KARL MANTEY and INSPECTOR-GENERAL IN BANKRUPTCY

[2010] AATA 421

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 421

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/5424

GENERAL ADMINISTRATIVE DIVISION		)
Re		KARL MANTEY

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY  

Respondent

DECISION

Tribunal Deputy President P E Hack SC

Date25 May 2010

PlaceBrisbane

Decision

The Tribunal sets aside the respondent’s decision of 14 October 2008 and remits the matter to the respondent for reconsideration:

(a) in accordance with s 42D of the Administrative Appeals Tribunal Act 1975 (Cth),

(i) in so far as the decision concerns the contribution assessment period commencing on 12 December 2007;

(ii) in so far as a claim is made for rental of $150 per week for office and garage rental, and

(b) in accordance with s 43(1)(c)(ii) of the Administrative Appeals Tribunal Act with a direction that Mr Mantey’s contribution assessment for the first contribution assessment period be determined on the basis that his liability was as set out in the attachment to the letter of 22 July 2009 adjusted for the amounts of $321.82 for additional material; $1,454.54 for legal fees; $370.80 for safety equipment; and $900.00 for accountancy. 

...............[Sgd]...............................

Deputy President

CATCHWORDS

BANKRUPTCY – calculation of amount of contribution – factual issues only considered – remission for reconsideration – decision set aside and remitted to respondent for reconsideration pursuant to ss 42 D and 43(1)(c)(ii) of the Administrative Appeals Tribunal Act 1975 (Cth)

Administrative Appeals Tribunal Act 1975 (Cth), ss 42D, 43(1)(c)(ii)

Re Newcombe and Inspector-General in Bankruptcy 85 ALD 402

REASONS FOR DECISION

25 May 2010 Deputy President P E Hack SC    

1.The applicant, Mr Karl Mantey became bankrupt on 13 December 2006 on the acceptance of a debtors petition.  The Official Trustee in Bankruptcy was and is the trustee of Mr Mantey’s estate.

2.Division 4B of Part VI of the Bankruptcy Act 1966 (Cth) makes provision for contribution by a bankrupt towards the bankrupt estate. The detail of the scheme is not presently relevant. It will suffice for present purposes to say that the trustee is required to undertake a calculation of the bankrupt’s income. In the case of a self-employed bankrupt that calculation ordinarily takes account of the bankrupt’s expenditure incurred in the course of employment. The contribution required to be made is one half of the amount of the excess of that net income over a prescribed threshold amount.

3.That process was undergone in relation to Mr Mantey’s post bankruptcy income for the two contribution assessment periods, the first beginning on 12 December 2006, the second beginning on 12 December 2007. Those calculations were undertaken and evidenced by a letter from the trustee dated 30 June 2008.

4.Mr Mantey was dissatisfied with those assessments and sought a review of the assessment by the respondent to these proceedings, the Inspector-General in Bankruptcy. Mr Noel Wharton, an officer in the employ of the Inspector-General, undertook that review which was protracted and detailed. Mr Mantey has raised considerable issue with the way in which the review was undertaken. It is not necessary for me to make any comment about the matter beyond observing that I have seen nothing that would suggest Mr Wharton approached the task in anything but a professional manner. In the course of the pre-hearing process Mr Wharton undertook further calculations including of Mr Mantey’s net income after the deduction of business related expenditure.

5.By agreement of the parties the hearing today has been limited to the first contribution assessment period. It seems to have been agreed that the other contribution assessment period ought be remitted to the respondent for further consideration.

6.At the outset of the hearing today it appeared that Mr Mantey wished to put in issue much of the calculation that had been undertaken by Mr Wharton evidenced by a decision made on 14 October 2008.

7.After lunch Mr Mantey indicated that, subject to six exceptions that he identified, he was prepared to proceed on the basis that a profit and loss account prepared by Mr Wharton was correct. That document[1] was sent under cover of a letter from the respondent to Mr Mantey of 24 July 2009 and calculates Mr Mantey’s liability to make contribution for the first assessment period in the sum of $10,991.55. As I have said, there are six items that remain in dispute.

[1]  Page 278 of exhibit 2.

8.The first concerns the motor vehicle tyres and rims said by Mr Mantey to have been purchased in April 2007 for a total cost of $2,900.00. The calculations by Mr Wharton allowed the post GST amount of $2,000 but not the full amount on the basis that on Mr Wharton’s enquiries the amount of $2,000 was reasonable and that in so far as the expenditure exceeded $2,000 the apparent cost of tyres of that type, the excess was not reasonable.  In the course of his cross-examination of Mr Wharton, Mr Mantey suggested that the expenditure included not only tyres, as the evidence to this point had suggested, but tyre rims as well, and that was the explanation for the additional cost. Even were that be so, I would regard the rims as being an expense of a capital nature which having regard to the decision of Deputy President Jarvis in Re Newcombe and Inspector-General in Bankruptcy[2] is not an amount allowable in reduction of a bankrupt’s income for the purposes of the calculation of a contribution by a bankrupt.

[2] 85 ALD 402.

9.The second item concerns what was originally claimed as materials used by Mr Mantey in his business in an amount of $285.40. Mr Wharton rejected that item because it appeared on the face of the document that it was not an expense incurred by Mr Mantey. That seems to be correct but to have arisen through a mistake made when Mr Mantey obtained a copy of the invoice. He has produced today what appears to be the next invoice in a sequence of invoices issued by that supplier which shows that the amount of $354.00 was incurred by Mr Mantey in acquiring material. Having regard to the explanations proffered I propose to allow an increase to the expenditure incurred by Mr Mantey by the after GST amount in respect of this item in the sum of $321.82.

10.The next issue concerns barrister’s fees of $1,600.00. The claim is somewhat unusual and the connection between Mr Mantey’s business and the claim made against him seemingly in the Southport Magistrates Court is at best obscure but in the circumstances I am prepared to allow the net after GST amount of $1,600.00 in the amount of $1,454.54.

11.The third item concerns a claim for safety equipment which understandably Mr Wharton rejected because the invoices described the equipment as rock climbing equipment. Mr Mantey’s explanation today satisfies me that he has incurred expenditure net after GST of $370.80 on safety equipment which should be expensed rather than capitalised. I propose to allow the further amount of $370.80.

12.The next concerns a claim by Mr Mantey for rental of portion of the house that he rented during the 2007 year. He said of that that the house cost $550.00 per week to rent and that that part of the house, a detached garage, which was occupied for the purposes of his business ought reasonably be allowed a deduction of $150.00 per week. He calculated this amount by reference to the difference between the overall rent and the rent on comparable properties at the time. Mr Wharton’s view was that there were other ways that he would consider whether that expense is reasonable. It seems to me, that in the circumstances where Mr Wharton has not had an opportunity to consider the reasonableness of the amount of $150.00 per week that it is best that that be remitted back to the respondent for reconsideration under s 42D of the Administrative Appeals Tribunal Act 1975.

13.The final issue concerns Mr Mantey’s claims for accountancy costs. The difference between the parties comes down to an invoice issued by Mr Mantey’s Accountant in September 2007 in the total sum of $5,940.00. When the document was provided to the official trustee a stub was attached to the face of the invoice so that it was not readily apparent until the original document was produced that $990.00, that is $900.00 net after GST, represented the cost of the preparation of business activity statements and the lodgement of those statements, an expense which Mr Wharton accepted was properly a business expense. The balance of the invoice was described as accounting services rendered for the preparation of income tax returns for 1999 to 2007. I take the view that the cost of preparation of income tax returns even for a sole trader is not a necessary business expense a fortiori when the returns are being prepared so many years in arrears. The result though is that on my view of the cost of the business activity statements a further $900.00 ought to be allowed.

14.Accordingly, it seems to me, that the decision I ought to make ought to be that the respondent’s decision of 14 October 2008 be set aside. I will remit the matter to the respondent for reconsideration (a) in accordance with s 42D of the Administrative Appeals Tribunal Act so far as a claim is made for rental of $150.00 per week for office and garage rental; (b) in accordance with s 43(1)(c)(ii) of the Administrative Appeals Tribunal Act with a direction that Mr Mantey’s contribution assessment for the first contribution assessment period be determined on the basis that his liability was as set out in the attachment to the letter of 24 July 2009 adjusted for the amounts of $321.82 for additional material; $1,454.54 for legal fees; $370.80 for safety equipment; and $900.00 for accountancy. The decision relating to the contribution assessment period from 12 December 2007 to 11 December 2008 will similarly be remitted pursuant to s 42D of the Act.

I certify that the 14 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed: .......................[Sgd]......................................................
  Associate

Date of Hearing  25 May 2010
Date of Decision  25 May 2010
The Applicant appeared in person
Counsel for the Respondent     Mr M Black  
Solicitor for the Respondent     Australian Government Solicitor