Broadley v Inspector-General in Bankruptcy
[2007] FMCA 1714
•12 October 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BROADLEY v INSPECTOR-GENERAL IN BANKRUPTCY | [2007] FMCA 1714 |
| BANKRUPTCY – Discharge – objection – whether bankrupt failed to comply with request to provide information about property, income or expected income. ADMINISTRATIVE LAW – Whether failure to consider whether requirement to provide complete information – whether failure to consider consequences of non-intentional failure to comply – whether error of law. |
| Administrative Appeals Tribunal Act 1975 (Cth), ss.44(1), (7) & (8), 44AA(1) Bankruptcy Act 1966 (Cth), ss.149C(1A), 149D(1)(c), (d) & (e), 149N(1)(c), 149Q Bankruptcy Regulations 1996 (Cth), reg.7.01A Federal Court Rules 1979 (Cth), O.53 r.3(2) |
| Birdseye v Australian Securities & Investments Commission (2003) 76 ALD 321; [2003] FCAFC 232 Broadley v Inspector-General in Bankruptcy (unreported, Administrative Appeals Tribunal, 26 October 2006) Re Hall (1994) 14 ACSR 488 Wharton v Official Receiver in Bankruptcy (2001) 107 FCR 28; [2001] FCA 96 |
| Applicant: | JOHN KENNETH BROADLEY |
| Respondent: | INSPECTOR-GENERAL IN BANKRUPTCY |
| File number: | PEG 330 of 2006 |
| Judgment of: | Lucev FM |
| Hearing date: | 23 March 2007 |
| Date of last submission: | 23 March 2007 |
| Delivered at: | Perth |
| Delivered on: | 12 October 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr K L Christensen |
| Solicitors for the Applicant: | Christensen Vaughan |
| Counsel for the Respondent: | Mr P N Bevilacqua |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
That the appeal be allowed.
That the decision of the Administrative Appeals Tribunal No W2005145 dated 26 October 2006 be set aside.
That the decision of the Inspector-General in Bankruptcy dated
21 November 2005 be set aside.
That the objection under s.149(1)(d) of the Bankruptcy Act 1966 (Cth) of the Trustee in Bankruptcy of the estate of John Kenneth Broadley (“the bankrupt”) to the discharge of the bankrupt from bankruptcy be cancelled.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 330 OF 2006
| JOHN KENNETH BROADLEY |
Applicant
And
| INSPECTOR-GENERAL IN BANKRUPTCY |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, Mr Broadley, is “a successful sales person but an unsuccessful business person.”[1]
[1] Broadley v Inspector-General in Bankruptcy (unreported, Administrative Appeals Tribunal, 26 October 2006) at para 10 per Friedman, Senior Member (“Broadley AAT”). The decision in Broadley AAT is in the Appeal Book (“AB”) at 432-442.
Mr Broadley was made bankrupt by order of the Federal Court on
3 September 2002 for a period of 3 years.[2]
[2] Broadley AAT at para 1 per Friedman, Senior Member; AB 434.
On 9 August 2005 Mr Broadley’s trustee in bankruptcy objected to Mr Broadley’s automatic discharge from bankruptcy.[3] The respondent, the Inspector-General in Bankruptcy,[4] reviewed the trustee’s objections and on 21 November 2005 upheld the trustee’s objection on two grounds only.[5] Mr Broadley then applied to the Administrative Appeals Tribunal[6] to review the Inspector-General’s decision.[7] In Broadley AAT the trustee’s objection was upheld on one ground only. That ground was that when Mr Broadley was requested to do so in writing by the trustee he failed to comply with a request to provide written information concerning Mr Broadley’s property, income or expected income.[8]
[3] AB 30-36.
[4] “Inspector-General”.
[5] AB 8-17.
[6] “AAT”.
[7] AB 1-4.
[8] Bankruptcy Act, 1966 (Cth), s.149D(1)(d) (“Bankruptcy Act”).
On 20 November 2006 Mr Broadley appealed to the Federal Court against the decision in Broadley AAT.[9]
[9] AB 442-446. The appeal is under s.44(1) of the Administrative Appeals Tribunal Act, 1975 (Cth) (“AAT Act”).
The Federal Court transferred the matter to this Court by order dated 21 December 2006.[10]
[10] Under s.44AA(1) of the AAT Act.
Issues
The first issue raised by the appeal is a question of law as to whether by omitting certain information from his statement of affairs Mr Broadley failed to comply with a request in writing by the trustee to provide written information about his property for the purpose of s.149D(1)(d) of the Bankruptcy Act.[11]
[11] The “trustee’s request”.
Mr Broadley asserts that his failure to properly complete his statement of affairs (which is conceded) was not a failure to comply with the trustee’s request.[12]
[12] Notice of Appeal, AB 444.
The second issue raised by the appeal is a question of law as to whether the AAT, in considering whether the trustee’s reasons for objecting justify the making of the objection under s.149N(1)(c) of the Bankruptcy Act, had an obligation to consider whether there was any evidence to support the reasons given.[13]
[13] Notice of Appeal, AB 443.
Mr Broadley says that the AAT did not consider whether the reasons had any foundations in fact, or were reasonable in all circumstances, and thereby failed to exercise the review jurisdiction conferred on it by s. 149Q of the Bankruptcy Act.[14]
[14] Notice of Appeal, AB at 444.
The third issue raised by the appeal is whether the AAT substantially failed to give reasons for its decision that the trustee’s reasons for objecting justified the making of the objection under s.149N(1)(c) of the Bankruptcy Act.[15]
[15] Notice of Appeal, AB at 444.
Mr Broadley asserts that the AAT’s finding that the reasons given by the trustee justified the making of the objection was manifestly unreasonable, and further that the AAT substantially failed to provide reasons for its finding that the reasons given by the Trustee justified the objection.[16]
[16] Notice of Appeal, AB at 444-445.
Mr Broadley also seeks findings of fact[17] from the Court as follows:
“(1) The failure of the applicant to make full disclosure of his interests in his statement of affairs did not prevent the Trustee from carrying out his investigations into the applicant’s personal and financial affairs, or significantly delay those investigations.
(2) The Trustee was aware of the information that the applicant failed to disclose either at the time of or shortly after the receipt of the statement of affairs.”[18]
[17] Under s.44(7) and (8) of the AAT Act.
[18] Notice of Appeal, AB at 445.
The appeal is brought under s.44(1) of the AAT Act 1975 (Cth), which provides for an appeal on a question of law from a decision of the AAT. The question of law raised on appeal must be stated with precision as a pure question of law,[19] the question of law being the subject matter of the appeal itself.[20]
[19] Birdseye v Australian Securities & Investments Commission (2003) 76 ALD 321 at 325 per Branson and Stone JJ; [2003] FCAFC 232 at para 18 per Branson and Stone JJ (“Birdseye”).
[20] Birdseye, ALD at 324 and 325 per Branson and Stone JJ; FCAFC at paras 11 and 16 per Branson and Stone JJ.
In this case, the Notice of Appeal properly raises questions of law and complies with the requirements of s.44(1) of the AAT Act and Federal Court Rules 1979 (Cth) O.53 r.3(2).
Consideration of issues
Compliance with trustee’s request
Mr Broadley’s statement of affairs was completed on 30 September 2002.[21]
[21] AB 37-67.
Mr Broadley’s failure to comply with the trustee’s request was constituted, for present purposes, by a failure to provide complete information to the trustee on shareholdings and directorships.[22]
[22] Broadley AAT at paras 13-14 per Friedman, Senior Member; AB at 438.
The AAT accepted that Mr Broadley’s failure to provide complete information on shareholdings and directorships was not intentional.[23] The AAT went on to find that the trustee had made a written request that Mr Broadley provide a statement of affairs, and that the failure to provide information was a failure to comply with the trustee’s request under s.149D(1)(d) of the Bankruptcy Act.[24]
[23] Broadley AAT at paras 12 and 15 per Friedman, Senior Member; AB at 437-438.
[24] Broadley AAT at para 14 per Friedman, Senior Member; AB at 438.
It does not appear to have been put to the AAT that a non-intentional failure to provide information in response to the trustee’s request was not a failure to comply with that request under s.149D(1)(d) of the Bankruptcy Act.[25] Nor was the matter adverted to by the AAT in those terms in Broadley AAT. The AAT seems simply to have accepted that a failure to comply with the trustee’s request would be made out by a failure to provide complete information.[26]
[25] The issue is not adverted to in the applicant’s or respondent’s Statement of Facts and Contentions before the AAT: see AB 415-423 (applicant’s Statement) and AB 425-431 (respondent’s Statement).
[26] Broadley AAT at para 14 per Friedman, Senior Member; AB at 438.
In Wharton v Official Receiver in Bankruptcy[27] the Federal Court found that there was no requirement under s.149D(1)(d) of the Bankruptcy Act for a bankrupt to provide information which was complete or accurate.[28] Further, the Federal Court said if the legislature had intended there to be a requirement to provide information which was complete or accurate the legislature could have easily so provided.[29]
[27] (2001) 107 FCR 28; [2001] FCA 96 (“Wharton”).
[28] Wharton, FCR at 39-40 per Weinberg J; FCA at paras 66-67 and 70 per Weinberg J.
[29] Wharton, FCR at 39 and 40 per Weinberg J; FCA at paras 66 and 68 per Weinberg J.
A legislative response was soon forthcoming. On 6 November 2002 reg.7.01A of the Bankruptcy Regulations, 1996 (Cth)[30] was enacted. It provides for a bankrupt to be taken to have failed to comply with a trustee’s request under s.149D(1)(d) of the Bankruptcy Act if the bankrupt provides information that is incomplete or inaccurate.[31]
[30] “Bankruptcy Regulations”
[31] Regulation 7.01A was inserted by SR 255 of 2002, reg.3.
Against the background of the Federal Court judgment in Wharton and the enactment of reg.7.01A of the Bankruptcy Regulations on 6 November 2002 it cannot be said that as at 30 September 2002 there was a legal requirement for a bankrupt, in this case Mr Broadley, to provide information which was complete or accurate in response to a trustee’s request under s.149D(1)(d) of the Bankruptcy Act.
The Inspector-General argues that in the context of a request to complete a statement of affairs it is complete information in relation to each item which is required, because that is what was requested, and not doing so constituted a relevant failure to comply in the circumstances of this case. The Inspector-General maintains that there is a statutory obligation to complete the statement of affairs and to ensure that the information is true and correct.[32] That is no doubt the position following the enactment of reg.7.01A of the Bankruptcy Regulations. It was not however the position at the time Mr Broadley completed his statement of affairs on 30 September 2002. Legally, he was simply not required to provide information which was both complete and accurate. The Inspector-General’s contention simply cannot stand against what was said by the Federal Court in Wharton, where having referred to dictionary definitions of the word “information” the Federal Court said:
[32] See, for example, respondent’s Outline of Submissions at paras 8 and 12.
“The word “information” in its ordinary sense is not confined to material that is reliable or has a sound factual basis: Winn v Minister for Immigration and Multicultural Affairs [2001] FCA 56;
…
Perhaps the legislature ought to have so defined that word in a manner which makes it clear that the information which a bankrupt must provide is information that is both complete and accurate. However, it has not done so expressly. Nor, in my view, has it done so by necessary implication.
…
…
The applicant was required by s.149D(1)(d) to provide written information about his “property, income or expected income” … He did precisely that. The fact that the Trustee now contends that the information so provided was incomplete, or even false, is not to the point.”
The Federal Court came to the view in Wharton having considered other grounds of objection in s.149D(1) of the Bankruptcy Act which, in that Court’s view, do focus upon the accuracy of information provided by a bankrupt, notably s.149D(1)(c) referring to a bankrupt having “engaged in misleading conduct” and s.149D(1)(e) referring to a bankrupt failing to disclose “particulars of income”.[34] The particularity of those paragraphs was contrasted with the more elastic concept of the provision of information in s.149D(1)(d) of the Bankruptcy Act.[35]
[34] Wharton, FCR at 220 per Weinberg J; FCA at para 67 per Weinberg J.
[35] Wharton, FCR at 220 per Weinberg J; FCA at para 66 per Weinberg J.
In any event, this Court, as the lowest court in the hierarchy of federal courts, is bound by and must follow the judgment in Wharton.
A further reason that the AAT erred in law is related to the nature of s.149D(1)(d) of the Bankruptcy Act. It is a special ground of objection.[36] Special grounds of objection “are directed at deliberate actions by the bankrupt to defeat creditors or to hinder the trustee’s administration.”[37] The AAT expressly found that the acts constituting the alleged failure to comply with the trustee’s requests were:
a)not intentional; and
b)the result of forgetfulness and a lack of awareness by Mr Broadley.[38]
[36] Bankruptcy Act, s.149C(1A).
[37] Bankruptcy Law Amendment Bill 2002, Explanatory Memorandum, para 51.
[38] See para 17 and footnote 23 above.
Having regard to the legislative intention behind s.149(1)(d) being a special ground, the facts found by the AAT can not, as a matter of law, give rise to a failure by Mr Broadley to comply with the trustee’s request, because the actions of Mr Broadley were not deliberate.
Other issues
In view of the Court’s finding as to the first ground of appeal it is unnecessary for the Court to consider the other questions of law and associated grounds of appeal raised by Mr Broadley.
Conclusion
The AAT erred in law because it:
a)failed to consider whether there was a requirement under s.149D(1)(d) of the Bankruptcy Act on the part of Mr Broadley to provide complete information in response to the trustee’s request, which there was not, and further erred in then proceeding to determine the review application as if there was no such requirement under s.149D(1)(d) of the Bankruptcy Act; and
b)failed to consider whether a non-intentional failure to provide complete information gave rise to a failure under s.149D(1)(d) of the Bankruptcy Act to comply with the trustee’s request, which it did not, and further erred in then proceeding to determine the review application without regard to the condition that s.149D(1)(d) of the Bankruptcy Act only applied, at that time, to deliberate acts of non-compliance.
Accordingly, there will be orders allowing the appeal, and setting aside the decisions of the AAT and the Inspector-General, and ordering that the trustee’s objection under s.149D(1)(d) of the Bankruptcy Act be cancelled. The effect of such orders is that the bankrupt is discharged from bankruptcy where, as here, the time for automatic discharge has passed.[39]
[39] Re Hall (1994) 14 ACSR 488. The Court notes that because of legislative change and time lag that this case is likely to be one of the last of this kind.
The Court will hear the parties as to costs.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 12 October 2007
[33] Wharton, FCR at 220-221 per Weinberg J; FCA at paras 66 and 68 per Weinberg J.
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