De La Hunty and Inspector-General in Bankruptcy

[2006] AATA 610

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 610

ADMINISTRATIVE APPEALS TRIBUNAL       )          No N2006/226

GENERAL ADMINISTRATIVE DIVISION		)  )
Re		PHILLIP DE LA HUNTY

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

DECISION

Tribunal M D Allen, Senior Member

Date10 July 2006

PlaceSydney

Decision The decision under review is affirmed

(Sgd) M D Allen

........................................

Senior Member

CATCHWORDS

BANKRUPTCY -  review of a decision by Respondent to confirm an objection to extend the Applicant’s discharge from bankruptcy due to a failure by the Applicant to provide information to the trustee regarding disbursement of the proceeds of a sale of property – whether Applicant had a ‘reasonable excuse’ for his conduct – what constitutes ‘reasonable excuse’ – decision under review affirmed.

Bankruptcy Act 1966 – ss 149, 149A, 149B, 149D and 149N

Kyriackou v Shield Mercantile Pty Ltd (2004) 207 ALR 393

R v Green (1971) 126 CLR 28

Thomas v R (1960) 102 CLR 584

Regina v Dolan [1969] 1 WLR 1479

REASONS FOR DECISION

10 July 2006  Senior Member M D Allen

1.      By application made the 28^th day of February 2006, the Applicant sought review of a decision of the Respondent to confirm an objection by the Official Receiver in Bankruptcy on behalf of the Official Trustee as Trustee of the Applicant’s estate, to his discharge from bankruptcy.

2.      The effect of the objection is that the Applicant’s discharge from bankruptcy has been extended from 7 August 2005 to 7 August 2010.

3. The sole objection ground before me was that made pursuant to paragraph 149D(1)(g) of the Bankruptcy Act 1966.

4.      So far as is relevant, the following provisions of Part VII of the Bankruptcy Act 1966 are applicable in these proceedings:

“SECT 149

(1) Subject to section 149A, a bankrupt is, by force of this subsection, discharged from bankruptcy in accordance with this section.

…

(4) If the bankrupt becomes a bankrupt after the commencement of section 27 of the Bankruptcy Amendment Act 1991, the bankrupt is discharged at the end of the period of 3 years from the date on which the bankrupt filed his or her statement of affairs.

SECT 149A

(1) If an objection to the discharge of a bankrupt has taken effect in accordance with section 149G, then, unless the objection is withdrawn or cancelled, the reference in whichever of subsections 149(2), (3) and (4) applies in relation to the bankrupt to the period of 3 years from the date on which the bankrupt filed his or her statement of affairs is taken to be a reference to the prescribed number of years from the prescribed date.

(2) For the purposes of subsection (1):

(a) the prescribed number of years is:

(i) if the objection was made on a ground, or on grounds that included                   a ground, referred to in paragraph 149D(1)(ab), (d), (da), (e), (f), (g),   (h), (ha), (k) or (ma)—8 years; or

(ii) in any other case—5 years; and

(b) the prescribed date is:

(i) if the objection was made on a ground, or on grounds that included                   a ground, referred to in paragraph 149D(1)(a) or (h)—the date on   which the bankrupt returned to Australia; or

(ii) in any other case—the date on which the bankrupt filed his or her                   statement of affairs.

SECT 149B

(1) Subject to the following provisions of this Subdivision, at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee may file with the Official Receiver a written notice of objection to the discharge.

(2) The trustee of a bankrupt's estate must file a notice of objection to the discharge if the trustee believes:

(a) that doing so will help make the bankrupt discharge a duty that the      bankrupt has not discharged; and

(b) that there is no other way for the trustee to induce the bankrupt to        discharge any duties that the bankrupt has not discharged.

SECT 149D

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

…

(g) at any time during the period of 5 years immediately before the           commencement of the bankruptcy, or at any time during the bankruptcy, the     bankrupt:

(i) …

(ii) disposed of property but failed to explain adequately to the trustee why no      money was received as a result of the disposal or what the bankrupt did with    the money received as a result of the disposal;

SECT 149N

(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.

…

(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.”

5. Very properly, the Applicant conceded at the outset of these proceedings that there existed evidence to support the special ground. The powers of the Tribunal are however constrained within the limitations imposed by s 149N of the Bankruptcy Act 1966 and there is no jurisdiction for the Tribunal to review the reasonableness of the objection or whether it should now be set aside. Likewise as provided by s 149N(1B), the fact that the Applicant has now complied with the request that gave rise to the objection is immaterial. The only matter before the Tribunal is whether the Applicant had, prior to the issue of the objection, a “reasonable excuse” for the conduct constituting the special ground, in this case a failure to provide information regarding the disbursement of the proceeds of sale of a property.

6.      As to what constitutes a “reasonable excuse” there is no authority directly on point. The best that could be said is that bankruptcy proceedings are quasi-penal (cf Kyriackou v Shield Mercantile Pty Ltd (2004) 207 ALR 393), and the consequences of bankruptcy are that the property and affairs of the bankrupt are controlled by the Trustee. Given the degree of control over the bankrupt and the very strict requirements that the bankrupt cooperate with the Trustee, what constitutes a “reasonable excuse” for non-compliance with a request by the Trustee must be judged accordingly and in context with the obligations.

7.      Many cases, for example R v Green (1971) 126 CLR 28, Thomas v Regina (1960) 102 CLR 584, point out the undesirability of attempting to further explain to a jury the term “beyond reasonable doubt”. As Kitto J in Thomas (supra) said at page 595, “whether a doubt is reasonable is for the jury to say”, adding that danger invests an attempt to explain “reasonable” and may prove unhelpful. Likewise what might constitute a “reasonable excuse” for the purposes of s 149N(1A) of the Bankruptcy Act 1966 is a matter of assessing whether the excuse is one which, in all the circumstances of the bankrupt’s case, is reasonable.

8.      The Applicant’s solicitor submitted that in assessing whether the Applicant’s excuse was reasonable I should take into consideration the fact that he had not been warned of the consequences of failing to comply with the Trustee’s demands. I agree with that submission. As pointed out by the Court of Appeal in Reg v Dolan [1969] 1 WLR 1479, a jury could take into account in considering whether an accused had a reasonable excuse for not providing a specimen for testing under the Road Safety Act 1967, the fact that he had not been warned of the consequences of failing to supply the specimen. Similarly here, that the Applicant was not warned is a matter to be taken into account, along with the other facts and circumstances attending the failure.

9.      In a letter directed to the Applicant dated 7 April 2003, the Trustee stated that a “failure to provide the information required will result in the Trustee utilising the remedies available to it without further reference to you.” This warning should have placed the Applicant upon notice that a failure to comply with the request to provide the information would be met with sanctions, although I regard the use of the word “remedies” as inexact and not fully conveying the penal nature of the sanction.

10.     Prior to the letter of 7 April 2003, the Applicant had been requested by letter dated 6 August 2002 to produce to his Trustee within 14 days a copy of the settlement statement following the sale of a property owned by a private company of which he was a director.

11.     The Applicant’s failure to provide the required information within the 14 days requested by the letter of 6 August 2003 or the 7 days requested by the letter of 7 April 2003, has been explained in 2 statutory declarations, the first dated 22 November 2005 and the second made 18 April 2006, together with his evidence to the Tribunal.

12.     Briefly stated, the Applicant’s evidence is that at the time the information was requested his life was in turmoil. He and his wife plus their child and three children from the Applicant’s first marriage were living first at Seaforth but then, upon his bankruptcy, they had to seek accommodation with friends, while the 3 children from his first marriage went to live with their mother. Family possessions were stored in another friend’s garage which made access difficult.

13.     So that the eldest children did not have to change schools, the Applicant initially was driving them everyday from Rozelle where they resided with their mother to Mosman where they attended school. In addition the Applicant was attempting to resolve business issues. He had searched for the documents required but had been unable to find them. For a time while his former wife was overseas he resided at Rozelle in order to care for the three children of that marriage. Later he moved with his wife and children to a unit at Mosman. Again, he sought to access his goods and chattels which were now in a car space at that unit in order to find the documents required.

14.     The Applicant stated that had he been aware that the failure to comply with the request by the Trustee for the documents would have resulted in the extension of his bankruptcy for a further five years, he would have sought to obtain a copy of the required documents from other sources, for example from the solicitors who acted on the sale.

15.     The Applicant also gave evidence of how the fact of his bankruptcy is impacting upon his life and in particular, upon his ability to obtain employment. I must concede that I agree with the Applicant that, so far as I can ascertain, no good purpose is being realised by extending his bankruptcy beyond the usual three years. Indeed, the objection seems to have been continued after the required information was provided in order to punish rather than advance the realisation of the Bankrupt’s estate, but the propriety of the Trustee’s actions in this regard are not a matter before me.

16.     So far as the Applicant’s excuse for not complying with the request is concerned, I do not regard it as reasonable. At the time the Applicant filed his statement of affairs a letter was forwarded to him bearing date 6 August 2002. In that letter he was “required” to produce the information sought within 14 days. A further letter dated 7 April 2003 again sought the information and this time warned of “remedies” being taken as a result of non-compliance.

17. The Applicant is a well educated businessman and could not have been oblivious to the imperative nature of the requests. To access the required documents would have taken considerable effort on his part at a time when his life was in turmoil. Although only alluded to in these proceedings, there were other personal matters which no doubt played their part in obscuring his responsibilities to the Trustee. Notwithstanding all of this, he should have been aware of what was required of him and taken appropriate action. To my mind, it is no excuse to say now that he would have acted differently or made further and better efforts if he had known at the time that a failure to comply would result in an extension of his bankruptcy. As paragraph 77(1)(g) of the Bankruptcy Act 1966 states, inter alia, a bankrupt shall aid to the utmost of his power the administration of his estate.

18.     As I am satisfied that the Applicant has not shown a reasonable excuse, the decision under review is affirmed.

I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M D Allen, Senior Member

Signed:         (E.Pope)           .....................................................................................
  Associate

Date of Hearing  23 June 2006
Date of Decision  10 July 2006
Solicitor for the Applicant          Mr S Titus, Carneys Lawyers
Solicitor for the Respondent     Mr M Murray, Australian Government Solicitor