Kneipp v Jonsson
[2013] FCCA 1695
•28 October 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KNEIPP v JONSSON | [2013] FCCA 1695 |
| Catchwords: BANKRUPTCY – Discharge – notices of objection to discharge – application to set aside notices of objection to discharge – where notices upheld by Inspector-General – where applicant debtor requested Trustee to withdraw notices – where Trustee refused request on basis of on-going investigations and disruptive behaviour of applicant – where applicant did not seek review of decisions of Inspector-General by Administrative Appeals Tribunal – whether 60 day time limit to challenge decision of Trustee to make objections absolute – whether applicant precluded from challenging the decision of the Trustee to make the objections – review of decision not to withdraw notices – where notices founded upon applicant’s failure to provide information – where one notice based on failure to disclose potential beneficial interest in estate of applicant bankrupt’s partner – whether applicant’s right to further and better provision out of estate of deceased vests in Trustee – where no application in fact made – whether Trustee should have withdrawn notice – where other notices lodged for valid grounds – where Trustee obtained, or already possessed, information the subject of the notices – whether applicant prompted by objections to provide information – whether notices may be sustained once information obtained by Trustee on basis of additional purpose of continuing investigations – whether to set aside the notices of objection to discharge – whether, when and where examinations should be held. |
| Legislation: Bankruptcy Act 1966, ss.139U, 149, s.149A, 149B, 149C, 149D, 149J, 149K, 149N(3), 149Q, 178, 179 Succession Act 1981 (QLD), s.41(1) |
| McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547 Heshmati v Paul Burness and Morgan Lane [2012] FMCA 884 Chase, in the matter of Chase v Donnolly [2002] FCA 1565 Macchia v Nilant [2001] FCA 7 Frost v Sheahan [2008] FCA 1073 Wharton v Official Receiver in Bankruptcy (2001) 107 FCR 38 Coffey v Bennett (1961) VR 264 at 266 McEvoy v Public Trustee (1989) 16 NSWLR 92 Collicoat v McMillan (1993) 3 VR 803 Menzies v Marriott (2009) VSC 345 Mango Boulevarde Pty Ltd v Whitton [2011] FCA 1383 Prentice v Wood (2002) 119 FCR 296 |
| Applicant: | HENRY HARVEY KNEIPP |
| Respondent: | ANTHONY JAMES JONSSON |
| File Number: | BRG 127 of 2012 |
| Applicant: | HENRY HARVEY KNEIPP |
| Respondent: | ANTHONY JAMES JONSSON |
| File Number: | BRG 401 of 2013 |
| Applicant: | ANTHONY JAMES JONSSON AS TRUSTEE IN BANKRUPTCY |
| Respondent: | HENRY HARVEY KNEIPP WENDY ANN MACKAY |
| File Number: | BRG 538 of 2013 |
| Judgment of: | Judge Raphael |
| Hearing dates: | 30 & 31 July 2013 |
| Date of Last Submission: | 23 August 2013 |
| Delivered at: | Sydney |
| Delivered on: | 28 October 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr P O Land |
| Solicitors for the Applicant: | Lee & Co Solicitors |
| Counsel for the Respondent: | Mr J Trevino |
| Solicitors for the Respondent: | MacDonells Law |
ORDERS
Application to review decisions the subject of review to the Inspector General dismissed.
Application to review decision of trustee not to withdraw notices of objection 5, 5A, 7 and 8 made on 8 December 2011 dismissed.
The Trustee to withdraw notice of objection to discharge number 3.
Application to review decision of Trustee to file notices of objection to discharge numbers 9 & 10 dismissed.
The Applicant to pay the costs of the Trustee, such costs to be paid from his estate and to be taxed if not agreed pursuant to the Federal Circuit Court (Bankruptcy) Rules 2001.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
BRG 127 of 2012
| HENRY HARVEY KNEIPP |
Applicant
And
| ANTHONY JAMES JONSSON |
Respondent
BRG 401 of 2013
| HENRY HARVEY KNEIPP |
Applicant
And
| ANTHONY JAMES JONSSON |
Respondent
BRG 538 of 2013
| ANTHONY JAMES JONSSON AS TRUSTEE IN BANKRUPTCY |
Applicant
And
| HENRY HARVEY KNEIPP WENDY ANN MACKAY DARREN MITCHELL |
Respondent
REASONS FOR JUDGMENT
Introduction
This judgment covers a number of applications made by a bankrupt, Henry Harvey Kneipp, against his Trustee Anthony James Jonsson. The applications arise out of a decision made by the Trustee to file notices of objection to discharge of the bankrupt. A sequestration order was made against the estate of Mr Kneipp on 17 August 2007. Mr Kneipp filed his statement of affairs on 20 September 2007 and would thus have been discharged from bankruptcy on 20 September 2010 pursuant to the provisions for automatic discharge found in s.149 of the Bankruptcy Act 1966, (Cth)[1]. The filing of the notices of objection extended the bankruptcy period to 20 September 2015 pursuant to s.149A(2)(a)(i) of the Act.
[1] “Act”
For the purposes of the proceedings the objection notices were referred to as notices 1, 2, 3, 4, 5, 5A, 6, 7 and 8. On 14 December 2010 the bankrupt sought review of all nine objections by the Inspector General in accordance with s.149K of the Act. On review the Inspector General confirmed Notices of Objection 3, 5, 5A, 6, 7 and 8 in accordance with s.149N(3) of the Act. The bankrupt was entitled pursuant to what the Full Bench has described as “a code” – in McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547, per Northrop, Ryan and O'Loughlin JJ – to seek review of the Inspector General’s decision to confirm those six objections by application to the AAT in accordance with s.149Q of the Act. He did not so avail himself. What the bankrupt did was to commence proceedings in this court being BRG 127/2012 seeking that the Notices of Objection to discharge be set aside or in the alternative that the court enquire into the conduct of the respondent in relation to the Notices of Objection and then set them aside. This application was made, according to the applicant bankrupt, pursuant to ss.178 and 179 of the Act which are in the following form:
“178 Appeal to Court against Trustee's decision etc.
(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the Trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
(2) The application must be made not later than 60 days after the day on which the person became aware of the Trustee's act, omission or decision.
179Control of Trustees by the Court
(1) The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a Trustee in relation to a bankruptcy and may do one or both of the following:
(a) remove the Trustee from office; and
(b) make such order as it thinks proper.
(2) The Inspector-General or a creditor may at any time require a Trustee to answer an inquiry in relation to the bankrupt's estate or affairs.”
Under that application number some interim applications were made. These related to one of the Notices of Objection. During the course of the bankruptcy Mr Kneipp’s de facto partner, Ms Mary Ann Azzopardi died. Mr Kneipp was a beneficiary in a small way from her estate but he believed that he had the right to further provision. The Trustee believed that any such right vested in him and eventually came to agree a Deed of Settlement between himself and the executors of the estate which had a financially neutral effect. The interim applications sought declarations that Mr Kneipp’s rights under s.41(1) of the Succession Act 1981 (QLD) to apply to the court for further provision out of Ms Azzopardi’s estate did not vest in the Trustee and that the proceeds of the settlement be repaid to the public Trustee for distribution, possibly to the bankrupt, should he be successful. That aspect of the various matters was not aired at the hearing, presumably because, as was made clear at the hearing, Mr Kneipp had received a considerable amount of legal advice that his prospects of success in such an application to the Supreme Court of Queensland were very very low and that the settlement by the Trustee with the executors did not release any moneys to the Trustee.
The Notices of Discharge which were referred to in BRG 127/2012 were all issued in 2010. In matter number BRG 401/2013 a similar application was made in respect of two Notices of Objection to Discharge dated 23 March 2013.
On 1 December 2011 the applicant’s solicitors sent five facsimile letters in relation to five of the confirmed Notices of Objection, 3, 5, 5A, 7 and 8, asserting that there was no further utility in maintaining the objections and that “given [the applicant’s] age and state of health the respondent Trustee was requested to withdrew each of them.” The Trustee responded to those requests for withdrawal on 8 December 2011 which relevantly stated:
“Thank you for your five facsimiles of 1 December 2011.
Your client’s lack of cooperation and disclosure to date, which prompted my objections to his discharge, has delayed and obstructed my investigations into his examinable affairs for the benefit of creditors of his bankrupt estate.
At present, my investigations are continuing, and the administration of his bankrupt estate is not finalised.
…
Accordingly, I do not propose to withdraw my objections to his discharge at this time.”
It was this letter that prompted application BRG 127/2012.
Proceedings BRG 401/2013 were commenced on 21 May 2013 seeking the set aside of the two Notices of Objection to Discharge dated 23 March 2013 under s.178 of the Act and make enquiries into the conduct of the respondent under s.179. These two Notices of Objection related in respect of the first to a failure to disclose in the bankrupt’s income contribution questionnaire for his fourth contribution assessment period 17 August 2011 to 16 August 2012 airfares paid on his behalf by another. That was said to be in breach of s.139U of the Act. The second Notice of Objection related to a failure to disclose legal expenses for the same period which had been paid for by another. Those Notices of Objection were not the subject of an application to the Inspector General for review.
The third set of proceedings constituted an application in a case in matter no BRG 538/2013 seeking review by the court under s.178 of the summonses to examine Mr Kneipp and his daughter Wendy Ann Mackay. The examination summonses were dated 19 June 2013. The proposed date for the examination was 2 July 2013. The examinations had not taken place by the time the matter came before me.
Both parties provided the court with helpful written submissions prior to the commencement of the hearing. Those of the respondent stated at [25] – [27]:
“25. Whilst it cannot be doubted that s 178 can be used as an alternative means of reviewing a Trustees [sic] decision to make an objection (i.e rather than review of the decision by the Inspector-General in accordance with s 149K), in so far as application BRG 127/12 is concerned, the applicant is precluded from challenging the making of the objections because the application was made more than 60 days after the day on which the bankrupt became aware of the objections: see 178(2).
26. Driver FM in Heshmati v Paul Burnessand Morgan Lane [2012] FMCA 884 considered that the 60 day time limit was an absolute one which cannot be extended by the court.
27. In the circumstances, in so far as application BRG 127/12 is concerned, the applicant should be limited to presenting argument and evidence relevant to the refusal of the respondent to withdraw the confirmed objections: the court should not entertain evidence and argument directed to challenging the objections themselves.”
The submissions made reference to what Driver FM, (as he then was), said in Heshmati at [68] – [70]. I also had regard to what fell from Allsop J (as he then was) in Chase, in the matter ofChase v Donnolly [2002] FCA 1565 at [5] and [6]:
“[5]The nature of the supervisory jurisdiction conferred on the Court by s 178 of the Act has been discussed in Cummings v Claremont Petroleum NL (1996) 185 CLR 124, 133, Re Tyndall [1977] FCA 15; (1977) 30 FLR 6, 9-10, Re Dingle; Westpac Banking Corporation v Worrell [1993] FCA 619; (1993) 47 FCR 478, McGoldrick v Official Trustee in Bankruptcy [1993] FCA 636; (1993) 47 FCR 547, Re Wheeler; Ex parte Wheeler v Halse [1994] FCA 1348; (1994) 54 FCR 166 and Macchia v Nilant [2001] FCA 7; (2001) 110 FCR 101, 112-16 [30] to [40].
[6]I do not propose to restate what is said in the above cases. From and assisted by them, the following considerations relevant to this application can be expressed There is a discretion to embark upon a supervisory review of a decision of the Trustee. If there is an available review to an administrative body (as there is under ss 149K and 149Q), that is a relevant consideration. Due weight should be given to not interfering with the day to day administration of the estate. If, from otherwise hearing matter N7280 of 2001, I am able to pass conveniently upon questions of fact and law raised in both proceedings, then I should do so. I am not obliged to attempt to resolve the underlying factual and legal matters raised by the grounds of the notice. This is especially so where there is an alternative remedy available and, as I have found, the applicant for review under s 178 has manifested questionable reliability in his evidence in matter N7280 of 2001. However, where issues are straightforward or otherwise able to be taken up, it may not be inappropriate to deal with them, especially since some grounds of the notice (the matters covered by N7280 of 2001) have been ventilated in full.”
I also had regard to the views expressed by French J (as he then was) in Macchia v Nilant [2001] FCA 7[2] where his Honour said at [40]:
“[40] Whatever may be the correct position in respect of challenges to decisions about proofs of debt, the availability of an administrative mechanism to review the Trustee's decision to file an objection should not be taken as manifesting, by implication, a legislative intention to preclude judicial challenge under s 178. There are enough examples of such parallel processes in Commonwealth statutes to prevent any argument being mounted that a multiplicity of remedies is so novel or unusual that it could not have been contemplated by the legislature even when provided in the one statute. It is important to bear in mind however that relief under s 178 is discretionary and that the availability of a comparatively speedy and inexpensive means of administrative review in relation to an objection decision will be a factor of considerable importance in deciding whether the Court should entertain an application under s 178 or grant relief thereunder in relation to such a decision.”
In Frost v Sheahan [2008] FCA 1073 French J’s views expressed in Macchia were referred to at [34] by Besanko J when his Honour set out the principles which govern an application under s.178. At [34.4] his Honour said:
“The power to make orders under s.178 is not necessarily ousted by the presence of an alternative remedy. In any particular case the presence of an alternative remedy may lead to an argument that the alternative procedure is a code for correcting alleged errors by a Trustee. That was a possibility discussed by the Full Court of this Court in McGoldrick although the argument did not succeed in that case. In almost cases, the presence of an alternative remedy will be relevant to the exercise of a discretion under s.178 not to make an order. There is, with respect, an illuminating discussion of the relevant principles by French J in Macchia v Nilant [2001] FCR 101.”
[2] “Macchia”
I take from these authorities that review under s.178 is an available alternative to an administrative review under s.149N and from there to the AAT. However, a court will be reluctant to exercise its discretion to hear such an application given the availability of an administrative path. In this particular case, BRG 127/2012, the administrative path was already taken and was not pursued to its end point. I concluded that it would not be appropriate to exercise my discretion to hear the matter under s.178 in these circumstances given that in any event the sixty day period had long expired. However, what I was required to do was to consider under s.178 the refusal to withdraw the objection consequent upon the letters between the parties referred to above. A withdrawal of objection is dealt with under s.149J of the Act:
Withdrawal of objection
“(1) If at any time before a bankrupt is discharged the Trustee withdraws the objection, the Trustee must give the Official Receiver a notice of the withdrawal of the objection and give the bankrupt a copy of the notice.
(3) The withdrawal takes effect at the beginning of the day when details of a notice under subsection (1) are entered in the National Personal Insolvency Index.”
In regard to the two objections made in March 2013 these had not been the subject of a merits review by the Inspector General and review under s.178 was sought.
The final set of proceedings related to the examinations summonses issued by the Trustee in support of the March Notices of Objection (and for the purposes of considering the bankrupt’s examinable affairs in particular the availability of any as yet undeclared assets). At the commencement of the hearing I discussed with the representatives of the parties the manner in which these three proceedings would be approached. It was determined that in regard to the first Notices of Objection the court would not exercise its discretion to review those Notices but it would exercise its discretion to review the decisions not to withdraw the Notices and that evidence in relation to that aspect of the matter could be called. In regard to the March 2013 Notices of Objection the court would exercise its discretion to review those and evidence in regard to them could be called. In regard to the applications to set aside the examination summonses it was determined that in the event that I permitted the Notices of Objection to Discharge to remain in force the examinations should take place but those examinations should be carried out in Hobart and the examinees should be given thirty days notice of the proposed examinations.
Review of decision not to withdraw the Notices of Objection to Discharge
Both parties provided the court with helpful written submissions upon their client’s cases. These included submissions made post hearing. The applicant’s submissions appear to proceed on the basis that the court was reviewing the original decisions to lodge the notice of objection to discharge. But this is not what the court has agreed to do save in the case of the objections lodged in March 2013. Much of the respondent’s argument on the law in relation to notices of objection is still valid for the purposes of reviewing the refusal to withdraw and will be discussed hereunder.
The gravamen of the applicant’s argument is found expressed at [16] of his submissions:
“[16]Finally, in exercising its jurisdiction under s.178, where, as here, the conduct of the Trustee includes the lodging of a number of Notices of Objection to Discharge, the Court should bear in mind the following:
a. That the lodging of a Notice of Objection to Discharge is a serious matter and must be controlled.
McGoldrick v Official Trustee (1993) 47 FCR 547 at 553-554;
b. Section 149A is an important provision, which provides strong incentives to bankrupts to co-operate with their Trustees, but it must be applied sensibly otherwise it can operate oppressively;
Wharton v Official Receiver in Bankruptcy (2001) 107 FCR 38 at para 80;
c. Section 149B(2)(b) requires that the Trustee must believe that the lodging of a Notice of Objection to Discharge is the only way to induce the bankrupt to discharge his duties – it is plainly a course of last resort;
Wharton’s Case, supra
d. The Notice of Objection to Discharge should be used for the purpose of persuading the bankrupt to discharge the bankrupt’s duties under the Act;
Frost v Sheahan (2005) 220 ALR 733 at para 47
e. It is submitted, that it follows that if the Notice of Objection to Discharge does persuade the bankrupt to discharge his duties and the Trustee obtains what the Notice of Objection to Discharge was designed to elicit from the bankrupt, then the utility of the Notice of Objection to Discharge is spent and the Trustee should exercise his powers under s.149J and withdraw the Notice of Objection to Discharge;
f. The power to lodge a Notice of Objection to Discharge is a power of last resort, when no other form of persuasion will assist to remind the bankrupt of his obligations;
Frost’s Case, supra at para 49;
g. A Notice of Objection to Discharge can only be validly lodged if the purpose in doing so relates to one or other of the 22 discrete grounds contained in s.149D(1) is made out: in the following excerpt from para 58 of Macchia v Nyland (2001) 110 FCR 101 French J. (as he then was) makes this clear:-
“The substance of the objections of 19 March 1997 may be debateable. The purpose they served appears to have been wider than that which was necessary to justify their lodgement. The Trustee’s purpose, as identified by Mr Macchia, was evidently directed to maximizing, from after acquired property, the assets available to the estate. While that purpose is consonant with the general duty of the Trustee it must not be allowed to distract from the specific considerations necessary to justify the issue of an objection. Nor does it justify the use of the objection as a tactical tool in the battle of wits with the bankrupt.”
In order to comment upon these submissions it was necessary for the court to read each of the cases cited and come to its own view as to their dicta. Thus in (a) it is correct to say that the court in McGoldrick said that:
“The entry of an objection was and remains a serious matter.”
But to my mind it did not say that it must be controlled. What the court actually said was:
“Thus, the power to lodge an objection was and (as will be seen) remains the subject of controls. In particular, an objector was not to lodge an objection unless he had “sufficient reason to believe there exists one or more of the grounds specified in s.149(4)”: Vanguard Service Print v Mercovich (1985) 10 FCR 32 at [40].
This means that notices of objection are amenable to review by the court and, where they are not lodged in compliance with the Act and authorities, can be revoked. In (b) it is again correct that in Wharton, albeit at [77] and not [80], Weinberg J said that s.149A is an important provision that provides a strong incentive to bankrupts to co-operate with their Trustees during the administration of their estates. His Honour did not use the word “applied” in relation to that section, he said:
“However, unless the section is construed in a sensible manner, it is capable of operating oppressively.”
I do not accept the interpretation of s.149B(2)(b) set out in (c). What his Honour said in Wharton at [77] was:
“[77]Section 149D(1)(d) must be construed in the light of the requirement in s.149B(2)(b) that the Trustee must believe that the filing of the notice of objection is the only way to induce the bankrupt to discharge his duties under the Act. It is plainly a course of last resort.”
It is well to look at the whole of s.149B to get a clearer understanding of its intention:
“149B Objection to discharge
(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.”
The section can be divided into separate parts, the discretionary part in (1) and the mandatory part in (2). It is clear from the grounds of objection found at 149D that there are a number of grounds for filing an objection to which 149B(2) would not be relevant. One needs only to look at 149D(1)(a) to (b):
“149D(1) The grounds of objection that may be set out in a notice of objection are as follows:
(a) the bankrupt has, whether before, on or after the date of the bankruptcy, left Australia and has not returned to Australia;
(aa) any transfer is void against the Trustee in the bankruptcy because of section 120 or 122;
(ab) any transfer is void against the Trustee in the bankruptcy because of section 121;
(ac) any transfer is void against the Trustee in the bankruptcy because of section 128B;
(ad) any transfer is void against the Trustee in the bankruptcy because of section 128C;
(b) after the date of the bankruptcy, the bankrupt contravened section 206A of the Corporations Act 2001 (disqualification from managing corporations);”
One might also look at 149D(1)(da):
“(da) after the date of the bankruptcy, the bankrupt intentionally provided false or misleading information to the Trustee;
(l) the bankrupt failed to attend a meeting of his or her creditors without having first obtained written approval of the Trustee not to attend or without having given to the Trustee a reasonable explanation for the failure;
(ma) the bankrupt intentionally failed to disclose to the Trustee the bankrupt's beneficial interest in any property;”
Section 149B(2) would apply to those matters where the Trustee has made a request of the bankrupt with which the bankrupt has not complied such as 149D(d):
“(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;
(f)the bankrupt failed to pay to the Trustee an amount that the bankrupt was liable to pay under section 139ZG;
(h) while the bankrupt was absent from Australia he or she was requested by the Trustee to return to Australia by a particular date or within a particular period but the bankrupt failed to return by that date or within that period;
(k) the bankrupt refused or failed to sign a document after being lawfully required by the Trustee to sign that document;” (as examples only)
In (f) what Lander J actually said in [48] and [49] of Frost:
“[48]“It is a power, however, which must be used sparingly and for the purpose of protecting the interests of creditors and in generally advancing the administration of the estate of the bankrupt.
[49]In a sense, it is a power of last resort when no other form of persuasion will assist to remind the bankrupt of the bankrupt's obligations.”
The gravamen of the applicant’s argument is found in (e) and it is here that the basis of the dispute really lies. The applicant argues that the notices did persuade the bankrupt to discharge his duty and that the Trustee has obtained what the notices were designed to elicit from him. The respondent argues that this is not the case and that to the extent that the Trustee has been provided with the information it was not provided with it by the bankrupt but he had to obtain it from third parties. He submits that Frost is authority for permitting a notice of objection to be maintained even though the substance of it has been satisfied where there is utility in continuing the administration:
“[117]It follows, in my opinion, that where the bankrupt has attended to the objections and dealt with them, ordinarily, there must be some utility and therefore some purpose in continuing the administration of the bankrupt's estate for the Trustee to refuse to exercise the power to withdraw under s 149J of the Act.”
And
“[125]Therefore, there is good reason that a bankruptcy continue where the Trustee has not been able to identify all of the assets which should form part of the bankrupt's estate and has not been able to identify all of the income which might be available for contribution to that estate.”
Finally, in upholding the objection his Honour said at [134]:
“[134]Moreover, I consider that the respondent has established that there is a need for further inquiries to be made to ascertain the applicant's assets at the date of his bankruptcy. The evidence establishes that those further investigations have been necessitated by the bankrupt's continuing refusal to cooperate with the respondent in identifying the applicant's assets and income since the sequestration order was made. No fault, in my opinion, can be attributed to the respondent. The respondent has done his best to ascertain the applicant's assets at the date of the applicant's bankruptcy. The evidence clearly discloses a continuing refusal on the part of the applicant to cooperate with the respondent in identifying the applicant's assets as at the date of his bankruptcy. For these reasons, there is utility in continuing the bankruptcy.”
The Notices of Objection
In the respondent’s outline of submissions filed on 29 July 2013, just prior to the hearing there was set out in tabular form a brief summary of each of the relevant objections:
Obj-
No.Brief Summary
Date of Objection of Notice
Date of Inspector-General’s Decision Notices
Grounds Confirmed by Inspector-General
Special
Ordinary
3
Bankrupt failed to disclose potential beneficial interest in Mary Ann Azzopardi’s, the Bankrupt’s deceased partner’s, estate.
Bankrupt failed to disclose instructions to make a claim out of Mary Ann Azzopardi’s estate.
19 August 2010
AJJ8
Affidavit of Anthony James Jonsson filed 05.04.12
9 June 2011
AJJ9
Affidavit of Anthony James Jonsson filed 05.04.12
s.149D(1)(da)
s.149D(1)(j)
5
Failure to disclose $150,000.00 loan from deceased partner (Mary Ann Azzopardi) until 3 August 2010.
$150,000.00 loaned on 4 August 2009.
16 August 2010
AJJ10
Affidavit of Anthony James Jonsson filed 05.04.12
13 July 2011
AJJ11
Affidavit of Anthony James Jonsson filed 05.04.12
s.149D(1)(d)
s.149D(1)(da)s.149D(1)(e)
s.149D(1)(i)
5A
Failure to disclose funds loaned to Carolyn gate
17 September 2010
AJJ12
Affidavit of Anthony James Jonsson filed 05.04.12
4 July 2011
AJJ13Affidavit of Anthony James Jonsson filed 05.04.12
s.149D(1)(d)
s.149D(1)(da)Nil
6
Failure to disclose bank accounts held with the ANZ Bank
19 August 2010
AJJ14
Affidavit of Anthony James Jonsson filed 05.04.12
9 June 2011
AJJ15
Affidavit of Anthony James Jonsson filed 05.04.12
s.149D(1)(d)
Nil
7
Failure to disclose bank accounts held with the NAB Bank
16 August 2010
AJJ18
Affidavit of Anthony James Jonsson filed 05.04.12
9 June 2011
AJJ19
Affidavit of Anthony James Jonsson filed 05.04.12
s.149D(1)(d)
s.149D(1)(da)s.149D(1)(i)
8
Failure to disclose bank accounts held with the Suncorp Bank
16 August 2010
AJJ20
Affidavit of Anthony James Jonsson filed 05.04.12
9 June 2011
AJJ21
Affidavit of Anthony James Jonsson filed 05.04.12
s.149D(1)(d)
s.149D(1)(j)
The case in relation to the refusal to withdraw the notice of objection No 3 is that the applicant believes that the objection should never have been filed in the first place because an applicant’s right to apply to a court for further and better provision out of the estate of a deceased person is a mere personal right which does not vest or pass to the respondent; Coffey v Bennett (1961) VR 264 at 266; McEvoy v Public Trustee (1989) 16 NSWLR 92 at 102; Collicoat v McMillan (1993) 3 VR 803 at 822 and Menzies v Marriott (2009) VSC 345 at [46]. In the latter the court said:
“[45] The fact that the plaintiff is an undischarged bankrupt needs to be considered.
[46] The right to apply for relief under Pt IV is personal, and does not vest in a person’s Trustee in bankruptcy. That means that the plaintiff, not his Trustee in bankruptcy, is the appropriate party to bring the proceedings. However if, whilst he remains an undischarged bankrupt, the plaintiff receives money or other property through Pt IV proceedings, either by way of judgment or a settlement sum, such property will be available to the Trustee for distribution to creditors.
[47] In Collicoat v McMillan, Ormiston J considered an application for provision under Pt IV. His Honour held that in deciding whether to make provision for a bankrupt applicant, the court should have regard to whether, once the creditors are paid out, there would be something left over for the benefit of the applicant. In the exercise of the court’s discretion, an order for provision should generally not be made if it would not in fact benefit the applicant, but would only benefit his or her creditors.”
The applicant further argues that there is no provision in s.149D that allows a Trustee to file a notice of objection for the actions of the bankrupt in this regard. I have no doubt that if the right was considered to be an asset of the bankrupt’s estate, as any eventual payment would be, then there was ample ground for the Trustee to have filed the notice of objection. The Inspector-General upheld the notice on grounds 149D(1)(da) and 149D(1)(j) and it is possible that such a claim could constitute a material change. I am not convinced by the applicant’s argument that the issue of a notice in these circumstances was ultra vires the powers of the Trustee. But on the other hand given the evidence that I have now heard that no application was made to the court and that all the advice Mr Kneipp has received is that any such application would be highly unlikely to succeed coupled with the fact that the Trustee has himself entered into an agreement with the executor leads me to the view that the Trustee should have agreed to a withdrawal of this particular notice of objection. In my view the Trustee’s grounds for issuing this notice of objection were so thin that it is not appropriate to use its continuance to justify any of the Trustee’s grounds for believing that the administration should continue for a further period.
It is in considering the other notices which the Trustee refused to withdraw that the court must resolve what the applicant considers to be the dichotomy between the dicta of French J (as he then was) in Macchia and what fell from Lander J in Frost noting always that Frost was a later decision by a Judge of the Federal Court and that Macchia was a case referred to by Lander J in his decision at [113]. The applicant puts this point in the following way:
“[20]The Applicant further submits that the remaining 5 Notices of Objection to Discharge, though based on one or other of the 22 grounds provided by s.149D(1), were nevertheless lodged for a purpose “…wider than that which was necessary to justify their lodgement…” (to use the words of French J., as he then was, in Macchia’s Case, supra) because that wider purpose, namely “In addition I require the further time provided by the extension of the bankruptcy to complete my investigations into the bankrupt’s examinable affairs” is not one of the 22 discrete grounds of objection provided by s.149D(1), but rather a purpose that is “…consonant with the general duty of a Trustee…” but nevertheless “… must not be allowed to distract from the specific consideration necessary to justify the issue of an objection” (again, to use the words of French J., as he then was, in Macchia’s Case, supra).”
In the court’s view there is not a dichotomy between these two dicta. What I believe French J was saying was that a court would have to look primarily at the given reason for filing the notice and if there was no basis for such a filing then the additional reason would not suffice because it was not one of the twenty two discrete grounds for objection provided by s.149D. In Macchia the grounds of objection utilised by the Trustee were themselves invalid and thus the additional purpose was not enough to save them. In the instant case there is no suggestion that these notices are invalid on their face. For the reasons that I have already expressed I am not reviewing them. They have been reviewed and they were not found wanting. I can therefore take comfort from the findings of Lander J in Frost that if the Trustee establishes that there is a need for further enquiries to be made to ascertain the applicant’s assets as at the date of his bankruptcy there is utility in continuing with the bankruptcy.
The applicant also relies on the decision of Greenwood J in Mango Boulevarde Pty Ltd v Whitton [2011] FCA 1383. This was a hearing of an application for summary judgment in respect of which his Honour had only to decide whether the applicants had no reasonable prospect of success upon their claim. In the relevant part of his Judgment, after discussing the decision in Prentice v Wood (2002) 119 FCR 296, a decision of the Full Court, his Honour said at [114]:
“Clearly, the Trustee must have reasons for exercising the power under s 149B(1) and act in reliance upon identified grounds. The question of law is whether a purpose or reason directed to advancing the administration of the estate is sufficient or whether the reason must relate to the grounds relied upon. I entirely accept that exercising the power to object under s 149B(1) for the purpose of enabling each bankrupt to put a composition proposal to creditors is not a purpose extraneous to the Bankruptcy Act: Minister for Aboriginal Affairs v Peko-Wallsend Limited[1986] HCA 40; (1986) 162 CLR 24; Water Conservation and Irrigation Commission (NSW) v Browning[1947] HCA 21; (1947) 74 CLR 492; R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd[1979] HCA 62; (1979) 144 CLR 45. However, the immediate question is whether I can be satisfied that the contention of the applicants of the need to demonstrate a purpose or reason for the decision related to the grounds relied upon, rather than a purpose (any purpose) not extraneous to the objects of the Bankruptcy Act, has no reasonable prospect of success for the purposes of s 31A(2)(b). I am not so satisfied.”
In my view this is the highest that this case goes. Frost was cited in the judgment but not considered. There is also the question of the rather unusual facts that brought the case to the court. The applicants were creditors of the second and third respondent bankrupts. The first respondent was their Trustee. The Trustee had determined not to withdraw certain objections to the discharge of the bankrupts for the purpose of allowing the bankrupts to put a composition to their creditors. This composition would effectively relieve the bankrupts from the responsibility of properly complying with the requirements for income contributions under s.139 of the Act. The creditors argued that the real reason for the notice of objection was not one found in s.149D(1). As in Macchia his Honour’s views appear to be heavily influenced by the validity or otherwise of the notices of objection, a matter that is not in dispute in the instant case. The conclusion that this court has come to is that a decision of a Trustee not to withdraw a valid notice of objection is itself valid if the Trustee genuinely believes that there may be utility in continuing the administration of the estate and of recovering further funds for the benefit of all creditors. This is what occurred in Frost where his Honour said at [132]:
“Indeed in my opinion the respondent was not wrong not to withdraw the second objection even though the applicant had fully responded to it.”
It would be open to this court to follow his Honour to the extent that if it was satisfied that there were good reasons to continue the bankruptcy it would not be necessary to enquire into the utility of the continuation of the notices. The applicant argues that the purpose of those notices has been fulfilled insofar as the Trustee now has information that compliance with the notices would have provided. Given that the court is reviewing an exercise of discretion on the part of the Trustee there should be taken into account the manner in which the applicant dealt with the notices. This may be done through an examination of the information received by the Trustee, either from Mr Kneipp or from other sources.
It is clear from the evidence that the Trustee genuinely believes that there is good reason to continue the bankruptcy. He believes that he is not far from discovering the whereabouts of substantial funds, expressed by him in multiples of his fees, that may be made available to creditors. Whilst it is certainly true that this administration has not been speedy, the Trustee has provided some understandable reasons for this. The bankrupt’s affairs were the subject matter of investigation by the Australian Federal Police. The Trustee has had difficulty obtaining records from that organisation. The court accepts the Trustee’s evidence that there would be a benefit in maintaining the bankruptcy so that further examinations can be carried out and every effort made to secure these assets.
Information received by the Trustee in relation to objections 5, 5A, 6, 7 and 8
Broadly, objections 5, 5A, 6, 7 and 8 relate to monetary transactions made by Mr Kneipp and the bank accounts related to those transactions that were held either solely or jointly by Mr Kneipp, and his failure to disclose information about those transactions and accounts.
The transaction at the heart of the objections was a loan of $149,250.00. Failure to disclose this loan formed the basis for objection 5. The loan of $149,250.00 was first held in a Suncorp Bank eOptions bank account held solely in the name of Mr Kneipp opened on 6 July 2009. It is comprised of a Direct Credit of $5,000.00 from M. Azzopardi made on 6 July 2009 and called ‘Loan To Hk’, and a branch deposit of $144,250.00 made on 3 August 2009 (Suncorp statement at AJJ p193).
Objection 5A related to loans from Mr Kneipp to Ms Caroline Gâté sourced from the $149,250.
Objection 6 related to the failure to disclose ANZ bank accounts that Mr Kneipp held in his own name. He used one account primarily for receipt of his pension. This account was disclosed to Mr Jonsson in his income questionnaires. Two other accounts were held but not disclosed, a visa debit card account and an online savings account, which was opened on 3 July 2009 with a $5,000 deposit called “From M. Azzopardi loan to HK” and used to make a loan to Ms Caroline Gâté of $4,500 (See AJJ p742). Mr Jonsson became aware of the existence of these accounts by at least 24 May 2010 through written correspondence with ANZ (AJJ p 699).
Objection 7 related to the failure to disclose an account with NAB which Mr Kneipp held jointly with Ms Azzopardi. An amount of $141,000 was transferred into that NAB account from a separate account of Ms Azzopardi’s held with ANZ in order to clear a cheque for $140,400 that was drawn from the joint account. The cheque for $140,400 was stamped as received by Suncorp Bank on 3 August 2009, and presumably formed a part of the Branch Deposit of $144,250 made on that day.
Objection 8 related to the failure to disclose the accounts held at Suncorp Bank. Following the deposit of $149,250.00, transfers were progressively made to a Suncorp Bank 55 Plus account that was also opened on 6 July 2009 (See bank statement at AJJ p 918).
In his affidavit sworn 4 April 2012 Mr Jonsson states at [7] that:
“In or around mid-2010 I came into possession of documentation, from sources other than the Bankrupt, evidencing that the Bankrupt had not been fully frank on several matters which founded a number of grounds on which I could object to his being discharged from bankruptcy and which would assist and facilitate my ongoing investigations in the Bankrupt’s examinable affairs.”
It is not entirely clear what information was, at that time, held by Mr Jonsson. It is not in dispute that Mr Jonsson currently holds most, if not all, of the information the subject of the objections. What is in dispute is the extent to which Mr Kneipp assisted in the provision of that information. The following paragraphs seek to determine what information was held by Mr Jonsson prior to and after his objections were made, and how that information was obtained.
On 29 July 2010 Mr Jonsson wrote to Mr Kneipp, requesting information about his bank accounts, the letter relevantly stated:
“Pursuant to section 77 of the Bankruptcy Act 1966, please provide your reply to the following questions and requests within seven (7) days of the date hereof;
1. Please advise details (including the bank, branch, account name and account number and current account balance) of all bank accounts held solely by you as at 17 August 2007. Please note that my request for details of all “bank accounts” means details of all saving accounts, passbook accounts, term deposits, cheque accounts, overdraft accounts, loan accounts, credit cards (visa and/or mastercard), leases, and/or any other facilities at any banks, finance companies, building societies, and/or credit unions in Australia or elsewhere in the world;
For all bank acocunts held solely in your name as at 17 August 2007 please also provide all bank account statements for the last six (6) months.
2. Please advise details (including the bank, branch, account name and account number, current account balance and name and address of the co-account holder) of all bank accounts held jointly by you and any others as at 17 August 2007;
For all bank accounts held jointly in your name as at 17 August 2007, please also provide all bank account statements for the last six (6) months.
3. Please advise details (including the bank, branch, account name and account number and current balance) of all bank accounts opened solely by you subsequent to 17 August 2007.
Further, for all bank accounts opened solely in your name subsequently to 17 August 2007 please advise details of all transactions (payments and deposits) for all amounts greater than two thousand dollars ($2,000) on all such accounts for the period subsequent to 17 august 2007. Details required include the date, the identity and details of the source of all deposits, the reason for all deposits; and the date, details of all payees, and the reason for all payments.
Further, for all bank accounts opened in your name solely subsequent to 17 August 2007, please also provide all bank account statements for the period subsequent to the account being opened.
4. Please advise details (including the bank, branch, account name and account number, current account balance and name and address of the co-account holder) of all bank accounts held jointly by you and any others subsequent to 17 August 2007.
Further, for all bank accounts opened jointly in your name subsequently to 17 August 2007 please advise details of all transactions (payments and deposits) for all amounts greater than two thousand dollars ($2,000) on all such accounts for the period subsequent to 17 August 2007. Details required include the date, the identity and details of the source of all deposits, the reason for all deposits; and the date, details and identity of all payees, and the reason for all payments.
Further, for all bank accounts opened jointly in your name subsequent to 17 August 2007, please also provide all bank account statements for the period subsequent to the account being opened.
5. Finally, please advise details (including the bank, branch, account name and account number and current account balance) of all bank accounts or bank facilities for which you are a supplementary card-holder or supplementary account user.
To avoid any confusion or misunderstanding with this last request, I require details of all bank accounts or facilities (including credit cards) held and in the name of third parties for which you are a co-signatory or authorised account or facility user, or for which you hold a supplementary card for use on that account or facility.
Further, in relation to this latter category of bank account or facilities in the name of third parties, I require details of when you became authorised or entitled to use the account as either a co-signatory or supplementary card-holder.
Finally, in relation to this latter category of bank account or facilities in the name of third parties, I also require details of all monies deposited to that account subsequent to 17 August 2007 from you or from all personal or corporate entities related or associated with you.”
In relation to all bank accounts or facilities in the name of third parties, to which you have deposited or caused to be deposited monies subsequent to 17 August 2007, I hereby place you on notice that any such funds which are in credit in those accounts and which form part of your bankrupt estate should not be dealt with by you subsequent to the date of this correspondence.
Thank you for your assistance. Please call me with any queries you may have. Please provide your reply within seven (7) days of the date hereof.”
A similar request for information was sent on the same day to Caroline Gâté (AJJ p 669).
On 3 August, Mr Kneipp sent an email to Mr Jonsson explaining that he had been speaking with Caroline Gâté and seeking to explain the loan of (what he therein states was for) $150,000 and its relation to Ms Gâté. He mentions Mr Prior. The gist of the letter is that the loan was to pay for debts of Ms Azzopardi’s estate. The letter states that an amount of $50,000 was paid to Annanuka Pty. Ltd., that “some of the residual Loan Funds” were used to pay “estate costs” and that some had been “loaned to Ms Gate Interest Free”. Ms Gate was carbon-copied into the correspondence along with Lee and Co.
Ms Caroline Gâté dated a letter to Mr Jonsson 3 August, but this was not received until 9 August 2009 (AJJ at p596 and p 688). In it Ms Gate disclosed that Mr Kneipp was a supplementary card holder to her NAB Visa Classic account, but denied that Mr Kneipp deposited money into that account. In a letter dated 25 August 2010, Ms Gâté confirms that she had received what she understood were “interest free, unsecured” loans from Mr Kneipp “repayable as & when requested by [Mr Kneipp]” (annexure to Mr Kneipp’s affidavit of 14 February 2012, HKK 7).
On 4 August 2010 Mr Jonsson telephoned Mr Kneipp to discuss his email response to the 29 July request (AJJ p595). Mr Jonsson attaches a file note of this conversation to his affidavit. According to Mr Jonsson, he noted that the Mr Kneipp’s email of 3 August did not specifically answer the questions posed to him. Certain information was provided throughout the conversation. Mr Kneipp explained that he understood the shed on Azzopardi’s land to belong to Annanuka Pty Ltd, that the Bentley had been sold to the trust, he explained his relationship with Ms Gate and the loan to her. He noted that Mr Prior had the written loan agreement and that he would arrange to have that given to Mr Jonsson. He explained that he hadn’t disclosed the loan previously because it had slipped his mind during a traumatic period. He also explained that the cheque relating to the loan from Ms Azzopardi had been deposited into his Suncorp Account. Harry also disclosed that he had a visa card for one of Ms Gate’s accounts, information which would be confirmed by Ms Gate’s letter when received on 9 August 2010. It was agreed during the telephone conversation that Mr Jonsson would resend his letter of 29 July via email and that Mr Keipp would provide a response to it within 7 days.
On 4 August 2010 Mr Kneipp responded with the following email:
“I refer to your letter sent by email ref Kneipp HH12 TJ:OVW:KN0359 and advise
Up until the time I was granted the old age pension I never had a bank account, credit card etc. Everything was done by Mary Ann through her accounts.
I never had Joint Accounts and was not a signatory to any accounts.
Your question 1 My Answer is Nil
Your Question 2 My answer is Nil
Your Question 3 I will get back to you with the details as soon as I can.
Your Question 4 My Answer is Nil
Your Question 5 This is answered by a reply posted to you today from Ms C. Gate. I have never deposited money into her Credit Card Account
Re The Loan Document – I may have a copy here If so I will get it up to you ASAP
At this stage I am booked to arrive by Train (costs mr nothing) into Cairns Late on the 31st August. I may be able to change the booking and arrive a few days before this if you want” [AJJ p686]
On 11 August 2010 Mr Kneipp again wrote to Mr Jonsson and attached the bank statements for his ANZ Deeming account (Account Number 5451-79768), ANZ Online Saver Account (Account Number 4513-63783), ANZ Visa Debit Account (Account Number456004501590707, Suncorp eOptions Account (Account number 004025008) and Suncorp 55 Plus (Account Number 004024958). He wrote that in his opinion the transaction descriptions in the account statements would be adequate for Mr Jonsson’s investigations (AJJ p 701). It is of note that there is no statement # 3 for the Suncorp 0042025008. But Statement #2 ends with closing balance: $2895.47 and Statement #4 begins with a Balance of $7,831.91. There is no apparent explanation for the increase in the evidence before the court. Mr Kneipp also enclosed a copy of the loan agreement relating to the $150,000 (AJJ p 703). He states that:
“Both Mr Lee and Mr Prior indicated verbally to me that in their opinion this document was sufficient to allow me to legally borrow this amount under the Bankruptcy Act and for the amount in question to be treated [as] a loan to me allowable under this Act.”
Prior to the lodgement of the objections 5-8, this is the extent of information provided by Mr Kneipp.
Information gleaned from sources other than Mr Kneipp before objections 5, 5A, 6,7 &8 were made and the decisions of the Inspector-General
It is apparent from the above that Mr Kneipp had not fully complied with the request by Mr Jonsson on 29 July 2010 for information. Objections 5-8 were upheld by the Inspector-General, though for differing reasons.
In relation to objections 5 and 5A, it is of note that the objections included reference to, and copies of, four cheques deposited by Mr Kneipp in favour of Ms Gate (see p409-411). It is not made clear how Mr Jonsson obtained these documents. The objections also make reference to, and enclose copies of, legal advices provided by Mr Prior to Mr Kneipp about the need to disclose the $150,000 loan (AJJ p 483-486). Again, it is not clear how this information was obtained. But it is apparent in both instances that Mr Kneipp did not provide the documents. Mr Jonsson uses this, in addition to the income questionnaire of 1 September 2009, to refute Mr Kneipp’s claim in his letter of 8 August 2010 that:
“You asked me why I had not reported this loan earlier, and I advise that I would have done so if you had requested earnings details on the second anniversary of my bankruptcy as you did on the first anniversary.”
In relation to objection 5A it is apparent that Mr Jonsson became aware of the further $4,500 loan to Ms Gate from a source other than Mr Kneipp. Mr Jonsson provided a statement for Ms Gate’s account with Credit Union of Australia as evidence of this loan (AJJ p511 and p571).
In relation to objection 6, the Inspector-General was satisfied that Mr Kneipp had provided the information requested by Mr Jonsson, however, he was not satisfied that sufficient detail had been provided about several transactions and therefore refused to cancel the objection (AJJ p784).
In relation to objection 7, it is clear that Mr Kneipp provided no information to Mr Jonsson prior to the objection being made. Indeed, whilst he acknowledged in his affidavit of 14 February 2012 that the account was in joint names (at [36]), he continued to deny involvement in the opening of the account (at [38] of his affidavit) and stated that he only realised the account was in joint names when a cheque book arrived in the mail three weeks before Ms Azzopardi’s death. He also stated at [38] that the NAB would not have had a specimen signature of his to attach to the documents which opened the account. Under cross-examination, Mr Kneipp’s story changed. He stated that he did not disclose the account to Mr Jonsson because he forgot about it and that it was only an account for a short time. He recounted the same story about the opening of the account: that he didn’t know Ms Azzopardi was intending to open an account and that he quite surprised that she had done so. He said he did not discuss the account with her. He could not recall being asked for a specimen signature, but then stated that he may have been asked for one and may have provided one, that he may have signed a document opening the account, but he could not remember. He then stated, “All I know is that I have never signed a cheque”. When then asked whether he signed the cheque for $140,400.00, he stated:
“I didn’t sign that cheque or any cheque, not to my knowledge or recollection, unless you have a copy of the cheque […] I have got no recollection of ever signing a cheque”.
However, annexed to Mr Jonsson’s affidavit at [AJJ230] was an account authority card for the joint account, signed by Mr Kneipp. Mr Kneipp conceded that he must have signed the authority card, but not told Mr Jonsson about the account because he was confused. The cheque, signed by Mr Kneipp was annexed to the affidavit of Mr Jonsson, at [AJJ225]. When taken to the cheque he agreed that he must have signed the cheque and apologised for lying to the court, before again denying knowledge of having signed the cheque.
It is evident that Mr Jonsson had a copy of the NAB bank statement and this was before the Inspector-General (AJJ p985), but it is not entirely clear when this information became available to Mr Jonsson. The earliest correspondence between KPMG and NAB before the court is dated 30 July 2010. The Inspector-General knew that a cheque existed for the amount of $140,400, but did not have before him that cheque. Mr Kneipp himself had referred to the existence of the cheque in his response to objection 7, but stated, falsely, that Ms Azzopardi had given him the cheque signed by her (AJJ p191). Instead, in determining that Mr Kneipp had knowledge of the account he relied on the bank statement annexed to Mr Jonsson’s objection, and the fact that large sums were passing through the account, to find that an account holder would be aware of such movements (AJJ p988). He also noted that the NAB account had been closed by a withdrawal of $906 on 16 November 2009, a date that the court notes was after the death of Ms Azzopardi.
In relation to objection 8, the Inspector-General was satisfied that Mr Kneipp had complied with Mr Jonsson’s request, however, he upheld the objection, finding that the use of the accounts he had opened with Suncorp had not been adequately explained. The Inspector-General tabled all of the transactions of the Suncorp accounts and this was annexed to Mr Kneipp’s affidavit (at HHK 29).
Information gleaned after the decisions of the Inspector-General, either from Mr Kneipp or from other sources.
In relation to objections 5, 5A and 7, Mr Jonsson’s continued correspondence with NAB resulted in the production of information relating to the transfer of the “$150,000 loan” monies into the account from Ms Azzopardi’s personal account into Mr Kneipp’s and Ms Azzopardi’s joint account, and to the withdrawal of the cheque deposited into Mr Kneipp’s personal eOptions Suncorp account.
On 11 April 2011, Mr Jonsson replied to a request made by ITSA for further information in relation to the objections. In relation to Objection 7 in particular that letter states:
“Have you made enquiries of the NAB regarding who opened the joint NAB Account 084 690 896 652 4631 and provided specimen signatures?
Not yet – instead I asked more general inquiries of the NAB for which they did not go to the detail of providing a signature card or specimen signatures. I have today made this specific enquiry of the NAB.”
On the same day, the NAB forwarded to Mr Dean, at KPMG, an email it had sent to Ms Kym Leet of KPMG on 20 August 2010. Attached to that email was a copy of the NAB cheque in the amount of $140,400 (although the email refers to a cheque for $141,400) (AJJ p215). It is not clear why this cheque was not before the Inspector-General when he made his decision on 9 June 2011.
The NAB confirmed to KPMG, on 18 May 2011 (AJJ p197), that an amount of $141,000 was transferred from Ms Azzopardi’s personal account to the joint account. The NAB also confirmed that it had documentation stating that Mr Kneipp had power of attorney for Ms Azzopardi.
On 7 July 2011, after the Inspector-General’s decision, the NAB provided KPMG with a copy of the Account Authority Card for the joint NAB account, signed by both Ms Azzopardi and Mr Kneipp (AJJ p230). Although this document was not before the Inspector-General it is annexed to Mr Jonsson’s affidavit as “Further material provided to the Inspector-General’s office (Index to annexures of Affidavit of 4 April 2012).
In relation to objection number 5, Mr Kneipp states in his affidavit of 14 February 2012, that he did not include it in his income assessment because it was not a loan, but money “to be held by [him] to pay the debts of [his] former partner” (at [20]). He states that he did not act in accordance with legal advice to disclose the loan for the same reason. He also notes that it was an oversight on his part and says that he was deeply affected by the death of his partner.
In relation to objection 5A, Mr Kneipp has provided, in some detail, information relating to the loans to Ms Gate in his affidavit of 14 February 2012 at [14]-[16].
In relation to Objection 8, Mr Kneipp states in his affidavit of 14 February 2012 that he has not received any request for further information in relation to the Suncorp transactions. At annexure HHK 30 to that affidavit Mr Kneipp provides a table that he prepared including those transactions, and at [56]-[62] he seeks to explain the transactions in that table. Mr Kneipp states that he did not include interest amounts, which come to $993.62, as they were “minor”.
It is clear that Mr Kneipp has gone to some lengths to explain the transactions related to the “$150,000” loan. There remain some gaps, as is apparent from the following table prepared based on Mr Kneipp’s own table which seeks to piece together the use of the loan monies.
| Use | $Amount | $Running total |
| Payment to self Paid to self for reimbursement of “hospital expenses of Ms Azzopardi” [61] of 14/2/12 affidavit. | 6,300 3,500 | 6,300 9,800 |
| Paid to C. Gâté to assist in moving from Tinaroo property to Gympie property and to assist in repairing house at Gympie (unsecured interest free loan) | 51,648 | 61,448 |
| Purchase of container for C. Gâté to store Mr Kneipp’s possessions. (Seized by Respondent) | 9,500 | 70,948 |
| Paid to C. Gâté for services in caring for Ms Azzopardi. | 5,500 | 76,448 |
| Used for maintenance of Tinaroo (although this includes food and fuel purchases, tyres for Bentley, ‘Prior Legal’, ‘accommodation’, an ‘air ticket’ for $7,148.6, ‘Airfare uk’ of $158.56 and ‘sundries’ of $1,000) | 21,233.62 | 97,681.62 |
| Amounts listed under HKPRIVATE column of table at HKK30, affidavit says this was “amounts used by [HKK] to have an overseas holiday” (but column includes domestic airfares, pills, P&O cruise fare Insurance, Accommodation) One refund listed is 3611.48 from “WAM” though not defined it is presumed this refers to Wendy Ann Mackay repaying Mr Kneipp for domestic flights (total $1846?) Another refund is called : “REIM to HK” amount $1350, this. This corresponds to a payment into account by “c turnbull” on 28/9/09 | Not including refunds Refunds claimed: Including refunds: | Not inc. refunds: Inc. refunds: |
| Paid to Annunaka allegedly in accordance with Deceased’s wishes. | Amount paid Offset listed as “truck to Brisbane”: | Not inc ‘offset’ inc refunds Inc Offset inc refunds: Not inc offset/ Inc Refunds: Inc Offset/ Not inc refunds: |
| Interest earned from E-option Suncorp Account 004025008 Interest earned from 55 Plus Suncorp Account 004024958 | Statement number/amount: 3 2 1 .03 |
Information relating to Objections 9 and 10
Objections 9 and 10 relate respectively to Mr Kneipp’s failure to disclose, in his fourth income contribution questionnaire, receipt of the benefit of travel expenses and legal fees paid for him, and are the subject of proceeding BRG401 of 2013.
Mr Jonsson states, in his affidavit of 22 July 2013, that to obtain the information the subject of objection 9, he wrote to Qantas, Jetstar and Virgin airways requesting copies of Mr Kneipp’s travel records (at [4]). Mr Jonsson attached as an annexure to objection 9 a table of Mr Kneipp’s flight records with the airlines mentioned (pages 194-196 of the annexures). Mr Jonsson notes that the undisclosed fringe benefits total $8,969.85.
It is clear that some of the amounts also feature in Mr Kneipp’s Suncorp Bank account statements and his explanations of those statements. It is of note that, as seen in the above table, those amounts were also, at least to a degree, reimbursed by Ms Mackay and credited to the Suncorp Bank accounts. However, the essence of Mr Kneipp’s submissions in relation to this objection was that he did not realise that he had to disclose travel expenses paid on his behalf as income (Applicant’s submissions of 26 July 2013 at [6]).
In relation to objection 10 Mr Jonsson states that whilst Mr Kneipp did disclose some legal fees ($29,945.84 from 17 August 2010 to 16 August 2012), Mr Lee, his solicitor, provided a ledger of legal fees paid on his behalf totalling $93,202.15 (page 219 of annexures to affidavit).
Mr Kneipp’s submissions on this point state that he explains why he did not disclose the legal fees at an earlier time in his affidavit of 27 June 2013 at [8]. That paragraph states:
“I refer again to section 16 of the Questionnaire for my third Contribution Assessment Period. For reasons that I can’t now explain, I took the question – “Are there any personal or business expenses of you or your family paid by someone, other than yourself or your employer?”, to mean that I only had to disclose my personal or business expenses or those of my family that were paid by someone other than me or my family. I mistakenly thought that because my daughter and all of her companies were “your family” personal or business expenses of “your family” did not have to be disclosed. The personal or business expenses that had to be disclosed, according to what I believed at the time were those of mine or my families [sic] not paid for by my family.”
Mr Kneipp again explains at [14] of his 27 June affidavit that the undisclosed legal fees of $63,267.34 paid for by Ms Mackay, were not disclosed in his third income assessment questionnaire due to this mistake. At [10] it appears that Mr Kneipp extends this explanation to the payment of $5,424.30 by Ms Gate on his behalf, as his de-facto wife. At [11] he adds that this failure to disclose may have resulted from his serious illness at the time. But he notes that it was disclosed in his fourth income assessment questionnaire. He states that he consulted with Mr Lee in completing question 16 of his fifth income assessment questionnaire (at [16] of 27 June affidavit) in which he disclosed legal fees of $24,391.15 for that income period, but asserts that the actual amount was $13,560.51. Mr Lee affirms in an affidavit of 12 June 2013, that he filled in question 24 on Mr Kneipp’s behalf, and that the amount for the income period 17 August 2012 to 16 August 2013 should have been $5,000. Whilst there does appear to have been an error, Mr Lee’s “Customer QuickReport” (List A) shows two amounts of $5,000 dated 30 August 2012 and 31 August 2012 respectively.
In any case, it is clear from the objection itself that the information upon which it is founded was provided to Mr Jonsson by Mr Lee, Mr Kneipp’s legal representative. The letter that attaches the ledger states:
“In a spirit of co-operation, we attach a list marked “A” which shows the date and payment of our legal fees rendered to our client from the beginning of our retainer to the present time.
You should note that we have no direct record as to the identity of the payer of our accounts, but we have been the recipient of each payment. We are instructed by our client that payment was made on his behalf by our client’s daughter, Wendy Mackay, either personally or through her company Annunaka Pty Ltd. You have used the wrong sections and procedures provided to you by the Act.
Please also be advised that by disclosing to you the attached list “A” you should not assume that our client thereby impliedly waives his privilege that attaches to legal advice contained in any advices, letters or other communications that are referred to in the memoranda of fees and accounts. No such waiver is intended nor given. Our client maintains his privilege.”
It would therefore appear that this information was provided by Mr Kneipp, albeit on 25 September 2012 and not in his income assessment questionnaires. It was provided reluctantly and not voluntarily. It was provided only after considerable correspondence was entered into. The court takes these matters into account when considering a review of the decision to extend the bankruptcy for reason of these failures to disclose. It concludes that it would not reverse the Trustee’s decision based upon the conduct of the bankrupt and the Trustee’s evidence that continuation of the bankruptcy has the purpose of enabling him to recover further monies for the benefit of the estate.
The view that the court takes about these matters is that it is naïve of Mr Kneipp to say that the Trustee’s decision not to withdraw the objections was an improper exercise of his discretion because all the information that those objections related to was in his possession. As can be seen most of that information only came into the Trustee’s possession from sources other than Mr Kneipp and over the resistance of Mr Kneipp. The court was particularly concerned at the way in which Mr Kneipp continued even under cross-examination to deny any involvement in opening and operation of the joint account between himself and Ms Azzopardi including his denial of having signed the cheque for $140,400.00. The information that was put to him, namely the existence of the account signing forms and the cheque itself had been made known to him some time previously. This was not a surprise. The clear impression that the court obtained from Mr Kneipp’s performance in the witness box was that he was a reluctant informant who bore quite a considerable responsibility for the situation he found himself in. Given that the court believes that a Trustee has the power to decline to withdraw Notices of Objection where he believes there is further information to be discovered the conduct of Mr Kneipp in relation to those notices confirms the court in the view that it should it should not review the exercise of the Trustee’s discretion in this matter and that the refusal to withdraw the Notices of Objection should be maintained.
For the sake of clarity, the decisions the court has come to on these matters can be summarised as follows:
Application to review decisions the subject of review to the Inspector-General – all applications dismissed.
Application to review decision of Trustee not to withdraw objections in letter of 8 December 2012 – application in relation to notice of objection 3 sustained. The notice of objection should be withdrawn (see [26] of these reasons). All other decisions of the Trustee are upheld and application dismissed.
Application to review decision in respect of objections 9 and 10 – objections “sustained” and application dismissed.
The final orders requested by the applicant debtor related to his proposed examination and examination of his daughter. It was made clear that it was the court’s view that any examination of either Mr Kneipp or his daughter should take place in Tasmania where they both lived and that they should be given not less than twenty-eight days’ notice of a proposed examination. It is the court’s understanding that that position was accepted by both parties and there was no necessity for the court to make any orders in relation thereto.
The outcome of these proceedings is that the court has supported the actions of the Trustee and has, with one exception, declined to make the orders sought by the applicant. The applicant must pay the costs of the Trustee, such costs to be paid from his estate and to be taxed if not agreed.
I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Date: 28 October 2013
23
0