Jones and Inspector-General in Bankruptcy - [2018] AATA 3260

Jones and Inspector-General in Bankruptcy [2018] AATA 3260 (5 September 2018)
Division:TAXATION & COMMERCIAL DIVISION
File Number: 2017/0503
2017/0504

Re:Sharon Jones & Garrick Jones
APPLICANTS

AndInspector-General in Bankruptcy
RESPONDENT

DECISION
Tribunal:Deputy President Boyle
Date:5 September 2018
Place:Perth

The decision under review is set aside and in substitution for that decision there be a decision that the Objection be cancelled.
.....[sgd]...................................................................
Deputy President Boyle
CATCHWORDS
BANKRUPTCY – trustee’s objection to discharge – does the objection specify at least one special ground – elements of s 149D(1)(d) – request in writing by the trustee to provide written information – was the request for information a valid request – did the Applicants’ fail to comply with the request – decision set aside and substituted
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) – ss 37, 43
Bankruptcy Act 1966 (Cth) – ss 181A, 149(4), 149A(1), (2) and (3), 149B, 149B(1), 149C(1) and (2), 149D(1), 149D(1)(d), 149K(1), (3) and (5), 149N, 149N(1), (1A) and (3), 149P(6), 149(Q), 265(1)(ca)
Bankruptcy Legislation Amendment Bill 2002 (Cth)
Bankruptcy Regulations 1996 (Cth)
CASES
Caruana and Inspector-General in Bankruptcy [2008] AATA 307
Commonwealth v Baume (1905) 2 CLR 405
Indigenous Business Australia v Kani [2012] NTSC 24
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Neffati and Inspector-General in Bankruptcy [2016] AATA 941
Playford and Inspector-General in Bankruptcy [2018] AATA 19
Rimanic and Inspector-General in Bankruptcy [2010] AATA 875
WA Bright Kids Family Day Care Pty Ltd and Secretary, Department of Education and Training [2018] AATA 1312
SECONDARY MATERIALS
Pearce DC and Geddes RS, Statutory Interpretation in Australia (7^th ed, LexisNexis Butterworths, 2011)
REASONS FOR DECISION
Deputy President Boyle
5 September 2018
THE APPLICATIONS

On 28 January 2017, the Applicants made applications to this Tribunal for review of a decision made by the Respondent on 13 January 2017 under s 149N of the Bankruptcy Act 1966 (Cth) (the Act).
On 13 September 2016 Mr George Lopez, the trustee of the Applicants’ bankrupt estates (the Trustee), filed a notice of objection to the discharge of the Applicants’ bankruptcies under s 149B of the Act (the Objection) on the ground:
section 149D(1)(d) of the Act – you failed, when requested in writing by the Trustee, to provide written information about your property, income or expected income, failed to comply with that request (T3, p12).
The Objection had the effect of extending the Applicants’ bankruptcies until 15 May 2022 unless the Objection is withdrawn or cancelled (s 149A(2) and (3) of the Act).
By request dated 10 November 2016 the Applicants requested the Respondent to review the decision of the Trustee to file the Objection. The request to review the Objection was received by the Respondent on 14 November 2016.
In a decision made pursuant to s 149N of the Act on 13 January 2017 (the Reviewable decision) the Respondent confirmed the Trustee’s decision to file the Objection under s 149B of the Act (T3).
BACKGROUND

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: [2018] AATA 3260
Decision Date: 5 September 2018

CaseChat Overview and Summary

This matter concerned an appeal by the Applicants against a decision of the Respondent, the Inspector-General in Bankruptcy, which confirmed the Trustee's objection to the Applicants' discharge from bankruptcy. The Applicants had become bankrupt in May 2014, and various trustees were appointed. Between September 2014 and August 2016, the Trustee made multiple requests for information regarding the Applicants' property, specifically details about art pieces. The Trustee warned that failure to provide this information by 30 August 2016 would result in an objection to their discharge. The Applicants responded on 31 August 2016, stating they did not know the exact location of the art pieces and required an extension, providing contact details for one representative and indicating efforts to obtain the requested information. The Trustee subsequently lodged an objection on 13 September 2016, asserting the Applicants failed to comply with the request for information.

The primary legal issues before the Tribunal were whether the Trustee's objection specified at least one "special ground" for objecting to discharge, whether there was sufficient evidence to support such a ground, and whether the Applicants had failed to establish a reasonable excuse for not providing the requested information. The relevant special ground was identified under section 149D(1)(d) of the Bankruptcy Act 1966 (Cth), which pertains to a bankrupt's failure to comply with a written request from the trustee for information about their property, income, or expected income. The Tribunal was required to consider the operation of section 149N of the Act, particularly the interplay between subsections (1) and (1A), and the standard of proof applicable to the Inspector-General's satisfaction.

The Tribunal adopted the reasoning from previous decisions, notably *Rimanic and Inspector-General in Bankruptcy* [2010] AATA 875, which clarified that the Inspector-General (and by extension, the Tribunal) must be "satisfied" of the grounds, rather than a party bearing an onus of proof to establish them. The standard of proof was that of the balance of probabilities. The Tribunal found that the objection did specify a special ground under section 149D(1)(d). The core of the Respondent's contention was that the Applicants failed to provide the requested information and lacked a reasonable excuse. The Applicants argued that their response on 31 August 2016 constituted a valid attempt to comply and sought an extension, which the Trustee claimed not to have received.

The Tribunal determined that the decision under review was made pursuant to section 149N of the Act. The Applicants' appeal was heard, and various submissions and documents were presented as evidence. The Tribunal's ultimate decision was to set aside the Respondent's decision and substitute it with a new decision.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Section 149N(1A) of the Act specifies the ground identified in s 149D(1)(d) of the Act as being a “special ground” for the purposes of s 149N(1A) of the Act. The Tribunal is therefore satisfied that the ground specified in the Objection is a special ground for the purposes of s 149N(1A) of the Act.Is there sufficient evidence to support the existence of at least one special ground specified in the objection? As there is a special ground, by operation of s 149N(1A) of the Act, the Objection must not be cancelled if:(a)there is sufficient evidence to support the existence of that special ground; and(b)the Applicants have failed to establish that they had a reasonable excuse for the failure to provide the information sought by the Trustee. Before looking at the facts relevant to this issue and considering the operation of s 149N(1A) of the Act, the inter-relationship between the subsections of s 149N of the Act needs to be considered. Previous decisions in the Tribunal have analysed this inter-relationship and in particular the inter-relationship of ss 149N(1) and 149N(1A) of the Act. Deputy President Forgie in Rimanic and Inspector-General in Bankruptcy [2010] AATA 875 (Rimanic) considered this issue in some detail from [26] onwards. This Tribunal agrees with and adopts Deputy President Forgie’s analysis of those subsections. As Deputy President Forgie noted at [28], a succinct statement of the operation of those subsections is contained in the decision of Senior Member Friedman in Caruana and Inspector-General in Bankruptcy [2008] AATA 307 at [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). As Deputy President Forgie points out, the only caveat to the acceptance of Senior Member Friedman’s summary of the operation of the section is that insofar as it suggests that the bankrupt has a burden or onus of proof to establish that one of the circumstances identified in subsections (a) to (d) of s 149N(1) exists, that is not correct. No such onus arises under the Act. In accordance with the general principles in s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) the Tribunal is to put itself in the position of the person making the decision under review. Deputy President Forgie summarised the position at [31] in Rimanic as being:…All that is required in relation to s 149N(1) is that the Inspector-General, and so the Tribunal, is “satisfied”. That does not impose a burden of proof upon a party to the application. All that it does is indicate the standard to which the Inspector-General, and so the Tribunal, must be persuaded. In the absence of any statutory provision to the contrary, the standard of proof applicable in civil proceedings in the courts is that applicable in the Tribunal i.e. on the balance of probabilities.

Decision

Reasons for decision

In a decision made pursuant to s 149N of the Act on 13 January 2017 (the Reviewable decision) the Respondent confirmed the Trustee’s decision to file the Objection under s 149B of the Act (T3). BACKGROUND On 14 May 2014 the Applicants became bankrupt upon acceptance of their debtors’ petitions (T10, pp 603-606). On the same date, the Official Trustee in Bankruptcy was appointed as trustee of the Applicants’ bankrupt estate. On 3 September 2014, the Trustee and Evan Verge were appointed as joint and several trustees of the Applicants’ bankrupt estates pursuant to s 181A of the Act. On 9 June 2015, Mr Verge notified the Respondent that he would not renew his registration as a registered trustee. The Trustee thereafter became the sole appointed trustee of the bankrupt estates of the Applicants. Between 19 September 2014 and 29 August 2016 the Trustee, or at least Melsom Robson, sent various requests to the Applicants for information about their property, including details about various art pieces and the location and addresses and contact details of the parties that then held those art pieces. It is a matter of contention whether these requests were valid requests for the purposes of s 149D(1)(d) of the Act and it is also a matter of contention whether the information sought was provided. In his letter of 29 August 2016, the Trustee informed the Applicants that if they failed to provide the requested information by 30 August 2016, it would result in an objection to their discharge from bankruptcy (T10, p 488). On 31 August 2016, the Applicants replied to the letter referred to in [9] above, in an email to the Trustee they attached a letter dated 30 August 2016 advising they did not know the exact physical location of any of the craft pieces and they needed an extension of time to get this information. In their letter the Applicants provided the name and email address of one representative and stated they were endeavouring to get all of the information requested (see T10, pp 489-91). The Trustee stated he did not receive this email and letter and lodged the Objection on 13 September 2016 (T4, pp 31-33). On 10 November 2016, the Applicants requested that the Respondent review the Trustee’s decision to file the Objection (T5, pp 39-56). As noted at [5] above, the Respondent confirmed the Trustee’s decision (T3, pp 12-30). THE HEARING The applications were heard together by the Tribunal on 1 June 2018. The Applicants appeared in person and represented themselves. The Respondent was represented by Mr Tim Burrows from the Australian Government Solicitor. The following documents were put into evidence at the hearing:(a)the Applicants’ submissions dated 29 September 2017, comprising 24 pages (Exhibit A1);(b)the Applicants’ further submissions titled “Submission 2” dated 23 March 2018, comprising 97 pages (Exhibit A2); (c)the Applicants’ further submissions titled “Addendum to Applicants’ Submissions” dated 1 June 2018, comprising 32 pages (Exhibit A3);(d)the Respondent’s Statement of Facts, Issues and Contentions (Respondent’s SFIC) dated 1 December 2017 (Exhibit R1);(e)the Respondent’s submissions dated 30 May 2018, including the Explanatory Memorandum for the Bankruptcy Legislation Amendment Bill 2002 (Cth) (Exhibit R2); and (f)the section 37 “T documents”, comprising 646 pages in two volumes (Exhibit R3.1 and R3.2). LEGAL FRAMEWORK

Ratio Decidendi

Legal Principle Established

The thrust of the Respondent’s contentions is that:(a)the Objection specifies one special ground, namely under s 149D(1)(d) of the Act, being a failure by the Applicants’ to provide written information about the Applicants’ property having been requested to do so by the Trustee;(b)the evidence supports that ground; and(c)the Applicants have failed to establish a reasonable excuse for failing to provide the information sought.CONSIDERATION Does the Objection specify at least one “special ground”? The Objection (T4) specifies only one ground, namely, that under s 149D(1)(d) of the Act which is that: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. Section 149N(1A) of the Act specifies the ground identified in s 149D(1)(d) of the Act as being a “special ground” for the purposes of s 149N(1A) of the Act. The Tribunal is therefore satisfied that the ground specified in the Objection is a special ground for the purposes of s 149N(1A) of the Act.Is there sufficient evidence to support the existence of at least one special ground specified in the objection? As there is a special ground, by operation of s 149N(1A) of the Act, the Objection must not be cancelled if:(a)there is sufficient evidence to support the existence of that special ground; and(b)the Applicants have failed to establish that they had a reasonable excuse for the failure to provide the information sought by the Trustee. Before looking at the facts relevant to this issue and considering the operation of s 149N(1A) of the Act, the inter-relationship between the subsections of s 149N of the Act needs to be considered. Previous decisions in the Tribunal have analysed this inter-relationship and in particular the inter-relationship of ss 149N(1) and 149N(1A) of the Act. Deputy President Forgie in Rimanic and Inspector-General in Bankruptcy [2010] AATA 875 (Rimanic) considered this issue in some detail from [26] onwards. This Tribunal agrees with and adopts Deputy President Forgie’s analysis of those subsections. As Deputy President Forgie noted at [28], a succinct statement of the operation of those subsections is contained in the decision of Senior Member Friedman in Caruana and Inspector-General in Bankruptcy [2008] AATA 307 at [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). As Deputy President Forgie points out, the only caveat to the acceptance of Senior Member Friedman’s summary of the operation of the section is that insofar as it suggests that the bankrupt has a burden or onus of proof to establish that one of the circumstances identified in subsections (a) to (d) of s 149N(1) exists, that is not correct. No such onus arises under the Act. In accordance with the general principles in s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) the Tribunal is to put itself in the position of the person making the decision under review. Deputy President Forgie summarised the position at [31] in Rimanic as being:…All that is required in relation to s 149N(1) is that the Inspector-General, and so the Tribunal, is “satisfied”. That does not impose a burden of proof upon a party to the application. All that it does is indicate the standard to which the Inspector-General, and so the Tribunal, must be persuaded. In the absence of any statutory provision to the contrary, the standard of proof applicable in civil proceedings in the courts is that applicable in the Tribunal i.e. on the balance of probabilities.