D'SOUZA And INSPECTOR-GENERAL IN BANKRUPTCY

[2010] AATA 708

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 708

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/5960

GENERAL ADMINISTRATIVE DIVISION		)
Re		RUSSELL D'SOUZA

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

DECISION

Tribunal G. D. Friedman, Senior Member

Date16 September 2010

PlaceMelbourne

Decision

The Tribunal sets aside the decision under review and substitutes a decision cancelling the objections to discharge from bankruptcy that had been made on grounds under s149D(1)(aa), (da), (f), (ma), and (n) of the Bankruptcy Act 1966.

  .................[signed]..............

   Senior Member

BANKRUPTCY – objection to discharge of bankruptcy – special grounds of objection – whether intentionally provided false or misleading information – implied undertaking not to disclose documents produced in Court proceedings – appropriate burden of proof

Bankruptcy Act 1966 ss 149D(1)(aa), (da), (f), (ma) and (n), 149N(1), (1A), (1B) and (3)

Bankruptcy Legislation Amendment Bill 2002  paragraph 52

Briginshaw v Briginshaw (1938) 60 CLR 336

Cannane v Cannane Pty Limited; Cannane v Official Trustee in Bankruptcy as Trustee of the Bankrupt Estate of Cannane (1998) 192 CLR 557

Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10

Lloyds bank Ltd v Marcan [1973] 2 All ER 359

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449

REASONS FOR DECISION

16 September 2010 G.D. Friedman, Senior Member   

1.      Dr Russell D’Souza was made bankrupt on 21 August 2006 for a period of 3 years on his own application as a result of unpaid debts following unsuccessful litigation.

2.      On 11 December 2009 a delegate of the respondent confirmed the trustee’s objection to Dr D’Souza’s discharge from bankruptcy on a number of grounds, in particular for intentionally providing false or misleading information to the trustee, and the bankruptcy was extended for a further 5 years until 22 August 2014.  Dr D’Souza has sought review of the decision.

RELEVANT LEGISLATION

3. Section 149D(1) of the Bankruptcy Act 1966 (the Act) lists grounds of objection to the discharge of bankruptcy.  The grounds specified in the objection to Dr D’Souza’s discharge were:

(1)The grounds of objection that may be set out in a notice of objection are as follows:

…

(aa)any transfer is void against the trustee in the bankruptcy because of section 120 or 122;

…                 

(da)after the date of the bankruptcy, the bankrupt intentionally provided false or misleading information to the trustee;

…

(f)the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG;

…

(ma)the bankrupt intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in any property;

(n)the bankrupt failed, whether intentionally or not, to disclose to the trustee the bankrupt’s beneficial interest in any property.

4.      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.

ISSUES

5. At the hearing the Tribunal was informed that the respondent was no longer relying on grounds of objection under s 149D(1)(f), (ma), and (n) of the Act. The Tribunal also accepted the respondent’s submission that it was open to the Tribunal to find that there was no longer utility in maintaining the objection under s 149D(1)(aa) of the Act because the claims that formed the objection have been settled between the trustee and Dr D’Souza’s preferred creditors. Therefore the only issue before the Tribunal is whether the objection must be cancelled under s 149N(1) of the Act, which requires consideration of whether there is sufficient evidence to support the special ground of objection under s 149D(1)(da) of the Act that, after the date of bankruptcy, Dr D’Souza intentionally provided false or misleading information to the trustee.

DID DR D’SOUZA INTENTIONALLY PROVIDE FALSE OR MISLEADING INFORMATION TO THE TRUSTEE?

6.      The trustee relied on three matters in which Dr D’Souza allegedly intentionally provided false or misleading information:

·     A personal questionnaire completed by Dr D’Souza on or about 17 November 2006 in which Dr D’Souza answered no to question 11: Have you any doubts about the correctness of any items shown in your Statement of Affairs? If so, state which items and your reasons for doubt. (the questionnaire matter);

·     Provision by Dr D’Souza of an email dated 30 October 2006 that is alleged to be false (the email matter); and

·     Provision by Dr D’Souza of an expense claim form dated 8 June 2008 that is alleged to be false (the invoice matter).

7.      Dr D’Souza told the Tribunal that there is insufficient evidence to support the existence of the ground of objection.  In respect of the questionnaire matter he said that in June 2006 he prepared his Statement of Affairs (SOA) with the assistance of his accountants with a view to filing for bankruptcy if negotiations with creditors failed.  He said that he signed the SOA on 10 August 2006 and it was filed with the Official Receiver on 21 August 2006.  Dr D’Souza stated that he was then asked to complete the questionnaire, which he submitted to the trustee in November 2006.  He said that he answered no to question 11 because at the time he submitted the document to the trustee he did not have any doubts about the correctness of any items in his SOA, and that the trustee had not drawn his attention specifically to his answers to questions 24, 29 and 36 of the SOA.

8.      Dr D’Souza agreed that in response to question 24 of the SOA: Do you expect to receive a tax refund? he answered yes and explained that he was told by his accountants to expect a refund of $3,500.00 for the year ended 30 June 2005 and $1,500.00 for the year ended 30 June 2006.  Dr D’Souza said that on or after 8 August 2006 he received a tax refund cheque for $36,134.74 from his accountants, and on or after 16 August 2006 he received a further cheque for $14,724.00, the day he filed his debtor’s petition for bankruptcy.  However he explained that at the time of signing the SOA he was ill, having just been released from the Intensive Care Unit in hospital, which affected his attention and concentration, and he did not notice that his answer to question 24 would need to be altered because of changed circumstances.

9.      Dr D’Souza agreed that in response to question 29 of the SOA: Do you own, or are you entitled to any shares, options, rights, convertible notes or any other securities? he answered no and explained that his accountants had mistakenly included 318 shares in One Steel Limited in his tax returns of 2005 and 2006 as a notional dividend.  He said that at all relevant times the shares were owned beneficially by his wife pursuant to a property settlement dated 27 March 2000, and she had not transferred to her name the half share that he had surrendered to her.  Dr D’Souza maintained that the shares were not vested in the trustee and were not required to be disclosed in answer to question 29.

10.     Dr D’Souza agreed that in response to question 36 of the SOA: As a result of pressure for payment from creditors have you, in the last 12 months, paid a total of more than $1,000 over and above your normal repayments or surrendered any assets to a creditor? he answered no and explained that at the time of preparation of the SOA he had not received the tax refund cheques and had not known of the disbursement of the proceeds.  He also stated that payments to his accountants and to a travel agency were made after 10 August 2006 when the SOA was signed, but prior to the date of his bankruptcy.  In any event he said that the payments were not made As a result of pressure for payment… or over and above your normal repayments.

11.     Dr D’Souza submitted that the evidence required for establishing the ground of objection under s 149D(1)(da) of the Act is found in the application of the test in Briginshaw v Briginshaw (1938) 60 CLR 336, which would require the interpretation of intentionally as one of specific intent rather than general intent, necessitating a higher test because the allegation of intentional provision of false information to the trustee is an allegation of serious criminal conduct.  He referred to Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 in which the majority of the High Court of Australia held at 449-450:

The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud… On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found." Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.

12.     The Tribunal does not accept Dr D’Souza’s contention.  In Lloyds Bank Ltd v Marcan [1973] 2 All ER 359 at 367 Pennyuik V-C stated:

…the word “intent” connotes a state of mind.  A man’s intention is a question of fact.  Actual intent may unquestionably be proved by direct evidence or may be inferred from surrounding circumstances…

In Cannane v Cannane Pty Limited; Cannane v Official Trustee in Bankruptcy as Trustee of the Bankrupt Estate of Cannane (1998) 192 CLR 557 the High Court of Australia considered the requisite intent in respect of intent to defraud creditors and held that the necessary intent was not one of establishing an actual intent but rather intent could be inferred from all the circumstances.

13.     Paragraph 52 of the Explanatory Memorandum of the Bankruptcy Legislation Amendment Bill 2002, which introduced special ground of objection s 149D(1)(da) of the Act, stated:

…While it can be difficult to infer intention, in each instance the burden of proof which the trustee will bear if an objection is challenged is the civil onus, ie, proof on the balance of probabilities.

14.     In considering all relevant matters including the intention of the legislation as expressed in the Explanatory Memorandum, the Tribunal concludes that the civil onus of balance of probabilities is one that can be inferred from the facts and circumstances of a particular case, and is appropriate in this instance.

15.     The Tribunal takes into account the detailed statements and oral evidence given by Dr D’Souza, including material that clarified his response to the trustee’s questions at the relevant time.  His medical condition at the time of completing the SOA and the questionnaire has not been disputed, and the Tribunal finds Dr D’Souza to be a credible witness.  The Tribunal accepts his explanation for his answer to question 24 of the SOA because at the time of completing the SOA this was the best information received from his accountants, and on the balance of probabilities his medical condition resulted in him overlooking the need to update the answer in the light of changed circumstances.  The Tribunal finds that in respect of question 24 Dr D’Souza did not intentionally provide false or misleading information to the trustee.

16.     In respect of question 29 of the SOA the Tribunal accepts that the property settlement dated 27 March 2000 between Dr D’Souza and his wife means that his accountants were mistaken in listing a notional dividend for the shares in his 2005 and 2006 tax returns, because the beneficial interest in the One Steel shares had been transferred to his wife.  The Tribunal finds that in respect of question 29 Dr D’Souza did not intentionally provide false or misleading information to the trustee.

17.     In respect of question 36 of the SOA, the Tribunal accepts Dr D’Souza’s evidence about the dates of payment and that the payments were not made as a result of pressure for payment, and the Tribunal finds that in respect of question 36 Dr D’Souza did not intentionally provide false or misleading information to the trustee.  Therefore the Tribunal finds that he did not doubt the correctness of any items in that document, and accepts his evidence that when he answered question 11 of the questionnaire he did not doubt the correctness of the SOA.  Further the Tribunal finds that Dr D’Souza did not intend to provide misleading information to the trustee by answering no to question 11.

18.     For these reasons the Tribunal concludes that there is insufficient evidence to support the existence of the special ground under s 149D(1)(da) of the Act in respect of the questionnaire matter.

19.     In respect of the email matter Dr D’Souza explained that since 2004 he has held the position of Director of Clinical Trials and Bipolar Program at Northern Psychiatric Research Centre, Northwest Mental Health, and is required to attend international conferences regularly.  He said that on 30 October 2006 he received an email from a representative of an Indian pharmaceutical company who was making arrangements for him to attend a conference conducted by the Indian Association of Private Psychiatrists in India in November 2006.  The email was for his own information and contained the statement: The following are your travel arrangements done for you at Delhi & Jaipur (email A).  The email then listed accommodation and contact details for Dr D’Souza’s stay in India.  Dr D’Souza said that he gave his copy of the email to the trustee on 31 October 2006 when he was refused entry to his scheduled flight at Melbourne Airport because the trustee queried his travel arrangements.

20.     Dr D’Souza said that in 2006 he issued proceedings in the Federal Magistrates’ Court of Australia to replace the trustee of his bankrupt estate.  In a supporting affidavit sworn on 15 January 2007 he said that he gave details of his proposed travel to India to the trustee, and attached a copy of what he thought was email A.  The email (email B) was almost identical to email A but appeared in a different typeface and after …Delhi & Jaipur contains the additional words …at the Indian Association of Private Psychiatrists Congress.

21.     Dr D’Souza told the Tribunal that he did not know why the emails were differently worded, but denied that the slight difference in wording between the emails called into question the authenticity or integrity of either email.  He emphasised that neither email was false or misleading because both described accurately the travel arrangements that had been made for him, and in any event there was no evidence that he had an intention to provide false or misleading information to the trustee.

22.     In relation to email B, Dr D’Souza acknowledged that the Tribunal is entitled to take into account all relevant material placed before it.  However he explained that, unlike email A which was given to the trustee, email B was provided to the Court specifically for use in its proceedings.  Dr D’Souza argued that as a consequence email B was subject to an implied undertaking that parties to a proceeding would not use any document disclosed in the course of discovery for any purpose other than in relation to the litigation in which it was disclosed (Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32). He said that the use of email B by the respondent to support the objection was inappropriate because the respondent had breached the implied undertaking in using email B to found the objection, and that email B had been provided to the Court and was not a provision of information to the trustee.

23.     The Tribunal takes into account that the relevant documents, including the affidavit and email B, were provided to the respondent by Dr D’Souza in his request for internal review of the trustee’s decision, and were not made available to the respondent pursuant to court process or litigation between Dr D’Souza and the trustee.  Therefore the use of the documents by the respondent did not breach any implied undertaking.  However there is no dispute that email A was in Dr D’Souza’s possession when he was detained at Melbourne Airport, at which time he handed the document to the trustee, and that it contained accurate information on Dr D’Souza’s travel plans.  There is no evidence that the information was false or misleading.  Accordingly the Tribunal finds that in respect of email A Dr D’Souza did not intentionally provide false or misleading information to the trustee after the date of the bankruptcy.

24.     In relation to email B the Tribunal takes into account that Dr D’Souza denied altering the email.  Although the wording of email B is slightly different from email A, there is no evidence to support an inference that he altered the email or had any reason to do so.  No evidence was given by the sender of the email to account for the difference.  The different typeface and provision of the extra words may have resulted from issues concerning word processing, facsimile transmission or other aspects of technology.  The extra words merely provide the name of the conference to which the travel details refer.  The words are correct and in fact complete the sentence in the email, which raises the possibility that email B is a more accurate version than email A.  There is no evidence that the information was false or misleading.  For these reasons the Tribunal finds that in respect of email B Dr D’Souza did not intentionally provide false or misleading information to the trustee after the date of the bankruptcy.

25.     Therefore the Tribunal concludes that there is insufficient evidence to support the existence of the special ground under s 149D(1)(da) of the Act in respect of the email matter.

26.     In relation to the invoice matter, Dr D’Souza explained that on 8 June 2008 he completed a continuing medical education (CME) expense claim form for attending the ISBD International Bipolar Conference in New Delhi in January 2008, which attracted CME credits, and he supported his application with invoice number 16873500 for $9,111.00 issued by Travel Talk on 20 January 2008 for travel to Mumbai and New Delhi.  Dr D’Souza said that invoice number 16873389 for $4,848.00 was issued by Travel Talk on 30 December 2007 for travel Mumbai/Bangalore/New Delhi/London/Edinburgh to speak at a research meeting in Bangalore and to attend the Royal College of Psychiatrists UK Congress in Coventry.  This invoice represented the work-related expenses of the cost of travel from New Delhi to Bangalore and London, and was not claimed elsewhere.  It was non-CME travel.

27.     Dr D’Souza stated that the trustee erroneously based his objection on the alleged provision of the two invoices which were in respect of the same period of travel (20 January 2008 to 6 February 2008).  He said that the itinerary prepared for him in December 2007 shows that he was scheduled to be in Bangalore from 21 January 2008 to 24 January 2008, New Delhi from 24 January 2008 to 30 January 2008, and London from 30 January 2008 to 5 February 2008 to attend three conferences.  Dr D’Souza emphasised that the invoices represented two different sections of his travel arrangements for separate purposes during the relevant period.  He noted that the invoice that was reimbursed by his employer was not submitted to the trustee or the respondent as a deduction for work-related travel, and that the invoices did not contain information that was false or misleading.

28.     The Tribunal accepts Dr D’Souza’s comprehensive evidence, including material not available to the trustee at the time of the original decision, about the details of each invoice and his explanation of the reasons for submitting the two invoices based on the separate components of his travel at the relevant time.  His version of events and the documentation submitted by him were not tested significantly in cross-examination.  The Tribunal is satisfied that although the invoices covered the same period of travel they were in fact in respect of different arrangements for separate purposes.  For these reasons the Tribunal finds that in respect of the invoice matter Dr D’Souza did not intentionally provide false or misleading information to the trustee after the date of the bankruptcy.

29.     Therefore the Tribunal concludes that there is insufficient evidence to support the existence of the special ground under s 149D(1)(da) of the Act in respect of the invoice matter.

MUST THE OBJECTION BE CANCELLED?

30.     In order to satisfy the Tribunal that the objection must be cancelled Dr D’Souza 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.

31.     In respect of the criteria in s 149N(1A) of the Act which specify the basis upon which an objection must not be cancelled under subsection (1), in view of its findings on each of the matters relied upon by the respondent to object to the discharge under s 149D(1)(da) of the Act, the Tribunal is satisfied that there is not sufficient evidence to support the existence of at least one special ground specified in the objection.  Consequently the requirements of 149N(1A)(b) cannot be met, so the criteria in s 149N(1A) cannot be met, and the Tribunal cannot find that An objection must not be cancelled under subsection (1).

32.     In respect of s 149N(1) of the Act, in view of its findings on each of the matters relied upon by the respondent to object to the discharge under s 149D(1)(da) of the Act, the Tribunal is satisfied that there is insufficient evidence to support the existence of the ground of objection.  Consequently Dr D’Souza meets the criterion in s 149N(1)(b) of the Act, and there is a basis on which the Tribunal must cancel the objection.

33.     For these reasons the provisions of s 149N(1) of the Act have been satisfied, so the Tribunal must cancel the objection.

DECISION

34. The Tribunal sets aside the decision under review and substitutes a decision cancelling the objection to discharge from bankruptcy that had been made under grounds s 149D(1)(aa), (da), (f), (ma), and (n) of the Bankruptcy Act 1966.

I certify that the preceding thirty-four [34] paragraphs are a true copy of the reasons for the decision of:

G.D. Friedman, Senior Member.

Signed:................................[signed]................................................

Grace Hortizski  Associate

Date of hearing:  2 August 2010 and 10 September 2010
Date of decision:  16 September 2010
Counsel for the applicant:            Mr P. Fary
Solicitor for the applicant:            Voitin Lawyers
Counsel for the respondent:         Mr J. Giacco
Solicitor for respondent:              Australian Government Solicitor