Andrew Yiasemides and Inspector-General in Bankruptcy

[2014] AATA 51

[2014] AATA 51

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2013/2611
Re	Andrew Yiasemides
APPLICANT
And	Inspector-General in Bankruptcy
RESPONDENT

DECISION

Tribunal	Ms N Bell, Senior Member
Date	3 February 2014
Place	Sydney

The Tribunal affirms the decision under review.

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Ms N Bell, Senior Member

CATCHWORDS

BANKRUPTCY – refusal of Inspector General to enter on National Personal Insolvency Index

 – applicant claims administration of his estate was finalised – was the administration of the estate finalised – decision under review affirmed

LEGISLATION

Bankruptcy Act 1966 (Cth), ss 19, 149, 184A

Bankruptcy Regulations 1966 (Cth), reg 8.14

CASES

Ferella and Another v Official Trustee in Bankruptcy [2010] FCA 766

SECONDARY MATERIALS

Insolvency and Trustee Service Australia, The Bankruptcy Regulator, Vol 5, Issue, May 2006

REASONS FOR DECISION

Ms N Bell, Senior Member

3 February 2014 

1. Andrew Yiasemides seeks review of the decision of the Inspector General in Bankruptcy to refuse to make an entry on the National Personal Insolvency Index stating that the administration of Mr Yiasemides’ bankrupt estate was finalised no later than 17 February, 2001.

2. Mr Yiasemides became bankrupt in February 1998 after presenting a debtor’s petition. The Official Trustee was appointed as the Trustee of Mr Yiasemides’ bankrupt estate and an initial report to creditors was made by the officer acting on behalf of the Official Receiver.

3. On 11 January, 1999, Mr Yiasemides sought the Official Trustee’s consent to travel overseas. After a telephone conversation between Mr Yiasemides and an officer of the Official Receiver on 15 January, a file note was made by the officer. Three days later Mr Yiasemides received a letter from the Official Receiver advising his travel overseas had been approved on the condition that he inform the Trustee within seven days of his return to Australia.

4. In August 1999 Mr Yiasemides contacted the Official Receiver regarding the format for an offer of composition. The following day the Official Receiver wrote to Mr Yiasemides enclosing a suggested format for an offer of composition. In October 1999 an officer of the Official Receiver wrote again to Mr Yiasemides with advice as to the sum required to pay out his bankruptcy.

5. On 17 February, 2001, by operation of section 149 of the Bankruptcy Act 1966, Mr Yiasemides was discharged from bankruptcy.

6. On 5 August 2011 the Official Trustee received a “Consent to Act” from Paul Leroy. Mr Leroy is now the Registered Trustee of Mr Yiasemides’ estate.

7. Mr Yiasemides contends that the administration of his estate was finalised, first, at the time he was given approval in January 1999 to travel overseas and is evidenced by the terms of the officer’s file note. He further contends that by the time of Mr Yiasemides’ automatic discharge from bankruptcy the administration of the estate was finalised. The Inspector-General contends that the file note is not evidence of finalisation and that in fact the estate has never been finalised. The Inspector-General also contends that, even if, as a matter of fact, the administration of the estate had been finalised, the Inspector-General should not make an entry on the National Personal Insolvency Index to that effect.

8. It was common ground that a discharge from bankruptcy by operation of the Act is distinct from the finalisation of administration of an estate and that the obligations on a trustee and a trustee’s conduct that may affect a bankrupt person can continue well after the person’s discharge from bankruptcy (Ferella and Another v Official Trustee in Bankruptcy [2010] FCA 766 per Yates J at 73).

   ISSUES

9. The issues for me to consider are:

   (i)Was the administration of the estate finalised?

   (ii)If so, should the Inspector-General in Bankruptcy make an entry on the Index to the effect that the estate was finalised and, if so, in what terms?

   WAS THE ADMINISTRATION OF THE ESTATE FINALISED?

10. Mr Yiasemides relies primarily on the combination of a file note made in January 1999 and an absence of activity in the estate after his discharge from bankruptcy in 2001 up until 2011.

11. The file note was made by Mr Ian Keller, delegate of the Official Receiver, on 15 January 1999 following Mr Yiasemides’ request for approval to travel overseas. The request for approval to travel overseas is preceded in the file by a file note by Mr Keller on 17 February 1998 that notes one unsecured creditor for the sum of $1.3 million and nil assets and says:

    The bankrupt does not meet the criteria for early discharge.

    The bankrupt is not required to make compulsory contributions.

    A dividend to creditors is not likely.

    No Proofs of debt need to be lodged.

    Further notices will not be issued.

12. The next document in the file appears to be a letter to Mr Yiasemides on behalf of the Official Receiver, by another officer, that advises him, among other things, that he is obliged to retain records, deliver documents relating to securities in which he has an interest and disclose all goods, property and monies belonging to him or acquired by him during the course of the bankruptcy. Then, after the request for approval to travel, the file note of interest appears. It says:

    The abovementioned became bankrupt on 16.2.98 – S.55.

    Bankrupt employed as a consultant by Concept Manufacturing P.L..

    In a letter dated 11.1.99 his employer advises that the bankrupt is required to travel to Hawaii on business, departing Australia on 10.2. 99 and returning on 20.2.99. The employer will meet all expenses.

    Nil realisable assets.

    1 creditor only – Tax – $1.3 million dollars – bankrupt was a director of Chem-Cal Industries P/L – bankrupt states than an administrator was appointed in 1993 and assured the bankrupt that the company had no tax liability, due to tax credits. Bankrupt later discovered substantial tax was outstanding & Tax looked to him for payment.

    Nothing outstanding & estate finalised.

    I recommend that the application be granted.

13. Mr Yiasemides set great store by that part of the file note that says:

    Nothing outstanding & estate finalised.

14. Mr Yiasemides also submitted that there is a positive duty on the Official Trustee to finalise the administration of an estate. He submitted that this duty arises out of section 19 of the Act and, in particular, the following duties listed in that section:

    (j) administering the estate as efficiently as possible by avoiding unnecessary expense;

    (k) exercising powers and performing functions in a commercially sound way.

15. He also pointed to the ten year period following his discharge from bankruptcy during which there appear to have been no acts of administration of the estate.

16. Mr Yiasemides also referred me to an entry in the client newsletter of the Insolvency and Trustee Service Australia, The Bankruptcy Regulator, Vol 5, Issue 1 that says:

    Trustees and administrators need to inform the Official Receiver of the results of an administration as well as finalisation of an administration.

    The ‘result’ of an administration is required to be noted on the National Personal Insolvency Index (NPII), while the ‘finalisation’ of an administration is noted on ITSA’s internal records to ensure that we hold current and accurate information about the status of all trustee administrations.

17. He submitted that this is an indication of the importance, to ITSA, of keeping the Index up to date and of the general duty to do so.

18. I was asked by Mr Yiasemides to infer that, because Mr Keller gave no evidence on the issue of the meaning of his file note, the evidence he would give would not assist the Inspector-General’s case. Assuming that Mr Keller is available to give evidence and could recall the intention behind the words used by him in the file note he wrote more than 14 years ago, it seems unlikely that he could add much to the matter. Acts of administration continued after the date of the file, immediately after Mr Yiasemides advised of his return to the jurisdiction and, in relation to the possibility of a composition offer, right up until 2001. The file note cannot be evidence of finalisation of the administration of the estate because acts of administration occurred after the file note was written. I draw no inference from Mr Keller’s absence from the proceedings.

19. The Inspector-General submitted that there is no duty to finalise the administration of an estate. She pointed to the list of duties of a trustee set out in section 19 and noted there is no express duty to finalise the administration of an estate. She submitted there has, in fact, been no act of finalisation, including no notice or advice of finalisation of any kind given to the Official Receiver, whose responsibility it is, under regulation 8.14 of the Bankruptcy Regulations 1966, to promptly enter on the Index the fact that the administration of an estate has been finalised. I note that there is no provision in the Act for particular notice or advice of the fact of the finalisation of administration of an estate from the Official Trustee to the Official Receiver. However, section 184A of the Act provides that the Official Trustee is released from being trustee of an estate at the end of seven years from the date on which the Official Receiver entered on the Index the fact that the administration of the estate was finalised. The Inspector-General referred me to a previous incarnation of section 184A that, making no distinction between a Registered Trustee and the Official Trustee, required the furnishing of a final account in respect of the estate before release by law from trusteeship. I was urged to the view that some kind of notice or advice from the Official Trustee to the Official Receiver must, logically, be necessary to inform the Official Receiver of the fact of the finalisation of an estate. I agree that is the logical view. There is no evidence of such notice or advice in Mr Yiasemides’ case.

20. Ms Czinner is a Business Manager employed by the Official Trustee. Her evidence, in an affidavit sworn on 29 November 2012 for the purposes of associated Federal Court proceedings, was:

    Even though the bankrupt might be discharged and the estate may no longer be being actively managed, the Official Trustee never finalises administration of the estate in the sense that the administration is ended and cannot be reactivated. Nor does the Official Trustee ever seek to be removed from office as trustee of the estate, unless it is transferring the trusteeship to a registered trustee. Indeed, there is no provision in the Act which provides for the removal of the Official Trustee from office. This is because the Official Trustee commonly receives information about a bankrupt’s conduct or the possibility of hidden assets from a variety of sources including creditors and members of the public and this can and does happen long after the active administration of the bankrupt estate has concluded. Such information can lead to discovery of further assets and can sometimes result in former bankrupt’s [sic]being prosecuted for offences or actions taken to recover assets. For example, various offence provisions of the Act apply regardless of whether a person has been discharged from bankruptcy or had their bankruptcy annulled and the Official Trustee may, at any time commence an action in respect of a transfer of property by a person who later becomes bankrupt where that transfer was made with intent to defeat creditors. As a result, very many estates in which the Official Trustee is the trustee are still current but are no longer actively managed.

21. I was asked by Mr Yiasemides to give Ms Czinner’s evidence little weight because she has held her position since only 2010 and could not know what happened in 2001. I give limited weight to this evidence, as evidence of what, if anything, took place in 2001 beyond what is recorded in the file she inspected, but to the extent that it is the evidence of an officer of the Official Trustee as to the practice by the Official Trustee in relation to the finalisation of the administration of estates generally, I accept it.

22. The Inspector-General submitted that Mr Keller’s file note should be read in the context of Mr Yiasemides’ application for approval to travel overseas and that any reference by Mr Keller to the estate being finalised is limited in that context to a consideration of whether there was any risk in Mr Yiasemides’ being gone from the jurisdiction. I note, in this regard, that the file note ends with a recommendation about the application for approval to travel and not with a note or recommendation about finalisation of the administration of the estate.

23. I also note that Mr Yiasemides’ statement statutory declaration made on 21 March 2013 reports his telephone conversation with Mr Keller, the same conversation that gave rise to the file note, in the following terms, referring to finalisation of his bankruptcy, rather than to finalisation of the administration of the estate:

    Mr Keller said words to the effect:

    “There is nothing outstanding and your bankruptcy is considered to be finalised.”

24. I consider the Inspector-General’s interpretation of the file note to be the better view. In the context in which it was written, and in view of the acts of administration that followed it, it casts little light on the question of whether, as a matter of fact, the administration of the estate was finalised.

25. The ten year period during which, it appears, nothing was done in relation to the estate suggests only that there was nothing done during that period. It is not evidence of finalisation of the administration of the estate. In this regard I note Ms Czinner’s evidence as to the practice of the Official Trustee and the intervention of Mr MacDonald who appears to have raised a complaint about non-disclosure of assets. The Registered Trustee to whom the Official Trustee transferred the administration of the estate is, I understand, investigating that complaint or means to. The administration of the estate is ongoing. A hiatus in the administration does not amount to finalisation.

26. I am also mindful that Mr Yiasemides seeks retrospective operation of the finalisation he contends. In these circumstances there should be clear evidence before I can be satisfied of the fact of finalisation. There is not.

27. I find that the administration of the estate was not finalised. It follows that the other issues in this application fall away.

    DECISION

28. The Tribunal affirms the decision under review.

I certify that the preceding 28 (twenty -eight) paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Senior Member.

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Associate

Dated 3 February 2014 

Date of hearing	6 December 2013
Counsel for the Applicant	Mr D Pritchard SC
Solicitors for the Applicant	Farrar Laywers
Counsel for the Respondent	Mr M Heath
Solicitors for the Respondent	AGS