Rutherfurd and Inspector-General in Bankruptcy

[2022] AATA 403

Rutherfurd and Inspector-General in Bankruptcy [2022] AATA 403 (8 March 2022)

Division:Taxation and Commercial Division

File Number(s):      2021/0664

Re:David Samuel Ivan Rutherfurd

APPLICANT

AndInspector-General in Bankruptcy

RESPONDENT

DECISION

Tribunal:Member Rob Reitano

Date:08 March 2022

Place:Brisbane

The Tribunal does not have power to make a fresh income contribution assessment when reviewing a decision by the Inspector-General in Bankruptcy refusing to review a trustee’s income contribution  assessment  

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Member Rob Reitano

Catchwords

TAXATION AND COMMERCIAL – bankruptcy – income contributions – decision not to review income contribution assessment – jurisdiction – can AAT make an assessment on review of decision under section 139ZA of Bankruptcy Act – application refused

Legislation

Administrative Appeals Tribunal Act 1975 (Cth) s.43

Bankruptcy Act 1966 (Cth) s.139W, 139ZA, s.139ZD, s.139ZF

Cases

Australian Securities and Investment Commission v Donald [2003] FCAFC 318

REASONS FOR DECISION

Member Rob Reitano

08 March 2022

1. This decision deals with a preliminary question that the parties have asked the Tribunal to deal with concerning the powers that are available to the Tribunal when it reviews a decision of the Inspector-General in Bankruptcy (Inspector-General) refusing to review a decision of a trustee to make an income contribution assessment.

2. I have decided that the Tribunal does not have power in dealing with a review of such a decision to make an income contribution assessment. My reasons are set out below.

   FACTS

3. On 18 September 2020 the trustee issued notices of income contribution assessment to David Rutherfurd (Mr Rutherfurd) under s.139W(4) of the Bankruptcy Act 1966 (Cth) (Act). The notices of income contribution assessment concerned the income contribution assessment that the trustee had made for the first four years of Mr Rutherfurd’s bankruptcy. The basis of the assessment is immaterial for present purposes.

4. On 13 November 2020 Mr Rutherfurd asked the Inspector-General to review the trustees income contribution assessment under the facility to do so in s.139ZA of the Act.

5. On 12 January 2021 the Inspector-General decided not to review the trustee’s income contribution assessment. The Inspector-General’s reason for that decision was because there were insufficient reasons to justify a review pursuant to s.139ZA(1)(b) of the Act.

6. On 8 February 2021 David Rutherfurd (Mr Rutherfurd) applied for a review of a decision of the Inspector-General refusing to conduct a review of an income contribution assessment which had been made by the trustee.  

   THE QUESTION

7. Mr Rutherfurd and the Inspector-General agreed that the Tribunal should answer the following question as a preliminary matter:

   Where the Applicant has requested the Respondent, being Inspector-General in Bankruptcy (the IG) review a decision of the Trustee to make an “assessment” within the meaning of 139ZA(1)(b) the Act (Trustee’s decision), but the IG has decided not to review the Trustee’s decision within the meaning of section 139ZA(5) (IG’s decision), does the Tribunal nevertheless have jurisdiction to carry out a review of the Trustee’s decision if it were to determine that the IG’s decision should be ‘set aside’ as sought in the Applicant’s application?

8. In the course of the hearing the question was changed with the agreement of both parties so that the word ‘jurisdiction’ was replaced with the word ‘power’, it being recognised that the fact of the Inspector-Generals decision and the making of a competent application for review were sufficient to give the Tribunal authority to deal with the matter.

   THE ACT

9. It is useful to set out the most important sections of the Act and of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).   

10. Section 139W of the Act provides:

    (1)  As soon as practicable after the start of each contribution assessment period in relation to a bankrupt, the trustee is to make an assessment of the income that is likely to be derived, or was derived, by the bankrupt during that period, of the actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made and of the contribution (if any) that the bankrupt is liable to pay in respect of that period under section 139S.

    (2)  If at any time, whether during or after a contribution assessment period, any one or more of the following paragraphs applies or apply:

    (a)  the trustee is satisfied that the income that is likely to be derived, or was derived, by the bankrupt during that period is or was greater or less than the amount of that income as assessed by the last preceding assessment in respect of that period;

    (b)  the base income threshold amount increased or decreased after the making of the last preceding assessment in respect of that period and before the end of that period;

    (c)  the trustee is satisfied that the number of the bankrupt's dependants increased or decreased after the making of the last preceding assessment and before the end of that period;

    the trustee is to make a fresh assessment of the income that is likely to be derived, or was derived, by the bankrupt during that period, of the actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made and of the contribution (if any) that the bankrupt is liable to pay in respect of that period.

    (3)  The powers of the trustee under subsection (2) may be exercised on the trustee's own initiative or at the bankrupt's request, but the trustee is not required to consider whether to exercise those powers at the bankrupt's request unless the bankrupt satisfies the trustee that there are reasonable grounds for the trustee to do so.

    (4)  As soon as practicable after the making of an assessment the trustee must give to the bankrupt written notice setting out particulars of the assessment and informing the bankrupt about the possibility of a variation under section 139T

11. Section 139ZA of the Act provides:

    (1)  The Inspector-General may review a decision of a trustee to make an assessment:

    (a)  on the Inspector-General's own initiative; or

    (b)  if requested to do so by the bankrupt for reasons that appear to the Inspector-General to be sufficient to justify such a review.

    (2) The Inspector-General must review such a decision if requested to do so by the Ombudsman.

    (3) A request by the bankrupt to the Inspector-General for the review of such a decision must:

    (a)  be in writing and given to the Inspector-General not later than 60 days after the day on which the bankrupt is notified of the trustee's assessment; and

    (b)  be accompanied by:

    (i) a copy of the notice of assessment; and

    (ii) any documents on which the bankrupt relies in support of the request.

    (5)       Within 60 days after the request is received, the Inspector-General must:

    (a)         decide whether to review the decision; and

    (b)  if the Inspector-General decides to review the decision--make his or her decision on the review.

12. It is important that when s.139ZA(1) refers to a ‘review of a decision of a trustee to make an assessment’ and when s.139ZA(2) and 139ZA(3) refer to ‘such a decision’ all of the references are to a decision following a ‘review of a decision of a trustee to make an assessment’. Similarly, when s.139ZA(5)(b) refers to ‘review the decision’ and ‘decision on the review’ those references to ‘decision’ are likewise references to a decision following a  ‘review of a decision of trustee to make an assessment’. On the other hand, the word ‘decide’ when used in s.139ZA(5)(a) must refer to a something different, namely a decision whether to ‘review… a decision of  trustee to make an assessment’.

13. Section 139ZD of the Act provides:

    On a review of a decision, the Inspector-General has all the powers of the trustee and may either:

    (a)  confirm the decision; or

    (b)  set aside the decision and make a fresh assessment under subsection 139W(2).

14. Again, it is worth noting, a little more than as a passenger, that s.139ZD uses the phrase ‘on a review of a decision’ which in context must be a reference to the same ‘review of a decision’ in s.139ZA(1), namely a ‘review of a decision of a trustee to make an assessment’. The importance of this is that as a matter of statutory construction it is pellucidly clear that until there is a ‘review of a decision of a trustee to make an assessment’ so far as the assumption of the trustees powers by the Inspector-General is concerned there is none. I will return to this briefly later

15. Section 139ZF of the Act provides:

    An application may be made to the Administrative Appeals Tribunal for the review of:

    (a)  a decision of the Inspector-General on the review of a decision by a trustee to make an assessment; or

    (b)  a decision by the Inspector-General refusing a request to review a decision by a trustee to make an assessment.

16. And yet again, almost inevitably, s.139ZF distinguishes between two different decisions contemplated by the s.139ZA, being on the one hand ‘a decision of the Inspector General on the review  of a decision by a trustee to make an assessment’ and on the other hand a decision refusing a request for a review.

17. Sub-section 43(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) provides:

    (1) For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:

    (a)  affirming the decision under review;

    (b)  varying the decision under review; or

    (c)  setting aside the decision under review and:

    (i) making a decision in substitution for the decision so set aside; or

    (ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.

18. To the extent that it may be relevant s.43(1) confers the powers of the original decision maker on the Tribunal for ‘the purpose of the reviewing a decision’. That necessarily requires identification of both the ‘decision’ that is being reviewed and the ‘powers’  conferred on the decision maker. Relevantly, the conferral of power is also limited to ‘The powers and discretions that are conferred by any relevant enactment on the person who made the decision…’.

19. Section 43(6) of the AAT Act provides:

    (6) A decision of a person as varied by the Tribunal, or a decision made by the Tribunal in substitution for the decision of a person, shall, for all purposes (other than the purposes of applications to the Tribunal for a review or of appeals in accordance with section 44), be deemed to be a decision of that person and, upon the coming into operation of the decision of the Tribunal, unless the Tribunal otherwise orders, has effect, or shall be deemed to have had effect, on and from the day on which the decision under review has or had effect.

20. Sub-section 43(6) gives statutory force to any decision of the Tribunal so that it becomes the decsion of the original decision maker  and making that decision one of the original decision-maker.

    THE ANSWER

21. The Tribunals powers are statutory so the answer to the question turns upon a consideration of the meaning of the relevant statutory provisions.

22. The Tribunal’s jurisdiction has been invoked by the filing of an application that seeks a review of ‘a decision of by the Inspector-General refusing a request to review a decision by a trustee to make an assessment’ under s.139ZF(b) of the Act. When the decision which is the object of the application for review is identified that way then together with the fact that there could not conceivably have been an application for review under s.139ZF(a), because the decision that has been made does not fall within the description of a decision within that sub-section and no such decision has in fact been made, it follows that the Tribunals powers are limited to those referable to the decision I have identified as the object of the review.

23. There is much to confirm the separate nature and character  of decisions of the Inspector-General under s.139ZA. I have observed that s139ZA, 139ZD and s.139ZF of the Act make a reasonably clear distinction between ‘a decision on the review of a decision of a trustee to make an assessment’ and ‘a decision refusing a request to review a decision by a trustee to make an assessment’. In particular, s.139ZF provides for a review of both kinds of decisions by referring to and defining them separately. The recognition of the distinction supports the conclusion that the legislature intended there to be a distinction made between them. This is especially so because there are only two kinds of decisions that can be made under s.139ZA and can be the subject of application for review under s.139ZF.

24. Nor do I consider that there are ‘two stages’ to a single process of review so that s.139ZD is or can be engaged at some time antecedent to the conduct of a review of the trustee’s decision to make an income contribution assessment. That contention is, in the view I take, contrary to the words of s.139ZA and 139ZD. It is also contrary to the identifiable separateness that the provisions give to decision involving whether to conduct a review and decisions that are the outcome of conducting a review. Even if there is a single process it is a single process that envisages the making of two different and separate decisions.

25. The approach, contrary to the argument of Mr Rutherfurd, is in an indirect sense supported by s.139W(3) which permits the trustee to make a fresh assessment under s.139W(2) at the request of a bankrupt, but only if the bankrupt satisfies the trustee that there are reasonable grounds to do so. The effect of that sub-section is, like its counterpart in s.139ZA, to create two potential decisional outcomes: one involving acceding to a request and making an assessment, the other involving refusing a request because the trustee is not satisfied that there are reasonable grounds to do so. Either outcome would leave a bankrupt aggrieved by a refusal to make a fresh assessment with a review of an extant assessment by the Inspector-General under s.139ZA. In turn if the Inspector-General considered there was sufficient reason to justify a review the facility of review by the Inspector-General would be available. Again, if that left a bankrupt aggrieved because the Inspector-General was not satisfied that there was reason to justify a review then ultimately the facility of review to the Tribunal under s.139ZF(b) would be available to the aggrieved bankrupt.

26. Although not entirely clear the policy underlying the legislative scheme leaves it to the good sense of the trustee, or the Inspector General, and incidentally the Ombudsman, to make and instigate reviews of income contribution assessments. The protections  for a bankrupt  against those decisions going awry are by the legislative scheme confined to things   concerned with ‘reasonable grounds’ and ‘reasons to justify’ probably so that a trustee and the Inspector-General are left to exercise their powers with a fair amount of discretion and uninhibited by the complaints of a bankrupt without reason or justification about the exercise of discretion. It should not be forgotten though that whichever course the trustee takes, to make a fresh assessment or to not be satisfied that there are reasonable grounds for a fresh assessment, the capacity for review by the Inspector- General is open. Similarly,  whichever course the Inspector-General may take, to make a fresh assessment or to not see sufficient reason to justify a review, the capacity for review of either decision by the Tribunal is open.

27. Turning then to the consequences that follow from the identification of the decision and its character as being within the meaning s.139ZF(b).

28. First, the Inspector-General because he was not reviewing a decision by a trustee to make an income contribution assessment was at no time clothed with the powers that s.139ZD would have conferred, in particular the power of the trustee to make an income contribution assessment under s.139W and 139ZF.  The Inspector-General power to make an income contribution assessment is conditioned by the conduct of ‘a review of a decision’ but the Inspector-General conducted no review at any time. The Inspector -General eschewed the conduct of any review because in the Inspector-General’s assessment there was not sufficient reason to justify a review. The power to make an income contribution assessment was not available to the Inspector General.

29. Second, as the Inspector-General was not dressed in the power to make an assessment s.43(1) of the AAT Act does not make the power available to the Tribunal. The power is not a ‘power[s] and discretion[s] …. conferred by any relevant enactment on the person who made the decision.’ True it is that that power might be activated if the condition for its exercise, the conduct of a review, were satisfied but the condition was not satisfied so it could not be said to have been a power that the Inspector-General had available.

30. Further, the Tribunal’s capacity to take on that power could not be said to be for ‘[f]or the purpose of reviewing a decision’ which is the decision to refuse to conduct a review because that is the object of the review. This is because the Inspector-General, and the Tribunal in his shoes, only acquires that power because of s.139ZD once a request for a review is acceded to. At that point the review of the decision that I have found to be the object of this application would be complete so it could not be said that the power is ‘for the purpose’ of the review. It would by then be for some subsequent or later or other purpose, the making of an income contribution assessment.

31. I do not consider that Australian Securities and Investment Commission v Donald [2003] FCAFC 318 stands for the proposition that because of s.43(1) of the AAT Act, no matter how wide the context or setting of the review might be, that the Tribunal has available to it powers that in making the decision which is the object of a review that the original decsion maker did not have. The context or setting involved in making a decision on review is not changed or added to because some other decision might need to be made as a consequence of any decsion on review that the Tribunal might make.

32. In my view even though the Act provides for two decisions which in the wash up may contain some common elements the legislature has left them so that they are treated separately for the purpose of any review. The policy position may well be that the legislative preference is for matters concerning income contribution assessment and their review so far as possible be dealt with internally and by the Inspector-General. In any event, whatever the reason absent an application for review of a trustees income contribution assessment, the Tribunal does not power to deal with a review of an income contribution assessment by a trustee.

33. Finally, I should say something about the practical consequence of the conclusion to which I have come, namely that the Tribunal is unable to make a decision reviewing the decision of the trustee to make an income contribution assessment when it is dealing with an application for a review of a decision refusing a review of such an assessment. That is best illustrated by reference to the possible outcomes in this matter. One possibility is that Mr Rutherfurd enjoys success so that the Inspector-General’s decision is set aside and a decision permitting a review of the trustees income contribution assessment is substituted. The effect of s.43(6) of the AAT Act is that the Inspector-General would be obliged to conduct a review of the trustees income contribution assessment. That, of course, is  what Mr Rutherfurd wanted in the first place. That would carry with it any attendant right of review by the Tribunal.  The approach I favour leaves open to Mr Rutherfurd the facility of having the trustees income contribution assessment reviewed by the Inspector-General should it appear to the Tribunal that there are reasons sufficient to justify a review. This is consistent with the legislative purpose that there should not be, in the absence of a satisfaction about sufficient reason to justify a review, any review of an income contribution assessment.

    DECISION

1. The Tribunal does not have power to make a fresh income contribution assessment when reviewing a decision by the Inspector-General in Bankruptcy refusing to review a trustee’s income contribution  assessment 

35.     I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of Member R Reitano

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Associate
Dated: 08 March 2022

Date of Hearing: 

4 March 2022

Solicitor for the Applicant:

Counsel for the Applicant:

B & G Law

Sean Russell

Solicitor for the Respondent:

Australian Financial Security Authority

Counsel for the Respondent:

Catherine Gobbo