Rowe v Official Trustee in Bankruptcy
[2014] FCCA 2819
•26 November 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ROWE v OFFICIAL TRUSTEE IN BANKRUPTCY | [2014] FCCA 2819 |
| Catchwords: BANKRUPTCY – Application in respect of actions discontinued by trustee in bankruptcy pursuant to s.60(2) of the Bankruptcy Act – where actions not within s.60(4) of the Bankruptcy Act – where actions personal to bankrupt. |
| Legislation: Administrative Appeals Tribunal Act 1975, s.44(1) Bankruptcy Act 1966, ss.5, 58, 60(1), 60(2), 60(3), 60(4), 60(5), 82, 116(1) Child Support (Assessment) Act 1989 |
| Brown v Premier Pet T/A Bay Fish (2012) FMCA 830 Cook v Secretary, Department of Employment and Workplace Relations (2007) 5 ABC 313 Cummins v Claremont Petroleum NL (1996) 185 CLR 124 Fuller v Beach Petroleum NL (1993) 43 FCR 60 Griffiths v Civil Aviation Authority (1996) 67 FCR 301 Healey v Prentice (No.2) [2000] FCA 1598 Perfection Dairies Pty Ltd v Finn (2006) 151 IR 197 Sarkis v Moussa (2012) 262 FLR 359 |
| Applicant: | CHAD EVERETT ROWE |
| Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| File Number: | BRG 567 of 2014 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 9 July 2014 |
| Date of Last Submission: | 9 July 2014 |
| Delivered at: | Brisbane |
| Delivered on: | 26 November 2014 |
REPRESENTATION
| The Applicant appeared in person |
| Solicitor for the Respondent: | Mr Muller |
| Solicitors for the Respondent: | Rogers Barnes and Green |
ORDERS
The application be adjourned to 9 December 2014 at 9.30 a.m. for directions in the Federal Circuit Court of Australia sitting at Brisbane.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 567 of 2014
| CHAD EVERETT ROWE |
Applicant
And
| OFFICIAL TRUSTEE IN BANKRUPTCY |
Respondent
REASONS FOR JUDGMENT
revised from the transcript
By his amended application filed on 17 June, 2014 the applicant seeks the following orders:
1. That pursuant to section 178 of the Bankruptcy Act 1966, the Applicant seeks orders that the Trustee continues the legal actions numbered 4, 7, 8, 9, 10, 11 in their letter to the Applicant dated 12 March, 2014 (which has been attached is Annexure “CER3” of the Affidavit of Chad Everett Rowe dated 7 February, 2014 and filed in these proceedings), alternatively, the Applicant be permitted to continue the matters listed above in the name of the Trustee.
The issue to be decided by this application is whether an application brought by a payer of child support pursuant to the provisions of the Child Support Assessment Act1989 (Cth) is an action which a bankrupt might pursue notwithstanding s.60(2) of the Bankruptcy Act1966.
Relevantly, s.60(2) of the Bankruptcy Act provides:
An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
Subsections 60(3) and 60(4) provide:
(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or (b) the death of his or her spouse or de fact partner or of a member of his or her family.
Subsection 60(5) provides:
In this section, action means any civil proceeding, whether at law or in equity.
The issue arises within the matrix of the following uncontested facts.
On 5 February, 2014 Mr Rowe was made bankrupt by sequestration order made against his estate. Mr Rowe remains an undischarged bankrupt. The respondent is Mr Rowe’s trustee in bankruptcy.
Mr Rowe has been involved in extensive litigation against his former wife, Alison Jane Schultz. On 12 February, 2014 Ms Schultz sent an email to the respondent’s representative requesting that the respondent make an election under s.60(2) of the Bankruptcy Act1966 to either prosecute or discontinue a number of legal matters instituted by him against her. The legal matters specified in the correspondence were:
High Court of Australia
1.Matter 59/13 – Special Leave Application appealing decision of Full Court of the Family Court in matter 62/2012.
2.Matter 60/13 – Special Leave Application appealing decision of Full Court of the Family Court in matter 97/2012.
Full Court of Family Court
3.Matter 34/2013 – Appeal to Full Court against decision of Federal Circuit Court dismissing SSAT Appeal;
4.Matter 62/2012 – Costs decision pending following Judgment in this Appeal;
5.Matter 97/2012 – Costs decision pending following Judgment in this Appeal.
Family Court
6.Matter 4493/11 – Parenting and Property proceedings.
Federal Circuit Court
7. Appeal filed 7 February, 2012 against a decision of the SSAT;
8. Appeal filed 23 May, 2012 against a decision of the SSAT;
9. Appeal filed 14 May, 2013 against a decision of the SSAT;
10.Application in a Case filed 6 December, 2013 seeking a stay of collection of child support;
11. Appeal filed 23 December, 2013 against a decision of the SSAT.
District Court of Queensland
12.Matter – 2222/13 – Appeal against decision of Magistrates Court dismissing Application for Protection Order;
13.Matter - 3744/13 – Appeal against decision of Magistrates Court granting Temporary Protection Order;
14.Matter – 4138/13 – Appeal against decision of Magistrates Court dismissing Application for Protection Order and Costs on basis Application was vexatious;
15.Matter – 4191/13 – Appeal against decision of Magistrates Court dismissing Application for Variation of Temporary Protection Order.
On 12 March, 2014 the respondent, by his officer, sent a letter to Mr Rowe informing him that the Official Trustee in Bankruptcy had elected to discontinue a number of the proceedings. The proceedings discontinued by the respondent included matters 1 – 5, and 7 – 11 in the list that I have just given. In addition, the respondent elected to discontinue another proceeding in the Federal court, QUD534/2013 – Chad Everett Rowe v Emmanuel College.
The respondent has filed notices of discontinuance in the applications that he has decided to discontinue.
By these proceedings Mr Rowe seeks to be able to continue matters numbered 4, 7, 8, 9, 10, and 11 in the above list “pursuant to section 60(4) and section 178 of the Bankruptcy Act 1966”.
Matters numbered 7, 8, 9, 10, and 11 specified by Mr Rowe in his application deal with, essentially, child support matters. Application number 4 seems to be in relation to an appeal in the Full Court of the Family Court of Australia in relation to a costs order, perhaps in a child support matter. In my view, Mr Rowe is entitled to relief in respect of actions numbered 7, 8, 9, 10, and 11 above, but not in respect of action numbered 4 which appears to be an appeal against a costs order. The costs order is a provable debt which, in my view, has a different character to the other actions.
The respondent argues that Mr Rowe’s application ought to be dismissed because:
a)Mr Rowe’s actions fall within s.60(2) of the Bankruptcy Act and so are stayed until his trustee makes an election to either prosecute or discontinue each of the actions;
b)Mr Rowe’s proceedings are not within the exemption provided for by s.60(4) of the Bankruptcy Act;
c)the trustee has elected for good reason to discontinue the proceedings; and
d)the proceedings have been discontinued and are at an end.
The respondent argues that s.60(2) operates against all actions commenced by the bankrupt before bankruptcy, subject to those actions excluded by s.60(4). The respondent argues that s.60(2) covers all actions, except those expressly excluded by s.60(4). It matters not whether the action relates to property which has vested in the trustee or a debt which is provable in the administration of the bankrupt’s estate.
The trustee points out that the definition of property in s.5 of the Bankruptcy Act is a very wide definition. It is apt to cover all forms of property known to the law. Moreover, the definition of action in s.60(5) of the Act is also a very broad definition. The term action has a wide meaning and it is apt to include an appeal (Healey v Prentice (No 2) [2000] FCA 1598 at [35]; Cummins v Claremont Petroleum NL (1996) 185 CLR 124 at 130 to 133; Sarkis v Moussa (2012) 262 FLR 359 at [31] to [32]) and a review of a decision made by a Commonwealth agency before the Administrative Appeal Tribunal (Cook v Secretary, Department of Employment and Workplace Relations (2007) 5 ABC 313 at [24] to [26]).
The nature of the applications in respect of which Mr Rowe seeks relief are appeals, or appeals from appeals, brought by him pursuant to the provisions of the Child Support (Registration and Collection) Act 1988 (Cth). Relevantly, those appeals are brought from a decision of the Social Security Appeals Tribunal on questions of law. The relevant section, s.110B, mirrors the section by which appeals are brought from decisions of the Administrative Appeals Tribunal to the Federal Court of Australia pursuant to s.44(1) of the Administrative Appeals Tribunal Act1975 (Cth) , which permits appeals from that tribunal to the Federal Court on questions of law.
The trustee argues that the exercise of a right of appeal, whilst it is not the exercise of a right in relation to property, is nonetheless caught by s.60(2) of the Bankruptcy Act. In that regard, I was taken to a number of decisions which, on their face, seemed to confirm that proposition. The leading authority is Cummings v Claremont Petroleum NL (1995) 185 CLR 124, a decision of the High Court of Australia. In that case, Brennan CJ, Gaudron and McHugh JJ considered two aspects of the matter then before the Court. The first was whether the purported exercise of a right of appeal by bankrupts was a property which vested in their trustees in bankruptcy. The second was whether, in the event that it was not a right of property that so vested, they nonetheless had no locus standi to prosecute an appeal in relation to the debt which led to their bankruptcy.
Cummings arose against these very brief facts. Judgment had been given in favour of a creditor against the respondents for the sum of in excess of $44 million. The respondents, soon after the judgment was given against them, became bankrupt upon the making of a sequestration order against their estates. Soon thereafter they filed notices of appeal in respect of the judgments that went against them.
The plurality to whom I have just referred determined that the right of appeal exercised by the bankrupts was not property for the purposes of the Bankruptcy Act. Moreover, it was not property which vested in the respondents’ trustees in bankruptcy (at pages 133, 136). Their Honours, however, determined that the respondents had no locus standi to prosecute the appeals because ultimately the bankrupts had no financial interest in the outcome of the appeal which would confer locus standi upon them to appeal the judgment. Their Honours’ said at 138:
This is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts.
Brennan CJ, Gaudron and McHugh JJ touched on s.60(2) at page 130 of the decision. In that respect their Honours say this:
If the appeals by the appellants had been commenced prior to their bankruptcy, they would have been stayed automatically pursuant to section 60(2) of the Act which provides –
And thereafter their Honours set out subsection (2). They go on:
The term “action” is defined to mean any civil proceeding. The institution of an appeal by a defendant against a judgment in favour of a plaintiff is the commencing of a proceeding.
And at page 131:
The respondents do not seek to support the order of the Full Court on the footing that the purported appeals were stayed pursuant to s 60(2) of the Act. The bankruptcies were prior, not subsequent, to the commencing of the appeals. But the respondents submit that it would be anomalous if the Act operated to stay an appeal commenced prior to the bankruptcy but not to stay an appeal commenced after the bankruptcy. The anomaly is avoided only if the respondents are right in contending that the appellants, upon becoming bankrupt, had no locus standi to institute an appeal either (i) because their rights to appeal were property vested in their respective trustees or (ii) because the fact that the judgment was enforceable only against property vested in the trustee meant that the appellants ceased to have an interest necessary to give a right to appeal.
Thus, the first point was determined against the trustees but the second in favour of the trustees. Their Honours seem to be suggesting, albeit in obiter, in those passages, that s.60(2) operated to stay the appeals, notwithstanding that the right to appeal was not property.
The approach taken by the High Court in Cummings is in contrast, in some respects, to the approach taken by the Full Court of the Federal Court of Australia in Griffiths v Civil Aviation Authority (1996) 67 FCR 301. The decision in Griffiths v Civil Aviation Authority was handed down whilst the decision in Cummings was still reserved by the High Court.
The decision of the Full Court of the Federal Court of Australia, from which the appeal in Cummings emanated, was reported as Fuller v Beach Petroleum NL (1993) 43 FCR 60. That decision received some attention by the subsequent Full Court in Griffiths v Civil Aviation Authority.
In Griffiths, the Court was considering whether an appeal under s.44(1) of the Administrative Appeals Tribunal Act was property for the purposes of the Bankruptcy Act and had thereby vested in the bankrupt’s trustee. The bankrupt held a commercial pilot’s licence and it had been the subject of a number of conditions. The imposition of those conditions had been the subject of an application to the Administrative Appeals Tribunal for review. The applicant, dissatisfied with the AAT’s decision, appealed to the Federal Court pursuant to s.44(1) on a question of law. The appeal (which although called an appeal was an application in the original jurisdiction of the Federal Court) was determined against Mr Griffiths at first instance. It was an appeal from that decision that was before the Full Court.
The Tribunal’s decision was given after the applicant became bankrupt, and Mr Griffiths, the applicant in that case, instituted his appeal under s.44(1) after he became bankrupt.
In Griffiths the Full Court declined to follow the approach taken by the earlier Full Court in Fuller. Of the justices that decided Griffiths v Civil Aviation, Spender J did not deal with the effect, if any, of s.60 of the Bankruptcy Act upon the outcome in that case. His Honour said:
The present proceedings were not “an action commenced by a person who subsequently becomes bankrupt”. Section 60 of the Act, which deals with actions commenced by a person before that person became a bankrupt, does not apply to the present case. I derive no assistance on the present question from arguments based on what might be thought anomalous consequences in the application of s 60 of the Act, depending on the width to be given to the definition of “property” in s 5 of the Act. Further, in my opinion, the question of the costs of proceedings either commenced or continued after a person becomes a bankrupt, is a red herring. Costs incurred by a bankrupt in proceedings subsequent to the bankruptcy are not debts provable in that bankruptcy; they are post-bankruptcy debts. Any order for costs against a bankrupt in those circumstances would not affect the estate available to the bankrupt’s creditors.
Spender J came to the conclusion that an appeal under s.44(1) of the Administrative Appeals Tribunal Act to challenge a decision of the Administrative Appeals Tribunal made in respect of the aviation licences of the bankrupt in that case, did not vest in the trustee when the Tribunal’s decision was given. His Honour based his conclusion in that case squarely on ss.58, 5 and 116(1).
Einfeld J, the second judge in the case, adopted a similar approach. His Honour determined that the right of appeal under the Administrative Appeals Tribunal Act was not property for the purposes of the Bankruptcy Act. His Honour said:
Despite the fact that the decisions in Fuller and Daemar mean that two present Justices of the High Court, Gummow and Kirby JJ, have expressed different views, it is my respectful opinion the reasoning adopted in the cases preserving to the bankrupt actions personal to the bankrupt which have no implications for the estate should be applied to the present appeal. The variations made to the present appellant’s commercial pilot’s licences are sufficiently personal in their likely effect upon the appellant to retain for himself the right of appeal in respect of them. Given its completely personal nature and the fact that it holds no interest for the estate whatsoever, the right of appeal in this case is not in my view “property” vesting in the trustee upon the appellant’s bankruptcy.
The third judge in that case, Cooper J, determined the case in the same way but his Honour undertook a detailed examination of the interaction between ss.5(1), 58, 116(1) and 60 of the Bankruptcy Act. At page 325 to 326 of the report, his Honour says:
In my view, “property” in s 5(1) of the Act does not include a statutory right in the nature of an appeal under s 44 of the AAT Act nor an appeal pursuant to s 19 of the Federal Court Act, with which we are here concerned. The statutory right does not affect any property which forms part of the bankrupt’s estate and which vests in the trustee as property of the bankrupt. Nor will the institution and prosecution of the proceedings by Mr Griffiths delay the administration of the estate or expose it to any adverse order for costs. If Mr Griffiths fails in the proceedings against the respondent CAA, any order for costs against him is not provable in his estate because it would be a debt which arose after the date of the sequestration order.
His Honour thereafter gives some authority. and continues:
There is a unity of object and purpose in the operation of ss 58, 60 and 116 of the Act if it is recognised that the consistent focus of attention is upon rights which the trustee can turn to advantage for the benefit of creditors or upon rights the exercise of which will adversely affect or delay the administration of the estate. It is these rights which fall within the definition of “property” in s 5 and the enforcement of which by action are stayed by s 60(2) upon a person becoming bankrupt. To interpret “property” for the purposes of s 5 in this way avoids the injustice of denying to the bankrupt the power to exercise a right in which the trustee has no interest and the exercise of which cannot operate adversely on the property of the bankrupt or the administration of the bankrupt’s estate
His Honour there was taking the view that the word action in s.60(2) of the Act does not bear its literal meaning but rather bears a meaning which is consistent with the operation of the Bankruptcy Act overall. That was the ratio of his Honour’s decision. It is persuasive authority. It is, in my view, not inconsistent with Cummings because Cummings was dealing with a very different right – namely the right of appeal against the very judgment debt that led to the appellants’ bankruptcy. It concerned a provable debt and the outcome of the appeal had the clear potential to have an impact upon the appellants’ estates in bankruptcy.
In this case, the actions in respect of which Mr Rowe seeks relief concern his ability to challenge a decision of the Social Security Appeals Tribunal to set the rate at which child support should be assessed against him. They are not actions which clearly do not come within s.60(4) of the Bankruptcy Act: they are not actions for personal injuries or wrong done to Mr Rowe. They are, nonetheless, in my view, actions which are personal to him.
He is exercising a statutory right of appeal which is of no particular benefit to his estate in bankruptcy. On that point, it is relevant to record that a child support debt is a provable debt. Section 82 of the Act provides that a debt which arises under a maintenance order before the date of bankruptcy is a provable debt. By s.5 of the Act, maintenance order is defined to include an assessment under the Child Support (Assessment) Act1989.
But, unlike Cummings and each of the other cases to which I was referred to in the course of argument, the debts in this case, the child support debts which might perhaps be affected by the success or otherwise of Mr Rowe’s child support appeals, are debts which survive bankruptcy. They are debts which are not discharged upon his discharge from bankruptcy. They are debts for which he will remain liable.
Moreover, to the extent that child support assessments set a rate at which he must make child support payments in the future, they have nothing at all to do with his estate in bankruptcy. Those assessments cast an obligation on him to make payments to the payee, Ms Schultz, in discharge of a liability assessed according to the relevant child support legislation. They are, in my view, clearly actions which are personal to Mr Rowe.
Consistently with Griffiths, those actions which are not actions for personal injury or wrong, but which might otherwise be described as actions personal to the bankrupt, do not vest in the bankrupt’s trustee in bankruptcy. That actions that can be properly so described do not vest in a trustee in bankruptcy is not new: Perfection Dairies Pty Ltd v Finn (2006) 151 IR 197 and a number of other cases collected in Brown v Premier Pet T/A Bay Fish (2012) FMCA 830.
Adopting, as I do, the view set out by Cooper J in Griffiths, the actions numbered 7, 8, 9, 10, and 11 above about which Mr Rowe seeks relief, did not vest in his trustee in bankruptcy. They were not stayed by the operation of s.60(2) of the Act. His trustee in bankruptcy had no entitlement to make an election to discontinue the proceedings and Ms Schultz had no entitlement to call on the trustee to do so. The discontinuance of the proceedings by the trustee in bankruptcy was unauthorised.
The proceedings, according to the evidence, however, have been discontinued and, having been discontinued, they are at an end. In those circumstances and after giving the parties an opportunity to consider these reasons for judgment once reduced to writing, I will hear the parties further as to the form of relief that might be granted.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 26 November 2014.
Associate:
Date: 3 December 2014
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