Micheletto (Trustee) v Butler, in the matter of the bankrupt estate of Walsh

Relevant statutory provisions 5 The focus of the separate question is on s 9A of the Bankruptcy Act, which at the time of the bankruptcy read as follows: 9A Act does not extend to Norfolk Island This Act does not extend to Norfolk Island. 6 This provision was inserted into the Bankruptcy Act by the Territories Legislation Amendment Act 2016 (Cth) (Territories Legislation Amendment Act) with effect from 1 July 2016. It was repealed on 2 August 2021 by the Territories Legislation Amendment Act 2020 (Cth). 7 Before leaving the Bankruptcy Act, it is also necessary to refer to the definition of property in s 5: property means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property. 8 The context in which s 9A was introduced is as follows. 9 Until 2016 Norfolk Island was, for most legislative purposes, treated as being in a jurisdiction of its own. Australian laws were presumed not to apply to Norfolk Island. 10 Prior to 2016, s 18 of the Norfolk Island Act 1979 (Cth) (Norfolk Island Act) provided: 18 Application of Commonwealth Acts (1) An Act or a provision of an Act (whether passed before or after the date of commencement of this section) is not, except as otherwise provided by that Act or by any other Act, in force as such in the Territory, unless expressed to extend to the Territory. (2) An enactment shall not be made so as to affect the application of its own force in, or in relation to, the Territory of an Act or a provision of an Act. 11 The Norfolk Island Act provided for Norfolk Island to have its own Legislative Assembly with plenary power to pass legislation with effect on Norfolk Island. Norfolk Island passed its own bankruptcy legislation, being the Bankruptcy Act 2006 (NI) (the NI Bankruptcy Act). Section 204 of the NI Bankruptcy Act provides for Norfolk Island courts to assist Australian courts in the enforcement of their bankruptcy laws: 204 Assistance by the Court to Courts of a foreign country (1) Subject to this Part, the Court shall assist a court of Australia and of a foreign country having jurisdiction in relation to bankruptcy laws. (2) In granting assistance under subsection (1), the Court shall have regard to the rules of international private law. 12 The Commonwealth overhauled Norfolk Island's governance arrangements, with Norfolk Island's Legislative Assembly being abolished by way of the Norfolk Island Legislation Amendment Act 2015 (Cth). At that time, by the Territories Legislation Amendment Act, s 18 of the Norfolk Island Act, which is recited above at [10], was amended to state: 18 Application of Commonwealth Acts (1) An Act or a provision of an Act extends to the Territory of its own force except so far as the Act or another Act expressly provides otherwise. (2) Except as provided by this Act, an enactment has no effect so far as it purports to affect the application of an Act or a provision of an Act in or in relation to the Territory. (3) Subsections (1) and (2) apply to Acts passed before, on or after 1 July 2016. 13 At the same time, amendments were also made to several Acts to provide that they would not extend to Norfolk Island. The insertion of s 9A into the Bankruptcy Act was one of those amendments. The relevant Explanatory Memorandum to the Territories Legislation Amendment Bill 2016 (Cth) that became the Territories Legislation Amendment Act (Explanatory Memorandum) stated: In effect, new section 18 provides that a Commonwealth Act is in force on Norfolk Island, except as otherwise provided by an Act. This means that: • Commonwealth Acts which do not state whether or not they extend to Norfolk Island extend to Norfolk Island (even if there is no practical effect of this extension). • Commonwealth Acts which expressly state they do not extend to Norfolk Island do not (or continue to not) extend to Norfolk Island. • Commonwealth Acts which state that they extend to Norfolk Island continue to extend (although this is technically unnecessary as a result of new section 18). In some cases, only certain provisions of Acts apply to Norfolk Island. The Australian Government has assessed all Commonwealth legislation to determine whether it is appropriate or not appropriate to extend an Act to Norfolk Island at this time. As a result of this consultation across federal government departments, this Schedule makes the necessary consequential amendments to Commonwealth Acts. 14 That passage was relied on by both parties. 15 The respondent also relied on the following passage from the Explanatory Memorandum: Item 18 inserts two new definitions in subsection 5(1). Subsection 5(1) provides that "Australia", when used in the geographical sense, does not include Norfolk Island; and "Territory of the Commonwealth" means a Territory referred to in section 122 of the Constitution, other than Norfolk Island. These amendments are consequential to the amendment in item 19. Item 19 inserts section 9A at the end of Part IB to expressly provide that the Bankruptcy Act 1966 does not extend to Norfolk Island. This has the effect of excluding Norfolk Island from the application of the Bankruptcy Act 1966.

Submissions 16 The Trustees submitted that before the insertion of s 9A in 2016, the Bankruptcy Act was not in force in Norfolk Island putting it in effectively the same position as any other foreign jurisdiction. Nonetheless, an Australian bankruptcy would be recognised and given effect on Norfolk Island in accordance with its domestic laws, in particular s 204 of the NI Bankruptcy Act. At that time, the Bankruptcy Act did not exclude Norfolk Island property from being "property of the bankrupt". That is, under the pre-2016 legislative regime, Norfolk Island was effectively a foreign jurisdiction for bankruptcy purposes, but (as with assets in any other foreign jurisdiction) assets on Norfolk Island would be capable of constituting "property of the bankrupt" in an Australian bankruptcy. 17 The Trustees submitted, relying on the legislative context in which s 9A was enacted, that the only plausible construction of s 9A is that it was intended to preserve the existing status quo, so that the NI Bankruptcy Act could continue to operate in circumstances where it would otherwise be overridden by the Bankruptcy Act, in light of the amendment to s 18 of the Norfolk Island Act. The Trustees emphasised that the word "extends" in the amended s 18 "precisely line[s] up" with s 9A, such that the two provisions "clearly show that one is attempting to refer to the other". The Trustees referred to the Explanatory Memorandum as recited above at [13], which they submitted supported their construction. Their submission was that nothing in the Territories Legislation Amendment Act, and so in s 9A, was intended to substantively change the pre-2016 position with respect to bankruptcy on Norfolk Island. They submitted that the purpose of s 9A was to act as a transitional provision to ensure that the pre-2016 position was preserved until such time as the Commonwealth decided to fully extend the Bankruptcy Act to Norfolk Island and thereby replace the NI Bankruptcy Act (as in fact occurred when s 9A was repealed in 2021). Thus, in their submission, s 9A did not purport to "substantively and astonishingly change the nature of Australian bankruptcy" by giving rise "to the anomalous…position that for slightly over five years Norfolk Island was a "bankruptcy free zone"". 18 The respondent submitted, relying on principles of statutory construction, that the starting point is that the words of the statute should be given their "natural and ordinary meaning". The respondent's submission was that the meaning of s 9A is clear - the use of the word "extend" is broad, and the words of the section are not qualified in any way (by reference to particular sections of the Bankruptcy Act, or bankruptcies occurring in Norfolk Island). The respondent drew a comparison between the uses of the phrase "extend to" in ss 9A and 116(2) of the Bankruptcy Act, relying on the statutory presumption that a word or phrase is presumed to bear the same meaning throughout an Act. Relevantly, s 116(2) states that s 116(1) "does not extend to the following property". The respondent's submission was that the Trustees' construction of s 9A gives the words "extend to" a much more limited meaning which cannot be reconciled with the use of that phrase in s 116. To that end, the respondent submitted that if, as contended by the Trustees, s 9A was to provide only for the exclusion of bankruptcies occurring in Norfolk Island (but not Norfolk Island property itself), then the legislature would have used language to that effect to provide for a conditional extension of the Bankruptcy Act to Norfolk Island. 19 In the respondent's submission, the ordinary meaning of s 9A is that the provisions of the Act do not apply to Norfolk Island (including property located in Norfolk Island). It was submitted that this is consistent with the meaning given to the provision by Rares J in Registrar, Supreme Court of Norfolk Island v Walsh [2021] NFSC 4 (Walsh) at [37]-[38] and Registrar, Supreme Court of Norfolk Island v Walsh (No 7) [2021] NFSC 5 (Walsh (No 7)) at [22]. The respondent also submitted that the Explanatory Memorandum recited above at [15] supports her interpretation. It was submitted that part of the Explanatory Memorandum suggests that the intention of the legislature was to exclude Norfolk Island from the application of the Act entirely. It was also submitted that the Trustees' submissions are inconsistent with the fact that the Territories Legislation Amendment Act specifically excluded Norfolk Island from the operation of the Cross-Border Insolvency Act 2008 (Cth) (Cross-Border Insolvency Act), which gave effect to the Model Law on Cross-Border Insolvency (1997) of the United Nations Commission on International Trade Law: see s 3, sch 5, items 30-32 of the Territories Legislation Amendment Act. 20 The respondent also submitted that the Trustees' reliance on s 5 of the Bankruptcy Act is misplaced. Two reasons were advanced in support of that submission. First, s 5 remains subject to: (1) the words of s 9A, which provide that the Bankruptcy Act does not extend to Norfolk Island, and (2) to the amendment of the definition of "Australia" in the Bankruptcy Act by the Territories Legislation Amendment Act, which excludes Norfolk Island. Second, although s 5 is expressed in broad terms, it remains subject to the principles of private international law. To the extent that s 5 purports to give extraterritorial application to the Bankruptcy Act, the respondent submitted it cannot apply to vest property which once belonged to the bankrupt, but which before the commencement of the bankruptcy already vested in some other person, citing Re Doyle; Ex parte Brien v Doyle [1993] FCA 102; (1993) 41 FCR 40 (Re Doyle) at 46-48, 54, and referring also to Lord Collins et al (eds), Dicey, Morris and Collins on The Conflict of Laws (16th ed, Sweet & Maxwell, 2022) at [31-052], Davies M, Bell AS, Brereton PLG, and Douglas M, Nygh's Conflict of Laws in Australia (10th ed, Lexis Nexis Australia, 2020) at [36.57], and Official Trustee in Bankruptcy, in the matter of Lyons [2000] FCA 1428; (2000) 104 FCR 486 (Lyons) at [6].

Consideration 21 It is important to recall at the outset the limited nature of the question posed, being whether the Bankruptcy Act, in force at the commencement of the bankruptcy, excluded Norfolk Island property from being "property of the bankrupt" within the meaning of that Act. 22 The starting point for ascertaining the meaning of a statutory provision is the text of the statute having regard to its context and purpose: SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 (SZTAL) at [14], citing Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69]-[71]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47]. 23 It is uncontroversial, as the respondent submitted, that words of a statute should, prima facie, be given their natural and ordinary meaning, unless it is plain that Parliament intended them to have some different meaning: see for example, Masson v Parsons [2019] HCA 21; (2019) 266 CLR 554 at [26]. That said, in SZTAL, Kiefel CJ, Nettle and Gordon JJ explained at [14] (citations omitted): The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected. 24 Given that s 9A was inserted into the Bankruptcy Act at the same time equivalent provisions were inserted into other legislation, the context and purpose of the amendment may be of particular significance. 25 Prior to the amendments in 2016, the Bankruptcy Act did not extend to Norfolk Island by virtue of the then s 18 of the Norfolk Island Act. Norfolk Island had its own Bankruptcy legislation. The respondent accepts as much. That said, there is no basis to suggest that prior to 2016, the definition of property in s 5 of the Bankruptcy Act would not include Norfolk Island (as with any other country). As the applicant submitted, prior to 2016 the Bankruptcy Act was not a law of New Zealand, France or any other foreign jurisdiction, but if a person made bankrupt under that Act had property in those countries, it would fall within the definition of property in s 5. It applied similarly to Norfolk Island. Although the respondent hesitated to accept that proposition, the only basis relied on for not doing so was Re Doyle. However, as explained below, Re Doyle does not affect the definition of property, but rather goes to the later question of whether the Norfolk Island Property can be retrieved and vest in the Trustees. 26 When the legislation was amended in 2016, the evident purpose, as reflected by the amendments to the Bankruptcy Act (and the other Acts amended in like terms), and as borne out by the extrinsic material, was not to extend the Bankruptcy Act at that time, to Norfolk Island. The only reason s 9A was necessary, and inserted into the Bankruptcy Act, was because of the amendments made at the same time to s 18 of the Norfolk Island Act. That is, it can be inferred that s 9A was inserted to ensure that the status quo was maintained. 27 The 2016 amendment to s 18 of the Norfolk Island Act uses the language "extends". The terms of s 9A mirror the language of that provision. The Explanatory Memorandum describes, as recited above, an assessment by the Australian Government of all legislation. As reflected in the Explanatory Memorandum, a provision in the same terms as s 9A was inserted in twenty-three Acts. Further, that being the explanation for the language used in s 9A, the respondent's submission in relation to reading the terms in the Bankruptcy Act consistently, relying on s 116, has little weight. 28 On the respondent's submission, the status quo was not maintained in relation to the Bankruptcy Act (and nor was it intended to be), but the provision went further and impacted on the definition of property in s 5 of the Bankruptcy Act such that where a sequestration order is made under that Act, property of the bankrupt held in Norfolk Island is excluded from the definition of property in s 5 (although property held anywhere else in the world is not). That is an unlikely intention. The definition of property is not determined by whether the Bankruptcy Act extends to that country. As the applicant submitted, given the context and purpose of s 9A, its more natural reading is that the Bankruptcy Act did not extend to Norfolk Island in the same way it does not extend to New Zealand or France (as described above at [25]). If a person made bankrupt under the Bankruptcy Act had property in those countries, it would fall within the definition of property in s 5. 29 The respondent's reliance on Re Doyle does not assist in determining how s 9A should be construed, given the limited nature of the question to be determined. That said, Re Doyle reflects that property held elsewhere would fall within the broad definition in s 5, although there may be an issue as to whether the property could actually be affected by the bankruptcy. In Re Doyle, Burchett J observed at 46: Since 1883, English bankruptcy legislation has included a definition of "property" in the widest terms - "whether real or personal and whether situate in England or elsewhere", to quote the language of the Bankruptcy Act 1883 (Imp), s 168. In Australia, the Bankruptcy Act 1924 (Cth) took for its model the English Act of 1883, as is pointed out in pars 17 and 18 of the Clyne Report. Section 5(1) of the Bankruptcy Act, based in its turn on the 1924 Act, now provides (in terms substantially reflecting those of s 4 of the 1924 Act): "In this Act, unless the contrary intention appears: … 'property' means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property." There is a separate definition of "the property of the bankrupt", an expression which generally refers to "the property divisible among the bankrupt's creditors" and certain rights and powers in relation to it. What is the effect of so wide a definition of "property" as that contained in the Act? G C Cheshire and P M North, Private International Law (12th ed, 1992), at pp 907-908, comment on the new English Act as follows: "The Insolvency Act 1986 provides that the estate of a bankrupt shall vest in his trustees. His estate is very widely defined and extends essentially to all of his 'property', which term, according to section 436, includes 'money, goods, things in action, land and every description of property wherever situated.' It will be noticed that the 1986 Act expressly and deliberately attributes a very extensive effect to an English adjudication. Not only movables, but even immovables, belonging to the bankrupt 'wherever situated', ie whether in England or elsewhere, are to pass to the trustee. Whether the transfer of property abroad can actually be effected is another matter. Although there was a view that Commonwealth countries were obliged to give effect to similar provisions under the Bankruptcy Act 1914 and earlier legislation as 'imperial statutes', this view cannot be sustained in relation to the Insolvency Act 1986. It is clear that an English adjudication cannot of its own force have any effect on property situated in, say, Australia or France, and it has been suggested that it is unlikely that a court in a foreign country would permit property there to be used for the payment of United Kingdom taxes owed by the bankrupt. Furthermore, if the English bankruptcy purports to act as an assignment of property abroad, it will only do so subject to any charges or liabilities attaching to the property under the law of the situs." 30 See also Lyons at [6], which refers to Re Doyle, and makes statements to the same effect. 31 These authorities do not suggest that the definition of property is to be read down, but rather that a practical issue arises as to whether a trustee can recover the property for the purpose of administering the bankrupt's estate: cf, Davies, et al (2020) at [36.57]. The separate question to be answered in this hearing is not concerned with the later issue of recovery of the Norfolk Island Property. That property may be difficult to recover such that a trustee might not ultimately be vested with the interest in it, does not affect the question of whether it is property within s 5 of the Bankruptcy Act. As an aside, I note that the Trustees submitted that they do not need to rely on the Bankruptcy Act to succeed in their claim to recover the Norfolk Island Property. However, as they acknowledged, that is not an issue relevant to, or to be addressed in answering, this preliminary question. 32 The respondent also relied on the judgments of Rares J in Walsh at [37]-[38] and Walsh (No 7) at [22]. Rares J was sitting as a Judge of the Supreme Court of Norfolk Island. The paragraphs relied on by the respondent are not as clear cut as she contends. 33 In Walsh, Rares J stated at [37]-[38]: [37] On 20 July 2020, a judge of the Federal Circuit Court made a sequestration order against the estate of Mr Walsh and ordered that the petitioning creditor's costs be paid out of the bankrupt's estate. That Court noted that the act of bankruptcy occurred on 24 January 2020 and that consent of joint trustees to act had been filed with the Court. However, that order does not affect Mr Walsh's obligations to make payments under the law applicable in the Island. That is because the Bankruptcy Act 1966 (Cth) provides in s 9A: 9A Act does not extend to Norfolk Island This Act does not extend to Norfolk Island. [38] Mr Walsh's CBA bank accounts and the CBA account of United Pacific are situated in the Island and, by force of s 9A of the Bankruptcy Act 1966 (Cth), may not be property over which trustees in bankruptcy appointed by the 20 July 2020 orders in the Federal Circuit Court can exercise powers. Bankruptcy on the Island is governed by the Bankruptcy Act 2006 (NI). It is not clear exactly what the bankruptcy trustees have done to control Mr Walsh's assets or bank accounts, save to say that Mr Walsh seems to have been able to operate freely on the CBA and ANZ accounts in evidence well after he was made bankrupt on mainland Australia. That may be because of the serendipitous confusion which could be caused, perhaps intentionally, by Mr Walsh's use of various different names to describe himself to financial institutions in the context that the relatively common name, John Walsh, is, without more, unlikely to be connected readily to his more exotic names in which he opened the bank accounts and credit cards. It may also be because those accounts are located in the Island. 34 There are two observations to be made about that passage. First, the conclusion in [37] that the order under the Bankruptcy Act does not affect Mr Walsh's obligation to make payments in Norfolk Island, referring to s 9A, simply reflects that he is not a bankrupt in Norfolk Island. I note also that there is no evidence that Norfolk Island has ever been asked for assistance pursuant to s 204 of the NI Bankruptcy Act in relation to Mr Walsh's bankruptcy. Second, in [38], Rares J does not adopt the respondent's construction as to the effect of s 9A. To the contrary, Rares J's observations that it was not clear what the Trustees had done to control Mr Walsh's assets implies that his Honour envisaged something could be done. His Honour did not decide the issue. Rather at [39], Rares J concluded that regardless of the explanation, Mr Walsh had finances in Norfolk Island to pay his Norfolk Island debt. Contrary to the respondent's submission, the issue of the construction of s 9A was not necessary for his Honour's conclusion. I note also that Mr Walsh did not appear at the hearing, and it is not clear what, if any, submissions were advanced on the topic. 35 It may be accepted that the statement by Rares J at [22] in Walsh (No 7) is more direct: As I pointed out to Mr Walsh in the course of the hearing, the first three orders he sought were beyond the jurisdiction of this Court. First, the Federal Circuit Court had jurisdiction to make a sequestration order under the Bankruptcy Act 1966 (Cth), and the Supreme Court of Norfolk Island has no jurisdiction in relation to the exercise of the Federal Circuit Court's jurisdiction in Australia. Secondly, s 9A of the Bankruptcy Act 1966 (Cth), which had applied since 1 July 2016 but was repealed effective from 2 August 2021, expressly provided that that Act did not apply to Norfolk Island, and, as a consequence, the bankruptcy orders applied to Mr Walsh's estate on the Australian mainland. Thirdly, whatever the Commonwealth Bank did on 2 December 2020 with moneys that it held at the time of the conversation to which Mr Walsh referred in respect of his bankruptcy was beyond this Court's jurisdiction. 36 This does not sit with his Honour's earlier judgment. Again, it is unclear what, if any, submission was made directed to this topic. The reasons do not reflect that any argument was advanced in the nature now being considered by this Court. Plainly, there is no reference in either judgment to the consideration of the text of s 9A, given its context or purpose. The statement is merely said as a conclusion. 37 Finally, I do not agree with the respondent's submission that the Trustees' construction is difficult to reconcile with the fact that the Cross-Border Insolvency Act was amended to exclude Norfolk Island from its operation: s 3, sch 5, items 30-32 of the Territories Legislation Amendment Act. The circumstances in which that amendment was made is reflected in the Explanatory Memorandum: The Cross-Border Insolvency Act 2008 applies the Model law on Cross-Border Insolvency of the United Nations Commission on International Trade Law to Australia in relation to the Bankruptcy Act 1966 and the insolvency provisions in Chapter 5 of the Corporations Act 2001. As the Bankruptcy Act 1966 and Chapter 5 of the Corporations Act 2001 do not apply in Norfolk Island, the Cross-Border Insolvency Act 2008 is also excluded from operating in Norfolk Island to avoid uncertainty or any unintended consequences. 38 This does not assist with the meaning of s 9A of the Bankruptcy Act. In any event, I note that s 204 of the NI Bankruptcy Act, recited above at [11], provides that Norfolk Island courts shall assist a court in Australia in relation to bankruptcy laws. This is akin to s 29 of the Bankruptcy Act: see for example, Warner (Trustee), in the matter of Barnes and Barnes [2018] FCA 1784 as to its effect. 39 I also do not accept the respondent's submission that the applicant's construction involves reading words into the legislation. Rather, it involves reading s 9A of the Bankruptcy Act in its context and in light of its evident purpose.

Conclusion 40 For the reasons above, in my view, the better construction of the text of s 9A, considered in its context and given its purpose, is that contended for by the Trustees. 41 Accordingly, the answer to the question is "no". I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.