Broadley and Inspector-General in Bankruptcy - [2006] AATA 914

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [2006] AATA 914
ADMINISTRATIVE APPEALS TRIBUNAL Nº W2005/425
GENERAL ADMINISTRATIVE DIVISION
Re: JOHN KENNETH BROADLEY
Applicant

And: INSPECTOR-GENERAL IN BANKRUPTCY
Respondent

DECISION
Tribunal:       G.D. Friedman, Senior Member
Date:             26 October 2006
Place:            Perth
Decision:The Tribunal affirms the decision under review.

(sgd) G.D. Friedman
Senior Member

BANKRUPTCY - objection to automatic discharge of bankruptcy - special grounds of objection - whether forgetfulness and lack of business skills constitute "reasonable excuse" - whether reasons for reasonable excuse can enable cancellation of objection
Administrative Appeals Tribunal Act 1975 s 43(1A)(1)(a)
Bankruptcy Act 1966 ss 149C, 149D(1)(d),(1)(ma), 149N(1)(a), (1)(b), (1)(c), (3)
Inspector-General in Bankruptcy v Nelson (1988) 86 FCR 67
Nguyen v Pattison (2005) 86 ALD 43
REASONS FOR DECISION

26 October 2006 G.D. Friedman, Senior Member

1.        John Broadley was made a bankrupt by order of the Federal Court of Australia on 3 September 2002 for a period of 3 years. On 10 June 2004 Mr A. Jonsson became the trustee of the bankrupt estate in place of the original trustee.
2.        By Notice of Objection to Discharge dated 9 August 2005 Mr Jonsson objected to Mr Broadley’s automatic discharge from bankruptcy on four grounds. On 21 November 2005 the respondent upheld the objections on two grounds, extending the bankruptcy to 8 years.
ISSUES
3.        The issues before the Tribunal are whether the grounds for the objection to automatic discharge of bankruptcy were made out, and whether the objections may be cancelled.

LEGISLATION
4. Section 149D(1)(d) and s 149D(1)(ma) of the Bankruptcy Act 1966 (the Act) are special grounds of objection, which must not be cancelled if there is sufficient evidence to support the existence of at least one special ground and Mr Broadley fails to establish that he had a reasonable excuse for the conduct or failure that constituted the special grounds. The sections provide:
(1)       The grounds of objection that may be set out in a notice of objection are as follows:
…
(d)       the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request;
…
(ma)     the bankrupt intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in any property.

5. Section 149N of the Act provides:
(1) On a review of a decision, if the Inspector‑General is satisfied that:
(a)the ground or grounds on which the objection was made was not a ground or were not grounds specified in subsection 149D(1); or
(b)there is insufficient evidence to support the existence of the ground or grounds of objection; or
(c)the reasons given for objecting on that ground or those grounds do not justify the making of the objection; or
(d)a previous objection that was made on that ground or those grounds, or on grounds that included that ground or those grounds, was cancelled;
the Inspector‑General must cancel the objection.

(1A) An objection must not be cancelled under subsection (1) if:

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] AATA 914
Decision Date: 26 October 2006

CaseChat Overview and Summary

John Kenneth Broadley was made a bankrupt on 3 September 2002, with an automatic discharge date of 3 September 2005. Mr Broadley's trustee objected to his automatic discharge on the basis of two special grounds, extending the bankruptcy to 8 years. The central issues before the Tribunal were whether the objections to Mr Broadley's discharge were valid and whether they could be cancelled.

The Tribunal examined whether Mr Broadley had intentionally failed to disclose his beneficial interest in the Broadley Auto Group Management Superannuation Fund, as required by section 149D(1)(ma) of the Bankruptcy Act 1966. The Tribunal found that while Mr Broadley had not disclosed his interest in the superannuation fund, he did not intentionally fail to disclose it. Instead, he attributed his failure to recall the interest due to forgetfulness and a lack of business acumen. The Tribunal concluded that Mr Broadley's lack of awareness of his interest in the fund, coupled with his reliance on professional advice, did not constitute intentional failure.

The Tribunal also assessed whether Mr Broadley had failed to comply with a request from the trustee for information regarding his property and income, as stipulated by section 149D(1)(d). It was established that Mr Broadley had not fully disclosed certain financial details, such as his directorship of various companies and shareholdings, in his Statement of Affairs. However, the Tribunal accepted Mr Broadley's explanation that his failure to provide this information was due to forgetfulness and a lack of awareness of his role as a director. Therefore, the Tribunal found that Mr Broadley had a reasonable excuse for his non-compliance.

Lastly, the Tribunal considered whether the objection under section 149D(1)(d) should be cancelled. The Tribunal ruled that for a special ground objection to be cancelled, certain conditions under section 149N(1) of the Act must be met, and the circumstances in section 149N(1A) must not apply. While Mr Broadley had established a reasonable excuse for his failure to disclose information, the Tribunal found that this did not justify cancelling the objection. The Tribunal concluded that the reasons given by the trustee for objecting, which included delays and additional costs incurred due to incomplete disclosure, were valid. Consequently, the Tribunal confirmed the decision to extend Mr Broadley's bankruptcy.

The Tribunal affirmed the decision of the Inspector-General in Bankruptcy, upholding the objections and extending Mr Broadley's bankruptcy period.

Orders