Taffs v Porter
[2016] FCCA 1875
•22 July 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TAFFS & ANOR v PORTER & ANOR | [2016] FCCA 1875 |
| Catchwords: BANKRUPTCY – Whether application within 60 day statutory time limit – relevant act, omission or decision – application made out of time – application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.116, 178 |
| Cases cited: Re Wong; Ex parte Wong v Donnelly and Others [1995] FCA 1466; (1995) 63 FCR 426; (1995) 131 ALR 180 Samootin v Official Trustee in Bankruptcy [2012] FCA 64 |
| First Applicant: | JOHN HAMILTON TAFFS |
| Second Applicant: | VALERIE JANE TAFFS |
| First Respondent: | JASON PORTER |
| Second Respondent: | PAUL WESTON |
| File Number: | SYG 2945 of 2015 |
| Judgment of: | Judge Nicholls |
| Hearing date: | Matter decided on the papers |
| Date of Last Submission: | 19 April 2016 |
| Delivered at: | Sydney |
| Delivered on: | 22 July 2016 |
REPRESENTATION
| Solicitors for the Applicants: | Parker & Kissane Solicitors |
| Solicitors for the Respondent: | Gadens Lawyers |
ORDERS
The application made on 30 October 2015 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2945 of 2015
| JOHN HAMILTON TAFFS |
First Applicant
| VALERIE JANE TAFFS |
Second Applicant
And
| JASON PORTER |
First Respondent
| PAUL WESTON |
Second Respondent
REASONS FOR JUDGMENT
On 30 October 2015 Mr John Hamilton Taffs and Mrs Valerie Jane Taffs (“the applicants”) made an application to this Court seeking an order pursuant to s.178(1) of the Bankruptcy Act 1966 (Cth) (“the Act”), that the Trustees of their respective bankrupt estates, Jason Porter and Paul Weston in their professional capacity (“the Trustees”) give consent to the Financial Ombudsman Service’s (“FOS”) consideration of a dispute between them and the Commonwealth Bank of Australia. The applicants brought the application against Mr Jason Porter and Mr Paul Weston, in their capacity as Trustees for the applicants’ respective estates. In submissions, the applicants stated that they understood Mr Porter was no longer a Trustee, therefore were proceeding against Mr Weston (“the Trustee”) only.
Background
On 23 November 2015 a Registrar referred the matter to a Judge of the Court and made orders concerning the filing of evidence and written submissions. The matter first came for directions before me on 4 February 2016.
The affidavits filed are:
(1)The affidavit of John Hamilton Taffs, farm manager, made on 26 October 2015 with annexures (“JHT”).
(2)The affidavit of Paul Gerrard Weston, registered trustee, made on 7 December 2015, and with reference to the bundle of exhibits (“PGW1”).
Written submissions were filed for the applicants on 19 January 2016 (“AS1”) and for the respondent on 29 January 2016 (“RS1”). The matter was set down for final hearing. Prior to the hearing, the parties notified the Court that they had agreed that it was appropriate for the Court to determine the application “on the papers”. The parties were given the opportunity to file further written submissions. The applicants filed further submissions on 14 April 2016 (“AS2”). The respondent filed further written submissions on 19 April 2016 (“RS2”).
Relevant Legislation
Section 178 of the Act is in the following terms:
“178 Appeal to Court against trustee's decision etc.
(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
(2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision.”
The Issue
The applicants’ further written submissions focussed on one issue. In his first written submission, the respondent asserted that the applicants had not made their application to the Court within the 60 day period referred to in s.178(2), starting from the date on which they became aware of the trustee’s relevant act, decision or omission. It is appropriate to deal with this as the immediate issue.
Further Background
The parties were represented by respective counsel before the Court. They were also represented by firms of solicitors during the time of the events set out below. The “papers” the parties have put before the Court, provide the relevant factual context within which the issue now before the Court arises. The applicants’ solicitors are Parker & Kissane (“P&K”). The respondent’s solicitors are Gadens Lawyers (“GL”).
The applicants are each bankrupt pursuant to sequestration orders made on 21 November 2014. The petitioning creditor in each was a subsidiary of the Commonwealth Bank of Australia, Bankwest (“the Bank”). For current purposes, the respondent was, and is, the Trustee for each of the applicants’ estates.
The applicants had previously had dealings with the Bank in relation to a “mortgage loan” concerning certain properties. Mr Taffs’ affidavit sets out some of the history at paragraphs [3] - [28] (of JHT). The applicants and the Bank continued to be in dispute about a particular matter outlined at [29] - [35] of the same affidavit.
By letter dated 30 March 2015, P&K wrote to solicitors Henry Davis York who had acted for the Bank in their dealings with the applicants (see “Q” of annexure JHT11 at JHT 132 to 134). The purpose of the letter was stated to be:
“The purpose of this letter is to outline the history of our clients’ dealings with the Bank, and their current position, in a final attempt to resolve this matter and have the Bank honour its understandings and arrangements with our clients. Failing resolution, our clients intend to refer this matter to the Financial Ombudsman Service (“FOS”).”
The letter then sets out in some detail the applicants’ complaint and their asserted facts in support of their complaint. The letter concludes with:
“We hope that an objective and reasonable review of the history of this matter by the Bank can lead to it being quickly resolved. As we have indicated, if it cannot be resolved, our clients intend to refer it to the FOS. We understand that the FOS will still consider references where the complainants are bankrupt, provided the trustee consents. We see no reason for the trustees withholding their consent in this instance, and would seek the Court’s review of any refusal under s178 of the Bankruptcy Act in any event.”
That letter was sent to the Bank by the lawyers, who no longer represented the Bank, on 30 March 2015 (JHT at 135). In any event, P&K sent, by email, a copy of that letter to GL under cover of a letter dated 7 April 2015 (JHT at 131). The letter indicated the following:
“In these circumstances we are seeking a response from the Commonwealth Bank and we ask that you allow for that response to be provided before considering any further action in the matter as that response is directly relevant to yourselves.”
While the matter of the potential FOS application was communicated to GL on 7 April 2015, it is of relevant explanation to note that the Trustee, through his solicitors, had earlier communicated with the applicants’ solicitors by letter dated 4 February 2015, concerning the proposed sale of certain land in respect of which the applicants’ appear to have earlier asserted was “exempt property” for the purposes of s.116(2) of the Act. The GL letter expressed the Trustee’s view that the property was not “exempt property”, and gave reasons for this. That letter ended with a request for the applicants to advise their “position in relation to a sale of the Property by Friday, 13 February 2015” (PGW1 at 71).
By letter dated 23 April 2015, GL wrote to P&K (JHT at 128 and PGW1 at 74). The letter is in the following terms:
“We refer to your letter of 7 April 2015.
Kindly note that the trustees are independent of the creditors of the bankrupt estates. The trustees are required to act in the interest of all creditors. Accordingly, the contents of your letter to the Commonwealth Bank is not relevant to the trustees’ claim.
Your letter has failed to address the issues outlined in our letter to you of 4 February 2015.
We again request that you kindly let us know the Bankrupts’ position in relation to the sale of the property by Friday, 30 April 2015.
In the event we do not receive clarification of the Bankrupts’ intentions in relation to the property by 30 April 2015, we are instructed to take steps in relation to the trustees’ claim without further notice to you. Those steps may include commencing court proceedings. We intend to rely on this letter in respect of the trustees’ costs of those proceedings.
We look forward to hearing from you by 30 April 2015.”
On 24 April 2015, P&K wrote to GL (PGW1 at 72), the relevant part of the letter is as follows:
“We refer to the above matter and to our correspondence of the 7th April 2015 and the writers telephone attendance upon you of the 23rd April 2015.
We understand that you do not hold current instructions from your client to consent to our client making a complaint through the Financial Ombudsman Service (FOS). We seek as a matter of urgency that you obtain such instructions as our client is wanting to pursue this course of action.
We understand that you are also providing a response to the correspondence which had been forwarded to your office and directed to the Commonwealth Bank. As indicated in our telephone conference we have had no response from the Commonwealth bank and we are pursuing that aspect of the matter. In any event we await receipt of your correspondence in due course.”
On 27 April 2015 GL sent the following by email to P&K (PGW1 at 73):
“Please find attached our letter in relation to this matter.
Kindly note that the trustee is not prepared to consent to the Bankrupts lodging a dispute with FOS.”
The attached letter was a copy of the letter dated 23 April 2015 from GL to P&K (see [14] above - JHT at 128 and PGW1 at 74).
P&K wrote to GL by letter dated 30 April 2015 (JHT at 126). The letter was said to be sent in reference to a telephone conversation between solicitors of P&K and GL respectively, regarding the applicants matter, and in response to the letter of 23 April 2015 from GL, received by P&K on 27 April 2015 (JHT at 126).
GL sent a letter to P&K dated 7 May 2015 (JHT at 125). The letter was said to be sent in response to P&K’s letter of 30 April 2015. The letter, amongst other things, also stated:
“For the avoidance of any doubt, the trustees do not consent to the Bankrupts lodging a dispute with FOS.”
P&K wrote to the FOS by letter dated 26 May 2015 (JHT at 112). Relevantly, the letter stated:
“When this request has been sought from the Trustee it has been refused and we believe unreasonably so.
Prior to lodging any request can your office please indicate whether you are able to proceed with any complaint in the circumstances without the consent of the Trustee.”
P&K also wrote to GL by letter dated 26 May 2015 (JHT at 116). The letter advised that the applicants believed the Trustee withholding consent to the application to FOS was unreasonable. It further advised that P&K had written to the FOS seeking direction on whether the FOS would proceed to consider the complaint. If the FOS was unable to do so then P&K advised that “we are instructed to make an Application to the Federal Circuit Court seeking Orders requiring your client to consent”, given the Trustee’s “continued unwillingness to consent ”.
On 27 May 2015 FOS responded to P&K. The letter stated (JHT at 110):
“Accordingly, based on the information you have outlined, we are unable to provide an assessment on whether a dispute should be lodged, given that the Trustee’s consent will not be provided. We would recommend that you lodge a dispute with the Financial Ombudsman Service, which will then allow us to conduct an assessment against our Terms of Reference and provide further guidance on whether our service can assist.”
By letter dated 1 June 2015, GL wrote to P&K in relation to P&K’s letter of 26 May 2015 (see [21] above and JHT at 108). The letter advised that the Trustee was of the view that the applicants had “little prospect of succeeding on the dispute against [the] Commonwealth Bank”. The Trustee was of the view that the “dispute [was] outside the FOS terms of reference.”
Further, the letter stated:
“If the Bankrupts are of the view that their dispute is within the FOS terms of reference, kindly provide us with a copy of the dispute they intend to lodge, together with detailed submissions on why the dispute falls within the terms of reference and the outcome the Bankrupts hope to achieve.
Unless the Bankrupts can provide a persuasive reason as to why the trustees should consent to the Bankrupts lodging the FOS dispute, we do not propose to address any further correspondence received from you in relation to the proposed FOS dispute.”
The applicants lodged a complaint with FOS (JHT at 103 to 107). Although not entirely clear, it appears this occurred on 13 July 2015.
P&K wrote to GL by letter dated 24 August 2015 (PGW1 at 81). The letter relevantly stated:
“We confirm that a complaint was lodged with the FOS by our clients on the 13th July 2015 and instruct that a response was received from the FOS on the 11th August 2015. In their consideration of the application the FOS advised that they cannot consider the dispute unless the Trustees in Bankruptcy provides to them their written consent for the matter to proceed.
In this regard and for the application to proceed we enclose an Authority Form provided by the FOS and we ask that the Trustees sign that form in all the circumstances.
If the Trustees are not willing to sign same, we ask that you have your clients provide to us in writing as to their basis and reasoning for their refusal.”
[Emphasis in original]
GL wrote to P&K by letter dated 28 August 2015 and sent by email on 1 September 2015. The letter states (PGW1 at 84 to 85):
“We refer to earlier correspondence between our offices from April this year. In particular we refer to our emails and letters to you dated 23 April 2015, 7 May 2015 and 1 June.
Our correspondence has made it clear to you that the trustee does not consent to the Bankrupts lodging a dispute with FOS. We have outlined in various correspondences the reasons for the trustee not consenting to such a dispute being lodged by the Bankrupts.
We do not intend to address those issues any further.
Any application made by the Bankrupts to the court under s178 of the Bankruptcy Act will be strongly opposed by the trustee. We rely on the reasons previously provided to you in respect of why the trustee believes your dispute with the Commonwealth Bank of Australia is futile.
Further, the Bankrupts are well out of time to bring such action under s178. We draw your attention to s178(2), which requires that any such application be brought by the Bankrupts not later than 60 days after the day on which the applicant became aware of the trustee’s decision. We refer to our email to you of 27 April 2015 which advises that the trustee is not prepared to consent to the Bankrupts lodging a dispute with FOS. For the avoidance of any doubt, the Bankrupts have been on notice that the trustee does not consent to their lodging a dispute with FOS since 27 April 2015.”
The Dispute Between the Parties
The immediate dispute between the parties was first identified in the respondent Trustee’s first written submissions. In essence, the submission was that s.178(2) of the Act requires that an application under s.178(1) “must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision” ([14] of RS1).
The Trustee’s position is that, with reference to what is set out above, the applicants’ solicitors requested the Trustee to consent to the applicants making a complaint to FOS, by letter of 30 March 2015. That request was refused by the Trustee, and this was communicated to the applicants (through their solicitors) by letter of 27 April 2015.
The Trustee’s primary position therefore, is that the applicants became aware of the Trustee’s refusal to give his consent on 27 April 2015. As the application to the Court was not made until 28 October 2015, which was later than 60 days after the day on which they became aware of the Trustee’s refusal, the applicants were out of time, pursuant to s.178(2) of the Act, to make their application.
As a secondary position, the Trustee points to his solicitor’s letter dated 7 May 2015, where the refusal was again communicated to the applicants’ solicitors in what are said to be clear and certain terms. This date also precedes 28 October 2015 by more than 60 days and provides a second and “unequivocal” basis, to say that the application to the Court was made out of time.
The applicants do not appear to dispute the events set out immediately above. The applicants’ submission for the most part however, is that the relevant “act, omission or decision” for the purposes of s.178 was the respondent’s refusal on 1 September 2015, to sign the authority form prepared by the FOS which the applicants had sent to the respondent on 24 August 2015. Given that the relevant date for that “act, omission or decision” which was a different “act, omission or decision” to the earlier communication of the “refusal” conveyed on 1 September 2015, the application to the Court made on 28 October 2015 was within time.
Consideration
It is to be noted that the language of s.178 refers to the “trustee’s act, omission or decision.” The applicants’ submissions (see AS2) were not consistent in their characterisation or description of the Trustee’s conduct.
There are some parts of the submissions that characterise the Trustee’s conduct as a “decision”. At [6] (of AS2) the applicants refer to “the trustee’s decision” although it may be that this was simply an accurate factual characterisation of the respondent’s submission. The matter is unclear because at [5] (of AS2), the applicants refer to the respondent’s “characterisation” on this issue as being expressed as “trustee’s act, decision or omission”, while at [7] (of AS2) they refer to their own view of what occurred as “act, omission or decision.” At [9] – [12] (of AS2), in referring to their own position, the applicants use the phrase “act, omission or decision”. Although they use the same reference in relation to the respondent’s “position” at [13] (of AS2).
Importantly, in that part of their submissions dealing with the substance of their argument and analysis of the events described earlier in their submissions, the applicants refer to the Trustee’s “first refusal” and “second refusal” throughout [15] of AS2. In particular, “second refusal decision” at [15] (a) of AS2, and again at [15] following the sub-paragraphs, after setting out the elements of their argument, they refer to “the same decision”, “the decision” and “the original decision”. Although, there is also a reference to “omission”. Nor do [16] to [17] (of AS2) make it any clearer. At [16] (of AS2), the reference is to “his [original] decision” and at [17] (of AS2), “act, decisions or omissions”.
The resolution of the dispute between the parties turns on how to characterise the communications of 27 April 2015 and 7 May 2015 on the one hand, and the communication of 1 September 2015 on the other, and the respective requests made by the applicants which led to these subsequent communications.
As stated above, it is important to note the language of s.178 the Act. That section talks of the “trustee’s act, omission or decision”. In their submissions, the applicants do not seek to distinguish between the three words. The repeated descriptions of the communications by the Trustee and the relevance to the statutory conduct, is, indistinguishably, to all three as if they were one concept, that is, an “act, omission or decision”.
The Trustee, without explanation, appears to take the position that the Trustee’s communications were to convey the “decision” to refuse consent (for example, see the Trustee’s second written submissions [“RS2”] at [2] “decided”. Further, at [22] “The applicants assert that the letter of 28 August 2015 constituted a ‘second refusal’ and therefore a fresh decision for the purposes of Section 178 of the Bankruptcy Act”. And even further at [24]: “a fresh decision”).
In my view, it may have been possible to argue that there is a difference between the three words. An “act” is relevantly defined as “a thing done; a deed”, “the process of doing; action, operation” (Shorter Oxford English Dictionary, 6th edition).
It may be allowed that an “omission” can be understood as providing the mirror image to an “act”. That is, “the action or an act of neglecting or failing to perform something” (Shorter Oxford English Dictionary, 6th edition). Therefore broadly an “act” is the doing of something, and an “omission” is the not doing of something.
However, it may have been available to the applicants to argue that a “decision”, as the Trustee has sought to characterise his conduct, to connote something narrower than an “act”. Relevantly, “decision” is defined as “the action of coming to a determination or resolution with regard to any point or course of action; a resolution or conclusion arrived at” (Shorter Oxford English Dictionary, 6th edition).
That distinction can be illustrated with reference to what was said by Justice Sackville in Re Wong; Ex parte Wong v Donnelly and Others [1995] FCA 1466; (1995) 63 FCR 426; (1995) 131 ALR 180 at
[52] - [53]:
“[52] I think it doubtful whether the Trustee has yet made a ‘decision’” that he is not satisfied that all the bankrupt's debts have been paid in full. Since the Trustee has admitted NZI's proof of debt, and since it is clear that that debt has not been paid, the occasion for the Trustee to make the judgment envisaged by s.153A(1), as a practical matter, has not yet arisen. It is true that the bankrupt has indicated that he will cause NZI's debt to be paid if the Trustee gives certain assurances. But the fact is that the debt has not yet been paid and the Trustee has never had sufficient funds in hand to enable NZI's debt to be discharged. In these circumstances, I think it is doubtful whether the Trustee can be regarded as having decided that payment of the debt is insufficient to allow him to be satisfied that ‘all the bankrupt's debts have been paid in full.’ Compare the views of Mason C.J., in a different statutory context, in Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321, at 336-337 (to the effect that a decision for the purposes of the Administrative Decisions (Judicial Review) Act 1977 will generally entail a decision which is final or operative and determinative).
[53] Nonetheless, the Trustee has expressed the view that payment of NZI's debt would not permit him to be satisfied of the matter referred to in s.153A(1). Section 178 does not merely use the word ‘decision’; it confers power on the Court whenever a bankrupt is affected by any ‘act, omission or decision of the trustee.’ The phrase ‘act or omission’ is clearly wider than ‘decision.’ The word ‘act’, in its dictionary meaning, covers ‘anything done or performed’: Macquarie Dictionary. In my opinion, a considered statement in writing by a trustee, in response to a formal request by a bankrupt, as to the course of action the trustee proposes to follow in the administration of the estate, usually will amount to an ‘act of the trustee’ within s.178 of the Act. In the circumstances of the present case I think that the Trustee's responses to the requests made on behalf of the bankrupt, as recorded in the correspondence and the report of 8 May 1995, constitute an ‘act’ of the Trustee for the purposes of s.178. I do not think there is any doubt that the Trustee's act has affected the bankrupt, since it has effectively blocked the path to annulment of the bankruptcy.”
[Emphasis added]
As set out above, in the current case both parties proposed and agreed that the Court determine the application “on the papers”, which I understood to be the material already filed, and as the parties respective argument is explained in subsequent written submissions (that is, the respective second written submissions).
For whatever reason, the applicants have elected not to distinguish between the separate words in the phrase “act, omission or decision”. The applicants’ submissions and argument therefore must be considered in light of their own submissions and explanations as to relevant events and how they have sought to describe or characterise them.
In this light, the applicants submitted three broad reasons as to why the respondent’s contention should not be accepted.
First, that the “surrounding circumstances” and what was asked of the Trustee changed between “the initial refused request” (up to May 2015), and the “later request” to sign the FOS authority form (August 2015). The applicants characterise this as the “first refusal” and “second refusal”. The applicants propose four matters which they say reveal the change in the “surrounding circumstances”.
One, that the “first refusal” occurred in the context of a potential application to FOS at a time when it could not have been known whether the Trustee’s refusal would have prevented the FOS application being made. The Trustee’s “second refusal” occurred after the FOS had advised that the application to it could not be made without the Trustee’s consent. The applicants argue that the second refusal therefore had “a more certain and drastic impact” on their position.
I do not accept the factual premise upon which this argument is based. P&K’s letter of 30 March 2015 to Henry Davis York (the Bank’s former solicitors), demonstrated knowledge of the need of the Trustee’s consent as a prerequisite, before the FOS could consider their complaint (see [11] above and JHT at 134). There is no basis in the material before the Court for the assertion that the FOS may have considered the application without the Trustee’s consent.
Two, the applicants argue that the “first refusal” occurred at a time when the Trustee had little information on the proposed FOS application. However, the “second refusal” occurred after the Trustee “had been provided with the terms of the FOS application and knew what the basis of it was and what was being asked of the FOS” ([15](b) of AS2).
On balance, I agree with the respondent that the P&K letter of 30 March 2015, which was given to the Trustee subsequently on 7 April 2015, provides sufficient detail on the nature of, and the basis of, the complaint to the FOS. The “first refusal”, whether it be 27 April 2015 or 7 May 2015, was after the Trustee’s receipt of that letter.
While the applicants submit that the Trustee had subsequently been provided with the terms of the FOS, and the basis of the complaint, they have not pointed to the material providing the basis for their assertion. In any event, on the material before the Court, and relevantly that part of the material which can be said to have been sent to, or brought to the attention of the respondent, it cannot be said that any more detailed explanation of the applicants’ complaint, or its basis, was brought to the Trustee’s attention, than what was contained in the letter of 30 March 2015, and known to the Trustee as at that time.
Three, the applicants argue that the first refusal related to what they describe as a “broad consent” from the Trustee, and the second related to a more “specific” authority (consent) drafted in “FOS terms”. Those terms included what was said to be an important condition for the protection of the Trustee. That is, that any offers of “financial compensation” be referred to the Trustee (see PGW1 at 82 to 83).
When properly understood, the applicants’ argument does not relate only to the factual situation asserted. Rather, it is directed to the impact on the Trustee of the specific protection available to the Trustee involved in the FOS application, and that the real “change” was the consent of the Trustee in relation to the “first” (broad) request and the “second” (specific) request.
The difficulty for the applicants, as the respondent submits, is that they have not pointed to any of the material before the Court to suggest, let alone establish, that the Trustee was not aware as at April or May 2015 that any “proceeds” arising out of the disposition of the FOS complaint would not go to the creditors of the bankrupt estates.
However, even if the applicants could have overcome this difficulty, what still remains on the material before the Court, is that there is no basis in the material for the applicants to assert that there would be any such proceeds to be made available.
To make good their argument, the applicants refer to the FOS “Bankruptcy Authority” form which contains the following (PGW1 at 82 to 83):
“I require that any offers of financial compensation resulting from the Ombudsman’s consideration of Mr John Taffs’s dispute be referred to me.”
[Error in original]
It is important to note that this was not drafted by the Trustee. It was in fact part of the “Authority Form”, obtained from the FOS by the applicants and which P&K sent to GL (see PGW1 at 81).
In this light, what the applicants actually sought from the FOS, as indicated by them, is illuminating. In the “application form” to the FOS dated 9 July 2015 (JHT at 106), in answer to the question:
“What do you think is a fair and reasonable resolution of the dispute? If you are seeking payment of a sum of money please provide any relevant calculations of your claim(s).”
The applicants answered:
“That the equity held in the Commonwealth Bank homeloan be excluded from funds available to the trustee in bankruptcy.”
Contrary to the assertion implicit, if not explicit, in the applicants’ submissions, it is difficult to see how the equity held by the Bank being excluded from funds available to the Trustee in bankruptcy was of real benefit to the Trustee. At its highest, “offers of financial compensation” would be referred to the Trustee, and may therefore have put him on notice of any such matter. However, the nature of what was being sought, in the circumstances, meant, as the Trustee now submits, that there would not be any funds arising from the disposition of the complaint by FOS.
Four, the applicants submit that one of the reasons given by the Trustee for the “first” refusal was that the application to FOS would be outside FOS’s terms of reference. The argument is that by the time of the second refusal, the application to FOS had not been rejected by FOS on the basis that it was outside its terms of reference.
As set out above, the applicants knew as of March 2015 that the consent of the Trustee was required to make the application to FOS. They also knew as at April or May 2015 that the Trustee would not give any such consent. On the material before the Court, they also knew, at least as at 7 May 2015 that the reason for this was that any such application would be futile (see the letter from GL to P&K in JHT at 125):
“In our view, there is a direct link between the trustees’ claim against the Property and the FOS dispute your clients are seeking to lodge against Bankwest. Although the FOS dispute does not directly impact the trustees’ claim, we see little purpose in consenting to the FOS dispute.
As indicated previously to you, the trustees are independent third parties. In that regard, Bankwest has no authority to direct the trustees to exclude the Property from the Bankrupts’ estates, irrespective of whether Bankwest is the sole creditor. Accordingly, any dispute lodged by the Bankrupts with FOS against Bankwest would be futile.”
Nonetheless, later on 26 May 2015, the applicants sought to press their application to FOS (see JHT at 112). They asked FOS to advise whether they could proceed without the Trustee’s consent. The FOS responded on 27 May 2015 (JHT at 110). The relevant point of this response for current purposes is reproduced at [22] above.
The applicants now submit that the forwarding of the FOS application form to GL on 26 May 2015 (JHT at 116) meant that the FOS application had not been rejected by FOS as being outside its terms of reference.
It must be said the applicants’ argument here is disingenuous. The advice of 27 May 2015 from FOS to the applicants (JHT at 110) is clear. The FOS was unable to say, on the information that the applicants had provided, “whether a dispute should be lodged”. Its recommendation that the applicants should lodge the appropriate complaint cannot be understood as a determination that any such complaint came within the FOS terms of reference. Rather, as stated by FOS (JHT at 110), such a step would “allow us to conduct an assessment against our Terms of Reference and provide further guidance on whether our service can assist”.
The letter from P&K to GL of 26 May 2015, which precedes the response from FOS, can only be understood as putting the Trustee on notice that the applicants were seeking advice from the FOS as to whether they could make their complaint to it without the Trustee’s consent, and in any event seeking, yet again, that the Trustee give such consent.
In these circumstances, I agree with the respondent that the inference which the applicants seek to draw that FOS considered it had “jurisdiction” because authority forms were sent to the applicants, is simply not available to them.
The second reason put forward by the applicants is that the Trustee indicated that he would reconsider his decision if he were provided with further information. The applicants refer to the letter from GL to P&K of 1 June 2015 (JHT at 108 and also see [23] above). The submission is that the Trustee invited further information. The applicants assert that the failure by the Trustee to be persuaded by this further information, or the failure to consider it, would provide the basis to say that a “second” and later decision was made. This would allow, within time, an application to the Court pursuant to s.178 of the Act.
In their submissions the applicants refer to GL’s letter of 1 June 2015 (see [23] above). It is the case that the letter does make reference to the provision of further information ([8](h) of AS2).
However, the letter must be read holistically and in context. By 1 June 2015, the Trustee had made his position clear, as he again repeated in that letter, that the Trustee refused to give his consent to the making of an application to FOS because the dispute at the heart of the applicants’ complaint was outside FOS’s terms of reference, and the “purpose” of the dispute was “fundamentally flawed.”
Notwithstanding this, the Trustee did give the applicants the opportunity to persuade him to the contrary if they believed that the dispute was within FOS’s terms of reference.
The difficulty for the applicants now is that they were unable to satisfactorily point to what new, or additional, information they provided such as to provide the basis for the argument that in August 2015 the Trustee notified or communicated a second, and therefore different, refusal to give consent.
As set out above, the provision of the FOS application form to the Trustee and the information it contained, and the information in the covering letter, and subsequent communications from P&K, did not provide any new or additional information of substance and relevance to the understanding of the proposed application to the FOS.
The basis of the dispute, what the applicants hoped to achieve, and the nature of these matters as they related to the FOS terms of reference, remained essentially and substantially, unchanged. The applicants laboured under the misapprehension at the relevant times, and appear to continue to do so now, that mere repetition of their request to the Trustee, and insistence that he give his consent, somehow constituted a change in the relevant circumstances such as to provide the foundation in their submission that there were two separate refusals by the Trustee.
In my view, there was one “act, omission or decision” (to use the approach of the parties in their submissions) by the Trustee. That was his refusal to give consent as communicated by the letter of 27 April 2015, and confirmed in the letter of 1 June 2015.
The terms of GL’s letter of 28 August 2015 (PGW1 at 85) make clear that the Trustee took the view that nothing of substance or significance had changed since April/June 2015. The Trustee’s letter (sent by GL) confirmed what had earlier been communicated to the applicants. In essence, that the Trustee continued to be of the view that the application to FOS was futile, and consent to the application would not be given. Mere repetition of the same request for consent by the applicants cannot be said to have caused a “new” or “second” refusal by the Trustee. This is particularly the case, as set out above, where the Trustee was in possession of relevant information as of April to June 2015, and the applicants had not provided any information or arguments of substance to alter that situation.
In their submissions before the Court, the applicants made reference to the “second refusal” relating to a “more specific authority drafted in FOS terms” ([15](c) of AS2). I have already addressed some aspects of the arguments relating to the “FOS authority.”
It is important to note that by this reference the applicants did not appear to focus on the authority form itself, but rather that it provided a more “specific” focus, in contrast with the situation prior to the provision of the form by them to the Trustee.
It is the case that, had the applicants applied to the Court for an extension of time pursuant to s.178(2) of the Act (see further below) and sought to distinguish between an “act, omission” and “decision”, the FOS application form may possibly have provided some basis to say that they had an arguable case in that context, arising from any distinction between an act or omission on the one hand, and a decision on the other.
However, in addition to what I have set out above in relation to the FOS application form, on the arguments presented in the submissions to the Court, and as these arise from the material before the Court, the FOS application form can only properly be seen as the mechanism by which the Trustee could signify his consent to the applicants making their application to the FOS. That is, the relevant “decision” made by the Trustee was that he would not give his consent. That remained unchanged as at August 2015 from what had been the “decision” as at earlier in 2015.
In that light, the Trustee’s conduct in August 2015 was not a “second refusal” as the applicants now contend, but a continuing confirmation of the “act, omission or decision” made on 27 April 2015 and 1 June 2015.
The applicants also submit that the Court ought to adopt an interpretation of s.178(2) that best achieves the purpose of the legislation. That proposition must be accepted. In applying that proposition however, there is a distinction between applying the relevant legislative provision in light of that proposition, and ignoring the focus of the legislative provision and adopting a conclusion contrary to the facts as found in each case.
The applicants argue that the reason for the “cautious” approach which they urge on the Court now, is that to do otherwise would tempt the “danger” that bankrupts faced with the “stated position of a trustee”, may be forced to “immediately apply to the Court for a review of the trustee’s position.”
That argument either requires, or seeks, to minimise the language and reason for the inclusion of s.178(2) in the Act. The “work” of s.178(2), amongst other things, is to assist in the efficient administration of a bankrupt estate. A Trustee should be allowed to proceed in the proper discharge of his other duties involving the bankrupt estate without repeated distraction. The Parliament plainly sought to give bankrupts, creditors or other persons aggrieved by the “act, omission or decision” of a Trustee, the right to seek review by the Courts. However, the sixty day period within which to exercise that right was plainly imposed to provide balance with the need for the proper and efficient administration of the bankrupt estate.
The applicants believe, as they now submit, that the sixty day period is “too short”, and forces those aggrieved to act “immediately”. I have some difficulty in accepting that sixty days within which to act, particularly if those aggrieved are already legally represented, can be described as requiring such persons to act “immediately”. In any event, that is the period chosen by Parliament. The applicants’ arguments in this regard should perhaps be directed to those charged with law reform.
For the reasons set out above, the application to the Court should be dismissed. However, one further matter requires explanation.
In his first written submissions, the Trustee draws attention to the time limit set out in s.178(2) ([14] of RS1). The submissions state that it is “well settled” that the application of the time limit in s.178(2) is “strict”. He relies on the decision of Justice Katzmann in Samootin v Official Trustee in Bankruptcy [2012] FCA 64 (“Samootin”) where Her Honour considered the application of s.33(1)(c) of the Act, and whether the Court’s general power under that section applied to s.178(2). The Trustee submits that “Her Honour at 18 found that ‘the general power must give way to the specific restriction in s178(2)’”.
The respondent also submits that subsequent decisions, for example, that of Judge Burnett in McIntosh v The Official Trustee in Bankruptcy [2014] FCCA 2502 at [11], have considered that this was “well settled”.
To that could be added Heshmati v Paul Burness and Morgan Lane [2012] FMCA 884 (per Driver FM, as his Honour then was) (“Heshmati”) which referred to Samootin and Liprini v Pascoe as Trustee of the Bankrupt Estate of Liprini [2012] FCA 886; (2012) 292 ALR 778 (per Jagot J) (“Liprini”) where Her Honour was said to have “proceeded on the basis that the parties agreed that the 60 day time limit in s.178(2) had expired and there was no continuing right of appeal” (Heshmati at [47] referring to Liprini at [21]).
In Heshmati at [48] – [51] his Honour went on to state:
“[48] In my view, s.178(2) on its face discloses a parliamentary intention that the 60 day time limit is an absolute one which cannot be extended by the Court. I note first the imperative language of the section in the use of the word ‘must’. I note secondly that the limitation period is a long one. Federal statutory limitation periods generally range from a few days to a period of 35 days, as in the Migration Act 1958 (Cth). I note further that the administration of bankrupt estates could be significantly disrupted if there were no certainty in decisions made by trustees in that administration. The opportunity to bring proceedings outside the limitation period of 60 days could create significant uncertainty, including after the bankrupt administration had been completed. In that regard, I note that the limitation period does not commence to run until the person becomes aware of the trustee’s act, omission, or decision.
[49] Considering those factors in combination, I am minded to conclude that Parliament intended that the limitation period was not one that could be extended by the Court. It is necessary, however, to consider also the operation of s.33 of the Bankruptcy Act which states:
(1) The Court may:
(a) upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;
(b) at any time allow the amendment of any written process, proceeding or notice under this Act; or
(c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.
[50] On one view, s.33(1)(c) confers on the Court a general power to extend limitation periods in the absence of an express prohibition on doing so. I have considerable doubt, however, that that provision was intended by Parliament to apply to limitation periods for the bringing of proceedings in the Court for the purposes of the Bankruptcy Act. Section 33 deals with the adjournment, amendment of process, and extension or abridgement of times generally in relation to proceedings before the Court. That suggests that the power conferred on the Court is conferred for the effective administration of justice in proceedings which are otherwise properly before the Court.
[51] I have doubt that the section was intended to permit the Court to confer on itself jurisdiction that it would not otherwise have because of the expiration of a limitation period for the bringing of proceedings.”
[Emphasis added]
I note that in Heshmati, that part of the judgment in Samootin referred to by his Honour, was not part of the ratio decidendi of the judgment. And as Her Honour stated in Samootin at [18], “No application has been made for an extension of time.”
Further, in Liprini, I respectfully understood the Court to refer, relevantly, to the respective positions of the parties in that case, not necessarily the concluded view reported in Heshmati, (Liprini at [21]):
“The parties have proceeded before me today on the common basis that the 60 day time limit in s 178(2) has expired and accordingly the applicant can no longer appeal against the decision of the trustee not to call the meeting or the omission of the trustee to call the meeting.”
In the current case, the applicants appear to have accepted the Trustee’s submissions in this regard. What is clear is that despite opportunity to do so, no reference is made in the applicants’ submissions to any possibility of seeking an extension of time. Importantly, no application has been made in the current proceedings for the Court to consider extending the time limit in s.178(2) of the Act.
I must note however, that I disagree with the respondent’s submissions that the proposition that there is no extension to the sixty day time limit is “well settled”. In Kerr (Trustee), in the matter of Cross (Bankrupt) v Bechara [2015] FCA 284 (“Bechara”), Jagot J stated at [44] – [45]:
“[44] For Mr Kerr it was submitted that the period of 60 days in s 178(2) may not be extended under s 33(1) because, in its terms, s 178(2) expressly provides to the contrary of any such extension. I disagree. Section 178(2) does not provide to the contrary of s 33(1). Section 178(2) merely provides a time limit of 60 days which is then amenable to extension under s 33(1). The submissions for Mr Kerr did not point to any authority to support the proposition that s 178(2) provides to the contrary for the purposes of s 33(1) and I am unable to see how the provisions can be construed in this manner.
[45] Accordingly, the Court is vested with discretion to extend time to enable Ms Bechara and Mr Akcan to apply to the Court for the orders they seek.”
In any event, as no application for an extension of the time limit has been made it is not appropriate now to consider this question. Although I note that subject to any later authorities to which the parties may have referred, I would have been bound by Bechara given it was the later authority (to the one the respondent relies on) of a Court superior to this one.
In all, and in any event, I agree with the respondent that the applications made to the Court by the applicants on 30 October 2015 are not within the statutory time limit and that the applications should be dismissed. I will make the appropriate orders.
I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of Judge Nicholls
Date: 22 July 2016
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