Caruana and Inspector-General in Bankruptcy

[2008] AATA 307

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 307

ADMINISTRATIVE APPEALS TRIBUNAL      )         No.  2007/2550

)

GENERAL ADMINISTRATIVE DIVISION		)
Re		ANDREW CARUANA

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

DECISION

Tribunal: G.D. Friedman, Senior Member

Date:15 April 2008

Place:Melbourne

Decision: The Tribunal affirms the decision under review.  

(sgd) G.D. Friedman

Senior Member

BANKRUPTCY - objection to discharge of bankruptcy - special grounds of objection - failure to provide written information and particulars - whether reasonable excuse

Bankruptcy Act 1966 ss 139U, 149D(1)(d), (e), 149N(1), (1A), (1B), (3)

Nguyen v Pattison (2005) 86 ALD 43

REASONS FOR DECISION

15 April 2008 G.D. Friedman, Senior Member   

1.        Andrew Caruana was made bankrupt by order of the Federal Court of Australia on 30 September 2004  for a period of 3 years.

2.        On 14 December 2006 the trustee in bankruptcy objected to Mr Caruana’s discharge from bankruptcy on the grounds that Mr Caruana had failed to provide written information when requested and had failed to disclose particulars of actual and expected income.  On 13 April 2007 the respondent upheld the objections, extending the bankruptcy for a further 5 years.

ISSUE

3.        The issue before the Tribunal is whether the grounds for the objection to discharge of bankruptcy were made out.

WHAT IS THE RELEVANT LEGISLATION? 

4. Section 149D(1) of the Bankruptcy Act 1966 specifies grounds of objection to the discharge of bankruptcy.  Subsections 1(d) and (e) provide:

(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;

(e)       the bankrupt failed to disclose any particulars of income or expected income as required by a provision of this Act referred to in subsection 6A(1) or by section 139U;

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:

(a)the objection specifies at least one special ground; and

(b)there is sufficient evidence to support the existence of at least one special ground specified in the objection; and

(c)the bankrupt fails to establish that the bankrupt had a reasonable excuse for the conduct or failure that constituted the special ground.

For this purpose, special ground means a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (k) or (ma).

(1B)     In applying subsection (1A), no notice is to be taken of any conduct of the bankrupt after the time when the ground concerned first commenced to exist.

…

(3)       If the Inspector-General is not satisfied as mentioned in subsection (1), the Inspector-General must confirm the decision.

Regulation 7.01 of the Bankruptcy Regulations 1996 provides:

For paragraph 149D(1)(d) of the Act, a bankrupt is taken to have failed to comply with a request to provide information if the bankrupt has provided information that is incomplete or inaccurate.

Section 139U of the Act provides:

(1)       A bankrupt must, as soon as practicable, and in any event not later than 21 days, after the end of a contribution assessment period, give to the trustee:

(a)       a statement:

(i)        setting out particulars of all the income that was derived by the bankrupt during that contribution assessment period; and

(ia)      setting out particulars of all the income that was derived by each dependant of the bankrupt during that contribution assessment period; and

(ii)       indicating what income (if any) the bankrupt expects to derive during the next contribution assessment period; and

(iii)      indicating what income (if any) the bankrupt expects each dependant of the bankrupt to derive during the next contribution assessment period; and

(b)       such books evidencing the derivation of the income referred to in subparagraph (a)(i) as are in the possession of the bankrupt or the bankrupt can readily obtain.

Penalty:         Imprisonment for 6 months.

(2)       The particulars that a bankrupt is required to include in a statement given to the trustee under subparagraphs (1)(a)(i) and (ia) are all the particulars that are known to the bankrupt and any particulars that the bankrupt can readily obtain.

…

DID MR CARUANA FAIL TO COMPLY WITH s 149D(1)(d) OR s 149D(1)(e)?

6.        The trustee forwarded letters to Mr Caruana on 19 October 2005, 14 December 2005, 24 August 2006 and 13 November 2006.  The letters referred to Mr Caruana’s failure to complete and return annual statements of income for the contribution assessment periods of 30 September 2005 to 29 September 2006 (CAP 2) and 30 September 2006 to 29 September 2007 (CAP 3).

7.        In a handwritten diary note dated 10 November 2006 of a telephone conversation with Mr Caruana (T9 page 169), an employee of the trustee recorded that Mr Caruana was reminded of his obligation to complete the annual statements of income.  The employee confirmed that Mr Caruana agreed to complete the forms within 14 days.  In the note Mr Caruana told the employee he had changed his address and had not received previous requests to provide information.

8.        In the letter of 13 November 2006 the trustee enclosed two blank forms for completion by Mr Caruana in relation to his income for each contribution assessment period.  On 12 December 2006 Mr Caruana forwarded annual statements of income for CAP 2 (T9 pages 170-179) and CAP 3 (T9 pages 180-189) which were almost identical.  The documents did not include complete details of income or expected income for either period, and a number of questions were not answered or were answered in an incomplete manner.  The forms were not signed or dated.

9.        Mr Caruana told the Tribunal that he did not fail to provide the trustee with the requested information.  He said that his statement of affairs dated 28 October 2004 (S13 pages 315-338) contained information about his property and income.  He said that on 19 January 2007 his accountant forwarded to the trustee details of his income for the period December 2004 to June 2005 (T9 pages 190-261).  He stated that on 8 February 2007 his accountant forwarded to the respondent details of his residential address (T10) which he said had been sent previously to the trustee.  On the same day his accountant forwarded details of his income (T3). In letters to the respondent dated 9 and 31 May 2007 (S12) Mr Caruana said that he had cooperated with the trustee and had complied with all requests for information.

10.      In oral evidence Mr Caruana explained that he was born in Australia but his parents spoke only Maltese at home, and he has difficulty reading and writing in English, especially in financial and other official documents.  He left school in Year 11.  He said that he has worked as a sub-contractor in steel fabrication for a builder for the past three years.  Mr Caruana said that he completed the CAP 2 and CAP 3 forms to the best of his ability and was in a hurry to return them because he was aware of the time limits.  He said that he had not received the forms earlier because he had not notified the trustee of his change of address.  Mr Caruana conceded that the forms were incomplete and inaccurate and had not been signed or dated, but maintained that he did not know the answer to some of the questions, particularly those relating to income and expenditure, so he left those sections blank.  He also said that he was under stress at the time because of his financial difficulties arising from the bankruptcy, and had problems in his personal life.

11.      Under cross-examination Mr Caruana agreed that he had not provided all bank statements, and stated that apparently the reverse side of bank statements had not been photocopied when he prepared his reply to the trustee’s request for information.  He was unable to explain the reason that the bank statements did not refer to a number of items of expenditure, such as the rent paid by him for his apartment, and denied that he had performed work for cash payments.

12. On all the material the Tribunal is satisfied that Mr Caruana received a written request from the trustee to provide information about his income and expected income and that he failed to comply with the request. The Tribunal is also satisfied that Mr Caruana failed to disclose particulars of income or expected income as required by s 139U of the Act. Consequently the Tribunal finds that Mr Caruana failed to comply with s 149D(1)(d) and (e) of the Act.

SHOULD THE OBJECTION BE CANCELLED?

13.      In order to succeed in obtaining a cancellation of a special ground of objection Mr Caruana must show that at least one of the conditions in s 149N(1) of the Act applies and that the circumstances in s 149N(1A) of the Act do not apply, otherwise the Tribunal must confirm the decision under s 149N(3) of the Act.

14.      In Nguyen v Pattison (2005) 86 ALD 43 Weinberg J stated at paragraph 38, without apparent disapproval, that the Federal Magistrate (whose decision was the subject of appeal) observed:

It appears clear that the legislature intended that establishing a ‘special ground’ for giving a notice objecting to a bankrupt’s discharge is now intended to be sufficient evidence to demonstrate that it is appropriate to continue a bankruptcy beyond 3 years. It appears that the intention of the amendments is to deem a ‘special ground’ sufficient evidence of the basis for continuing a bankruptcy, without reference to the considerations discussed in Wharton and Nelson (supra)…

15.      In respect of s 149N(1) the Tribunal finds that the grounds on which the objection was made were grounds that were specified in s 149D(1) of the Act (s 149N(1)(a)); the failure by Mr Caruana to complete the CAP 2 and CAP 3 forms demonstrates that there is sufficient evidence to support the existence of the grounds of objection (s 149N(1)(b)); the reasons given by the respondent for objecting on grounds 149D(1)(d) and (e) justify the making of the objection (s 149N(1)(c)); and there was no previous objection on the relevant grounds that was cancelled (s 149N(1)(d)). Consequently there is no basis on which the Tribunal must cancel the objection under s 149N(1) of the Act.

16.      In respect of s 149N(1A) the Tribunal finds that the objection specifies at least one special ground as defined in the section (s 149N(1A)(a)); the written and oral evidence about the deficiencies in the answers by Mr Caruana to questions contained in the forms before the lodgement of the objection satisfies the Tribunal that there is sufficient evidence to support the existence of at least one special ground specified in the objection (s 149N(1A)(b)).

17.      On the question of whether Mr Caruana’s excuse for not complying with the request for information was reasonable, the Tribunal takes into account his evidence of financial and other problems in his life at the time, and his difficulties in understanding official forms, particularly financial documents.  However he was born in Australia and was educated to Year 10.  He understands English.  By all accounts he is a competent worker with stability of employment in the last three years.  The Tribunal is satisfied that Mr Caruana was aware of and understood his obligations to the trustee to provide full and accurate information about his financial affairs.  He employed an accountant and had the means to provide the information or seek professional assistance in completing the forms when requested to do so.  At the hearing he failed to provide any explanation for the absence of relevant entries in bank statements relating to items such as rent, which leads to the conclusion that he has chosen not to comply fully with requests by the trustee.  In all the circumstances the Tribunal finds that he has failed to establish that he had a reasonable excuse for the conduct or failure that constituted the special ground (s 149N(1A)(c)).

18.       For these reasons the criteria under which the objection or objections must not be cancelled under s 149N(1) of the Act are satisfied, taking into account that no notice has been taken of any conduct of Mr Caruana after 14 December 2006, which was the time when grounds 149D(1)(d) and (e) first applied (s 149N(1B)).

19.      In view of its findings concerning s 149N(1) the Tribunal is required to confirm the decision made by the respondent (s 149N(3)).

DECISION

20.      The Tribunal affirms the decision under review.

I certify that the preceding twenty [20] paragraphs are a true copy of the reasons for the decision of:

G.D. Friedman, Senior Member.

(sgd) Mara Putnis

Associate

Date of hearing:  11 April 2008
Date of decision:  15 April 2008
Advocate for applicant:                Mr N. Meletsis, financial consultant
Advocate for respondent:            Mr G. Carroll
Solicitor for respondent:              Australian Government Solicitor