Bell and Inspector-General in Bankruptcy
[2004] AATA 1035
•30 September 2004
DECISION AND REASONS FOR DECISION [2004] AATA 1035
Administrative
Appeals
Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) Nos. S2004/44 & S2004/177
GENERAL ADMINISTRATIVE DIVISION ) Re MARGARET LYNNE BELL Applicant
And
INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal Deputy President D G Jarvis and Mr D J Trowse, Member Date30 September 2004
PlaceAdelaide
Decision In matter number S2004/44 the Tribunal sets aside the decision under review, and in place of that decision, decides that the Official Trustee’s fee be remitted to the extent necessary to provide Ms Bell surplus funds amounting to $5,389.00. In matter number S2004/177 relating to the realisations charge, the Tribunal affirms the decision under review.
D G Jarvis
(Signed)
Deputy President
CATCHWORDS
BANKRUPTCY - Official Receiver's fees – remittal of fees because payment would impose undue hardship on applicant – remittal of fees because of other exceptional circumstances – meaning of “undue hardship” – decision under review set aside.
BANKRUPTCY - realisations charge – power to remit refers to hardship of the trustee, not the bankrupt – decision under review affirmed
Bankruptcy Act 1966, s 283
Bankruptcy (Estate Charges) Act 1997, s 6
Bankruptcy Regulations 1966, regulation 16.13A
Re Clark and Inspector-General in Bankruptcy (2004) 78 ALD 517
Re Excell and Inspector-General in Bankruptcy [2000] AATA 13
Re Shea and Inspector-General in Bankruptcy (2003) 75 ALD 733
Re Lopez and Inspector-General in Bankruptcy (2002) 70 ALD 535
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Peets and Inspector-General in Bankruptcy (2002) 70 ALD 524
Re Ayoub and Insolvency & Trustee Service Australia (Inspector-General in Bankruptcy) (2002) 70 ALD 513
REASONS FOR DECISION
30 September 2004 Deputy President D G Jarvis and Mr D J Trowse, Member 1. Ms Bell was made bankrupt on 24 July 2001 under s 55 of the Bankruptcy Act 1966 (Cth) (the “Act”) on her own debtor’s petition. The Official Trustee in Bankruptcy became trustee of her bankrupt estate, and proceeded to administer her estate. Ms Bell was discharged from bankruptcy on 25 July 2004 under s 149 of the Act, which provides for discharge from bankruptcy (relevantly) after 3 years from the filing of the bankrupt’s statement of affairs.
2. A financial counsellor applied on Ms Bell’s behalf, by a letter dated 28 October 2003, for waiver or reduction of the Official Trustee’s fee for administering her bankrupt estate. The application was based on hardship arising from a medical condition necessitating a new supportive bed and supportive chairs, which she could not afford because of her financial position. A delegate of the Inspector-General in Bankruptcy refused the application by letter dated 7 January 2004, which provided reasons for that decision. Ms Bell has applied to this Tribunal for review of that refusal in matter S2004/44.
3. By letter dated 10 May 2004, Ms Bell’s solicitor applied pursuant to s 283 of the Act for remission of the realisations charge imposed by the Official Trustee effectively on the same grounds. A delegate of the Inspector-General also refused that application, and Ms Bell’s solicitor was advised of that refusal by letter dated 24 May 2004. Ms Bell has applied to this Tribunal for review of that refusal in matter number S2004/177. The Tribunal directed that both applications should be heard together, and that the evidence in each matter should be treated as evidence in the other.
4. Ms Bell was represented by her solicitor, Ms Christine Squires from the Northern Community Legal Service, and the Inspector-General was represented by Mr Michael Murray, a senior executive lawyer employed by the Sydney office of the Australian Government Solicitor. Ms Bell and her general practitioner, Dr Astrid Lettberg, gave evidence in support of the applications, and a Mr David Humphries, a realisation officer in the Office of the Official Receiver in Bankruptcy in Adelaide, gave evidence for the Inspector-General. The documents lodged in the two applications to this Tribunal pursuant to s 37 of the Administrative Appeals Tribunal Act 1975(Cth) (the “T Documents”) were admitted in evidence as exhibits A1 and A2 respectively.
5. The hearing of this matter was substantially completed on 21 July 2004, but the applicant had not then provided appropriate evidence as to the nature of the bed or chair she required. We accordingly gave the applicant leave to adduce further material as to these matters. Each party subsequently tendered further material, and this comprised:
(a)pamphlets, price lists and copy correspondence relating to special beds, chairs and orthopaedic mattresses, which were provided to the Tribunal by Ms Bell’s solicitor under cover of communications to the Tribunal dated 16 and 18 August 2004 (exhibit A4);
(b)a copy of an email from the Customer Administration Centre of Optus to Ms Bell’s solicitor dated 18 August 2004 (exhibit A5);
(c)a copy of a letter from Sleep Haven to Ms Bell’s solicitor dated 18 August 2004 (exhibit A6);
(d)a further letter dated 6 September 2004 from Ms Bell’s solicitor to this Tribunal and its enclosures, which identified the orthopaedic ensemble and chair sought by Ms Bell, and stated the prices of those items (exhibit A7);
(e) a letter dated 9 August 2004 from Mr Humphries to Mr Murray explaining (at our request) the basis of calculation of the realisations charge to be imposed by the Official Trustee (exhibit R3);
(f)a copy of a letter dated 10 August 2004 from Insolvency and Trustee Service Australia (“ITSA”) advising the applicant’s discharge from bankruptcy (exhibit R4);
(g) a copy of the National Insolvency Index maintained by ITSA (exhibit R5); and
(h)a copy of the list of all creditors in the estate of the applicant, showing those who proved in the estate and those who did not prove in the estate (exhibit R6).
6. Following receipt of the above material, the respondent’s solicitor submitted in effect (inter alia) that the medical evidence (comprising at that stage a medical report from Dr Lettberg) did not say that Ms Bell required the motorised rocker recliner chair or the ensemble that Ms Bell had identified, and that other chairs and ensembles for a lower cost were of the nature suggested by Dr Lettberg. In these circumstances, we decided that further evidence should be adduced from the applicant and Dr Lettberg with reference to the particular ensemble and chair identified by Ms Bell in exhibit A7. We accordingly arranged a resumed hearing, and received further evidence from Ms Bell, and oral evidence from Dr Lettberg.
Issues
7. The issues before the Tribunal were:
(a)whether the fees of the Official Trustee should be waived or remitted, wholly or in part, on the grounds that:
· payment of the fee by the person liable to pay it would impose undue hardship on the person; or
· because of other exceptional circumstances, it is proper and reasonable to do so;
(b)whether the amount of the unpaid realisations charge should be remitted pursuant to s 283(1) of the Act; and
(c)whether the orthopaedic ensemble and chair selected by Ms Bell were reasonably required, having regard to her medical condition and the price of those items.
In considering these issues, we have had careful regard to all of the evidence and documentary material before us, as well as the further submission made on behalf of the parties.
Background Facts
8. The facts in this matter were not in dispute. The following summary of our findings is based on the oral evidence given by Ms Bell and by Mr Humphries, as well as on the documentary material before us. We found Ms Bell to be a truthful witness, and accept her evidence. We also accept without question the evidence of Mr Humphries.
9. Ms Bell is 45 years of age. She is a sole parent and raised a son, who is now aged 22, without assistance from her own family or from her son’s father. Since 1996 Ms Bell has received a disability support pension, and before that she received a supporting parent’s pension.
10. For approximately the last 20 years, Ms Bell has occupied the house where she presently lives as a tenant of the South Australian Housing Trust. She lives in a northern suburb of Adelaide where vandalism is rife and there is a high rate of unemployment, particularly amongst young people. She pays $159.90 rent per fortnight and $5.00 a fortnight for an excess water bill. Her disability support pension is her only source of income, and she receives approximately $470.00 per fortnight from this pension. She said that her finances are “very, very tight” and she is not able to save. Her son still lives with her at home, and Ms Bell and her son take it in turns to buy their week’s food. She has one brother and two sisters, but they have not assisted her financially.
11. Ms Bell’s son has been unemployed for most of the time, and the work he has obtained has been casual work which is generally of short duration. Her son has not been able to help her financially in the past. As at the first day of the hearing before us, he had just obtained a new job. Ms Bell said that she expected that he would use his income from this job to pay the arrears of a store credit card, and then to obtain a driver’s licence and purchase a car, so that he would be in a position to obtain future employment in places not served by public transport. She thought that this should increase his prospects of obtaining work. However, Ms Bell did not expect her son to assist her financially in the near future, having regard to past events and her above expectations as to how he would use the income from his new job. At the resumed hearing earlier this week, Ms Bell said that her son had lost his new job early in September, that his employment had made him ill, and that after a delay of some 3 weeks he was now again receiving unemployment benefits.
12. Ms Bell said that in 1999 she met a man who subsequently moved into her house with her son, and then began terrorising her and her son. He demanded money and sold off her and her son’s possessions. Before her relationship with this man commenced, Ms Bell had managed her finances satisfactorily and was not in debt. However, as a result of her partner’s behaviour she fell into debt, and this led to her petitioning for her own bankruptcy. The relationship ended when her partner was arrested during a robbery, and he is now serving a prison term.
13. By letter dated 25 July 2001, the Official Trustee advised Ms Bell that she might be eligible for an early discharge from bankruptcy if she applied in writing six months after the date of her bankruptcy. She did not apply, because at that time she was looking after her parents who lived in Waikerie, a country town, and she was very concerned about their circumstances. Her mother had broken her hip and had gone back to her home in Waikerie, and was also endeavouring to look after her father, who had Alzheimer’s disease. Ms Bell’s brother and sisters were unwilling to assist in the care of their parents, and Ms Bell’s costs in travelling to her parents’ home in the country and other incidental expenses incurred by her in caring for her parents added to her financial difficulties. Ms Bell’s mother later died in September 2002, and her father died in June 2003.
14. Ms Bell’s statement of affairs disclosed debts owing to six creditors amounting to $9,748.59 in total. Telstra Corporation Ltd (to which she was indebted in an amount of $1,200.00) and one other small creditor owed $82.02 failed to lodge claims in the estate, and Ms Bell has been discharged from those debts by virtue of s 153 of the Act. On the resumed hearing, Ms Bell said that she had now been reconnected to Telstra, and had paid a reconnection fee of $27.50. The total claims from four creditors which the Official Trustee admitted amounted to $8,214.00. This includes an amount of $5,755.00 owing to Lion Finance, the assignee of a debt from the ANZ Collections Department, which was Ms Bell’s largest single debt.
15. Ms Bell has an unusual and rare congenital absence of a bony sternum. She has gristle instead of bone in the sternal area leaving her rib cage less stable than normal. When she uses her chest and upper arm muscles they have less stability and more strain is put on her back, shoulder and neck muscles. As a result of this abnormality, combined with increasing wear and tear due to the passing years, Ms Bell finds it difficult to do her usual household tasks. She also has other health problems, including misalignment of her upper chest, strain on the cervical spine through scoliosis, constant back pain, predisposition to pneumonia, asthma, difficulty in breathing, chest pains, high blood pressure, migraines, vomiting attacks, a lazy eye, varicose veins and an irritable bowel and bladder. Ms Bell said that as she gets older all of her conditions and her quality of life are becoming worse. She has difficulty in standing or sitting for long periods and has difficulty in travelling by bus or going shopping. In the mornings she is very robotic and stiff for an hour and she has difficulty in putting on her shoes and socks. She said that her condition is deteriorating at an accelerating pace.
16. The T Documents include an undated report (received by Ms Bell’s solicitor on 9 December 2003) from Dr Astrid Lettberg, who has been Ms Bell’s general practitioner for over 20 years (exhibit A1, page 8). In this report, Dr Lettberg confirms that Ms Bell will experience increasing difficulty in lifting, bending and general other body work due to the normal wear and tear of ageing combined with an acceleration of the process due to her abnormality. She says further that Ms Bell will also be more prone to injuring her muscles due to her lack of bony stability. She has limited recourse to relief from medication, because of the side effects of this medication, including muscle spasm. Dr Lettberg reports that her treatment is “mainly on prevention, with emphasis on posture, seating and sleeping arrangements to reduce their occurrence. Her current chairs and bedding are woefully inadequate and I feel that she would greatly benefit by their replacement”.
17. When Ms Bell was recalled on the resumed hearing, she explained why she had chosen the ensemble and chair referred to in exhibit A7. She said that the Golden Emperor ensemble had extra springs which supported her lower back through to her shoulders, and that the latex foam incorporated into the mattress also provided extra support. She also said that the ordinary retail price of this ensemble was in excess of $3,000.00, but to assist her, the company selling the ensemble had agreed to sell it for $1,639.00, so that it was a good bargain. She said that the chair she had selected would be made to measure to her bodily proportions. She said that she had been having increasing problems with her back and her back had been bad this year’s cold winter. She said that some custom made chairs were not wide enough across the seat, and the wider chairs which would otherwise be suitable were generally too high for her (and we noted that she is person of very short stature). Ms Bell also explained that the chair she had selected provided more support in the area of her spine. She said that she needed a chair with a recliner because if she sat upright for too long her back locks and she finds it very difficult to walk. She also said she needs to sit with her legs up because of her varicose veins. If she can sit in a suitable chair it assists her to relax physically, and the rocker option would also assist with respect to her blood pressure.
18. Dr Lettberg confirmed the matters set out in her medical report. She confirmed that Ms Bell’s condition affected the muscles of her neck and back and restricted her ability to pull and push. She said that Ms Bell’s condition had slowly and steadily deteriorated over the last few years and that as she gets older it would get progressively worse. Dr Lettberg also confirmed that Ms Bell is allergic to a number of pain relieving drugs and could not take anti-inflammatory drugs because she suffered from asthma. She considered that the ensemble and chair Ms Bell had selected were the most suitable for Ms Bell, taking into account her prognosis.
19. As mentioned above, the Tribunal permitted Ms Bell’s solicitor to provide evidence of the cost of an orthopaedic ensemble and supportive chair following the conclusion of the first day’s hearing. Ms Bell said in evidence that she would not be able to afford to purchase a new orthopaedic ensemble and chair as recommended by her doctor unless sufficient funds were available to her from the Official Trustee following the completion of the administration of her bankrupt estate. Based on the information in exhibit A7, Ms Bell claims the following amounts:
Orthopaedic ensemble from Sleep Haven $1,639.00
Utopia motorised orthopaedic chair, with rocker $3,750.00
Telstra reconnection fee $27.50
Total $5,416.50
We will refer below to the amount claimed in respect of the Telstra reconnection fee.
20. Following the death of her father, Ms Bell became entitled under his estate to an amount of $19,755.91, and this amount was payable to her bankrupt estate as after-acquired property under s 58 of the Act. Public Trustee notified the Official Receiver of her interest in her father’s estate on 29 July 2003.
21. By letter dated 30 September 2003, the Official Trustee advised Ms Bell that the amount required to pay the claims received plus the statutory costs of the administration was approximately $14,500.00, and that a small surplus might remain which would be refunded to her at the time a final dividend of 100 cents in the dollar was paid to creditors. The Official Trustee has already received the sum of $14,500.00 from Public Trustee. The letter advised that the sum of $14,500.00 would be distributed as follows:
Debts (including debt of $5,800.00 owing to ANZ Bank) $8,214.00
Official Trustee’s fees $5,103.89
Realisations charge $1,158.08
Total $14,475.97
22. The debt of $5,755.00 owing to Lion Finance is carrying interest at the rate of 17.5% per annum. Lion Finance has advised that it will claim interest on this debt, and the interest due to it from the date of bankruptcy to the date of the hearing came to a further $3,005.64. Interest will continue to accrue at the rate of $2.76 per day until the payment of the final dividend. According to Mr Humphries’ evidence, the amount required to enable the Official Trustee to pay the interest claim of $3,005.64 would be $3,798.20, comprising:
Debts (including debt of $5,755.00 owing to Lion Finance) $3,005.64
Official Trustee’s fees (ie 16.26% of the amount paid) $488.71
Realisations charge (calculated at 8%) $303.85
Total $3,798.20
23. In his written statement (exhibit R1) Mr Humphries said that if neither the Official Trustee’s fees nor the realisations charge were remitted, the Official Trustee would require the total sum of $18,274.17 (ie $14,475.97 plus $3,798.20) in order to pay Ms Bell’s debts, including fees and charges. Ms Bell would then be entitled to the surplus funds of $1,481.74, being the difference between her inheritance of $19,755.91 and the above figure of $18,274.17. However, this surplus will have been further reduced by interest accruing since the date of the hearing, and a corresponding increase in the Official Trustee’s fee and the realisations charge.
24. Ms Bell told us that she was concerned that the telephone was disconnected following her bankruptcy. She said that since then she has been dependent on using her neighbour’s telephone, but if her neighbour was not at home, she had to undertake a 15 minute walk to the nearest public phone. On occasions, she had found that this phone was not in working order, and so she would then have to set out to find another public telephone in working order. In view of Ms Bell’s difficult medical problems, not having a telephone would, in our view, constitute undue hardship. However, the reconnection fee already incurred of $27.50 is very modest, and she has already paid it. There is no need for her to apply for remission of the Official Trustee’s fees to pay this amount. Of course, the position would have been otherwise if (as Ms Bell’s solicitor had previously understood might have been the case because of Telstra’s credit policy) the fact of Ms Bell’s bankruptcy and the unpaid indebtedness to Telstra of $1,200.00 would have prevented her from having her telephone reconnected unless she had paid the indebtedness of $1,200.00 to Telstra (even though Telstra did not lodge a proof of debt, and she is now discharged from that liability).
25. The realisations charge was payable by 4 August 2004, but on the application of Ms Bell’s solicitor following the hearing, this time was extended by the Inspector-General until the date of the Tribunal’s decision in these proceedings.
26. Mr Murray for the Inspector-General tendered a publication by ITSA entitled “Profile of Debtors 2003”, and this was marked exhibit R2. This publication indicates that 50% of debtors who became bankrupt in 2003 owed less than $20,000.00 to their unsecured creditors, and 78% owed less than $50,000.00. Mr Humphries is a realisation officer in the Office of Official Receiver in Bankruptcy in Adelaide and has worked in bankruptcy administration for over 16 years, and has had considerable experience in that area. He said in his evidence that some 80% of bankrupts could be described as “consumer” bankrupts, whose total indebtedness at the time of bankruptcy tended to be in the lower ranges. He said that it was very rare for the creditors of “consumer” bankrupts to be paid 100 cents in the dollar (as will occur in the case of Ms Bell’s bankruptcy).
Legislative Provisions
27. The fees payable to the Official Trustee are calculated pursuant to Regulation 16.07A of the Bankruptcy Regulations 1966. This provides for a flat fee in all cases of $4,500.00, plus 16.26% of amounts recovered in excess of $4,500.00, up to $50,000.00.
28. Provision is made in Regulation 16.13A of the Bankruptcy Regulations for waiver or remission of fees by the Inspector-General. This Regulation provides as follows:
“16.13A(1) Subject to subregulation (2), the Inspector-General may waive or remit the whole or part of any fee.
(2)A fee may only be waived or remitted, whether wholly or in part, if the Inspector-General is reasonably satisfied that:
(a)payment of the fee by the person liable to pay it has imposed, or would impose, undue hardship on the person; or
(b)because of other exceptional circumstances, it is proper and reasonable to do so.
(3)For paragraph (2)(a), “undue hardship” means hardship that is unusual and exceptional in comparison to the hardship arising in the normal course of bankruptcy.
(4)A decision under subregulation (1) must be notified in writing to:
(a)the person concerned; and
(b)except where the fee is payable to the Inspector-General – the officer to whom the fee is or, but for the waiver or remission, would be payable.
(5)In this regulation:
fee means a fee payable under a provision, other than regulation 16.04, of this Division.”
29. Section 6 of the Bankruptcy (Estate Charges) Act 1997 (Cth) (the “Estate Charges Act”) provides for a realisations charge, and provides as follows.
“6(1)A charge, calculated in accordance with sections 7 and 8, is imposed in respect of amounts received by a person (including the Official Trustee) who, during a charge period:
(a)is the trustee of the estate of a bankrupt under the Bankruptcy Act 1966; or
(aa)is the trustee of a composition or scheme of arrangement under Division 6 of Part IV of the Bankruptcy Act 1966; or
(b)is controlling trustee in relation to a debtor whose property has become subject to control under Division 2 of Part X of the Bankruptcy Act 1966; or
(c)is the trustee of a deed of assignment or deed of arrangement executed, or a composition accepted, in relation to a debtor under Part X of the Bankruptcy Act 1966; or
(d)is the trustee of the estate of a deceased person under Part XI of the Bankruptcy Act 1966.
(1A)No charge is payable by a person for a charge period in respect of a particular estate, deed, composition or debtor (as the case required) if the amount of that charge would be less than $10, or a higher amount prescribed by the regulations.
(2)The charge is payable by the person to the Commonwealth.
(3)The charge is payable within 35 days after the end of the charge period.”
30. Section 283 of the Act empowers the Inspector-General to remit the amount of a realisations charge. This section provides as follows:
“283(1) The Inspector-General may remit an amount of interest charge, realisations charge or late payment penalty that is payable but has not been paid if the Inspector-General thinks that:
(a)failure to remit the amount would cause a person undue hardship; and
(b)it is appropriate to remit the amount.
(2)The following provisions apply in relation to remissions under subsection (1):
(a)the person liable to pay the charge or penalty may apply for a remission;
(b)an application is to be in writing, setting out the reasons for the application, and is to be made to the Inspector-General;
(c)the Inspector-General’s decision on an application is to be in writing;
(d)application may be made to the Administrative Appeals Tribunal for review of a decision to refuse an application, or to remit a lesser amount than was applied for.
Note:Section 27A of the Administrative Appeals Tribunal Act 1975 requires notification of a decision that is reviewable.”
Consideration
31. Regulation 16.13A(2)(a) refers to undue hardship being imposed on the “person liable to pay” the trustee’s fees. The fees are payable by the bankrupt estate and not by Ms Bell. However, the Inspector-General accepts that as a dividend of 100 cents in the dollar is expected to be paid by the bankrupt estate to creditors, it is Ms Bell who is the “person liable to pay” the fees under Regulation 16.13A(2)(a), since if the fees were to be remitted, then Ms Bell would benefit by way of receiving payment of an additional surplus derived from the remitted fees. The Inspector-General’s concession in this regard accords with the decision of Senior Member McCabe in Re Clark and Inspector-General in Bankruptcy (2004) 78 ALD 517, at [19], where the Tribunal decided that the applicant had standing to apply for remission of the fee because the fee would ultimately come out of his pocket in view of the anticipated dividend to be paid to creditors of, in that case, 99.42 cents in the dollar.
32. The discretion to waive or remit the fee entails considering whether payment of the fee by Ms Bell would impose undue hardship on her. Whilst the test in Regulation 16.13A(2)(a) is “undue hardship”, it is helpful to first refer to the summary of authorities dealing with the meaning of word “hardship” which is contained in the decision of Deputy President Forrest in Re Excell and Inspector-General in Bankruptcy [2000] AATA 13. After discussing those authorities, Deputy President Forrest continued:
“[24] The term ‘hardship’ can potentially cover a broad spectrum of connotations including meaning an appreciable detriment whether it be financial, personal or otherwise: Re Queensland Medical Laboratory and Department of Health, Housing and Community Services (1994) 33 ALD 159 at 166-167.
[25] While due weight must be given to the policy objective of the legislation that cost recovery is to be achieved wherever possible, this has to be counter-balanced by the consideration contained in the legislation that the application of this policy does not cause hardship. Hardship is gauged by an examination of individual circumstances. In some circumstances a realisations charge of $6,905 may produce negligible hardship whereas in other circumstances it may be oppressive.
[26] Hardship may impact in a number of ways. At a personal level a person may suffer an emotional drain, loss of enjoyment of life or social dislocation. A person’s age and state of health may be relevant factors. It may, in the case of a person suffering from a physical or mental disability or condition, impact adversely on coping strategies or on a treatment regime for the disability. These are not only subjective perceptions of hardship but in my view matters which an informed bystander would take into account. Put another way, the question of whether hardship exists is not necessarily answered simply by considering a person’s financial position and examining a statement of assets and liabilities.”
33. Under Regulation 16.13A(3), the expression “undue hardship” means “hardship that is unusual and exceptional in comparison to the hardship arising in the normal course of bankruptcy.” We note that in Re Shea and Inspector-General in Bankruptcy (2003) 75 ALD 733 Member Isenberg commented that earlier Tribunal decisions gave the expression “undue hardship” in Regulation 16.10(2)(a) an interpretation which was consistent with the interpretation introduced by Regulation 16.13A(3) when it was introduced to the Bankruptcy Regulations in 2002. We approach this issue by reference to the meaning provided for in Regulation 16.13A(3), rather than the interpretation given to the words “undue hardship” in Re Lopez and Inspector-General in Bankruptcy (2002) 70 ALD 535. In that case the Tribunal referred to dictionary definitions of the word “undue”, and commented, in effect, that the term “undue hardship” should not be equated with the test for “special circumstances” in the context of the Social Security Act 1947 (Cth), and went on to say that the dictionary meanings raised “the questions whether the hardship imposed on Ms Lopez by payment of the fees would be inappropriate or unjustifiable or unwarranted or excessive or disproportionate.” However, the Tribunal did not refer to the 2002 amendment to the Bankruptcy Regulations 1966 (which came into force only 16 days before the date of the Tribunal’s decision), and following that amendment, we must have regard to the express provisions of Regulation 16.13A(3). In our view, the authorities on the meaning of “special circumstances” are now potentially helpful, and should be followed in preference to the analysis in Lopez.
34. We were referred to a number of earlier decisions where this Tribunal examined the circumstances of particular applicants and determined whether or not payment of the trustee’s fee by them would impose undue hardship. Whilst, as counsel for the Inspector-General pointed out, some of the circumstances which gave rise to a finding of undue hardship in earlier Tribunal decisions do not exist in the present matter, each case must be determined on its own facts. In the present case, we consider that there are particular circumstances affecting Ms Bell which constitute undue hardship. We refer to the following matters.
(a)Ms Bell’s rare condition as well as her other medical problems have resulted in significant incapacity and have substantially interfered with her enjoyment of life, and these effects are likely to accelerate as she gets older. It is most unfortunate that she is affected to the extent of her present condition at her age.
(b)The most effective form of treatment for Ms Bell’s condition is to use an orthopaedic bed and chair, and without those items her condition will be more painful and incapacitating. Her inability to obtain relief because she is unable to take pain relieving medication makes it even more important for her to have an orthopaedically correct bed and chair. Her only prospect of obtaining these items is through a partial remission of the Official Trustee’s fees, so that she would then receive a sufficient surplus payment from a bankrupt estate to cover the costs of the items concerned.
35. The second limb of Regulation 16.13A(2) is to consider whether we should be satisfied that it is proper and reasonable to waive or remit the Official Trustee’s fee because of “other exceptional circumstances”. The inclusion of the word “other” means that we should consider circumstances other than the undue hardship which we have identified above. We consider that the concept of “exceptional circumstances” means circumstances which do not customarily exist when trustee’s fees are imposed. By way of analogy, we again refer to the definition of the expression “special circumstances” in the context of s 102(1) of the Social Security Act 1947 (Cth). In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Court of the Federal Court said (at page 674):
“It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given.”
The Full Court affirmed the decision of the Administrative Appeals Tribunal under review in that case and expressly approved a passage in Re Beadle and Director-General of Social Security (1984) 6 ALD 1, at page 4 in which the Tribunal said:
“The question is whether, when the relevant circumstances of the applicant are looked at in their entirety, they may fairly be described as unusual, uncommon or exceptional … “ (emphasis added).
36. In his evidence, Mr Humphries said that it was very rare in the case of a “consumer” bankruptcy for creditors to be paid 100 cents in the dollar. The consequence of this is that in the large majority of cases, the Official Trustee’s fee would be borne by creditors, and if there are a number of creditors, the burden of the fee would, of course, be apportioned between those creditors. We are also mindful that in the present matter, Ms Bell did not take advantage of securing an early discharge from her bankruptcy. If she had done so, her inheritance would not have vested in her trustee, and she would not have incurred the fee which is the subject of the present application. Her reason for not applying for early discharge was her concern to look after her elderly parents, and she gave priority to their position to the detriment of her own already difficult financial situation. If she had secured early discharge from her bankruptcy, she would have been able subsequently to discharge in full her pre-bankruptcy debts amounting to $9,748.59 if she so wished (and from her evidence before us we think it likely that she would have done so). She would not then have incurred any liability for trustee’s fees on the realisations charge, and she would still have had left a balance approaching $10,000 of her inheritance. In the events that have happened Ms Bell has not gained any relief from her financial straits as a result of her bankruptcy. On the contrary, she is substantially worse off than she would otherwise have been, and on our findings, her creditors are in the same position as they would have been in if she had not become bankrupt.
37. Whilst the Official Trustee’s fee is correctly calculated in the present matter, it seems to be disproportionate to the amount of work entailed in the administration of this particular estate. There were few creditors in total, and there is no evidence before us that there was any undue difficulty about the admission of the proofs of debt or the quantification of the amounts claimed, and no undue steps were needed in order to recover the asset available to creditors, namely the entitlement from the estate of Ms Bell’s father. We refer in this regard to Re Peets and Inspector-General in Bankruptcy (2002) 70 ALD 524, where Member Cowdroy pointed out that the fees of administering the estate amount to more than 70% of the amount required to discharge the debt on which the bankruptcy rested. We appreciate that the Official Trustee’s fees are fixed by the Bankruptcy Regulations, and that they have been correctly calculated. However, as in Peets, they represent a substantial proportion of the total of the admitted debts, and in our opinion this consideration, in combination with the fact that Ms Bell could have avoided any liability for the Official Trustee’s fee if she had applied for early discharge from bankruptcy, also constitutes a further exceptional circumstance.
38. We also note that if the Inspector-General had decided on 7 January 2004 to grant a partial waiver of the Official Trustee’s fee (which in our view would have been the correct or preferable decision), the administration of the estate could then have been completed, and the debt to Lion Finance could have been discharged, thus avoiding ongoing interest expenses and the consequential increase in the trustee’s fee and the realisations charge owing because of the increased payment of interest to the creditor.
39. Having regard to all of the above matters, we consider that “other exceptional circumstances” exist in Ms Bell’s case within the meaning of Regulation 16.13A(2)(b). Further, we are reasonably satisfied and that it is proper and reasonable to do so. We consider that both of the grounds for remission referred to in Regulation 16.13A(2) apply in this matter.
40. As to the issue of quantum, counsel for the respondent submitted in effect that we should find that the applicant had simply compiled a “wish list” of items that she needed, the cost of which happened to nearly approach the total amount of fees and charges in issue. We do not think that this is a correct interpretation of the evidence before us. We find that the applicant has carefully investigated the kind of bed and chair which is required to alleviate her hardship, and having regard to her evidence as to her disabilities and to Dr Lettberg’s evidence, we consider that the items selected are reasonable, and that the total cost of the items is reasonable. We accordingly determine that the Official Trustee’s fees be partially remitted to an extent sufficient to enable Ms Bell to purchase the ensemble and orthopaedic chair referred to in paragraph 19 above, which would together cost $5,389.00.
Realisations Charge
41. On our calculations, and on the assumption that the creditors whose debts have been accepted (including in particular the debt owing to Lion Finance which has continued to accrue interest) are now discharged promptly, there should be sufficient surplus funds available to Ms Bell, following a partial waiver of the Official Trustee’s fee, to enable her to purchase the orthopaedic ensemble and chair without any need for her to resort to her further claim for remission of the realisations charge. It is therefore not necessary for us to determine that aspect of the proceedings before us. Nevertheless, in view of the arguments presented to us we will make some brief comments on the issues arising from this aspect of Ms Bell’s claim.
42. Section 283(1) of the Act confers on the Inspector-General a discretion to remit an amount of the realisations charge if the Inspector-General thinks that the failure to remit the amount would cause “a person” hardship. The words “a person” would literally extend to any person, including in particular the bankrupt, in circumstances where creditors received 100 cents in the dollar, and the surplus available to the bankrupt would accordingly be reduced by the amount of the realisations charge. This interpretation appears to have been adopted in Re Excell and Inspector-General in Bankruptcy (supra) and in Re Ayoub and Insolvency & Trustee Service Australia (Inspector-General in Bankruptcy) (2002) 70 ALD 513, where the Tribunal examined the question of whether the bankrupt would be caused hardship.
43. However, s 283(2) then refers to the procedure applicable to the discretion to remit which is provided for in s 283(1). Section 283(2)(a) provides in effect that it is “the person liable to pay the charge” who may apply for the remission. That person is the trustee of the estate of the bankrupt (s 6 of the Estate Charges Act), and in this case that person is the Official Trustee. Further, s 283 is contained within Part XV of the Bankruptcy Act, and this Part contains provisions relating (inter alia) to the Estate Charges Act. The expression “realisations charge” is defined in s 278 of the Bankruptcy Act to mean in effect the charge imposed under that Act. The Estate Charges Act does not impose any liability on the bankrupt to pay the realisations charge. Further, s 281 of the Bankruptcy Act imposes a liability for a late payment penalty on the person liable to pay the realisations charge, and once again, that person is the trustee, not the bankrupt.
44. Counsel for the respondent also drew our attention to the Explanatory Memorandum for the Bankruptcy Amendment Bill 1996, which introduced s 283. This Memorandum says in respect of the then proposed s 283 that; “(i)t will only be in exceptional circumstances that it would be appropriate (to remit the amount) such as in the case of a genuine and unavoidable error on behalf of the trustee.” This reference to the position of the trustee in conjunction with the scheme of the legislation, indicates that the section is intended to refer to hardship of the trustee, not the bankrupt.In the present matter, it has not been suggested that there is any hardship on the part of the Official Trustee, and of course this would be irrelevant to the position of Ms Bell.
45. In any event, even if (contrary to our interpretation) s 283(1) does apply to hardship of the bankrupt, we find that there is no hardship to Ms Bell in the present case if the realisations charge is not remitted, because the partial remission of the Official Trustee’s fee will enable Ms Bell to acquire a suitable new bed and chair to alleviate her disabilities.
46. For all of the above reasons, we find that there is no basis for any determination that the amount of the realisations charge, or any part of that amount, should be remitted.
47. For the sake of completeness, we record that counsel for the Inspector-General also submitted that there had been no application by the Official Trustee (as the person liable to pay the realisations charge) for remission of that charge. We note that the application for remission is contained in a letter dated 10 May 2004 from the applicant’s solicitor to ITSA (see exhibit A2, T4, page 6). As mentioned above, we consider that the bankrupt is not the person liable to pay the charge, and accordingly an application on behalf of the bankrupt to ITSA is not contemplated by s 283(2)(a). We understand that following the first day of the hearing before us, Ms Bell’s solicitor formally requested the Official Trustee to make the appropriate application to the Inspector-General, and we assume that this happened, so that an application in the form required has now been formally made to the Inspector-General. In any event, whilst s 283(2) provides for various procedural matters, the discretion conferred on the Inspector-General by s 283(1) is not expressed to apply if an application for remission has been made by the relevant person (as is a common statutory formulation of discretionary powers). However, it is not necessary for us to resolve these matters, in view of the conclusions we have reached above in relation to the realisations charge.
Decision
48. For the above reasons, in matter number S2004/44 we set aside the decision under review and in place of that decision, decide that the Official Trustee’s fee be remitted to the extent necessary to provide Ms Bell surplus funds amounting to $5,389.00. In matter number S2004/177 relating to the realisations charge, we affirm the decision under review.
I certify that the 48 preceding paragraphs are a true
copy of the reasons for the decision herein of
Deputy President D G Jarvis and Mr D J Trowse, MemberSigned: .....................................................................................
N Quirke AssociateDate/s of Hearing 21 July 2004 and 28 September 2004
Date of Decision 30 September 2004
Counsel for Ms Bell Ms Christine Squires
Solicitor for Ms Bell Northern Community Legal Service
Counsel for Inspector-General Mr Michael MurraySolicitor for Inspector-General Australian Government Solicitor
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