Francis and Inspector-General in Bankruptcy [2021] AATA 644 (22 March 2021)

Last Updated: 26 March 2021

Francis and Inspector-General in Bankruptcy [2021] AATA 644 (22 March 2021)

Division: GENERAL DIVISION

File Number: 2014/3965

Re: Louise Francis

APPLICANT

And Inspector-General in Bankruptcy

RESPONDENT

DECISION

Tribunal: The Hon. Matthew Groom, Senior Member

Date: 22 March 2021

Place: Melbourne

The application for review is dismissed pursuant to section 42B(1)(a) of the Administrative Appeals Tribunal Act 1975 (Cth).

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The Hon. Matthew Groom, Senior Member

CATCHWORDS

BANKRUPTCY – annulment of bankruptcy – review by Tribunal of decision of Inspector-General in Bankruptcy of contribution assessment – all outstanding debts met – Trustees released – consideration of difference between annulment and discharge of bankruptcy – application dismissed under section 42B of the Administrative Appeals Tribunal Act 1975 (Cth)

PRACTICE AND PROCEDURE – bankruptcy – annulment of bankruptcy – decision sought by the applicant no longer of any practical effect and serves no other legitimate purpose – application has become frivolous and vexatious – application dismissed under section 42B of the Administrative Appeals Tribunal Act 1975 (Cth)

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

Bankruptcy Act 1966 (Cth)

CASES

Currey and Australian Community Pharmacy Authority, Re [2007] AATA 1963

Farnan and Inspector-General in Bankruptcy, Re [2007] AATA 1199

Marnotta Pty Ltd and Secretary, Department of Health and Ageing, Re [2004] AATA 326; (2004) 82 ALD 514

Stenhouse and Secretary, Department of Education, Employment and Workplace Relations [2012] AATA 57

Williams and Australian Electoral Commission, Re [1995] AATA 160; (1995) 38 ALD 366

REASONS FOR DECISION

The Hon. Matthew Groom, Senior Member


22 March 2021

Introduction

1. This matter arises out of the administration of the applicant’s former bankrupt estate.
2. The present issue before the Tribunal is consideration of an application to dismiss in accordance with sections 42B(1)(a) or (c) of the Administrative Appeals Tribunal Act 1975 (Cth) (the “AAT Act”) brought by the respondent on the basis that, by reason of the applicant’s bankruptcy having come to an end, the application has become futile.

Background

3. The broader history to this matter is significant. It has involved extensive litigation over a number of years. The litigation has included a significant number of applications before the Administrative Appeals Tribunal seeking a review of various decisions relating to the applicant’s bankruptcy. The present application is one of those matters. The essential background facts are as follows:

(a) On 25 July 2011, the applicant became bankrupt pursuant to a sequestration order. Mr Gess Rambaldi and Mr Andrew Yeo (the “Trustees”) were appointed trustees of the applicant’s bankrupt estate. The applicant subsequently sought to challenge the effect of the sequestration order through the Federal Court and the High Court but was unsuccessful. The debt that gave rise to the sequestration order had itself arisen out of earlier litigation in which the applicant had been involved.

(b) The applicant lodged her Statement of Affairs with the Trustees on 15 April 2013.

(c) On 28 April 2014, the Trustees issued the applicant with a notice of contribution assessment requiring her to make payments to her bankrupt estate under section 139P of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”). Pursuant to the notice the applicant was required to pay the following amounts to her bankrupt estate:

(i) $35,775.71 in respect of the contribution assessment period from 25 July 2011 to 24 July 2012 (“CAP 1”);

(ii) $78,189.23 in respect of the contribution assessment period from 25 July 2012 to 24 July 2013 (“CAP 2”); and

(iii) $36,220.71 in respect of the contribution assessment period from 25 July 2013 to 24 July 2014 (“CAP 3”).

(d) On 29 April 2014, the applicant requested the respondent review the Trustees’ decision under section 139ZA of the Act. On 30 June 2014, a delegate of the respondent wrote to the applicant advising that they had decided to set aside the Trustees’ assessment and to make fresh assessments under section 139ZD of the Bankruptcy Act. The fresh assessments were as follows:

(i) $29,882.60 in respect of CAP 1;

(ii) $70,784.43 in respect of CAP 2; and

(iii) $18,468.30 in respect of CAP 3.

(e) On 28 July 2014, the applicant sought review of the respondent’s decision before the Administrative Appeals Tribunal pursuant to section 139ZF of the Bankruptcy Act.

(f) Separate to the sequence of events relating to the contribution assessments, both the applicant and the Trustees were involved in a series of other legal proceedings relating to the applicant’s bankruptcy. On 8 January 2013, the applicant commenced proceedings in the Federal Court seeking an annulment of her bankrupt estate. That application was dismissed. During the course of 2013 various attempts were made by the Trustees to secure a sale of a property of the applicant. There was a sequence of further legal proceedings relating to that sale.

(g) On 16 November 2015, the applicant’s mother passed away and the applicant became a beneficiary of her will. Probate was granted in respect of the will and the applicant’s brother was appointed as executor. Again, there were a number of legal proceedings commenced in relation to the deceased estate. The deceased estate included various properties and other assets.

(h) During the course of 2017 and following, the applicant engaged in various other legal proceedings seeking to challenge the Trustees’ remuneration.

(i) On 16 June 2017, the Trustees received $850,000 from the deceased estate. Following this the Trustees wrote to the applicant notifying the applicant of an estimate of the funds required to pay all outstanding debts and annul the bankruptcy. The Trustees subsequently engaged in negotiation with the applicant’s brother, as executor of the deceased estate, for this purpose. A further dispute arose in respect of the sale of one of the properties. The Trustees subsequently applied to the Federal Circuit Court for directions. On 1 October 2018, His Honour Judge McNab made orders that the Trustees were acting reasonably in giving consent for the sale of one of the properties.

(j) The property the subject of those orders was subsequently sold and an amount from that sale was paid to the Trustees for the purpose of meeting all outstanding debts and costs in the applicant’s bankruptcy. The applicant’s bankruptcy was then annulled.

4. Following annulment of the bankruptcy the respondent made an application to have this matter dismissed pursuant to sections 42B(1)(a) or (c) of the AAT Act on the basis that the bankruptcy was now at an end and that a review of the decision relating to the contributions assessment was therefore obsolete and that, as a consequence, the application lacked any practical effect and was futile.
5. The applicant continued to resist the dismissal of the proceedings on the basis of a concern she had that the bankruptcy could in some form be resurrected and a future claim in respect of the contribution assessments be made against her. In addition, the applicant expressed a frustration that errors in respect of her bankruptcy remained on the record, and because she believed the errors she claims exists in respect of the contribution assessments could in some manner be used against her in respect of a dispute she is currently engaged in with the Australian Taxation Office (“ATO”) in relation to her tax affairs. That dispute is not presently before this Tribunal.
6. An interlocutory hearing was conducted on 4 September 2020 to consider the matter. Following the hearing the Tribunal invited the respondent to provide further submissions in respect of the legal effect of the annulment and for the applicant to provide submissions in reply. The respondent did so in writing on 9 September 2020. The applicant sought a number of extensions of time for the provision of her reply. The applicant subsequently provided the Tribunal with what were described as “brief submissions” on 7 November 2020 but requested further time to provide more detailed submissions due to personal health issues and the death of her father. Given the applicant’s difficult personal circumstances the Tribunal agreed to a further extension up to 18 December 2020 but advised the applicant that no further extensions would be granted.
7. In his submissions the respondent contends that following the payment of all outstanding debts and costs associated with the bankruptcy the applicant’s bankruptcy was annulled with effect from 14 August 2020. The respondent contends that the legal effect of the annulment is that the bankruptcy has come to an end. The respondent contends that, as a consequence the Trustees no longer hold office as trustees of the bankrupt estate and that there is no legal mechanism in the Bankruptcy Act for the applicant’s bankruptcy to be revived and that therefore the applicant has no residual liability to pay contribution assessments. The respondent argues that, as a consequence, the applicant’s application to have the contribution assessments reviewed is of no practical effect and is therefore futile and should be dismissed in accordance with sections 42B(1)(a) or (c) of the AAT Act.
8. In her submissions the applicant contended that the application does continue to have practical effect and is therefore not futile and should not be dismissed. The applicant has expressed an ongoing concern that it may be possible in some way for the bankruptcy to be revived and that at some point in the future she could once again become liable to a future recovery of the contribution assessments. Further, the applicant claims that the application continues to have practical effect because errors were made in the contribution assessment process, and more broadly in her bankruptcy, that are wrong and need to be corrected. The applicant also expressed a concern that the errors in respect of the contribution assessments could be relied on by the ATO in a separate dispute she has underway with the ATO in respect of her tax matters.

Relevant law

9. Section 42B(1) of the AAT Act provides that the Tribunal may dismiss an application for the review of a decision, at any stage of the proceeding, if the Tribunal is satisfied that the application:

(a) is frivolous, vexatious, misconceived or lacking in substance; or

(b) has no reasonable prospect of success; or

(c) is otherwise an abuse of the process of the Tribunal.

10. A number of earlier Tribunal decisions have considered the purpose and scope of section 42B(1) of the AAT Act including, more specifically, section 42B(1)(a) where an application is claimed to be frivolous, vexatious, misconceived or lacking in substance. It is clear from the case law that the power should be exercised cautiously and if the application can continue to serve a legitimate purpose then the application should not be dismissed^[1]. However, if the application ceases to have any practical benefit, or is primarily focused on achieving a collateral purpose then the application should be dismissed^[2].
11. In Re Williams and Australian Electoral Commission [1995] AATA 160; (1995) 38 ALD 366 it was acknowledged that an application that commenced with a legitimate purpose can, through a change of circumstances, cease at some point to retain that purpose. In that case the Tribunal found:

The interest which gave the applicant standing to commence the proceedings has long since ceased to exist. He has no legitimate interest in pursuing them further. Accordingly, in our opinion, while the proceedings were not instituted vexatiously, they have become vexatious.

12. In Re Farnan and Inspector-General in Bankruptcy [2007] AATA 1199 Deputy President Jarvis considered the application of section 42B(1)(a) specifically in the context of a bankruptcy matter. In that case the discharge of the applicant’s bankruptcy had been delayed because the trustee had lodged a notice of objection to the discharge. The Inspector-General subsequently made a decision to affirm the action of the trustee. The applicant applied to the AAT for a review of the Inspector-General’s decision. The trustee subsequently withdrew the notice of objection with the effect that the applicant’s bankruptcy was discharged. Despite this the applicant sought to continue with the application for review of the Inspector-General’s decision because he wished to demonstrate that the decision had been wrongly taken. The respondent, which was the Inspector-General, sought dismissal under section 42B(1) of the AAT Act on the basis that the application had become frivolous or vexatious, claiming that no purpose would be served in continuing with the review. The Tribunal dismissed the application on the basis that as the applicant had since become discharged from the bankruptcy there would no longer be any utility in reviewing the decision of the Inspector-General. The Tribunal concluded:

Mr Farnan has already been discharged from bankruptcy by virtue of s 149A(3)(b), because the trustee has previously withdrawn his objection. Any decision by this tribunal would accordingly be of no practical utility, thus also enlivening the discretion conferred on the tribunal by s42B(1) of the AAT Act to dismiss the application for review.

Consideration

13. The Tribunal is satisfied that the applicant’s bankruptcy has been annulled and is now at an end. The annulment has been effected pursuant to section 153A of the Bankruptcy Act as a consequence of all debts and costs having been paid in full. This is confirmed by the National Personal Insolvency Index extract dated 22 August 2020 included in the Tribunal materials. The extract describes the applicant’s bankruptcy as having been annulled pursuant to section 153A of the Bankruptcy Act as a consequence of “PAYMENT IN FULL”. The extract states that the applicant is no longer a bankrupt “under this administration” and states that the date of the annulment is 14 August 2020.
14. In addition, the Tribunal is also satisfied that the Trustees’ office has come to an end and therefore there is no Trustee in place to enforce a contribution assessment either now or at any time the future. This is consistent with the orders of Judge McNab of 3 June 2020 where he ordered that

upon payment of ‘all the bankrupt’s debts’ (as defined in s 153A of the Bankruptcy Act 1966 (Cth) (‘the Act’), including trustees remuneration and expenses and interest on interest bearing debts, the trustees are released from the trusteeship of the bankrupt estate of Louise Ellen Francis pursuant to section 183 of the Act upon the giving of the certificate save that the release shall not prevent the review of the remuneration of the trustees.

15. The Tribunal accepts that the orders were made self-executing upon the payment of all the applicant’s debts. The Tribunal is satisfied on the basis of the recording of the annulment of the bankruptcy in the National Personal Insolvency Index extract referred to above, that all of the applicant’s debts pursuant to the bankruptcy have been paid in full and that the Trustees have been released pursuant to section 183 of the Bankruptcy Act consistent with Judge McNab’s order.
16. The Tribunal accepts the respondent’s contention that there is no mechanism under the Bankruptcy Act for the applicant’s previous bankruptcy to be revived.
17. In this respect there is an important distinction to be made between a bankruptcy brought to an end as a consequence of an annulment pursuant to section 153A of the Bankruptcy Act, as is the case with the applicant, and the effect of a discharge of a bankrupt pursuant to section 153(2)(aa) of the Bankruptcy Act where the discharge has been affected pursuant to section 149 of the Bankruptcy Act.
18. In respect of the latter, the Bankruptcy Act includes a provision which renders a former bankrupt still potentially liable to pay an income contribution following the discharge of their bankruptcy. Section 139R of the Bankruptcy Act provides for exactly this scenario. However, in the case of an annulment pursuant to section 153A there is no equivalent provision to section 139R. Having carefully reviewed the balance of the legislative scheme the Tribunal is satisfied that there is no provision consistent with section 139R in respect of an annulment pursuant to section 153A. The Tribunal accepts the respondent’s contention that had the parliament intended that such a mechanism be available it would have included a specific provision to that effect consistent with section 139R. It did not do so. The Tribunal is satisfied that a liability to meet an outstanding contribution assessment is only available in respect of a person who is either a bankrupt or a discharged bankrupt but not in respect of a person whose bankruptcy has been brought to an end as a consequence of being annulled.
19. For these reasons, the Tribunal is satisfied that there is no residual risk of the applicant becoming liable in respect of a contribution assessment arising from her former bankruptcy at any time in the future.
20. Further, the Tribunal is satisfied that the central purpose in seeking to review the earlier decisions of the respondent in respect of the contribution assessment arising from the applicant’s former bankruptcy, which is to ensure that those assessments were correct and that the applicant was not liable to contribute amounts that were excessive, has now come to an end. There is no decision within the jurisdiction of this Tribunal that could provide the applicant with any practical benefit in that sense as those earlier decisions of the respondent are now redundant and of no legal consequence whatsoever.
21. The Tribunal has also had regard to the applicant’s concern regarding errors she claims to exist on the record in relation to earlier contribution assessments that she considers to be detrimental to her dealings with the ATO. The Tribunal understands the applicant’s position to be that she remains concerned that the ATO could in some way rely on erroneous information referred to, or relied on, in the contribution assessments. It is difficult to conceive of a circumstance where the ATO might be minded to rely on such information without undertaking its own assessment of it. It would certainly be inadvisable for the ATO to do so given that the contribution assessments continued to be the subject of an unresolved review process right up until the point of the annulment of the applicant’s bankruptcy. In any case, if such a scenario were to emerge then there is no reason of which the Tribunal is aware that would prevent the applicant from raising her objection with the ATO in relation to such matters. This Tribunal is not the forum in which to resolve those issues.
22. In any case, if the applicant’s purpose in seeking to pursue this matter is to correct the record to assist her in relation to another dispute she has concerning her tax affairs then that is a purpose which is clearly collateral to the central purpose of the review before this Tribunal.
23. The Tribunal has formed the same view with respect to the applicant’s other concerns, including her concern regarding the appropriateness of the Trustees’ remuneration and her concern generally that there are factual errors on the record in respect of her bankruptcy which are manifestly wrong and which she wishes to correct. The Tribunal is not satisfied that these broader concerns would in any way justify the Tribunal undertaking what would be essentially an artificial exercise to reconsider the decision under review.
24. For these reasons, the Tribunal is satisfied that the review of the decision sought by the applicant in this present application is no longer of any practical effect and serves no other legitimate purpose and in that sense has become frivolous and vexatious within the meaning of section 42B(1)(a) of the AAT Act and should be dismissed.
25. In reaching this conclusion the Tribunal does not intend to in any way reflect adversely on the applicant herself. In all of her dealings with the Tribunal the applicant has presented as an intelligent person with genuine concerns. The Tribunal has real empathy for the difficult personal circumstances the applicant has had to navigate. The difficulty for the Tribunal is that as matters now stand it can no longer see a legitimate purpose in proceeding with the application. As now Deputy President McCabe noted in Stenhouse and Secretary, Department of Education, Employment and Workplace Relations [2012] AATA 57 at [4]:

The expression “frivolous or vexatious” is often misunderstood. In one sense, the words are unfortunate: an applicant might suppose the Tribunal is not taking his or her complaint seriously if it is described as being “frivolous”. That word has a particular meaning when it is used in the Act. It means the application is futile or pointless, most obviously because the Tribunal is not able to assist the applicant in a meaningful way.

Decision

26. The application for review is dismissed pursuant to section 42B(1)(a) of the Administrative Appeals Tribunal Act 1975 (Cth).

I certify that the preceding 26 (twenty-six) paragraphs are a true copy of the reasons for the decision herein of The Hon. Matthew Groom, Senior Member

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Associate

Dated: 22 March 2021

Date(s) of hearing:	4 September 2020
Applicant:	By telephone
Advocate for the Respondent:	Ms R. Curnow
Solicitors for the Respondent:	Australian Government Solicitor

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^[1] See Re Marnotta Pty Ltd and Secretary, Department of Health and Ageing [2004] AATA 326; (2004) 82 ALD 514.

^[2] See Re Williams and Australian Electoral Commission [1995] AATA 160; (1995) 38 ALD 366 and also Re Currey and Australian Community Pharmacy Authority [2007] AATA 1963.