Bride v Official Trustee in Bankruptcy [1999] FCA 1519 (3 November 1999)

Last Updated: 4 November 1999

FEDERAL COURT OF AUSTRALIA

Bride v Official Trustee in Bankruptcy [1999] FCA 1519

BANKRUPTCY - application for stay of contributions by bankrupt pending the outcome of legal actions - whether Court has jurisdiction under s 178 in these circumstances.

Bankruptcy Act 1966 (Cth), ss 139P, 139S, 139T, 139ZA, 139ZF, 139ZG, 178

Re Wheeler; Ex parte Wheeler v Halse [1994] FCA 1348; (1994) 54 FCR 166

Poletti v Commissioner of Taxation (1994) 52 FCR 154

McGoldrick v Official Trustee in Bankruptcy [1993] FCA 636; (1993) 47 FCR 547

WENDY MARGARET BRIDE v OFFICIAL TRUSTEE IN BANKRUPTCY

W 7091 of 1999

BOON JR

3 NOVEMBER 1999

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W7091 OF 1999

BETWEEN:	WENDY MARGARET BRIDE Applicant
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY Respondent
JUDGE:	BOON JR
DATE OF ORDER:	3 NOVEMBER 1999
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The application be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W7091 OF 1999

BETWEEN:	WENDY MARGARET BRIDE Applicant
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY Respondent

JUDGE:	BOON JR
DATE:	3 NOVEMBER 1999
PLACE:	PERTH

REASONS FOR JUDGMENT

1 The applicant, Mrs Bride, has applied pursuant to s 178 of the Bankruptcy Act 1966 as amended for orders as follows:

"1. The monthly contributions of $187.00 payable to the Attorney General's Department, Common Investment Fund, WA Official Account, as ordered by Mr D Smithson, for the Official Receiver in Bankruptcy, "Be Stayed" until the outcome of the following actions:-

(a) High Court Appeal, P20 of 1998, Bride vs KMG Hungerfords.

(b) Supreme Court Action, CIV 1804 of 1989, Bride vs Peat Marwick Mitchell.

(c) Supreme Court Action, CIV 1570 of 1989, Bride vs The Australian Bank Limited and Oths.

(d) Supreme Court Action, CIV 2041 of 1990, Bride vs Stewart.

(e) Supreme Court Action, CIV 1632 of 1996, Bride vs Anglo Foods, Freehills, Muirwil Nominees etc."

2 The respondent, the Official Trustee in Bankruptcy, opposes the application on the following grounds:

"1. The Applicant is not entitled to bring, and this Honourable Court does not have jurisdiction to entertain, an application for a stay of monthly contributions to her bankrupt estate, whether under s 178 of the Bankruptcy Act 1966 or otherwise.

2. In the exercise of the Court's discretion, it should not grant the application because no realistic prospect of benefit to the applicant's unsecured creditors flowing from the litigation in which the Applicant and her husband are involved is demonstrated."

3 In an affidavit filed by the applicant in support of her application she states that she is a registered nurse and has worked night shift for the past fifteen years at the Katanning District Hospital. She states that her husband, Edward James Bride, is an experienced litigant, and acts on behalf of the applicant's family with the applicant's total support.

4 The applicant states that because of the extent of the litigation in which she and her husband are involved, she is the breadwinner of the family. She states that it is from her salary that she and her husband are funding their joint efforts to "rectify the wrong done" to their children and the unsecured creditors of the family business, and to pay out the unsecured creditors of their former bankrupt estate (No. 455 of 1984) "who are victims of fraud".

5 The applicant and her husband are both bankrupt and the Official Receiver has decided that the applicant make compulsory monthly contributions of $187.00.

6 In her affidavit the applicant states that the order of the Official Trustee in Bankruptcy that she pay this monthly contribution is oppressive in that all of her salary at present is used to fund the litigation in which she and her husband are involved. She also has to support their daughter who is studying at Murdoch University.

7 The applicant further states that the order is capable of causing and will cause extreme financial hardship to her and her family as they reside some three hundred kilometres from Perth and her husband is usually in Perth once a week on legal matters.

8 It is further stated by the applicant in her affidavit that the order would cause extreme financial hardship and possibly jeopardise their litigation as it is from her salary that she and her husband pay for stationery, telephone, fuel and other things connected with the litigation.

9 The applicant states that the main causes of action in which she and her husband are involved are due to commence trial on the 9^th of November 1999 in the Supreme Court of Western Australia. She states that she and her husband have never been legally assisted and the actions in which they are engaged are funded from her salary. The applicant further states that despite numerous requests from herself and her husband to the Official Trustee in Bankruptcy for relief or for a stay in the contribution, such requests have been refused.

10 The applicant has annexed to her affidavit copies of correspondence between herself and her husband on the one part and the Insolvency and Trustee Service Australia on the other. In a letter dated 3 May 1999 the applicant wrote to the Official Receiver's office stating that she sought exemption from making contributions on the grounds of hardship. In that letter she cited the fact that she had to pay rates upon the family home of $800 per annum, maintenance on the house of $20 per week and current and outstanding water rates of $100 per month. The applicant also referred to the six legal actions in which she was involved and which were fully funded by her. The applicant stated that the average weekly cost of funding the actions amounted to about $250 per week, which included motor vehicle expenses, paper, telephone and away from home costs for her husband. In that letter the applicant stated that the funding of the legal actions by herself was an exceptional reason which warranted a stay of compulsory contributions that at this time caused financial hardship. The letter stated that the payment of contributions would impose an excessive burden on the applicant and her family and render her unable to carry on the legal applications they had in train to rectify past actions. In addition, the applicant stated that she had a daughter studying at Murdoch University and she herself had to pay all costs associated with her daughter's fees, accommodation, books, travel to and from home and living expenses.

11 In a letter dated 4 June 1999 the Deputy Official Receiver stated that the application was refused. The notice of decision indicated that the reasons for the decision were as follows:

"The bankrupt relies on three grounds;

1. Rented Accommodation.

The bankrupt has not provided evidence that she lives in rented accommodation.

2. Person unable to contribute to maintaining household.

The bankrupt has not provided evidence that her spouse has become unable to contribute to the costs of maintaining their household because of unemployment, illness or injury.

3. Exceptional circumstances.

The bankrupt has not convinced me that exceptional circumstances have occurred which impose an excessive financial burden on her."

12 It is apparent from the documents filed in this matter that although the applicant initially indicated to the Insolvency and Trustee Service Australia that she intended to "appeal" to the Administrative Appeals Tribunal, she did not in fact do so.

13 The Court also has before it an affidavit of Jeremy White, a Deputy Official Receiver. In his affidavit sworn 8 October 1999, Mr White states that in his capacity as Deputy Official Receiver he made a decision to reject the applicant's application to vary the contribution payable by the applicant to her bankrupt estate on grounds of hardship. In the course of his activities as Deputy Official Receiver, Mr White had been required to inform himself of the contents of the file held by the Official Trustee in Bankruptcy in relation to the applicant's affairs. In the course of so doing, Mr White became aware of the documents which form annexures to his affidavit. There are three deeds of assignment annexed to that affidavit. The first deed of assignment was made 19 August 1988 between Bernard Putnin (as trustee of the bankrupt estate of the applicant and her husband) on the one part, and the applicant and her husband on the other part. By that deed Mr Putnin as the trustee of the bankrupt estate assigned to the applicant and her husband all of his right to carry on legal proceedings against the former solicitors of the applicant and her husband. A deed in similar terms between Mr Putnin and the applicant and her husband was made on 12 January 1995 in relation to legal action against Peat Marwick Mitchell and the Australian Bank Limited. A third deed of assignment was made on 6 February 1995 between the applicant and her husband on the one part, and the Pinwernying Family Trust on the other part. This deed states that the applicant and her husband are trustees of the trust, the beneficiaries being John Oliver Bride, Edward James Bride and Holly Zoe Bride. The deed refers to Supreme Court Action CIV 1570 of 1989 and Supreme Court Action CIV 1804 of 1989 and states that the applicant and her husband assign to the trust absolutely all their right to carry on the causes of action against the Australian Bank Limited and Peat Marwick Mitchell, including all rights to recover and receive from the legal actions all such sums of money and property as shall be awarded and are judged to the plaintiffs in any such action.

14 The respondent in this matter has also made available to the Court Reasons for Judgment by the Full Court of this Court in WAG 149 of 1997, which was an appeal from a sequestration order made against the estates of the applicant and her husband by a Judge of this Court on 26 November 1997. The reasons for judgment state that the estates of the applicant and her husband had been the subject of two earlier sequestration orders on 6 September 1984 and on 6 November 1990. The reasons for judgment set out in some detail some of the litigation in which the applicant and her husband had been involved. I do not propose to set out again the nature of the litigation. It appears that the applicant and her husband have been and continue to be involved in litigation arising out of the preparation of reports by a firm of accountants. The firm was engaged by the Australian Bank in 1983 to carry out a financial investigation in respect of the business conducted by the applicant and her husband. The report and the conduct of the receivership in 1984 and subsequently in 1990 have given rise to litigation including the litigation relied on by the applicant in support of the present application before this Court.

The Applicant's Submission

15 The applicant's husband, Mr E J Bride, made submissions on behalf of the applicant. Mr Bride told the Court that his wife was seeking an order that the monthly contributions of $187.00 be stayed pending the outcome of litigation in which they had been involved for fourteen or fifteen years. Mr Bride stated that despite the lengthy litigation, he could now see "the light at the end of the tunnel" in that the litigation against the mortgagee and receiver had been set down for hearing before Justice Parker in the Supreme Court of Western Australia on 9 November 1999. Mr Bride stated that neither he nor his wife had received legal aid for any of the litigation in which they had been involved.

16 It was submitted by Mr Bride that if an order staying the monthly contributions were not made, this would cause undue hardship and be oppressive.

17 Mr Bride rejected the respondent's contention that this Court did not have jurisdiction to hear an application under s 178 of the Bankruptcy Act. Mr Bride submitted that the provisions of s 178 were quite simple and in their terms allowed a person affected by a decision of a trustee to apply to the Court and that the Court may make such order in the matter as it thinks just and equitable. Mr Bride stated that his wife was affected by the decision of the trustee not to stay the contribution payments. It was submitted that $187.00 per month was such a low contribution that it would not really affect the creditors if the payments were stayed. It was submitted that the trustee was refusing a reasonable application for the staying of the contributions.

18 Mr Bride stated that the trustee's rights of action had been assigned to him and his wife and that there was the potential that a major benefit could flow to the creditors of their 1994 bankrupt estate. In addition, there were enormous potential benefits to the applicant and himself in continuing the litigation. Mr Bride stated that his wife was aggrieved by the decision of the trustee and that it would be just and equitable to make the orders sought.

The Respondent's Submissions

19 In his summary of argument, the respondent sets out the scheme of the Bankruptcy Act 1966 governing assessment, payment and review of contributions by bankrupts as follows:

20 Subsection 139P(1) provides for the liability of a bankrupt to pay the trustee a contribution in respect of a contribution assessment period in certain circumstances.

21 Section 139S provides that the amount of the contribution which a bankrupt is liable to pay is the amount worked out in accordance with the formula set out in the section. The trustee makes the relevant assessments.

22 Section 139T provides by subsection (1) for a bankrupt to apply to the Official Receiver for the making of a determination in respect of a contribution assessment period where he considers that, if required to pay a contribution as assessed, he will suffer hardship for a reason or reasons set out in subsection (2). Subsection (2) specifies five reasons for making such an application and also allows for "any other reason prescribed by the regulations". Regulation 6.16 of the regulations provides for one further prescribed reason, namely, where a circumstance has occurred in relation to the bankrupt or a dependent of the bankrupt that, in the opinion of the Official Receiver, is of an exceptional nature and imposes an excessive financial burden on the bankrupt.

23 Under subsection (6) of s 139T if the Official Receiver is satisfied that the bankrupt will suffer hardship if required to pay the contribution, the Official Receiver may determine that the amount of the contributions as assessed be in effect reduced or eliminated.

24 Subsection (13) of s 139T states:

"An application may be made to the Administrative Appeals Tribunal for the review of a decision by the Official Receiver under this section."

25 Section 139ZA provides for an internal review of an assessment by the Inspector-General, either on the Inspector-General's own initiative, or, if requested to do so by the bankrupt, for reasons that appear to the Inspector-General to be sufficient to justify such a review.

26 Section 139ZF states

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

(a) a decision by a trustee to make an assessment; or

(b) a decision of the Inspector-General on the review of such decision; or

(c) a decision of the Inspector-General refusing a request to review such a decision.

27 The sections of the Bankruptcy Act just referred to are contained in Part 6 of the Act which deals with administration of property.

28 Section 178 is contained in Part 8 of the Act which deals with trustees. Section 178 states:

"If the bankrupt, a creditor or any other person is affected by an act, omission or a decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable."

29 The respondent's submissions state that the threshold difficulty for the applicant, and the Court in considering the application, is that the Act provides a self-contained code governing challenges to a trustee's assessment of a bankrupt's liability to pay a contribution. Relevantly, where hardship is relied upon as the ground for relief, the bankrupt is entitled to apply to the Official Receiver for the making of a determination under subsection 139T(6). Section 139T itself delineates the reasons which can be relied upon as giving rise to the alleged hardship. It is submitted that leaving aside the reason referred to in Regulation 6.16, the prescribed reasons reflect a legislative intention that any review of an assessment on hardship grounds should occur only where a bankrupt is faced with severe deprivation going to the necessities of life (such as medical attention, accommodation), or ability to work (such as child daycare, travel to and from work), or caused by disruption to the bankrupt's family's income earning potential (such as a family member becoming unemployed, ill or injured.)

30 It is submitted that Regulation 6.16 is of a different nature in a number of respects. Where it is relied upon, the Official Receiver is required to reach a view as to whether "a circumstance has occurred" that is "of an exceptional nature" and "imposes an excessive financial burden on the bankrupt". The submissions point out that a bankrupt dissatisfied with the decision of the Official Receiver on the application of Regulation 6.16 has his or her recourse to the Administrative Appeals Tribunal in accordance with subsection 139T(13).

31 The respondent makes the point that the applicant did make application pursuant to subsection 139T(1) to the Official Receiver based on two of the subsection 139T(2) grounds and the Regulation 6.16 ground. The Official Receiver refused the application based on his finding that none of the prescribed grounds for hardship was made out. The applicant has made no application to the Administrative Appeals Tribunal in respect of the Official Receiver's decision.

32 It is submitted that to the extent that the amended application is characterised as an application for a stay of operation of the Official Trustee's assessment for the applicant to make a contribution to her bankrupt estate (pursuant to ss 139P and 139S), there is no statutory basis upon which such a stay can be granted. It is submitted that the application is unassociated with any other action in respect of the assessment, and is contrary to the provisions of the statutory scheme for review of such assessments, which provides for an appeal to the Administrative Appeals Tribunal.

33 The respondent submits that although such an appeal would not have the effect of entitling the bankrupt to an automatic stay (see s 139ZG(2)), an applicant to the Administrative Appeals Tribunal would be entitled in appropriate circumstances to make an application to the Tribunal for a stay.

34 The respondent submits that the applicant may seek to characterise the amended application as an application for review of the Official Trustee's determination under subsection 139ZG(1) that the total contribution of $2,244 be paid by twelve monthly payments of $187.00 commencing 5 March 1999. It is submitted that to argue that the Court's jurisdiction is founded on s 178 of the Act, the "act, omission or decision of the trustee" being the trustee's determination of the amounts and times for payment of the contribution instalments, would be tantamount to the case for the applicant being "pulled up by the boot straps" in a way which runs contrary to statutory interpretation principles.

35 It was submitted that although it might be difficult for the respondent to argue that the trustee's determination pursuant to subsection 139ZG(1) cannot amount to an "act" or "decision" on a literal interpretation of s 178, his determination is properly to be seen as a mere corollary of his primary decision-making function, namely, assessment of the bankrupt for a contribution pursuant to ss 139P and 139S. It is submitted that to ascribe the subsection 139ZG(1) "decision" with a completely independent operation, the exercise of which is amenable to the supervisory jurisdiction of the Court pursuant to s 178 of the Act, would be wholly artificial and contrary to the clear legislative intention underlying the statutory scheme governing assessment, payment and review of contributions by bankrupts as described. It is submitted that to do so would offend against the recognised principle that an Act should be read as a whole, and individual sections not as if they were divorced from the context, but as a part of the whole Act. Further, such a construction of s 178 would offend the intrinsic aids to statutory interpretation expressum facit cessare tacitum and generalia specialibus non derogant.

36 The respondent further submits that if the Court is of the view that it does have jurisdiction under s 178, it should not exercise its discretion in the applicant's favour. It is submitted that the applicant must point to some benefit that would or might accrue to her bankrupt estate, which would flow from the moratorium on her contributions. It is submitted that she purports to do so in her affidavit and elsewhere by reference to the proceeds of the litigation flowing back to creditors. It is stated that this will not occur, however, in the case of at least three actions which the evidence indicates have been assigned out of the bankrupt estate.

37 Further, it is submitted that the interests of the general body of creditors should not be compromised by the applicant's resort to litigation the prospects of which are, at best, dubious.

38 I put to counsel for the respondent that the intention of the legislature could be looked at in a different way: namely, that it is intended that this Court exercise a supervisory function over and above the specific powers given to trustees and other bodies such as the Administrative Appeals Tribunal. Mr Carey's response was that the highly regulated scheme set out in the Act regarding assessment of contributions cannot be ignored, and that the statutory intention can only be gleaned by looking at the whole context of s 178.

Application of the Law

39 Although s 178 of the Act has been interpreted on several occasions, I have not managed to locate any prior decisions on the relationship between s 178 and s 139T, and none have been cited to me.

40 In the case of Re Wheeler; Ex parte Wheeler v Halse [1994] FCA 1348; (1994) 54 FCR 166, Lee J looked at the provisions of s 178 in relation to the decision of the applicant's trustee in bankruptcy to refuse to return the applicant's passport. The trustee had not considered whether the applicant's proposed trip overseas would improve his prospects of earning income. His Honour referred to the decision of Poletti v Commissioner of Taxation (1994) 52 FCR 154 where the Full Court of the Federal Court dealt with the nature of an "appeal" to the Court under s 14V(1) of the Taxation Administration Act 1953. The Full Court in that case concluded that it was ultimately a matter of eliciting the intention of the legislature and continued at pages 156-157:

"This is particularly so in the case of appeals to federal courts or state courts exercising federal jurisdiction from the decisions of officers of the Commonwealth where the rights of appeal are conferred by federal statutes. Appeals from decisions of Commonwealth officers or federal administrative tribunals, though called appeals, are not appeals in the strict sense. The right of "appeal" is to a court exercising the judicial power of the Commonwealth, for it is the first occasion on which a court is seized with jurisdiction to consider a matter after it has been dealt with by administrative bodies. ...

There is a fundamental distinction between an appeal to a court from the decision of an administrative body, which may necessarily include a re-hearing, frequently de novo, and an appeal to a federal court or a state or territory court exercising federal jurisdiction, in each case exercising the judicial power of the Commonwealth under Chapter III of the Constitution. ...The reason is, of course, that federal courts or other courts exercising federal jurisdiction exercise only the judicial power of the Commonwealth, and do not act administratively or exercise administrative or executive powers by, for example, substituting their own discretion for the discretion of the original decision maker. This distinction must be kept sharply in mind in this case because it argues powerfully against the appeal from the Commissioner's order under s 14S(1) of the Act being a rehearing de novo."

41 Lee J in Wheeler noted that the Taxation Administration Act specifically provided in s 14V(2), to which the Full Court gave considerable weight, that s 14V had effect subject to Ch III of the Constitution. His Honour noted that s 178 was in Part VII of the Act entitled "Trustees" and Division 4 of Part VII of the Act is headed "Control Over Trustees". His Honour then stated (at pp 168-169)

"It may be concluded that s 178 is the means by which the bankrupt, a creditor or person affected by the trustee's conduct in administering the estate may challenge the trustee's exercise of his powers.

In the absence of any other indication as to the nature of the application to be made under s 178, that section should be construed with the observations of the Full Court in Poletti firmly in mind.

As was recognised in Poletti the Federal Court exercises federal jurisdiction pursuant to s 71 of the Constitution. The Court can only exercise the judicial power of the Commonwealth and powers incidental thereto. The Court cannot be asked by application to perform the administrative functions of a trustee administering an estate in bankruptcy. The Court, by a grant of jurisdiction exercisable as original jurisdiction, may hear an application, sometimes described as an `appeal', from non-judicial or administrative bodies. The exercise of that jurisdiction may entail orders of a supervisory character insofar as the determination of questions of law raised by the application require those orders to be made but the Court cannot be asked, by mere application, to stand in the shoes of an administrative body or administrator and exercise the powers of that body in its stead. The Court may only exercise such a power ancillary to the exercise of judicial power."

42 His Honour went on to state that the use of the word "affected" rather than "aggrieved" indicated that Parliament intended to enlarge the supervisory jurisdiction conferred on the Court with a regard to the exercise of powers by a trustee. His Honour stated at p 169-170 that:

"The discretion of the Court to make orders thought to be just and equitable depends upon the Court's determination of the justiciable issue raised in the application."

43 His Honour referred to the case of McGoldrick v Official Trustee in Bankruptcy [1993] FCA 636; (1993) 47 FCR 547 in which the Full Court stated that s 178 entitles a person affected to seek review by the Court of the trustee's decision. Lee J concluded in Wheeler that the applicant must show a ground on which the trustee's administration of the affairs of the bankrupt is to be reviewed.

44 Accordingly, the respondent in the present case is correct in his submissions to the extent that this Court does not have jurisdiction to stand in the shoes of the trustee or the Administrative Appeals Tribunal and exercise the powers of the trustee or the Tribunal by way of hearing the matter de novo. To the extent that this is what the applicant is asking this Court to do, it does not have jurisdiction. The legislative scheme of the Act is such that an application may be made to the Administrative Appeals Tribunal for a review of the decision by the Official Receiver under s 139(2). The applicant has chosen not to pursue an application for a review under that section and has instead applied to this Court for an order under s 178.

45 To the extent that the respondent argues that this Court has no jurisdiction to hear and determine any application under s 178 when the application relates to a decision assessing the contributions to be paid by a bankrupt, the submission of the respondent is wrong. This Court does have jurisdiction to hear such an application. However, the Court may only exercise its powers under s 178 ancillary to the exercise of judicial power.

46 The question in this case is therefore whether the applicant has shown a ground on which the decision of the respondent is to be reviewed. The applicant argues that the refusal of a stay of contributions results in undue hardship and is oppressive. In making her application, the applicant relies substantially on the same material as was placed before the respondent when the original decision was made. There is nothing in the material before me to indicate that the respondent erred in any way in arriving at the decision to refuse to stay the payment of contributions pending the outcome of the litigation in which the applicant and her husband are involved. All of the material before me indicates that the respondent properly addressed himself as to the issues to be decided and the material upon which the decision should be made.

47 In the absence of any error on the part of the respondent, I must look at whether, on the basis of all the material now before me, there is ground for finding that it would be just and equitable to make the orders sought. I am not persuaded, after reviewing of all of the circumstances of this case as already outlined earlier on in these reasons for judgment, that there is sufficient ground on which the orders should be made. The application is therefore dismissed.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of Judicial Registrar Boon.

Associate:

Dated: 3 November 1999

Mr E J Bride appeared for the Applicant:
Counsel for the Respondent:	Mr T Carey
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	19 October 1999
Date of Judgment:	3 November 1999