Cook and Inspector-General in Bankruptcy [2000] AATA 30 (11 January 2000)

Last Updated: 25 January 2000

DECISION AND REASONS FOR DECISION [2000] AATA 30

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/423

GENERAL ADMINISTRATIVE DIVISION )

Re linda kathryn cook

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

DECISION

Tribunal Senior Member M D Allen

Date 11 January 2000

Place Sydney

ADMINISTRATIVE APPEALS TRIBUNAL ) No NT1999/218

)

GENERAL ADMINISTRATIVE DIVISION )

Re: linda kathryn cook

Applicant

And: INSPECTOR GENERAL IN BANKRUPTCH

Respondent

DECISION

Tribunal Senior Member M D Allen

Date 11 January 2000

Place Sydney

Decision FOR the reasons given orally at the conclusion of the hearing in this matter, the decision under review is AFFIRMED.

(Sgd) M D ALLEN

.............................

Senior Member

CATCHWORDS

e". Term "exceptional circumstance" equated to "special circumstances".

Bankruptcy Act 1966 - s109

Bankruptcy Regulations - 16.10

Re Faulkner and Inspector General in Bankruptcy (AAT 12950, 3 June 1998)

Secretary, Department of Social Security v Ellis (1997) 24 AAR 535

REASONS FOR DECISION

24 January 2000 Senior Member M D Allen

At the conclusion of the hearing of the above matter the terms of the decision intended to be made and the reasons therefor were stated orally. After service upon the Respondent of a copy of the decision that was in fact made, the Respondent pursuant to Sub-section 43(2A) of the Administrative Appeals Tribunal Act 1975 requested the Tribunal to furnish to the Respondent a statement in writing of the reasons of the Tribunal for its decision.

2. The oral reasons for decision have been transcribed by Auscript, the Commonwealth Reporting Service. Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

3. The said transcript is annexed hereunto and furnished to the Respondent and to the Applicant as it is the reasons for the Tribunal's decision.

I certify that this and the preceding page are a true copy of the decision and reasons for decision herein of:

Senior Member M D Allen

Signed: Ivanka Mamic

....................................................................................

Associate

Date of Hearing 11 January 2000

Date of Decision 11 January 2000

Solicitor for Applicant Applicant self-represented

Solicitor for Respondent Mr M Murray,

Australian Government Solicitor's Office

DRAFT DECISION

ADMINISTRATIVE APPEALS TRIBUNAL

Matter No NT 99/423

By MR M. D. ALLEN, Senior Member

LINDA COOK and

INSPECTOR GENERAL IN BANKRUPTCY

SYDNEY, 11 JANUARY 2000

MR ALLEN: In this matter the applicant pursuant to an application for review dated 4 March 1999 seeks a review of a decision by the Inspector General in Bankruptcy made on 19 January 1999 to refuse a waiver of the Official Trustee in Bankruptcy's fees in relation to the bankrupt estate of one, Melissa Anne Clark. It is not disputed in these proceedings that Mrs Cook, the applicant, was an employee of Melissa Anne Clark who was trading under the business name, firm or style of Country Essence Living from leased premises at Mona Vale.

As is set out in document T8 of the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act when the bankrupt's estate was realised after the payment of legal costs, agent's commission and the sale of certain stock items a valuation fee and removal fees there then remained after the payment of all statutory fees and costs no funds to pay any dividend to priority creditors.

It's clear that the applicant is a priority creditor. A section 109 of the Bankruptcy Act 1966 gives a priority to the payment of wages. So far as is relevant section 109 reads:

(1) Subject to this Act, the trustee must, before applying the proceeds of the property of the bankrupt in making any other payments, apply those proceeds in the following order:

(a) first, in the order prescribed by the regulations, in payment of the taxed costs of the petitioning creditor and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee and the costs of any audit carried out under section 175;

(b) ...

(ii) the costs, charges and expenses properly and reasonably incurred by the controlling trustee while the authority was in force (including any debts incurred by the controlling trustee that are provable in the bankruptcy); ...

Then follows paragraph (d) fourth which refers to the estate of a deceased debtor which is not relevant here and (e) states:

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upt, whether remunerated by salary, wages, commission or otherwise, in respect of services rendered to or for the bankrupt before the date of the bankruptcy;

Other provisions then extend in relation to particular priorities. So that it will be seen that the outstanding wages of the applicant rank fifth in the order of payment of debts.

The first is, of course, payment of the tax costs, petitioning creditor and costs charges and expenses of the administration of the bankruptcy.

As I said the applicant found herself in the position that after the payment of costs incurred and the trustee's statutory fees that there was no funds in the bankrupt estate to make any payment to her on account of wages owed.

The applicant has put before the Inspector General in Bankruptcy and also before this Tribunal, as can be seen from the T documents, her financial circumstances and that of her husband. Indeed, it is conceded by the respondent that the applicant is in straitened financial circumstances and however little may be obtained from the bankrupt estate it would certainly be of material assistance to the applicant and her husband that much is not denied. The bankruptcy regulations do permit a change in the order of priorities. Regulation 16.10 reads inter alia:

Subject to sub-regulation 2 the Inspector General may waive or remit the whole or part of any fee.

What the applicant argues is that in this case the Inspector General should remit his fee and so enable a payment to be made to her. The circumstances in which the Inspector General may waive or remit are set forth in subsection 2 of 16 regulation.10 and read:

A fee may only be waived or remitted whether wholly or in part if the Inspector General is reasonably satisfied at (a) payment

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of the fee by the person liable to pay it imposed or would impose undue hardship on the person.

So far as that particular paragraph is concerned I accept the submissions of Mr Murra, for the respondent, that the person there referred to is the bankrupt, himself, or perhaps more accurately, his estate. And that a creditor cannot bring him or herself within paragraph (a). however, subparagraph (b) is at large. It reads:

Because of other exceptional circumstances it is proper and reasonable to do so.

The term exceptional circumstances is not defined in the Bankruptcy Act or regulations. They were considered by Senior Member Ettinger in the matter of re Stanley Faulkner and the Inspector General in Bankruptcy unreported Tribunal decision No 12950 and the Senior Member there equated the term with the term, Special Circumstances. With respect, I agree with that word exceptional is defined in the New Shorter Oxford Dictionary 1993 Edition in the following terms:

Of the nature of or forming an exception unusual, out of the ordinary, special, unusually good etcetera.

It would seem, therefore, that the term exceptionable can quite properly be equated to the term, Special Circumstances. There have been several decisions of both this Tribunal and the Federal Court relating to the term, Special Circumstances. I would simply refer these proceedings to Carr Js decision in Secretary, Department of Social Security v Ellis, reported 24 ADR 535 where at page 539 his Honour said:

In Beadle v Director General of Social Security (1985) 7 ALD 607 a Full Court of this court had to consider whether the Administrative Appeals Tribunals had erred in its interpretation of section 1021(a) of the Act which provided for an extension of time in which to claim a family allowance in special circumstances.

At 673, 674 the Full Court said:

Presumably in this context special circumstances must include events that would render the six months unfair or inappropriate. It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director General bearing in mind the purpose for which the

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power is given. The phrase, Special Circumstances, although lacking precision is sufficiently understood, in our view, not to acquire judicial gloss.

His Honour continued:

In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 Kiefel J after referring to Beadle said: For present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others to take it out of the usual or ordinary case. That was, I consider, the only inquiry to be undertaken in this case.

It would, of course, follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The inquiry I have referred to would involve considering what would be the effect if the provision in question or the principle of liability it creates is applied.

Later, on the same page, Kiefel J expressed approval of the Tribunal's reasoning in holding that Mr Groth's circumstances were not out of the ordinary when Part 3.14 of the Act in which sections 1168 and 1184 are to be found had the same effect on him as it did on other persons qualified to receive a disability support pension. Her Honour added:

If the Tribunal went on to find that his circumstances and those of his family although difficult did not constitute hardship and they could not be said to be different from other pension recipients.

Now, in this matter, as has been pointed out, there is provided by the Bankruptcy Act a scheme of priority of payments and in order for there to be remitted or any part of the trustee's fees there has to be exceptional circumstances. Now, it seems to me that although the applicant and her husband are in straight and financial circumstances the fact that they have been left out of pocket by an employer becoming bankrupt in circumstances where the payment of wages, back wages, amounting to a considerable sum, cannot be paid is not what one would term a special circumstance in the case that he cannot be said to be exceptional or some feature out of the ordinary.

It is an unfortunate fact of commercial life that quite often when a person goes bankrupt or a company goes into liquidation that creditors are left out of pocket. So that although it is no doubt unfair in particular circumstances I cannot see that it constitutes special,

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that is to say, exceptional circumstances and the decision under review is affirmed.

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