Samootin v Official Trustee in Bankruptcy

REASONS FOR JUDGMENT 1 Alexandra Samootin is a discharged bankrupt. A bankruptcy notice was issued for non-payment of judgment debts, followed by a creditors' petition and then, on 24 May 2006, a sequestration order. As a result of that order the Official Trustee in Bankruptcy ("Official Trustee") was appointed trustee of Ms Samootin's bankrupt estate. Ms Samootin was discharged from bankruptcy pursuant to s 149 of the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act") on 22 June 2009. 2 For some time Ms Samootin has claimed that the Official Trustee "misappropriated" her marital property. She contends that the Official Trustee had no legal right to take ownership of that property before the final hearing of Family Court proceedings between her and her former husband. In the principal proceeding she seeks an order pursuant to s 178 of the Bankruptcy Act for the release of her bankrupt estate as well as damages. The application was filed on 18 February 2011. In its amended notice stating grounds of opposition to the application the Official Trustee asserts, amongst other things, that the application was made more than 60 days after the date upon which Ms Samootin became aware of the trustee's act, omission or decision, which they submit was 3 September 2007 at the latest. 3 Section 178 of the Bankruptcy Act provides: (1) If a bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable. (2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision. 4 On 10 June 2011 the Official Trustee filed a notice of motion which relevantly sought a separate hearing of two questions: (a) whether Ms Samootin commenced this proceeding within 60 days after the day upon which she became aware of the Official Trustee's act, omission or decision of which she complains; and (b) whether Ms Samootin is affected by any act, omission or decision of the Official Trustee. 5 The Official Trustee only moves on prayer 1(a) and does not press for a separate hearing of the second question. 6 Before considering the motion there is one preliminary matter I must deal with. On 22 December 2011 Ms Samootin filed a notice pursuant to s 78B of the Judiciary Act 1903 (Cth) addressed to the Federal Attorney-General, the NSW Attorney General and the Official Trustee that the proceeding involves a matter arising under the Constitution or involving its interpretation within the meaning of that section. The matters the subject of the notice relate to the validity of certain provisions of the Sex Discrimination Act 1984 (Cth) and the implications of the Convention on the Elimination of all Forms of Discrimination against Women, opened for signature 18 December 1979 [1983] ATS 9 (entered into force on 27 August 1983) ("CEDAW"). 7 Section 78B(1) imposes a duty on a court not to proceed in a pending cause that "involves a matter arising under the Constitution or involving its interpretation" unless and until the court is satisfied that notice of the cause, specifying the nature of the matter, has been given to the Attorney-General of the Commonwealth and the Attorneys General of the States, and a reasonable time has elapsed since the giving of the notice for their consideration of whether to intervene in the proceedings or apply for the removal of the cause to the High Court. Ms Samootin's notice is defective. Quite apart from anything else, she has not given notice to all the Attorneys General. It is difficult to see how the matters arise in the proceeding. Ms Samootin's submission merely referred to the notice. A cause does not "involve" a matter arising under the Constitution or involving its interpretation merely because someone says it does: Re Finlayson; Ex parte Finlayson (1997) 72 ALJR 73 at 74. Regardless, the matters raised in the notice are irrelevant to the issue with which I am concerned, namely, whether there ought to be a separate hearing of the question raised by the Official Trustee. If Ms Samootin's application truly involves a constitutional question, it does not arise at this stage of the proceeding. Subsection 78B(2)(c) enables a court to continue to hear evidence and argument concerning matters severable from any matter arising under the Constitution or its interpretation and this is plainly such a matter. 8 I now turn to the Official Trustee's motion. 9 The motion was brought under the former Federal Court Rules (O 29 r 2). The current rules were not then in force. Still, r 1.04 of the Federal Court Rules 2011 ("the Rules") provides that these Rules apply to a step in a proceeding that was started before 1 August 2011 (when the current Rules came into effect), if the step was taken on or after that date, unless the Court otherwise orders. No such order was made in this case. It follows that r 30.01 applies. That said, there is no significant difference between O 29 r 2 and r 30.01. 10 Rule 30.01 of the Rules permits a party to apply to the Court for an order that a question arising in the proceeding be heard separately from any other question and requires that the application be made before a date is fixed for trial of the proceeding. 11 A convenient summary of the principles governing the exercise of the Court's discretion to make an order for the separate trial of a question arising in a proceeding appears in the judgment of Branson J in Reading Australia Pty Ltd v Australian Mutual Provenance Society (1999) 217 ALR 495 ("Reading"). Despite the changes to the Rules, neither party suggested that the principles were no longer applicable and there is no reason to think otherwise. In short, those principles are: (a) Whilst ordinarily issues of fact and law are determined at the same time, the rule provides for a separate hearing in appropriate cases, that is, where it is just and convenient to make such an order. (b) The question may be one of fact or law. (c) A question can be the subject of an order for a separate hearing although a decision on the question will not determine any of the parties' rights. (d) The question must be capable of being conclusively or finally determined on the basis of facts found or agreed for the purpose of quelling a controversy between the parties and not hypothetical. (e) Where the question is one of mixed fact and law, it is necessary that the question can be precisely formulated and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination or as agreed facts or facts to be judicially determined. (f) The power should be exercised with care to avoid deciding issues that are not "ripe" for separate determination, for example where an applicant puts her case in alternative ways and determination of the question would leave significant issues unresolved. 12 These principles are drawn from a number of authorities, principally Landsal Pty Ltd (in liq) v REI Building Society (1993) 41 FCR 421 at 425, Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 ("Bass"), Jacobson v Ross [1995] 1 VR 337 at 341, and CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601. 13 I would, however, observe that, in addition to the matters her Honour raised, I note that, since then, Pt VB was inserted into the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act") and I am now obliged to exercise the power conferred by r 30.01 (or O 29 r 2 as the case may be) in the way that best promotes the overarching purpose of the civil practice and procedure provisions of the Federal Court Act and the Rules: s 37M Federal Court Act. That purpose is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. 14 It might be thought that the question the Official Trustee raises is a pure question of fact. But Ms Samootin contends that she became relevantly aware when she learned of the prospect of an application under s 178 of the Bankruptcy Act through reading the reasons for judgment of the Court of Appeal in Samootin v Shea [2010] NSWCA 371 (in which the Court dismissed various applications Ms Samootin had made on the basis that she lacked standing to bring them) and the application to this Court was made within 60 days of her receiving a copy of those reasons. That Ms Samootin's awareness dates from this time is in dispute. The dispute appears to raise mixed questions of fact and law. The legal question involves the proper interpretation of s 178(2). In substance, it is whether the state of awareness with which the subsection is concerned includes awareness of a right to relief under subsection (1). 15 Although most of her submissions were directed to the substance of the question to be tried (that is, the day she became aware of the relevant act, omission or decision), it seems reasonably clear that Ms Samootin opposes the Official Trustee's motion. In written submissions she put that dismissing her application will "not finally determine the outcome of these proceedings in her quest for rectification of the human rights abuse in the State of Australia that has occurred to her and other litigants in court". She flagged her determination to exhaust all domestic avenues to resolution . She submitted that saving money is no reason to terminate the litigation before a trial. She alleged that that raises a human rights issue in that it would deny her equality before the law. She pointed out that in the ordinary course all issues of fact and law should be determined at the same time and that a party seeking to depart from the ordinary procedure must point to some perceptible benefit to be gained from such a course. She submitted that the issue is whether it is just and convenient that the order be made. She cited the judgment of Branson J in Reading at [8]-[9]. She drew my attention to CEDAW (in particular arts 15(1), (a) and (3) and 16(1), (c) and (h)) and to a number of judgments that refer to it. She also referred to the Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power adopted by the United Nations General Assembly Resolution 40139 of 29 November 1985, as she contended that she is the victim of such abuse and of sex discrimination. 16 The Official Trustee concedes that, although the discretion is apparently unfettered, in practice, the power is exercised cautiously. Nevertheless, it submits that this is a suitable case for its exercise. I agree. 17 Here, there is no difficulty about formulating the question with precision. Although it is unlikely that the parties will reach agreement on the facts, facts may be assumed in Ms Samootin's favour or proved in evidence. Credit issues are unlikely to arise. The Official Trustee concedes for the purposes of the motion that Ms Samootin did not become aware of the availability of a remedy under the subsection before she read the Court of Appeal's reasons. It also indicates that the only evidence it proposed to call was documentary, including transcripts of court hearings, applications and affidavits filed by Ms Samootin herself. It seems unlikely this evidence will be controversial. 18 None of the circumstances Branson J identified in Reading (at [8]) that tell against a separate hearing applies here. As I have already observed the separate hearing is unlikely to give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial. Nor is there a potential overlap between the evidence to be adduced on the hearing of the separate question and Ms Samootin's application, should the Official Trustee's motion be unsuccessful. And a separate hearing of the preliminary question will not unduly prolong the litigation. If the Official Trustee is right, then the application will have to be dismissed, for it will have been made outside the time prescribed by the Act. No application has been made for an extension of time. In any event, there is no power to extend time. Ms Samootin did not argue to the contrary. Section 33(1)(c) of the Bankruptcy Act confers a general power on the Court to extend any time limited by the Act, even after its expiration, in the absence of any provision to the contrary. But the general power must give way to the specific restriction in s 178(2), which was inserted into the Bankruptcy Act on 5 May 2003 - after the commencement of s 33. See David Grant & Co Pty Ltd (rec apptd) v Westpac Banking Corporation (1995) 184 CLR 265. ("David Grant v Westpac"), which deals with analogous provisions of the Corporation Law. For the reason given in that case, the requirement in s 178(2) for the application to be made within 60 days of the day the person affected by the trustee's act, omission or decision becomes aware of it, should not be treated as qualified by the operation of s 33(1)(c). This interpretation accords with the evident purpose of s 178(a) - the avoidance of inconvenience and cost to trustees. In that regard I note that the Explanatory Memorandum to the Bankruptcy Legislation Amendment Bill 2002 (Cth), which introduced s 178(2), stated at [199]: Item 142 proposes an amendment to section 178 of the Act to insert a 60 day time limit in which an application may be made to the Court for a review of a trustee's act, omission or decision. At present, no time limit is specified: some bankrupt's [sic] have applied to the Court for a review many years after the act, omission or decision concerned. This is both inconvenient and costly for trustees: setting a time limit will allow a reasonable period for persons to seek review under section 178. 19 As Branson J noted in Reading at [8], factors favouring a separate hearing include where the separate determination of a question may contribute to the saving of time and cost by substantially narrowing the issues for trial or lead to disposal of the action. The High Court said in Bass at [51]: It cannot be doubted that in many cases the formulation of specific questions to be tried separately from and in advance of other issues will assist in the more efficient resolution of the matters in issue. However, that will be so only if the questions are capable of final answer and are capable of being answered in accordance with the judicial process. 20 The question in this case is capable of final answer in accordance with the judicial process. 21 The Official Trustee's position, in effect, is that Ms Samootin's application is statute-barred. It is not unusual for such a question to be determined in advance of the substantive hearing. If the application is found to have been brought outside the time the Bankruptcy Act allows, there is no good reason why the parties should spend the time, effort and money involved in preparing and running a case that would be doomed to fail. It would not further the overarching purpose of the civil practice and procedure provisions to require the parties to do so. The Official Trustee submitted that the hearing of the separate question would take less than a day but that the matters raised in Ms Samootin's application would take considerably longer. It pointed to the likely need to conduct a detailed review of the Official Trustee's conduct in earlier proceedings and the prospect that evidence would have to be taken from present and former case officers involved in the administration of the estate and the legal representatives of the Official Trustee (and perhaps also the other parties involved in the earlier litigation). There appears to be no real chance that it would recover the costs involved. Ms Samootin emphasised the non-financial costs she has had to bear as a result of the injustice she says has been done to her and I have taken into account everything she put. But, on any view of the matter, it is in the interests of both parties as well as the administration of justice that the question raised by the Official Trustee be determined as a preliminary question. In other words, it is just and convenient to make the order the Official Trustee seeks. 22 This is a truly threshold question. It defines the jurisdiction of the Court to entertain the application. Like "may only" in s 459G(2) of the Corporations Law, the force of the verb "must" in s 178 imposes a requirement as to time as an essential condition of the right conferred by s 178(1). To hold otherwise would deprive the command of effect. cf. David Grant v Westpac at 277. 23 In all the circumstances, then, the Official Trustee's motion of 10 June 2011 should succeed although the separate question should be more precisely formulated. I therefore order that the question whether the applicant's application of 18 February 2011 was filed within the time limit prescribed by s 178(2) of the Bankruptcy Act be heard and determined separately from any other questions, and before any further step is taken in the proceeding. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.