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Tsakirakis v Official Receiver & Anor [2013] FCCA 106 (24 April 2013)

Last Updated: 29 April 2013

FEDERAL CIRCUIT COURT OF AUSTRALIA

TSAKIRAKIS v OFFICIAL RECEIVER & ANOR

[2013] FCCA 106

Catchwords: BANKRUPTCY – Application seeking a review that the decision of the Official Receiver to issue a notice pursuant to s.139ZQ on the grounds that it was an abuse of process – validity of material supporting the s.120/121 claim in question – notice set aside.

Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth), ss.5, 6, 12 Bankruptcy Amendment Act 1991 (Cth) Bankruptcy Act 1966 (Cth), ss.15(5), 30, 120, 121, 139ZQ, 139ZR,139ZS, Conveyancing Act 1919 (NSW), s.37A Income Assessment Act 1936 (Cth), s.218 Taxation Administration Act 1953 (Cth), ss.261, 262, 263, 264, 265 Federal Circuit Court Rules 2001 (Cth), r.11.03

Cases cited: Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd & Anor [2007] NSWCA 57; (2007) 69 NSWLR 374 Finance Facilities Pty Ltd v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106 Flower & Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 Halse as trustee of the property of Payne, a Bankrupt v Norton [1997] FCA 673; (1997) 76 FCR 389 Lin v Official Trustee in Bankruptcy (2001) 187 ALR 220 Norton v Halse (Trustee for the Bankrupt estate of Payne) & Anor (1996) 137 ALR 593 Re Pearson; Ex Parte Wansley (1993) 46 FCR 55 Re Lucera (Bankrupt); Ex Parte Official Receiver v Lucera [1994] FCA 1380; (1994) 53 FCR 329 Re McKee & Anor; ex parte Laroar Holdings Pty Ltd & Ors v Ross (1996) 71 FCR 156 Re McLernon; Ex Parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble & Anor [1995] FCA 1408; (1995) 130 ALR 609 Sutherland v Vale [2007] FMCA 1617 United States Tobacco Co. v Minister for Consumer Affairs & Ors (1988) 83 ALR 79 Vale v Sutherland [2009] HCA 26; (2009) 237 CLR 638 Worrell (as trustee of the estate of Wedgwood) v Power & Power [1993] FCA 551; (1993) 46 FCR 214 Insolvency: Personal and Corporate Law and Practice, 4th ed, Law Book Company

Applicant:

THEODORE TSAKIRAKIS

First Respondent:

OFFICIAL RECEIVER

Second Respondent:

SAMUEL PISCOPO AS TRUSTEE OF THE BANKRUPT ESTATE OF JOANNA TSAKIRAKIS

File Number:

SYG 2507 of 2012

Judgment of:

Judge Lloyd-Jones

Hearing date:

19 December 2012

Delivered at:

Sydney

Delivered on:

24 April 2013

REPRESENTATION

Counsel for the Applicant:

Mr J. Johnson

Solicitors for the Applicant:

Matthews Folbigg Lawyers

Counsel for the First Respondent:

Mr G. McGrath

Solicitors for the First Respondent:

Lobban McNally Lawyers

Counsel for the Second Respondent:

Mr D. Allen

Solicitors for the Second Respondent:

Proctor & Associates

ORDERS

(1) The s.139ZQ Notice issued to the Applicant by the First Respondent on 11 October 2012 be set aside.

FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY

SYG 2507 of 2012

THEODORE TSAKIRAKIS

Applicant

And

OFFICIAL RECEIVER

First Respondent

SAMUEL PISCOPO AS TRUSTEE OF THE BANKRUPT ESTATE OF JOANNA TSAKIRAKIS

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application in proceedings SYG 2507 of 2012, filed on 2 November 2012, seeking a declaration pursuant to the provisions of s.30 of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”) that the decision of the Official Receiver to issue a notice pursuant to the provisions of s.139ZQ of the Bankruptcy Act dated 11 October 2012 is an abuse of process on the part of the Official Receiver in accordance with his powers under the Bankruptcy Act. Associated orders were also sought. To assist in the understanding of the context of this application a separate application was also launched by Theodore Tsakirakis against the Official Receiver, identified as proceedings SYG 1469 of 2012 filed on 5 July 2012, seeking orders pursuant to s.139ZS of the Bankruptcy Act that a notice issued pursuant to s.139ZQ of the Bankruptcy Act to the Theodore Tsakirakis by the Official Receiver dated 10 August 2011 in respect of the bankrupt estate of Joanna Tsakirakis be set aside. Subsequent to filing of that application a cross-claim was brought in those proceedings by Samuel Piscopo, the Trustee of the bankrupt estate of Joanna Tsakirakis. Counsel for the parties initially indicated to the Court that both matters could be resolved during the same hearing with proceedings SYG 2507 of 2012 being addressed first, followed by proceedings SYG 1469 of 2012. These matters first came before this Court on 26 November 2012 and the following orders were made:
   • These proceedings be listed for hearing, concurrently with proceedings SYG1469/2012 on 5, 6 and 7 December 2012.
2. On 29 November 2012 an interim application was filed on behalf of the Official Receiver seeking the following interim orders:
   • 1. An order that the Applicant file and serve on the Respondent an amended application that:
     • (a) Sets outs out the grounds of the application for an order of review under sections 5, 6 or 7 of the Administrative Decisions (Judicial Review,) Act 1977,
     • (b) States each section of the Bankruptcy Act 1966 or each regulation of the Bankruptcy Regulations under which the applicant seeks an order setting aside the notice dated 11 October 2012 issued by the respondent under section 139ZQ of the Bankruptcy Act 1966.
   • 2. An order that the Applicant file and serve on the Respondent a statement of claim or in the alternative points of claim providing full particulars of:
     • (a) The basis or bases on which the Applicant’s claim/s of abuse of process are made and each matter or circumstance upon which the Applicant will rely in relation to each such basis;
     • (b) The basis or bases on which the Applicant’s claim/s the Respondent’s decision to issue the notice pursuant to section 139ZQ of the Bankruptcy Act 1966 dated 11 October 2012 is to be reviewed pursuant to the provisions of section 5, section 6 and/or section 7 of the Administration Decisions (Judicial Review) Act and each matter or circumstance upon which the Applicant will rely in relation to each such basis;
     • (c) The basis or bases on which the Applicant’s claim/s the notice pursuant to section 139ZQ of the Bankruptcy Act 1966 issued by the Official Receiver and dated 11 October 2012 be set aside is made and each matter or circumstance upon which the Applicant will rely in relation to each such basis.
   • 3. An order pursuant to rule 2.06(1) of the Federal Court of Australia (Bankruptcy) Rules 2006 that the respondent be granted leave to file and serve its response and affidavit in support to the Applicant’s Amended Application and Statement of Claim, or in the alternative Points of Claim.
   • 4. An order the Applicant pay the Respondent’s assessed costs of this application.
   • 5. Such other orders as the Court deems fit.
3. The proceedings next came before the Court on 30 November 2012, where the following orders were made:
   • 1. The Applicant serve the Respondent with:
     • (a) Points of claim providing full particulars of each basis (including each variety of abuse of process alleged) on which the Applicant seeks relief:
       • (i) Under s.30 of the Bankruptcy Act 1966 (Cth);
       • (ii) Ss. 5, 6 and/or 7 of the Administrative Decisions (Judicial Review) Act 1977 (Cth); or
       • (iii) Otherwise.
     • (b) The facts, matters and circumstances on which the Applicant relies in support of each such basis; and
     • (c) All evidence upon which the Applicant proposes to reply and which has not been previously served;
     • By 4.00pm on 4 December 2012.
   • 2. The Respondent either:
     • (a) Serve the Applicant with:
       • (i) A response; and
       • (ii) All evidence upon which the Respondent proposes to rely; or alternatively
     • (b) Notify the Applicant and the Court that the Respondent is unable to meet the case advanced in time;
     • By 4.00pm on 11 December 2012.
   • 3. Both parties are to provide a copy of all documents referred to in these orders to the Chambers of Federal Magistrate Lloyd-Jones by 4.00pm on Tuesday 4 December 2012.
   • 4. The Applicant file and serve their written submissions by 4.00pm on 14 December 2012.
   • 5. The Respondent to file and serve their submissions by 12.00pm on 18 December 2012.
   • 6. The proceedings stand over to 9.30am on 19 December 2012.
   • 7. The listings for 5, 6 and 7 December 2012 be vacated.
4. On 30 November 2012 an amended application was filed in Court in accordance with leave that had been granted.
5. On 10 December 2012, an interlocutory application was filed by the Trustee of the bankrupt estate of Joanna Tsakirakis, seeking the following interim orders:
   • 1. The Trustee of the bankrupt estate of Joanna Tsakirakis be joined as the Second Respondent; and
   • 2. Theodore Tsakirakis pay the costs of this interim application on an indemnity basis.

On 11 December 2012, I made the following orders:

1. The proceedings be adjourned for hearing of the interim application to 2.15pm on Monday 17 December 2012.

6. On 17 December 2012 the hearing of the interim application filed on 10 December 2012 was heard (see below at [7-11]) and the following orders made:
   • 1. The Trustee of the bankrupt estate of Joanna Tsakirakis be joined as Second Respondent to these proceedings.
   • 2. The costs of today be reserved.

THE COURT NOTES THAT:

• 3. The Applicant is to provide the Second Respondent with all the documents in these proceedings by the close of business, today.

Application by Trustee to be joined as Second Respondent

7. On 10 December 2012 the Trustee for the bankrupt estate of Joanna Tsakirakis, Samuel Piscopo (the “Trustee”) filed an interlocutory application seeking to be joined as the second respondent in these proceedings. The matter was listed for hearing on Monday 17 December 2012. Mr Allen moved on the interlocutory application and read the affidavit of Jim Kekatos sworn 7 December 2012, being the only evidence before the Court on the interlocutory application.
8. Mr Allen referred the Court to s.139ZQ of the Bankruptcy Act which permits a notice to be issued, on the application of the trustee, requiring a person to pay to the trustee an amount equal to the money received by the recipient of the notice from the bankrupt. The notice creates a debt payable by the recipient to the trustee. The normal mechanism for setting aside a s.139ZQ notice is found in z.139ZS: Worrell (as trustee of the estate of Wedgwood) v Power & Power [1993] FCA 551; (1993) 46 FCR 214 where the Full Court confirmed that the trustee was a proper party to an application under s.139ZS. However, the application brought in the main proceedings is not an application under s.139ZS, rather s.30. Mr Allen contends that because the Trustee is a proper party under s.139ZS it is also a proper party in an application under s.30. If that conclusion is made there are no grounds for the operation of any discretion. Mr Allen submits that his client is a proper party, ought to be joined, wants to uphold the notice which requires the payment of the debt and has a right to be heard before the legal right in respect of that debt is extinguished.
9. Mr Allen referred the Court to s.12(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the “AD(JR) Act”) which provides a mechanism that a person can be joined to proceedings commenced under that Act and to subsection which (2) sets out that such an order for joinder is made in the Court’s discretion: United States Tobacco Co. v Minister for Consumer Affairs & Ors (1988) 83 ALR 79. In the head note of that decision it notes that the term “interested” and “interest” as contained in ss.5, 6 and 12 of the AD(JR) Act are broad, technical terms going beyond legal, proprietary, financial or other tangible interest or interests necessarily peculiar to the person. Similarly in Re McKee & Anor; ex parte Laroar Holdings Pty Ltd & Ors v Ross (1996) 71 FCR 156 his Honour Spender J applied the same reasoning in relation to a s.139ZS application to an application under the AD(JR) Act and found that a trustee was an interested party, and in that case there was an application under s.77 of the Bankruptcy Act as opposed to an application under s.139ZS.
10. Mr Johnson, appearing for Theodore Tsakirakis, acknowledged that it was conceded that the Trustee was an interested party. However, his client intended to also move under s.15(5) of the Bankruptcy Act to review the decision of the Official Receiver. Mr Johnson objected to the Trustee being joined as a party on the basis the Trustee would not be able to contribute to the argument against the Official Receiver on a review of his decision to issue a s.139ZQ notice. That review of the decision of the Official Reviewer goes to the purpose for which the notice was issued. As there are possible criminal sanctions attached to non-compliance that is the purpose of the review. There is no basis that has been put forward by Mr Allen other than that the Trustee is an interested party to justify his joinder to the proceedings, particularly when there are other proceedings on foot.
11. I acknowledge that the substantive hearing of these proceedings does not involve the conduct of the Trustee nor have they taken steps to sue for the debt that has not been paid under the s.139ZQ notice. The Trustee has pursued the debt by filing a cross-claim seeking relief under ss.120 and 121 of the Bankruptcy. Act. However, they are an interested party and I grant leave for the Trustee to be joined as the second respondent to the main proceedings. This will permit better understanding and management of all the issues in the substantive hearing.

Hearing of Amended Application

Amended Application

12. A further amended application was filed in Court at the hearing on 19 December 2012 with leave of the Court seeking to correct an error that appeared in the amended application filed on 30 November 2012. The final orders sought by the Applicant were as follows:
    • On the grounds stated in the supporting affidavit, the applicant seeks the following relief:
      • 1. A declaration pursuant to the provisions of s. 30 of the Bankruptcy Act 1966 that:
        • (a) The decision of the Official Receiver to issue a Notice pursuant to the provisions of s. 139ZQ of the Bankruptcy Act 1966 dated 11 October 2012, a copy of which is attached to this Application, is an abuse of process on the part of the Official Receiver in accordance with his powers under the Bankruptcy Act 1996.
      • 2. Orders that:
        • (a) The Court review the decision made by the Respondent, acting by his delegate Fraser Thomson, on 11 October 2012 to issue or cause to be issued a notice in accordance with the provisions of s. 139ZQ of the Bankruptcy Act 1966 in respect of a transaction giving rise to a requirement under such Notice requiring the Applicant to pay to the trustee of the property of Joanna Tsakirakis, a bankrupt, an amount of $400,000.00, on the ground that:
          • (i) the delegate on behalf of the Respondent erred in the law in failing to have any or any due regard to the rules of natural justice in connection with the making of the decision as previously acknowledged by that delegate at the time of the revocation of an earlier notice issued pursuant to s. 139ZQ of the Bankruptcy Act 1966 dated 11 August 2011, 5 October 2012;
          • (ii) the delegate on behalf of the Respondent erred in law in failing to have any or any due regard to the existence of the claim made by the trustee of the property of Joanna Tsakirakis, a bankrupt, or the identical subject matter in then existing proceedings in the Federal Magistrate’s Court of Australia, Proceeding No: SYG 1469 of 2012;
          • (iii) the delegate on behalf of the Respondent erred in law in improperly exercising his power conferred under the provisions of s. 139ZQ in circumstances where to the knowledge of the delegate there was an existing claim made by the trustee of the property of Joanna Tsakirakis, a bankrupt, or the identical subject matter in then existing proceedings in the Federal Magistrate’s Court of Australia, Proceeding No: SYG 1469 of 2012;
          • (iv) the delegate on behalf of the Respondent failed to have regard to or take into account in a proper manner the existence of proceedings commenced by the trustee of the property of Joanna Tsakirakis, a bankrupt then existing in the Federal Magistrates Court of Australia, Proceeding No: SYG 1469 of 2012;
          • (v) the delegate on behalf of the Respondent erred in law in failing to have any or any due regard to the fact that the issue of the notice pursuant to s. 139ZQ of the Bankruptcy Act 1966 on 11 October 2012 would be relied upon by the trustee of the property of Joanna Tsakirakis, a bankrupt, to gain an advantage in existing proceedings being prosecuted by him in the Federal Magistrates Court of Australia, Proceeding No: SYG 1469 of 2012 so that:
            • (1) having regard to the rules of natural justice the exercise of discretion by him failed to have regard to a relevant consideration in the exercise of the power, namely the use to which the notice would be put by the trustee of the property of Joanna Tsakirakis, a bankrupt, and the criminal sanctions attaching to the notice;
            • (2) having regard to the previous communication by the delegate to the Applicant on 5 October 2012 of the exercise of discretion to issue such notice was in bad faith;
            • (3) having regard to the previous communication by the delegate to the Applicant on 5 October 2012 of the exercise of discretion to issue such notice constituted an abuse of the power conferred upon the Respondent;
        • (b) The decision of the delegate on behalf of the Respondent made on 12 October 2012 communicated on that day be set aside.
        • (c) The Official Receiver pay the costs of the Applicant, such costs to be assessed on an indemnity basis.
        • (d) Any such further or other order as the Court deems fits.

Evidence

13. The Applicant relied on the following evidence:
    1. The Affidavit of Stephen Mullette sworn 30 October 2012;
    2. Exhibit “A1” – Amended Notice of Cross-Claim;
    100. Exhibit “A2” – The Defence;
    4. Exhibit “A3” – The Amended Defence; and
    5. Exhibit “A4” - Hard copy of the Court Book (made available to the parties in electronic form). This material was obtained from a Notice to Produce issued on behalf of the Applicant.
14. The First Respondent relied on the following evidence:
    1. Affidavit of Fraser Thomson sworn 12 December 2012; and
    2. Exhibit “R1” – Insolvency Trustee Service Australia, Practice Statement, Exercise of Official Receiver’s powers to assist trustees, revised December 2011.
15. The Second Respondent did not call any evidence but provided the Court with a chronology.

Cross-examination of Stephen Mullette

16. In examination-in-chief by Mr Johnson, Mr Stephen Keith Mullette confirmed his full name, that he was a director at Matthews Folbigg Lawyers of Parramatta, was the solicitor for the Applicant in these proceedings and swore an affidavit in support of the application in these proceedings. Mr Mullette was then cross-examined by Mr Allen, the details of which are contained in the transcript of the hearing. Any issues arising from the cross-examination are referred to below identified by the relevant transcript reference.

Cross-examination of Fraser Thomson

17. In examination-in-chief by Mr McGrath, Mr Fraser Thomson confirmed his full name, his title was Business Manager Information Registries of ITSA and he swore an affidavit in these proceedings on 12 December 2012. Mr Thomson was then cross-examined by Mr Johnson, the details of which are contained in the transcript of the hearing. Mr Thomson was briefly re-examined by Mr McGrath. Any issues arising from the cross-examination or re-examination are referred to below identified by the relevant transcript reference.

Points of Claim

18. Orders were made on 30 November 2012 (noted at [3] above) for the Applicant to serve the Respondent with his points of claim. This order was complied with on 5 December 2012, however, that document and the Amended Application contained no specific reference to a claim under s.15(5) of the Bankruptcy Act. Consequently, an amended points of claim was ordered to be filed during the hearing to correct this issue. The contents of the amended points of claim are set out below.
19. The First Respondent filed its points of defence in response to the Applicant’s points of claim on 12 December 2012. The responses are also reproduced below next to the relevant claim.
20. There were a number of typographical errors contained in the amended points of claim which were addressed during the hearing and that have been altered for correctness in the material below.
21. The Applicant’s Amended Points of Claim states:
    • 1. On 24 September 2009 the Official Receiver pursuant to the provisions of s.55 of the Bankruptcy Act 1966 accepted a Debtor’s Petition presented by Joanna Tsakirakis, as a consequence of which Joanna Tsakirakis became an undischarged bankrupt.
      • Defence - admitted.
    • 2. On 24 September 2009 the Official Trustee in Bankruptcy became Trustee of the property of Joanna Tsakirakis, a bankrupt.
      • Defence - admitted.
    • 3. On 28 April 2010 pursuant to the provisions of s.181A of the Bankruptcy Act 1966, Samuel Piscopo became Trustee of the property of Joanna Tsakirakis, a bankrupt.
      • Defence - admitted.
    • Claim for Abuse of Process
    • 4. On 11 August 2011 the Official Receiver acting by Bhawna Sharma, a person nominated as his delegate issued a Notice pursuant to the provisions of s.139ZQ of the Bankruptcy Act 1966 upon the application of Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt (“the First Notice”).
      • Defence - admitted. The Respondent notes that the Applicant had challenged the validity of the delegation.
    • 5. On 14 (sic: [2]) February 2012, the Official Receiver by his officer wrote to Theodore Tsakirakis regarding criminal sanctions attaching to the non compliance with the First Notice dated 11 August 2011 and that if he did not pay the amount the subject of that demand within 14 days thereafter a complaint would then be made to the Commonwealth Director of Public Prosecutions in respect of the offence provided for under s.139ZT of the Bankruptcy Act 1966.
      • Defence - denied.
        • - Paragraph 5 is an inaccurate characterisation of the contents of the letter. The Respondent relies upon the whole of the letter as it was sent in circumstances where the Applicant.
          1. had not complied with the first notice pursuant to s.139ZQ dated 11 August 2011;
          2. had been legally represented since at least 10 November 2011;
          100. had not responded to a letter dated 6 December 2011 from Tim Hancock, Compliance Investigator ITSA, forwarded by registered post to the Applicant;
          4. had not filed an application under s.139ZS to have the first notice set aside;
          5. had not personally or by his solicitors, Matthews Folbigg, responded to ITSA’s letter dated 14 December 2011.
        • - Prior to 2 February 2012 the Official Receiver had considered and rejected the claim by the Applicant that he had repaid the money to or at the direction of his mother.
          6. letter dated 9 December 2011 from Matthews Folbigg to ITSA;
          7. letter dated 14 December 2011 from ITSA to Matthews Folbigg;
          8. the lack of response by Matthews Folbigg to ITSA’s letter dated 14 December 2012.
        • ITSA letter dated 2 February 2012 is in evidence Exhibit A4, Tab 4, page 49.

In these proceedings there is no dispute about the first notice as it was subsequently revocated.

6. On 5 July 2012 Theodore Tsakirakis made application to the Federal Magistrates Court of Australia pursuant to s.139ZS of the Bankruptcy Act 1966 to set aside the Notice referred to in paragraph 4 above.

• Particulars - Proceeding No: SYG 1469 of 2012.
  • Defence - admitted. The Respondent filed a submitting appearance in these proceedings on or about 19 July 2012.

7. On 6 September 2012 Theodore Tsakirakis served upon the Official Receiver a Notice to Produce documents including documents evidencing the delegation held by Bhawna Sharma as at the date of the issue of the Notice under s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011.

• Particulars - Affidavit Stephen Mullette 24 October 2012 annexure “A” pages 3-4 in Proceeding No: SYG 1469 of 2012.
• Defence - admitted.

8. On 14 September 2011 the Official Receiver provided to the solicitors for Theodore Tsakirakis a copy of a delegation in answer to the Notice to Produce referred to in paragraph 6 above.

• Particulars - Affidavit Stephen Mullette 24 October 2012 annexure “B” pages 5-17.
• Defence - admitted.

9. On 24 September 2012 the solicitors acting on behalf of Theodore Tsakirakis wrote to the Official Receiver in respect of the validity of the execution of the Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011.

• Particulars - Affidavit Stephen Mullette 24 October 2012 annexures “C” pages 18-19 and “D” page 20.
• Defence - admitted.

10. On 5 October 2012 the Official Receiver acting by his delegate, Fraser Thompson, and as the Acting Business Manager - Information and Registries:

• (a) Confirmed that Samuel Piscopo as Trustee of the property of Joanna Tsakirakis had filed a Cross-Claim against Theodore Tsakirakis seeing to declaratory relief under the provisions of s.120 and/or s.121 of the Bankruptcy Act 1966.
• (b) Did not admit that the execution by Bhawna Sharma of the Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011 was invalid and ineffective to the extent that it was signed by her as a delegate.
• (c) Asserted that the Official Receiver was conscious that the prosecution of the Cross-Claim by the Trustee against Theodore Tsakirakis was not dependent upon the continuance of the application brought by Theodore Tsakirakis in Proceeding No. SYG 1469 of 2012 against the Official Trustee in Bankruptcy.
• (d) Asserted that the Official Receiver saw no utility incurring costs in defending the validity of the Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011 when the substantive issue between Theodore Tsakirakis and the Trustee would be determined under the Trustee’s Cross-Claim.
• (e) Enclosed a Notice of Revocation pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 5 October 2012.

Particulars - Affidavit of Stephen Mullette 24 October 2012 annexure “D” pages 20-36.

• Defence - not admitted. The Respondent relies on the entirety of the letter of 5 October 2012 part of which is particularised above.

11. On 5 October 2012 the Official Receiver acting by his delegate, Fraser Thompson, issued a Notice of Revocation pursuant to s.139ZQ of the Bankruptcy Act 1966 addressed to Theo Tsakirakis in respect of the Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011.

• Particulars - Affidavit of Stephen Mullette 24 October 2012 annexure “D” pages 23-36.
• Defence - admitted.

12. Acting upon and following the revocation referred to in paragraph 11 above Theodore Tsakirakis and the Official Receiver settled the proceedings as between themselves in Proceeding No: SYG 1469 of 2012 upon the basis that those proceedings be dismissed and there be no order as to costs.

• Defence - The Respondent does not know and cannot admit what the motive of Theodore Tsakirakis was in agreeing to settle proceedings SYG 1469 of 2012 as against the Official Receiver.

13. Acting in relation to the exercise of the discretion conferred upon the Official Receiver under the provisions of s.139ZQ of the Bankruptcy Act 1966 in the circumstances of the application for issue of a further notice, the Official Receiver by his delegate, Fraser Thomson, was obliged to have regard to and act in accordance with the principles of fair play and good faith in the administration of justice described as the “model litigant” policy.

• Particulars - LVR (WA) Pty Ltd and Anor v Administrative Appeals Tribunal and Anor (2012) 289 ALR 244; [2012] FCAFC 90 at [42] and the legislation and rules considered in that paragraph.
  • Defence - admitted. The Respondent says that it did so act.

14. As at 11 October 2012 the Official Receiver, by his delegate, Fraser Thomson:

• (a) was aware of the potential criminal sanctions attaching to the notice when issued under the provisions of s.139ZT of the Bankruptcy Act 1966;

Defence - admitted.

• (b) was aware of the intention, on the part of Samuel Piscopo as trustee of the property of Joanna Tsakirakis, a bankrupt, to use the existence of the notice in support of settlement discussions which were then being undertaken in relation to Proceeding No: SYG 1469 of 2012;

Defence - admitted.

• (c) was aware that it was the intention on the part of Samuel Piscopo as trustee of the property of Joanna Tsakirakis, a bankrupt, to use the notice as part of the cross claim then on foot in relation to Proceeding No: SYG 1469 of 2012; and

Defence - admitted.

• (d) was aware or ought to have been aware that Samuel Piscopo as trustee of the property of Joanna Tsakirakis, a bankrupt, would rely upon the non-compliance with the notice in accordance with its terms for the purposes of a criminal offence, namely the offence existing under the provisions of s.139ZT of the Bankruptcy Act 1966.

Particulars

• (i) letter dated 2 February 2012 from the Insolvency and Trustee Service Australia to Theodore Tsakirakis: Affidavit Theodore Tsakirakis 29 June 2012 page 78 in Proceeding No: SYG 1469 of 2012.
• (ii) email dated 5 October 2012 at 4:36 PM from Fraser Thomson to Samuel Piscopo: produced by Official Receiver under Notice to Produce on 4 December 2012.
• (iii) the intention on the part of Samuel Piscopo as the trustee of the property of Joanna Tsakirakis, a bankrupt, to allege “fraud” in or about the cross claim maintained by him: letter 9 October 2012 Matthews Folbigg to Proctor & Associates: produced by Official Receiver under Notice to Produce on 4 December 2012.
• (iv) email dated 9 October 2012 at 5:40 PM from Samuel Piscopo to Fraser Thomson: produced by Official Receiver under Notice to Produce on 4 December 2012.
• (v) email dated 9 October 2012 at 5:45 PM from Samuel Piscopo to Fraser Thomson: produced by Official Receiver under Notice to Produce on 4 December 2012.
• (vi) Decision Record issued by Fraser Thomson, on 10 October 2012 in relation to the issue of the new notice: produced by Official Receiver under Notice to Produce on 4 December 2012.

Defence - does not understand and does not admit paragraph 14(d).

15. As at 5 October 2012 the Official Receiver by his delegate, Fraser Thompson, knew or ought to have known that:

(a) Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, had filed a Cross-Claim in proceeding no. SYG 1469 of 2012 against Theodore Tsakirakis seeking relief under the provisions of ss.120 and 121 of the Bankruptcy Act 1966 upon the same basis as set out in the Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 issued 11 August 2011.
Defence - not admitted. The Applicant submits that Mr Thomson was aware that he had received a draft cross-claim and the Official Receiver was a party to those proceedings.
(b) The revocation of the First Notice in the circumstances would have the effect of extinguishing the earlier Notice dated 11 August 2011.
Defence - admitted on the basis that extinguishing has the same meaning as revocation.
(c) On 14 February 2012 an Officer of the Insolvency and Trustee Service Australia writing on behalf of the Official Receiver had written advising Theodore Tsakirakis as to the criminal sanctions attaching to non compliance with the First Notice dated 11 August 2011 and that if he did not pay the amount the subject of that demand within 14 days thereafter a complaint would be then made to the Commonwealth Director of Public Prosecutions in respect of the offence provided for under s.139ZT of the Bankruptcy Act 1966.

Defence - denied.

(d) Theodore Tsakirakis acting upon the revocation referred to in paragraph (c) above of the First Notice under s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011 would agree to the dismissal of the then existing proceedings, Proceeding No. SYG 1469 of 2012 upon the basis that there be no order as to costs between himself and the Official Receiver.
Defence - denied. Theodore Tsakirakis had full knowledge that the second s.139ZQ notice had been issued and the Applicant had the option of proceeding to settle the matter or not.
(e) Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, in the Cross-Claim filed by him in Proceeding No. SYG 1469 of 2012 sought to rely upon the existence and non-compliance with the First Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 11 August 2011.

Particulars - Theodore Tsakirakis repeats the pleading and particulars referred to in respect of paragraph 14 above.

Defence - admitted.

• Mr Johnson submits that the Official Receiver, by his delegate, was aware of the intention to rely upon the earlier notice.

16. On 11 October 2012 the Official Receiver, acting by his delegate, Fraser Thompson, at the request of Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, issued a further Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 (“the Second Notice”).

Particulars - Affidavit of Stephen Mullette 30 October 2012 annexure “B” pages 15-26.
Defence - admitted.

17. In issuing the Second Notice, the Official Receiver by his delegate, Fraser Thomson, in exercising the discretion conferred under the provisions of s.139ZQ of the Bankruptcy Act 1966 acted in a manner contrary to the powers conferred upon him to issue for the purposes of it being an illegitimate and or improper purpose, to gain an advantage in the then existing proceedings, Proceeding No: SYG 1469 of 2012, and for the advantage of Samuel Piscopo as trustee of the property of Joanna Tsakirakis, a bankrupt, in those proceedings.

Particulars

• (i) Theodore Tsakirakis repeats the particulars referred to in respect of paragraph 13 above.
• (ii) Practice Statement: Exercise of Official Receiver’s powers to assist trustee ed December 2011 — ORPS 7 para 75-84, 122, 128, 129.

Defence - denied.

• Mr Johnson submits that on the information available to the delegate, Mr Thomson, the issue of this new notice would bring improper pressure to bear of Mr Tsakirakis at the behest of the Trustee, particularly in light of the policy statement. The role of the Official Receiver is a vetting process so that the procedures for administrative notices, which give rise to criminal sanctions can be monitored.

18. The Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 referred to in paragraph 16 above was in the same terms, mutatis mutandis as the First Notice issued on 11 August 2011 except that the time for payment was provided for as being 14 November 2012 rather than 28 days from the date of service of the Notice upon Theodore Tsakirakis.

Particulars - Affidavit of Stephen Mullette 30 October 2012 annexure “B” pages 15-26.
Defence - admitted.

19. As at 11 October 2012 the Official Receiver by his delegate, Fraser Thompson, knew or ought to have known:

(a) Each of the matters referred to in paragraphs 14 and 15 above.

Defence - denied.

(b) That Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, would seek to rely upon the Second Notice by way of amendment to his Cross-Claim.

Defence - denied.

(c) That the proceedings, being Proceedings No. SYG 1469 of 2012 to the extent that they remained on foot in respect of the Cross-Claim brought by Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, were being defended.

Defence - admitted.

(d) The factual basis upon which Theodore Tsakirakis intended to defend the Cross-Claim brought by Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt.

Defence - denied.

(e) That no contact had been made between the Official Receiver or anyone on behalf of the Official Receiver with Theodore Tsakirakis in relation to the proposed issue of the Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 between 5 October 2012 and 11 October 2012.

Defence - admitted.

(f) That non-compliance by Theodore Tsakirakis with the Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 dated 11 October 2012 would constitute an offence in terms of s.139ZT of the Bankruptcy Act 1966.

Defence - admitted.

(g) The contents of Practice Statement: Exercise of Official Receiver’s powers to assist trustee ed December 2011 — ORPS 7 para 75-84, 122, 128, 129.

Defence - admitted.

20. On 1 November 2012, Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, purported to file an Amended Cross-Claim, without leave, in Proceeding No: SYG 1469 of 2012 including reliance upon the Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 issued by the Official Receiver, by his delegate, dated 11 October 2012.

• Defence - not admitted.

• This is in evidence – Exhibit A3, paragraph 12.

21. The Cross-Claim in Proceeding No: SYG 1469 of 2012 has not been heard and determined by the Court.

• Defence - admitted.

22. The issue by the Official Receiver of a Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 is a proceeding under the Bankruptcy Act 1966.

• Defence - admitted.

23. The issue by the Official Receiver by his delegate, on 11 October 2012 of the Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966:

• (a) was not for the purpose of vindicating the rights of Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, as contemplated by the provisions of s.139ZQ of the Bankruptcy Act 1966;
• (b) was for a collateral or improper purpose so as to exert pressure upon Theodore Tsakirakis in respect of the conduct of his Defence of the Cross-Claim then on foot as between Samuel Piscopo as Trustee of the property of Joanna Tsakirakis, a bankrupt, and Theodore Tsakirakis;
• (c) imposed a threat of criminal sanction against Theodore Tsakirakis if he did not satisfy the Second Notice in accordance with its terms on or before the date nominated.
• (d) took into account threats of complaint in relation to his actions in formulating his decision;
• (e) was without any or any proper regard to the discretion held by the Official Receiver for the issue of the Second Notice; and or
• (f) was without any or any proper regard to the purpose for which the power conferred under s.139ZQ of the Bankruptcy Act 1966 is conferred.

Particulars

• (i) Theodore Tsakirakis repeats the particulars referred to in respect of paragraphs 13 and 15 above.
• (ii) Email from Samuel Piscopo to Adam Toma 5 October 2012 at 1:38 PM: produced by Official Receiver under Notice to Produce on 4 December 2012.
• (iii) Practice Statement: Exercise of Official Receiver’s powers to assist trustees December 2011 — ORPS 7 para 75-84, 122, 128, 129.

Defence - denied.

• Mr Johnson submits that this raises the question that if someone brings an administrative recovery under the anti-avoidance scheme while an action is unresolved in relation to a section of the Act, the notice falls away until the other action is resolved.

Claim under s.15(5) of the Bankruptcy Act 1966 and Administrative Decisions (Judicial Review) Act

24. Theodore Tsakirakis repeats the facts and matters set forth in paragraphs 4-21 inclusive.

• Defence - The Respondent repeats the answers to paragraphs 4-21 above.

25. The Official Receiver by his delegate, Fraser Thomson, in exercising the discretion conferred upon him to issue the Second Notice failed to have any or any due regard to the rules of natural justice in connection with his decision to issue the Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 on 11 October 2012.

• Defence - denied.

26. The Official Receiver by his delegate, Fraser Thomson, in exercising the discretion conferred upon him to issue the Second Notice failing to have any or any due regard to the existence of the claim made by the trustee of the property of Joanna Tsakirakis, a bankrupt, or the identical subject matter in then existing proceedings in the Federal Magistrates Court of Australia, Proceeding No: SYG 1469 of 2012.

• Particulars - Theodore Tsakirakis repeats the matters and particulars referred to in respect of paragraph 13 and 22 above.
• Defence - denied.

27. The Official Receiver by his delegate, Fraser Thomson, in exercising the discretion conferred upon him to issue the Second Notice improperly exercised his power conferred under the provisions of s.139ZQ of the Bankruptcy Act 1966 in circumstances where to the knowledge of the delegate there was an existing claim made by the trustee of the property of Joanna Tsakirakis, a bankrupt, or the identical subject matter in then existing proceedings in the Federal Magistrate’s Court of Australia, Proceeding No: SYG 1469 of 2012.

• Defence - denied.

28. The Official Receiver by his delegate, Fraser Thomson, in exercising the discretion conferred upon him to issue the Second Notice failed to have regard to or take into account in a proper manner the existence of proceedings commenced by the trustee of the property of Joanna Tsakirakis, a bankrupt, then existing in the Federal Magistrates Court of Australia, Proceeding No: SYG 1469 of 2012.

• Defence - denied.

29. The Official Receiver by his delegate, Fraser Thomson, in exercising the discretion conferred upon him to issue the Second Notice failed to have any or any due regard to the fact that the issue of the Second Notice pursuant to s.139ZQ of the Bankruptcy Act 1966 on 11 October 2012 would be relied upon by the trustee of the property of Joanna Tsakirakis, a bankrupt, to gain an advantage in existing proceedings being prosecuted by him in the Federal Magistrates Court of Australia, Proceeding No: SYG 1469 of 2012 so that:

• (a) having regard to the rules of natural justice the exercise of discretion by him failed to have regard to a relevant consideration in the exercise of the power, namely the use to which the Second Notice would be put by the trustee of the property of Joanna Tsakirakis, a bankrupt and the criminal sanctions attaching to the notice;
• (b) having regard to the previous communication by the delegate to the Applicant on 5 October 2012 of the exercise of discretion to issue the Second Notice was in bad faith;
• (c) having regard to the previous communication by the delegate on 5 October 2012 to Theodore Tsakirakis of the exercise of discretion to issue the Second Notice constituted an abuse of the power conferred upon the Official Receiver.

Defence - denied.
Defence – in addition, the Respondent says that there is no right of review, alternatively, review should be refused under the Administrative Decisions (Judicial Review) Act 1977 of the decision of the Respondent to issue a second s.139ZQ notice due to the existence of specific alternative procedures and/or alternative more suitable remedies under ss.15(5), 30 and/or 139ZS of the Bankruptcy Act.

Review Sought

22. This application seeks review of the decision of Fraser Thomson acting as a delegate of the Official Receiver to issue a s.139ZQ notice to Theodore Tsakirakis on 11 October 2012. It is noted that an earlier s.139ZQ notice was issued on 11 August 2011, however, a notice of revocation was subsequently issued by Fraser Thomson on 5 October 2012. This earlier notice is not the subject of these proceedings.
23. The Applicant’s argument is that there is an extant cross-claim issued by the Trustee on 14 September 2012 in proceedings SYG 1469 of 2012 (Theodore Tsakirakis v Samuel Piscopo), seeking a declaration that the transfer of $400,000 from the bankrupt (Joanna Tsakirakis) to her son, Theodore Tsakirakis, on 20 April 2005 is void and/or void against the Trustee, pursuant to ss.120 and 121 of the Bankruptcy Act and s.37A of the Conveyancing Act 1919 (NSW). The Applicant claims that it was an abuse of process for the Official Receiver to issue a s.139ZQ notice because it directly or indirectly sought to interfere with the proper conduct of claims by the Trustee which are already before the Court in the earlier SYG 1469 of 2012 proceedings. The Applicant claims that the s.139ZQ notice issued on 11 October 2012 ought to be set aside. It is also noted that no application has been made in the present proceedings to set aside the notice, the subject of these proceedings under the provisions of s.139ZS of the Bankruptcy Act. Nor is there any issue as to the authority of Fraser Thomson to act as a delegate of the Official Receiver at the time of either the revocation of the earlier notice or at the time of the issue of the new notice that is relevant to these proceedings.
24. The Applicant relies on the following legislative foundation for the power of review:
    1. Administrative Decisions (Judicial Review) Act 1977 (Cth), ss.5 and 6:
       • 5 Applications for review of decisions
         • (1) A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Magistrates Court for an order of review in respect of the decision on any one or more of the following grounds:
           • (a) that a breach of the rules of natural justice occurred in connection with the making of the decision;
           • (b) that procedures that were required by law to be observed in connection with the making of the decision were not observed;
           • (c) that the person who purported to make the decision did not have jurisdiction to make the decision;
           • (d) that the decision was not authorized by the enactment in pursuance of which it was purported to be made;
           • (e) that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;
           • (f) that the decision involved an error of law, whether or not the error appears on the record of the decision;
           • (g) that the decision was induced or affected by fraud;
           • (h) that there was no evidence or other material to justify the making of the decision;
           • (j) that the decision was otherwise contrary to law.
         • (2) The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:
           • (a) taking an irrelevant consideration into account in the exercise of a power;
           • (b) failing to take a relevant consideration into account in the exercise of a power;
           • (c) an exercise of a power for a purpose other than a purpose for which the power is conferred;
           • (d) an exercise of a discretionary power in bad faith;
           • (e) an exercise of a personal discretionary power at the direction or behest of another person;
           • (f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;
           • (g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;
           • (h) an exercise of a power in such a way that the result of the exercise of the power is uncertain; and
           • (j) any other exercise of a power in a way that constitutes abuse of the power.
         • (3) The ground specified in paragraph (1)(h) shall not be taken to be made out unless:
           • (a) the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or
           • (b) the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist.
       • 6 Applications for review of conduct related to making of decisions
         • (1) Where a person has engaged, is engaging, or proposes to engage, in conduct for the purpose of making a decision to which this Act applies, a person who is aggrieved by the conduct may apply to the Federal Court or the Federal Magistrates Court for an order of review in respect of the conduct on any one or more of the following grounds:
           • (a) that a breach of the rules of natural justice has occurred, is occurring, or is likely to occur, in connection with the conduct;
           • (b) that procedures that are required by law to be observed in respect of the conduct have not been, are not being, or are likely not to be, observed;
           • (c) that the person who has engaged, is engaging, or proposes to engage, in the conduct does not have jurisdiction to make the proposed decision;
           • (d) that the enactment in pursuance of which the decision is proposed to be made does not authorize the making of the proposed decision;
           • (e) that the making of the proposed decision would be an improper exercise of the power conferred by the enactment in pursuance of which the decision is proposed to be made;
           • (f) that an error of law had been, is being, or is likely to be, committed in the course of the conduct or is likely to be committed in the making of the proposed decision;
           • (g) that fraud has taken place, is taking place, or is likely to take place, in the course of the conduct;
           • (h) that there is no evidence or other material to justify the making of the proposed decision;
           • (j) that the making of the proposed decision would be otherwise contrary to law.
         • (2) The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:
           • (a) taking an irrelevant consideration into account in the exercise of a power;
           • (b) failing to take a relevant consideration into account in the exercise of a power;
           • (c) an exercise of a power for a purpose other than a purpose for which the power is conferred;
           • (d) an exercise of a discretionary power in bad faith;
           • (e) an exercise of a personal discretionary power at the direction or behest of another person;
           • (f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;
           • (g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;
           • (h) an exercise of a power in such a way that the result of the exercise of the power is uncertain; and
           • (j) any other exercise of a power in a way that constitutes abuse of the power.
         • (3) The ground specified in paragraph (1)(h) shall not be taken to be made out unless:
           • (a) the person who proposes to make the decision is required by law to reach that decision only if a particular matter is established, and there is no evidence or other material (including facts of which he or she is entitled to take notice) from which he or she can reasonably be satisfied that the matter is established; or
           • (b) the person proposes to make the decision on the basis of the existence of a particular fact, and that fact does not exist.
    2. Bankruptcy Act 1966 (Cth), s.15(5):
       • 15 Official Receivers
       • ...
       • (5) The Court may review an act done by an Official Receiver.
       • Note: Section 303 explains who may apply to the Court for review of an Official Receiver‘s action.

Decision Record

25. Fraser Thomson produced a decision record dated 10 October 2012 in respect to the issue of the s.139ZQ notice, dated the same date as the decision subject to this review. The document was produced pursuant to the Applicant’s Notice to Produce dated 8 November 2012 (Exhibit “A4”, Tab 19; 179-180).
    • REPRODUCE THE NOTICE TO INCLUDE THE DECISION RECORD. 193ZQ Notice – Bankrupt Estate of Theo Tsakirakis NSW7929/9/4 Facts and Circumstances

[Redaction – legal professional privilege claimed]

Applicant’s Submissions

26. Mr Johnson referred the Court to a practice statement used by Insolvency and Trustee Service Australia (“ITSA”) titled “Exercise of Official Receiver’s powers to assist trustees”, revised December 2011 (the “Practice Statement”). Mr Johnson acknowledged that the Practice Statement has no legislative force or effect, however, it was something that Mr Thomson had regard to in making the decision to issue the s.139ZQ notice, which is the subject of this review. By way of introduction, Mr Johnson indicated that paragraphs [1] and [2] (p.3) of the Practice Statement relate to the public perception of the role of the Official Receiver and professional reputation of a Trustee. Paragraph [3] (p.3) of the Practice Statement relates to the Official Receiver’s decision to issue a notice, which is subject to judicial review by the Federal Court, either under the provisions of the Bankruptcy Act or the AD(JR) Act. The next relevant provision is in [75] (p.14) which deals with the power to issue a notice under s.139ZQ, while [76] (p.14) deals with the exercising of the discretion to issue a notice.
27. Mr Johnson submits that on one hand the Official Receiver’s delegate is effectively stating “Well, I’ve exercised the discretion. I’ve followed this practice note.” He argues that on the other hand the delegate is now saying it is a “must” that they have no discretion. It is argued on behalf of the respondent that they have a minimum requirement that the Trustee must meet and so the Trustee must provide appropriate material to support the issue of a notice under s.139ZQ. In the guidelines under the subheading “Exercising the discretion to issue a notice” at [77] (p.14 of the Practice Statement) it states:
    • 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 exercise of the discretion to issue a notice. Any determination of whether a transfer is actually void must be made by a Court.
28. Mr Johnson submits that the above statement is consistent with the reasons of Wilcox J in Re Pearson; Ex Parte Wansley (1993) 46 FCR 55. Consequently, once the Trustee brings an action, the issue of a s.139ZQ notice is inappropriate. Paragraph [78] (pp.14-15) of the Practice Statement deals with the sort of matters under s.120. Paragraph [79] and [80] (p.15) of the Practice Statement deal with the s.121 issues. Mr Johnson referred the Court to [97] (p.19) of the Practice Statement in which the following parts are relevant to these proceedings:
    • 97. An application to issue a Notice must be constituted by:
      • (a) A draft notice or notices. Ideally these should be provided electronically to allow for any suggested amendments to be made correctly to the Notice.
      • ...
      • (d) A statement setting out the background and purpose of the Notice.
      • ...
29. Mr Johnson submits that the notice the subject of these proceedings is a new notice being requested, but that Mr Thomson has totally ignored this practice. He has not acquired a statement. The Trustee, for reasons which are totally unexplained and despite becoming a party to these proceedings, has not sought to say why he did not give any information as the basis for the issue of the s.139ZQ notice. The Trustee has not even put on a statement explaining why it was necessary. He instead engaged in a series of emails and phone calls which Mr Johnson described as threatening. The Practice Statement, at [99]-[105] (p.19-20), relates to other forms of notices, not relevant to this matter.
30. Paragraph [106] (p.20) of the Practice Statement states:
    • 106. The trustee will also need to explain to the Official Receiver, the reason for believing that the books or assets are in the position of the recipient (if the recipient is not the debtor) or held on the premises to which access is sought. The Official Receiver will not require the trustee to prove that the books exist but will require something more than a general suspicion.
31. At [119] (p.22) it states:
    • 119. Where a Notice is sought pursuant to section 139ZQ, the trustee must also provide additional information supporting the assertion that the transfer of the assets sought being recovered is void.
32. The Practice Statement then deals with other matters being the form of the notice in s.120 and who is able to make the decision in respect of ss.121 and 122. Mr Johnson submits that Mr Thomson has chosen not to comply with the Practice Statement, again, because he signed it in his capacity as an acting business manager of the Official Receiver, not as suggested in the Practice Statement. At [122] (p.23) it states:
    • 122. Where a delegate of the Official Receiver does exercise power, the Notice should clearly identify that person as a delegate.
33. The example provided (p.23) states:
    • Where the Notice is signed by a delegate, a template should:
      • (a) name the delegate in and provided that “being an authorised employee duly delegated under s. 15(4) of the Act to exercise the powers of the Official Receiver under s (insert relevant official power) of the Act...”; and
      • (b) identify any relevant signature as a signature of a delegate of the Official Receiver.
        

Mr Johnson submits that this paragraph suggests what should occur, however, this is another instance of Mr Thomson ignoring the guidelines.

34. The “Reasons for decision” are contained in [128] and [129] of the Practice Statement (at p.24):
    • 128. The exercise of the powers is subject to review under the AD(JR) Act and the recipient is entitled to request a statement of reasons. The exercise of the powers can also be subject to review under terms of the Bankruptcy Act itself (see section 139ZS). It is consistent with good administrative decision making practices for written reasons to be prepared that support the exercise of the Official Receiver’s powers.
    • 129. The reasons should be prepared at the same time or as soon as possible after the decision has been made to exercise the power. They should, as a minimum, identify the information the Official Receiver has taken into account to form the view that the evidentiary threshold for the power to be exercised has been met.

Mr Johnson submits that these statements indicate the necessity for reasons under the AD(JR) Act. The Practice Statement deals at [130] (p.24) with withdrawing and amending notices.

35. Paragraph [132] (at p.24) states:
    • The Official Receiver will also withdraw or revoke a notice if satisfied that it should not have been issued or if satisfied that the bankrupt has complied with his or her obligations. The Official Receiver will consider information supplied both by the bankrupt and the trustee in making this decision.

Mr Johnson submits that Mr Thomson did not consider anything from the Trustee because he did not undertake this consultation. It is argued that this explains the Trustee’s response when informed that the previous notice had been revoked.

36. Paragraph [134] (at p.25) states:
    • 134. In the case of Notices issued pursuant to section 139ZQ, the Official Receiver will not withdraw a notice unless satisfied that the evidence upon which it was based did not exist. The Official Receiver will not adjudicate on arguments about whether the transfer of property underlying the notice was actually void. In that regard, the Official Receiver will not consider information or evidence provided by the person to whom the notice is given or the bankrupt. The Official Receiver’s only concern is to decide whether the trustee provided sufficient evidence upon which the discretion to issue the notice, could be based. If there is a dispute about whether a transfer of property is void, the Official Receiver will let the notice stand. The trustee can then take action to enforce the notice and the Courts will decide on the merits of the argument about the status of the transfer.
    • (emphasis added)
37. Mr Johnson submits that in the matter of Sutherland v Vale [2007] FMCA 1617 there was no ss.120 or 121 action and the notice failed. In this matter, however, there is a positive cross-claim, but that is not the issue before the Court.
38. Paragraph [138] and [139] of the Practice Statement (p.25) deal with the defending of notices, these paragraphs state:
    • 138. Whether it is the Official Receiver or the trustee that is principally responsible for responding to an application should be discussed by the trustee with the Official Receiver. However, as a general principle, the Official Receiver will seek to join the trustee as a party to the proceedings, taking into account that the Notice will have issued at the request of the trustee and be based on information provided by the trustee.
    • AD(JR) Act Review
    • 139. The Official Receiver is the responsible decision maker for the purposes of an application for a statement of reasons, or an application for review of a decision to issue a Notice under the AD(JR) Act. In those circumstances it is the Official Receiver that is principally responsible for responding to this type of application.

Paragraph [140] (p.25) of the Practice Statement relates to applications under s.139ZS, while [141] (p.26) relates to applications to set aside other notices. Mr Johnson submits that these two paragraphs provide one of the starting points for an application for review under s.15(5) of the Bankruptcy Act, being a hearing de novo.

39. Mr Johnson claims that the only material put before the Court in support of the transaction is a letter from his instructing solicitors Matthews Folbigg dated 9 December 2011 (Exhibit A4, Tab 2, p.9-17), particularly the following paragraphs:
    • For this reason alone (but not limited to this reason) the s.139ZQ notice does not apply to our client on the basis of the alleged facts and circumstances set out in the notice, and is liable to be set aside.
    • In this regard the notice relies on paragraphs 5, 6, 8 and 9 upon the assertions that the bankrupt has transferred property to our client. This is incorrect in that it fails to acknowledge that the property has been transferred to the bankrupt, prior to the bankruptcy.
    • In the circumstances there is therefore no funds which ‘would probably have become part of the transferees estate’ (s.121) nor is there a ‘transfer of property’ (s.120, s.121) should the funds have been re-transferred to the bankrupt. In the premises we suggest the notice be set aside.
40. Fraser Thomson, as a delegate of the Official Receiver, replied on 14 December 2011 (Exhibit A4, Tab 3, p.44-45). In that letter Mr Thomson states:
    • ... I am not satisfied that, based on the evidence provided, the 139ZQ notice issued to Mr Tsakirakis ought to be revoked.

Mr Johnson submits that it was Mr McGrath’s submission that there was no response to Mr Thomson’s letter of 14 December 2011, however, by that time proceedings were already on foot to set aside the notice. The notice was subsequently withdrawn, because the notice was not properly signed and because it did not have utility due to the cross-claim being on foot. Mr Johnson drew the Court’s attention to the contents of the 14 December 2011 letter in the second last paragraph that states:

An application to set aside an Official Receiver notice, being based on the circumstances surrounding the transfer of property, is considered the domain of the trustee to defend. Consequently, as representative of the Official Receiver I can confirm that he will not be defending the notice. However, the Official Receiver will abide by all directions and Orders of the Court in this matter save and except as to costs.

41. Mr Johnson contends that this is an extraordinary circumstance where the Official Receiver, as the gate keeper, has embarked on a course to issue a notice which has possible criminal sanctions against Theodore Tsakirakis, regarding non-compliance with the invalid notice. There is other material in evidence that suggests that the Trustee would like this matter to be referred for prosecution. Mr Johnson acknowledges that there are authorities going both ways, but it is an extraordinary circumstance for a regulator to find itself in, having regard to the overriding purposes of the regulations in bankruptcy in Australia.
42. Mr Johnson next referred the Court to the question of utility, which was first raised in Mr Thomson’s letter of 5 October where it states:
    • The Official Receiver does not admit your client’s assertion that the section 139ZQ notice has been issued under an invalid and ineffective delegation. Nonetheless, the Official Receiver is conscious that the prosecution of the trustee’s cross claim against your client is not dependent upon the continuance of your client’s application under s.139ZS of the Bankruptcy Act. The Official Receiver sees no utility incurring costs defending the validity of the section 139ZQ notice when the substantive issue between your client and the trustee will be determined under the trustee’s cross claim.
    • (emphasis added)
    • (Exhibit A4, Tab 8, p. 108-109)

This is repeated in Mr Thomson’s decision record where he states:

On 5 October 2012 the OR revoked the section 139ZQ Notice as it deemed that there was no utility incurring costs in defending the notice where the matter would be dealt with under the trustee’s cross claim.
(emphasis added)
(Exhibit A4, Tab 19, p.179)

43. Mr Johnson referred the Court to the decision in Flower & Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 per Lee, Hill and Sundberg JJ at [64], where their Honours held:
    • ...Whatever the situation may be where delay is promoted in the course of vindicating a legal right, a matter upon which we would not wish to comment, where delay is the purpose, in other words, the end in itself, which is this case, the institution of and prosecution of proceedings will be an abuse of process. An abuse of process exists where proceedings are brought not to vindicate a legal right but for some other purpose.
44. Mr Johnson referred the Court to the Case Log-ORN for Joanna Tsakirakis and the entry made on 5 October 2012 at 1.25pm by Mr Thompson recording a telephone discussion with the Trustee. During that conversation Mr Thomson stated:
    • ...that I did not believe his position was compromised and the cross claim would become the substantive issue to be dealt with.
    • (Exhibit A4, Tab 38, p. 282)

Mr Johnson raised the question as to what other purpose the Official Receiver by his delegate would issue the new notice, having revoked the initial notice for the express purpose that it served no utility. There was no change in circumstances after the revocation. Recorded in the Case Log-ORN on 8 October 2012 at 11.30am, Mr Thomson records a telephone discussion with the Trustee, which stated:

...Sam Piscopo who confirmed that the cross claim is not affected by the removal of the ZQ notice, however, re-issuing the notice was a matter of costs and confidence in the system. He had spent around $75,000 himself to date and the fact the notice was issued was one of the driving factors that was bringing Theo [Tsakirakis] to the negotiation table.
Sam advised that if the notice was not reissued he will consider his options against the OR.
(Exhibit A4, Tab 38, p.83)

45. Mr Johnson contends there would be a real lack of confidence in the system if this notice was allowed to stand on a review because it is a quite improper stance taken by the Official Receiver that goes to the proper administration of the Bankruptcy Act. On one hand the Official Receiver states “I withdraw a notice because of utility” and, without it giving any explanation at all, subsequently issues another notice on the same terms. However, at the time of the issue of the new notice, the delegate of the Official Received is aware that the Trustee has an offer of settlement and wants to negotiate, which is a circumstance addressed in Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (supra). Mr Johnson also noted the Trustee did not seek to review the decision of the Official Receiver which he was entitled to do under s.15(5) of the Bankruptcy Act or under the AD(JR) Act.
46. In a further telephone discussion between Mr Thomson and Mr Piscopo on 10 October 2012 at 9.00am the Case Log-ORN records:
    • ...He advised that what I should be asking is if there is a legal authority that precludes the OR from issuing a 139ZQ notice in the circumstances and he stated that there was not. He referred me to Whitton v Regis Towers as an authority on issuing notice in these circumstances...
    • (Exhibit A4, Tab 38, p.285)
47. The Trustee did not indicate which particular case he was referring to, however, after review of the two Federal Court proceedings and the Full Court proceedings of this citation, none make any comment in respect of the issue of notices.
48. In the same telephone discussion on 10 October 2012, Mr Piscopo stated:
    • ... [H]e has a legislative right to the notice...
    • (Exhibit A4, Tab 38, p. 286)

Mr Johnson challenges this statement on the basis that the issue of a s.139ZQ notice is a discretion and it may be issued when it has some utility. He contends it does not have any utility in the present circumstances because of the proceedings contained in the cross-claim. Mr Johnson referred the Court to the provisions of s.139ZR which state:

BANKRUPTCY ACT 1966 - SECT 139ZR
Charge over property

• (1) If a notice under section 139ZQ is given to a person in respect of any property:
• (a) the property is charged with the liability of the person to make payments to the trustee as required by the notice; and
• (b) if the person makes the payments or transfers the property to the trustee, the property ceases to be subject to the charge.

49. The relevant property in these proceedings is the $400,000 cheque issued by Joanna Tsakirakis in Theodore Tsakirakis’ favour. Mr Johnson contends that there is nothing in the legislation that states one can trace the initial property into other property as that would require a tracing order. It is only a charge which normally would arise. This leaves the question as to why the second s.139ZQ notice was issued and the Court has been requested to review what the Official Receiver has, in effect, done. Mr Johnson argues that the Official Receiver has issued a notice for a predominant purpose, which is an abuse to gain an advantage from the litigation. In the written submissions provided by Mr Allen, appearing for the Trustee, at [6] he states:
    • It will be apparent that real effect of the second notice is to replace the first notice.
50. Mr Johnson argues that this is incorrect, on the basis that the first notice was revoked. Consequently, it came to an end and had no existence at law or in equity as a result of it being revoked. The first notice was then dropped from the cross-claim and the Trustee did not seek to review that action, but instead sought to issue another notice. Mr Allen’s submissions suggest that Theodore Tsakirakis benefitted from the decision to revoke the first notice as it reduced the scope of litigation. Mr Johnson contests that view, because the issue of the new notice meant that Theodore Tsakirakis had to commence new litigation proceedings. It was acknowledged that if Theodore Tsakirakis had pursued an application under s.139ZS that would also have been a new set of proceedings. However, the approach adopted here is to seek a review of the Official Receiver’s decision in the existing proceedings.
51. Mr Johnson notes that both Mr McGrath and Mr Allen refer to the decision in Vale v Sutherland [2009] HCA 26; (2009) 237 CLR 638. However, that case was not a dispute going to the question of construction of the Bankruptcy Act where construction is the issue in the current proceedings before this Court. As the purpose of these notices is to avoid expensive litigation, the apparent failure of the system is obvious.

First Respondent’s Submissions

52. Mr McGrath acknowledged this case was about whether Fraser Thomson’s decision to issue the s.139ZQ notice on 11 October 2012 was done so in a manner that could be attacked. It is a case about what occurred over six days commencing 5 October 2012 when Mr Thomson revoked the earlier notice and at which time there was no request for a new notice. The position was that the Trustee was not made aware of the decision until he received the revocation notice, so the question is what happened with regards to Mr Thomson and his decision making process over the six days from 5 October 2012 to 11 October 2012.
53. Mr McGrath referred the Court to the Case Log-ORN records for 5 October 2012 (Exhibit A4, Tab 39, p. 282). The first unredacted entry on that page refers to the first s.139ZQ notice being revoked. The instrument of revocation is at Tab 13, the emailed advice to the applicant is at Tab 8 and the emailed advice to the Trustee is at Tab 11. The Case Log-ORN then records a telephone discussion at 1.25pm from the Trustee to Mr Thomson. The Trustee expressed his extreme grievance at the revocation and that the decision was made without consultation. The Trustee indicated that he was considering a formal complaint to the Inspector General. The Trustee advised that consultation would not have changed the position. The Trustee asked for another notice and was advised that it could be done quite quickly but that Mr Thomson would have to confer with his legal adviser to ascertain if this was viable. Mr McGrath submits that Mr Thomson was giving consideration, at that stage, to whether another notice should be issued. In an email sent by Mr Thomson to The Trustee on 5 October 2012 at 4.36 pm the following is stated:
    • ...in the interim, can you advise as to the reason you require another 139ZQ notice to be issued in this matter? As stated on the phone, and in the earlier correspondence, we are of the view that the substantive issue, between yourself and Mr Tsakirakis will be determined under your cross-claim.
    • (Exhibit A4, Tab 30 , p.283)
54. Mr McGrath referred the Court to two emails sent by the Trustee on 9 October 2012 that are very important to the case:
    1. Email sent at 5.40pm on 9 October 2012 (Exhibit A4, Tab 12, p.172)

Within that email, it states:

...The point, however, is that with the notice in place, he would be talking much larger sums...

Mr McGrath submits that there is nothing wrong with that statement as the Trustee is entitled to make that observation. No line is crossed and would be crossed, unless it was found that there was an intention to use the issue of a s.139ZQ notice for a purpose for which it does not exist.

2. Email sent 9 October 2012 at 5.45pm (Exhibit A4, Tab 18, p.176). In that email the Trustee states:
   • ...I don’t want to go through a full blooded hearing if I can help it, even if I feel I am going to win. ...

Mr McGrath submits that the Trustee is indicating he was prepared to go through a hearing which takes this issue outside of the position of a person issuing a bankruptcy notice, a person who the issuer knows is solvent and without any intention to pursue the notice through the bankruptcy.

55. Mr McGrath submits that Mr Johnson cross-examined Mr Thomson on those two emails (noted at [54] above) and was suggesting that
    Mr Thomson took into account both emails of 9 October 2012 in making his decision. In response to that question, in cross-examination, Mr Thomson answered “I wouldn’t say they informed my decision”.
56. Mr McGrath submits that this point was the crux of the cross-examination. Mr McGrath argues that there was absolutely no evidence that Mr Thomson was swayed in any way by anything the Trustee said in relation to settlement or pressure. Rather, he acted because the conditions of the statute for the issue of the notice had been fulfilled. Mr McGrath referred to the Case Log-ORN, which records a telephone discussion between Mr Thomson and the Trustee on 10 October 2012. During that call, the Trustee stated he had a legal basis for requesting a s.139ZQ notice. Mr Thomson acknowledges that the facts and circumstances supported the issue a s.139ZQ notice and that is reflected in the decision reasons. Mr Thomson asked the Trustee if he thought that this may constitute an abuse of process, considering it was unlikely the recipient would comply. In response, the Trustee indicated that he had a legitimate right to seek the issue of the notice. Mr McGrath submits that Mr Thomson considered whether there might have been an abuse of process in someway in issuing the notice but reaching a contrary decision. Mr McGrath argues that this is a case where the Trustee’s answer is correct, that really, in a way, the likelihood of the recipient’s compliance with the notice does not form a basis for an allegation of abuse of process, or indeed for a review under the AD(JR) Act.
57. Mr McGrath referred the Court to the decision record which has a two part structure. The first is the facts and circumstances, while the second addresses “the following has informed my decision.” Mr McGrath argues that a s.139ZQ notice has multiple uses. One of its legitimate uses is, in fact, to create pressure on the debtor to pay which is a key factor. It is intended to shortcut, short circuit, to avoid or at least minimise litigation to collect money in circumstances where there is evidence of an action under ss.120, 121 and 122 of the Bankruptcy Act. Mr McGrath also indicated it should be noted that Mr Thomson had questioned the utility of the notice as a substantive issue was to be determined under the Trustee’s cross claim. However, the notice still had utility and Mr Thomson identified that in the witness box. There are no authorities that support the Official Receiver refusing to issue the notice in these circumstances.
58. In this matter, there is a situation where a decision had already been made, not challenged, to issue that notice on the same circumstances where the Official Receiver was satisfied there was sufficient evidence to support the issuing of a s.139ZQ notice and that is one of the two criteria that activate s.139ZQ. The other issue was the Trustee’s request. Mr McGrath submits that s.139ZQ(8) creates a cause of action for recovery of the debt. That cause of action is available for the Trustee to use, in the proceedings against the recipient of the notice. The Trustee had, in fact, used the first notice in those proceedings and while the evidence was that it was not discussed it was entirely possible and highly likely that the second notice would be used in the current proceedings. Mr Thomson gave evidence that one of the purposes of the notice is to create a charge over the property received. Mr Thomson appears to have had, in his mind, the thought that large sums of money do sometimes end up in property, one way or another, and that a charge could be useful as being registered against that property. Section 139ZR(6) creates a power of sale over any such property in the Trustee so there is utility there, and s.139ZT creates an offence, punishable on conviction by imprisonment which has a salutary effect, as was the intended effect on debtors by the legislation.

Second Respondent’s Submissions

59. Mr Allen, appearing for the Trustee submitted that his client had the benefit of a s.139ZQ notice that provided him with a cause of action. He relied upon that cause of action in his notice of cross-claim that was a cause of action in property. That property was taken away from him, which lead him to complain and reapply for a fresh notice. The Official Receiver considered that application and quite correctly formed the opinion that the jurisdictional facts required for a notice to be issued had been met. A decision was made on 14 December 2011 and with the same criteria still met, enabled the making of the decision to issue a s.139ZQ notice on 11 October 2012 on the basis that the jurisdictional facts still existed. Mr Allen referred the Court to the decision in Vale v Sutherland (supra) at [13] which quoted with approval the decision of Carr J in Re McLernon; Ex Parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble & Anor [1995] FCA 1408; (1995) 130 ALR 609 where his Honour indicated that there was very little discretion for the administrative decision-maker once the jurisdictional facts had been established. Mr Allen submits that when the Official Receiver considered an application for a new notice to be issued, one of the purposes was to give the Trustee a cause of action. Mr Thomson asserted in cross-examination twice that the purpose of issuing the s.139ZQ notice on 11 October 2012 was to give the Trustee a cause of action.
60. Mr Allen contends that even if there was the purpose of encouraging Mr Tsakirakis to settle, that cannot be said to be the true and dominant purpose and, in itself, is not an abuse of process. Mr Allen referred the Court to Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374 at 389 where it states:
    • The Court of Appeal of New South Wales accepted that parties in contested litigation are permitted to try and outmanoeuvre each other.

Mr Allen argues that in this case his client, having lost his cause of action, applied to be given it back which he was entitled to do. Mr Allen argues that it is entirely appropriate to use a statutory instrument to gain advantage in litigation if the statutory instrument is otherwise available. In Australian Beverage Distributors (supra), the parties were involved in litigation. The applicant had a costs order that had been assessed and chose to use that cost order to wind up the respondents and the Court found that there was no abuse of process in that proceedings.

Consideration

61. As a general historical issue, prior to 1991 the trustee of a bankrupt estate may have needed to pursue litigation in order to recover assets to which he or she was entitled on behalf of the bankrupt estate. Such actions were expensive, complex and time consuming. To overcome these problems the Bankruptcy Amendment Act 1991 (Cth) introduced ss.139ZQ-139ZT (Pt. VI Division 4B Subdivision J). This amendment introduced an administrative procedure that enabled the Official Receiver, on behalf of the Official Trustee or registered Trustee to recover property disposed of by a bankrupt in a transaction to defeat creditors which was void against the Trustee. The Explanatory Memorandum released with the Bill at [22], articulates this intention and briefly indicates this mechanism. The amendment was introduced to overcome two problems:
    1. Many transactions involving the disposition of a bankrupt’s property which were entered into by a bankrupt prior to the advent of bankruptcy and which were void as against the trustee pursuant to the provisions contained in ss.120-122 of the Bankruptcy Act, as it was before the amendments were made, could not be challenged by the trustee by way of litigation because of the lack of available funds; and
    2. Often bankrupts arranged their affairs knowing that it was likely that no action would be taken to set aside the transaction because of the cost factor. Also, if a trustee commenced proceedings pursuant to ss.120-122 to attack a transaction, he or she would bear the onus of proving that the transaction entered into was one which was covered by one of these sections.

These pre-amendment burdens tended to discourage trustees from taking action to recovery property from an estate because of the difficulties of proof and cost.

62. The provisions of Subdivision J were modelled loosely on the former s.218 of the Income Assessment Act 1936 (Cth) (now ss.261, 262, 263, 264, 265 of the Taxation Administration Act 1953 (Cth)) and establish case law under that section that is relevant to notices under s.139ZQ. It is noted that the power of the Official Receiver to order payment with a s.139ZQ notice does not constitute the exercise of judicial power and, therefore, does not constitute a contravention of the provisions of the Constitution in respect of the judiciary: Re McLernon; Ex Parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble & Anor (supra).
63. Where a party has been served with a s.139ZQ notice and refuses or fails to comply with that notice, they are guilty of an offence which can be punishable by imprisonment (s.139ZT(1)). Under s.139ZT(2) the convicted person may also be ordered to pay the Trustee an amount not exceeding the total amount that he or she refused or failed to pay to the trustee in accordance with the s.139ZQ notice.
64. The recipient of a notice may apply to the Federal Court or the Federal Circuit Court to have that notice set aside (s.139ZS(1)). If the court is satisfied that Subdivision J does not apply to the notice recipient on the basis of the alleged facts and circumstances set out in the notice the Court may make an order setting aside the notice (s.139ZS(1)). In the proceedings before this Court that avenue has not been pursued. In the circumstances where there are other separate proceedings in which issues relating to the s.139ZQ notice are to be determined by a court there is no need for the formal filing of an application to set the notice aside. A recipient of a notice can take issue with it and the court may order a notice to be set aside: Re Lucera (Bankrupt); Ex Parte Official Receiver v Lucera [1994] FCA 1380; (1994) 53 FCR 329 per Olney J at 336.
65. The learned authors Andrew Keay and Michael Murray in Insolvency: Personal and Corporate Law and Practice, 4th ed, Law Book Company, express the view that Subdivision J has not changed the traditional position that the trustee has the onus of proof in relation to a claim that a transaction is void against the trustee.
66. In the related proceedings SYG 1469 of 2012 the following procedural steps have occurred. These steps are raised because it is information that is known, particularly to Mr Thomson as the administrative decision-maker, and he acknowledges this in both his affidavit and cross examination. The steps are:
    1. Application filed by Theodore Tsakirakis against the Official Receiver seeking the s.139ZQ notice dated 10 August 2011 be set aside (Affidavit of Fraser Thomson, sworn 12 December 2012, Annexure “F”);
    2. On 6 August 2012, pursuant to orders made by a registrar of this Court, Samuel Piscopo as trustee of the estate of Joanna Tsakirakis, a bankrupt, was joined as the Second Respondent, pursuant to Rule 11.03 of the Federal Magistrates Court Rules 2001 (Cth) (now the Federal Circuit Court Rules 2001 (Cth);
    100. The Second Respondent, Samuel Piscopo, filed a cross-claim seeking a declaration that the transfer of $400,000 from the bankrupt Joanna Tsakirakis to Theodore Tsakirakis on 20 April 2005 was void and/or void against the trustee (Affidavit of Fraser Thomson, sworn 12 December 2012, Annexure “F”);
    4. An amended cross-claim was filed on 1 November 2012, amending the pleadings and particulars; and
    5. On 5 October 2012, the Official Receiver issued a notice of revocation in respect of the s.139ZQ notice issued on 11 August 2011 (Affidavit of Fraser Thomson, sworn 12 December 2012, Annexure “F”).

Consequently, in proceedings SYG 1469 of 2012, the initial issue seeking an order to set aside the s.139ZQ notice issued on 10 August 2011 was resolved by the issue of the notice of revocation. The remaining issue to be resolved at hearing is the issue raised in the cross-claim filed by the Trustee of whether transfer of $400,000 from Joanna Tsakirakis to her son Theodore Tsakirakis on 20 April 2005 is void and/or void against the trustee, together with a new issue of alleged fraud. A date for the hearing of those matters is yet to be allocated.

67. In respect to the onus of proof to a claim that a transaction is void against the trustee, this was addressed by his Honour Black CJ in the Full Court decision Halse as trustee of the property of Payne, a Bankrupt v Norton [1997] FCA 673; (1997) 76 FCR 389 where he was commenting on the judgment at first instance in Norton v Halse (Trustee for the Bankrupt estate of Payne) & Anor (1996) 137 ALR 593, a decision of his Honour Carr J. His Honour made the following observation:
    • ...Carr J concluded that the answer did not depend exclusively upon the terms of s.139ZS, or upon the terms of Subdivision J as a whole, but required consideration of some of the provisions within Div. 3. I agree, because those provisions determine the circumstances under which transactions are void against the trustee and it is voidness against the trustee under Div 3 that is an essential precondition on the valid exercise of the power to give a notice under s.139ZQ(1). Carr J observed that Subdivision J only applies where a person has received (in this case) property as a result of a transaction that is void against the trustee of a bankrupt. He described that as “a basic jurisdictional fact”: see 137 ALR 593 at 599.
    • As his Honour pointed out, referring to the decision of the Full Court of this Court in Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 363 at 369-70, and the cases cited in that decision, a trustee has always carried the onus of proving the facts that make a transaction void and in instances in which the onus of proof is to lie elsewhere the Parliament has clearly so provided. ...
    • ...
    • Carr J concluded that Subdivision J had not changed the position concerning the onus of proof other than by requiring an applicant for an order under s.139ZS setting aside a notice to put before the Court sufficient evidence to call validity of the notice into question.
    • The regime established by Div 3, with its specific provisions as to the onus of proof in certain cases and its assumptions as to where the onus lies otherwise, takes on particular significance when it is seen that the voidness of a transaction under Div 3 is the basis for the exercise of the power to give a notice under s 139ZQ(1). Moreover, for the reasons given by Carr J in Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble [1995] FCA 1408; (1995) 58 FCR 391 at 400-401 (and see also at 403) the power to issue the notice is conditioned not upon the Official Receiver's opinion or satisfaction that the transaction is void against the trustee but upon the existence of the facts and circumstances that produce such a result.
    • (emphasis added)
68. His Honour Black CJ also noted in his reasons:
    • Clearly, too, s 139ZS is not the exclusive means of challenging a notice under s 139ZQ (see Re McLernon at 403), and there may well be cases in which there is good reason for the trustee to bring what would be in effect a cross-application for a declaration that a transaction is void, as in Re McLernon; see also Theo v Official Trustee in Bankruptcy [1998] FCA 862; (1996) 34 ATR 404. ...
69. The decision record prepared by Fraser Thomson on 10 October 2012 is reproduced in this decision at [25] above. Under the sub-heading “Facts and Circumstances” the opening paragraph states:
    • On 20 July 2011 the Official Receiver (OR) received an application from Sam Piscopo (the trustee) requesting that a section 139ZQ notice be issued in the estate of Joanna Tsakirakis. The notice related to the transfer of $400,000 that the trustee claimed was void pursuant to section 120 and/or 121 of the Bankruptcy Act 1966 (the Act)
    • (Exhibit A4, Tab 19, p.179)

Under the heading “The following has informed my decision” it states:

a) The notice sufficiently set out the facts and circumstances upon which I have considered that the transaction is void against the trustee.
b) There has been sufficient evidence of previously provided to the OR to consider the transaction as void.
...
(Exhibit A4, Tab 19, p. 180)

70. The reference to sufficient evidence “previously provided” is not in evidence. In cross-examination, Mr Thomson was asked the following sequence of questions by Mr Johnson:
    • Mr Johnson: Did Mr Piscopo provide you with any documents to contradict any of the matters that were set out in the letter of 9 December 2011?
    • Mr Thomson: The only information that I would provide was a draft copy of the cross claim, that’s about it.
    • Mr Johnson: He didn’t show you transcripts of public examination, did he?
    • Mr Thomson: There was information provided that when the notice was initially issued by Ms Bhawna Sharma. Those included transcripts of the Supreme Court matter amongst other information. They were on hand and I reviewed those materials or that material before issuing the second notice.
    • Mr Johnson: Well, you didn’t say that in your decision record, did you? Was that done intentionally or inadvertently?
    • Mr Thomson: No, it wasn’t intentional. It is stated in my Case Log.
    • (Transcript 19 December 2012, p.41)
71. A review of the Case Log-ORN for the period of 5 - 11 October 2012 does not reveal any notation detailing a review of relevant material prior to the issue of the second notice. However, a large number of entries during this period have been redacted. Mr McGrath advised the Court that the redactions were due to either a claim of privilege or the material not being within the scope of the notice to produce.
72. Without venturing into the details of proceedings SYG 1469 of 2012, as it acknowledged by this Court that they are not part of this application, it has emerged from cross-examination and submissions that those proceedings were initiated seeking the first s.139ZQ notice to be set aside on the basis that the amount of $400,000 received by Theodore Tsakirakis from his mother Joanna had been repaid in excess of that amount. This claim of full repayment was brought to Mr Thomson’s attention in a letter from Theodore Tsakirakis’ lawyers, Matthews Folbigg, dated 9 December 2011. This letter is addressed in more detail below.
73. Subsequently, the challenge to the original s.139ZQ notice fell away due to the revocation of the first notice by the Official Receiver. However, the very important point is that prior to that event the Trustee had filed a cross-claim challenging Theodore Tsakirakis’ claim of the payment together with a new allegation of fraudulent activities in respect of a substantial amount of the claimed repayment. During Mr Thomson’s cross-examination the following exchange occurred:
    • Mr Johnson: ... You were aware then at the time of the issue of the second notice that Mr Piscopo was asserting some fraud on the part of the parties but included Mr Tsakirakis [objection was raised to this question, however the question was allowed].
    • Mr Johnson: You were aware that Mr Piscopo was propounding allegations of fraud against Mr Tsakirakis, weren’t you?
    • Mr Thomson: Yes.
    • Mr Johnson: To your knowledge has Mr Piscopo lodged in report with the Official Receiver reporting fraud?
    • Mr Thomson: No.
    • (Transcript 19 December 2012, p.45)
74. This introduced a new element that must be assumed to have been contained in the original documentation tendered by the Trustee to the Official Receiver requesting the first s.139ZQ notice. In cross-examination, Mr Thomson indicated that he had access to the transcript of the Supreme Court proceedings that had been filed with the original application for the s.139ZQ notice (Transcript 12 December 2012, p.41.15). This new issue appears to have raised some concern by Mr Thomson as he gave evidence, indicating that he sought legal advice in respect of what impact the existence of a cross-claim may have had in respect to the issue of the new s.139ZQ notice. In cross-examination of Mr Thomson, the following sequence of questions occurred;
    • Mr Johnson: In your decision record you say that “There are no identified authorities that support the OR refusing to issue a 139ZQ notice in these circumstances.” Did you do research into the authorities yourself?
    • Mr Thomson: I sought legal advice.
    • Mr Johnson: Who from?
    • Mr Thomson: Mr McNally and others.
    • (Transcript 19 December 2012, p.41)
75. On further questioning, Mr Thomson affirmed that he had sought both internal and external legal advice. Initially advice was sought from Mathew Osbourne, the principal legal officer for the Official Receiver and subsequently from Mr McNally of Lobban McNally Lawyers. The nature of that advice was that there were no identified authorities in respect of the issue of a s.139ZQ notice in the specific circumstances as were before Mr Thomson.
76. In the absence of any authority expressing a contrary view to the authors of Insolvency; Personal and Corporate Law and Practice, referred to above, Subdivision J has not modified a trustee’s onus of proof in relation to a claim that a transaction is void against the trustee, which is confirmed by his Honour Black CJ in Halse v Norton (supra), again referred to above. On the material before the Court, I am satisfied that in the period between the issue of the first s.139ZQ notice (10 August 2011) and the issue of the second s.139ZQ notice (11 October 2012) there was an essential change in the material relied upon by the Trustee in seeking to have the s.139ZQ notice issued by the Official Receiver. This formally occurred with the filing of the cross-claim by the Trustee on 17 September 2012, which introduced the issue of alleged fraud by Theodore Tsakirakis through the distribution of substantial parts of the money advanced to him by his mother in the process. That was acknowledged by Mr Thomson in his cross-examination and the relevant extract from the transcript is set out above.
77. The evidence also indicates that the material supplied by the Trustee in support of his initial application for a s.139ZQ notice has not been amended or updated, other than by the provision of a draft copy of the cross-claim being provided to Mr Thomson. This is found in the transcript where it records the following:
    • Mr Johnson:...Prior to you making your decision to issue the second notice, were you provided with any other material as to what had happened with the fund of money that was subject to the earlier notice?
    • Mr Thomson: No.
    • (Transcript 19 December 2012, p. 37)
78. It is freely acknowledged that the Trustee did not make a formal written request for the issue of the second s.139ZQ notice but, rather, relied on oral communications and brief email exchanges.
79. That situation is clearly reflected in the transcript of the cross-examination as follows:
    • Mr Johnson referred Mr Thomson to an entry in the case log-ORN record at Exhibit A4, Tab 19, p. 179, where it states:
    • “After revocation the trustee advocated strongly for another notice to be issued?”
    • Mr Thomson: That’s correct.
    • Mr Johnson: ...he wasn’t prepared to make a written request?
    • [This question was not answered due to an objection raised by Mr Allen which was subsequently withdrawn however a review of the Case Log confirms that there was no written request]
    • Mr Johnson: ... each of his requests that at least were made to you are recorded in the ORN case record?
    • Mr Thomson: That’s correct
    • (Transcript 19 December 2012; p.46)
80. At the commencement of Mr Thomson’s cross-examination he acknowledged the events that had occurred since the issue of the first s.139ZQ notice created a potential problem in the exercise of his discretion to issue a second notice. This is reflected in the following exchange:
    • Mr Johnson referred Mr Thomson so the Case Log (exhibit A4; p.179) where the entry appears “I have considered whether issuing another notice may constitute an abuse of process?”
    • Mr Thomson: That’s correct.
    • Mr Johnson: What was the abuse of process that you gave consideration to?
    • Mr Thomson: That there was already proceedings on foot for the – effectively the subject matter at hand.
    • Mr Johnson: Did you give consideration to that?
    • ...
    • Mr Thomson: ...whether there was any purpose to the notice, yes. I was trying to determine that. That’s correct.
    • (Transcript 19 December 2012; p.38)
81. I note the Practice Statement for “Exercise of Official Receiver’s powers to assist Trustees” at [77] (set out at [25] above). I also note the submission made by Mr Johnson that the contents of that direction is consistent with the decision in Re Pearson; Ex Parte Wansley (supra) and, as a consequence of those two items that once a trustee commences an action seeking the judicial resolution of an issue, the subsequent request for an issue of a s.139ZQ notice is inappropriate. In the case summary [2009] HCA Sum26 issued on 29 July 2009, in respect of the High Court decision in Vale v Sutherland (supra) the summary states:
    • ...The High Court handed down a decision about notices which the Official Receiver may issue under the Bankruptcy Act to recover money or property received by a third party through a void transaction with a Bankrupt. Significantly, the Court held that in general any dispute between parties about the value of property that is the subject of such a notice should be determined in proceedings to recover the debt rather than in a proceeding to set the notice aside.
82. In the joint judgment of Gummow, Hayne, Heydon, Crennan and Kiefel JJ in Vale v Sutherland (supra), their Honours stated at [21] – [24]:
    • 21. Valuation for the purposes of ss 120 (and 121 and s 122) involves market value at the time of the transfer. Valuation is a notoriously inexact science [20]. It is apparent from the reference in the opening words of s 139ZQ(1) to those provisions as rendering transactions void under Div 3 of Pt VI of the Act, that questions of the accuracy of particular valuations may be presented by subdiv J. Section 139ZQ(8) makes allowance for this by using the phrase "recoverable ... as a debt", stating:
      • 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.
    • The provision requires treatment as a liquidated sum of an amount claimed by the trustee as being equal to the value received. In that sense it represents an adaptation and extension of the rule in Shepherd v Hills [21] respecting statutory obligations to pay money and recovery on a liquidated claim.
    • 22. The scheme of subdiv J encourages the saving of costs by, on the one hand, compliance with the notice by the transfer to the trustee of property in respect of the value of which the notice requires payment (s 139ZQ(7)) and on the other, by the revocation or amendment of notices to accommodate a settlement (s 139ZQ(4)).
    • 23. But s 139ZS does not provide the means for the determination of a dispute, not as to the engagement of the avoidance provision, here s 120, but as to the amount payment of which is required by the notice. Such disputes are to be resolved in proceedings to recover the debt or enforce the charge.
    • 24. In an action by the Trustee to recover that amount as a debt, the appellant would be at liberty to establish such matters of fact, from which the liability was alleged to arise, as were disputed [22]. The same would be so in any action to restrain the exercise of the power of sale conferred by s 139ZR(6).
    • [20] See Boland v Yates (1999) 74 ALJR 209; 167 ALR 575; [1999] HCA 64.
    • [21] [1855] EngR 377; (1855) 11 Ex 55 at 67 [156 ER 743 at 747]; see The Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285 at 313 [65]; [1998] HCA 20.
    • [22] See Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51.
83. In Lin v Official Trustee in Bankruptcy (2001) 187 ALR 220 his Honour Raphael FM made the following observations in respect of the operation of ss.120 and 139ZQ at [12] – [14]:
    • 12. Section 139ZQ is an administrative aid to a trustee in bankruptcy who seeks to recover money or property to which he claims he is entitled pursuant to ss 120, 121 or 122 of the Bankruptcy Act. Although a notice requires the recipient to make a payment or to transfer property to the trustee on pain of criminal sanctions it is not determinative of any issue between the trustee and the recipient but is subject to the right of the recipient to apply to the court under s 139ZS to set the notice aside. In the meantime the notice acts a[s] charge upon the property. The provision is constitutionally valid (McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Limited v Prebble [1995] FCA 1408; (1995) 58 FCR 391; (1995) 130 ALR 609).
    • 13. In Halse v Norton [1997] FCA 673; (1997) 76 FCR 389 the Full Bench of the Federal Court (Black CJ, Lee and RD Nicholson JJ) upheld the decision of Carr J reported as Norton v Halse (1996) 137 ALR 593 that the trustee bore an onus of establishing either that the facts and circumstances alleged in the notice under s 139ZQ and relied upon at the hearing existed, or that other facts or circumstances existed that would bring the transaction, the subject of the notice, within s 120 or 121 of the Act (per Black CJ at 391). At 392 the Chief Justice said:
      • Clearly, s 139 ZS is not the exclusive means of challenging a notice under s 139ZQ (see re McLernon at FCR 403), and there may well be cases in which there is good reason for the trustee to bring what would be in effect a cross-application for a declaration that a transaction is void, as in re McLernon: see also Theo v Official Trustee in Bankruptcy [1998] FCA 862; (1996) 70 FCR 317; 34 ATR 404.
    • This is the very application and cross application with which the case before me deals.
    • 14. Mr Bigmore QC who appeared on behalf of the applicant invited me to consider first the validity of the allegation that the property had been transferred in breach of s 120 of the Bankruptcy Act. In other words he wished me to deal with the respondent's cross-application. He asserted that if I found that the transfer was not void against the trustee there was no need to consider the validity of the s 139ZQ notice.
84. I note Mr McGrath’s submission that the only valid purpose of the issue of a bankruptcy notice is to bankrupt someone and the use of one in circumstances where it is not intended to seek sequestration is improper, whereas the s.139ZQ notice has multiple uses. One of those legitimate uses is to create pressure on a debtor to pay, which is a key factor pursued by the Trustee in the matter before this Court. It is intended to shortcut, short circuit, avoid, or at least minimise litigation by a trustee or in circumstances where there is evidence of an action under ss.120, 121 and 122 of the Bankruptcy Act. I do not believe that these contentions are in dispute in this matter. Nor do these contentions in any way shift, reduce or nullify the strict requirements identified by his Honour Black CJ in Halse v Norton (supra) in that:
    • ...a trustee has always carried the onus of proving the facts that make a transaction void and in instances in which the onus of proof is to lie elsewhere the Parliament has clearly so provided.
    • (emphasis added)
85. On the material before the Court it was the actions of the Trustee himself, by lodging the cross-claim in proceedings SYG1469/2012, that introduced the claim of fraudulent behaviour by Mr Tsakirakis and impacted upon the completeness and integrity of the material tendered seeking the original s.139ZQ notice. The basis of the original material tendered in support of the initial notice has changed by the introduction of the new issue articulated in the cross-claim that seeks the resolution by this Court, exercising its powers in the Bankruptcy jurisdiction and is no longer something that can be addressed by an administrative decision maker. Under cross-examination, Mr Thomson confirmed that he did not receive any update to the original material supplied for the first notice before making the decision to issue the second notice. The transcript reveals the following:
    • Mr Johnson: ...Prior to you making your decision to issue the second notice, were you provided with any other material as to what had happened with the fund of money that was the subject of the earlier notice?
    • Mr Thomson: No.
    • (Transcript 19 December 2012, p.37.32)
86. Mr McGrath advanced the argument that in this matter there exists a situation where a decision has already been made and not challenged to issue a new notice in the same circumstances where the Official Receiver was satisfied that there was sufficient evidence to support issuing of the first s.139ZQ notice. Mr McGrath contends that the existence of this situation is one of the criteria that activates the issuing of a s.139ZQ notice and the other is the request of which there is ample evidence. Mr McGrath referred the Court to the decision record prepared by Fraser Thomson on 10 October 2012 (Exhibit A4; Tab 19, p.180). Under the heading “The following has informed my decision” in respect to:
    • a) The notice sufficiently sets out the facts and circumstances upon which I have considered that the transaction is void against the trustee.

Mr McGrath contends that goes to the satisfaction of the second of the two s.139ZQ criteria. The second item:

b) There has been sufficient evidence previously provided to the OR to consider the transaction as void.

Mr McGrath suggests that in many ways this note is a cogent point that contained (a). Mr McGrath submits that these are excellent reasons beyond challenge and there is no basis, whatsoever, to suggest that in some way something else has happened and this is a cover-up.

87. The defect in these submissions made by Mr McGrath is that, as pointed out above, the initiation of the cross-claim challenges Theodore Tsakirakis’ defence raised in respect of the $400,000 transferred to him, which he claims has been progressively repaid to meet ongoing living expenses incurred by his mother. However, an element of this explanation has been challenged by the Trustee, in that he raises a claim that a fraudulent transaction has taken place as part of the distribution of those funds as claimed by Theodore Tsakirakis. I am of the view that the cross-claim introduces a challenge, to the basis of the material relied upon to issue the second s.139ZQ notice as it is now fundamentally different to the material tendered in the original application.
88. As mentioned above, Mr Thomson had in his possession a letter from Matthews Folbigg dated 9 November 2011 acknowledging that Theodore Tsakirakis had received the sum of $400,000 from his mother on or around 20 April 2005 which had been deposited into a St. George Bank direct deposit account. Subsequent to that deposit funds were given to Joanna Tsakirakis as requested by her from that or associated accounts under the control of Theodore Tsakirakis. The letter then sets out a schedule of payments which totals $426,092.53 with the final withdrawal being 18 July 2008. The Amended Points of Claim, set out above at [21], indicate that Joanna Tsakirakis’ debtor’s petition was accepted by the Official Receiver on 24 September 2009 and the Official Trustee in Bankruptcy became trustee of the bankrupt estate of Joanna Tsakirakis. Subsequently, on 28 April 2010, Mr Samuel Piscopo was appointed trustee. These points were admitted in the defence.
89. In cross-examination, Mr Thomson confirmed that he had access to the Matthews Folbigg correspondence (see Transcript 19 December 2012, p.37.13-28). The following exchange then took place:
    • Mr Johnson: Well, what was the purpose of issuing the notice?
    • Mr Thomson: The facts that I took into consideration obviously, but underlying the issuing of the notice is that there was some conjecture, I suppose, as to whether personal liability could be attached to the transaction if it was- or the transfer of the property if it was or the transfer of the property if it was made before the commencement of the bankruptcy.
    • Mr Johnson: That was all you had?
    • Mr Thomson: That was one of the key issues, yes.
    • Mr Johnson: Alright. The transfer of the property in this instance was a payment of a cheque of $400,000?
    • Mr Thomson: That’s correct.
    • Mr Johnson: You had received material in December 2011 that you reviewed explaining what had happened to the $400,000?
    • Mr Thomson: Yes, yes.
    • Mr Johnson: You were aware that there were proceedings on foot?
    • Mr Thomson: Yes
    • Mr Johnson: ...by the trustee by virtue of the cross-claim?
    • Mr Thomson: Yes
    • ...
    • Mr Johnson: You had not been provided with any further clarification for the basis upon on which Mr Tsakirakis would be challenging in the proceedings brought by Mr Piscopo?
    • Mr Thomson: I was not aware of the eventual basis of the defence, no.
    • Mr Johnson: Did Mr Piscopo provide you with any documents to contradict any of the matters that were set out in the letter of 9 December 2011?
    • Mr Thomson: The only information that I would provide was that it was a draft copy of the cross-claim, that’s about it.
    • Mr Johnson: He didn’t show you transcripts of the public examination, did he?
    • Mr Thomson: There was information provided that when the notice was initially issued by Ms Bhawana Sharma. Those included transcripts of the Supreme Court matter amongst other information. They were on hand and I reviewed those materials or that material before issuing the second notice.
    • Mr Johnson: Well you didn’t say that in your decision record, did you? Was that done intentionally or inadvertently?
    • Mr Thomson: No it wasn’t intentional. It was stated in my Case log.
    • (Transcript 19 December 2012, p.40)
90. I believe that the contents of the letter of 9 December 2011, the existence of which is freely acknowledged by Mr Thomson in his cross-examination and the clear statement about the content of that letter suggest that there may be an issue of consideration in respect to the timing of the distribution of these funds back to Joanna Tsakirakis, well before the filing of her debtor’s petition and may raise some question as to the validity of the ss.120 and 121 claim.
91. Mr Johnson, in his submissions, drew the Court’s attention to the contents of the Practice Statement “Exercise of the Official Receiver’s Power to Assist Trustees” emphasising the matters that the Official Receiver should take into account when issuing a s.139ZQ notice. These submissions are set out above at [26]-[38]. I note that Mr Johnson acknowledges that the Practice Statement has no legislative force or effect. However, Mr Thomson in cross-examination confirmed that he had acted upon the contents of the Practice Statement when making the decision to issue the second s.139ZQ notice in the following exchange:
    • Mr Johnson: Mr Thomson do you have a copy of the Practice Statement issued in respect of the exercise of discretion by the Official Receiver... That is the Practice Statement that was issued in the, I think, November or December 2011?
    • Mr Thomson: It was current as of December 2011.
    • Mr Johnson: Yes and hasn’t been changed since?
    • Mr Thomson: No.
    • Mr Johnson: That is a practice guideline that you made reference to in your decision record?
    • Mr Thomson. It is.
    • Mr Johnson: And as part of that process, you prepared your decision record because it was indicated as being required when you’re exercising a delegation for the Official Receiver?
    • Mr Thomson: Correct and it is also just good administrative process.
    • (Transcript 19 December 2012, p.32)
92. Two important criteria, in respect to the exercising of the discretion to issue a notice are contained in the Practice Statement at [76] and [77]:
    • 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.
93. On the material before the Court, Mr Thomson’s evidence is that he had access to the material lodged by the Trustee when the initial s.139ZQ notice was sought, but there had been no attempt by the Trustee to update or amend that material prior to the oral request for the issuing of the second s.139ZQ notice. However, prior to the issue of the second notice, the Official Receiver had been furnished with a letter from Matthews Folbigg challenging the basis of the claim that the transfer of the $400,000 was actually void, together with the filing of a cross-claim by the Trustee himself seeking a declaration that the transfer was void.
94. As stated in the Practice Statement at [77] the Official Receiver was not required to adjudicate on whether the transfer was actually void, but rather to determine whether the Trustee had provided sufficient evidence. Even if the assumption is that the Official Receiver was satisfied that the material tendered in support of the original notice satisfied that requirement 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.
95. At the time of the making of the decision to issue the second notice proceedings to determine that question had been initiated and filed in this Court. In those circumstances the Official Receiver was on notice that the material tendered in support of the initial notice was now being challenged. I acknowledge that the parties have been unable to identify any authority directly on point, and that the Practice Statement is purely a guide with no legislative force or effect. Nevertheless, on the material before the Court, the Practice Guidelines at [76](b) and [76](c) are not satisfied, nor at [77] could the Official Receiver be satisfied that the Trustee had provided evidence of a void transfer sufficient to allow the exercise of the discretion. However, the approach adopted by his Honour Black CJ in Halse v Norton (supra) that “the power to issue the notice is conditional not upon the Official Receiver’s opinion or satisfaction that the transaction is void against the trustee, but upon the existence of the facts and circumstances that produce such a result.” With the existence of the two intervening events described above, the validity of the material tendered in support of the original notice has been put in doubt. For an abundance of caution, I believe that the issue of the second s.139ZQ notice should have been delayed until the resolution of those matters by this Court. As there is no bar to the Trustee seeking the issue of a further s.139ZQ notice, he would suffer no permanent detriment if the s.139ZQ notice in dispute in these proceedings were set aside. The structure of the legislation in Subdivision J appears to provide for a mechanism for the revocation and reissue of s.139ZQ notice if it contains a defect.
96. I refer to the following issue because a significant volume of written and oral submissions focused on the aspect of mandatory issuing of s.139ZQ notices. Mr McGrath, in his written submissions, referred the Court to Finance Facilities Pty Ltd v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106, where the High Court laid down the conditions where the exercise of a power referred by the use of the word “may” would be mandatory. Mr McGrath submits that s.139ZQ is a provision of the kind considered in Finance Facilities (supra). The power must be construed in light of all its terms. The Official Receiver must be able to comply with this requirement and the proper construction of the provision is that the Official Receiver has no discretion, but must exercise the power to issue the notice under s.139ZQ when the Official Receiver considers the conditions of s.139(1) have been complied with. Mr McGrath acknowledges that no authorities directly relating to s.139ZQ have been identified in the research carried out on behalf of the first respondent in these proceedings. Consequently, it is submitted that s.139ZQ:
    1. Fulfils the conditions of application of the Finance Facilities (supra) principle;
    2. Appears in Subdivision J in which s.139ZS also appears;
    100. Section 139ZS is directly related to s.139ZQ;
    4. Section 139ZS is a mandatory provision under the finances liberty principle, as a result of Vale v Sutherland; and
    5. As a result, s.139ZQ provides the power to the Official Receiver which must be exercised when the conditions are met.

Mr McGrath argues that the Official Receiver had no choice but to issue the notices. The only basis not to issue the notice would be that there had been no request from the Trustee or the Official Receiver did not genuinely consider that the transaction was void against the Trustee.

97. Mr Johnson, in his submissions, contends that the terms of s.139ZQ specifically differentiate between “may” and “must” in respect to the actions of the Official Receiver and, as such, it is submitted that on a plain reading of the section itself the use of the word “may” in the decision making process leading to the issue of the notice is discretionary, not mandatory. Mr Johnson argues if the decision to issue a notice in accordance with the provisions of s.139ZQ is one in respect to which there is no discretion, as suggested by the first respondent, there would be nothing in respect of which the powers of review under the provisions of s.15(5) of the Bankruptcy Act or ss.5 or 6 of the AD(JR) Act could have any operation. Mr Johnson submits that would be contrary to the spirit and intent of the legislation and its structure.
98. In Finance Facilities (supra) his Honour Windeyer J indicated that the word “may” is merely used to confer the authority: and the authority must be exercised if the circumstances are such as to call for its exercise. In the matter the before this Court, I am not satisfied that the circumstances have established that the authority should have been exercised, because of the intervening events that put the material advanced in support of the issue of the first s.139ZQ notice now being in doubt. That doubt needs to be resolved by a judicial hearing that is addressed in proceedings SYG 1469 of 2012 and referred to as the cross-claim.

Conclusion

99. Accordingly, the s.139ZQ notice issued on 11 October 2012 should be set aside.

I certify that the preceding ninety-nine (99) paragraphs are a true copy of the reasons for judgment of Judge Lloyd-Jones

Associate:

Date: 24 April 2013

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