.”[78]

[78] [2008] FCA 1939; (2008) 174 FCR 441; 74 ATR 188; 110 ALD 41 at [49]-[50]; 449; 196; 49

60.                  The Bankruptcy Act has been amended since Nette v Howarth was decided and the scheme of contributions introduced.  I have referred to that already.  Despite its amendment, Lander J said that:

“… the Act continues to recognise … that the bankrupt’s income is not part of the bankrupt’s property except to the extent that a contribution is made.  If it were otherwise, there would be no need for the Division 4B machinery because the trustee would be entitled to the bankrupt’s income and wages.  The Act continues to recognise the principle enunciated by Dixon N in Nette v Howarth 53 CLR 55 and recognises, as the law has since 1785, that income and earnings do not form part of the bankrupt’s estate: Chippendall v Tomlinson (1785) L Co Bank L 428 per Lord Mansfield at 432; and 99 ER 900 at 902.”[79]

[79] [2008] FCA 1939; (2008) 174 FCR 441; 74 ATR 188; 110 ALD 41 at [57]; 450; 197; 50

61.                  Lander J applied this principle to the case before him:

“… [T]he Bankruptcy Act still contemplates that income earned after the bankrupt’s bankruptcy does not vest in the bankrupt’s trustee: Re Gillies (1993) 115 ALR 631 at 636-637. While the trustee may require the bankrupt to make contributions out of the bankrupt’s income, the Bankruptcy Act contemplates that those contributions will be made out of income in the hands of the bankrupt and not the trustee.

… The bankrupt’s income, after bankruptcy, does not vest in the bankrupt’s trustee.

If the bankrupt’s income does not vest in the trustee, it must be because it is not property, or at least property divisible among the bankrupt’s creditors.

In those circumstances, the trustee cannot sue for wages or income due to the bankrupt because those wages or that income have not vested in the trustee: Williams v Chambers (1847) 10 QB 335; 116 ER 130. Indeed, even if the Court ordered (under the repealed s 131) or the trustee assessed contributions payable by the bankrupt to the trustee, no right to recover that sum or those sums vests in the trustee against the employer. The liability to pay that sum or those sums is imposed upon the bankrupt.

The right to seek a review of the respondent’s decision to terminate the applicant’s employment remains with the applicant. The trustee has no interest in seeking a review of that decision. The trustee, for example, could not ensure that if the decision were reversed that the applicant would resume employment. If the trustee was interested in the proceeding and brought the proceeding and the decision was quashed as the applicant seeks in this proceeding, there would be no property in the result which would be divisible among the applicant’s creditors. The right to seek an order quashing the decision of the respondent to terminate the applicant’s employment is not a right which can be exercised beneficially for the creditors, even in circumstances where the applicant seeks the further orders which may result in a sum of money being paid to him by way of compensation. Whether if the bankrupt received compensation that money would become after-acquired property for which he would have to account to his trustee does not need to be determined on this application: see Chippendall v Tomlinson (1785) L Co Bank L 428; 99 ER 900.”[80]

[80] [2008] FCA 1939; (2008) 174 FCR 441; 74 ATR 188; 110 ALD 41 at [72]-[76]; 452-453; 199-200; 52

62.                  As the right to sue for a bankrupt’s earnings, wages or income does not vest in the trustee, the right was exercisable by Mr Randall.[81]

[81] [2008] FCA 1939; (2008) 174 FCR 441; 74 ATR 188; 110 ALD 41 at [78]; 453; 200; 53

Authorities relating to continuation of proceedings commenced before bankruptcy

63.                  In Lofthouse (In the matter of Guss)[82] (Lofthouse), Mr Guss and his daughter were plaintiffs in a proceeding in the Supreme Court of Victoria when the Federal Court made a sequestration order against Mr Guss’s estate.  The defendant was the Geelong Building Society (GBS).  Mr Guss and his wife were the registered proprietors of real property at Portsea.  They held the property on trust for their three children.  They mortgaged the property to GBS, which subsequently exercised its power of sale and sold the property.  Mr Guss and his daughter allege that GBS sold the property at price below its value.  They also alleged that GBS owed them a duty of care to act reasonably, fairly and in good faith in respect of the sale of the property, having regard to his interest as mortgagor and trustee and to her interest as a beneficiary of the trust.

[82] [2001] FCA 25; (2001) 107 FCR 151

64.                  Gray J considered two issues.  The first was whether the Supreme Court proceeding was an “action” for the purposes of s 60 so that the trustee was required to make an election regarding it.  That required consideration of whether an “action” included a proceeding brought as a trustee for another by a person who was subsequently made bankrupt.  If it was an “action”, the second issue was whether Mr Lofthouse had made a valid election to prosecute the Supreme Court proceeding but that is not relevant in this case. 

65.                  As to the first issue, his Honour said:

“         In s 60(5), the legislature has defined ‘action’ for the purposes of the section as meaning any civil proceeding, whether at law or in equity. This is plainly a definition of great width. It has been recognised to be so in several contexts. In John v Neiman Holdings Pty Ltd (1986) 84 FLR 84, Young J of the Supreme Court of New South Wales held that s 60(2) operated to stay the whole of a proceeding, even though the bankrupt concerned was only one of several plaintiffs, whose claim was separate from those of the other plaintiffs, although raising common questions of law and fact. In Daemar v Industrial Commission of New South Wales (1988) 79 ALR 591, the Court of Appeal of New South Wales held that an application for relief in the nature of prerogative writs directed to the Industrial Commission of New South Wales was an ‘action’ for the purposes of s 60(2). At 596, after referring to ss 58, 60 and 116 of the Act, Kirby P (as his Honour then was, and with whose judgment the other two members of the Court of Appeal expressed agreement) said:

‘         These provisions make it clear that the scheme and purpose of the Act is, upon the debtor’s becoming a bankrupt, to transfer property rights, including certainly the right to sue in respect of claims to property, from the bankrupt to his trustee.  This is so, notwithstanding that it involves personal inconvenience to the bankrupt: see Faulkner v Bluett (1981) 52 FLR 115 at 119. Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he or she would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for by the Act, that property which belongs to the bankrupt, including choses in action (other than those which are specifically exempted) are vested upon bankruptcy in the bankrupt’s trustee. The trustee has the charge of the estate of the bankrupt. It is then for the trustee to distribute that property as the Act provides, principally for the benefit of the creditors. To secure the benefits and protections which the Act provides to a debtor, the debtor’s status is changed, rights are diminished and property is controlled. It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1). This would be so despite the specific and limited terms of the exemption in the case of rights to recover damages or compensation provided by s 116(2) and the very purposes of gathering in the bankrupt’s property.’

It is clear from these authorities that the approach of the courts has been to regard the word ‘action’ in s 60 as casting a net widely.”[83]

[83] [2001] FCA 25; (2001) 107 FCR 151 at [16]; 156-157

66. Gray J examined the scheme of the Bankruptcy Act:

“         Section 60 is an adjunct to the scheme of the Act whereby the property of a bankrupt passes to the bankrupt’s trustee consequent upon a sequestration order.  By s 58 of the Act, the property of a bankrupt vests forthwith in the Official Trustee or a trustee in bankruptcy when a debtor becomes a bankrupt.  That section has the effect of vesting in the trustee in bankruptcy all rights of action in pending proceedings commenced by the bankrupt.  Even if it be the case that property of which a bankrupt is a bare trustee for someone else does not pass to the trustee in bankruptcy (because such property is not available for distribution to the bankrupt’s creditors), it does not follow that s 60 must be construed as excluding proceedings brought by the bankrupt as trustee.

Section 60 is not the provision that vests the right of action in the trustee in bankruptcy.  It has a different, and in some respects wider, role.  It operates to stay pending proceedings unless the trustee elects to prosecute or discontinue them.  It also provides the machinery for a defendant or other party to a pending proceeding to force the making of an election.  It is directed towards the protection of the bankrupt’s creditors, by preventing the unnecessary dissipation of the assets of the estate in fruitless litigation.  In my view, s 60 also has the purpose of protecting a defendant or other party to a pending proceeding.  A defendant or other party to a pending proceeding suffers an immediate detriment upon the plaintiff becoming a bankrupt.  The detriment is that if the defendant or other party should be successful in the proceeding, and should obtain an order that the plaintiff pay the costs of the proceeding, the order will be effectively unenforceable because of the bankruptcy.  The rationale behind s 60(2) and 60(3) is therefore, at least in part, to protect those whom the bankrupt has been suing.  Such protection would be lost if the word ‘action’ in s 60 were to be construed as excluding a proceeding in which the bankrupt has sued as a trustee for someone else. 

In my view, s 60 has been enacted deliberately as a broad provision, so as to encompass any proceeding brought by a bankrupt before bankruptcy.  The exceptions have been expressed quite narrowly.  The intention is that, once a bankruptcy occurs, no further costs should be incurred in a proceeding unless the trustee in bankruptcy makes an election to continue the proceeding.  If such an election is made, the trustee in bankruptcy will ordinarily become substituted as plaintiff in the pending proceeding, in the capacity of trustee in bankruptcy for the former plaintiff.  The trustee in bankruptcy will thereby become liable for the costs of the proceeding in the event that it is unsuccessful and a costs order is made in favour of the defendant in the proceeding or some other party to it.  The trustee in bankruptcy may be entitled to an indemnity in respect of those costs out of the bankrupt estate, as expenses of the administration of the estate, to the extent to which the estate has assets.  The trustee in bankruptcy will obviously consider whether continuing to prosecute the proceeding will be likely to have any benefit to the estate of the bankrupt, and therefore to the bankrupt’s creditors.  One of the elements that the trustee in bankruptcy will take into account is whether the bankrupt is suing in a personal capacity or some other capacity, particularly that of trustee for someone else.  If the bankrupt has sued as trustee for another person, and the estate will not benefit, the trustee in bankruptcy would no doubt usually elect not to continue to prosecute the proceeding.  This would protect any defendant, and perhaps other parties to the proceeding, with respect to costs.  Of course, it may impact on the beneficiary of the trust of which the bankrupt claims to be trustee.  The beneficiary may be forced to institute proceedings in his or her own right to enforce the trustee’s legal right, as can be done where there are ‘exceptional circumstances’.  See Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432.”[84]

[84] [2001] FCA 25; (2001) FCR 151 at [18]-[20]; 157-158

67.                  In Owens v Comlaw[85] (Owens), the Victorian Court of Appeal considered whether Ms Owens’ trustee had power under s 60(2) to elect to prosecute an appeal she had commenced before her bankruptcy.  Ms Owens, who was a solicitor, sought to challenge a declaration made by Nettle J concerning the terms of a retainer between her and Comlaw as well as the costs orders made at trial.  If the trustee was empowered to make the election, the Court was also asked to consider whether the trustee was also entitled to seek leave to discontinue it.

[85] [2006] VSCA 151; (2006) 201 FLR 275; Ashley and Redlich JJ

68.                  Ashley JA, with whom Redlich JA agreed, decided that s 60(2) applied to

Ms Owens’ appeal.  Therefore, her trustee was entitled to elect to continue her appeal.  His Honour said in part:

“…

4)        The question whether an action is one to which s.60(2) applies, assuming that it fits the description in sub.s.(5), and is not excluded by operation of sub.s.(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.”[86]

[86] [2006] VSCA 151; (2006) 201 FLR 275 at [42]; 285-286

69.                  In Stankovic, Beazley JA considered whether Mr Stankovic was entitled to appear on the hearing of an appeal lodged by the Baulkham Hills Shire Council (Council) before a sequestration order was made against him.  That order had been made on the petition of the Council upon the non-payment of a costs order made against Mr Stankovic.  The costs order had been made by the Land and Environment Court (LEC) when it decided that
Mr Stankovic and his wife were using certain premises as a junkyard contrary to s 76B of the Environmental Planning and Assessment Act 1979 (NSW). It made orders that Mr Stankovic take certain steps with regard to the goods stored on the property. The Council then alleged that Mr and Mrs Stankovic had not complied with those orders and, by notice of motion in the LEC, sought orders permitting it to enter the property and remove goods, sell or dispose of it and requiring Mr Stankovic to pay its costs and expenses. The LEC refused to make the orders and the Council lodged an appeal.

[139] [1981] FCA 209; (1981) 38 ALR 624; 53 FLR 356 at 628-629; 361-362

123.                In McAuliffe v Secretary, Department of Social Security,[140]  Von Doussa J approved the consideration given by Senior Member Hall in Re Te Velde and Director-General of Social Services[141] when he said:

“         There may, however, be further modifications necessary to the meaning suggested in Re McKenna, supra, in relation to self-employed persons.  Whilst the concept of ‘work’ normally connotes some activity pursued as a means of earning one’s livelihood, the absence of evidence that the activity is effective in producing a livelihood may not be critical in deciding whether the activity qualifies as ‘work’: see Clear v Smith (1981) 1 WLR 399. A self-employed person, in particular, may be engaged full-time in activities intended to earn him a living, but which, despite his diligent efforts, fail to do so. Thus in Re Brabenec and Director-General of Social Services (1981) 3 ALN No 39, a self-employed miner engaged unsuccessfully in full-time prospecting for opals was held not to be ‘unemployed’ within the meaning of the Act.  As the Tribunal commented in that case, the opal miner was no more ‘unemployed’ than any person setting himself up on his own in a profession, trade or business (cf s 130A of the Act (now s.133)).”[142]

[140] [1991] FCA 268; 13 AAR 462; 23 ALD 284

[141] [1981] AATA 87; (1981) 3 ALN N111

[142] [1981] AATA 87; (1981) 3 ALN N111 at [34]; N114 approved by McAuliffe [1991] FCA 268; 13 AAR 462; 23 ALD 284 at [13]; 471; 291

124.                In Secretary, Department of Employment and Workplace Relations v Joss,[143]Justice Graham considered the meaning of “unemployed” as it is used in s 593(1). The following principles can be drawn from his Honour’s judgment and those on which he relied:

(1)“… [T]he word ‘unemployed’ bears its colloquial or popular meaning of not being engaged in work of a [potentially] remunerative nature.  This meaning must … be modified to allow for those special cases where a person is not engaged in work of a remunerative nature but whose commitment to some activity … demonstrates a preference for that activity rather than employment …”;[144]

(2)“The question whether the appellant was ‘unemployed’ during the whole or part of the period was essentially a question of fact and degree to be decided having regard to the above principles.”[145]

(3)“         In addressing the question of whether or not a person is ‘unemployed’ for the purpose of s 593 of the Act it is not sufficient to confine one’s consideration to the question of whether or not a contract of employment existed between the person claiming to be unemployed and a third party.  Other situations which must be considered are those of the self-employed whether they be engaged in endeavours on their own account or as members of a partnership or of a joint venture.  One might say that if a person is carrying on business or engaged in work with a view of profit, that person could not be considered to be unemployed.”[146]

(4)“It may well be that viewed as a question of fact and degree and having regard to the intensity with which a person applies him or herself to a particular enterprise, one may conclude that a person is not self-employed at all.  But, once it be found that the person is self-employed it seems to me impossible to conclude that such a person was, at the same time, unemployed.”[147]

[143] [2006] FCA 884; (2006) 152 FCR 541; 92 ALD 60

[144] Re McKenna and Director-General of Social Services (1981) 3 ALD 219 at [11]; 221 per Morling J (sitting as a presidential member of the Tribunal), Hon JBK Williams, Senior Member, and Dr Billings, Member, as modified in Joss [2006] FCA 884; (2006) 152 FCR 541; 92 ALD 60 at [11]; 543; 62

[145] McAuliffe v Secretary, Department of Social Security [1991] FCA 268; (1991) 23 ALD 284; 13 AAR 462; von Doussa J approved by the Full Court on appeal in McAuliffe v Secretary, Department of Social Security [1992] FCA 483; (1992) 28 ALD 609; Spender, Foster and O’Loughlin JJ

[146] [2006] FCA 884; (2006) 152 FCR 541; 92 ALD 60 at [31]; 546; 65

[147] [2006] FCA 884; (2006) 152 FCR 541; 92 ALD 60 at [35]; 547; 66

The time at which I must decide whether Mr Singh was qualified for Newstart Allowance

125.                Resolution of the question I have posed turns on the particular facts of this case but, as the Full Court said in Thomson, where the answer lies is a matter of fact and degree.  For that reason, it is not always easy to divine the answer and that has been my experience in this case.  The time at which I must consider it is the date on which he made his claim i.e. 5 February 2009.  That is the date of his first contact with Centrelink but, as he lodged a written claim on 16 February 2009 and so within 14 days of his first contact with Centrelink, the combined effect of ss 11 and 13 of the SSA Act is that he is taken to have made his claim on the day of contact i.e. 5 February 2009. 

126.                That is the day on which I must decide whether he is entitled to a Newstart Allowance.  The next question is whether I am also required to consider Mr Singh’s entitlement over any subsequent period and, in particular, up to the day on which I give this decision.  That question has always arisen.  Previously, it required a consideration of the principles in a case such as Freeman v Secretary, Department of Social Security[148] (Freeman), Re Tiknaz and Director-General of Social Services[149] (Tiknaz), Jebb v Repatriation Commission,[150]  Re Easton and Repatriation Commission[151] (Easton) and Re McGourty and Repatriation Commission[152] (McGourty).  It must now be considered in light of the principles established by the High Court in Shi v Migration Agents’ Registration Authority[153] (Shi).  I considered the application of those principles in Re Lobo and Department of Immigration and Citizenship[154]  and adopt my reasons in that case at [20] to [39] regarding their application.  I will repeat only my summary of the approach that they require me to take.  Unless varied by the particular legislation conferring jurisdiction on the Tribunal, its task (as described by Bowen CJ and Deane J in Drake v Minister for Immigration and Ethnic Affairs (Drake)[155]) has, since Shi, been as follows:

[148] [1988] FCA 294; (1988) 19 FCR 342; 87 ALR 506; 15 ALD 671; 9 AAR 255

[149] (1981) 4 ALN N44 (Davies J, President, Senior Member Ballard and Dr Garlick, Member)

[150] [1988] FCA 105; (1988) 80 ALR 329 (Davies J)

[151] (1987) 12 ALD 777 (Davies J)

[152] (1988) 9 AAR 87 (Davies J)

[153] [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147

[154] [2010] AATA 583

[155] (1979) 24 ALR 577; 46 FLR 409; 2 ALD 60

(1)the decision that the Tribunal must review is determined by reference to the statutory provisions conferring jurisdiction on it;

(2)the Tribunal will address the same issues or questions as those addressed by the original decision-maker;

(3)unless there is a temporal element in the legislation requiring a contrary conclusion, the Tribunal reviews a decision as at the date it conducts that review and reaches its own decision;

(4)the Tribunal may have regard to evidence on issues and matters up to the date of its decision on review; and

(5)the task of the Tribunal:

(a)is to reach a decision that is the correct or preferable decision i.e. the decision that is correct according to the law and on the evidence and, where more than one decision meets that description, the decision that is preferable having regard to the limits imposed by the legislation under which the decision is made and the facts of the case; and

(b)is not to decide whether the decision under review is itself the correct or preferable decision.

127. Does the Social Security Act or the SSA Act show a temporal approach that would limit the scope of my consideration? I think that it does. That conclusion follows in part from s 593(1), which refers only to a person’s being qualified in respect of “a period” if he or she is, “throughout the period” unemployed and, if required to do so, meets the activity test.  What is meant by “the period” is not defined but it is apparent from s 593(1) that it is not a period that is confined to the moment of lodgement of the claim. That it is of a wider compass is consistent with the provisions relating to the activity test. A person satisfies the activity test “in respect of a period” if, “throughout the period”, the person is actively seeking and willing to undertake paid work in Australia provided that work is not unsuitable to be undertaken by that person.[156] 

[156] Social Security Act, s 601(1)

128. That it has a wider compass is apparent from the payment provisions. Qualification for a Newstart Allowance is not enough. It must also be payable. Whether it is payable to a person depends on whether that person meets the assets test imposed by ss 611 and 612 of the Social Security Act and, subject to two exceptions, whether the rate at which it is payable to him is greater than nil.[157] The rate is calculated on the basis of Rate Calculator B at the end of s 1068 in Part 3.3 of the Social Security Act.[158]  If payable, the rate of Newstart Allowance is a daily rate worked out by dividing by 14 the fortnightly rate calculated according to the Rate Calculator.  The period of a fortnight is the basis on which the Rate Calculator requires a person’s income to be assessed.[159]  Special provision is made for leave or termination payments in respect of periods longer than a fortnight[160] and for ordinary income received at intervals longer than a fortnight.[161]  The rate at which a Newstart Allowance is paid may be increased if, for example, the person participates in an approved program of work under s 664AAA.  Participation is assessed on a fortnight by fortnight basis.

[157] Social Security Act, s 608

[158] Social Security Act, s 643

[159] Social Security Act, s 1068-G1

[160] Social Security Act, s 1068-G7AL

[161] Social Security Act, s 1068-G8

129.                Given that payability of Newstart Allowance is determined on a fortnightly basis, it would seem that the relevant period is the preceding fortnight.  That this is so gains support from the fact that it is paid in arrears and in instalments relating to periods that do not exceed 14 days.[162]  It also gains support from the fact that the Secretary must be satisfied that the person meets the criteria for qualification.  Those criteria are ongoing and whether they are met may change from fortnight to fortnight.  A person must, for example, meet the activity test every fortnight and must take active steps to do so.  Those steps may be assessed and so entitlement to a Newstart Allowance is a much more dynamic concept than it is in the case of, for example, an Age Pension or even a Disability Support Pension.   Age does not reduce and, although a disability may ultimately be reduced, the nature of those pensions is that the circumstances of those entitled to them are relatively unchanging when viewed from fortnight to fortnight.  Not so a person who is unemployed and who is looking for work.  That does not mean that a person must make a new claim in relation to each fortnight but it does mean that entitlement is considered by reference to that period.

[162] SSA Act, s 43(1). A Newstart Allowance is a social security periodic payment: Social Security Act

130.                It does not follow that all of the evidence in the form of reports, assessments or records had to be generated in that period.  What it means is that they must relate to that period.  An example is found inSurinakova v Minister for Immigration and Ethnic Affairs,[163] in which Hill J said:

“There may be occasions where evidence of events subsequent to the decision may have relevance, not in the sense that those events are matters that should have been taken into account at the time the decision was made, but rather as showing that the probability of the subsequent event happening is one that could be taken into consideration.”[164]

[163] (1991) 33 FCR 87; 26 ALD 203

[164] (1991) 33 FCR 87; 26 ALD 203 at 94; 205. See also TheHospital BenefitFund of Western Australia Inc v Minister for Health, Housing and Community Services (1992) 39 FCR 225; 28 ALD 50; 111 ALR 1 at 234; 59; 11 per Wilcox, Burchett and French JJ

Events preceding the period directly relevant to the making of a decision may also be relevant.  They may form the foundation for events that occur during that period and may go some way to understanding why those events occurred as they did.                 

Was Mr Singh unemployed?

131.                I will begin with Mr Singh’s income for the year ending 30 June 2008 for that sets the scene in which he was to lose the independent fuel business and “servo” in Morwell.  While I understand that Mr Singh regards his income from his music amounting to only some $8,357 in 2008, I have decided that his income tax return for the year ending 30 June 2008 gives a more comprehensive view.  Mr Singh’s view of his musical activities related only to his performances but it is clear that he overlooked - and it is no more than that - income he received from sources other than performances.  I draw that conclusion from his income tax returns and from his funding application to the Australia-India Council.

132.                Starting with his income tax return for the year ending 30 June 2008, shows that he had income from only one business activity.  That was the business coming under the Industry Code of 90021 of “Musicians and entertainers”.  The Notice of Assessment for the year ending 30 June 2008 confirms that he did not return income from the fuel business and servo as income he received as an individual.  That is not to say that he did not operate that business for it may be that he did so through a company structure.  I note that, at one time, Dyalu Pty Ltd was a company of which he was a director.[165]  What is clear from a comparison of his income tax return for that year with the following year ending 30 June 2009 is that his income remained fairly constant despite the loss of the fuel business and servo.  That suggests that his level of activity with his music and related activities remained fairly constant both before and after the loss of the other business.

[165] T documents at 65.  A company search on ASIC’s website shows that the company was deregistered by the Australian Securities and Investments Commission on 9 August 2009.

133.                On the basis of Mr Singh’s evidence and that of his daughter, I find that
Mr Singh’s activities in the music and entertainment business extend beyond his performances.  They extend to his recording his music and to his marketing the resulting CDs.  That they are available for sale is also clear from his application to the Australia-India Council for funding.  In the costings Mr Singh set out in response to Question 18 of the Funding Application, Mr Singh proposed that income of $17,500 from the sale of CDs at
400[166] each would be put towards the cost of the tour. 

[166] 400 rupees

134.                Mr Singh’s music is not a sporadic activity or an activity that he took up while he looked for full-time employment.  It was an activity that he continued while he looked for full-time employment.  This is shown by the three festivals at which he performed between March and April 2009.  It is also shown by his seeking funding for the Dya Singh World Music Group to perform.  His spiritual work was also continued during this period and this is illustrated by his engaging in the walk he took from Kuala Lumpur to Malacca between
12 May and 31 May 2009.

135.                Mr Singh’s music was a business activity from which he gained an income although it was a modest income.  Employment refers not only to work carried out for an employer for remuneration but also to work of a potentially remunerative nature carried out by a person on his or her own account.  Mr Singh is a person who comes within the latter category.  It could be said that he was underemployed but I am not satisfied that he was unemployed.  That is so even though he did not perform at any festivals between December 2008, when he performed at the Woodford Folk Festival, and 8 March 2009 when he performed at the Goolwa River and Boat Festival.  This is consistent with his being underemployed in a business that he had developed alongside his other work over the years.  It is consistent with the gap in his schedule of performances in 2008 when he did not perform in January, April, June, July or August.  There was nothing unusual about that hiatus.

Should I disregard Mr Singh’s employment under s 595(1)?

136. I am satisfied that Mr Singh is a person who comes within s 595(1)(a) of the Social Security Act for he has undertaken paid work that is suitable for him to undertake and that leads to his not being taken to be unemployed. Under s 595(1)(b), I may disregard his paid work if I am “of the opinion” that it should be disregarded having regard to the four factors set out in that paragraph.  Apart from those factors themselves, the provision does not give any express guidance as to the manner in which the Secretary is to reach that opinion.  Guidance must be found in its context and particularly in the reason for providing for the payment of Newstart Allowance and the circumstances in which a person becomes entitled to be paid it.

137. When I do that, it becomes apparent that Newstart Allowance is payable to provide income support for those who are not engaged in work undertaken as a means of earning a livelihood (whether or not it actually does so) and who are either actively trying to find that work, enhancing or adding to their skills to broaden the opportunities for them to find that work or doing both. It becomes apparent from the dual requirement that a person be both unemployed and satisfy the activity test. Recognition that unemployment takes many forms is found in its lack of definition in the Social Security Act. Recognition that people may find work in a variety of ways and may enhance their skills in a variety of ways is found in the flexibility in the formulation of the activity test. Enhancement for the individual may come through activities that assist others as well as through activities focused solely on enhancement. Activities directed to finding work and/or enhancing skills may lead to work that is remunerative but casual, short-term or intermittent or in the nature of work experience. If viewed in isolation, it may be that the person undertaking it would no longer be regarded as unemployed during the period in which it was undertaken. If a person were to be regarded as unemployed because he or she has undertaken that sort of work, it is to be expected that he or she might refuse to accept such jobs. A refusal might close an opportunity for the person to work in a position that begins as casual, short-term or intermittent or in the nature of work experience but changes to something more permanent. Even if it would not have led to that positive outcome, it might have provided an opportunity to enhance skills and so future employment opportunities.

138. It seems to me that considerations of this sort underpin the discretion conferred by s 595(1). It is consistent with the decisions reached by the Tribunal in Re Waller and Secretary, Department of Social Security,[167] Re Robson and Secretary, Department of Social Security[168] and Re Rouf and Secretary, Department of Family and Community Services[169] (Rouf).  In Rouf, Senior Member Hunt said:

“… Previous cases show that this discretion has been exercised where the employment has been sporadic or very short term. See, for example, Re Robson and Secretary, Department of Social Security …, Re Hill and SDSS … and Re Waller and Secretary, Department of Social Security (1985) 8 ALD 26.”[170]

[167] (1985) 8 ALD 26

[168] [1992] AATA 157; Deputy President Johnston

[169] [2004] AATA 838; (2004) 83 ALD 357; Senior Member Hunt

[170] [2004] AATA 838; (2004) 83 ALD 357 at [12]; 360-361

139.                Deputy President Johnston explained the purpose behind the similar provision then found in s 516 when he said in Robson:

“11.     It is my view that the primary purpose behind s.516 is to allow short term periods of employment of a somewhat unusual or sporadic character to be disregarded for the purpose of calculating job search allowance.  The provision is designed to ensure a person who otherwise should receive support by way of an unemployment benefit is not prejudiced by undertaking, say, a short-term part-time job (see re Hine and Director-General of Social Services (Decision No 557; 16 October 1981); re Waller and Secretary, Department of Social Security (1985) 8 ALD 26, 33-4).”[171]

[171] [1992] AATA 157 at [11]

140. In this case, Mr Singh had been working as a musician for approximately 20 years. In the years leading up to his applying for Newstart Allowance and in the period following his claim for that payment, he has had a steady flow of performance work and recording. It was not work that engaged his attention on a full-time basis but it was work that produced a small but not insubstantial net income of a little over $17,000 per annum on a steady basis. Although there were gaps in his performance work, the fact that gaps occurred was part of the regular and cyclical nature of his work. Finally, I note that his work is highly valued as is his contribution to the Australian and worldwide community. That, however, is not a criterion that is relevant in deciding whether or not I should exercise the discretion under s 595(1).

141. Having regard to these factors, I have decided that I should not exercise the discretion under s 595(1). The nature of Mr Singh’s work was not of a sort that is consistent with his being regarded as unemployed even though it may be consistent with his being employed to a level below his full capacity. Treating him as unemployed while he undertakes it is not consistent with the general understanding of what is meant by a person’s being unemployed. It would not encourage him to continue or increase his participation in the workforce had he been regarded as unemployed at the time he made his claim.

DECISION

142.                As I have decided that Mr Singh was not unemployed when he lodged his claim for a Newstart Allowance in February 2009 or for the period following his claim, I do not need to consider the second criterion of the activity test.  Both criteria must be satisfied before he can qualify for that payment.  Therefore, I have decided that Mr Singh is not qualified for a Newstart Allowance and affirm the decision of the Social Security Appeals Tribunal dated 28 October 2009.

I certify that the preceding one hundred and forty two paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,

Signed:           .......................................................................
  Kate Conners, Associate

Date of Hearing       24 August 2010

Date of Decision  22 September 2010

Advocate for the Applicant     Self represented

Advocate for the Respondent     Mr Tim Noonan

Centrelink

The advice received by Centrelink from the Department of Immigration and Citizenship also suggests that
Mr Singh was absent from Australia between 2 July and 23 July 2009: T documents at 108-109.

Bankruptcy Act, s 60(1)(a). The Court is a court having jurisdiction in bankruptcy under the Bankruptcy Act: s 5(1). Those courts are the Federal Court, the Federal Magistrates Court and, in the circumstances set out in
ss 35 and 35A, the Family Court. It is jurisdiction exclusive of all courts other than the High Court under s 75 of the Constitution: s 27.

With one exception, the Tribunal is not a jurisdiction in which costs are awarded against an applicant and so considerations regarding security of costs are irrelevant.  The exception relates to the costs of a claimant in proceedings instituted by the Commonwealth under the Safety, Rehabilitation and Compensation Act 1988:
s 67(8A).  It is irrelevant in this context.

“The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. … [the] cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action – if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal – is clearly demonstrated.  The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”.
…
… Dixon J. (as he then was) sums …a number of authorities in Dey v Victorian Railways Commissioners [(1949) 78 CLR 62] where he says:  ‘A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury.  The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious.  But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.’  Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal.  On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim.  Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.” (at 128-129, footnotes omitted)
Principles of this sort underpin the Tribunal’s exercise of the power given to it by s 42B(1) of the AAT Act.  The Tribunal’s reasons for decision in Re Williams and Australian Electoral Commission and The Greens (party joined) [1995] AATA 160; (1995) 38 ALD 366; 21 AAR 467 at [30]-[31]; 372; 473-474 set out the following general principles governing the exercise of the power:
“(30)     The power for peremptory dismissal of proceedings is to be exercised cautiously and sparingly: per Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1965] ALR 636; (1964) 112 CLR 125. The mere fact that a proceeding is shown to have no foundation in fact is insufficient to justify a finding that it was commenced vexatiously or without reasonable cause: Per von Doussa J in Hatchett v Bowater Tutt Industries Pty Ltd (No 2) (1991) 28 FCR 324.

(31)       The manifest untenability of a proceeding provides one ground for finding that the proceeding is a vexatious one. …” (at 372).
An application that has been stayed by operation of s 60(2) of the Bankruptcy Act and that the applicant’s trustee has discontinued is an application in which the applicant cannot succeed. There might have been reasonable prospects of success when it was lodged but those prospects count for nought when s 60 of the Bankruptcy Act takes effect.
It is also feasible that the bankrupt could withdraw it under s 42A(1A) so that it is taken to have been dismissed by virtue of the operation of s 42(1B).