Waterco Limited and Inspector-General in Bankruptcy
[2000] AATA 1063
•1 December 2000
DECISION AND REASONS FOR DECISION [2000] AATA 1063
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2000/1661
GENERAL ADMINISTRATIVE DIVISION )
Re WATERCO LIMITED
Applicant
And INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal Mr B.J. McMahon (Deputy President)
Date01 December 2000
PlaceSydney
Decision 1. The Applicant is not a person whose interests are affected by the decision under review. 2. The application is therefore dismissed.
..............................................
BJ McMahon
Deputy President
CATCHWORDS
BANKRUPTCY – whether applicant is a person whose interests are affected by the decision under review – creditors excluded from process of objecting to discharge - applicant does not have standing – application dismissed.
Administrative Appeals Tribunal Act 1975 – s 27
Bankruptcy Act 1966 – ss 55, 149, 178
Australian Conservation Foundation Incorporated v Commonwealth of Australia and others (1980) 146 CLR 493
Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67
Transurban City Link Ltd v Allan [1999] FCA 1723
REASONS FOR DECISION
01 December 2000 Mr BJ McMahon (Deputy President)
These reasons are concerned only with the Applicant's entitlement to bring this application for review.
Thomas Stanley Green was made bankrupt upon acceptance of a debtors' petition under section 55 of the Bankruptcy Act 1966 (the Act) on 24 June 1997. Mr Shirlaw was appointed his Trustee. By operation of law, he would have been entitled to be discharged from bankruptcy after three years unless an objection was lodged.
At a meeting of creditors held on 23 June 2000, Mr Shirlaw was removed as Trustee and Mr Sutherland was appointed in his stead. On the same day, Mr Sutherland lodged an objection to the discharge from bankruptcy of Mr Green pursuant to section 149B of the Act. The effect of this objection was to extend the bankruptcy to 25 June 2005.
The Bankrupt requested a review of the decision of the Trustee pursuant to section 149K(3) by the Inspector-General in Bankruptcy. On 26 September 2000, the Inspector-General cancelled the objection and gave his reasons for doing so. Copies of this decision and of those reasons were sent to the Trustee and to the Bankrupt, as required by subsection 149P(3), together with a notification of their rights. The subsection provides that in the case of a decision reviewing the decision to file a notice of objection, the notice to the parties must also include a statement to the effect that if the Bankrupt or the Trustee (relevantly) is dissatisfied with the Inspector-General's decision, application may be made to this Tribunal for review of that decision. The subsection does not explicitly limit the identity of an applicant for external review to the Trustee or the Bankrupt. In fact neither of them have sought a decision to review the Inspector-General's decision. It is for this reason that the Applicant has sought to initiate a review in this Tribunal.
The Applicant is a substantial creditor in the bankrupt estate which was under the control of the Trustee. As neither the Trustee nor the Bankrupt made application to this Tribunal, the Bankrupt was discharged from bankruptcy on 26 September 2000, the date of the Inspector-General's decision cancelling the notice of discharge. The application for review was made by the present Applicant to this Tribunal on 26 October 2000.
This Tribunal's power to review a decision of the Inspector-General, cancelling an objection, is to be found in section 149Q. It simply provides that an application may be made to this Tribunal for review of such a decision. It does not stipulate the identity of any party who may make such an application. The present Respondent, the Inspector-General in Bankruptcy, objects to the standing of the Applicant. A preliminary hearing was held to determine that issue.
The Applicant relies principally upon section 27 of the Administrative Appeals Tribunal Act 1975. That provides that where another enactment gives power to this Tribunal to review a decision, the application for review may be made by or on behalf of any person "whose interests are affected by the decision". It was the Applicant's case that its interests were affected by the cancellation of the objection in two ways. Firstly it was said that the discharge consequent upon the cancellation meant that it would no longer be possible for the Applicant to benefit from any contributions payable by the Bankrupt under Division 4B. Secondly the interests of the Applicant were said to be affected in that the discharge prevented the Applicant from participating in any distribution financed by additional assets (if any) to be discovered by the Trustee during the extended period of bankruptcy.
The general law as to standing has recently been reviewed by a Full Bench of five judges of the Federal Court in Transurban City Link Ltd v Allan [1999] FCA 1723. The principal authorities to be found in various High Court and Federal Court decisions were reviewed. The propositions to emerge from those decisions were summarised by the court at paragraph 50 in the following terms:
"In summary, the question of standing to review an administrative decision is to be determined by reference to the interest which the applicant has in the decision which is under review. It is to be determined by reference to the nature and subject matter of the review and the relationship which the applicant individually or a representative body may have to it. An interest in the outcome of the review may give standing. But there will be no standing where the actual outcome of the review will not affect the applicant. There will be a question of degree involved in many cases."
There are two principal aspects to be considered. The first is the nature and subject matter of the review, and the second is the degree of involvement of the Applicant.
A claimed interest must be consistent with the general purpose of the objection and review procedures set out in the Act. The policy of the Act was discussed by another Full Court in Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67. At 78 their Honours said:
"The policy of the current bankruptcy legislation is that, prima facie, a bankrupt is entitled to the benefit of a discharge by operation of law. The sections dealing with objections to discharge are consistent with this policy. By requiring that a notice of objection must not only set out the ground or grounds of objection and refer to the evidentiary material relied upon in support, but also state the 'reasons' for objecting, s 149C makes it clear that a trustee filing such a notice must have reasons for doing so, in addition to being satisfied that the evidentiary material establishes one or more permissible grounds. By providing for review by the Inspector-General of the decision to object, s 149K makes it clear that the reasons for objecting were intended to be subject to scrutiny. Finally, by providing for review by the AAT of, inter alia, a decision to file a notice of objection and the Inspector-General's decision on review of such a decision, s 194Q [sic] again makes it clear that the reasons for the filing of a notice of objection are to be the subject of scrutiny.
There is no reason to be found in these provisions for thinking that the considerations relevant to the exercise of the discretion to file a notice of objection are any less extensive than all those conformable to the purpose and objects of the Act. In the absence of any indication of a contrary legislative intention, we would be disposed to think that in order to 'keep a person bankrupt' beyond the ordinary period, a trustee would need to have reasons directed to achievement of a purpose of the law of bankruptcy. In fact, although ss 149B-149D do not indicate what will be 'sufficient reasons', as distinct from 'permissible grounds', to support an objection, s 149N(1) (set out earlier) provides that on review of a trustee's decision to object the Inspector-General must cancel the objection if, inter alia, he is satisfied that the reasons given by the trustee for objecting 'do not justify the making of the objection'. Thus, far from giving rise to a prima facie right to object, the existence of a permissible ground supported by sufficient evidence is a threshold: there must also be reasons justifying the making of the objection in the particular case."
The interest put forward by the Applicant is, in my view, not consistent with the achievement of a purpose of the law of bankruptcy. Simply to assert an interest that a bankruptcy should be prolonged so that a creditor may receive further contributions is, in my view, contrary to the overriding policy referred to by their Honours that a bankrupt is entitled to the benefit of a discharge by operation of law.
The alternative basis upon which to support a claim of interest, namely the potential loss of an entitlement to share in subsequently discovered assets, is, in my view, misconceived. The fact that Mr Green has now been discharged does not preclude a trustee from locating and recovering property to be distributed to creditors if it should become apparent at a later date that there was recoverable property in accordance with the terms of the statute.
Furthermore, either of these bases for the Applicant's claim is too remote. The interest which the Applicant must show was described by Gibbs J in Australian Conservation Foundation Incorporated v The Commonwealth 146 CLR 493 at 530 as a "special interest" by which he meant:
"… an interest, for present purposes, does not mean a mere intellectual or emotional concern. A person is not interested within the meaning of the rule, unless he is likely to gain some advantage, other than the satisfaction of righting a wrong, upholding a principle or winning a contest, if his action succeeds or to suffer some disadvantage, other than a sense of grievance or a debt for costs if his action fails."
The interest of a creditor in a bankrupt estate could not be said to be special in this sense, although undoubtedly the creditor could show an "intellectual or emotional concern". The development of bankruptcy legislation has established a clear pattern intended to eliminate this intellectual or emotional concern as a basis for objecting to discharge from bankruptcy. The determination of an interest is to be made with reference to the nature and subject matter of the review. It cannot be done without reference to the relevant legislation and the statutory context in which the right of review arises.
A pattern has emerged over the years of diminishing and ultimately excluding the right of a creditor to object to automatic discharge. A creditor had that right in 1973 under subparagraph 149(3)(b). The section has been amended subsequently on a number of occasions. By 1991 a creditor required the leave of the court to enter an objection. By 1993 the creditor's rights had been totally excluded. Power to file a written notice of objection to the discharge was then vested in the Trustee or the Official Receiver. Section 149B was added in 1997. Its effect was to preserve the rights of the Trustee or Official Receiver, to the exclusion of any creditor, to give a written notice of objection to the discharge and to oblige the Trustee to object in the circumstances outlined in subsection (2). The grounds of objection are limited to those set out in section 149D.
If an objection to discharge is lodged, section 149F requires the Trustee or Official Receiver to give a copy of the notice to the Bankrupt together with a notice stating that he may either request the Inspector-General to review the decision of the Trustee or Official Receiver, or he may make an application to this Tribunal for a review of the decision of the Trustee or Official Receiver. Subsection 149F(1) deals only with the giving of notice to the Bankrupt. It does not, in its own terms, confer an exclusive right to apply to this Tribunal. It is clearly the intention of the section, however, that at this stage that right would be confined to the Bankrupt. Notification is not required to be given to creditors or any other person associated with the bankrupt estate.
The Inspector-General in Bankruptcy is empowered to review a decision of the Trustee or Official Receiver, either on his or her own initiative or, if requested by the Bankrupt, for reasons that appear to the Inspector-General to be sufficient to justify the review. The Inspector-General then gives his or her decision under section 149N. If he or she finds that the grounds were not available under the Act or were otherwise inappropriate as set out in subsection (1), then he or she must cancel the objection. That is what happened in this case.
Upon making that decision the Inspector-General is obliged by section 149P to notify the Bankrupt and the Trustee or Official Receiver of the terms of the decision, the evidence on which the decision was based and the reasons for the decision. Again subsection (3) provides that this notice must include a statement to the effect that if the Bankrupt or the Trustee or the Official Receiver is dissatisfied with the Inspector-General's decision, application may be made to this Tribunal for external review. In terms, the subsection does not limit the right to apply to this Tribunal to any one of those three parties. It is a notice provision rather than the conferment of substantive rights. Those rights are created by the following section, 149Q. In this context, it seems to me inescapable that the rights of external review are intended to be conferred only on those parties named in the preceding section.
It has to be noted, however, that the court in Transurban did not appear to give support to this as a universal proposition. Their Honours said at paragraphs 55 and 56:
"We would, however, reject the submission of counsel for Transurban that standing can be considered by reference only to the object, scope and purpose of the legislation under which the decision is made, and in particular by reference to the persons whom the legislature has directed be notified of the decision. It is correct to say that the object, scope and purpose of the legislation will be relevant in determining the question of standing It is not correct to say that it is the only matter which is relevant. With respect it is also not correct to say that the learned primary judge gave no or no sufficient consideration to the object, scope and purpose of the DAA Act.
We would agree with the previous Full Court that the failure of the legislature to require notice to be given of the decision to grant certificates under the DAA Act (other than to the Commissioner of Taxation) gives no support to the submission that only the Commissioner of Taxation could be affected by a decision to grant certificates and have standing to review that decision. The Explanatory Memorandum to the Bill which introduced the system of certificates refers to a review of a decision not to issue certificates to an applicant. But this does not require the conclusion that the only review which Parliament contemplated was review of a decision not to issue certificates."
I understand these observations to mean, however, that standing is not conclusively determined by reference only to the persons whom the legislature has directed to be notified of the decision. In my view, however, the notice provisions in the Act are nevertheless one of the elements to be considered in determining the legislative scheme.
There is a complete code for administrative review of an objection decision set out in successive sections of the Act. Creditors have not played any part in that process since 1993. The legislature has intended that the Trustee, or if the Trustee is a registered Trustee, the Official Receiver, be vested with the exclusive right to object subject to overall control by the Inspector-General. Giving the Trustee such powers is no doubt a recognition by the legislature that he or she is likely to act in the interests of creditors generally and is likely to have a better understanding of the bankrupt estate than any one creditor. A Trustee may not act arbitrarily. He or she must always be conscious of the supervisory powers of the court which may be invoked under section 178.
Creditors are excluded from every step in the process of objecting to discharge. It would be quite contrary to the scheme of the Act, and indeed would be illogical, if in the very last process – that of external review – the creditor was suddenly to be given a right to initiate reviews from which he has hitherto been precluded. The Applicant submitted that this Tribunal offered it the last opportunity to make representations. In my view that opportunity was removed by legislative amendments in 1993.
Having regard both to the general principles of standing and to the particular statutory context in which this Tribunal's jurisdiction is to be found, I am of the view that the Applicant is not a person whose interests are affected by the reviewable decision.
Accordingly, the application is dismissed.
I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B.J. McMahon (Deputy President)
Signed: .....................................................................................
Dominika Rajewski, AssociateDate of Hearing 27 November 2000
Date of Decision 01 December 2000
Counsel for the Applicant Mr JT Johnson
Solicitor for the Applicant Philip Day & Associates
Representative for the Respondent Mr Michael Murray
(Australian Government Solicitor)
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