Jack and Inspector-General in Bankruptcy - [2022] AATA 2908

Jack and Inspector-General in Bankruptcy [2022] AATA 2908 (8 September 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2021/4090
Re:Phillip Jack
APPLICANT

AndInspector-General in Bankruptcy
RESPONDENT

Decision
Tribunal:Deputy President Boyle
Date:8 September 2022
Place:Perth

The decision of the delegate of the Respondent made on 31 May 2021 pursuant to s 149N of the Bankruptcy Act 1966 (Cth) not to cancel an objection to the Applicant’s discharge from bankruptcy is affirmed.
...[SGD].....................................................................
Deputy President Boyle
Catchwords
BANKRUPTCY – s 149N of the Bankruptcy Act 1966 (Cth) – trustee’s objection to discharge – special ground of objection – whether there is sufficient evidence to support the special ground – whether Applicant failed to provide any reasonable excuse for conduct constituting special ground – Applicant’s salary paid into wife’s account – house owned by Applicant’s wife – Applicant’s income paid into wife’s account used to repay mortgage over property – Applicant’s lack of bank account not a reasonable excuse – prohibition under s 149N(1A) of the Bankruptcy Act applies – reviewable decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 43
Bankruptcy Act 1966 (Cth) ss 121, 121(2), 121(4), 121(4)(a), 121(6), 121(6)(e), 139CA(1)(a)(ii), 149A, 149B(1), 149C, 149D(1), 149D(1)(ab), 149D(1), 149D(1)(ab), 149D(1)(d), 149D(1)(e), 149K, 149N, 149N(1), 149N(1)(a), 149N(1)(b), 149N(1)(c), 149N(1)(d), 149N(1A), 149N(1A)(a), 149N(1A(b), 149N(1A)(c), 149Q
Bankruptcy Legislation Amendment (Anti-Avoidance) Act 2006 (Cth)
Corporations Act 2001 (Cth)
Cases
Carter and Australian Securities and Investments Commission [2020] AATA 809
Caruana and Inspector-General in Bankruptcy [2008] AATA 307
Jones v Dunkel (1959) 101 CLR 298
Mallett and Inspector-General in Bankruptcy [2018] AATA 3739
Michael John Fuller and Hugh Jenner Wily [1998] AATA 577
Nguyen v Pattison [2004] FMCA 517
Phillips and Inspector-General in Bankruptcy [2012] AATA 788
Rimanic and Inspector-General in Bankruptcy [2010] AATA 875
Wortman and Inspector-General in Bankruptcy [2021] AATA 2919
Secondary Materials
Explanatory Memorandum, Bankruptcy Law Amendment Bill 2002 (Cth) para 52
Explanatory Memorandum, Bankruptcy Legislation Amendment (Anti-avoidance) Bill 2005 (Cth) para 22
Michael Murray and Joe Giacco, Australian Government Solicitor’s Office, ‘Objections to Discharge – Getting it Right’ (Conference Paper, Insolvency and Trustee Australian Natural Bankruptcy Congress, 2006)
REASONS FOR DECISION
Deputy President Boyle
8 September 2022
the application

The Applicant seeks review of the decision of a delegate of the Respondent made on 31 May 2021[1] pursuant to s 149N of the Bankruptcy Act 1966 (Cth) (Act) not to cancel an objection to the Applicant’s discharge from bankruptcy.
[1] R1/10.
The application to the Administrative Appeals Tribunal was made under s 149Q of the Act.
background
On 23 November 2017 the Applicant became bankrupt by a debtor’s petition. Graeme Trevor Lean (Trustee) was appointed as the trustee of the Applicant’s bankrupt estate.[2]
[2] R1/26–27.
On 8 February 2021, the Trustee advised the Applicant that he had, on 5 February 2021, filed an objection to the Applicant’s discharge from bankruptcy on the grounds identified in ss 149D(1)(e), 149D(1)(ab), and 149D(1)(d) of the Act.
By an “application for review of objection” dated March 2021,…

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: [2022] AATA 2908
Decision Date: 8 September 2022

CaseChat Overview and Summary

This matter concerned an application by Mr Phillip Jack to review a decision of the Inspector-General in Bankruptcy not to cancel an objection to his discharge from bankruptcy. The objection was based on special grounds under section 149D(1) of the *Bankruptcy Act 1966* (Cth). The applicant's salary was paid into his wife's bank account, and these funds were used to repay the mortgage over a house owned by his wife. The applicant argued that he lacked a reasonable excuse for this conduct.

The primary legal issue before the court was whether the applicant had provided a reasonable excuse for his conduct, which the trustee alleged constituted a special ground for objecting to his discharge under section 149D(1) of the *Bankruptcy Act 1966* (Cth). Specifically, the court considered whether the applicant's lack of a personal bank account constituted a reasonable excuse for his salary being paid into his wife's account and used for her mortgage. The court also considered whether the trustee's objection, based on grounds including section 149D(1)(ab) (void transfers), section 149D(1)(d) (failure to provide information), and section 149D(1)(e) (failure to disclose income), should be cancelled.

Deputy Boyle P found that the applicant had failed to provide a reasonable excuse for his conduct. The court reasoned that the prohibition under section 149N(1A) of the Act applied, meaning that certain grounds of objection, including the one based on section 149D(1)(ab), could not be cancelled. Given this finding, it was unnecessary to consider the objections based on sections 149D(1)(d) and (e). The court affirmed the decision of the delegate of the Inspector-General not to cancel the objection to the applicant's discharge from bankruptcy.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The effect of the decision on the Applicant is to extend his period of bankruptcy until 24 November 2025.the hearing and the evidence The application was heard on 23 March 2022. Mr R Gillon appeared for the Applicant and Mr J Giacco appeared for the Respondent. The Applicant provided written closing submissions on 6 April 2022 and the Respondent provided written closing submissions on 20 April 2022. The Applicant was the only witness to give evidence at the hearing. The following documents were admitted into evidence:(a)Affidavit of Phillip Jack sworn 1 December 2021 (A1);(b)Electronic lodgement declaration signed 11 June 2020 for 2019 tax return (A2);(c)T-documents filed in the Tribunal 30 July 2021 (R1);(d)Supplementary T-documents filed in the Tribunal 23 December 2021 (R2);(e)Tender bundle filed in the Tribunal 22 March 2022 (excluding documents not specifically raised in the proceedings) (R3);(f)Scanned document from Lawton Gillon dated 1 October 2021 (R4);(g)Email from Ms Pereira of the Trustee’s office (R5); and(h)Bank statements of the Applicant’s wife handed up at hearing on 23 March 2022 (R6).legislative framework Section 149A of the Act provides that if an objection is made to the discharge of a bankrupt then the date of discharge of the person from bankruptcy is extended from three years to five years or eight years, depending on the grounds of the objection. Section 149B(1) of the Act provides as follows: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. Section 149C of the Act provides:(1)A notice of objection must:(a)set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and(b)refer to the evidence or other material that, in the opinion of the trustee, establishes that ground or each of those grounds; and(c)state the reasons of the trustee for objecting to the discharge on that ground or those grounds.(1A)Paragraph (1)(c) does not apply to a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (ia), (k) or (ma).(2)A notice of objection is not invalid merely because it does not state the ground or grounds of objection precisely as set out in subsection 149D(1) provided that the ground or grounds can reasonably be identified from the terms of the notice. Section 149D(1) of the Act relevantly provides that:The grounds of objection that may be set out in a notice of objection are as follows:…(ab)any transfer is void against the trustee in the bankruptcy because of section 121;…(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;

Decision

Reasons for decision

Given my finding that the objection based on the ground identified in s 149D(1)(ab) of the Act cannot be cancelled, it is unnecessary to consider whether the objections based on the grounds identified sub-ss 149D(1)(d) and (e) of the Act should be cancelled.Decision The decision of the delegate of the Respondent made on 31 May 2021 pursuant to s 149N of the Act not to cancel an objection to the Applicant’s discharge from bankruptcy is affirmed.

Ratio Decidendi

Legal Principle Established

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