By Amelia Fearnside and Parnia Firouzabadi, Law Clerks of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
In a decision which appears to be the first of its kind, a bankruptcy trustee has taken the bankruptcy regulator to Court to overturn its refusal to issue a statutory notice. In Cooper v Official Receiver [2025] FCA 1155, the Federal Court made consent orders in the nature of certiorari, which quashed the decision of the Official Receiver who had refused to issue a notice sought by a trustee under s 139ZQ of the Bankruptcy Act 1966 (Cth) (“the Act”).
Effect of s 139ZQ of the Bankruptcy Act 1966 (Cth):
Section 139ZQ is intended to be an administrative ‘shortcut’ which enables a trustee to recover property transferred by a bankrupt without the need to go to court. Instead, upon application to the Official Receiver a notice is issued to the recipient of the property is required to pay an amount equal to the value of the property which they have obtained, and this notice creates a debt for this sum, and importantly, also gives rise to a statutory charge over the property transferred to secure payment of the debt (s139ZR of the Act).
Proceedings are only required if the transferee wishes to dispute that the transfer is void against the Trustee, or if the Trustee then needs to enforce the debt / charge.
Material Facts:
However in Cooper the matter did not get that far as the Official Receiver declined to issue the s 139ZQ notice to begin with, forcing the Trustee to commence proceedings. Unusually, rather than commence proceedings against the transferee, the Trustee (rightly, as it turned out) chose to take issue with the Official Receiver’s refusal to issue the statutory notice.
In this matter, the trustee applied to the Official Receiver for a s 139ZQ notice in relation to the transfer of a motor vehicle by the bankrupt to his father. The Official Receiver refused to issue a notice because:
- The Official Receiver did not believe that the trustee had established the vehicle had been transferred, as there was no notice of change of ownership vehicle license transfer form; and The Official Receiver was not satisfied there was sufficient evidence of the market value of the vehicle at the date of the transfer.
Following this, the Trustee commenced proceedings in the Federal Court seeking judicial review of the refusal.
Jurisdiction
Although the parties sought orders by consent, quashing the decision of the Official Receiver and for the application by to be determined according to law, the Court considered that it must still be satisfied that there was an error in the Official Receiver’s decision.
The jurisdictional basis for the Court’s review of the Official Receiver’s decision was not clear in the application, however the Court accepted that an order in the nature of certiorari was available. Certiorari is an administrative law remedy which operates to “remove the legal consequences or purported legal consequences of an exercise or purported exercise of power”: Wingfoot Australia Partners Pty Ltd v Kocak [2013] HCA 43; 252 CLR 480 per French CJ, Crennan, Bell, Gageler and Keane JJ at [25]. It can operate where there is a jurisdictional error, or (as long as the right has not been removed by statute) where there has been an error of law on the face of the record (see Wingfoot at [26], Cooper at [6]).
In Cooper the Official Receiver accepted that there was a legal error in the reasoning that just because chance of registration had not been registered that this did not mean there was a transfer of the motor vehicle to which the proposed s139ZQ notice related. The Court was prepared to accept that this was an error of law, and because the decision did not proceed according to correct legal principles, the Court was also satisfied that the agreed error was jurisdictional.
In addition, the Court found (and the Official Receiver accepted) that the Official Receiver had failed to provide procedural fairness to the Trustee in not affording the opportunity to make submission of furnish evidence regarding whether there had been a transfer and in relation to the value of the vehicle at the time of the transfer.
Outcome
The Court quashed the decision of the Official Receiver to refuse to issue a s139ZQ notice and order the Official Receiver to determine the Trustee’s application (for a s139ZQ notice) according to law. By consent the Official Receiver was ordered to pay the Trustee’s costs.
The Official Receiver is right to be cautious about issuing notices which are able to be challenged by recipients (see s139ZS of the Act) and which have a significant effect of creating a statutory debt and charge which can then be enforced. However, this case serves as a reminder of the importance for the Official Receiver to also provide procedural fairness to the Trustees who are simply trying to use the administrative provisions of the Bankruptcy Act in order to administer a bankrupt’s estate.
Read the decision here
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
