Arundell and Inspector-General in Bankruptcy

[2006] AATA 88

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 88

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2005/892

GENERAL ADMINISTRATIVE DIVISION		)
Re		WILLIAM NORMAN ARUNDELL

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

DECISION

Tribunal Ms N Bell, Senior Member

Date3 February 2006

PlaceSydney

Decision The decision under review is affirmed.

................................................

Ms N Bell,
  Senior Member

BANKRUPTCY – Objection to Discharge of Bankruptcy – Applicant Had Reasonable Excuse For Failing to Provide Certain Information by Particular Date – Applicant Did Not Have Reasonable Excuse For Failing to Disclose a Creditor in his Statement of Affairs – Objection Must Not Be Cancelled – Decision of Inspector-General in Bankruptcy Affirmed

Bankruptcy Act 1966 ss149D(1)(d), 149D(1)(ha), 149N(1A)

REASONS FOR DECISION

3  February 2006 Ms N Bell, Senior Member

1.Mr Arundell entered into voluntary bankruptcy on 20 February 2002.  The Official Trustee became Trustee of the Bankrupt Estate.

2.In the normal course, Mr Arundell would have been discharged from bankruptcy on 21 February 2005.  However, on 18 February 2005 the Official Trustee filed a Notice of Objection to the discharge.  The effect of a Notice of Objection is to extend the period of bankruptcy.

3.Mr Arundell applied to the Inspector-General in Bankruptcy for review of the decision to file the Notice of Objection and on 20 June 2005, the Inspector-General confirmed the objection on two of the three grounds relied on by the Official Trustee.  It is that decision by the Inspector-General that is under review in this application.

4.The two special grounds specified by the Official Trustee on the Notice of Objection were that:

(i)Mr Arundell, when requested by a letter dated 1 February 2005, failed to provide certain information by 10 February 2005. This is permitted as a ground of objection under s149D(1)(d) of the Bankruptcy Act 1966 (the Act); and,

(ii)Mr Arundell failed to disclose a Mr Smith as a creditor in his statement of affairs filed in 2002. This is permitted as a ground of objection under s149D(1)(ha) of the Act.

5.Section 149N(1A) of the Act designates grounds under ss149D(1)(d) and 149D(1)(ha) as “special grounds” and provides that an objection made on a special ground must not be cancelled if there is sufficient evidence to support the existence of at least one special ground in the objection and the bankrupt fails to establish that he or she had a reasonable excuse for the conduct or failure that constitutes the special ground.

issues

6.The issues for me to consider are whether there is evidence to support the special grounds and, if so, whether Mr Arundell has a reasonable excuse in relation to each ground.

evidence to support the special grounds

7.The following facts are not in dispute:

·The Official Trustee wrote to Mr Arundell on 1 February 2005 requesting him to provide, on or before 10 February 2005, information concerning specified companies in which he had been a director, secretary or shareholder, information concerning his relationship with a named individual and information concerning his financial dealings with Mr Smith.

·Mr Arundell did not provide the information requested by 10 February 2005 or by 18 February 2005 when the objection was filed.

·Mr Arundell had, at the date of his bankruptcy, a debt of $85,000 to Mr Smith and did not disclose that debt in his statement of affairs.

·Mr Arundell believed Mr Smith did not want the debt to be disclosed and Mr Arundell wished to keep the debt to Mr Smith as a personal matter.

·Mr Arundell was bankrupt previously in 1974.

·Mr Arundell, prior to his retirement, was a butcher and had 83 butcher shops and some dealings in property.

·Mr Arundell included a range of other liabilities on his statement of affairs including debts to a bookmaker, a hay supplier, a solicitor and a debt for agistment.

8.These facts support the existence of the special grounds on which the objection was lodged. As to the ground under s149D(1)(d), it is clear on the face of the above facts that Mr Arundell did not provide the information requested by 10 February 2005.

9.As to the ground under s149D(1)(ha), Mr Skinner, for Mr Arundell, submitted that Mr Arundell did not intentionally fail to disclose his liability to Mr Smith.

10.Mr Arundell’s evidence was that he did not intentionally hide his debt to Mr Smith.  However, his evidence was also that he intended to repay Mr Smith, that he regarded it as a personal or “gentlemen’s” debt and that he considered that by not disclosing the debt he would enable Mr Smith to continue to claim repayment from him and Mr Arundell would retain a personal liability for repayment of the debt.

11.It is clear that Mr Arundell was aware of his debt to Mr Smith when he became bankrupt.  If he was not, he would not have been aware of Mr Smith’s desire, as described by him, for the debt not to be disclosed.  Mr Arundell’s evidence was that he and Mr Smith wished the debt to not be effected by the bankruptcy.  I cannot escape the conclusion that Mr Arundell’s failure to disclose was the result of a conscious decision on his part to keep the debt unaffected by the bankruptcy and, it follows, his failure to disclose was intentional.  This conclusion is also confirmed by Mr Arundell’s evidence in relation to the debt to his bookmaker which he decided to disclose because of unpleasant recovery action being taken by representatives of the bookmaker.  He wished to put an end to that recovery action and so, he said, he disclosed the debt to his bookmaker in his Statement of Affairs.  He simply made a different, but equally intentional, decision in relation to the debt to Mr Smith.

12.I find that the facts support the existence of these two grounds on which the objection was lodged.

reasonable excuse

13.Mr Arundell’s evidence as to when he received the Official Trustee’s letter of 1 February 2005 was inconsistent.  In his statement of 5 December 2005, he said he did not receive the letter until 10 or 11 February 2005 because he had been away from home.  He also said he telephoned his solicitor and Mr Macausley of the Official Trustee’s office, but cannot recall when he did so or what Mr Macausley said to him. 

14.In his oral evidence, Mr Arundell said that when he received the letter he rang Mr Macausley and told him he was ill and his solicitor would look after it.  He also said he rang his solicitor on the same day.

15.In cross-examination, Mr Arundell said he had been in Terrigal, staying with his son and seeing a doctor in Gosford up to 10 or 11 February 2005.  He then said he thought he called Mr Macausley on 16 February 2005 and then immediately rang his solicitor.  He said he telephoned from hospital on a mobile phone.  When it was put to Mr Arundell that Mr Macausley had made a file note of a telephone call from Mr Arundell on 4 February 2005, Mr Arundell said he could not recall it.  He said he considered it unfair that the objection was lodged only four or five days before he was to be discharged.

16.Mr Macausley’s statement of 8 November 2005 was that he received a letter from Mr Arundell’s solicitor on 16 February 2005.  In oral evidence, he deciphered a file note he had written, dated 4 February 2005, of a telephone conversation with Mr Arundell on that day.  The note described a conversation concerning Mr Smith, a Lexus motor vehicle, and a family trust.  The file note did not make mention of whether Mr Arundell had received the letter of 1 February 2005.  Mr Macausley could not recall any other details of the conversation except that Mr Arundell said his solicitor would contact him.  He confirmed that the Official Trustee’s file had no file note of a conversation with Mr Arundell’s solicitor on 16 February 2005, but Mr Macausley recalled the conversation.

17.Mr Arundell’s evidence was that he was suffering from chest pains in early February and was admitted to Gosford Hospital on 15 February 2005 and remained there for five to six days.  He was then transferred to Brisbane Waters Private Hospital on 21 February 2005 and underwent minor heart surgery.  He was discharged on 28 February 2005.  Notes and certificates from the respective hospitals confirm Mr Arundell’s stay at each hospital.

18.I am satisfied that in February 2005 Mr Arundell was preoccupied with, or indisposed by serious health issues.  His evidence as to when he received the letter of 1 February 2005 was inconsistent and somewhat confused.  His apparent telephone call to Mr Macausley on 4 February 2005 suggests that he had been prompted to call by his receipt of the 1 February 2005 letter.  However, Mr Macausley’s file note does not confirm this.

19.The detail with which Mr Arundell recalls his telephone call to Mr Macausley on 16 February (from hospital, using a mobile phone and at a time coinciding with his admission to hospital), lends substance to his evidence that he did make a call to Mr Macausley on that day.  I also note his statement to the effect that he told Mr Macausley that he was ill.  It may be that Mr Arundell received the letter on 10 or 11 February, as he said in his statement, but took no action on it until 16 February.  However, I consider, that he was more likely to have received it on 4 February when he telephoned Mr Macausley and discussed Mr Smith with him.

20.In any event, I consider that Mr Arundell’s ability to deal effectively with the letter of 1 February 2005 was impeded by his medical treatment and his health concerns and I conclude that this constitutes a reasonable excuse within the meaning of s149N(1A) of the Act.

21.I turn now to the question of whether Mr Arundell has a reasonable excuse for intentionally failing to disclose his liability to Mr Smith.  I note Mr Arundell has been bankrupt before and that he has substantial business experience.  His evidence was not that he forgot about the debt or simply overlooked it.  He made a conscious decision about how it should be dealt with and he adhered to that decision throughout the course of his bankruptcy.  I consider that his view of his debt to Mr Smith as a personal debt or a “gentlemen’s” debt that should not be affected by his bankruptcy is not a reasonable one in a man experienced in business matters.  Nor does it constitute a reasonable excuse for his intentional failure to disclose it.

22.It follows that, for intentionally failing to disclose the debt to Mr Smith in the absence of a reasonable excuse, the objection must not be cancelled.

decision

23.The decision under review is affirmed.

I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bell

Signed:         ............[Linda Blue]......................................
  Associate

Date of Hearing  14 December 2005
Date of Decision  3 February 2006
Counsel for the Applicant         Mr B Skinner
Solicitor for the Applicant          Picone & Co
Solicitor for the Respondent     Australian Government Solicitor