FEDERAL CIRCUIT COURT OF AUSTRALIA
| TSAKIRAKIS v OFFICIAL RECEIVER & ANOR | [2013] FCCA 106 |
| Catchwords: BANKRUPTCY – Application seeking a review that the decision of the Official Receiver to issue a notice pursuant to s.139ZQ on the grounds that it was an abuse of process – validity of material supporting the s.120/121 claim in question – notice set aside. |
| Legislation: Federal Circuit Court Rules 2001 (Cth), r.11.03 |
| Applicant: | THEODORE TSAKIRAKIS |
| First Respondent: | OFFICIAL RECEIVER |
| Second Respondent: | SAMUEL PISCOPO AS TRUSTEE OF THE BANKRUPT ESTATE OF JOANNA TSAKIRAKIS |
| File Number: | SYG 2507 of 2012 |
| Judgment of: | Judge Lloyd-Jones |
| Hearing date: | 19 December 2012 |
| Delivered at: | Sydney |
| Delivered on: | 24 April 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. Johnson |
| Solicitors for the Applicant: | Matthews Folbigg Lawyers |
| Counsel for the First Respondent: | Mr G. McGrath |
| Solicitors for the First Respondent: | Lobban McNally Lawyers |
| Counsel for the Second Respondent: | Mr D. Allen |
| Solicitors for the Second Respondent: | Proctor & Associates |
ORDERS
The s.139ZQ Notice issued to the Applicant by the First Respondent on 11 October 2012 be set aside.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2507 of 2012
| THEODORE TSAKIRAKIS |
Applicant
And
| OFFICIAL RECEIVER |
First Respondent
| SAMUEL PISCOPO AS TRUSTEE OF THE BANKRUPT ESTATE OF JOANNA TSAKIRAKIS |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an application in proceedings SYG 2507 of 2012, filed on 2 November 2012, seeking a declaration pursuant to the provisions of s.30 of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy…
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- AGLC
- TSAKIRAKIS v OFFICIAL RECEIVER & ANOR [2013] FCCA 106
- Case
- [2013] FCCA 106
- Decision Date
CaseChat Overview and Summary
This matter concerned an application by the applicant, Mr. Tsakirakis, seeking a review of the Official Receiver's decision to issue a notice pursuant to section 139ZQ of the *Bankruptcy Act 1966* (Cth). The applicant contended that the issuance of the notice constituted an abuse of process and that the material supporting the underlying claim, which was the basis for the notice, was invalid. The application was heard by Lloyd-Jones J in the Federal Court of Australia.
The primary legal issues before the Court were whether the decision to issue the section 139ZQ notice was an improper exercise of power, specifically an abuse of process, and whether the material relied upon by the Official Receiver to support the notice was sufficient and valid. The Court was required to consider the purpose of a bankruptcy notice and the onus on a trustee to prove the facts that render a transaction void.
Lloyd-Jones J reasoned that the actions of the Trustee in lodging a cross-claim in separate proceedings had introduced the issue of fraudulent behaviour by Mr. Tsakirakis, thereby altering the basis upon which the original section 139ZQ notice was sought. The Court found that this new issue required resolution by the Court in its bankruptcy jurisdiction and was no longer a matter that could be determined by an administrative decision-maker. Crucially, the Court noted that the Official Receiver had not been provided with any updated material regarding the fund of money that was the subject of the earlier notice before deciding to issue the second notice. The Court applied the principle that a trustee bears the onus of proving the facts that make a transaction void, and that the Parliament has clearly provided where this onus should lie.
The Court ordered that the section 139ZQ Notice issued to the Applicant by the First Respondent on 11 October 2012 be set aside.
The primary legal issues before the Court were whether the decision to issue the section 139ZQ notice was an improper exercise of power, specifically an abuse of process, and whether the material relied upon by the Official Receiver to support the notice was sufficient and valid. The Court was required to consider the purpose of a bankruptcy notice and the onus on a trustee to prove the facts that render a transaction void.
Lloyd-Jones J reasoned that the actions of the Trustee in lodging a cross-claim in separate proceedings had introduced the issue of fraudulent behaviour by Mr. Tsakirakis, thereby altering the basis upon which the original section 139ZQ notice was sought. The Court found that this new issue required resolution by the Court in its bankruptcy jurisdiction and was no longer a matter that could be determined by an administrative decision-maker. Crucially, the Court noted that the Official Receiver had not been provided with any updated material regarding the fund of money that was the subject of the earlier notice before deciding to issue the second notice. The Court applied the principle that a trustee bears the onus of proving the facts that make a transaction void, and that the Parliament has clearly provided where this onus should lie.
The Court ordered that the section 139ZQ Notice issued to the Applicant by the First Respondent on 11 October 2012 be set aside.
Orders
Orders of the court
1.The s.139ZQ Notice issued to the Applicant by the First Respondent on 11 October 2012 be set aside.
Background
Background to the litigation
I note Mr McGrath’s submission that the only valid purpose of the issue of a bankruptcy notice is to bankrupt someone and the use of one in circumstances where it is not intended to seek sequestration is improper, whereas the s.139ZQ notice has multiple uses. One of those legitimate uses is to create pressure on a debtor to pay, which is a key factor pursued by the Trustee in the matter before this Court. It is intended to shortcut, short circuit, avoid, or at least minimise litigation by a trustee or in circumstances where there is evidence of an action under ss.120, 121 and 122 of the Bankruptcy Act. I do not believe that these contentions are in dispute in this matter. Nor do these contentions in any way shift, reduce or nullify the strict requirements identified by his Honour Black CJ in Halse v Norton (supra) in that:…a trustee has always carried the onus of proving the facts that make a transaction void and in instances in which the onus of proof is to lie elsewhere the Parliament has clearly so provided.(emphasis added) On the material before the Court it was the actions of the Trustee himself, by lodging the cross-claim in proceedings SYG1469/2012, that introduced the claim of fraudulent behaviour by Mr Tsakirakis and impacted upon the completeness and integrity of the material tendered seeking the original s.139ZQ notice. The basis of the original material tendered in support of the initial notice has changed by the introduction of the new issue articulated in the cross-claim that seeks the resolution by this Court, exercising its powers in the Bankruptcy jurisdiction and is no longer something that can be addressed by an administrative decision maker. Under cross-examination, Mr Thomson confirmed that he did not receive any update to the original material supplied for the first notice before making the decision to issue the second notice. The transcript reveals the following:Mr Johnson: …Prior to you making your decision to issue the second notice, were you provided with any other material as to what had happened with the fund of money that was the subject of the earlier notice?Mr Thomson: No.(Transcript 19 December 2012, p.37.32) Mr McGrath advanced the argument that in this matter there exists a situation where a decision has already been made and not challenged to issue a new notice in the same circumstances where the Official Receiver was satisfied that there was sufficient evidence to support issuing of the first s.139ZQ notice. Mr McGrath contends that the existence of this situation is one of the criteria that activates the issuing of a s.139ZQ notice and the other is the request of which there is ample evidence. Mr McGrath referred the Court to the decision record prepared by Fraser Thomson on 10 October 2012 (Exhibit A4; Tab 19, p.180). Under the heading “The following has informed my decision” in respect to:a) The notice sufficiently sets out the facts and circumstances upon which I have considered that the transaction is void against the trustee.Mr McGrath contends that goes to the satisfaction of the second of the two s.139ZQ criteria. The second item:b) There has been sufficient evidence previously provided to the OR to consider the transaction as void.Mr McGrath suggests that in many ways this note is a cogent point that contained (a). Mr McGrath submits that these are excellent reasons beyond challenge and there is no basis, whatsoever, to suggest that in some way something else has happened and this is a cover-up.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
The Applicant relies on the following legislative foundation for the power of review: a) Administrative Decisions (Judicial Review) Act 1977 (Cth), ss.5 and 6: 5Applications for review of decisions(1)A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Magistrates Court for an order of review in respect of the decision on any one or more of the following grounds:(a) that a breach of the rules of natural justice occurred in connection with the making of the decision;(b) that procedures that were required by law to be observed in connection with the making of the decision were not observed;(c) that the person who purported to make the decision did not have jurisdiction to make the decision;(d) that the decision was not authorized by the enactment in pursuance of which it was purported to be made;(e) that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;(f) that the decision involved an error of law, whether or not the error appears on the record of the decision;(g) that the decision was induced or affected by fraud;(h) that there was no evidence or other material to justify the making of the decision;(j) that the decision was otherwise contrary to law.(2)The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:(a) taking an irrelevant consideration into account in the exercise of a power;(b) failing to take a relevant consideration into account in the exercise of a power;(c) an exercise of a power for a purpose other than a purpose for which the power is conferred;(d) an exercise of a discretionary power in bad faith;(e) an exercise of a personal discretionary power at the direction or behest of another person;(f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;(g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;(h) an exercise of a power in such a way that the result of the exercise of the power is uncertain; and(j) any other exercise of a power in a way that constitutes abuse of the power.(3)The ground specified in paragraph (1)(h) shall not be taken to be made out unless:(a) the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or(b) the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist.6Applications for review of conduct related to making of decisions(1)Where a person has engaged, is engaging, or proposes to engage, in conduct for the purpose of making a decision to which this Act applies, a person who is aggrieved by the conduct may apply to the Federal Court or the Federal Magistrates Court for an order of review in respect of the conduct on any one or more of the following grounds:(a) that a breach of the rules of natural justice has occurred, is occurring, or is likely to occur, in connection with the conduct;(b) that procedures that are required by law to be observed in respect of the conduct have not been, are not being, or are likely not to be, observed;(c) that the person who has engaged, is engaging, or proposes to engage, in the conduct does not have jurisdiction to make the proposed decision;(d) that the enactment in pursuance of which the decision is proposed to be made does not authorize the making of the proposed decision;(e) that the making of the proposed decision would be an improper exercise of the power conferred by the enactment in pursuance of which the decision is proposed to be made;(f) that an error of law had been, is being, or is likely to be, committed in the course of the conduct or is likely to be committed in the making of the proposed decision;(g) that fraud has taken place, is taking place, or is likely to take place, in the course of the conduct;(h) that there is no evidence or other material to justify the making of the proposed decision;(j) that the making of the proposed decision would be otherwise contrary to law.(2)The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:(a) taking an irrelevant consideration into account in the exercise of a power;(b) failing to take a relevant consideration into account in the exercise of a power;(c) an exercise of a power for a purpose other than a purpose for which the power is conferred;(d) an exercise of a discretionary power in bad faith;(e) an exercise of a personal discretionary power at the direction or behest of another person;(f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;(g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;(h) an exercise of a power in such a way that the result of the exercise of the power is uncertain; and(j) any other exercise of a power in a way that constitutes abuse of the power.(3)The ground specified in paragraph (1)(h) shall not be taken to be made out unless:(a) the person who proposes to make the decision is required by law to reach that decision only if a particular matter is established, and there is no evidence or other material (including facts of which he or she is entitled to take notice) from which he or she can reasonably be satisfied that the matter is established; or(b) the person proposes to make the decision on the basis of the existence of a particular fact, and that fact does not exist.b)Bankruptcy Act 1966 (Cth), s.15(5): 15Official Receivers…(5)The Court may review an act done by an Official Receiver.Note:Section 303 explains who may apply to the Court for review of an Official Receiver‘s action.
Ratio Decidendi
Legal Principle Established
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