BANKRUPTCY ACT 1966 - SECT 139ZQ
A
statutory notice issued at the request of a bankruptcy trustee by an
Official Receiver (ITSA) has been set aside as an abuse of process. The
notice – under s 139ZQ - sought to challenge a transfer of $400,000 by
the bankrupt before bankruptcy.
An
initial s 139ZQ notice was issued by ITSA based on material supplied by
the trustee seeking the issue of the notice. Lawyers for the recipient
of the notice then challenged the basis of the claim that the transfer
of the $400,000 was actually void; the trustee then filed a cross-claim
seeking a declaration that the transfer was void. That notice was then
withdrawn and a second s 139ZQ notice was applied for and issued.
Official Receiver Practice Statement “Exercise of the Official Receiver’s Power to Assist Trustees”
(ORPS 7) sets out matters that the Official Receiver should take into
account when issuing notices under the Bankruptcy Act, including s 139ZQ
notices. ITSA’s evidence was that regard was had to ORPS 7 in deciding
to issue the first notice, but not the second.
The Judge referred to important paragraphs in the Practice Statement, that in exercising the discretion to issue a notice,
76. The minimum requirements which the trustee must meet are:
a) detailed description of the transaction which gave the benefit to the person to whom the notice is to be given;
b) detailed description of why this transfer is void; and
c) evidence in support of the trustee’s assertion that the transfer is void.
77. The Official Receiver is not required to adjudicate on whether the transfer is actually void. The Official Receiver’s role is merely to determine that the trustee has provided evidence of a void transfer sufficient to allow the exercise of the discretion to issue a notice. Any determination of whether the transfer is actually void must be made by a Court.
Here, the trustee did not update or amend the material given to ITSA prior to the request for the issuing of the second notice, nor did ITSA have regard to that material which was on the record. The Court acknowledged that the Practice Statement was purely a guide with no legislative force or effect.
The Judge referred to important paragraphs in the Practice Statement, that in exercising the discretion to issue a notice,
76. The minimum requirements which the trustee must meet are:
a) detailed description of the transaction which gave the benefit to the person to whom the notice is to be given;
b) detailed description of why this transfer is void; and
c) evidence in support of the trustee’s assertion that the transfer is void.
77. The Official Receiver is not required to adjudicate on whether the transfer is actually void. The Official Receiver’s role is merely to determine that the trustee has provided evidence of a void transfer sufficient to allow the exercise of the discretion to issue a notice. Any determination of whether the transfer is actually void must be made by a Court.
Here, the trustee did not update or amend the material given to ITSA prior to the request for the issuing of the second notice, nor did ITSA have regard to that material which was on the record. The Court acknowledged that the Practice Statement was purely a guide with no legislative force or effect.
“Even
if the assumption is that the Official Receiver was satisfied that the
material tendered in support of the original notice satisfied [the
requirements in the Practice Note] there had been two intervening events
that clearly placed the Official Receiver, as the administrative
decision maker, on notice that the sufficiency of the original material
was now questioned. That consequently required a Court to adjudicate as
to whether the transfer was actually void".
The
Court said that with the existence of the challenge to the notice and
the trustee's cross-claim, the validity of the material in support of
the original notice had been put in doubt and the issue of the second s
139ZQ notice should have been delayed until the resolution of those
matters by the Court. The Practice Statement is purely a guide with no
legislative force or effect.
The
Court rejected a submission that the Official Receiver had no choice
but to issue the notices. There is a discretion that ITSA must exercise,
based on the material provided by the trustee. And the trustee making
any such application must ensure that ITSA has the relevant and up to
date information: Tsakirakis v Official Receiver & Anor[2013] FCCA 106..
Outcomes
- The Official Receiver has a discretion whether to issue a s 139ZQ notice, indeed most if not all statutory notices. It should be noted that non-compliance with a s 139ZQ notice has criminal consequences - s 139ZT;
- There is also an obligation on a trustee in making an application for a notice to be issued to ensure that ITSA has the relevant and up to date information.
- ITSA's, and ASIC's, practice statements are only guides and have no legislative force but they are nevertheless important guidance both for the regulator and for practitioners.
Commonwealth Consolidated Acts
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Official Receiver may require payment [see Table B]
(1) If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver:
may require the person, by written notice given to the person, to pay to the trustee an amount equal to whichever of the following is applicable:
(c) if:
(ii) the transaction is by way of a contribution to an eligible superannuation plan for the benefit of a person (the beneficiary ) who may or may not be the bankrupt; and
(iii) the beneficiary is a member of the eligible superannuation plan;
whichever is the lesser of the following:
(v) the beneficiary's withdrawal benefit in relation to the eligible superannuation plan;
(2) The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee.
(3) The notice may:
(a) require the amount to be paid at a time or within a period set out in the notice; or
(b) require the amount to be paid at such times, and in such instalments, as are set out in the notice.
(4) After the Official Receiver has given a notice to a person under subsection (1), the Official Receiver may at any time, by a further notice given to the person, revoke or amend the first-mentioned notice.
(5) If the Official Receiver gives a notice under this section, the Official Receiver must send a copy of the notice to the bankrupt and, if a registered trustee is the trustee, to the trustee.
(6) A notice to be given under this section to the Commonwealth, a State or a Territory, or to an authority of the Commonwealth, of a State or of a Territory,
is taken to be duly given if it is given to a person who, by any law,
regulation, appointment or authority, has the function of paying, or in
fact pays, money on behalf of a Department of the Commonwealth, of that
State or of that Territory, or on behalf of the authority, as the case may be.
(7) If a person is required by a notice under this section to pay to the trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the trustee.
(8) An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction.
(9) For the purposes of subparagraph (1)(c)(ii), disregard a benefit
that is payable in the event of the death of a person.
(10) In this section:
"member" of an eligible superannuation plan has the same meaning as in Subdivision B of Division 3.
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