The Administrative Appeals Tribunal is to be abolished we are told and replaced by a new administrative law review body in 2023: see Government to abolish Administrative Appeals Tribunal – Mark Dreyfus KC MP.
The AAT has contributed much in its areas of relevance in bankruptcy and corporate insolvency. It serves the purpose of providing a fresh review of decisions of the Inspector General and ASIC and others. For example, it set the law on the right course in refusing ASIC’s narrow view of the term “exposure to bankruptcy” as a criterion for appointment as a registered liquidator: Mansfield and A committee convened under section 20-10 of the Insolvency Practice Schedule (Corporations) [2018] AATA 1510 (5 June 2018) (austlii.edu.au). In bankruptcy it has handled many objection to discharge matters on reviews of the decisions of the Inspector General offering useful guidance.
Nevertheless, insofar as it is a de novo exercise of the discretion available to the Inspector General, it is bound by any restrictions imposed on that discretion by the law.
For example, section 149N(1B) of the Bankruptcy Act provides that no conduct of the bankrupt since the issue that led to the objection is to be taken into account in assessing whether the objection should be withdrawn. That limits the discretion of the Inspector-General. That is a rather perverse provision introduced in circumstances where trustees were unable to properly give reasons for decision for lodging objections. The legislative response was not only to remove the requirement to give reasons but also to disregard any subsequent attempt by the bankrupt to remediate their default. See Objections to a bankrupt’s 3 year discharge in Australia – mixed messages and unfair law – Murrays Legal
Comparison with the Court
Importantly that restriction does not apply to the court which can have regard to a full range of matters and is not constrained by the limitations imposed on the Inspector-General. This was made clear in Nguyen v Pattison [2005] FCA 650. That is, the AAT has no general right to review a trustee’s conduct. Instead, the bankrupt can seek a review by a Judge of the validity of the objection to discharge, and the trustee’s reasons, under Schedule 2 s 90-20 which offers a far wider scope than is available before the AAT: see also Mango Boulevard v Whitton [2025] FCA 1169.
In that respect there is some potential for misuse of the objection to discharge process by trustees in particular now that reasons for lodging a ‘special ground’ objection are not required. The Court in Nguyen v Pattison gave a hypothetical example of an objection being maintained solely because the trustee was being vindictive, and wished to punish the bankrupt for past breaches of his or her obligations. While the power of the Inspector-General to assess and sanction such a perverse motivation does exist, including by way of himself bringing proceedings against the trustee, a review by a Judge of the trustee’s reasons on a challenge by the bankrupt, where such a motivation might be exposed, will offer a wider scope of challenge.
In whatever form the AAT is ultimately reconstituted, its replacement will no doubt be available to continue the AAT’s useful role in insolvency, in parallel with the role of the court.
