Federal Court of Australia

Hartnett v Inspector-General in Bankruptcy [2025] FCAFC 190

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The Appellant pay the First Respondent’s costs of and incidental to the appeal, to be taxed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    The relevant issue in this appeal is a narrow but important one of statutory construction. It arises in the context of Part X of the Bankruptcy Act 1966 (Cth) (the Act) and involves the Court’s power to set aside a personal insolvency agreement under s 222(1) of the Act.

2    On 24 February 2025, the primary judge in Inspector-General in Bankruptcy v Hartnett [2025] FCA 111 (PJ) ordered pursuant to s 222(1) that the personal insolvency agreement of the Appellant (Mr Hartnett) dated 23 April 2024 (PIA) be set aside. The primary judge also made a sequestration order against the estate of the Appellant with an effective date of bankruptcy of 19 December 2024.

3    The only issue to be determined on this appeal is whether, in circumstances where the PIA was fully executed and completed by the time of the application to the Court, it could be set aside pursuant to s 222(1) of the Act. This question turns on the proper construction of the requirement in s 222(1) that a personal insolvency agreement be “in force”. The Appellant contends that as the PIA was fully executed and completed by the time of the application to the Court, it was no longer “in force” and therefore the Court did not have power to set it aside.

4    The First Respondent, the Inspector-General in Bankruptcy, contends that the primary judge correctly found that the words “in force” refer to the statutory force of a personal insolvency agreement under the Act and that the PIA therefore remained in force at the time that the primary judge made the setting aside order pursuant to s 222(1) of the Act.

5    For the following reasons, we have concluded that there was no error of construction of s 222(1) of the Act by the primary judge and the appeal must be dismissed with costs.

Background

6    The following matters were not disputed.

7    On 1 March 2024, the Appellant appointed Ms Anne Meagher and Mr Adam Kersey, the Second and Third Respondents respectively, as the Controlling Trustees.

8    On 23 April 2024, the Appellant and the Controlling Trustees executed the PIA.

9    On 3 June 2024, the Controlling Trustees distributed the dividends under the PIA.

10    On 4 June 2024, the Controlling Trustees issued a Certificate of Completion of the PIA to the Appellant.

11    On 29 August 2024, the Inspector-General filed an originating application, relevantly seeking that the PIA be set aside pursuant to s 222(1) of the Act.

12    The matter was heard by the primary judge on 28 to 30 January 2025, with judgment being delivered on 24 February 2025. The primary judge set aside the PIA pursuant to s 222(1) of the Act and sequestrated the Appellant’s estate pursuant to s 222(10).

13    The appeal was filed by the Appellant on 24 March 2025.

Statutory provisions and legal principles

Statutory provisions

14    The Court has the power to set aside a personal insolvency agreement pursuant to ss 222(1), (2) and (5) of the Act. Section 222 provides:

Court may set aside personal insolvency agreement

Setting aside on grounds of unreasonableness etc.

(1)    If a personal insolvency agreement is in force, the Court may, on application by:

(a)    the Inspector - General; or

(b)    the trustee; or

(c)    a creditor;

make an order setting the agreement aside if the Court is satisfied that:

(d)    the terms of the agreement are unreasonable or are not calculated to benefit the creditors generally; or

(e)    for any other reason, the agreement ought to be set aside.

Setting aside on grounds of non-compliance with this Part etc.

(2)    If a personal insolvency agreement is in force, the Court may, on application by:

(a)    the Inspector - General; or

(b)     the trustee; or

(c)    a creditor; or

(d)    the debtor;

make an order setting the agreement aside if the Court is satisfied that:

(e)    the agreement was not entered into in accordance with this Part; or

(f)    the agreement does not comply with the requirements of this Part.

(3)    The Court must not make an order setting aside a personal insolvency agreement on the ground that it does not comply with the requirements of this Part if the agreement complies substantially with those requirements.

(4)     The Court must not make an order under subsection (2) unless the application for the order is made before all the obligations that the personal insolvency agreement created have been discharged.

Setting aside on grounds of false or misleading information etc.

(5)    If a personal insolvency agreement is in force, the Court may, on application by:

(a)     the Inspector - General; or

(b)    the trustee; or

(c)    a creditor;

make an order setting the agreement aside if the Court is satisfied that:

(d)    the debtor has given false or misleading information in answer to a question put to the debtor with respect to any of the debtor's conduct or examinable affairs at the meeting of creditors at which the resolution requiring the debtor to execute the agreement was passed; or

(e)    the debtor has:

(i)    omitted a material particular from the statement of the debtor's affairs given under subsection 188(2C) or (2D); or

(ii)    included an incorrect and material particular in that statement; or

(f)    the debtor was subject to a requirement under Division 75 of Schedule 2 (including rules made under that Division) to table a statement, and the debtor has:

(i)    omitted a material particular from that statement; or

(ii)    included an incorrect and material particular in that statement; or

(g)    the controlling trustee has:

(i)    omitted a material particular from the declaration given by the controlling trustee under subsection 189A(3); or

(ii)    included an incorrect and material particular in that declaration; or

(h)    the controlling trustee was subject to a requirement under Division 75 of Schedule 2 (including rules made under that Division) to table a statement, and the controlling trustee has:

(i)    omitted a material particular from that statement; or

(ii)    included an incorrect and material particular in that statement; or

(i)    a person who became the trustee of the agreement has:

(i)    omitted a material particular from the declaration given by the person under subsection 215A(3) or (4); or

(ii)    included an incorrect and material particular in that declaration.

(6)     The Court must not make an order under subsection (5) unless it is satisfied that it would be in the interests of the creditors to do so.

(7)    The Court must not make an order under subsection (5) unless the application for the order is made before all the obligations that the personal insolvency agreement created have been discharged.

Ancillary orders

(8)    If the Court makes an order under subsection (1), (2) or (5), the Court may make such other orders as the Court thinks fit.

(9)    An order under subsection (8) may be an order directing a person to pay another person compensation of such amount as is specified in the order. This subsection does not limit subsection (8).

Application for sequestration order

(10)     The trustee or a creditor may include in an application under subsection (1), (2) or (5) an application for a sequestration order against the estate of the debtor. If the Court, on the first - mentioned application, makes an order under this section setting the personal insolvency agreement aside, it may, if it thinks fit, immediately make the sequestration order sought.

(11)     The making of an application by the trustee or a creditor for a sequestration order under this section is taken, for the purposes of this Act, to be equivalent to the presentation of a creditor's petition against the debtor, but the provisions of subsection 43(1), sections 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to such an application.

Court may dispense with service on debtor of notice of application

(12)    The Court may, if it thinks fit, dispense with service on the debtor of notice of an application by the Inspector - General, the trustee or a creditor under this section, either unconditionally or subject to conditions.

Legal principles

15    There was no real dispute as to the applicable principles of statutory construction.

16    The starting point for construing a statutory provision is the text of the statute, whilst regard is also had to its context and purpose: Palmanova Pty Ltd v Commonwealth of Australia (2025) 99 ALJR 1362; [2025] HCA 35 at [4] (Gageler CJ, Gordon, Jagot and Beech-Jones JJ); SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14] (Kiefel CJ, Nettle and Gordon JJ); Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 335; [1998] HCA 28 at [69]-[70] (Brennan CJ). In this sense, context is an enquiry made at this first stage and in its widest sense: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ); SZTAL at [14]; R v A2 (2019) 269 CLR 507; [2019] HCA 35 at [33] (Kiefel CJ and Keane J) and [148] (Nettle and Gordon JJ); Palmanova at [5].

17    It is necessary to construe a provision in the light of the relevant extrinsic materials and legislative history, which go to the statutory purpose the provision is designed to achieve: Palmanova at [4]. Specifically, such materials will illuminate the mischief which the statute is intended to remedy: R v A2 at [33] and [148]; CIC Insurance at 408. However, considerations drawn from the extrinsic materials cannot be relied on to displace the clear meaning of the text of the relevant provision: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47] (French CJ): Federal Commissioner of Taxation v Consolidated Media Holdings Pty Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ). Furthermore, extrinsic materials cannot be substituted for the text of the statute: Consolidated Media at [39]. The construction which best achieves the purpose or object of the legislation is to be preferred: s 15AA of the Acts Interpretation Act 1901 (Cth) (Acts Interpretation Act).

18    There is a presumption that the same words that occur in different parts of a statute have the same meaning, however, this presumption must yield to the requirements of context: McGraw-Hinds (Aust) Pty Ltd v Smith (1979) 144 CLR 633; [1979] HCA 19 at 643 (Gibbs J); WorkPac Pty Ltd v Skene (2018) 264 FCR 536; [2018] FCAFC 131 at [106] (Tracey, Bromberg and Rangiah JJ). Finally, when construing a statute, all words are to be given meaning and effect: Project Blue Sky at [71]; Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [39] (French CJ, Gummow, Hayne, Crennan and Kiefel JJ).

Grounds of appeal

Overview

19    The Appellant advanced three interrelated grounds of appeal in his notice of appeal. He contends that the primary judge erred in the construction of “if a personal insolvency agreement is in force…” in s 222(1) of the Act (ground of appeal [1.1]) by holding that the words “in force” mean that the PIA continues to have legal force or effect under the Act (ground of appeal [1.2]) and the primary judge ought to have held that the precondition for the exercise of the discretion was not enlivened as the PIA was no longer in force, according to the terms of the PIA (ground of appeal [1.3]).

Reasoning of the primary judge

20    The primary judge addressed the meaning to be given to the requirement in s 222(1) that a personal insolvency agreement be “in force” in her reasons at PJ at [55]-[64].

21    Her Honour relevantly determined that:

(a)    the words “in force” were inserted into s 222 on 30 November 2004 by s 142 of the Bankruptcy Legislation Amendment Act 2004 (Cth) and cannot be regarded as mere surplus wording and must be given work to do (PJ at [56]);

(b)    the words “in force” are also used in ss 222(2) and (5), but those sub-sections can only be engaged “before all of the obligations that the personal insolvency agreement created have been discharged” and therefore the words “in force” must mean something different to “the discharge of all obligations under an agreement” (PJ at [57]);

(c)    the words “in force” in s 222 mean that the PIA continues to have legal effect under the Act because it has not been set aside or terminated as otherwise provided in the Act, including pursuant to s 222 itself (PJ at [59]);

(d)    a personal insolvency agreement can only achieve its intended legal effect by reason of the force of legislation, as at general law it could not operate to release any debts because creditors are not parties to a personal insolvency agreement and therefore it only has such “force” as the Act gives it, which is the “force” to which s 222 is referring (PJ at [60]);

(e)    s 229 and s 230 of the Act provide examples where statutory force is given to a personal insolvency agreement after all payments have been made under it provided that the agreement remains valid (s 229) and a debtor is released from all provable debts as provided in the agreement unless the agreement is set aside or terminated (s 230) (PJ at [61]-[62]).

22    Her Honour concluded that as the PIA had “not been set aside or terminated”, an application could be brought under s 222(1) as the PIA remained “in force” with the meaning of that provision (PJ at [64]).

Submissions of the Appellant

23    The Appellant advances the following submissions in support of its interrelated grounds of appeal.

24    First, the Appellant submits that a proper distinction needs to be drawn between the operation of the statute and the operation of the personal insolvency agreement. He submits, relying by analogy on the reasoning in Robinswood Pty Ltd v Horsman & Ors (1988) 19 FCR 318 at 322-323 (Northrop, Sheppard and Lee JJ), that the PIA cannot be said to be “in force” unless it is presently in operation and presently having effect and has not terminated in accordance with its terms. He submits that given it is common ground that by the time the application was made to the Court, the PIA had been fully executed and completed, the agreement was no longer in force for the purposes of s 222.

25    Secondly, the Appellant submits that an ability to set aside a personal insolvency agreement indefinitely, including where it has been fully executed and completed, is contrary to one of the fundamental purposes of the Act, being to provide debtors with a “fresh start”. Relatedly, he submits that the conditional language in s 222(1) also supports a construction that a personal insolvency agreement is meant to come to an “end”, as that word is defined in s 5(1)(ba) of the Act.

26    Thirdly, the Appellant submits that a construction that a personal insolvency agreement remains “in force” unless set aside or terminated is difficult to reconcile with other provisions of the Act. He submits that the Act draws a distinction between the termination of a personal insolvency agreement and the satisfaction of all of the obligations under that agreement. He submits that if the precondition was only that a personal insolvency agreement had not been set side or terminated, then that would have been the language used in the section. The use of “in force” means something broader was intended. Furthermore, he submits in this context that “termination” occurs in circumstances where a personal insolvency agreement comes to an end prematurely, but not in circumstances where the deed or agreement ceases to be in force because of the satisfaction of its terms.

27    Fourthly, the Appellant submits that neither s 229 nor s 230 supports the construction accepted by the primary judge. He submits that nothing in s 230 provides that a personal insolvency agreement continues “in force” after its terms have been completed. He submits, by way of example, that a release from a provable debt arises while the agreement is in force but once the release is effective, the agreement has no further work to do, and it is spent. He submits that the language in s 229 “so long as the agreement remains valid” is very different to that of “in force”. He submits that a fully performed personal insolvency agreement may still be regarded as “valid” even though it has ceased to be in force.

28    Fifthly, the Appellant submits that the expressions “in force” and that “all the obligations that the personal insolvency agreement created have been discharged” are not mutually exclusive. He submits that given the flexible nature of personal insolvency agreements, it was possible that an agreement, according to its terms, might be intended to continue in force after all of the obligations created under it have been discharged. He submits, therefore, any determination of whether a personal insolvency agreement was “in force” would require a consideration of the terms of the particular personal insolvency agreement and it is possible, relying on the decision in Re: Hugh Maxwell Taylor and Albert Brian Taylor; Ex Parte: Century 21 Real Estate Corporation v Hugh Maxwell Taylor and Albert Brian Taylor [1997] FCA 618 (Burchett J), that an agreement may be intended to continue in force after all obligations under it might have been discharged.

29    For these reasons, the Appellant submits that the preferable construction of s 222(1) is that a personal insolvency agreement remains “in force” if it remains operative in its own terms. He submits that as the PIA was fully executed and completed, and its provisions indicated that it was not intended to be operative after the Certificate of Completion, it was no longer “in force” and the Court’s discretion to set the agreement aside did not arise.

Statutory context

30    The current Part X of the Act was introduced by the Bankruptcy Legislation Amendment Act 2004 (Cth) (Amendment Act). The revised explanatory memorandum to the Bankruptcy Legislation Amendment Bill 2004 (EM) expressly stated that the changes followed a review of and report on the operation of Part X undertaken by the Insolvency and Trustee Service Australia and the Attorney-General’s Department (ITSA Report) (EM at [2] and [10]).

31    On 14 October 2003, the Attorney-General announced the release of the ITSA Report in a media release (AG Release). The AG Release provided a summary of the ITSA Report and proposals for legislative change.

32    Both the ITSA Report and the AG Release are relevant matters of context for the proper construction of s 222 of the Act. Such matters guide but do not govern the construction: Palmanova at [5]; R v A2 at [25]-[30] and see the non-exhaustive list of materials in s 15AB(2) of the Acts Interpretation Act.

33    Prior to the Amendment Act, Part X of the Act recognised three distinct types of arrangements as alternatives to bankruptcy, being (1) a deed of arrangement, (2) a deed of assignment, and (3) a composition (see ITSA Report at [2.1]-[2.7]). Further, prior to the Amendment Act, s 222 relevantly provided in s 222(6) that orders pursuant to subsections (2) and (4) shall not be made unless the application for such an order was made (a) in relation to a deed of assignment, before the final dividend, (b) in relation to a deed of arrangement, before the terms of the deed have been carried out, or (c) in relation to a composition, before the final payment has been made under the composition.

34    Section 239 provided (prior to the Amendment Act) that the Court may set aside a composition on the application of a creditor if made within 21 days of the special resolution accepting the composition under Part X. This provision also allowed the creditor to apply to the Court for the making of a sequestration order.

35    The ITSA Report identified reforms to increase effectiveness and efficiency (EM at [14]). The amendments proposed were intended to enhance the integrity of the Part X process but not to interfere with it providing a simple and flexible process, without sequestration (EM at [15]). As part of this simplicity and flexibility, a single type of generic Part X agreement, to be known as ‘personal insolvency agreements’, would be introduced (EM at [16]).

36    The AG Release noted the ITSA Report was in response to concerns that “Part X arrangements were being manipulated by some debtors” (AG Release, page 1). Part of the improvements were to increase “creditors’ access to judicial remedies to set aside a Part X administration” (AG Release, page 1). The attached summary of changes included “Proposal 27”, which recommended the introduction of an amalgamation of provisions to provide a consistent and simplified regime for the termination and avoidance of all kinds of agreements by the Court, and “Proposal 28”, which recommended that the Court be empowered to void a completed agreement.

37    The EM, which referred to both the ITSA Report and the AG Release (EM at [3]), described the objects of the amendments as follows:

3    The objects of this Bill are to:

(a)    enhance the integrity of Part X arrangements by increasing the disclosure requirements imposed on those involved in such arrangements; and

(b)    streamline the operation of Part X by providing a single type of agreement which will replace the existing three types as well as simplify the processes for setting aside and terminating such agreements.

38    The ITSA Report observed that the Part X arrangements may be entered into improperly or incorrectly (ITSA Report at [8.19]). The ITSA Report also observed that there were current limitations on the Inspector-General’s ability to make an application to the Court to set aside a Part X arrangement. Such an application could not be made on the basis that the agreement was unreasonable, that it was not calculated to benefit creditors generally, that it could not proceed without injustice or undue delay, or for any other reason (ITSA Report at [8.23]-[8.24]).

39    The EM also described the amendment provisions in relation to setting aside a personal insolvency agreement in the following terms (EM at [90]):

Although this is required because the existing provisions apply individually to deeds of arrangement, deeds of assignment and compositions, it is also aimed at providing a single and simpler regime detailing the circumstances in which an agreement should be capable of being set aside or terminated…The new provisions would also allow the Inspector-General in Bankruptcy to apply for a personal insolvency agreement to be set aside.

40    Section 222(1)(e) of the Amendment Act enabling the Inspector-General to make an application to set aside a personal insolvency agreement on the basis that it was unreasonable or not calculated for the benefit of creditors or for “any other reason” was in response, at least in part, to the ITSA Report’s concerns.

Consideration

Textual considerations

41    The words “in force” in s 222(1) of the Act must be construed whilst regard is had at the same time to its context and purpose, including the Act as a whole, in particular with the other sub-sections of s 222.

42    Each of ss 222(1), (2) and (5) commence with the same words “If a personal insolvency agreement is in force” and provide the Court with power to set aside a personal insolvency agreement. The structure and headings of s 222 also inform its construction.

43    Section 222(2) of the Act empowers the Court to set aside a personal insolvency agreement, on the application of either the Inspector-General, the Trustee, a creditor or the debtor. That power is subject to ss 222(3) and (4). Section s 222(4) provides that the power can only be exercised if that application is made before all of the obligations under that agreement have been discharged.

44    There is a similar structure for s 222(5). That power is subject to ss 222(6) and (7). This provision empowers the Court to make an order setting aside a personal insolvency agreement on the grounds of a debtor providing false or misleading information, but relevantly s 222(7) provides, only if that application was made before all of the obligations of the personal insolvency agreement have been discharged.

45    In contrast, s 222(1) is not subject to any further temporal conditions and relevantly provides that the Court on the application of the Inspector-General, the trustee or a creditor may set aside a personal insolvency agreement where the terms are unreasonable or where for “any other reason”, the Court is satisfied that the agreement ought to be set aside but is not subject to any temporal requirement, other than that the agreement must be “in force”.

46    Textually it is readily apparent that there must be a distinction between the meanings to be given to when an agreement is “in force” in ss 222(1), (2) and (5), and the “discharge of all the obligations” under an agreement in ss 222(2) and (5). To give proper work for ss 222(4) and (7) to do, the opening phrase of each of the provisions being “If a personal insolvency agreement is in force, the Court may, on application by…” must include circumstances where all of the obligations created by the personal insolvency agreement have been discharged. If all of the obligations created by the personal insolvency agreement have been discharged, the powers in ss 222(2) and (5) would not be available because of the operation of ss 222(4) and (7) respectively, requiring that the application be made before all of the obligations have been discharged.

47    It is clear from the structure and text of s 222(1) of the Act that a personal insolvency agreement may be “in force” notwithstanding that all contractual obligations under the agreement have been discharged. As the primary judge concluded, a personal insolvency agreement is “in force” if it continues to have legal effect under the Act unless and until it has not been terminated or set aside as otherwise provided in the Act and a personal insolvency agreement can only achieve its statutory purpose of releasing debts by reason of statutory force, as creditors are not parties to a personal insolvency agreement.

Contextual considerations

48    Contrary to the submissions that s 229 and s 230 do not assist, these provisions provide further context relevant for the construction of s 222(1). Both sections give a continuing and conditional force to a personal insolvency agreement.

49    Section 229(2)(a)-(c) provides that if a personal insolvency agreement becomes binding on creditors and remains valid, it is not competent for a creditor to do certain things. A valid personal insolvency agreement is one that continues to have legal force. That is, the personal insolvency agreement continues in force by reason of the statute, not by way of contractual obligations.

50    Section 230 releases the debtor from provable debts as provided for in a personal insolvency agreement, “unless the agreement is set aside or terminated under this Part.” Therefore, so long as the personal insolvency agreement remains valid (s 229), a release continues to operate unless and until the personal insolvency agreement is set aside or terminated (s 230).

51    Both of these provisions provide that a personal insolvency agreement has statutory force beyond the period when all of the obligations under the agreement have been satisfied. Textually and in their statutory context, we do not discern any material difference between an agreement being “valid” in s 229 and a personal insolvency agreement being “in force” for the purposes of s 222(1).

52    In this regard, we do not gain any assistance with this question of construction from Robinswood. The essential question in Robinswood was (at 318) whether the termination of a deed of arrangement under Part X (which was prior to the Amendment Act) had the effect of preventing a creditor from pursuing a claim for a provable debt against the debtors in circumstances where, arising from the same transactions, the debtors were free to pursue a claim against the creditor. This considered the previous version of s 233 of the Act, which is not analogous to s 222 of the Act. As is clear from the following quoted passage from Robinswood, the context assists in understanding and fixing a meaning to the statutory text: “(i)n the context of s 233, the word “force””. However, the meaning of “force” in the context of the previous s 233 cannot be merely inserted into s 222 of the Act as introduced by the Amendment Act, in a different context and with provisions seeking to achieve a different purpose: Harding v Federal Commissioner of Taxation (2019) 269 FCR 311; [2019] FCAFC 29 at [43] (Davies and Steward JJ); McNamara v Consumer Trader and Tenancy Tribunal (2005) 221 CLR 646; [2005] HCA 55 at [40] (McHugh, Gummow and Heydon JJ).

53    A similar observation can be made in relation to the use of the phrase “while …is in force” or “if a debt agreement is in force” in Part IX of the Act, which the Appellant referred to in oral submissions. Part IX - Debt Agreements is separate and distinct. Part IX was not the subject of the ITSA Report or the Amendment Act. Although context can be used in its widest sense, this is a separate part of the Act with a different purpose, requirements, and system, and responsive to a different mischief. It does not assist in seeking to construe the relevant words in s 222(1) in Part X.

Extrinsic materials

54    Contrary to the Appellant’s submissions, the following extrinsic material does not support the position that the words “if a personal insolvency agreement is in force…” are words of limitation intended to ensure the debtor is not subject to the Act indefinitely:

(a)    the Court be empowered to void a completed agreement (AG Release, Proposal 28);

(b)    that a simplified regime for the setting aside or avoidance of the agreements was to be introduced, which was to reduce the confusion, difficulty, cost and time associated with that process (AG Release, Proposal 27; EM at [3(b)] and [90]; ITSA Report at [8.11]-[8.13]) and expand the Inspector-General’s power to apply to the Court to set aside an agreement (ITSA Report at [8.14]);

(c)    under the previous s 222, the circumstances and grounds upon which the Inspector-General could rely to seek to set aside a Part X arrangement were limited and the Inspector-General was powerless to apply to the Court to have the agreement set aside:

(i)    on the basis that the agreement was unreasonable, was not calculated to benefit creditors generally, that the agreement could not proceed without injustice or undue delay or “for any other reason”; or

(ii)    if the agreement had already been complied with (ITSA Report at [8.26]-[8.27]);

(d)    the proposed s 222(1) would also allow the Court to make an order setting aside the agreement where it is satisfied that, for any other reason, the agreement ought to be set aside. Contrary to proposed subsections 222(2) and (5), this was expressed without qualification (EM at [91]-[93]);

(e)    some of the improvements were to increase creditors’ access to judicial remedies to set aside Part X agreements, including being empowered to void a completed agreement (AG Release at page 1 and Proposal 28); and

(f)    a consistent and simplified regime for termination and avoidance of agreements by the Courts should be adopted and the grounds upon which the Inspector-General may apply to the Court to void an agreement should be expanded to include that the agreement is unreasonable or is not calculated to benefit creditors generally.

55    Taken together, this extrinsic material does not support the Appellant’s construction of s 222(1) of the Act, instead supporting a broader, not narrower, construction making clear that the Inspector-General’s powers to set aside personal insolvency agreements extended to completed agreements.

56    Although one of the purposes of the Act, and the Part X arrangements, is to provide debtors with a “fresh start”, it is not the only purpose. It would be a factor weighed in the exercise of the Court’s discretion under ss 222(1)(d) or (e) of the Act, once the power was enlivened. The Appellant’s contention that the purpose of a “fresh start” is one which supports a limit on the Court’s power to set aside a personal insolvency agreement, because otherwise there would be an indefinite “Sword of Damocles” hanging over a debtor, is not supported by the extrinsic material. One of the improvements sought to be made by the Amendment Act was to enhance the ability of the Inspector-General to apply to the Court to set aside a personal insolvency agreement on the ground that it is unreasonable, it is not for the benefit of creditors or for “any other reason”. These bases accord with the Inspector-General being able, after completion of the operative terms of the relevant personal insolvency agreement, to make an application to set it aside, particularly given there is no temporal limitation.

57    Another objective is that the assets of the debtor are distributed rateably amongst creditors. Consideration of this objective in exercise of the Court’s discretion under ss 222(1)(d) or (e) will promote the objectives of Part X and those of the Amendment Act if there is a broader construction of a personal insolvency agreement being “in force”. As the primary judge (correctly, with respect) observed (PJ at [53]-[54]), s 222(1)(e) confers a broad discretion which permits a range of factors to be taken into account, including those which may overlap with s 222(1)(d) of the Act.

Agreements remaining “operative” after discharge of all obligations

58    It is common ground that the PIA had been fully executed and completed at the time that the primary judge made orders under s 222(1).

59    We do not accept the Appellant’s submission that, given the flexible approach to be taken after the Amendment Act, s 222(1) could potentially have application to a personal insolvency agreement on the basis that the agreement was intended to remain “operative” notwithstanding that all obligations created under the agreement had been discharged. This would necessarily depend on the manner in which the personal insolvency agreement had been drafted. It would require a detailed consideration of the terms and operation of the relevant personal insolvency agreement on an application under s 222(1) of the Act to ascertain whether it was still “operative” notwithstanding all the obligations created by the agreement had been discharged.

60    Such an approach only serves to highlight the distinction between obligations imposed under the Act, in particular s 229 and s 230, and those imposed under a personal insolvency agreement. It is at best a theoretical contention devoid of any practical application. By reason of s 229 and s 230, the Act plainly provides that a personal insolvency agreement will continue to be “operative” after all contractual obligations under the agreement have been discharged.

61    Further, and in any event, any contention that a personal insolvency agreement could be construed as including provisions that provided for any additional contractual operation, beyond that imposed by statutory force, to an agreement once all obligations under it had been discharged, would be contrary to the extrinsic material. That material makes it plain that the amendments were seeking to simplify and reduce confusion, difficulty, cost and time involved in making an application to have a personal insolvency agreement set aside.

62    Moreover, it would mean that some debtors, depending on the advice they had obtained, may draft a personal insolvency agreement in a way that evinces no intention for that agreement continuing in force after the obligations have been discharged, and some debtors may not. The provision should be consistently applied to all personal insolvency agreements and as between ss 222(1), (2) and (5), where the same words are used. There should not be a jurisdictional pre-condition to the making of an application to set aside a personal insolvency agreement by the Inspector-General, the trustee or a creditor that would effectively turn on the advice obtained by a debtor or the particular way in which the personal insolvency agreement has been drafted. Such an approach would leave a Part X agreement open to manipulation, contrary to one of the express purposes of the Amendment Act.

63    The intention of these amendments is to provide a broad, flexible process whereby the Inspector-General, the trustee or a creditor can make an application to the Court with respect to in-force personal insolvency agreements. The grounds upon which the application is to be made are also broad and flexible and support a construction that the opening words of s 222(1) are not words of limitation.

64    Finally, the Appellant’s reliance on Taylor to advance its contractual “remains operative” submission is misplaced. Taylor was a different case and based on the previous legislation. It was an application under the former s 222(6)(b) relating to a deed of arrangement. The relevant deed in Taylor contained a clause which conveyed and assigned the debtor’s right, title and interest to any proceeds from litigation by Century 21 (South Pacific) Pty Ltd (in liquidation), arising against Century 21 Real Estate Corporation and/or any other parties, to be divided amongst the creditors. The deed was executed on 24 July 1991, and the trustee gave a certificate of completion on 7 February 1992. The application under s 222(6) was said to be made approximately two years later. Section 222(6)(b) required that the application in relation to the deed of arrangement be made before the terms of the deed had been carried out. Burchett J set out the facts of the case, including that the litigation referred to above between Century 21 (South Pacific) Pty Ltd (in liquidation) and Century 21 Real Estate Corporation took place, judgement was delivered in respect of it on 21 March 1996, and the proceedings failed such that no money was recovered. His Honour held that all of the terms of the deed had been carried out by the parties to the deed. The litigation of another party which may have resulted in further money, described by his Honour as an “outstanding possibility”, did not alter the position that there was nothing more actually to be done under the deed after the date of the certificate. The application was dismissed as it had not been brought before the terms of the deed had been carried out. That is of no assistance under the current terms of s 222(1) of the Act.

CONCLUSION

65    For the foregoing reasons, the proper construction of the phrase “in force” in s 222(1) is that the relevant personal insolvency agreement continues to have statutory force under the Act. A personal insolvency agreement will bind and effect other parties who are not a party to the agreement. Those parties are bound by force of the statute, not by contractual obligations. One of the mischiefs of the Amendment Act was to address deficiencies from the previous provisions under Part X of the Act. There was no ability under the former provisions for the Inspector-General to bring an application to the Court to seek to set aside a personal insolvency agreement on the grounds of it being unreasonable. Further, only a creditor could bring an application under s 239 of the former provisions, and it had its own limitations. Section 222(1) is broader and intended to empower the Court to be able to consider personal insolvency agreements which are in force under the Act, but completed in their terms, in appropriate circumstances. It is a broad discretion which permits the Court to take into account a range of considerations.

66    In the circumstances of this case, the PIA was “in force” under the Act, although fully executed and completed, by its terms. There was no error by the primary judge in concluding that the Court had jurisdiction to consider the discretion available under s 222(1) of the Act.

67    The appeal must be dismissed with costs.

Associate:    

Dated:    17 December 2025

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