The Official Trustee in Bankruptcy v Shaw (No 3) [2023] FCA 1178

Federal Court of Australia

The Official Trustee in Bankruptcy v Shaw (No 3) [2023] FCA 1178 File number(s): VID 361 of 2021

Judgment of: SARAH C DERRINGTON J

Date of judgment: 6 October 2023

Catchwords: BANKRUPTCY AND INSOLVENCY – application by Official Trustee for vexatious proceedings orders against a bankrupt pursuant to s 37AO of the Federal Court of Australia Act 1976 (Cth) – whether Official Trustee authorised under the Bankruptcy Act 1966 (Cth) to bring such proceedings – whether relates to the administration of the estate under s 134(1)(j) of the Bankruptcy Act – whether proceedings validly instituted by the Official Trustee under ss 15 and 18 of the Bankruptcy Act – whether Official Trustee's powers and functions were validly delegated – where Carltona principle applicable PRACTICE AND PROCEDURE – vexatious proceedings order sought by Official Trustee against applicant pursuant to s 37AO of the Federal Court of Australia Act 1976 (Cth) – whether Official Trustee authorised under the Bankruptcy Act 1966 (Cth) to bring such proceedings – whether proceedings validly instituted by the Official Trustee under ss 15 and 18 of the Bankruptcy Act – whether solicitors validly instructed to institute and conduct proceedings

Legislation: Acts Interpretation Act 1901 (Cth) ss 34AA, 34AB(1)(b) Bankruptcy Act 1966 (Cth) ss 5, 11(2), 12, 13, 13(a), 13(a)(ii), 13(b), 13(d), 15, 15(1), 15(3), 15(4), 18, 18(8), 19, 19(1), 60(1), 60(4), 134, 134(1)(e)-(g), 134(1)(ia), 134(1)(j), 134(3), 146, 306 Federal Court of Australia Act 1976 (Cth) ss 37, 37AO(2), 37AO(3), 37AO(3)(d)-(c) Federal Court Rules 2011 (Cth) rr 15.01, 15.10, 30.02

Cases cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 Carltona Ltd v Commissioner of Works [1943] 2 All ER 560 Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 Garrett v Commissioner of Taxation (Cth) [2015] FCA 117; (2015) 157 ALD 342 Hawksford v Hawksford [2005] NSWSC 463; (2005) 191 FLR 173 Joye v Beach Petroleum NL (1996) 67 FCR 275 McAusland v Commissioner of Taxation (1993) 47 FCR 369 Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 Mulhern v Pearce (No 3) [2015] FCA 806 O'Reilly v The Commissioners State Bank of Victoria (1983) 153 CLR 1 Official Trustee in Bankruptcy v Gargan (No 2) [2009] FCA 398 Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664 Tooheys Ltd v CMR of Stamp Duties (NSW) [1961] HCA 35; (1961) 105 CLR 602

Division: General Division

Registry: Victoria

National Practice Area: Commercial and Corporations

Sub-area: General and Personal Insolvency

Number of paragraphs: 76

Date of last submissions: 18 September 2023

Counsels for the Applicant: Mr C Brown Ms Tessa Meyrick

Solicitor for the Applicant: Harris Carlson Lawyers

Counsel for the Respondent: Respondent was self-represented.

Table of Corrections

6 October 2023 Paragraph [2] reference to the trial listed in this matter corrected to read "with an estimation of three days commencing on 11 December 2023. 6 October 2023 At paragraph [52] reference is made to Ms Sullivan's affidavit filed in support of the Originating Application and it reads 'Ms Shaw deposes that she is a lawyer…' M Shaw corrected to read and refer to 'Ms Sullivan'.

ORDERS VID 361 of 2021

BETWEEN: THE OFFICIAL TRUSTEE IN BANKRUPTCY Applicant

AND: JOHN RASHLEIGH SHAW Respondent

order made by: SARAH C DERRINGTON J DATE OF ORDER: 6 October 2023

THE COURT ORDERS THAT:

1. The separate questions be answered as follows: Question 1: Is the Applicant authorised under the Bankruptcy Act 1966 (Cth) to institute proceedings under s 37AO(2) of the Federal Court of Australia Act 1976 (Cth) against the Respondent? Answer: Yes Question 2: Have these proceedings, VID 361 of 2021, been validly instituted by the Applicant with the authority of the Official Receiver under ss 15 and 18 of the Bankruptcy Act 1966 (Cth)? Answer: Yes Question 3: Have the Applicant's solicitors been validly instructed and conducted the proceedings with the authority of the Applicant in accordance with ss 15 and 18 of the Bankruptcy Act 1966 (Cth)? Answer: Yes 2. The Respondent pay the Applicant's costs of the determination of the separate questions. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

SARAH C DERRINGTON J:

Introduction 1 On 2 July 2021, the Official Trustee in Bankruptcy (OT) commenced these proceedings, pursuant s 37AO of the Federal Court of Australia Act 1976 (Cth) (FCA Act), against the Respondent, Mr John Shaw. Mr Shaw is an undischarged bankrupt pursuant to orders made in VID 1371 of 2013. By these proceedings, the OT seeks orders prohibiting Mr Shaw from instituting any proceeding without leave of the Court and dismissing any extant proceedings instituted in the Court by Mr Shaw. 2 Mr Shaw defends the application on a number of grounds. By paras 6(a)-(c) of an amended interlocutory application filed by leave on 24 July 2023 (amended IA), Mr Shaw challenged the jurisdiction, standing and authority of the OT to commence these proceedings. At an interlocutory hearing on 21 August 2023 to, inter alia, provide directions as to the matter going forward to the trial, which is listed for an estimation of three days commencing on 11 December 2023, Mr Shaw, who is self-represented, pressed for the earlier resolution of the issues raised in those paragraphs of the amended IA on the basis that everything that is needed to determine those matters is already before the Court. As Mr Shaw contended, if those issues are resolved in his favour, there would be no trial. 3 Consequently, on 21 August 2023, I made Orders that the question of the authority of the OT to commence proceedings against Mr Shaw is to be determined as a separate question pursuant to r 30.02 of the Federal Court Rules 2011 (Cth). The parties were agreed that I could determine the relevant questions on the papers. The questions to be determined are as follows: Question 1: Is the Applicant authorised under the Bankruptcy Act 1966 (Cth) to institute proceedings under s 37AO(2) of the FCA Act against the Respondent? Question 2: Have these proceedings, VID 361 of 2021, been validly instituted by the Applicant with the authority of the Official Receiver under ss 15 and 18 of the Bankruptcy Act? Question 3: Have the Applicant's solicitors been validly instructed and conducted the proceedings with the authority of the Applicant in accordance with ss 15 and 18 of the Bankruptcy Act? 4 Pursuant to the Orders, on 23 August 2023, Mr Shaw filed a list of affidavits, submissions, and authorities on which he wished to rely, albeit one day late. The OT filed its submissions and an affidavit of Daniel Burke (Burke Affidavit) on 1 September 2023. On 5 September 2023, Mr Shaw filed a document in the nature of objections to the Burke Affidavit. Mr Shaw's submissions in reply were lodged, in purported compliance with the Orders, on 8 September 2023. Mr Shaw required leave to file those submissions because they were more than twice the length specified in the Orders for reply submissions. They were accepted for filing on 18 September 2023. Despite those minor aspects of non-compliance with the Orders, I have had regard to all the materials filed by Mr Shaw and the OT. 5 For the reasons that follow, each of the questions is answered in the affirmative.

Question 1: Is the Applicant authorised under the Bankruptcy Act to institute proceedings under s 37AO(2) of the FCA Act against the Respondent?

Jurisdiction 6 The OT is established as a body corporate by s 18(1) of the Bankruptcy Act. Division 4 of Part VI of the Bankruptcy Act deals with the powers and functions of the OT in the realisation of the estate of the bankrupt. Relevantly, s 134 of that Part provides: 134 Powers exercisable at discretion of trustee (1) Subject to this Act, the trustee may do all or any of the following things: … (j) bring, institute or defend any action or other legal proceeding relating to the administration of the estate; … (3) Subject to this Act, the trustee may use his or her own discretion in the administration of the estate. 7 Mr Shaw contends that the OT lacks jurisdiction under s 134(1)(j) of the Bankruptcy Act to bring the present application under s 37AO(2) of the FCA Act. The basis for this contention is that a s 37AO application does not relate to the "administration of the estate" of the bankrupt. Accordingly, Mr Shaw argues that the OT is acting outside the scope of the powers conferred upon it by ss 18 and 134 of the Bankruptcy Act, and that the s 37AO application should be dismissed. 8 The principles of statutory interpretation are clear and well-settled. The task of statutory construction begins with a consideration of the text itself, in accordance with the ordinary and natural meaning of the words, and the accepted rule that a court will have regard to the context in which the words appear and their purpose: Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664 [22]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 [39]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [47]. 9 The ordinary meaning of the words "relating to" connote a connection or link between the action or legal proceedings brought, and the administration of the estate of the bankrupt. In Tooheys Ltd v CMR of Stamp Duties (NSW) [1961] HCA 35; (1961) 105 CLR 602 at 620, Taylor J described the phrase "relating to" as "extremely wide but … also vague and indefinite". 10 In Joye v Beach Petroleum NL (1996) 67 FCR 275, Beaumont and Lehane JJ observed at 285: … ordinarily, "relates to" is a wide term, and that it will depend upon context whether it is necessary that the relationship be direct or substantial, or whether an indirect or less than substantial connection will suffice. (Citations omitted.) 11 The powers contained in s 134 of the Bankruptcy Act are wide and articulated in general terms. Indeed, the heading of s 134 and the terms of subsection (3) expressly provide for the "discretion" of the OT in exercising powers under the section without further limitation. The discretion of the OT is only confined by its general duties under the Bankruptcy Act, such as the duty under s 19(1) to exercise its powers in a commercially sound way that avoids unnecessary expense in the administration of the estate. The broad nature of the discretion afforded to the trustee under s 134 indicates that s 134(1)(j) should be read in a way that expands, rather than narrows, the authority of the trustee to take appropriate steps in the administration of the estate for the benefit of those having an interest. 12 While s 134(1)(j) is contained in Div 4 of the Bankruptcy Act dealing with the realisation of property, consideration of the entirety of s 134 makes clear that the section is not intended to be directly limited to such realisation, but rather to bear on the general administration of the property of the estate in the sense that it in some way facilitates or otherwise concerns proof of debts or the distribution of dividends to the estate. For example, ss 134(1)(e)-(g) empower the trustee to make compromises in respect of debts claimed against the estate, and s 134(1)(ia) empowers the trustee to refer disputes to arbitration. 13 There is nothing to suggest that the term "relating to" was not intended to have a wide operation or that an indirect, but relevant, connection to the administration of the estate would not constitute a sufficient relationship for present purposes. 14 The evidence of the OT is that the various proceedings brought by Mr Shaw against the OT and employees of the Australian Financial Security Authority (AFSA), being the Commonwealth agency responsible for administering personal insolvencies, "have made, or are continuing to make it difficult to administer the Respondent's estate efficiently and effectively": Burke Affidavit at [25]. Mr Burke deposes to the following proceedings as having been commenced by Mr Shaw, outlined in the Burke Affidavit at [26]: 24 July 2019: VID 778 of 2019 against the OT seeking, inter alia, review of the OT's adjudication on a proof of debt and injunctive relief in respect of a particular property which the OT proposed to sell; 3 October 2019: lodgement of caveat over that property after the proceeding had been dismissed on 26 September 2019 by Snaden J, requiring the OT to commence proceedings to have the caveat removed; 9 October 2019: NSD 1690 of 2019 seeking an inquiry into the conduct of the OT, which was dismissed on 17 December 2021 by Wigney J; 14 October 2019: VID 1098 of 2019 being an appeal against the decision of Snaden J, which was dismissed on 4 August 2020; 10 September 2020: M 85 of 2020 being an application for an extension of time and for special leave to appeal the Full Court's dismissal of the appeal from Snaden J, which was dismissed on 10 December 2020; 18 March 2021: QUD 127 of 2021 against 14 employees of AFSA, which is currently stayed pending the outcome of NSD 1690 of 2019 and the appeal proceedings in NSD 9 of 2022; 10 January 2022: NSD 9 of 2022 being an appeal from Wigney J's decision; 21 January 2022: NSD 42 of 2022 being an application to extend time and leave to appeal from interlocutory orders made by Wigney J in NSD 1690 of 2019. 15 The OT explains that it is incurring legal costs and disbursements in relation to these, and other proceedings involving Mr Shaw and the petitioning creditors, and that to seek an order at this stage, pursuant to s 146 of the Bankruptcy Act, from the Court to distribute a dividend to creditors is likely to be premature so long as costs continue to be incurred in relation to several proceedings, all of which will ultimately come out of Mr Shaw's estate: Burke Affidavit at [28]. The OT also explains that the longer the period of Mr Shaw's bankruptcy is prolonged, the higher the amount of the OT's remuneration and the realisation charge payable to the Commonwealth will be. This will further impact the final amounts payable to creditors: Burke Affidavit at [30]. 16 Mr Shaw does not dispute that he commenced the proceedings outlined above. He contends, however, that the evidence concerning the impact of increasing costs and the appropriateness of the timing of any application under s 146 is "irrelevant opinion and speculation". Mr Shaw's objections are unfounded. As the Acting Director of the Estate and Administration and Service Delivery business lines within AFSA, whose key responsibilities include overseeing a section of staff who administer bankrupt estates on behalf of the OT, and who has been employed with AFSA for 11 years (Burke Affidavit at [4]-[5]), Mr Burke is able to give evidence from his own knowledge of the unsurprising proposition that the OT will be incurring additional costs for so long as it is required to deal with multiple pieces of litigation relating to or arising out of Mr Shaw's estate. In any event, it is self-evident that, in circumstances where a sequestration order was made against Mr Shaw on 11 June 2014, and where he has not lodged a statement of affairs but has commenced multiple proceedings both in this Court and others, increasing costs will be incurred by the OT which, in turn, are likely to diminish the amount of the estate. 17 These circumstances explain the basis for the OT's application under s 37AO(2) of the FCA Act. The connection between an application brought under s 37AO(2) and the administration of the estate of the bankrupt is supported by examples of similar applications brought by trustees. In Official Trustee in Bankruptcy v Gargan (No 2) [2009] FCA 398, the official trustee was successful in a cross-claim seeking orders dealing with the bankrupt as a vexatious litigant, where the bankrupt had commenced vexatious proceedings against the official trustee and a number of other parties. Similar circumstances arose in Mulhern v Pearce (No 3) [2015] FCA 806, where Rangiah J made orders pursuant to s 37AO(2) against the bankrupt preventing him from initiating proceedings against the trustees without leave of the Court. 18 Although the orders sought in Gargan (No 2) and Mulhern were made by way of cross-claim, rather than as a principal proceeding, this does not require a different result in respect of principal proceedings. Under r 15.10 of the Rules, a cross-claim is conducted in the same manner as a principal proceeding. Further, r 15.01 of the Rules provides that a cross-claim may be made for any relief to which a party would be entitled in a separate proceeding. There is no sensible reason to accept that the OT is authorised to pursue an application only as a cross-claim, and not by way of an originating claim where the purpose of each is identical. Such an application is consistent with the duties of a trustee in bankruptcy as specified in s 19 of the Bankruptcy Act to, inter alia, administer the estate as efficiently as possible by avoiding unnecessary expense and exercise powers and functions in a commercially sound way, in circumstances where the OT has formed the opinion that Mr Shaw's litigation is having a deleterious effect on the efficient and effective administration of the estate: Burke Affidavit at [25]. 19 Accordingly, I consider that the s 37AO(2) application brought by the OT relates to the administration of the estate, and thus falls within the ambit of s 134(1)(j) of the Bankruptcy Act.

Standing 20 Mr Shaw also submits that the OT lacks standing to bring an application under s 37AO(3) of the FCA Act. That section relevantly provides: (3) The Court may make a vexatious proceedings order on its own initiative or on the application of any of the following: … (c) a person against whom another person has instituted or conducted a vexatious proceeding; (d) a person who has a sufficient interest in the matter. 21 Mr Shaw contends that the OT is not a person against whom he has instituted or conducted a vexatious proceeding, nor a person with sufficient interest in the matter. 22 The phrase "sufficient interest in the matter" is broad in scope and not clearly defined. However, in the context of s 37AO, it refers to a person having a sufficient interest in the making of a vexatious proceedings order. Here, the OT has a sufficient interest in such orders being made against Mr Shaw, for the reasons explained above that it bears on the administration of the estate and the OT's duty to administer the estate in accordance with the requirements of the Bankruptcy Act. The same conclusion was reached by Rangiah J in Mulhern where his Honour said, at [82], "[p]lainly, the trustees have standing to bring the application, pursuant to s 37AO(3) of the Federal Court Act". 23 Mr Shaw submits that the scope of the orders sought are too broad for the OT to fall within s 37AO(3)(d). In his written submission, Mr Shaw states that some classes of proceedings do not vest in the trustee before or after the bankruptcy, such as those excluded by s 60(4) of the Bankruptcy Act, such that the OT does not have a sufficient interest in all future and extant proceedings that may be brought by Mr Shaw. 24 However, s 37AO does not confine the scope of the orders that a person with sufficient interest may seek, including orders that may apply to potential respondents in future proceedings brought by Mr Shaw where the OT would not have an interest. 25 This was articulated with respect to orders sought under s 37AO(3)(c) in Garrett v Commissioner of Taxation (Cth) [2015] FCA 117; (2015) 157 ALD 342. Pangone J stated at [6]: The second order which is sought, however, would apply more generally to any other person who is not a party to this proceeding against whom Mr Garrett might hereafter seek to institute a proceeding, directly or indirectly, contrary to the terms of any order that might be made under s 37AO(2). It is therefore broader in its application than the other orders sought by the respondents for their own benefit, and raises for consideration the extent to which a person coming within the terms of s 37AO(3)(c) may seek an order applying to potential respondents to proceedings which are not yet commenced by Mr Garrett. Section 37AO(3) identifies and limits the persons who may apply for a vexatious proceedings order. Amongst those who may apply are Attorneys-General and Court Registrars. In this case, the first respondent making the application is a public official with statutory powers and each of the other respondents making the application are public servants employed by the first respondent in the exercise of statutory duties. None, however, has responsibilities which are either as broad as those of the Attorney-General of the Commonwealth or of a State or Territory, or as specific as those of a Registrar of the court, each of whom are expressly given the power to make applications under ss 37AO(3)(a) and (b). The basis of the application made by the respondents is that they are each, within the meaning of the words in s 37AO(3)(c), "a person against whom another person [namely Mr Garrett] has instituted or conducted" what they contend to be a vexatious proceeding. The section does not, however, prevent a person who may apply for an order under that provision from seeking orders applying more generally than to themselves. A person "who has a sufficient interest in the matter" is, by s 37AO(3)(d), also able to apply for an order within the full breadth of s 37AO(2) and there is no reason to read down the entitlement of a person coming within the terms of s 37AO(3)(c) to apply for a vexatious proceedings order by reference to s 37AO(3)(d). A person against whom another person has instituted or conducted a vexatious proceeding (assuming the latter is established) is permitted to make an application under s 37AO without needing to establish "a sufficient interest in the matter" that would need to be established by a person whose entitlement to make the application depends upon establishing the sufficient interest contemplated by s 37AO(3)(d). Since a person may apply for one or more of the orders contemplated by s 37AO(2) only because a vexation proceeding has been instituted or conducted against that person, it does not matter that the orders sought, if granted, would apply to others. Accordingly, the respondents in this case are entitled to seek orders which, if granted, will apply to potential respondents to proceedings which have not yet been commenced by Mr Garrett. (Emphasis added.) 26 Accordingly, the OT has standing under s 37AO(3)(d) as a person with sufficient interest to seek the relevant orders to prevent Mr Shaw from commencing proceedings without leave of the Court and to dismiss any extant proceedings.

Question 2: Have these proceedings, VID 361 of 2021, been validly instituted by the Applicant with the authority of the Official Receiver under ss 15 and 18 of the Bankruptcy Act? 27 Section 18(8) of the Bankruptcy Act provides that the powers and functions of the OT may be exercised and performed by the Official Receiver, which is a statutory office established by s 15(1) of the Bankruptcy Act. 28 The Official Receiver is empowered under s 15(4) of the Bankruptcy Act to delegate its powers. The section relevantly provides: 15 Official Receivers … (3) An Official Receiver may by signed instrument delegate to an authorised employee all or any of the powers and functions of the Official Receiver under this Act. 29 An 'authorised employee' is defined in s 5 of the Bankruptcy Act as: "authorised employee" means an APS employee whose duties include either or both of the following: (a) supporting the Inspector General in the performance of his or her functions, or in the exercise of his or her powers, under this Act; (b) supporting the Official Receivers in the performance of their functions, or in the exercise of their powers, under this Act. 30 Mr Shaw alleges first, that there is no evidence that Mr Bergman was the Official Receiver at the relevant time and, secondly, that the OT has not demonstrated that the authorisation of the OT was conferred on the Official Receiver to conduct these specific proceedings. 31 Mr Burke deposes in his affidavit that, at the time of the commencement of the proceedings, Mr Bergman was an Official Receiver: Burke Affidavit at [15]. The instrument of appointment, dated 1 October 2014, is exhibited to the Burke Affidavit at DB-6. Mr Burke deposes that Mr Bergman held the appointment as an Official Receiver until his retirement on 20 February 2023. 32 Mr Shaw contends that there is no proof of Mr Bergman's retirement date. Mr Burke has, however, sworn to that date as being a matter of his own knowledge, information and belief. There is no evidence produced by Mr Shaw to cast any doubt on Mr Burke's statement. In any event, the relevant question is whether Mr Bergman was an Official Receiver at the time when he authorised the institution of the proceeding. 33 The Burke Affidavit exhibits a copy of a "Delegation of Powers and Functions of the Official Receivers and the Official Trustee in Bankruptcy" which, on its face, was signed by Mr Bergman on 25 March 2021: Burke Affidavit at [13]; DB-1. That evidence establishes that Mr Bergman was still an Official Receiver at least up until 25 March 2021. Further, the email chain exhibited to the Burke Affidavit at DB-3 annexes correspondence from Stephen Abraham, the then Director of Estate Administration Insolvency and Trustee Services within AFSA, at 11.24am on 9 April 2021 to Mr Bergman about a quote received from solicitors for the OT to commence the proceedings and asking for advice "with a view to instructing" solicitors to continue with the matter. Mr Bergman responded affirmatively by return email at 11.30am. 34 The clear inference to be drawn from the evidence before me is that Mr Bergman was an Official Receiver when he authorised the proceedings to be instituted, and when the proceedings were in fact instituted. The fact that the Originating Application was not filed until 2 July 2021 does not deprive Mr Bergman's authorisation to institute proceedings of its efficacy unless there was some evidence that the proceedings as commenced were different from those authorised. There is no such evidence, and what evidence does exist is consistent with authorisation being sought and given to commence vexatious litigant proceedings. 35 In any event, for the reasons discussed below in relation to Question 3, it is doubtful that the authority of the Official Receiver was in fact necessary to commence these proceedings. The Delegation referred to above delegated the requisite authority to institute the proceedings to a person at APS EL2 level, as was Mr Abraham. If there be any doubt about whether the gap between Mr Bergman's authorisation to institute the proceedings and their actual commencement is of some significance so far as authority is concerned, that doubt is removed by the terms of the Delegation. 36 I reject Mr Shaw's contention that "there is no evidence or proof that Abraham [Melvin & Hasan] were APS AFSA authorised employees" within the terms of ss 13(a)(ii) and 15(4) of the Bankruptcy Act. AFSA is the entity created under s 13 of the Bankruptcy Act, the purposes of which include the functions of the Inspector-General in Bankruptcy referred to in ss 11(2) and 12 of the Bankruptcy Act. 37 The AFSA's functions are to assist the Inspector-General, the Official Trustee and the Official Receivers in the performance of their powers and functions. As deposed to by Mr Burke, this is generally done by employees of AFSA who work within the Estate Administration section of the Service Delivery division: Burke Affidavit at [6]. 38 As prescribed by s 13(a), AFSA is comprised of the Inspector-General (who is the accountable authority, or Chief Executive Officer pursuant to s 13(b)), and those public servants engaged under the Public Service Act 1999 (Cth) to assist the Inspector-General, who are together the "officials" of AFSA: s 13(d). Those officials are the Official Trustee and the Official Receivers. 39 By contrast, the definition of "authorised employees" is much broader. It includes any APS employee whose duties, relevantly, include supporting the Official Receivers in the performance of their functions, or in the exercise of their powers under the Bankruptcy Act. This definition is clearly intended to capture the employees of AFSA who are responsible for "supporting" the Official Receivers by undertaking the day-to-day work relevant to the powers and functions of the Official Receivers. Mr Shaw does not dispute that Mr Abraham was an employee of AFSA. The evidence is clear that he was: Burke Affidavit at [15]. 40 To the extent that Mr Shaw contends that there is no evidence that the email chain demonstrates it was concerned with this proceeding, as opposed to some other proceeding, such a contention cannot be accepted. The Applicant produced the email chain in response to a Notice to Produce that specifically sought the production of "any email or document indicating or confirming that proceedings VID361/2021 has been commenced with the authority of the Official Trustee". I accept that the documents produced in response to the Notice were relevant to this proceeding. Nothing has been produced by Mr Shaw that would cast any doubt on that conclusion. 41 Accordingly, these proceedings have been validly instituted by the Official Receiver with the authority of the OT under ss 15 and 18 of the Bankruptcy Act.

Question 3: Have the Applicant's solicitors been validly instructed and conducted the proceedings with the authority of the Applicant in accordance with ss 15 and 18 of the Bankruptcy Act? 42 It appears from Mr Shaw's submissions that he raises two matters to be considered in relation to this question. The first is his contention that there is no evidence that Mr Abraham had "express or implied authority to act as an agent in the name of the OR or delegate instructing the solicitors to commence" these proceedings. The second challenges the authority of any and all of Messrs Abraham, Melvin, Hasan and Burke to provide instructions to the OT's solicitors throughout the course of the proceedings.

Have the solicitors been validly instructed? 43 Mr Shaw's first contention must be rejected. First, Mr Abraham was the delegate for the OT "in taking legal proceedings". Secondly, nothing supports the contention that he sub-delegated that power or function to anyone else. 44 The Delegation referred to above delegated: …to the employees of the Australian Financial Security Authority, for the time being occupying or performing the duties of the position listed in the attached schedule, the respective powers and functions of the Official Receivers and the Official Trustee specified in the schedule, subject to the limitations specified therein. Where the title of the position listed in the schedule changes, but where the duties, function and responsibilities of that position remain substantially unchanged, a reference to the title of the position in the schedule is a reference to the changed title position. 45 The schedule provided: # FUNCTION LEGISLATIVE PROVISION POWER SES EL2 EL1 APS6 APS5 APS4 APS3 The delegation extends to all functions and powers within the relevant provision, subject to any limitations expressly specified or where there is an express delegation limiting a broader function based delegation. 11 Legal proceedings and expenses 60(2), 130, 134(1)(i), 134(1(j),146, ISP 90, ISP 100 Taking or defending legal proceedings, incurring associated legal expenses Note 1 <$100,000

Note 1: Where AFSA funds are used for legal or other expenses in an estate, National Manager (SES) delegation is limited to $250,000 under the CE's delegations under the PGPA Act. 46 By this Delegation all functions and powers within the notion of "bring, institute or defend any action or other legal proceeding" as prescribed by s 134(1)(j) of the Bankruptcy Act have been delegated to employees of AFSA who, for the time being, occupy or perform the duties of an SES or EL2 position, subject to the financial limits. It is self-evident that the functions necessary to "bring, institute or defend" legal proceedings include instructing solicitors. 47 Mr Shaw criticises the Delegation on the basis that it does not delegate particular functions to particular people but only to APS levels, that it is "ambiguous, indeterminate, incapable of verifying authority", and that it is based on the "arbitrary dollar value of an exercise of that power". He contends that is therefore invalid. Mr Shaw's complaint is misconceived. 48 Section 34AA of the Acts Interpretation Act 1901 (Cth) provides: Where an Act confers power to delegate a function, duty or power, then the power of delegation shall not be construed as being limited to delegating the function, duty or power to a specified person but shall be construed as including a power to delegate the function, duty or power to any person from time to time holding, occupying, or performing the duties of, a specified office or position, even if the office or position does not come into existence until after the delegation is given. (Emphasis added.) 49 There is nothing unusual or untoward about a delegation specifying classes of persons holding positions at certain APS classification levels for the purposes of delegation. There is also nothing unusual or improper about limiting the scope of a particular delegation to certain APS classification levels tied to a specified monetary limit. Absent any express statutory provision to the contrary, that is entirely within the power of the person delegating his or her authority. 50 To the extent that Mr Shaw asserts that there is a "regular AFSA practice of allowing EL1's to call themselves 'acting EL2'", that assertion must be rejected. Mr Burke has deposed to his holding the acting EL2 position and Mr Shaw has not provided any reason as to why that evidence should be rejected. 51 The email chain exhibited to the Burke Affidavit at DB-3 demonstrates that the person who was to conduct or have carriage of the proceeding was Mr Stephen Abraham. Mr Burke deposes that at that time, Mr Abraham was the Director of AFSA's Estate Administration and Insolvency and Trustee Services business lines, which was an EL2 position. Mr Burke deposes that Mr Abraham held that position from 27 June 2019 until his retirement on 2 July 2021: Burke Affidavit at [15]. It was clearly within the scope of his delegation to instruct solicitors. 52 Further, in the Affidavit of Meghan Louise Sullivan sworn on 2 July 2021 in support of the Originating Application, Ms Sullivan deposes that she is a lawyer employed by Harris Carlson Lawyers, the solicitors for the OT (at [1]) and that she is authorised by the OT to make the affidavit (at [4]). The Originating Application was signed by Ms Sullivan and filed on behalf of the OT. 53 Mr Shaw has not pointed to any evidence that in any way contradicts Ms Sullivan's sworn testimony that she has been instructed by the OT. It would be a grave situation for a solicitor to purport to commence proceedings and to appear for a party without authority: Hawksford v Hawksford [2005] NSWSC 463; (2005) 191 FLR 173; McAusland v Commissioner of Taxation (1993) 47 FCR 369. In each of those cases, solicitors had been appointed to act for companies in circumstances where there were no validly appointed directors. The situation in this case is very different.

Conduct of proceedings 54 Mr Shaw's second complaint relates to the validity of any instructions that have or may have been given to the solicitors during the conduct of the proceedings by any and all of Messrs Abraham, Melvin, Hasan and Burke. 55 As has already been explained above, there is no basis for any complaint in relation to any instructions given by Mr Abraham. Similarly, no complaint can be made in respect of any instructions given by Mr Burke. Mr Burke has been the Acting Director since 28 November 2022 (Burke Affidavit at [4]) and, in that role is considered to be the employee "for the time being occupying or performing the duties" of an EL2 position in the terms of the Delegation. 56 As the OT submits, even if it is accepted that the decision to institute proceedings under s 134(1)(j) must be exercised personally by the Official Receiver (or his or her delegate), that does not mean that the Official Receiver is required also to personally exercise all powers and functions that are necessarily incidental to the primary power. 57 Consistent with that proposition, Mr Burke deposes that, since the proceedings were commenced, the day-to-day conduct of the proceedings has been the responsibility of a Case Manager (APS 6 level) assigned to the matter under the supervision of the Director (an EL2 position) and an Assistant Director (an EL1 position): Burke Affidavit at [18]. 58 The email chain annexed to the Burke Affidavit supports an inference that Messrs Melvin and Hasan are under the direct supervision of Mr Abraham, consistent with the description in the Burke Affidavit at [8] as to the manner in which proceedings generally progress. 59 Mr Shaw contends that, to the extent that Messrs Melvin and Hasan may have provided instructions to the solicitors for the OT, there has been no proper delegation in accordance with s 15 of the Bankruptcy Act. He supports this contention by reference to an email from Mr Dave Maher, FOI & Privacy Officer within AFSA, in which Mr Maher indicates that there are no documents in existence that delegate authority to Mr Hasan. 60 This contention is also misconceived. The circumstances that pertain within AFSA, as deposed to in the Burke Affidavit, involve the person in whom the delegated power is vested – in the circumstances of this case Mr Abraham – authorising another person to exercise the power for and on behalf of the other as the "alter ego" of the person in whom the power is vested. In other words, any power or function exercised by the Case Manager or the Assistant Director is done in the name of the Director, not in their own names. This is a classic example of the principle of implied authority known as the "Carltona principle". The distinction between the legal effects of an agent, as opposed to the acts of a delegate, is summarised in Aronson, Groves and Weeks, Judicial Review of Administrative Action and Government Liability (7th ed, Lawbook Co, 2022) at [7.130] (emphasis added, footnotes omitted): Carltona allows the agent to act in the principal's name and use all of the principal's powers. The agent is the principal's ghost writer. True delegates decide for themselves unless an Act provides to the contrary, and they must obey any limits imposed by the instrument of delegation. True delegates who purport to sign off for the principals act invalidly… … Agents need no delegation, although they do have either to be authorised, or possibly (in some cases) have ostensible authority. 61 The purpose behind the principle was explained by Gibbs CJ in O'Reilly v The Commissioners State Bank of Victoria (1983) 153 CLR 1. After referring to the line of authorities commencing with Carltona Ltd v Commissioner of Works [1943] 2 All ER 560, which established what has become known as the "Carltona principle", the Chief Justice said, at 11: Those authorities establish that when a Minister is entrusted with administrative functions he may, in general, act through a duly authorized officer of his department. This result depended in part on the special position of constitutional responsibility which Ministers occupy, and in that respect these authorities are distinguishable from cases such as the present. However, they also rest on the recognition that the functions of a Minister are so multifarious that the business of government could not be carried on if he were required to exercise all his powers personally. 62 The Chief Justice went on to observe that Ministers were "not alone in that position" before concluding, on the proper construction of the statute in question, that the powers conferred by that statute were not intended to be exercised only by the Commissioner or his delegate personally but "may be exercised through a properly authorized officer": O'Reilly at 13. 63 The Carltona principle was also considered by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 38: The cases in which the principle has been applied are cases in which the nature, scope and purpose of the function vested in the repository made it unlikely that Parliament intended that it was to be exercised by the repository personally because administrative necessity indicated that it was impracticable for him to act otherwise that through his officers or officers responsible to him. 64 In the present case, the nature, scope and purpose of the power in s 134(1)(j) to "bring, institute or defend any action or other legal proceedings" is one that can have serious consequences for an individual. It can therefore be seen from the scope of the Delegation that the exercise of that particular power is confined to being exercised by the Official Receiver him or herself or by a Delegate at SES or EL2 level. 65 Beyond the exercise of that particular power, however, the functions of the Official Receiver, as the natural person proxy of the OT, under the Bankruptcy Act are "so multifarious" that it would be absurdly impractical if the Official Receiver, or his or her Delegate, were required to personally make all decisions necessary for the day-to-day conduct of all proceedings validly instituted under s 134(1)(j). Consequently, it is both necessary and appropriate for the Official Receiver to act through the staff of AFSA in the conduct of proceedings instituted by or against the OT. 66 Mr Shaw contends that, to the extent that certain AFSA employees were involved in providing day-to-day instructions to the OT's solicitors or were otherwise involved in the conduct of the proceedings, they "have exceeded their authority & statutory limitation of s 134 in the conduct of this proceeding". He complains in particular about the involvement of Messrs Osborne, Melvin and Hasan. 67 The extent of the involvement of those persons is to be gleaned from the email chain exhibited to the Burke Affidavit at DB-3: 1 April 2021 – Mr Hasan (Senior Case Manager) to Mr Abraham (Delegate), with Mr Melvin in cc, sending quote from solicitors, HC, regarding potential proceedings against Mr Shaw. 6 April 2021 – Mr Abraham (Delegate) to Mr Bergman (Official Receiver) forwarding submission and quote. 6 April 2021 – Mr Abraham (Delegate) to Mr Osborne forwarding previous email and seeking Mr Osborne's opinion in relation to the quote and proposed action. 9 April 2021 – Mr Abraham (Delegate) to Mr Bergman (Official Receiver) forwarding "L&G's" advice in relation to the quote. 9 April 2021 – Mr Bergman (Official Receiver) to Mr Abraham (Delegate) saying "Happy for you to proceed". 9 April 2021 – Mr Abraham (Delegate) to Messrs Melvin and Hasan saying "David is happy for us to proceed as per HC's quote". 68 It is clear from this correspondence that the only person who made a decision under s 134(1)(j) to institute the proceedings was the Official Receiver himself, even though Mr Bergman also held the delegated authority to do so. There is no basis for Mr Shaw's complaint that Messrs Osborne, Hasan or Melvin have exceeded any authority. 69 Mr Shaw complains further that Mr Hasan exceeded his authority in purporting to attend a mediation on behalf of the OT that was to be held in Brisbane on 27 September 2022. In correspondence with Ms Sullivan, Mr Shaw protested that Mr Hasan did not have the requisite authority to compromise or settle the proceedings at mediation. On pressing that issue a number of times, it seems that the response from the OT was to provide a letter to the Registry of the Federal Court, dated 26 September 2022 by which the then Director of Estate Administration Division, Ms Longford, authorised Mr Hasan "to attend the mediation and to negotiate and/or settle the matter" and "execute any terms of settlement on behalf of the" OT, purportedly "in accordance with any relevant delegation set out in the Official Trustee's Delegation Schedule". 70 Mr Shaw challenges that letter on the basis that it is "misleading and meaningless as the delegation schedule does not refer to any powers of sub-delegation". It is true that Ms Longford had no power to sub-delegate: s 34AB(1)(b) of the Acts Interpretation Act. To the extent that the letter purports to sub-delegate Ms Longford's powers and functions conferred on her within authority, it is a nullity. 71 The letter does not, however, on its proper construction, amount to a purported sub-delegation. As is apparent on its face, the letter uses the word "authorise", in contradistinction to the terms of the Delegations annexed to the Burke Affidavit at DB-1 and DB-4 which, in terms, expressly "revoke all previous delegations…and delegate to the employees…the respective powers and functions of the Official Receivers and the Official Trustee…subject to the limitations specified therein". 72 Properly construed, the letter is written authorisation within the scope of the Carltona principle for Mr Hasan to attend to instruct Ms Sullivan, as the solicitor acting for the OT, within the ordinary day-to-day functions of a Senior Case Manager. Although there was no evidence before me as to the number of mediations to which the OT is a party and so in which AFSA is required to participate, I am prepared to infer that the number is not insignificant. I draw that inference, in part, from the breadth of the terms of the Delegation of "taking or defending legal proceedings, incurring associated legal expenses". Whilst I accept that the settlement of legal proceedings with a bankrupt is a matter of serious consequence for the individual concerned, I am persuaded that it would be a very significant administrative burden on the OT, and his Delegate, were he required to attend every such settlement negotiation personally. 73 Consequently, I reject Mr Shaw's contention that Mr Hasan acted without authority.

Disposition 74 For these reasons, I am of the opinion that the separate questions should each be answered in the affirmative. 75 It is unnecessary to consider whether, had the proceedings not been instituted or conducted by a person with statutory authority to do so, s 306 of the Bankruptcy Act would have cured that defect. 76 There is no reason why the usual costs orders should not follow. I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.

Associate: Dated: 6 October 2023