SHOULD THE ADVICE DECLARATION BE MADE?
24 Here, the trustee was in a dilemma once it received Golledge SC's opinion that it could not make the complaint under the AFCA scheme rules, or resolve it, because the trustee was not an "eligible person" under the rules and no property, chose in action or other right of Mr Kent had vested in the trustee. That dilemma intensified with Ms Gobbo's inconsistent opinion (see [66]-[69], [74] of the principal reasons).
25 The trustee's originating application sought declarations, first, under ss 30(1) and 134(1) of the Bankruptcy Act together with s 63 of the Trustee Act that it would be justified in treating the settlement sum as property of the bankrupt and, secondly, pursuant to s 90-15 in Sch 2 to the Bankruptcy Act, that the settlement sum was property of the bankrupt that had vested in the trustee.
26 Counsel for the trustee submitted on the first day of the hearing:
I would agree that it is something of a test case, your Honour, because it is not uncommon that people who find themselves bankrupt also may have valid complaints against a financial services firm, and the decision here will undoubtedly affect quite a few other administrations - - - by not just the official trustee but trustees in bankruptcy generally.
(emphasis added)
27 The trustee should have joined the bank and AFCA at the outset of the proceeding because each was a proper and necessary party. Their participation from the inception is likely to have shortened the length of the proceeding, although this is not certain.
28 In its initial written submissions in reply, the trustee made clear that it was seeking both judicial advice and a binding declaration of right stating (par 21):
It is not unusual for directions and orders declaratory of substantive rights and intended to bind parties to the proceedings being started as an application for directions [Re Staff Benefits Pty Ltd (in liq) and the Companies Act [1979] 1 NSWLR 207]. The appropriate course where such determinations are sought is to join parties with competing interests [Re Bamboo Direct Pty Ltd (in liq) [2016] FCA 264. [41]; citing Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd [2007] FCA 1443]. The [trustee] has done so and [Mr Kent] has opted to contest the matter.
(emphasis added)
29 By the time of the commencement of the trial, the submissions of the parties engaged on the substantive issue of whether the trustee had the legal right to enter into the deed and be paid the settlement sum which it had received and retained since late February 2021. From about that time, the trustee was aware that Mr Kent disputed its asserted entitlement to enter into the deed and to resolve any matter the subject of his complaint.
30 Mr Kent's cross-claim also sought a final determination of his legal rights. That reflected the way which the trustee's submissions concentrated on the substantive issues of what the parties' legal rights were based on the evidence.
31 In my principal reasons, I found (at [155]) that the trustee was not entitled to any of the relief it had sought and (at [156]):
This was very much in the nature of a test case as to the interaction between the AFCA scheme and the rights of trustees in bankruptcy, bankrupts and financial firms under the Bankruptcy Act. Ultimately, Mr Kent has had substantial success, although not on, and perhaps despite, some of his arguments.
32 I am of opinion that it is not appropriate to make the advice declaration. That is because the agreed form of the non-vesting declaration is a binding declaration of right that determines, as a matter of substance under s 30(1) of the Bankruptcy Act and Mr Kent's cross-claim, that the settlement sum which the trustee received from the bank is not property of Mr Kent's bankrupt estate that vested in the trustee and, as the trustee accepted (based on that declaration), now must be repaid to the bank.
33 While the trustee was entitled to apply for judicial advice on this subject matter (Macedonian Church 237 CLR 66, see [18]-[20] above), that aspect of its originating application was overtaken by the trustee's need for a binding determination as to whether a trustee in bankruptcy has any, and if so what, interest or property in a complaint by a (present or former) bankrupt under the AFCA scheme or whether any property of the bankrupt the subject or product of a complaint under that scheme vests in a trustee in bankruptcy. This was the essential reason why the trustee, together with all the parties, conducted the proceeding as a test case about the legal nature of the right of a bankrupt to make a complaint under the AFCA scheme and what, if any, interest vested in, or could be exercised by, a trustee in bankruptcy in respect of such a complaint or any proposed resolution of it.
34 The Court's resolution of what, if any, rights or property of Mr Kent vested in the trustee, in the factual context established in the evidence at the trial, would provide, first, a judicial determination of the substantive dispute between the trustee and Mr Kent about the trustee's ability to resolve the complaint in the circumstances and, secondly, at least possibly useful obiter dicta or judicial reasoning that could assist trustees in bankruptcy, AFCA and members of the AFCA scheme, such as the bank, in dealing with future issues involving persons in the positions of those now in the present litigation.
35 However, in contrast, any judicial advice that I gave could not create a legally binding finding, res judicata or issue estoppel in respect of any issue arising under the wider questions in the proceeding because such advice could not resolve authoritatively any controversy between parties. That is why I required the joinder of the bank and AFCA and Mr Kent filed his cross-claim. Moreover, the advice declaration that the trustee now proposes be made reflects the antithesis of the advice that it sought in the originating application.
36 I found in the principal reasons that some of the subject matter of the complaint comprised the personal, unassignable rights of Mr Kent to apply for an order under ss 178(1) and 179(1) of the National Consumer Credit Protection Act 2009 (Cth) that were not property at all or property of the bankrupt and could not vest in a trustee in bankruptcy because any such right fell within the exception in s 116(2)(g)(i) of the Bankruptcy Act (see [129]-[130]). Accordingly, at least by lodging the complaint with AFCA in respect of those matters, Mr Kent had enlivened AFCA's obligation to perform its dispute resolution functions under the tripartite contract between himself, AFCA and the bank, in which the trustee had no unilateral capacity to participate, as it had purported to do by entering into the deed to "resolve" the complaint.
37 Thus, my findings in the principal reasons did not determine the advisability of the trustee's decision to enter into the deed, but rather represented conclusions about the parties' legal rights on the evidence that resolved, once for all, the issues of fact and law contested in the litigation.
38 The substance of the three declarations of right that all of the parties agreed would give effect to my reasons are not of the character of judicial advice. Those three declarations resolved the controversy between all four parties. That resolution makes it unnecessary to give any judicial advice to the trustee in the form of the advice declaration. Rather, the substance of the three declarations states the legal rights of the parties and leaves no room for doubt that the deed did not resolve the complaint.
39 The trustee acknowledged in the course of argument that, in this event, it would be obliged to repay the settlement sum to the bank. It does not need the advice declaration. The substance of the three declarations of right will make clear that the deed did not resolve the complaint because the trustee had no legal right to do so and that, as a result, the trustee cannot retain the settlement sum that the bank paid it in purported performance of its obligations under the deed: cf Warramunda Village Inc v Pryde (2001) 105 FCR 437 at 440 [8] per Gray, Branson and North JJ.
40 It is unnecessary and inappropriate to give the trustee any judicial advice sought in the advice declaration that would do no more than repeat, in a non-binding way, the determinative effect of the non-vesting declaration. The advice declaration would produce no foreseeable consequence for the parties and should not be made: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582 per Mason CJ, Dawson, Toohey and Gaudron JJ.