Robson v Body Corporate for Sanderling at Kings Beach CTS 2942
[2021] FCAFC 143
•12 August 2021
FEDERAL COURT OF AUSTRALIA
Robson as former trustee of the estate of Samsakopoulos v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143
Appeal from: Body Corporate for Sanderling at Kings Beach v Samsakopoulos (No 2) [2020] FCCA 1909 File number: QUD 234 of 2020 Judgment of: ALLSOP CJ, MARKOVIC, DERRINGTON, COLVIN AND ANASTASSIOU JJ Date of judgment: 12 August 2021 Catchwords: BANKRUPTCY AND INSOLVENCY - application by trustee for leave to appeal from decision of Federal Circuit Court - where Circuit Court set aside sequestration order and dismissed creditor's petition on review of registrar's decision - where Circuit Court dismissed trustee's application for orders for payment of remuneration, costs and expenses of trustee in administering former bankrupt estate - consideration of nature and extent of power pursuant to s 104(3) of Federal Circuit Court of Australia Act 1999 (Cth) - whether Circuit Court has discretionary power to both set aside sequestration order and annul bankruptcy on review of decision by registrar - whether other source of power to order remuneration of trustee when creditor's petition dismissed - whether Circuit Court had jurisdiction to hear interim application for remuneration orders after creditor's petition dismissed - application for leave to appeal allowed - appeal allowed
PRACTICE AND PROCEDURE - consideration of nature of delegated federal judicial power exercised by registrar - consideration of nature of de novo review by judge of registrar's decision
Legislation: Bankruptcy Act 1924 (Cth) s 26
Bankruptcy Act 1966 (Cth) ss 37, 43, 44, 55, 58, 74, 153A, 153B, 154, 252A, 252B, 252C, 315
Bankruptcy Amendment Act 1980 (Cth)
Bankruptcy Amendment Act 1991 (Cth)
Federal Circuit Court of Australia Act 1999 (Cth) ss 15, 102, 103, 104
Federal Court of Australia Act 1976 (Cth) ss 28, 35A
Bankruptcy Regulations 2021 (Cth) reg 80
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) rr 2.02, 7.02, Schedule 1, Item 9
Federal Circuit Court Rules 2001 (Cth) r 16.05
Federal Court Rules 2011 (Cth) r 39.05
Cases cited: AMB19 v Minister for Home Affairs [2020] FCA 439
Australian Rail, Tram and Bus Industry Union v Metro Trains Melbourne Pty Ltd [2020] FCAFC 81; (2020) 276 FCR 172
Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300
Bailey v Marinoff (1971) 125 CLR 529
Balhorn v Colby [1982] FCA 226; (1982) 45 ALR 174
Bechara v Bates [2021] FCAFC 34; (2021) 388 ALR 414
Body Corporate for Sanderling at Kings Beach v Samsakopoulos [2019] FCCA 2133
Boensch v Somerville Legal [2021] FCAFC 79
Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218
Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571
Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589
Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220
Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285
Consolidated Lawyers Ltd v Abu-Mahmoud [2016] NSWCA 4
Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; (2017) 343 ALR 632
CZA19 v Federal Circuit Court of Australia [2021] FCAFC 57
De Robillard v Carver [2007] FCAFC 73; (2007) 159 FCR 38
Décor Corp Pty Ltd v Dart Industries Inc (1993) 33 FCR 397
Dimes v Proprietors of Grand Junction Canal (1852) 3 HLC 759
DJL v Central Authority [2000] HCA 17; (2000) 201 CLR 226
Elliott v The Queen [2007] HCA 51; (2007) 234 CLR 38
Emanuele v Australian Securities Commission (1997) 188 CLR 114
Esso Australia Pty Ltd v Australian Workers' Union [2017] HCA 54; (2017) 263 CLR 551
Ex parte Lennox; In re Lennox (1885) 16 QBD 315
Flint v Richard Busuttil & Company Pty Ltd [2013] FCAFC 131; (2013) 216 FCR 375
Gamser v Nominal Defendant (1977) 136 CLR 145
Gett v Tabet [2009] NSWCA 76
Guss v Johnstone [2000] HCA 26
Guss v Veenhuizen (No 2) (1976) 136 CLR 47
Harrington v Lowe (1996) 190 CLR 311
Harris v Caladine [1991] HCA 9; (1991) 172 CLR 84
Hartley Poynton Ltd v Ali [2005] VSCA 53; (2005) 11 VR 568
In Re Tobias and Co; Ex parte Tobias [1891] 1 QB 463
Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; (1988) 165 CLR 71
Kotsis v Kotsis (1970) 122 CLR 69
Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338
McHugh v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCAFC 223
Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft [2021] HCA 19
Nyoni v Murphy [2018] FCAFC 75; (2018) 261 FCR 164
Owners of the Ship, Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404
Pattison v Hadjimouratis [2006] FCAFC 153; (2006) 155 FCR 226
Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No 2) [2009] NSWCA 387; (2009) 78 NSWLR 190
Phillips v Eyre (1870) LR 6 QB 1
Rangott v Marshall [2004] FCA 961; (2004) 139 FCR 14
Re Anasis; Ex parte Total Australia Ltd [1985] FCA 615; (1985) 11 FCR 127
Re Bond; Ex parte A Bankrupt [1978] FCA 42; (1978) 36 FLR 131
Re Deriu (1970) 16 FLR 420
Re Edgar; Ex parte Davidson & Michael Hunt's Health Club Pty Ltd (1973) 2 ALR 649
Re Gollan; Ex parte Gollan (1992) 40 FCR 38
Re Macks; Ex parte Saint [2000] HCA 62; (2000) 204 CLR 158
Re Schierholter; Ex parte Geis [1978] FCA 6; (1978) 32 FLR 22
Shephard v Chiquita Brands South Pacific Limited [2004] FCAFC 76
Simon v Vincent J O'Gorman Pty Ltd [1979] FCA 75; (1979) 41 FLR 95
Strata Plan 23007 v Cross [2006] FCA 900; (2006) 153 FCR 398
Symons v Bateman [1999] FCA 658
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362
Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1
The Austral Brick Company Pty Ltd v Daskalovski [1998] FCA 782
Tran v Pu [2015] FCA 97; (2015) 228 FCR 562
Udowenko v Rasevi Pty Ltd [2006] FCA 1217
Viscariello v Legal Practitioners Disciplinary Tribunal [2021] SASCFC 18
Wilde v Australian Trade Equipment Co Pty Ltd [1981] HCA 13; (1981) 145 CLR 590
Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212
Zdrilic v Hickie [2016] FCAFC 101; (2016) 246 FCR 532
Gordon DM, “Effect of the Reversal of Judgment on Acts Done Between Pronouncement and Reversal: Parts I and II” (1958) 74 LQR 517
Gordon DM, “Effect of the Reversal of Judgment on Acts Done Between Pronouncement and Reversal: Part III” (1959) 75 LQR 85
Mason K, Carter J and Tolhurst G, Mason and Carter’s Restitution Law in Australia (2nd ed, Butterworths, 2008)
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 299 Date of hearing: 16 June 2021 Counsel for the Applicant: Mr GJ Handran QC with Mr GW Dietz Solicitor for the Applicant: Moore Lawyers Counsel for the First Respondent: Mr MC Long Solicitor for the First Respondent: Celtic Legal Counsel for the Second Respondent: The Second Respondent appeared in person Amici Curiae: Ms V Whittaker SC with Mr M Pulsford ORDERS
QUD 234 of 2020 BETWEEN: WILLIAM ROLAND ROBSON AS FORMER TRUSTEE OF THE BANKRUPT ESTATE OF VICTORIA SAMSAKOPOULOS
Applicant
AND: BODY CORPORATE FOR SANDERLING AT KINGS BEACH CTS 2942
First Respondent
VICTORIA SAMSAKOPOULOS
Second Respondent
ORDER MADE BY:
ALLSOP CJ, MARKOVIC, DERRINGTON, COLVIN AND ANASTASSIOU JJ
DATE OF ORDER:
12 AUGUST 2021
THE COURT ORDERS THAT:
1.There be leave to the applicant to appeal.
2.The appeal is allowed.
3.The orders of the Federal Circuit Court made on 11 December 2019 are set aside and in lieu thereof it is ordered pursuant to s 104(3) of the Federal Circuit Court of Australia Act 1999 (Cth) that the following orders be made consequent upon the order made by the Federal Circuit Court on 17 July 2019 that the creditor's petition filed on 30 July 2018 be dismissed (Dismissal Order):
(a)the petitioning creditor do pay the reasonable remuneration of Mr William Roland Robson in administering the estate of Ms Victoria Samsakopoulos pursuant to the orders made by a registrar of the Federal Circuit Court exercising delegated judicial power (Administration) which orders ceased to have effect on 17 July 2019, such remuneration to be capped in the amount of $30,000 plus GST;
(b)the petitioning creditor do pay the costs and expenses reasonably and properly incurred by Mr Robson in the Administration prior to 17 July 2019;
(c)there be no order as to the remuneration, costs and expenses incurred by Mr Robson in respect of the Administration on or after 17 July 2019;
(d)to the extent necessary, all acts done prior to 17 July 2019 by Mr Robson when acting as trustee pursuant to the sequestration order made on 1 November 2018 or any person acting under the authority of Mr Robson when acting pursuant to the order are taken to have been validly done;
(e)to the extent necessary and to the extent possible without further order, all property that vested in Mr Robson when acting as trustee pursuant to the sequestration order made on 1 November 2018 that has not been returned to Ms Samsakopoulos shall vest immediately in Ms Samsakopoulos;
(f)there be liberty to Mr Robson to apply for such further orders as may be reasonably necessary to ensure that all property that vested in Mr Robson when acting as trustee pursuant to the sequestration order made on 1 November 2018 is vested in Ms Samsakopoulos and as soon as reasonably possible Mr Robson do apply pursuant to such liberty for such orders as may be reasonably necessary to vest the property in Ms Samsakopoulos;
(g)Mr Robson shall do all things as may be reasonably necessary to give effect to order (e) and any orders made pursuant to order (f);
(h)the petitioning creditor shall not by any means seek to recover any contribution from Ms Samsakopoulos in respect of any amount that the petitioning creditor is liable or becomes liable to pay pursuant to these orders;
(i)it is declared that Ms Samsakopoulos shall not have the status of a former bankrupt;
(j)there be no orders as to the costs of the application filed on 11 December 2019; and
(k)there be liberty to apply for any further consequential orders.
4.The appellant and first respondent shall each bear their own costs of the appeal.
5.On or before 2 September 2021, the appellant do file and serve an affidavit providing any explanation as to why the appellant failed to promptly give effect to the Dismissal Order and do show cause by affidavit and any submissions as to any reason why the Court should not appoint a registrar as a referee to inquire into the extent to which the failure by Mr Robson to promptly give effect to the Dismissal Order has caused loss or damage to Ms Samsakopoulos for the purpose of the Court formulating such further consequential orders pursuant to s 104(3) of the Federal Circuit Court of Australia Act as may be appropriate in the circumstances which have occurred.
6.On or before 16 September 2021, Ms Samsakopoulos do file and serve any submissions in response to any submissions filed by the appellant pursuant to order 5.
7.The question whether there should be any further orders in the appeal be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ALLSOP CJ:
The Court sat a bench of five judges in this and a related appeal raising similar issues because the arguments involved a reconsideration of the correctness of two previous decisions of the Full Court: Pattison v Hadjimouratis [2006] FCAFC 153; 155 FCR 226 and Flint v Richard Busuttil & Company Pty Ltd [2013] FCAFC 131; 216 FCR 375. Further, the issues raised important questions as to the power of the Court to make orders that were convenient and just in the administration of the bankruptcy jurisdiction.
I have read the careful and comprehensive reasons of Colvin J. As would be expected, in the light of our joint reasons (with Markovic J) in Bechara v Bates [2021] FCAFC 34; 388 ALR 414, there is much in the reasons with which I concur; indeed, I agree fully with almost all of what his Honour has so clearly expressed. We disagree, however, in one respect only: as to the nature of the orders that can be made upon the dismissal of the creditor’s petition by the judge upon de novo review of the earlier making of a sequestration order by a registrar. The disagreement may only be a different way of expressing the same or very similar ideas and conceptions about the nature of the exercise of judicial power in the sui generis process of the one application being dealt with first by a registrar and later by a judge in the one exercise of judicial power by the Court. I otherwise agree in the orders his Honour proposes.
My view, shortly put, is that whilst it may be that the order of the registrar was not attended by any error, if a judge on review dismisses the creditor’s petition, the setting aside of the sequestration order made by the registrar is the appropriate consequential order in that proceeding. The existence on the record of an order that the estate of the debtor be sequestrated, even one speaking up to, but no further than, the time at which the judge’s order dismissing the petition is made or takes effect, is fundamentally inconsistent with the (one) exercise of judicial power by the Court in respect of the (one) creditor’s petition. That is not to say that the order made by the registrar did not have effect with consequences in statute, vesting of property, or status of the debtor and office of the trustee upon being made. But once the underlying creditor’s petition is dismissed those intervening events and statutory consequences are to be dealt with by consequential orders authorised by statutory provision (here s 104(3) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCCA Act) and in another case s 35A(6) of the Federal Court of Australia Act 1976 (Cth) (FCA Act)). The amplitude and width of such powers is to be recognised as apt to accommodate and deal with the foreseeable consequences of the operation of the exercise by delegation of judicial power and its review de novo in the way conforming with the Constitutional imperative derived from Harris v Caladine [1991] HCA 9; 172 CLR 84.
The second and third complexities to which the Court referred in Bechara v Bates 388 ALR at 423 [30] are raised here, together with the additional complexity as to whether it is open for the Court upon dismissing the creditor’s petition to set aside the sequestration order made by the registrar, at least when it has not been demonstrated to have been made erroneously. It is important to recognise the nature of that order in this context: It is not a setting aside for some vitiating flaw as substantive relief; rather, it is a consequential order recognising that the one petition can only have one outcome if it be dismissed by the judge as the Court on review. That is not to undermine the character of the power exercised by the registrar. The power exercised by the registrar was judicial power. Rather, it is to accommodate the reality that the one whole exercise of delegated judicial power (including the review) cannot have two contradictory orders by way of outcome on the court record. Thus the issues which call for resolution in this appeal are, perhaps, better expressed as follows:
(1)If the creditor’s petition is dismissed on the rehearing, what is the proper order, if any, to deal with the sequestration order made by the registrar?
(2)As part of (1), whether in addition, or in the alternative, to any other order consequent upon the dismissal of the creditor’s petition, is it open to the Court to annul the bankruptcy?
(3)What orders are authorised by s 104(3) of the FCCA Act (and s 35A(6) of the FCA Act) upon the dismissal of the petition, and in particular, can orders be made (in the absence of any annulment) for the division of responsibility for the trustee’s remuneration, costs and expenses in connection with the administration carried on under authority of the registrar’s order?
As the reasons of Colvin J make clear, it is necessary to identify and distinguish the nature of the application or process invoked and the precise statutory framework in any discussion of the source, content and any limits on the power of a court to deal with an order for the sequestration of the estate of a debtor under relevant bankruptcy legislation. The applications or processes include at least the following: an appeal against the making of such an order; an application under rules of Court to vary or set aside such an order made in the absence of the debtor; an application to set aside such an order made not only in the absence of the debtor, but without the debtor being aware of the hearing whether because of lack of service or other reason; an application to set aside such an order made in excess of authority or involving jurisdictional error such as a denial of procedural fairness (even if the debtor was not absent); an application for review of such an order made by a registrar; and an application for an annulment.
The nature of such applications or processes and what needs to be proved may depend in part on whether what is impugned is an order made by a judge of a superior or inferior court or by a registrar under delegated judicial power.
It is right to begin, as Colvin J does, with the recognition of the importance of the jurisdiction being exercised. As Lord Esher MR said in Ex parte Lennox; In re Lennox (1885) 16 QBD 315 at 321 it is a “great power” that is being exercised: one that alters the rights of all creditors and that alters the status of the debtor. There is, and always has been in the history of bankruptcy, a human reality to the jurisdiction. The sequestration order can affect the lives of ordinary people very deeply, as lucidly explained by Deane J in Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; 165 CLR 71 at 82. Whilst the process of bankruptcy administration may alleviate the position of the insolvent debtor allowing a return to normal life without the burden and oppression of creditors beyond his or her capacity to pay, if a solvent person is made bankrupt the costs and expenses of the administration may turn a solvent debtor into a financially diminished, if not penniless, person. The jurisdiction of bankruptcy is concerned with insolvency and its consequences, not mere debt collection: Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; 343 ALR 632 at 644–645 [44]. The importance of the status of being a bankrupt, or having been a bankrupt is, for many, if not most, people, not possible to overstate. It may be the price for the future freedom from oppression of past creditors which circumstances, ill fortune or naivety brought about, but it nevertheless remains to many, as Deane J said in Kleinwort Benson 165 CLR at 82, “a pronouncement of failure and humiliation attended by the fear of unknown consequences and the susceptibility to criminal punishment from what would otherwise be innocent conduct”. For the future, it can mark, if not necessarily to all, a social stain, certainly it marks a commercial stain on the credit history of the person. To call becoming a bankrupt an “ignominy” as Madgwick J did in Udowenko v Rasevi Pty Limited [2006] FCA 1217 at [3] is to many no exaggeration. These are not merely passing considerations that the profession and trustees should bear in mind in how they invoke and administer the jurisdiction, they can be taken as implicit in Parliament’s understanding of the jurisdiction and as matters relevant to the amplitude of provisions enacted to empower a court to correct or adjust the position of parties (in particular the debtor) affected by a sequestration order that for some reason should not be seen as operative.
Section 37 of the Bankruptcy Act
Section 37 of the Bankruptcy Act 1966 (Cth) is in the following form:
(1)Subject to subsection (2), the Court may rescind, vary or discharge an order made by it under this Act or may suspend the operation of such an order.
(2)The Court does not have power to rescind or discharge, or to suspend the operation of:
(a) a sequestration order; or
(b) an order for the administration of the estate of a deceased person under Part XI.
The original terms of s 37 in the Bankruptcy Act 1966 (until 1980) were as follows:
The Court may rescind, vary or discharge an order made by it under this Act or suspend the operation of such an order.
In 1980 by s 22 of the Bankruptcy Amendment Act 1980 (Cth) a restriction on the width of s 37 was introduced such that the provision read as follows:
(1)Subject to subsections (2) and (3), the Court may rescind, vary or discharge an order made by it under this Act or suspend the operation of such an order.
(2)The Court shall not, after a sequestration order has been signed and sealed as provided by the rules, rescind or suspend the operation of the order.
(3)The Court shall not, after an order for the administration of the estate of a deceased person under Part XI has been signed and sealed as provided by the rules, rescind or suspend the operation of the order.
Section 37 before the 1980 amendment was in the same form as s 26(1) of the Bankruptcy Act 1924 (Cth) (the 1924 Act). The change to bring about the current form of s 37 was made in 1992 by s 8 of the Bankruptcy Amendment Act 1991 (Cth).
The object of the rescission contemplated by s 37 in its original form and by s 37(1) in its later form was for orders correctly made in the first instance in respect of which reconsideration was sought from circumstances that had subsequently occurred making rescission appropriate. But, if the order had been wrongly made in the first instance the course of institution of an appeal should be followed: In Re Tobias and Co; Ex parte Tobias [1891] 1 QB 463 at 465 (Cave J), cited by Riley J in Re Edgar; Ex parte Davidson & Michael Hunt’s Health Club Pty Ltd (1973) 2 ALR 649 at 656; Simon v Vincent J O’Gorman Pty Ltd [1979] FCA 75; 41 FLR 95 at 108–109 (Lockhart J); though cf Balhorn v Colby [1982] FCAFC 226; 45 ALR 174. The purpose of s 26(1) under the 1924 Act was also, as Rich J said in Cameron v Cole [1944] HCA 5; 68 CLR 571 at 591, to exempt bankruptcy courts from the usual rule that a valid decision after a hearing determinative of rights cannot be recalled. The power was described by Cave J in the passage cited by Riley J in Re Edgar as providing a power of re-consideration and was:
a discretion of the widest and most far-reaching character; and, when properly exercised, it is so beneficial in its operation and so calculated to advance the ends of justice, that I think it ought not to be restrained by construing it in any niggardly spirit.
An understanding of the nature of the power under s 37 to reconsider orders made (including until 1992 sequestration orders) as a wide beneficial power, together with the terms of s 43(2) of the Bankruptcy Act, assists in understanding the view of Gibbs J in Re Deriu (1970) 16 FLR 420 at 422 (citing Williams J in Cameron v Cole 68 CLR at 610) that rescission of the sequestration order under s 37 would not put an end to the bankruptcy; a view reiterated by J B Sweeney J in Re Bond [1978] FCA 42; 36 FLR 131 at 133.
That the power in s 37 cannot now be used to reconsider sequestration orders does not constrain nor speak to the amplitude of power on appeal under s 28 of the FCA Act, just as it did not when it did extend to sequestration orders: Simon v Vincent J O’Gorman 41 FLR at 102 and 109; Wren v Mahony [1972] HCA 5; 126 CLR 212; Re Schierholter; Ex parte Geis [1978] FCA 6; 32 FLR 22; De Robillard v Carver [2007] FCAFC 73; 159 FCR 38 at 66–68 [142]–[150].
Nor did the existence of the power in 1944 under s 26(1) of the 1924 Act constrain or speak to the amplitude of the inherent power of a court, even of an inferior court, to set aside an order against a person who did not have a reasonable opportunity to appear at the hearing: Cameron v Cole 68 CLR at 584 (Latham CJ), 589 (Rich J) and 607 (Williams J); Taylor v Taylor [1979] HCA 38; 143 CLR 1 at 6–8 (Gibbs J); 10 (Stephen J), 16 (Mason J) and 22 (Aickin J); and see the discussion in Re Anasis; Ex parte Total Australia Ltd [1985] FCA 615; 11 FCR 127 at 129–134, where Burchett J made not only an order that the sequestration order be set aside, but also orders that the bankruptcy be annulled and that the petition be reheard. It is apparent that Burchett J considered there was a risk (based on Re Deriu and s 37) that an order setting aside the sequestration order would not put an end to the bankruptcy.
Nor should the current form of s 37(2) be seen as somehow constraining the proper exercise of authority and discretion which is contained within s 104(3) of the FCCA Act or s 35A(6) of the FCA Act. Such was the view (with which I agree) of Edmonds J in Strata Plan 23007 v Cross [2006] FCA 900; 153 FCR 398 at 424 [110] and of Madgwick J in Udowenko [2006] FCA 1217 at [3]. Such, implicitly, was also the view of each of the three judges in Pattison 155 FCR at 232 [14] (Nicholson J), 236 [51]–[53] (Jacobson J) and 255–257 [176]–[182].
Thus, I do not consider that s 37 impinges upon or constrains the authority and discretion of the Court under s 104(3) (or s 35A(6)) to grant appropriate relief consequent upon dismissal of the petition.
Can one set aside the sequestration order made by the registrar in an exercise of power under s 104(3) of the FCCA Act (or s 35A(6) of the FCA Act)?
Before turning to matters of principle, as a matter of precedent, Pattison 155 FCR 226 stands as authority for an affirmative answer. The debate in the three sets of reasons was whether an annulment order could also be made, and if so, on what foundation. All agreed that the subsisting sequestration order be set aside. Further, that conclusion was not founded upon any flawed conception of the nature of the review. That said, as Colvin J says, there was an assumption, and no argument to the contrary, in Pattison as to the availability of an order to set aside the sequestration order. As the Court said in Bechara v Bates and as Colvin J says, the analysis of the nature of the review by Lander J (from which there was no dissent by Nicholson J or Jacobson J) accords with the views expressed in Bechara v Bates and the unbroken line of authority to which reference was made in Bechara v Bates. On that correct foundation, I would prefer not to see the approach in Pattison as to the availability of an order to set aside the sequestration order as wrongly founded on vitiation of the registrar’s decision, but rather as an exercise of power to make consequential orders.
As a matter of practice and practicality an application for review under s 104(2) of the FCCA Act (or s 35A(5) of the FCA Act) may be made without any other application; it may be accompanied (as it was here by Ms Samsakopoulos) by an application for an annulment; it may be accompanied by an application under the rules (such as r 16.05(2)(a) or (b) of the Federal Circuit Court Rules 2001 or r 39.05(a) or (b) of the Federal Court Rules 2011), or under the inherent or implied power (Cameron v Cole) to set aside the sequestration order if no opportunity to be present was afforded, or perhaps for some other vitiating reason, perhaps jurisdictional error. Not infrequently given the nature of the jurisdiction, litigants are self-represented and their documents, claims and the jurisprudential bases therefor may be confused or wanting in expression.
It is correct to say, as Colvin J does, as the Court did in Bechara v Bates and as Lander J did in Pattison that the demonstration of error on the part of the registrar is not a necessary part of the review. Rather, the review is the rehearing of the creditor’s petition and the earlier exercise of jurisdiction is not the subject of debate. Nevertheless, in the often confused or multiple applications, what happened before the registrar may be part of the whole controversy. Also, what happened at the hearing before the registrar may be relevant to the choice of consequential orders should the petition be dismissed on review.
In any event, if one focuses on the application for review, as the Court has stated and as, correctly with respect, was stated by Lander J in Pattison 155 FCR at 251–252 [155]–[156] an application for review (under s 104(2) of the FCCA Act or s 35A(5) of the FCA Act) is an entirely different procedure to an application to set aside the existing order made in the absence of the party or for some other reason or to an application for an annulment. The review application is the rehearing of the petition to determine whether or not a sequestration order should be made by the Court (through the judge) on the evidence then available. If the answer be ‘no’, the first order to be made is to dismiss the petition. It would be fundamentally inconsistent with the dismissal of the petition to annul the bankruptcy. I agree with Colvin J that within the framework of the Bankruptcy Act and the validity of the delegation of power, the order made by the registrar can have no continuing effect. At one level of abstraction the registrar’s order (unless set aside for some reason, such as absence of the debtor or non-service or some other vitiating reason) spoke as an order of the Court. The validity of the delegation in the statute means that the registrar’s order was, and took effect as, an exercise of judicial power. Upon dismissal of the creditor’s petition on review the bankruptcy that the making of the sequestration order by the registrar created and the statutory consequences that flowed therefrom, such as vesting of property and the trustee taking up office, are brought to an end by the superseding dismissal of the petition: There is no bankruptcy to be annulled. That superseding can be seen as the merging or substitution of the order made by the registrar and of its continuing effect in or by the order made by the judge. Neither the bankruptcy nor the sequestration order can continue to have any effect.
What of the interim period between registrar’s order and judge’s order? An otherwise valid order of the Court burdened by an inhering right of the party to seek review and rehearing engaged the operation of the Bankruptcy Act, including the change of status of the debtor to bankrupt. Rights in and to property changed: s 58(1). The trustee took up office and began to act.
For the reasons expressed by Colvin J, the terms of s 104(3) (and s 35A(6)) should be construed as ample and sufficient to untangle and unravel as far as possible, and to the extent that it is just, the rights and positions of the parties involved. The “matter with respect to which the power was exercised” is the width of the controversy which by the time of the rehearing involves not merely the parties to the creditor’s petition but also potentially others, in particular the trustee, who have a proper interest in the consequences of the rehearing.
The immediate actors in the controversy, at the point of dismissal of the petition, are (here) the debtor, the creditor, and the trustee. The public represented by the creditors are also affected. The proper analysis of the superseding or overtaking of the registrar’s order by the order of the judge cannot simply mark the end of the existence of a temporary bankruptcy in which the debtor was, for a limited time, a bankrupt. The creditor’s petition on which the registrar acted has been dismissed. There can be but one outcome of the one overall exercise of judicial power by the Court. If the Constitutional imperative of a rehearing by a judge of the creditor’s petition is to have meaning, the consequence of the dismissal of the petition must include the eradication of the status of the debtor as a bankrupt. For any other position to obtain would permit the delegated exercise of power to have not only temporary, but lasting, if limited, effect notwithstanding that the same power has now been exercised in a contrary way. The order would remain on the Court record, potentially causing confusion. The procedure is sui generis; it is framed and given content by the Constitutional imperative. The appropriate way to vindicate the protection of the debtor is to set aside the sequestration order as a consequential order to ensure that the Court record has one result of the exercise of judicial power in respect of the one petition, not two diametrically opposed orders of the Court potentially affecting the status of the debtor. This ensures the elimination of the status, and the record of the status, of the debtor as a bankrupt. That does not mean that other orders cannot be made consequentially under s 104(3) of the FCCA Act (or s 35A(6) of the FCA Act) which protect the position of the trustee and third parties. Those consequential orders can proceed on the basis, as was the case, that there was a valid order of the Court in place such that those who acted upon the order are protected in what they did. Such not only accords with long-standing authority: Dimes v Proprietors of Grand Junction Canal (1852) 3 HLC 759 at 786; Phillips v Eyre (1870) LR 6 QB 1 at 22, but also with the statutory and Constitutional structure of hearing and rehearing de novo and the non-provisional nature of the order of the Court when made by the registrar.
Thus, the content of s 104(3) of the FCCA Act (and s 35A(6) of the FCA Act) and the nature and contours of, and limits upon, the consequential orders that can be made are set or framed by the Constitutional imperative that facilitates the delegation.
A consequence of that is that a debtor, in respect of whom a creditor’s petition has been dismissed by a judge on de novo rehearing, should not be burdened in status, nor (unless other considerations as to the conduct of the debtor independently justify it) with financial liability, by the earlier making of a sequestration order. To leave someone with the apparent temporary, but unremoved, status of a bankrupt, or to burden him or her with some share of the costs and expenses of the bankruptcy, let alone remuneration of a trustee, would substantially diminish the necessary protection of the de novo hearing and call into question the “guarantee” that a litigant may have recourse to a hearing and a determination by a judge: Harris v Caladine 172 CLR at 95 (Mason CJ and Deane J).
There can now be no doubt that on appeal the sequestration order can be set aside. The consequences of such an order on appeal were stated by the court in Simon v Vincent J O’Gorman 41 FLR 95, De Robillard 159 FCR 38, Rangott v Marshall [2004] FCA 961; 139 FCR 14 (approved in De Robillard) and by the High Court in Wren v Mahony 126 CLR 212. Such an order is made to correct error. It is a necessary substantive order on appeal, clearing the way to dismiss the petition as the order that should have been made by the court below. On a review, the petition is reheard and if dismissed (as the substantive order) a consequential order is made to set aside the inconsistent order that has been overtaken by, or merged in, or substituted by, the substantive order of the Court dismissing the petition.
There would be no common sense in relief consequent upon a de novo rehearing being less adequate (even if the orders be differently conceptualised) to protect the debtor than an appeal where error had to be demonstrated in the registrar’s decision. To leave on the record of the Court a sequestration order against the debtor’s estate after the petition has been dismissed on review would leave a legacy of a financial stain that would be as unjust as it would be confusing, given the order of the Court on rehearing.
Thus, in my view, s 104(3) is wide enough upon dismissal of the creditor’s petition to found an order setting aside the sequestration order made by the registrar as a necessary consequential order to perfect the overtaking or superseding of the registrar’s order by the order made on review by the judge as the Court. This ensures the debtor is taken not to have, or henceforth ever to have had, the status of a bankrupt.
The other consequential orders on review under s 104(3) or s 35A(6)
I agree with Colvin J and for the additional reasons that I have given that there is ample content to s 104(3) of the FCCA Act (and s 35A(6) of the FCA Act) to make all appropriate orders to deal with the remuneration, costs and expenses of the trustee and the other consequential matters to which Colvin J refers. For the reasons that I have given, this burden should not fall to be shared by the debtor merely because the sequestration order has been set aside. There may in any given case be circumstances that make it just for the debtor to pay some money for what, or in respect of what, has occurred. Such an order would need to be conformable with the Constitutional imperative. The debtor may have contributed to the making of the first sequestration order by his or her conduct, such as by failing, after being told clearly of the necessity, to bring forward evidence of solvency; the debtor may have asked the trustee to take steps that the trustee was not obliged to take and which have benefitted the debtor. There may be other circumstances. Thus, the circumstances surrounding the making of the order by the registrar may be relevant to consider in the making of the consequential orders. No such circumstances were demonstrated here.
It is strictly unnecessary to deal with Flint 216 FCR 375, nevertheless it is appropriate to deal with the position on appeal because it assists in understanding the scope and amplitude of s 104(3) of the FCCA Act and s 35A(6) of the FCA Act.
The powers given by s 28 to the Court hearing appeals by way of rehearing should be given amplitude in order to resolve and quell the controversy on appeal. Matters may come on appeal to this Court from a single judge of this Court or from a judge of the Circuit Court. In either case, that judge at first instance might be exercising the judicial power by way of review of a registrar’s decision or directly. The power of the Court to make just consequential orders should not be different in these different contexts.
If the Court allows an appeal against the making of a sequestration order it may set aside that order. There is no reason in principle or from the text of s 28 of the FCA Act for the Court to refrain from making orders that are just, necessary or convenient consequential upon or ancillary to the setting aside of a hitherto valid order.
Some such orders may be seen as restitutionary, some compensatory, some adjectival, some dealing with property that has vested or been dealt with. It may be that in a given case the dispute as to consequences is so substantial as to warrant remitter for trial. That possibility is no reason not to make orders that are just, that can be made conveniently, and that accord with principle for the dealing with the consequences of the setting aside of a hitherto valid and effective order: See Mason K, Carter J and Tolhurst G, Mason and Carter’s Restitution Law in Australia (2nd ed, Butterworths, 2008) Ch 7; Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; 53 CLR 220 at 225; Wilde v Australian Trade Equipment Co Pty Ltd [1981] HCA 13; 145 CLR 590 at 602; Gordon DM, “Effect of the Reversal of Judgment on Acts Done Between Pronouncement and Reversal: Parts I and II” (1958) 74 LQR 517 and Part III (1959) 75 LQR 85.
The approach to the remuneration and costs of the trustee under s 28 of the FCA Act should not differ from that under s 104(3) of the FCCA Act or s 35A(6) of the FCA Act. If a sequestration order is set aside on appeal and consequential or ancillary orders about the trustee’s position need to be made under s 28 from the direct exercise of judicial power (as opposed to s 104(3) or s 35A(6)) there will be no governing or moulding effect of the Constitutional imperative underpinning delegation. Nevertheless, good cause would need to be shown as to why a debtor (erstwhile bankrupt) should fund an administration sought unsuccessfully ultimately by the creditor after a successful appeal. This approach brings into focus in a practical and concrete way the significance of the nature of the jurisdiction being insolvency and not debt collection. In that context, the stringency of approach of Riley J (mentioned by Deane J in Kleinwort Benson 165 CLR at 82) should not be seen as a call for pedantry, but as a feature of the seriousness of the invocation of the jurisdiction.
Also, I wish to emphasise what Colvin J has said in his reasons about the need for despatch in the dealing with matters in bankruptcy, in particular applications concerned with the invocation of the jurisdiction, including applications for review of registrars’ decisions concerned with such. The need for that despatch is part of the recognition of the public importance of a jurisdiction that affects all creditors and the status of the debtor and of the fact that the foundation of the jurisdiction is insolvency, not debt collection.
It is unnecessary to make a consequential order setting aside the sequestration order made by the registrar. The Circuit Court judge did so on 12 July 2019. Order (i) proposed by Colvin J may not be strictly necessary given the setting aside of the sequestration order, but I agree that it should be made for clarity and full protection of the debtor. Thus, my disagreement with Colvin J does not affect the proper orders to dispose of the appeal.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop. Associate:
Dated: 12 August 2021
REASONS FOR JUDGMENT
MARKOVIC J:
I have had the advantage of reading the draft reasons for judgment of each of the Chief Justice and Colvin J. Like the Chief Justice I agree with almost all of the detailed and comprehensive reasons given by Colvin J and with the orders proposed by his Honour for the disposition of the appeal. Like the Chief Justice I disagree with the reasons of Colvin J to the extent that his Honour expresses the view that the consequential orders that can be made upon the dismissal of a creditor’s petition by a judge following a de novo review of a sequestration order made by a registrar do not extend to an order setting aside the sequestration order.
Like the Chief Justice and for the reasons expressed by his Honour I take a different view and am of the opinion that it is open to do so. The making of a consequential order setting aside the sequestration order in those circumstances is, as the Chief Justice observes, the appropriate way to vindicate the protection of the debtor and ensures the eradication of the status of the debtor as a bankrupt as well as removing any confusion as to the status of the debtor for the purpose of, among other things, his or her future dealings.
I certify that the preceding two (2) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic. Associate:
Dated: 12 August 2021
REASONS FOR JUDGMENT
DERRINGTON J:
I agree with the reasons of the Chief Justice and the orders proposed by Colvin J.
I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate:
Dated: 12 August 2021
REASONS FOR JUDGMENT
COLVIN J:
On 1 November 2018, a sequestration order was made against the estate of Ms Victoria Samsakopoulos. The orders were made by a registrar of the Federal Circuit Court of Australia on the hearing of a creditor's petition brought by the Body Corporate for Sanderling at Kings Beach CTS 2942 (Body Corporate). In making the sequestration order, the registrar exercised delegated judicial power of the Circuit Court. Mr William Roland Robson (Trustee) assumed the conduct of the administration of the estate pursuant to the sequestration order.
After the administration had been underway for about five months, Ms Samsakopoulos brought an application to review the registrar's decision. In that application she also claimed an order annulling her bankruptcy. On hearing the review application, orders were made by a Circuit Court judge setting aside the sequestration order and dismissing the creditor's petition. The Trustee appeared in person at the hearing of the review application but did not seek any orders.
Some months thereafter, the Trustee brought an interim application in the bankruptcy proceedings for orders that Ms Samsakopoulos and the Body Corporate pay the remuneration, costs and expenses of the Trustee in administering the former bankrupt estate in such proportions as the Court thinks appropriate. The Circuit Court judge determined that the Circuit Court had no power to make such an order and the interim application was dismissed.
The Trustee now seeks leave to appeal against the decision dismissing the interim application. If leave is given, the Trustee seeks orders as to payment of his remuneration, costs and expenses in conducting the administration pursuant to the sequestration order made by the registrar.
The basis for the application by the Trustee
The Trustee says that the Circuit Court had power pursuant to s 104(3) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCCA Act) to make the order sought on the interim application. Section 104(3) provides, amongst other things, that on review of the exercise by a registrar of a delegated judicial power the Circuit Court 'may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised'. If there is no such power, the Trustee submits, in the alternative, that the Circuit Court had a discretion to order that the bankruptcy of Ms Samsakopoulos be annulled instead of or in addition to dismissing the creditor's petition and there was error in failing to consider the exercise of that discretion. The Trustee says that if the exercise of the discretion had been considered then it should have been exercised in favour of making an order annulling the bankruptcy. On that basis, the Trustee says that the orders sought on the interim application should now be made on appeal. The significance of an order for annulment is that it would enable the Trustee to rely upon provisions of the Bankruptcy Act 1966 (Cth) that allow for the remuneration of the Trustee consequent upon an annulment by Court order.
In the course of submissions to this Court, the Trustee also sought an order that would enable him to re-convey the Kings Beach unit to Ms Samsakopoulos. It is to be noted that the Trustee sought no such consequential order before the Circuit Court on the hearing of the interim application. The order was said to be necessary and appropriate consequential relief because, during the course of the administration conducted by the Trustee, a transmission application had been granted and the unit had become registered in the name of the Trustee. No other consequential order was sought by the Trustee on the interim application or in the appeal.
As a result of the issue of the transmission of the Kings Beach unit being raised by the Trustee in the proceedings in this Court (and submissions made by Ms Samsakopoulos appearing on her own behalf) it emerged that, notwithstanding the order made by the Circuit Court dismissing the creditor's petition and setting aside the sequestration order, the Trustee had retained control of all of the property comprising the estate of Ms Samsakopoulos.
The position of the Body Corporate
On the hearing of the interim application in the Circuit Court, the Body Corporate did not submit that the Circuit Court lacked jurisdiction to make the orders sought. In this Court, the Body Corporate adopted the same position. However, if leave was given to appeal it advanced two submissions. First, it said that Ms Samsakopoulos should bear the burden of any order for payment of the Trustee's remuneration, costs and expenses up until her application to review the registrar's order was filed and that thereafter there should be no order (with the consequence that the Trustee would bear the costs and expenses thereafter). Second, it said that any consequential orders that may be required should be made on appeal and the matter should not be remitted to the Circuit Court.
The position of Ms Samsakopoulos
Before this Court, Ms Samsakopoulos maintained that she should not have been made bankrupt, that she owed no debt to the Body Corporate and she should not have to bear any of the costs of the administration conducted by the Trustee.
The assistance of amicus curiae
Ms Samsakopoulos is not legally represented. The Court requested and was afforded the assistance of amicus curiae. The Court is grateful for the willingness of Ms Whittaker SC and Mr Pulsford to assist the Court and for their helpful submissions. Four issues were raised by counsel for consideration. First, whether the determination of the review application by the Circuit Court dismissing the creditor's petition finally determined the question of the orders that could be made on review such that, in the absence of an appeal against those orders, the Circuit Court was correct to dismiss the subsequent interim application for remuneration (and for that reason leave to appeal should be refused). Second, whether there was power on review of the order made by the registrar to both set aside the sequestration order and annul the bankruptcy. Third, whether there was power to set aside the sequestration order and then allocate as between the Body Corporate and Ms Samsakopoulos the costs associated with the administration of the estate prior to the set aside order and, more generally, whether the Court on appeal had power to make the orders sought by the Trustee. Fourth, whether there was an alternative statutory basis on which the Circuit Court could have made orders as to the costs of the administration of the estate which the Court could exercise on appeal.
Issues of importance
Practice in the bankruptcy jurisdiction is informed by due and proper understanding of the nature of the 'great power' that is being exercised: Ex parte Lennox; In re Lennox (1885) 16 QBD 315 at 321 (Lord Esher MR). It is a power that alters the rights of all creditors who must thereafter participate in an administration with its attendant costs in order to pursue their debts and, in due course, must share rateably in realisable property of the debtor. It is also a power the exercise of which brings about a significant change in status on the part of the debtor. As a result, there is a recognition that formal requirements must be duly observed.
Nevertheless, once formal requirements have been met and the bankrupt is unable to demonstrate solvency, in many cases there is no real basis to oppose the making of a sequestration order. In the interests of efficiency in judicial administration, it is common and established practice for delegated judicial power to be exercised in making orders on creditor's petitions in cases of that kind.
The issues that arise on the Trustee's application in the present case concern the proper approach to be adopted where a sequestration order has been made in the exercise of delegated judicial power but on hearing the matter de novo on review the Court is persuaded that a sequestration order should not be made. Different approaches are evident in the reasoning in previous Full Court decisions relied upon by the Circuit Court judge, particularly Pattison v Hadjimouratis [2006] FCAFC 153; (2006) 155 FCR 226 and Flint v Richard Busuttil & Company Pty Ltd [2013] FCAFC 131; (2013) 216 FCR 375.
Uncertainties for trustees in bankruptcy as to the manner in which they may be remunerated and the approach that they should adopt on a review application when a sequestration order in respect of the estate they are administering might be brought to an end are matters of wider significance than the particular issues in the present case. If, as was found by the primary judge, there is indeed some form of lacuna in the power of the Court to make orders for remuneration, costs and expenses of trustees in cases like the present then that is a matter that should be clearly identified as an issue that may invite consideration by the legislature.
If there is no lacuna and there is power to make an order then important issues arise as to the nature and extent of the orders that may be made, particularly the circumstances in which an alleged debtor may be made liable for the costs of an administration even though a judge has determined that a sequestration order should not be made on a creditor's petition.
For all those reasons, the application gives rise to important issues for the administration of bankruptcy law. Further, the correctness of Flint and the resolution of the disagreements in Pattison are important matters of precedent and practice in the bankruptcy jurisdiction. For these reasons it was thought appropriate to constitute a bench of five judges to address those issues.
Before stating in precise terms the issues that arise, it is appropriate to first address the conceptual issue at the heart of the appeal, namely the nature of delegated judicial power and the manner in which it may be exercised. It is important to direct attention to this at the outset because it assists in understanding why the authority and power of the Court on review is different to that which it has on appeal or pursuant to other applications or in different statutory contexts. These differences are important also in understanding the correct form of order to be made upon a review of the making of a sequestration order by a registrar in the exercise of delegated judicial power if the judge decides that the creditor's petition should be dismissed.
Delegated federal judicial power
One characteristic of judicial power is that it is entrusted to courts, not individual judges: Kotsis v Kotsis (1970) 122 CLR 69 at 91 (Windeyer J). Therefore, 'when any court is authorized to exercise the judicial power of the Commonwealth the power of adjudication thus committed to it must be exercised by the whole court or by a judge of the court, not by a subordinate officer': Kotsis at 91-92. Further, there is a 'constitutional imperative' that the judicial power of the Commonwealth be exercised by judges of federal courts or other courts entrusted with the exercise of federal jurisdiction: Tran v Pu [2015] FCA 97; (2015) 228 FCR 562 at [19] (Beach J, adopting the language of McHugh J in Harris v Caladine (1991) 172 CLR 84 at 164).
Nevertheless, judicial power can be delegated, but only in a manner that is consistent with its character as a power entrusted to a court. In the case of federal judicial power, there are limits upon the extent to which notions derived from the character of the common law courts may be deployed when reasoning as to the jurisdictional limits of federal courts: though see Re Macks; Ex parte Saint [2000] HCA 62; (2000) 204 CLR 158. Irrespective of the extent to which, at common law, courts of record may delegate judicial power, all federal courts are statutory courts and are subject to constitutional limits. In the case of delegated judicial power, for the delegation of judicial power to be consistent with the constitutional character of federal courts, the review provided for must be a de novo review by a judge: Harris v Caladine at 95, 123, 164.
The nature of delegated judicial power was recently considered in this Court in Bechara v Bates [2021] FCAFC 34 where it was observed at [2]:
It is now an accepted incident of judicial power that it may be exercised … by an order being made pursuant to a delegation, but only if the order may be reversed or otherwise corrected by a judge on review. In such cases, however, it is important to recognise that the review … is not concerned with correcting error and in that respect is to be differentiated from the statutory rights of appeal that have gradually become an established part of the judicial system. Nor is it a review de novo as a further stage in a tiered process. Rather, the review is an attribute of a recognised mechanism by which the exercise of judicial power may be delegated to an officer of the Court who is not a judge, such as a registrar. The right to seek review attaches to the delegation and is an attribute of the nature of the delegated authority.
It appears also that the delegation must not be of a kind that would prevent the Court, by its judges, exercising judicial power unless a party had first resorted to the delegated decision‑maker. In other words, the delegation must not deprive the Court of its authority to determine the matter even though there has been no decision in exercise of the delegated authority. Therefore, in all cases where delegated judicial authority may be exercised there must be the prospect for a judge of the Court to determine the application if the judge considers it appropriate for that course to be followed in a particular case.
It follows that where a registrar (or other court officer) exercises delegated judicial authority, it is wrong to view that exercise of power as being separated from the prospect of review by a judge or judges of the Court in a manner that will involve a fresh (that is, de novo) exercise of the judicial power as to the making of the order. Any order made by a registrar in the exercise of delegated judicial power has a particular character or quality that is an incident of the nature of the delegation. The prospect of review by a judge inheres in the order made by the registrar as an incident of the extent of the delegated authority. Put another way, the registrar's order speaks as an order of the Court but only on the basis that it is subject to the prospect of subsequent review de novo by a judge.
Further, the de novo review is not to be seen as directed to a consideration of the correctness of the delegate's decision or redressing error by the delegate. On review, the Court hears the case again unaffected by what has gone before. However, the Court does not act as if there is a new appellate proceeding. The review task it undertakes is a determination again of an application that has already been listed for hearing and proceeds in the same manner that would be the case if the power had not been delegated. In consequence, on review, the Court can entertain new arguments, receive new evidence or adjourn the proceeding but only to the extent, and in the circumstances where, it would do so in a matter that had already been set down for determination. Further, the applicant on review is the applicant on the application irrespective of whether the applicant was successful before the delegate. The same onus arises as if the application was being heard for the first time. This has particular significance for the review of a sequestration order. The review is initiated by the debtor (now bankrupt by the order to be reviewed), but proceeds as an application by the creditor on its petition.
The ability to delegate the exercise of judicial power in the manner described is consistent with the nature of judicial power. Therefore, it is consistent with the constitutional character of a federal court for such delegation to be authorised by statute. For present purposes it is not necessary to grapple with the extent to which the legislature might prevent such delegation. The issues were joined in the present case on the basis that the authority for the delegation of the judicial power of the Federal Circuit Court was statutory and was conferred by the FCCA Act. However, the statutory source of the authority could not alter the nature of the judicial power being exercised. It also could not exceed the statutory limit of the extent to which judicial power might be delegated.
Particular consequences arise from the character of the review which was described by Lander J in Pattison, correctly with respect, as a 'procedure sui generis': at [156]. As was observed in Bechara v Bates an order made by a registrar in the exercise of delegated judicial power takes effect without reservation when pronounced. It does so as an exercise of judicial power and (save for the prospect of review) operates with the same effect as if it had been made by a judge making the decision of the Court. Its past validity is not undone if a judge, on review, decides on the review that the order should not be made on the application. Rather, a review in which the judge reaches a different decision to the delegate results in the operation of the earlier, valid and operative, exercise of delegated judicial power coming to an end. At least from the point in time of the decision on review, the delegation which authorised the exercise of judicial power comes to an end. The act of the delegate is replaced by an exercise of judicial power by the judge. For that reason, even where, on review, the Court determines that the same order should be made as was made by the delegate it is usual for the Court on review to affirm the orders made by the delegate.
It is to be expected, consistently with the nature of the reservation of the right of review as a condition of the delegation, that the earlier order would be overtaken on review. That is to say, the nature of the delegation (with attendant right of review) is such that the authority of the delegate to exercise judicial power may be withdrawn because any such order always spoke in a manner that was subject to the exercise of the review power.
Therefore, if and when the review power is exercised then consistently with the conceptual character of the delegation with a right of review, the decision on review overtakes the delegation. Whether it speaks with a consequence that affects the past operation of the order of the delegate is a matter considered below. As will emerge, in the present case it is a question of statutory construction as to what may be done upon undertaking the review because the delegation and the powers that may be exercised on review are expressed in the particular terms of s 103(4) of the FCCA Act. Further, in the case of a sequestration order it is necessary to consider the terms of s 37(2) of the Bankruptcy Act which provides that the Court 'does not have power to rescind or discharge, or to suspend the operation of … a sequestration order'.
The appropriateness of the practice that has developed, with the blessing of authority, of making an order on review setting aside the delegated decision is considered below. The issue arises because the Court on review of the exercise of delegated judicial power does not decide that the delegate's exercise of power was made in error and therefore should be set aside. Rather, the Court on review of the exercise of delegated judicial power makes its own determination unaffected by the delegate's decision. The Court then makes its order. The consequence of that order is that it overtakes the order of the delegate. It brings to an end the delegated authority by giving effect to the condition of review to which the exercise of the delegated authority was always subject. The way in which the past operation of a valid exercise of delegated judicial power is to be addressed when a judge makes an overtaking order on review is a matter of some importance especially when it comes to the bankruptcy that has commenced pursuant to that order and the status of a person as a bankrupt by reason of the making and operation of the sequestration order as an exercise of judicial power. As has been indicated, consideration will be given to the appropriate form of consequential relief that might be expressed where the Court on review dismisses an application where the order of the delegate had been to allow the application.
There may be particular instances where the complaint to be made about a delegate is that the delegate's decision exceeded the extent of delegated judicial authority and in that sense was beyond the jurisdiction as delegated. In such a case, it may be that the decision of the delegate is a nullity (at least in a case like the present where the delegated judicial power is not the power of a superior court). Different relief may be available in such a case. However, even in such a case if the application comes before a judge on a purported application for review, conduct by the delegate in excess of the delegation would not deprive a judge of the Court of authority to determine the application for review. The limits on the delegated authority could not confine the Court's jurisdiction being exercised by a judge. Therefore, if the issue was only as to whether the delegate exceeded the extent of delegated authority, the judge could make the appropriate order without considering whether there has been action taken in excess of the delegation. It would only be in those cases where it was said that the Court had no jurisdiction that the appropriate course may be to seek some form of prerogative relief in respect of the registrar's decision.
For completeness, it may be noted that a registrar of the Court may exercise administrative power and in such cases different considerations apply: Nyoni v Murphy [2018] FCAFC 75; (2018) 261 FCR 164 at [30]‑[39]. Further, the administrative power of a registrar is exercised under the direction of the judges of the Court. As to the limits of the exercise of that administrative supervision and the circumstances in which a direction by a judge to a registrar will involve an exercise of judicial power, see AMB19 v Minister for Home Affairs [2020] FCA 439 at [61]‑[64].
The utility of delegated judicial power
The delegation of the exercise of judicial power subject to a right of review de novo has obvious utility where applications must be granted in circumstances where particular criteria are met which are of a character that can be objectively assessed and where those applications are sufficiently significant in number that they may (if not delegated) consume limited judicial resources better applied to determining more complex cases.
However, the nature of delegated judicial power confines its utility. As has been explained, any such exercise of power must be burdened with the prospect of an application for review by the party adversely affected. More significantly, the review must be of a kind that involves, in effect, a complete re-exercise of the power as if the delegate had not made a decision. The obvious consequence is that the decision of the delegate may be overtaken (in effect reversed) even though that decision may have been acted upon in the interim.
In the case of the exercise of the power to make a sequestration order on a creditor's petition the need for a delegate to be conscious of these aspects of the exercise of delegated judicial power is heightened, as the circumstances of the present case illustrate. The nature of the power being exercised in such cases also heightens the need for any review to be conducted expeditiously and for there to be careful consideration on review as to whether it is appropriate to extend any time limit appropriately imposed in the interests of finality upon the bringing of any application for review of the exercise of the delegated judicial power. As to such time limits, at least where they are expressed by the judges of the Court in the exercise of their rule-making power and not by the exercise of a power conferred upon the Executive, they are consistent with the constitutional imperative for the provision of an opportunity for review: see Harrington v Lowe (1996) 190 CLR 311 at 321.
Having noted these matters, the delegation of judicial power is an important way in which to promote efficiency. It provides ready access for applicants to an exercise of delegated authority to determine an application more quickly than may be the case if the matter was required to be considered by a judge. It also frees up limited judicial resources.
However, in all cases, the parties (particularly the applicant) and the delegate must be conscious of the character of the delegation. If for some reason known to the applicant or the delegate it is not appropriate for the application to be determined by the exercise of delegated judicial power then that is a matter that should result in the application being referred to a judge for determination (without any prior exercise of delegated judicial power).
A metaphysical question
As has been noted, by reason of the form in which federal judicial power may be delegated, there is the possibility that an affirmative decision may be made by the delegate in the exercise of the power which is subsequently reversed by a judge if a review application is brought. There is also the potential for delay between the exercise of delegated judicial power and the bringing of a review. This may be occasioned by a vast array of circumstances not all of which may be visited upon the party who seeks a different order on review. Any review cannot be conducted instantly. Therefore, inherent in the delegation is the possibility that a valid judicial order which has been carried into effect may be affected by a decision on the review to which the exercise of the delegated judicial power was always subject.
If there is a reversal on review, an issue arises as to what is to occur in relation to steps that have been taken in the interim in reliance upon any order made in the exercise of delegated judicial power.
It may be observed that it would be strange if there could be delegation of judicial power but only if there could be a review by the Court, yet on review the Court lacked any authority to make consequential orders addressing what has occurred between the exercise of the delegated judicial power and the completion of a review. This is especially so when the exercise of delegated judicial power may result in an order that speaks with the authority of the Court and must be obeyed accordingly at least until it is replaced by a different order on review.
In the bankruptcy context, the metaphysical question that arises when delegated judicial power is exercised to make a sequestration order but, on review in accordance with the nature of the delegation, the Court determines that a sequestration order should not be made is one that troubled this Court in Pattison (considered below).
The answer to the question is further complicated by the conferral upon a Court exercising bankruptcy jurisdiction of the power to make an order annulling the bankruptcy if the Court is satisfied that a sequestration order ought not to have been made, a power that is now to be found in s 153B of the Bankruptcy Act. In order to understand the significance of that aspect it is necessary to bear in mind the difference between an annulment and a decision on review not to make a sequestration order.
The difference between annulment and a decision on review not to make a sequestration order
There is express statutory power to annul a bankruptcy. It arises in different circumstances. If a composition or arrangement is accepted by creditors then the bankruptcy is annulled: s 74. In such a case, the Bankruptcy Act makes express provision as to the validity of acts done by the trustee and as to the vesting of property: s 74(6).
The annulment of a bankruptcy can also take effect upon payment of all debts (s 153A) or by order of the Court (s 153B). In either case, there is express provision as to the validity of acts done by the trustee, as to the application of property to meet the costs of administration of the estate including the remuneration of the trustee and as to the vesting of property: s 154. These matters flow by statute as a consequence of the annulment. There are equivalent provisions for the annulment of the bankruptcy of a deceased estate: s 252A, s 252B and s 252C. If there is an annulment then the statutory provisions deal with the consequences for the vesting of property and remuneration of the trustee.
Although these provisions allow for remuneration of the trustee to be paid from the assets that were the subject of the bankruptcy that is to be annulled, they do not mean that remuneration will be paid to the trustee. The Court has long supervised the appropriateness of trustees' remuneration, costs and expenses. Therefore, the extent of any payment that may be made pursuant to the statutory provision allowing for payment from the assets of the debtor whose bankruptcy is annulled will be subject to approval in accordance with those requirements.
A decision made by a judge in order to give effect to a condition attaching to the delegation of judicial power to the effect that the creditor's petition be dismissed is of a different character to an annulment. The judge on review does not treat the earlier exercise of delegated judicial power as if it never existed. On review, the Court gives effect to a condition that attached to the delegation and its exercise. When the decision is made by the judge on review it speaks as a judicial decision made with operative effect at that point in time. Speaking generally as to the review of the exercise of delegated judicial power, it may be that the nature of the judicial power being exercised is such that an order can be made which speaks now for then by changing the effect of what has gone before. In such cases, the Court may be able to make an order that takes effect from a date that is earlier than the date on which the order is made by the judge on review (especially where the decision concerns procedural orders).
It is generally recognised that common law courts may make orders nunc pro tunc: Hartley Poynton Ltd v Ali [2005] VSCA 53; (2005) 11 VR 568 at [25]‑[80] (Ormiston JA) as approved in Esso Australia Pty Ltd v Australian Workers' Union [2017] HCA 54; (2017) 263 CLR 551 at [49] (Kiefel CJ, Keane, Nettle and Edelman JJ). That is to say an order may be expressed as taking effect from a date that is earlier than the date on which it was pronounced. Therefore, it is not the case that a court of record lacks the authority 'to deem something to exist which does not exist and cannot deem something to have remained in existence which no longer remains in existence': Australian Rail, Tram and Bus Industry Union v Metro Trains Melbourne Pty Ltd [2020] FCAFC 81; (2020) 276 FCR 172 at [20] (Flick J). It can be accepted that 'courts should eschew the exercise of inherent power to vary an order nunc pro tunc where the variation would have the effect of altering the substantive rights of the parties': Esso Australia v Australian Workers' Union at [49] and cases there cited at fn 75 (recognising that statutory authority may be different: Esso Australia v Australian Workers' Union at [49]). It is also generally recognised that nunc pro tunc orders should not be made where they would affect vested rights of third parties: Guss v Veenhuizen (No 2) (1976) 136 CLR 47 at 53 (Gibbs ACJ, Jacobs and Aickin JJ).
A defect which is a mere irregularity may be cured by a nunc pro tunc order: Emanuele v Australian Securities Commission (1997) 188 CLR 114 at 124‑125. Such orders have been made 'to prevent unjust prejudice to a party claiming relief occasioned by delay which unavoidably arises without fault on that party's part and simply because of the exigencies of court lists': Hartley Poynton v Ali at [69]. All these authorities suggest that, absent some express statutory power, the making of an order affecting substantive rights that takes effect from an earlier date could not be supported on the basis of an inherent jurisdiction to make such an order nunc pro tunc.
As has been indicated, the extent to which orders might be made with past effect upon the review of an exercise of delegated judicial power to make a sequestration order is a matter to which it will be necessary to return. At this point, it need only be observed that uncertainties as to the existence of a power of that kind has led to consideration in the decided cases as to whether the express statutory provision as to a trustee's remuneration, costs and expenses consequent upon annulment might justify an order for an annulment in preference to (or perhaps in addition to) the making of an order dismissing a creditor's petition where, on review of a decision by a registrar making a sequestration order, the view is formed that a sequestration order should not be made.
Also, as has been noted, the general power of the Court under the Bankruptcy Act to rescind, vary or discharge an order or suspend the operation of an order does not extend to a sequestration order: s 37(2) of the Bankruptcy Act; and Re Gollan; Ex parte Gollan (1992) 40 FCR 38. A sequestration order once made could not be undone by an order of that character. It is an exception to a power that is otherwise recognised as being very broad in its operation and as being conferred by reason of the nature of the 'great power' that is exercised by bankruptcy courts. It too must be borne in mind.
Finally, it is necessary to note that the position is different where there is an appeal against the making of a sequestration order. The appellate powers of this Court enable the Court to set aside a judgment appealed from and that power extends to a judgment in which a sequestration order is made: De Robillard v Carver [2007] FCAFC 73; (2007) 159 FCR 38 at [141]‑[151] (Buchanan J, Moore and Conti JJ agreeing). Therefore, on appeal against a decision by a judge making a sequestration order, there is appellate power to order that the sequestration order be set aside and substitute an order for the creditor's petition to be dismissed with such order taking effect in a way that results in the person the subject of the order that has been set aside never having the status of a bankrupt.
It may be observed that in De Robillard v Carver, although an order was made setting aside the sequestration order on appeal, no order was made as to the costs of the administration in the meantime. However, in the earlier case of Re Schierholter; Ex parte Geis (1978) 32 FLR 22 where a sequestration order was set aside by consent on appeal in circumstances where the making of the order had been brought about by the 'extraordinary approach' by the lawyer for the debtor of appearing at the hearing of the creditor's petition without undertaking any preparation, the order setting aside the sequestration order was only made after an undertaking had been given to pay to the official receiver any outgoings that had been incurred: at 30.
The issues now before the Court
With that introductory explanation, it is now possible to state the issues that arise for determination in the present case as a result of the submissions advanced. They are:
(1)Should leave to appeal be granted?
(2)On review of a decision made by a registrar in the exercise of delegated judicial power to make a sequestration order, what is the nature and extent of the power to 'make any order or orders it thinks fit' that is conferred upon the Circuit Court by s 104(3)?
(3)On review of a decision made by a registrar in the exercise of delegated judicial power to make a sequestration order, does the Circuit Court have a discretionary power to annul the bankruptcy?
(4)On review of a decision made by a registrar in the exercise of delegated judicial power to make a sequestration order, if the Circuit Court determines that the petition should be dismissed, does the Court have another source of power to order payment of remuneration, costs and expenses to a trustee incurred in administering the estate up until the petition is dismissed?
(5)In the present case, once the creditor's petition was dismissed by the primary judge on review, did the Circuit Court have jurisdiction thereafter to entertain the subsequent interim application by the Trustee for remuneration orders?
(6)If yes to Issue (5), did the primary judge err in finding that there was no power to make the remuneration order sought by the Trustee?
(7)If yes to Issue (6) and taking account of the answers to Issues (2), (3) and (4), what, if any, orders should be made on appeal concerning the remuneration of the Trustee? In particular, should the matter be remitted to the Circuit Court?
(8)In the circumstances which have occurred should there be any further order on the appeal? In particular, should there be orders dealing with the vesting of property in Ms Samsakopoulos and the delay that has occurred by the Trustee in delivering the property to Ms Samsakopoulos?
Summary of outcome
For the following reasons, there should be leave to appeal and the appeal should be allowed. The Trustee should be allowed reasonable remuneration, costs and expenses until the hearing of the review application with the remuneration to be capped at $30,000 plus GST. The remuneration, costs and expenses should be paid by the Body Corporate. Thereafter, the Trustee should not be entitled to remuneration, costs and expenses. Further, the Body Corporate should not be allowed to recover a contribution from Ms Samsakopoulos of any of its legal or other costs of and incidental to the creditor's petition or the administration by the Trustee.
Section 37 of the Bankruptcy Act is expressed in the following terms:
(1)Subject to subsection (2), the Court may rescind, vary or discharge an order made by it under this Act or may suspend the operation of such an order.
(2)The Court does not have power to rescind or discharge, or to suspend the operation of:
(a)a sequestration order; or
(b)an order for the administration of the estate of a deceased person under Part XI.
The question is whether s 37 confines the extent of the power to make consequential orders under s 104(3) where the matter the subject of the review concerns whether there should be the sequestration of the estate of a debtor. If so, a further question arises as to the extent to which the language in s 37(2) limits the extent of those consequential orders.
When a sequestration order is made in the exercise of delegated judicial power then the constitutional imperative requires that there may be a review de novo. It was not argued that the delegation may not be in respect of the exercise of the power to make a sequestration order. There is no suggestion of any such qualification in the terms in which s 104(3) is expressed. In those circumstances, s 37 should be construed in a manner that contemplates the possibility that a sequestration order may be made in the exercise of delegated judicial power.
A consequential order made under s 104(3) which gives effect to a determination on review that a creditor's petition should be dismissed is not directed to rescinding or discharging or suspending the operation of an earlier sequestration order made in the exercise of delegated judicial power. It proceeds on the basis of the historical fact that there was a sequestration order and makes orders to give effect to the determination on review. Therefore, s 37 of the Bankruptcy Act is no barrier to the making of such an order.
Issue (3): On review of a decision made by a registrar in the exercise of delegated judicial power to make a sequestration order, does the Circuit Court have a discretionary power to annul the bankruptcy?
If on a review of the making of a sequestration order in the exercise of delegated judicial power, the debtor applicant demonstrates that a creditor's petition should be dismissed then that is the order that must then be made on the application. It would be fundamentally inconsistent with the making of an order on review to treat the bankruptcy that has been administered pursuant to the delegate's sequestration order up until that point as if it were a bankruptcy that should be annulled by order made under the provisions of the Bankruptcy Act. On review, the first order to be made is a dismissal of the creditor's petition. From that point on there is no sequestration order that continues to speak with operative effect. The order made by the registrar in the exercise of delegated judicial authority no longer has any force. There is therefore no ongoing bankruptcy and no annulment to operate as to that bankruptcy.
It follows, with respect, that the reasoning of the majority in Pattison to the effect that there is power to annul the bankruptcy that arises when the creditor's petition is dismissed on review in accordance with s 104(3) (or an equivalent review to give effect to the constitutional imperative where there is a delegation of judicial power to hear and determine a creditor's petition) is plainly wrong in the relevant sense (as to which see Gett v Tabet [2009] NSWCA 76 at [283]). On proper analysis, for the reasons that have been given, there is no power to annul or set aside the sequestration order made by the registrar. Rather, the bankruptcy itself is brought to an end by the dismissal of the creditor's petition on review.
Further, the bankruptcy that was commenced pursuant to the registrar's order is not to be continued to completion. It is not a bankruptcy from which a bankrupt need be discharged or annulled. Rather, it is a bankruptcy that must cease to be administered. It is the powers attendant to the nature of the delegation of judicial power that fall to be exercised. For reasons that have been given in dealing with Issue (2) those powers are broad and extend to making orders that speak to the ongoing consequences of the events that have already occurred.
Issue (4): On review of a decision made by a registrar in the exercise of delegated judicial power to make a sequestration order, if the Circuit Court determines that the petition should be dismissed, does the Court have another source of power to order payment of remuneration, costs and expenses to a trustee incurred in administering the estate up until the petition is dismissed?
There being a clear power under s 104(3) to order the payment of remuneration, costs and expenses, it is not necessary to consider the alternative arguments. However, if there was no order made pursuant to s 104(3) concerning the sequestration order that operated prior to the review then as a matter of historical fact there will have been an administration in bankruptcy up until the time of the order on the review and the trustee would be entitled to be remunerated for the period of the administration. In the present case, for reasons expressed below in dealing with Issue (7), there should be consequential orders under s 104(3) dealing with the remuneration of the trustee during the period up until 17 July 2019 when the creditor's petition was dismissed.
Further, in a case like the present where there is an appeal in respect of the decision made on review of the delegated judicial power then the Court on appeal does not gain some power to make a substantive order of a kind that could not be made in undertaking the review under s 104(3) and the argument advanced to the contrary by the Trustee should not be accepted. To the extent that the statutory powers of appeal provide a source of authority to make orders, it allows this Court to deal with consequences that flow from any identified error in the decision of the primary judge and the actions that have been taken since that decision.
Issue (5): In the present case, once the creditor's petition was dismissed by the primary judge on review, did the Circuit Court have jurisdiction thereafter to entertain the subsequent interim application by the Trustee for remuneration orders?
The Trustee was named as a party to the review application brought by Ms Samsakopoulos. The Trustee was also required by the Federal Circuit Court (Bankruptcy) Rules to be given notice of the alternative claim for an annulment. The Trustee filed an affidavit in response to the application and appeared in person at the hearing on 12 July 2019.
At the beginning of the hearing on 12 July 2019, the primary judge made clear that the hearing was proceeding 'in the first instance' as 'an application for review of the registrar's decision to make a sequestration order and to embark on a hearing again of the creditor's petition'. The Trustee made some submissions to the effect that Ms Samsakopoulos was solvent on a balance sheet basis but not on a cash flow basis. In response to questions from the primary judge, the Trustee said:
I've, obviously, withheld doing anything, obviously, given today's proceedings, but it would be my recommendation would be we move on sale of the Queensland property, probably. Payable liabilities, there would be an annulment of the bankruptcy by virtue of [section] 153 and the debtor can move on with life, hopefully.
The Trustee made no submissions concerning remuneration and sought no consequential orders at the hearing. The application for an annulment brought in the alternative did not fall for consideration. The Trustee did not claim that there should be an order for an annulment. In any event, for reasons that have been given, there was no discretion on the part of the Circuit Court to make an order annulling the bankruptcy as a consequential order to the order dismissing the creditor's petition. Once the petition was dismissed there was no ongoing bankruptcy to annul.
In those circumstances, it is apparent that the hearing proceeded on the basis that the only matter being considered by the primary judge was whether there should be a sequestration order made on the creditor's petition. The reasons for decision of the primary judge consider only that issue.
In those circumstances, there was no determination made on 17 July 2019 of a kind that foreclosed an application by the Trustee for orders consequential upon the decision to dismiss the petition. That is, in substance, what occurred when the interim application was brought on 11 December 2019. Certainly the hearing of the interim application proceeded on the basis that the Trustee sought orders for remuneration, costs and expenses based upon the terms of s 104(3) of the Federal Circuit Court of Australia Act. For reasons that have been given, it was appropriate for the Trustee to do so.
Therefore, the issue raised by counsel appearing as amicus curiae should be determined on the basis that the nature of the hearing on 17 July 2019 (and the fact that there is no appeal against the order made on that date) are not matters that stand in the way of the relief sought on appeal.
Issue (6): If yes to Issue (5), did the primary judge err in finding that there was no power to make the remuneration order sought by the Trustee?
As to the claim of error by the primary judge, whilst the decision reached was understandable given the decision in Pattison, now that the matter has reached this Court by way of appeal, it should be determined that there is power under s 104(3) of the Federal Circuit Court of Australia Act to make a consequential order dealing with the remuneration of the Trustee. Therefore, this is a case where constructive error has been demonstrated by reason of the conclusions reached by this Court. No criticism is intended of the primary judge who dealt with an issue by reference to the state of the legal authorities and directed attention to the correct questions in an area of the law that is not without its complexities.
Issue (7): If yes to Issue (6) and taking account of the answers to Issues (2), (3) and (4), what, if any, orders should be made on appeal concerning the remuneration of the Trustee? In particular, should the matter be remitted to the Circuit Court?
All parties invited the Court to deal with all issues rather than remit the matter to the Circuit Court. It is possible and appropriate to do so, recognising that the approval of any remuneration, costs and expenses ordered to be paid will require approval of the quantum.
The Body Corporate sought orders that would make Ms Samsakopoulos liable for the costs up until the commencement of her review application and would make the Trustee liable thereafter.
The submissions advanced as to the basis upon which Ms Samsakopoulos should be made liable were to the following effect:
(1)On the facts as known to the Body Corporate at the time of proceeding with the petition only a payment of $77.25 had been received and it was proper for the Body Corporate to proceed with the creditor's petition in those circumstances.
(2)On the evidence, Ms Samsakopoulos had paid $80.00 at Australia Post where a fee had been applied which accounted for the difference between the $80.00 amount paid and the amount of $77.25 shown on the running account as received by the Body Corporate.
(3)On the evidence, Ms Samsakopoulos was indebted to the Body Corporate in respect of other amounts that supported the bringing of the creditor's petition.
The submissions advanced were unmeritorious for the following reasons:
(1)The order dismissing the creditor's petition was based upon an express finding that the amount of $80 had been paid by Ms Samsakopoulos.
(2)There was no appeal brought by the Body Corporate against the order dismissing the creditor's petition.
(3)Neither at the hearing of the review application nor the hearing of the interim application did the Body Corporate submit by reference to evidence that a fee charged by Australia Post accounted for the difference between the amount of $80 and $77.25.
(4)Even assuming that the Body Corporate may be permitted to rely upon evidence that was not relied upon before the primary judge, there was no attempt on appeal to establish that the fee charged by Australia Post was a charge to Ms Samsakopoulos by her agent in making the payment rather than a charge to the Body Corporate as its agent for receiving the payment.
(5)For reasons that have been given, the interim application is properly viewed as part of the application for review of the sequestration order by Ms Samsakopoulos. It deals with the making of orders pursuant to s 104(3) of the FCCA Act consequential upon the dismissal of the creditor's petition. Therefore, factual findings made in dismissing the creditor's petition are binding upon the Body Corporate for the purposes of determining those consequential orders.
(6)In any event, by the time of the review hearing it was not in dispute that Ms Samsakopoulos had made a further payment of $933.26 in late December 2018 and therefore the debt claimed in the affidavit of Mr Collie (being the debt the subject of the bankruptcy notice) had been reduced to below the statutory minimum.
(7)On the review application, the primary judge also rejected the evidence of Mr Collie in the form of the running account.
(8)The rejection of that evidence also formed part of the factual findings made in dismissing the petition.
(9)As was accepted by the Body Corporate on the interim application, the evidence of the Body Corporate as to the amount due by Ms Samsakopoulos was confused and 'not greatly helpful'.
(10)Most of the amounts claimed to be due were for legal fees. The legal fees claimed included an amount of $5,487.70 charged to draft and file the creditor's petition which could hardly be an amount that Ms Samsakopoulos could be said to be liable to pay when the creditor's petition was dismissed. There was no attempt before the primary judge or on appeal to justify the legal fees or the basis upon which they were charged to Ms Samsakopoulos. Even if there was a right to claim them it may be that they were not due unless and until the Body Corporate had informed Ms Samsakopoulos of her right to present the relevant accounts for taxation if she was to be the person liable to pay the amounts. Also, it appears that orders were made by the Magistrates Court in entering judgment on the claim by the Body Corporate that included a determination of the costs to which the Body Corporate was entitled. It may be that the making of that order addressed costs the subject of the running account. The Court simply does not know the position because, even though Ms Samsakopoulos claimed there was no basis to claim legal fees, there was no attempt by the Body Corporate at any point in time to demonstrate the basis upon which the amounts in the running sheet might be claimed to be due and payable.
(11)Proceeding with the creditor's petition when the amount claimed (and deposed by affidavit to be the debt relied upon for the petition) was only $1.76 over the statutory minimum for bankruptcy proceedings and where a payment was received from Ms Samsakopoulos after she had been informed by a registrar of the statutory minimum was redolent of sharp practice.
(12)There was no evidence pointed to by the Body Corporate other than its claim to the outstanding amount that suggested a basis for any belief that Ms Samsakopoulos was insolvent.
(13)By the time of the hearing of the creditor's petition on the review application, the Body Corporate knew from the terms of the report to creditors that Ms Samsakopoulos was solvent on a balance sheet basis because there was a substantial excess in her assets over her liabilities, but chose to pursue the creditor's petition.
In circumstances where the debt relied upon was only barely above the statutory minimum and it was not demonstrated that there were other reasons to suspect insolvency, there was always the prospect that a miscalculation or error in recording a payment would mean that the creditor was not entitled to present the petition. In substance, that is what occurred. The sharp practice of the Body Corporate was exposed by the decision on the review application. In a different case where a solvent debtor did nothing until the review application, there may be reasons to adopt a different course. Even so, the fact that it is the creditor who has initiated proceedings in which ultimately the creditor has been unsuccessful will be a significant factor which supports the making of a consequential order requiring the creditor to bear the costs of the intervening bankruptcy administration. Usually there will need to be some affirmative basis upon which the debtor may be said to have been substantially at fault for the events that have happened before it will be appropriate to make a consequential order that attributed some or all liability for the costs of the administration to the debtor.
The Trustee did not point to any evidence to the effect that Ms Samsakopoulos had been unreasonable in her dealings with the Trustee or that she had received a particular lasting benefit that should be brought to account in making orders consequential upon the dismissal of the creditor's petition in the circumstances which have occurred.
In the circumstances of the present case, the appropriate order is for the Body Corporate to bear the reasonable costs of the administration.
After the decision was made to dismiss the creditor's petition, there was no basis upon which the Trustee could continue the administration. The Trustee sought no consequential order as to provision for remuneration, costs and expenses or for re-vesting assets. In circumstances where the Trustee has, without authority, retained control of the assets of Ms Samsakopoulos for some 23 months since the dismissal of the creditor's petition, there is no reasonable basis upon which such an order may now be considered. In a different case, it may be appropriate for a trustee, in circumstances where a sequestration order is made by a registrar and then overturned on review to seek and obtain orders that would allow for an orderly return of property and for provision to be made for the costs of doing so to be met by the creditor or the debtor or in proportions as between them. However, in the present case, principally by reason of the conduct of the Trustee, no such order should be made. The result is that after the dismissal of the creditor's petition the Trustee had no authority to continue with the administration. The sequestration order of the registrar was overtaken by the order dismissing the petition. Thereafter, the lawfulness of the Trustee's possession of the property of Ms Samsakopoulos came to an end and the Trustee was obliged to immediately return that property.
For the Body Corporate, it was submitted that remuneration, costs and expenses should be limited to those which the Trustee had reported as having been incurred up until the commencement of the review application. However, unless and until there was an order made bringing the administration pursuant to the registrar's order to an end, the Trustee was obliged to continue with the administration. As has been noted, the Trustee was obliged to act with due care once the review application was underway but that is not to say that it was inappropriate for the trustee to incur any costs thereafter.
On the evidence the Trustee's own estimate of the likely reasonable remuneration for the administration was $30,000 plus GST. That estimate was provided in the report to creditors at a time when the Trustee was aware of the likely extent of what was involved in the administration. There is no suggestion in the evidence that thereafter the Trustee became aware of some new or different matter concerning the nature or extent of the creditors and property to be administered. On the evidence, the nature of the administration did not change in any material respect.
Therefore, it is appropriate to make an order for reasonable remuneration, costs and expenses to be paid by the Body Corporate to the trustee for administration of estate up to and including 17 July 2019 with remuneration to be capped at the amount of $30,000 plus GST.
Issue (8): In the circumstances which have occurred should there any further order on the appeal? In particular, should there be orders dealing with the vesting of property in Ms Samsakopoulos and the delay that has occurred by the Trustee in delivering the property to Ms Samsakopoulos?
In the events which have occurred, in order to ensure the unqualified return to Ms Samsakopoulos of her property, there should be consequential orders under s 104(3) to that effect. In cases such as the present case, it is to be expected that the Trustee will seek such consequential orders as may be necessary to effect the return of property and, to the extent necessary and appropriate, to validate or authorise the acts of the Trustee in conducting and completing the administration. The Trustee has not followed that course in the present case. Therefore, Ms Samsakopoulos has been held out of her property for a very considerable period.
In those circumstances, it is appropriate for this Court to consider the making of orders that will redress Ms Samsakopoulos for her loss and damage in not having access to her property since the dismissal of the creditor's petition. There are perhaps three sources of power for the making of such orders. First, this Court on appeal can make consequential orders of a kind that might have been made by the primary judge under s 104(3). As the primary judge was of the view that there was no power to make any orders, the form of those orders was not considered. In those circumstances, it appears to be open to this Court to make such orders by reference to the circumstances as they now pertain.
Second, the Court has power upon the reversal or setting aside of a judgment on appeal to order restitution.
Third, the Trustee was appointed and acted as an officer of the Court whose conduct may be supervised by the Court.
The issue of the return to Ms Samsakopoulos of her property was one that arose in the course of oral argument and is one on which the Trustee has since reported briefly and informally to the Court. It is an issue upon which Ms Samsakopoulos may wish to be heard. In those circumstances, it is appropriate for orders to be made which would afford the Trustee and Ms Samsakopoulos a further opportunity to provide affidavit evidence and submissions as to whether further orders should be made concerning the loss and damage to Ms Samsakopoulos.
The effect of the decision by the primary judge was to determine that Ms Samsakopoulos was not to be made bankrupt. For reasons that have been given, the order on review to the effect that the creditor's petition be dismissed overtakes the order made by the registrar in the exercise of delegated judicial power. From that point in time there is no operative judicial order sequestrating the estate of Ms Samsakopoulos. The historical fact of the registrar's order (and its past legal effect as a valid exercise of judicial power up until the order on review) are matters that are unaffected by the dismissal of the creditor's petition on review. However, going forward there is no longer any legal foundation for Ms Samsakopoulos being considered to have the status of a former bankrupt. The order that may have conferred that status is overtaken. The ongoing delegated authority in respect of that order has been brought to an end. In those circumstances, it was appropriate to make consequential orders to ensure that Ms Samsakopoulos, from the time of the review, does not have the status of a former bankrupt.
As to the appropriate terms of consequential orders, s 315(2) of the Bankruptcy Act provides that regulations made under the Act may 'provide for the establishment, maintenance, correction and inspection of the National Personal Insolvency Index' and 'specify matters that must be, or may be, entered in the Index'. The Index has been established by the Bankruptcy Regulations 2021 (Cth). Those regulations do not deal, in terms, with a case like the present case where a sequestration order is made in the exercise of delegated judicial power but the creditor's petition is dismissed on review. However, they do allow a person who is a debtor or bankrupt to apply to the Official Receiver for information about the person in the Index 'to be corrected on the ground that it is inaccurate or misleading': reg 80. Therefore, it appears that correction of the Index may be obtained by application. It is sufficient for present purposes to make clear by way of consequential declaratory order that the effect of the dismissal of the creditor's petition on review is that Ms Samsakopoulos does not have the status of a former bankrupt. The existence of that order may found an application to the Official Receiver.
Issue (1): Leave to appeal
Leave to appeal will only be granted where an applicant can demonstrate that the orders in question are attended by sufficient doubt that reconsideration on appeal is warranted and that substantial injustice would result if the orders were left uncorrected: Décor Corp Pty Ltd v Dart Industries Inc (1993) 33 FCR 397 at 398. For reasons that have been given the orders are attended with sufficient doubt. As has been noted, the appeal raises matters of importance as a matter of bankruptcy law and more generally as to the nature of the exercise of delegated judicial power. The determination of the issues raised are a matter of importance to the Trustee and other trustees in the administration of bankrupt estates pursuant to sequestration orders made in the exercise of delegated judicial power where there is a review by a judge. The decision by the primary judge would deprive the appellant of any remuneration in the administration carried out pursuant to a valid order of the Court. There is sufficient injustice to the Trustee when considered with the importance of the issues raised to justify leave to appeal. There should be an order for leave to appeal.
Costs
As to the costs of the appeal, the Body Corporate has failed on the contentions that it raised and there is no reason why it should have a costs order made in its favour. The Trustee has had a measure of success but that occurs in a circumstance where it is evident that the Trustee has failed to give effect to the order dismissing the creditor's petition and return to Ms Samsakopoulos her property for a considerable period. Irrespective of any explanation that might be advanced, the fact that Ms Samsakopoulos has not had access to her property for 23 months despite the creditor's petition being dismissed is a reason, of itself, why no costs order should be made in favour of the Trustee. In all the circumstances, the appropriate order is that the Trustee and the Body Corporate should each bear their own costs of the appeal and there be no order as to the costs of the application before the primary judge.
It is also appropriate that the Body Corporate not be entitled by indirect means to cause Ms Samsakopoulos to have to bear any of the costs associated with the steps taken in respect of the creditor's petition. An order of that kind should be made to protect the integrity of the Court's orders as to costs to ensure that they are not undermined by steps being taken to recover some part of those costs from Ms Samsakopoulos by way of body corporate fees or other indirect means.
Orders
For the reasons that have been given, there should be leave to appeal and the appeal should be allowed. There should be orders made under s 104(3) consequential upon the dismissal of the creditor's petition filed on 30 July 2018. Those orders should be in the following terms:
(a)the Body Corporate do pay the reasonable remuneration of Mr William Roland Robson in administering the estate of Ms Victoria Samsakopoulos pursuant to the orders made by a registrar of the Federal Circuit Court exercising delegated judicial power (Administration) which orders ceased to have effect on 17 July 2019, such remuneration to be capped in the amount of $30,000 plus GST;
(b)the Body Corporate do pay the costs and expenses reasonably and properly incurred by Mr Robson in the Administration prior to 17 July 2019;
(c)there be no order as to the remuneration, costs and expenses incurred by Mr Robson in respect of the Administration on or after 17 July 2019;
(d)all acts done prior to 17 July 2019 by Mr Robson when acting as trustee pursuant to the sequestration order made on 1 November 2018 or any person acting under the authority of Mr Robson when acting pursuant to the order are taken to have been validly done;
(e)to the extent necessary and to the extent possible without further order, all property that vested in Mr Robson when acting as trustee pursuant to the sequestration order made on 1 November 2018 that has not been returned to Ms Samsakopoulos shall vest immediately in Ms Samsakopoulos;
(f)there be liberty to Mr Robson to apply for such further orders as may be reasonably necessary to ensure that all property that vested in Mr Robson when acting as trustee pursuant to the sequestration order made on 1 November 2018 is vested in Ms Samsakopoulos and as soon as reasonably possible Mr Robson do apply pursuant to such liberty for such orders as may be reasonably necessary to vest the property in Ms Samsakopoulos;
(g)Mr Robson shall do all things as may be reasonably necessary to give effect to order (e) and any orders made pursuant to order (f);
(h)the Body Corporate shall not by any means seek to recover any contribution from Ms Samsakopoulos in respect of any amount that the petitioning creditor is liable or becomes liable to pay pursuant to these orders;
(i)it is declared that Ms Samsakopoulos does not have the status of a former bankrupt;
(j)there be no orders as to the costs of the application filed on 11 December 2019; and
(k)there be liberty to apply for any further consequential orders.
As to the costs of the appeal, there should be no order as to costs.
As to whether there should be further consequential orders by reason of the delay in the return to Ms Samsakopoulos of her property, there should be orders requiring the Trustee to file and serve an affidavit providing any explanation as to why the Trustee failed to promptly give effect to the order dismissing the creditor's petition and to show cause by affidavit and any submissions as to any reason why the Court should not appoint a registrar as a referee to inquire into the extent to which the failure by Mr Robson to promptly give effect to the order has caused loss or damage to Ms Samsakopoulos for the purpose of the Court formulating such further consequential orders pursuant to s 104(3) of the Federal Circuit Court of Australia Act as may be appropriate in the circumstances which have occurred. There should be provision for Ms Samsakopoulos to make submissions in response to any submissions filed by the Trustee.
I certify that the preceding two hundred and fifty-seven (257) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin. Associate:
Dated: 12 August 2021
REASONS FOR JUDGMENT
ANASTASSIOU J:
I have had the advantage of reading the draft reasons of the Chief Justice and Colvin J. There is only one issue about which the Chief Justice and Colvin J disagree. As the Chief Justice has said: “The disagreement may only be a different way of expressing the same or very similar ideas and conceptions about the nature of the exercise of judicial power in the sui generis process of the one application being dealt with first by a registrar and later by a judge in the one exercise of judicial power by the Court.” Be that as it may, on this single point of difference, I respectfully agree with the reasons given by Colvin J. In all other respects I agree with the reasons given by the Chief Justice and with the orders proposed by Colvin J.
Having regard to the thorough and careful analysis of the Chief Justice and of Colvin J, it would be otiose for me to endeavour to summarise those aspects of Colvin J’s reasons which have compelled me to agree with his Honour’s reasons. Further, any explanation of my reasons for respectfully preferring the reasons of Colvin J could provide fodder for unintended points of distinction between any reasons I might otherwise have expressed in relation to the one point of contention. For these reasons, it is unnecessary for me to say anything further, other than to gratefully adopt the reasons given by Colvin J and to agree with the orders his Honour proposes.
I certify that the preceding two (2) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou. Associate:
Dated: 12 August 2021
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