LNDN and Inspector-General in Bankruptcy - [2021] AATA 1995

LNDN and Inspector-General in Bankruptcy [2021] AATA 1995 (21 June 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number:2020/1962
Re:LNDN
APPLICANT

Inspector-General in BankruptcyAnd
RESPONDENT

DECISION
Tribunal:Member D Mitchell
Date:21 June 2021
Place:Brisbane

The Tribunal affirms the decision under review.
................[SGD]...............................................
Member D Mitchell
CATCHWORDS
BANKRUPTCY – objection to discharge – where bankruptcy trustee filed a notice to objection to the Applicant’s discharge from bankruptcy – objection on special grounds – whether evidence supports grounds – whether Applicant had a reasonable excuse for conduct or failure constituting special grounds – decision under review affirmed
LEGISLATION
Bankruptcy Act 1966 (Cth)
CASES
De La Hunty v Inspector-General in Bankruptcy [2006] AATA 610
Mallett and Inspector-General in Bankruptcy [2018] AATA 3739
Phillips and Inspector-General in Bankruptcy (2012) 58 AAR 452: (2012) 131 ALD 564: [2012] AATA 788
REASONS FOR DECISION
Member D Mitchell
21 June 2021
INTRODUCTION

LNDN (the Applicant) is seeking review of a decision of the Inspector-General in Bankruptcy (the Respondent) dated 9 March 2020.[1]
[1] Exhibit 1, T-Documents, T2, pages 4-37, Application for Review of Decision.
The reviewable decision confirmed all grounds of objection to the Applicant’s discharge from bankruptcy which effectively extended the Applicant’s period of bankruptcy to 29 November 2024.[2]
[2] Exhibit 1, T Documents, T2.1, pages 38-67, Notice of Reviewable Decision and Reasons for Decision.
BACKGROUND
On 29 November 2016, the Applicant became bankruptcy upon the acceptance of a Debtor’s Petition by the Official Receiver.[3] The Applicant’s period of bankruptcy was due to end on 29 November 2019.
[3] Exhibit 1, T Documents, T11, pages 296-298, LNDN Debtors Petition.
On 26 October 2017, following a creditor request, Mr Alan Scott (the Trustee) was appointed trustee of the Applicant’s bankruptcy.[4]
[4] Exhibit 1, T Documents, T9.1, page 266, Trustee’s Timelines of Significant Events.
On 12 November 2019, the Trustee filed a Notice of Objection (the Objection) to the Applicant’s discharge from bankruptcy under section 149B of the Bankruptcy Act 1966 (Cth) (the Act). The Trustee objected based on the grounds contained in sections 149D(1)(d), (da), (ma) and (ab) of the Act. These grounds provide:[5]
(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 (Ground 1).
(da) – After the date of the bankruptcy, the bankrupt intentionally provide false or            misleading information to the trustee (Ground 2).
(ma) – The bankrupt intentionally failed to disclose to the trustee the bankrupt’s                beneficial interest in any property (Ground 3).
(ab) – Any transfer is void against the trustee in bankruptcy because of section 121        (Ground 4).
[5]     Exhibit 1, T Documents, T3.3, pages 95-100, Trustee’s Notice of Objection.
The Objection had the effect of extending the Applicant’s bankruptcy until 29 November 2024 unless the objection is withdrawn or cancelled.[6]
[6] Sections 149A(2) and (3) of the Act.
On 10 January 2020, the Applicant applied to the Respondent requesting a review of the Trustee’s Objection.[7]
[7] Exhibit 1, T Documents, T3.1, pages 68-72, Application for Review of Objection.
On 9 March 2020, in a decision made pursuant to section 149N(3) of the Act, the Respondent confirmed all grounds of the Objection.[8]
[8] Exhibit 1, T Documents, T2.1, pages 38-67, Notice of Reviewable Decision and Reasons for Decision.
On 2 April 2020, the Applicant sought review of the Respondent’s decision by way of an application to this Tribunal.[9]
[9] Exhibit 1, T-Documents, T2, pages 4-37, Application for Review of Decision.
On 18 December 2020, a Hearing was conducted in this matter. At Hearing the Applicant was self-represented, was supported by Mrs LNDN (his wife), appeared by Microsoft Teams and gave evidence under affirmation.
LEGISLATIVE FRAMEWORK
The relevant legislation in this matter is the Bankruptcy Act 1966 (Cth) (the Act). Section 149Q of the Act provides this Tribunal with the jurisdiction to review the decision of the Respondent, not the decision of the Trustee to file an objection.[10] As such in this matter the Tribunal must give consideration to the requirements of section 149N of the Act.
[10] Phillips and Inspector-General in Bankruptcy (2012) 58 AAR 452: (2012) 131 ALD 564: [2012] AATA 788.
Section 149N of the Act provides:
149N Decision on review
(1) On a review of a decision, if the Inspector‑General is satisfied that:
(a)the ground or grounds on which the objection was made was not a ground or were not grounds specified in subsection 149D(1); or
(b)there is insufficient evidence to support the existence of the ground or grounds of objection; or
(c)the reasons given for objecting on that ground or those grounds do not justify the making of the objection; or
(d)a previous objection that was made on that ground or those grounds, or on grounds that included that ground or those grounds, was cancelled;
the Inspector‑General must cancel the objection.
(1A) An objection must not be cancelled under subsection (1) if:
(a)the objection specifies at least one special ground; and
(b)there is sufficient evidence to support the existence of at least one special ground specified in the objection; and
(c)the bankrupt fails to establish that the bankrupt had a reasonable excuse for the conduct or failure that constituted the special ground.
For this purpose, special ground means a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (ia), (k) or (ma).
(1B)In applying subsection (1A), no notice is to be taken of any conduct of the bankrupt after the time when the ground concerned first commenced to exist.
(2)The cancellation does not take effect until:
(a)the end of the period within which an application may be made to the Administrative Appeals Tribunal for the review of the decision of the Inspector‑General; or
(b)if such an application is made—the decision of the Tribunal is given.
(3)If the Inspector‑General is not satisfied as mentioned in subsection (1), the Inspector‑General must confirm the decision.
In applying subsection 149N(1A) of the Act the Tribunal is not to take any notice of the conduct of the Applicant after the time when the ground concerned first commenced to exist.
ISSUES
The Tribunal notes that based on the information before it, it is clear that the grounds on which the Objection was made were grounds specified in section 149D(1) of the Act and that no previous objections have been made on those grounds.[11] As such the Tribunal is satisfied that the requirements of section 149N(1)(a) and (d) of the Act are not met for each of the grounds of objection. This point is uncontentious.
[11] As such sections 149N(1)(a) and (d) of the Act are not satisfied.
Each of the grounds of the Objection are special grounds of objection.[12] As such the operation of section 149N(1) of the Act is modified in this case by section 149N(1A) so that in determining whether the objection should be cancelled the Tribunal must in this case consider whether there is sufficient evidence to support the existence of at least one special ground specified in the objection and whether the Applicant establishes that he had a reasonable excuse for the conduct or failure that constituted that special ground. The reasons given for objecting on the grounds pursuant to section 149N(1)(c) of the Act are not relevant by virtue of the operation of section 149N(1A) of the Act.
[12] Pursuant to sections 149D1(d), (da), (ma) and (ab) of the Act.
The issues outstanding before the Tribunal, therefore, are:
Ground 1 - Section 149D(1)(d) of the Act
1.     Did the Applicant when requested in writing by the Trustee to provide written          information about his property, income or expected income, fail to comply with the request?
2.     If so, did the Applicant have a reasonable excuse for doing so?
Ground 2 – Section 149D(1)(da) of the Act
3.     After the date of bankruptcy, being 29 November 2016 did the Applicant      intentionally provide false or misleading information to the Trustee?
4.     If so, did the Applicant have a reasonable excuse for doing so?
Ground 3 – Section 149D(1)(ma) of the Act
5.Did the Applicant intentionally fail to disclose to the Trustee a beneficial interest in any property?
6.     If so, did the Applicant have a reasonable excuse for doing so?
Ground 4 – Section 149D(1)(ab) of the Act
7.     Was there a transfer that is void against the Trustee in bankruptcy because of        section 121 of the Act?
8.If so, did the Applicant have a reasonable excuse for the conduct that lead to that transfer?

To be successful in this application the Applicant must establish that none of the four grounds of the Objection have been established, or where they have that he had a reasonable excuse for his conduct or failure that constituted that special ground. Should the Tribunal find that one of the grounds is established without a reasonable excuse the Applicant’s application must fail.
EVIDENCE AND CONTENTIONS
Upon review of the evidence before the Tribunal and that provided at Hearing by the Applicant and Mrs LNDN it is clear that the events that led up to the Applicant’s bankruptcy and those that have transpired since have been difficult for both him and his family.
The Applicant’s overall contentions seemed to be that:
(a)he believes he co-operated with the Trustee and provided everything he was asked to, to the extent that he was able to;
(b)that any inaccuracy in the information he provided was unintentional as his disclosures were made after seeking professional advice;
(c)there was confusion in relation to what was being asked; and
(d)he was under a considerable amount of strain.
Concerns were raised by the Applicant in relation to the conduct of a creditor, however whilst no doubt the issues raised are distressing to both him and Mrs LNDN, they are not matters to which this Tribunal can have regard to or comment about.
The Respondent’s overarching contention is that the Applicant has not adequately addressed the grounds of objection in order to disturb the reviewable decision. At Hearing the Respondent contended that in relation to reasonable excuse that there is insufficient evidence of any kind that is proximate to the events. The Respondent contended that there is no medical evidence that might give rise to a reasonable excuse and while there had been an opportunity to obtain that evidence it has not been put forward before the Tribunal.
The Respondent sought to rely upon the reviewable decision,[13] the Statement of Facts Issues and Contention dated 5 August 2020[14] and Submissions dated 5 November 2020.[15] The Tribunal notes that the Respondent’s Statement of Facts, Issues and Contentions and Submissions were brief documents, which on their own were unhelpful. The documents sought to adopt the forementioned reasons provided for the reviewable decision.
[13]    Exhibit 1, T Documents, T2.1, pages 38-67, Notice of Reviewable Decision and Reasons for Decision.
[14]    Exhibit 2, Tribunal Book, TB2, pages 1-3, Respondent’s Statement of Facts, Issues and Contentions.
[15]    Exhibit 3, Respondent’s Final Submission.
As an attachment to the notice of decision dated 9 March 2020, the Respondent outlined the background and its consideration which led to the decision to confirm all the grounds of objection raised by the Trustee (reasons for the reviewable decision).[16] That document clearly sets out the background of this matter and reflects the evidence before this Tribunal. As such the Tribunal does not propose duplicate that material here but rather will include it where relevant in the consideration outlined below.
[16] Exhibit 1, T Documents, T2.1, pages 40-67, Respondent’s Reasons for Decision.
Overall, the facts of this matter are not in contention, the parties largely agree to what happened or what information was supplied by the Applicant. The divergence of views lies in the fullness of such information and reasons that sit behind the information provided and the events that transpired.
Ground 1 – the Applicant, when requested in writing by the trustee to provide written information about his property, income or expected income failed to comply with the request – section 149D(1)(d) of the Act
In relation to Ground 1, the Trustee claimed that the Applicant failed to give sufficient information in response to the request for further information in relation to the Applicant and a number of associated entities, dated 29 May 2019. The Trustee claimed that the response given indicated that in many instances the Applicant did not have the documents (even in circumstances where he ought to have or could obtain the documents) and provided no justification or information as to why he did not have those documents or where the Trustee could locate them.[17]
[17] Exhibit 1, T Documents, T3.3, page 97, Trustee’s Notice of Objection.
On 10 January 2020, in requesting to have the Objection reviewed, the Applicant’s solicitor addressed the issues raised by the Trustee as follows:[18]
·[The Applicant] did respond to the Trustee’s request of 2 May 2019.
·The contents of his response was true.
·He has, through [Mrs LNDN] provided 57,000 pages of documentation required by the trustee during the course of a public examination.
·His accountant sent a letter to the Trustee on 15 May 2019 containing relevant information.
·The solicitors for the Trustee have not written to the [Applicant] indicating that his answers are untrue for any reason.
·He is not appointer, Trustee, or beneficiary of the LNDN Discretionary Trust. He is not a director of [the Trustee of the LNDN Discretionary Trust] nor has any controlling interest in that company.
[18] Exhibit 1, T Documents, T3.2, pages 87-88, Applicant’s Arguments accompanying request for Review of the Objection.
At Hearing the Applicant’s evidence was consistent with the written material that had been provided by him throughout the decision making process. The Applicant told the Tribunal that:[19]
·He has provided everything that he can access personally because he is not connected to the other entities and he is not an accountant.
·He knows nothing and has no resources whatsoever.
·He has no computer or email boxes.
·He does not have any working papers.
·He agreed that he received a warning notice from the Trustee on 13 February 2020 giving him notice of what his obligations were and that he had signed it.
·Whenever he got a letter he would go and see his lawyer, accountant, and debt advisor.
[19] Transcript, pages 19-20.
On cross-examination, the Applicant:[20]
·Explained how the business worked prior to his removal as a director, which was some time mid-2016.
·Said, the mobile number he uses is owned by Mrs LNDN’s company not by him.
·Agreed, that it is his signature block that goes out on the emails from his wife’s business and there is an email address that is made up of his name and the business name.
·Said, he talks to people wanting to buy properties as part of his wife’s busines, but most interaction is via email.
[20] Transcript, pages 41-45.
Mrs LNDN told the Tribunal that she has provided over 57,000 pages of documents and her accountant has provided thousands of pages of documents as well. She said she does not give the Applicant access to any of the business statements or documents as he is not in a state to assist her to run the business, it is purely on a need basis that she calls on him.[21]
[21] Transcript, page 21.
On cross-examination, Mrs LNDN said:[22]
·She elected due to the Applicant’s extensive experience in the industry to have him as the front and face and the contact of her business. She has him visit or meet with clients offsite and he speaks to people on the phone.
·When taken to a letter from their accountant dated 15 May, 2019 (pages 167-168 of the T-Documents), agreed that the letter provides that all original working papers for the entities identified were provided to the Australian Financial Authority and that all source documents used in the preparation of financial statements and income tax returns have been returned to the client as per normal practice.
·Confirmed that she took over the running of the business in around April 2016 and that any source documents between April and November 2016 she would have.
·When asked if to the best of her knowledge that those documents had not been provided to the trustee, said no, every document she was under the impression that was required had been provided and she had given a schedule under her submission on everything she had provided. The accountant had said that everything besides little invoices and receipts, which are detailed in the bank statements had been provided.
·She had not understood what working papers and source documents meant.
[22] Transcript, page 47and 82-86.
At Hearing the Applicant contended that he had always provided everything he had.[23]
[23] Transcript, page 89.
At Hearing, the Respondent contended that since at least April 2016, some nine months before the Applicant’s bankruptcy, Mrs LNDN has documents and is able to provide them and that prior to that the accountant returned documents to the Applicant in keeping with his practice and that where the Applicant had the care, custody and control of those documents to the extent that they still exist, he would at least be in the position with the assistance of his wife to provide them. The Respondent submitted that the Tribunal should approach Mrs LNDN’s evidence that she was not aware of what a source document was cautiously because it is clear that she knows enough about it in order to present them to an accountant, and it is clear that the Applicant himself knows what source documents are. The Respondent contended that even if the Applicant and Mrs LNDN were unsure they could have provided them to the Trustee against the contingency that, that is what was being sourced.[24]
Ground 2 – after the date of the bankruptcy, the Applicant intentionally provided false or misleading information to the trustee – section 149D(1)(da) of the Act
[24] Transcript, pages 92-93.
In relation to Ground 2, the Trustee claimed that the Applicant provided misleading information over time in relation to the purpose and quantum of a loan from his parents. The Trustee referred to:[25]
·An Affidavit of the Applicant filed in a District Court proceeding in January 2015 where he provided that the money utilised to purchase the CIW Property, held in the LNDN Discretionary Trust included a $200,000 loan from his parents.
·In response to a request for information from the delegate of the Official Trustee in Bankruptcy regarding the $200,000 loan from his parents to purchase the CIW Property, the Applicant advised the loan was a personal loan to him and no mention was made regarding the amount nor the purpose of the loan.
·An undated and unsigned letter from the Applicant’s parents responding to the delegate of the Official Trustee in Bankruptcy advising that they had loaned the Applicant $95,000 over a 7 year period, the amount was not $200,000 and that they have never loaned any funds to the Applicant for the purposes of purchasing the CIW Property.
·During the examination of the Applicant held on 4 February 2019, pursuant to section 81 of the Act he could not explain why he had submitted an Affidavit that indicated he had received a loan from his parents to purchase the CIW Property. The Applicant also confirmed that his parents had not loaned $200,000 but rather they had loaned $115,000 over a 10 year period and that this loan had no connection to the CIW Property.
[25] Exhibit 1, T Documents, T3.3, pages 97-99, Trustee’s Notice of Objection.

On 10 January 2020, in requesting to have the Objection reviewed, the Applicant’s solicitor addressed the issues raised by the Trustee as follows:[26]
·The letter of 5 July 2017 (sic) was true in that the loan from his parents was a personal loan and neither quantum nor purpose was mentioned.
·He did not provide the Affidavit to the Trustee, nor did he represent that the contents were true.
·If the contents of the Affidavit were incorrect in any respect then:
othey were sworn on or prior to 7 January 2015 and before bankruptcy;
othey were not sworn after the date of bankruptcy; and
othe letter of 5 July 2017 (sic) did not assert the truth of these statements.
[26] Exhibit 1, T Documents, T3.2, pages 88-89, Applicant’s Arguments accompanying request for Review of the Objection.
At Hearing the Applicant’s evidence was consistent with the written material that had been provided by him throughout the decision making process. The Applicant told the Tribunal that:[27]
·His Statement of Affairs was accurate where he said that his parents gave him a personal loan of $115,000, being $95,000 plus interest.
·The loan was for personal expenses.
·The letter from pre-bankruptcy that said the money was lent to the business was drafted by another solicitor and was incorrect.
·When asked about the Affidavit he swore prior to bankruptcy on 7 January 2015 having different details, it was drafted and he was asked to sign it so he did. He corrected it when he did his Statement of Affairs and this was what he repeated at the public examination. There were no funds that went to any of the trust entities, it was for his personal expenditure.
·It was a private agreement with his parents and there were no loan documents.
·He never lied about this ever, he told the truth in the Statement of Affairs and at examination, he did not provide the old letter to anyone as he never at any stage said that actually happened, so he could not have intentionally lied.
·He has never lied the whole time he has been bankrupt, it was a third party that provided the document so he does not see it that he has misled anyone.
[27] Transcript, pages 23-24.
On cross-examination, the Applicant:[28]
[28] Transcript, pages 73-80.
·When taken to T14.1, page 312 of the T-Documents, being an Affidavit of the Applicant dated 7 January 2015, filed in the District Court of South Australia, confirmed it was his signature on the document, that he understood an oath is to tell the truth, that he was asked to swear the truth before the solicitor listed in the document.
·Said that he did not remember signing the Affidavit, he would run in and sign whatever they told him to.
·Said there was an error in the Affidavit at paragraph 8 where it says the property was purchased together with funds of $200,000 which were loaned to him from his parents.
·Said he did not give the Affidavit to the Trustee.
·When put to him that he understood that the Affidavit was a document where he had to tell the truth, said the solicitor wrote it, he cannot undo what he wrote, that was what he wrote and what he signed.
·Said that he had been dealing with the solicitors over a long period of time. They only acted for him in that court proceedings matter.
·When put to him that the information in the Affidavit was provided by him, said that the solicitor wrote it up and he signed it.
·Said he does not know where the information in paragraph 8 came from.
·Said he corrected the mistake at the public examination.
·When asked whether he agreed that in the public examination, he was confronted with the Affidavit document and he realised that he had made an earlier inconsistent statement with the evidence he was then giving, said the only time it has been raised is during this Trustee thing, it was not raised in the public examination.
·When it was put to him that it was the case that what he has sworn in the Affidavit, and what his is saying now is different and that he was not telling the truth about it, said: “No, in the public examination I said it, and when they went through all the documents I supplied, it clearly shows exactly what I said in the public examination, so at no stage from going bankrupt was it changed at all. … Because the third-party creditor put this in and it was an inconsistency. I never provided it. Someone threw it in.”
At Hearing, the Applicant contended that after the date of bankruptcy he did not intentionally provide false or misleading information, they are going back to a document from prior to bankruptcy. He did not provide that document.[29]
[29] Transcript, page 89.
At Hearing the Respondent contended that it was clear on the material before the Tribunal that there was adequate warning given. The Respondent contended that the Applicant was dealing with a solicitor he knew, that was preparing documents that other people were seeking to rely on and that they were formal documents in the form of an Affidavit, in which he knew he was swearing to tell the truth and that the submission that the solicitor put the information in there should not be accepted. The Respondent contend that the solicitor put in the information they were given by the Applicant.[30]
[30] Transcript, pages 92-93.
The Respondent contended that by trying to say that the Affidavit was made prior to the date of bankruptcy the Applicant is trying to do two things, firstly he did that in the past and it was before bankruptcy and secondly, for practical purposes he had simply forgotten about it. The Respondent contended that what happened was that the Trustee got hold of the Affidavit, confronted the Applicant with it and it became inconvenient to him that the information was there and he tried to make up some other excuse as to where the money had come from. The Respondent submitted that the Tribunal should not be satisfied that the Applicant’s answers on that topic are truthful.[31]
Ground 3 – the Applicant intentionally failed to disclose to the trustee the Applicant’s beneficial interest in any property – section 149D(1)(ma)
[31] Transcript, page 93.
In relation to Ground 3 the Trustee claimed that the Applicant failed to disclose in his Statement of Affairs signed on 24 November 2016 that in the last 5 years he was a beneficiary of a trust or/and that he had transferred assets to a trust. The Trustee referred to:[32]
·At question 44 of the Statement of Affairs the Applicant indicated that he:
oHas not been a unit holder in or beneficiary of a trust in the last 5 years; and
oHas not transferred any assets to a trust in the last 5 years.
·The Trust Deed for the LNDN Discretionary Trust confirmed that the Applicant was a nominated beneficiary of the that trust.
·The Applicant was the sole registered owner of the B Property and on or about 23 October 2014, the sale contract for that property settled and the Applicant was to receive $43,782.13. That amount was paid directly into the LNDN Discretionary Trust.
[32] Exhibit 1, T Documents, T3.3, page 99, Trustee’s Notice of Objection.
On 10 January 2020, in requesting to have the Objection reviewed, the Applicant’s solicitor addressed the issues raised by the Trustee as follows:[33]
[33] Exhibit 1, T Documents, T3.2, pages 89-91, Applicant’s Arguments accompanying request for Review of the Objection.
·The trust deed does indeed state that [the Applicant] is a nominated beneficiary
·Prior to bankruptcy, [the Applicant] retired as appointor and director of the trustee of the LNDN Discretionary Trust, and was removed as a beneficiary, through a deed of variation, evidenced by a minute.
·He ran the Statement of Affairs past his accountant and by Queensland Administrative Services prior to signing to ensure the facts were correct.
·He was suffering from mental problems at the time.
·As such he did not intentionally answer incorrectly but gave an innocent but incorrect answer.
·[The Applicant] is not an appointor, director of the Corporate Trustee, or a beneficiary of the [LNDN] Discretionary Trust. As such, even if there were a voidable payment owing by the trust to the bankrupt estate, he has no power to cause a payment to be made.
·The Trustee has made no claim on the [LNDN] Discretionary Trust, and has given no notice of such a claim. The merit of any such claim may be gauged on the fact that there has been no such claim in the last 3 years.
·The statement at Q44 indicating that no assets had been transferred to a trust in the last five years was untrue.
·It was also an innocent misstatement for the same reasons set out above
·On settlement of the B Property, the proceeds $43,782.13 were paid directly into the [LNDN] Discretionary Trust.
·The payment into the trust was a repayment of loans from the trust to pay legal fees to fight litigation with the petitioning creditor totalling $53,944.01 since the date of transfer.
·The [LNDN] Discretionary Trust continued to fund litigation after the receipt by it on 23 October 2014 of $43,782.13.
·Had the sale proceeds have not been paid into the [LNDN] Discretionary Trust they would have been utilised in payment of rent for the family or litigation expenses from 23 October 2014.
·The funds would not have been available to [the Applicant’s] bankrupt estate because it would no longer have existed.
At Hearing the Applicant’s evidence was consistent with the written material that had been provided by him throughout the decision making process. The Applicant told the Tribunal that:[34]
·Question 44 on the Statement of Affairs was confusing, there should have been a box beside 44(a) not just “or” and then answer at 44(b).
·He had his accountant and debt advisor look over the Statement of Affairs and advise that it was being completed correctly.
·When asked about the money transferred to the LNDN Discretionary Trust from the sale of the property and whether that meant he should have answered yes to question 44(b), he knew at the time they were paying lawyers so all the money just went to legal bills.
[34] Transcript, pages 25,
On cross-examination, the Applicant:[35]
[35] Transcript, pages 55-73.
·Confirmed that it was his writing on the Statement of Affairs that he provided as part of his partition for bankruptcy.
·Agreed he understood that when he was filling in the Statement of Affairs document that he was making a declaration to tell the truth about what was in the document and that is why he showed it to his accountant and debt consultant to check that it was fine to sign it.
·Said that neither his accountant nor debt advisor were prepared to sign the Statement of Affairs.
·Was unable to confirm that he had placed the completed Statement of Affairs document before his accountant.
·Said he had not asked his accountant to give evidence for the Tribunal proceedings.
·Said he did not remember asking the debt advisor to sign the Statement of Affairs document.
·Said he had not asked the debt advisor to give evidence for the Tribunal proceedings.
·Agreed he was aware of the LNDN Discretionary Trust prior to the proceedings in South Australia commencing, but it was not involved in those proceedings.
·When asked if he knew prior to his bankruptcy that the LNDN Discretionary Trust existed and that he was a beneficiary, said that he was aware of the trust.
·When asked if he knew when he completed the Statement of Affairs that he had transferred money, or authorised, or directed the surplus funds from the sale of the B Property to LNDN Discretionary Trust, said the question was not asking him that, it was asking if he transferred any assets to the trust in the last five years, he did at some stage transfer something but to his knowledge he did not because he was paying legal fees. There is nothing in the trust that he transferred because it all disappeared on legal fees.
·When asked if the fact of the matter was that before he filled out the Statement of Affairs, on his and his wife’s evidence he sought advice to ensure it was filled out correctly, said if he personally owed money to the trust for legal fees, he cannot see that as transferred assets. He was just paying bills.
·When asked if he agrees that his evidence was that he sought professional advice from two people about filling out the form and that he did so because he wanted to ensure that he filled out the form accurately, said “Well, now looking back on it, probably, because it wasn’t – wasn’t recorded going into my name. I probably didn’t know where the funds went to.”
·When put to him that he had the opportunity to get professional advice, he knew about the existence of the trust and that he deliberately answered question 44 falsely, said “No.”
Mrs LNDN told the Tribunal that the trustee of the LNDN Discretionary Trust was funding all the legal bills to represent the Applicant and when the B Property was sold the legal bills were in excess of $120,000. There was no formal loan agreement between the Applicant and the trustee of the LNDN Discretionary Trust, however when the property sold and the associated costs were paid the sum of $43,782.13 which was left over was deposited into the trustee of the LNDN Discretionary Trust’s account of which monies were paid to solicitors and for personal expenses in regards to the Applicant. Mrs LNDN told the Tribunal that the Applicant in effect still owes the trustee of the LNDN Discretionary Trust a sum of money as well, although he did not list that as a creditor. Once she took over the business she wiped any potential debt from the Applicant and started afresh.[36]
[36] Transcript, page 26.
On cross-examination, Mrs LNDN:[37]
·Said that the Applicant presented a blank form to the debt advisor and they went through it together and she and the Applicant were taking notes.
·Said she did not assist the Applicant in completing the Statement of Affairs form, she just gave him the notes from the meeting and he completed the form.
·Said she had not seen that it was relevant to ask the accountant or debt advisor to give evidence in the Tribunal proceedings.
·When put to her that she did not show the completed Statement of Affairs to the accountant in the company of the Applicant, said she did not recall if it was completed.
·Said that when the objection to release from bankruptcy was made they took the Statement of Affairs to the accountant and upon re-reading the document, the accountant agreed that question 44 was a bit ambiguous. They took the form to the accountant to see where the Applicant had gone wrong because he was under the impression and so was she that everything was true and correct.
[37] Transcript, page 61-68.
At Hearing the Applicant contended that:[38]
·He did not intentionally fail to disclose that he had a beneficial interest in a trust, because it is plain as day to see on the trust deed he was a beneficiary.
·He did not believe the funds from the sale of the property were his funds, they were just being spent on legal fees. He did not transfer the funds to delay creditors.
[38] Transcript, page 89.
At Hearing the Respondent submitted that question 44 is clear in its terms. The Respondent contended that the Statement of Affairs document was being completed in circumstances where on the evidence of the Applicant and Mrs LNDN, they were concerned that it was completed accurately, but the picture that emerges is one where they took a blank form to an accountant and a debt consultant in order to ask questions about the form. The Respondent contended that it was the Applicant who filled out the form on his own and that if the Applicant had of had advice from his accountant in relation to the completed form he would not have answered question 44 the way that he did. The accountant had a long history and understanding of the affairs of the Applicant and his company.[39]
Ground 4 – any transfer is void against the trustee in bankruptcy because of section 121 – section 149D(1)(ab)
[39] Transcript, pages 93-94.
In relation to Ground 4 the Trustee claims that the Applicant transferred property to prevent it from becoming divisible amongst creditors. In referring to the sale of the B Property and the payment of the proceeds from that sale being paid directly to the LNDN Discretionary Trust, the Trustee outlined:[40]
·On 13 August 2002, the Applicant purchased B Property in his sole name.
·On 18 July 2014, a formal letter of demand was issued by solicitors acting for PDB Project Management Australia Pty Ltd (PDB) against the Applicant, a company of which he was the director and that company’s other director for payment in the amount of $252,468.40.
·On 10 September 2014, proceedings were issued in the District Court of South Australia by PDB against the Parties.
·On 23 October 2014, the sale contract for the B Property settled and monies totally $43,782.13 were due to the Applicant from the sale. Those amounts were paid into the bank account of the corporate trustee of the LNDN Discretionary Trust.
·On 1 August 2016, the District Court of South Australia made an order finding in favour of PDB against the Applicant and the company of which he was one of the directors of in the amount of $174,750.00.
·In the examination of the Applicant held on 4 February 2019, pursuant to section 81 of the Act the Applicant advised that the reason for the transfer was to repay the Discretionary Trust monies used from the LNDN Discretionary Trust to pay the living expenses of the Applicant. The Applicant further indicated that his accountant told him the money had to go back to the LNDN Discretionary Trust for those living expenses. The Applicant was unable to say whether this was a repayment of a loan or not.
·It appears that the funds were placed in LNDN Discretionary Trust to ensure that they were protected from a Trustee in Bankruptcy should PDB ultimately be successful in its legal proceedings.
[40] Exhibit 1, T Documents, T3.3, pages 99-100, Trustee’s Notice of Objection.
On 10 January 2020, in requesting to have the Objection reviewed, the Applicant’s solicitor addressed the issues raised by the Trustee as follows:[41]
·[The Applicant] states that he transferred the property to the trust to repay a loan for ongoing litigation expenses. The proceeds would probably have not been available to creditors had they not been transferred, as they would have been expended on litigation.
·The transfer is not void, as section 121(1)(a) is not satisfied.
·Even if the transfer was void, [the Applicant] does not control the trust and has no power to repay $43,782.13.
[41] Exhibit 1, T Documents, T3.2, pages 91-92, Applicant’s Arguments accompanying request for Review of the Objection.
At Hearing the Applicant’s evidence and that of Mrs LNDN was consistent with the written material that had been provided by the Applicant throughout the decision making process. Mrs LNDN told the Tribunal that the B Property was in arrears as the Applicant had not paid the mortgage for three months. The B Property had to be sold or it would be foreclosed. The decision to sell the B Property was made way before the legal proceedings with PDB, it was sold in 2014, two years prior to the legal proceedings.[42]
[42] Transcript, page 28.
On cross-examination, the Applicant:[43]
[43] Transcript, pages 48-54.
·Agreed that there was an amount of money left over after the sale of the B Property, that the B Property was owned by him in his name and that the sale settled at the end of 2014.
·Confirmed he recalled getting a letter of demand from a firm of solicitors prior to the commencement of the South Australian court proceedings.
·Said the property was on the market before he received that letter.
·When put to him that he entered into the sale contract after the letter of demand was received from the solicitor in the South Australian District Court proceedings, said that he had to keep paying the solicitor and the property was in default so someone had to sell it.
·Agreed that in the normal course of a sale where there was a surplus of funds, they would have come to him unless it was directed to be paid somewhere else.
·Confirmed that the surplus funds were actually paid to the LNDN Family Trust.
·When put to him that he did that while the South Australian court proceedings were in progress, explained why he thought the proceedings would resolve in his favour.
·Agreed that everyone going to court has a risk of losing.
·When suggested to him that the reason why the surplus funds were paid into the trust to then pay his legal fees was so that the solicitor could receive money from the trust and not from him, said he did not know, but probably in hindsight he should have paid it to himself and then paid the solicitors. It would have been the same thing.

At Hearing the Respondent contended that the surplus proceeds of the B property, were clearly the property of the Applicant of which he authorised to be transferred to the trust. It was a transfer of property from the Applicant to the trust within 5 years of the bankruptcy and is clearly subject to section 121 of the Act.[44]
CONSIDERATION
[44] Transcript, page 95.
Introduction
Pursuant to section 149N of the Act the Objection must not be cancelled where there is evidence to support the existence of at least one special ground and the Applicant fails to establish that he had a reasonable excuse for the conduct or failure that constituted that special ground.
Consequently, where the Tribunal finds that at least one special ground is established without reasonable excuse the Applicant’s application must fail.
In the present matter, based on the evidence before it, and for the reasons set out below, the Tribunal considers that Ground 4 of the Objection has been established without reasonable excuse on the basis that the transfer of the proceeds from the sale of the B Property to the LNDN Discretionary Trust is void against the trustee in bankruptcy because of section 121 of the Act.
In reaching this decision the Tribunal had regard to whether ground 4 of the Objection had been established and if so whether the Applicant had a reasonable excuse for the associated conduct.
In such circumstances the Tribunal does not consider it necessary to make findings on the remaining three grounds of the Objection.
Has Ground 4 of the Objection been established?
Ground 4 of the Objection relates to whether the transfer of the settlement monies from the B Property paid into the LNDN Discretionary Trust in the sum of $43,782.13 (the transferred property) are void against the trustee in bankruptcy because of section 121 of the Act.
Section 121 of the Act relevantly provides:
121 Transfers to defeat creditors
Transfers that are void
(1)A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a)    the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(b)    the transferor’s main purpose in making the transfer was:
(i)to prevent the transferred property from becoming divisible among the transferor’s creditors; or
(ii)to hinder or delay the process of making property available for division among the transferor’s creditors.
Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.
Showing the transferor’s main purpose in making a transfer
(2)The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.
Other ways of showing the transferor’s main purpose in making a transfer
(3)Subsection (2) does not limit the ways of establishing the transferor’s main purpose in making a transfer.
Transfer not void if transferee acted in good faith
(4)Despite subsection (1), a transfer of property is not void against the trustee if:
(a)    the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and
(b)    the transferee did not know, and could not reasonably have inferred, that the transferor’s main purpose in making the transfer was the purpose described in paragraph (1)(b); and
(c)    the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent.
……..
Meaning of transfer of property and market value
(9)For the purposes of this section:
(a)transfer of property includes a payment of money; and
(b)    a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and
(c)    the market value of property transferred is its market value at the time of the transfer.
There is no question that the transaction occurred, this is not in dispute. Section 121(9) of the Act provides that transfer of property includes a payment of money. As such to determine whether a section 121 transaction occurred the Tribunal must consider whether:
(a)the property would probably have become part of the Applicant’s estate or would probably have been available to creditors if the property had not been transferred; and
(b)was the Applicant’s main purpose in making the transfer to prevent the transferred property from becoming divisible among the Applicant’s creditors to hinder or delay the process of making property available for division among the Applicant’s creditors.
In response to the Objection and in seeking to have it reviewed the Applicant’s solicitor provided a statement dated 10 January 2021 outlining:[45]
[45] Exhibit 1, T Documents, T3.2, pages 90-92, Applicant’s Arguments accompanying request for Review of the Objection.
(r) on or about 23 October 2014, the sale contact for the [B Property] registered to the [Applicant], settled and he was to receive $43,782.13 and that amount was paid directly into the [LNDN] Discretionary Trust.
(s) [B Property] had to be sold because the mortgage was in arrears and the bank would have forced a sale – see enclosed documents marked “Annexure J” which are bank statements demonstrating that the mortgage payments were not being paid and the amount owing on the property was increasing;
(t) the payment of $43,792.13 back to the trust was to repay loans from the trust to [the Applicant] to pay legal fees to fight litigation with the petitioning creditor;
(u) the [LNDN] Discretionary Trust continued to fund the litigation after the receipt by it on 23 October 2014 of the sum of $43,782.13;
(v) the further legal costs which it has paid since that date in furtherance of the litigation is $53,944.01 – see statement of account of [LNDN] Discretionary Trust enclosed marked “Annexure K”. Payments by the trust to HW Litigation have been highlighted in yellow.
(w) Invoices of HW Litigation, from the date of 31 October 2014, for professional services rendered are annexed and marked “Annexure L”.
(x) Additional payments of approximately $5,135.85 for legal services have also been made to HW Litigation and DMAW Lawyer by [PF Pty ATF the P Trust] to cover ongoing Litigation requirements. See enclosed Trust Account statements of DMAW Layer and HW Litigation marked “Annexure M”. The deposits by PF Pty Ltd (as trustee) are highlighted for your convenience.
(y) had the sale proceeds [from the B Property] not been paid to the [LNDN] Discretionary Trust it would have been utilised in the payment of rent for the family or litigation expenses from 23 October 2014 onwards until the conclusion of the litigation. That is evidenced by the documentation above showing the amount paid from the trust these expenses after 23 October 2014.
(z) it would not have been available for creditors of [the Applicant’s] bankrupt estate because it would have no longer existed.
(aa) accordingly, there are no monies to recover under section 121 of the Bankruptcy Act (see below) because of the wording of that section.
(bb) even if the trustee could sustain a claim under section 121 or any other section of the Act against the trust there are no assets to recover.
…….
2. Although [the Applicant] states that he transferred the property to the trust to repay the loan referred to above, even if the Inspector-General did not accept that to be the primary purpose, the fact remains that the property would probably not have become part of the transferor’s estate or would probably not have been available to creditors if the property had been transferred because the funds were utilised by the trust to pay ongoing expenses of the litigation against the petitioning creditor and would have been exhausted in any event as they were by the trust.
3. So, subparagraph (1)(a) of section 121 is not satisfied and therefore the transfer is not void.
4. Even if the transfer was void the bankrupt does not control the trust and has no power to repay $43,782.13.
5. No claim has been made by the trustee against the [LNDN] Discretionary Trust in the last three years which may indicate that the trustee does not consider there are viable prospects of recovery.
…….
In response to further questions put to them, the Trustee provided on 31 January 2021 the following:[46]
[46]    Exhibit 1, T Documents, T8.1, pages 255-264, Trustee Response to the Respondent.
I note firstly that the Bankrupt’s solicitor indicates that the $43,782.13 paid into [Trustee of the LNDN Discretionary Trust] was used to pay legal fees to fight litigation with the petitioning creditor. In this regard, the Bankrupt has provided a number of inconsistent responses as set out below:
·In a letter to the OT dated 1 May 2017, the Bankrupt advised that $30,000 was used to pay living expense and legal fees in relation to the litigation against the Bankruptcy.
·In a letter dated 5 June 2017 (presumably meant to be 5 July 2017), the Bankrupt further advised the OT that the amount of $43,329.63 was repaid to [the Trustee of the LNDN Discretionary Trust].
The Bankrupt explained that the funds were required to be paid to [the Trustee of the LNDN Discretionary Trust] to reimburse the trust for expenses used to pay for the family’s personal living expenses whilst [Property B] was sold. The Bankrupt stated that these funds were not loans to the trust but were repayments for amounts withdrawn for private reasons.
The Bankrupt indicated that his accountant had initiated the repayment of these expenses to prevent adverse tax consequences resulting.
·During the Examination, the Bankrupt stated that funds were used to pay his legal fees that [the Trustee of the LNDN Discretionary Trust] had been paying on his behalf, i.e. creating a loan between the parties.
He then stated that there were no loan and that the money was owed back to [the Trustee of the LNDN Discretionary Trust] as the accountant advised him that he needed to reimburse [the Trustee of the LNDN Discretionary Trust] for living expense paid on his behalf, which in my view indicates a loan between the parties.
Finally, he indicated that the amount of $43,781.13 was the exact amount that the Bankrupt needed to reimburse [the Trustee of the LNDN Discretionary Trust] as there was no more monies owing to [the Trustee of the LNDN Discretionary Trust] by him. I also note that the Bankrupt regularly referred the matter back to his accountant indicating he didn’t understand why the money was paid to [the Trustee of the LNDN Discretionary Trust].
Notwithstanding the above, Re Mallett and Inspector-General in Bankruptcy [2018] AATA 3739 (Mallett Case), states that:
1.    Apart from the funds transferred to the relevant trust, the funds in the trust would have been expended in the manner they were even if the transfer had not occurred; and
2.    Funds were held in the trust that would enable the repayment of the transfer to the bankrupt.
In the Bankrupt’s circumstances, I note as follows:
1.    The legal fees would have been paid by [the Trustee of the LNDN Discretionary Trust] regardless of whether the transfer of the proceeds from the [B Property] were transferred. This was because [the Trustee of the LNDN Discretionary Trust] was utilised to pay for all expenses of the Bankrupt whether personal to the Bankrupt, the Bankrupt’s family or related to the business of [the Trustee of the LNDN Discretionary Trust].
2.    As at 29 November 2016 (i.e. Date of the bankruptcy), [the Trustee of the LNDN Discretionary Trust] held $333 in its bank account, however it also held the CIW Property which my investigations have revealed may have substantial equity.
Whilst I have been provided with a number of inconsistent responses as to how the funds in [the Trustee of the LNDN Discretionary Trust] were used, I am o the opinion that the circumstances of Mallett Case applies to the $43,782.13 transferred to [the Trustee of the LNDN Discretionary Trust] by the Bankrupt.
My objection to Discharge also sets out that the Bankrupt’s main purpose of the transfer was to protect those funds from any trustee in bankruptcy particularly given the legal action that had commenced by PDB Projection Management Pty Ltd at the time of the transfer.
The Respondent’s contentions as set out in the reviewable decision are as follows:[47]
[47] Exhibit 1, T Documents, T2.1, pages 59-65, Respondent’s Reasons for Decision.
a) But for the transfer, would the transferred property have probably formed part of [the Applicant’s] bankrupt estate or probably been property available to creditors?
……….
……. [in response to points (y), (z), (aa) and (bb) set out in paragraph 61 above, of this decision] While these arguments are relevant, from perusal of the [LNDN Discretionary Trust] Financial statements, I note payment for litigation, and other expenses of a person nature. However, no rental income is disclosed, and as the family resided in the CIW property, owned by the trust, I am not sure why rental would be payable in this situation.
From perusal of the bank statements of the [LNDN Discretionary Trust] , I note that there was $333 left in the account at the date of bankruptcy so it does not appear that the transfer had been fully expended in the course of living or funding litigation as was claimed.
I also note that during the time since the transfer, mortgage payments have been made form the [LNDN Discretionary Trust] on the CIW property, and may have had the effect of converting some off the transferred money into equity in the CIW property.
…..
The cash transfer of $43,782.13 took place on 24 October 2014. [The Applicant] became bankrupt on 28 November 2016. This is a period of close to two years. I have difficulties accepting that the full $43,782.13 probably would have been still extant and available to creditors had the transfer not taken place, but that is impossible to say, because the transfer did in fact take place and the money was placed into a trust situation.
In any event, [the Applicant] retained control over the money as the director of the trustee company for the entire period prior to bankruptcy and expended most of it. I believe that the transfer is void because of section 121.
As there was $333 remaining in the trust at the date of bankruptcy I am convinced that there was an amount that probably would have been available to creditors. What the quantum of that amount might be is unnecessary to determine at this time.
I make no other finding in relation to the balance of the funds because for present purposes the findings I have made is sufficient to support the ground of objection.
…..
b) Was [the Applicant’s] main purpose in making the transfer to prevent the transferred property from becoming divisible among his bankrupt estate, or to hinder or delay the process of making property available for division among [the Applicant’s] creditors
….
From my perusal of the bank statements of [the trustee of the LNDN Discretionary Trust], I note many apparent personal expenses of a personal nature being paid through that account, e.g. chemists, books, fast food, and IKEA.
From my perusal of the accounts of [the trustee of the LNDN Discretionary Trust], I cannot see any loans to/from beneficiaries or directors, or how else these expenses are accounted for to indicate a reason necessitating this money to be reimbursed.
The [LNDN Discretionary Trust] was created in 2002 and [the Applicant] has utilised the discretionary trust structure to run his business dealings, and also as a vehicle to hold property. Significant moneys have flowed through the trust structure over the years I have perused.
When settling the property, there were moneys dues to [the Applicant], as he was the sole owner [the B Property].
Through his actions he has caused the proceeds to be transferred into the [LNDN Discretionary Trust].
It does not appear that there was evidence of a properly identified obligation to necessitate [the Applicant’s] transfer of the proceeds into the structure.
The main benefits of utilising a discretionary trust structure is asset protection and tax purposes.
Specifically, “Property held in a trust is legally protected from creditors. A creditor cannot take trust property in bankruptcy or liquidation.”
It is difficult to ascribe the main purpose [of the making of the transfer], given that this is one of the primary reasons for utilisation of discretionary trusts. It would be one of the purposes and I can infer by reason of subsection 121(2) as outlined at c) below.
c) Can it reasonably be inferred from all the circumstances that at the time of the transfer [the Applicant] was insolvent, or was about to become insolvent?
Subsection 121(2) allows me to infer the requisite main purpose. Subsection 121(2) provides that the transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can be reasonably inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent. …… your client received a formal letter of demand from PDB on 18 July 2014 for $252,468.40. Two months later on 10 September 2014 a sale contract was entered into on the [B Property]. On 22 September 2014 proceedings were entered into in the District Court of South Australia by PDB. One month later on 23 October 2014 (approx. 6 weeks after contract) the [B Property] settled and $43,782.13 due to your client was paid into the bank account of [the trustee for the LNDN Discretionary Trust]. 19 months later on 1 August 2016 the District Court of South Australia made a finding in favour of PDB against your client. 4 month later your client submitted his Debtors Petition on 18 November 2016.
From the sequence of events listed above, it appears that, [the Applicant] would have been aware of this debt at the very latest when the formal demand letter was issued, and the likelihood that it would crystalise into a liability. The fact that a court process can take significant time to conclude would have had little bearing on the probability of the ultimate outcome.
I therefore find that he was insolvent, or about to become insolvent at the time of the transfer, and in consequence his main purpose in transferring the money is taken to be the purpose described in paragraph 121(1)(b).
d) Can the defences in subsection 121(4) be established?
There is express evidence that the transfer was a gift for no consideration, and that the transferee was a family trust of which [the Applicant] had unfettered control. There is therefore no basis to find that any of these defences are established.
There is therefore no doubt as to the source of the money held by the trust in June 2014. Based on my findings in paragraphs (a), (b), (c) and (d) above I find that the transfer is void pursuant to section 121 of the Act. I find that there is evidence to support his special ground of objection.
At Hearing the Applicant told the Tribunal he agreed that he had directed the funds be deposited in the LNDN Discretionary Trust, however he did not see it as a transfer of property as it went to paying legal fees. Mrs LNDN told the Tribunal that the trustee of the LNDN Discretionary Trust was funding all of the Applicant’s legal bills, which were over $120,000. Mrs LNDN told the Tribunal that there was no formal loan agreement in place, however when the B Property was sold the sum left over was deposited into the trustee of the LNDN Discretionary Trust’s bank account and was paid to solicitors and used for personal expenses in regards to the Applicant. She said that the Applicant in effect still owes the LNDN Discretionary Trust a sum of money however when she took over she wiped any potential debt and started afresh.

The evidence provided by the Applicant is contradictory in relation to why the proceeds from the sale of the B Property were paid into the LNDN Discretionary Trust:
·On one hand there was no loan to be repaid, and on the other there was a loan, what is clear is that there was no written agreement in place.
·The funds were repayments for personal expenses and legal fees already incurred and paid by the LNDN Discretionary Trust.
·The funds were used to pay further legal fees that were being incurred.
·The Applicant sought advice from his accountant and does not understand why the deposit is being seen as a transaction.
Was the ground of objection properly specified?
In Mallett and Inspector-General in Bankruptcy [2018] AATA 3739 (Mallett) the notice of objection from the trustee was based on the transfer of approximately $3.1 million to the trust, but at the time of the bankruptcy approximately $14,558.00 remained in the trust. The Applicant in that matter submitted that because the smaller number was not specified in the notice of objection, the Respondent was obliged to conclude that there was not sufficient evidence to support the ground specified in the notice.[48] Deputy President Hanger addressed this issue at [22]:
22. I have formed the view that the subject of the objection was not the presence of the approximately $14,558 in the trust account. Rather, it was the gift of around $3.1 million from Dr Mallett to the trust. This much is clear from paragraphs 1(h) and 2(b) of the notice, which referred to the transfer of $3.1 million into the trust account. There is no doubt that a right to be discharged from bankruptcy is a right of great value (Van Reesema v Official Trustee in Bankruptcy (1983) 50 ALR 253), and that a bankrupt is entitled to be fully informed as to the basis on which a notice of objection has been filed (Re Hall (1994) 14 ACSR 488). Only if the trustee shows that he has addressed his mind to the right question should an objection be allowed to stand (Van Reesema per Sheppard J at 267 L23). Ultimately, the bankrupt must be fully informed by the notice of objection as to the basis upon which the objection is filed so that he or she can determine whether to take the matter further.
[48] Mallett and Inspector-General in Bankruptcy [2018] AATA 3739 at [20].
The facts in this case are similar. The Tribunal considers that the Applicant could have no doubt of the basis on which the Objection was made to enable him to take the matter further. As such the Tribunal is satisfied that the ground was properly specified in the objection as requires by section 149C of the Act.
Is there sufficient evidence to support the existence of special ground 149D(1)(ad)?
Would the transferred property have become part of the Applicant’s estate or would probably have been available to creditors if the property had not been transferred?
Whether the transferred property, being the $43,782.13 from the proceeds of the B Property would have or would probably have been available to the Applicant’s creditors if it had not been transferred into the LNDN Discretionary Trust is a difficult question to answer.
It is impossible to determine with any form of certainty whether the entire $43,782.13 would have been available or only the proportion that remained in the LNDN Discretionary Trust account at the time that the Applicant became bankrupt.
It is clear from the evidence before the Tribunal that at the date of the Applicant’s bankruptcy there was $333.00 remaining in the LNDN Discretionary Trust account.[49]
[49] Exhibit 1, T Documents, T4.13, page 189, Bank statement of the LNDN Discretionary Trust for the period 28 October 2016 and 29 November 2016.
The Tribunal notes that up until 14 July 2016, the Applicant was the appointor of the LNDN Discretionary Trust, from that date Mrs LNDN become the appointor.[50] Further up until 29 November 2016 the Applicant was a beneficiary of the LNDN Discretionary Trust.[51] As such at all material times from when the LNDN Discretionary Trust was formed in 2002 up until July 2016, the Applicant had control of the trust. The Applicant was also the director of the Trustee of the LNDN Discretionary Trust until he resigned on 27 April 2016.[52]
[50]    Exhibit 1, T Documents, T4.2 and T4.3, pages 149-154, Deed of Appointment and Removal to LNDN Discretionary Trust dated 14 July 2016 and Minutes of meeting of LNDN Discretionary Trust dated 14 July 2016.
[51]    Exhibit 1, T Documents, T4.4 and T4.5, pages 155-158, Deed of Variation of the LNDN Discretionary Trust dated 29 November 2016 and Minutes of meeting of LNDN Discretionary Trust dated 29 November 2016.
[52]    Exhibit 1, T Documents, T9.1, page 265, Timeline of Events.
The Tribunal has before it an incomplete set of bank statements of the LNDN Discretionary Trust for the period between 29 July 2015 and 12 December 2016.[53] These bank statements show that during that period that the Trust continued to receive income, paid the mortgage repayments for the CIW Property, paid legal fees, paid wages (some of which were labelled, it was further identified that regular cash withdrawals were made from the account), and paid for personal expenses.
[53] Exhibit 1, T Documents, T4.13, pages 187-200, Bank statements of LNDN Discretionary Trust July 2015 to December 2016.
The Tribunal also has before it the Profit and Loss Statements and Balance Sheets of the LNDN Discretionary Trust for the 2013-2017 income tax years[54]. The Balance Sheets indicated that the CIW property of which is the Applicant’s family residence was first acquired by the Trust during the 2014 income tax year with an asset being recorded to the value of $848,338.56 and a bank loan being recorded to the value of $718,234.08 in that same year.[55] During the following years, what seems to have been comparable to how well the Trust performed the loan recorded increased and then decreased.
[54] Exhibit 1, T Documents, T14.2-14.6, pages 316-352, Financial Statements of LNDN Discretionary Trust for income tax years ended 30 June 2013 to 30 June 2017.
[55] Exhibit 1, T Documents, T14.3, page 328, Financial Statements of LNDN Discretionary Trust for the income tax year ended 30 June 2014.
As provided above the Applicant’s evidence in relation to why the property was transferred to the LNDN Discretionary Trust are contradictory. The fact was that the LNDN Discretionary Trust or then the new PF Trust which was utilised by Mrs LNDN after taking over the business continued to pay the Applicant’s legal fees and personal expenses up until at least 2019.[56] There is no mention in any of the bank statement of rent having been received in relation to the CIW property. There was no indication in the accounts provided that there were any loans to directors or beneficiaries. Mrs LNDN gave evidence that the Applicant still owed the LNDN Discretionary Trust a sum of money however when she took over the business she wiped any potential debts from the Applicants and stared afresh.
[56] Exhibit 1, T Documents, T4.15 and T4.16, pages 227-243, Bank Statements of PF Trust and Trustee of the PF Trust for the periods between February 2017 and July 2019.
There is no supporting evidence before the Tribunal that the Applicant would have himself expended the funds on his legal fees or personal expenses rather than have them met by the trusts.
As such it appears to the Tribunal that regardless of whether the Applicant had of transferred the proceeds of his sale from the B Property to the LNDN Discretionary Trust his expenses would have continued to be met by the trusts. Consequently, the Tribunal considers that pursuant to section 121(2)(a) of the Act if the property had not have been transferred to the LNDN Discretionary Trust it would have either in full or part probably have become part of the Applicant’s estate or would probably been available to creditors. At the very least the small amount of $333.00 would have been available.
The Applicant contended that no claim had been made by the Trustee against the LNDN Discretionary Trust in relation to the transfer property. Deputy President Hanger in Mallett dealt with this issue at [48]-[49]:
48. The term “void as against the trustee in bankruptcy” is used in the context of sections 120, 121, 122, 139ZQ and in each case means voidable and as a principle of statutory construction should, if possible, be given the same meaning for the purposes of paragraph 149D(1)(ab). It would be a strange situation if the word “void” used in section 149D referring to section 121 carried a different meaning in that section to the meaning it bears in section 121. There is nothing that compels such a conclusion despite the best efforts on behalf of Dr Mallett. Rather, if “void” means voidable, as appears to be the case, action under section 121 to avoid a transaction is not a condition precedent to a trustee objecting to a bankrupt’s discharge from bankruptcy. All that is necessary is a transaction which satisfies the criteria of section 121 such that a trustee may avoid the transaction.
49. I reject the submission that a transaction is not void because of the provisions of section 121 of the Act for the purposes of paragraph 149D(1)(ab), until the trustee calls for delivery or revesting of the property the subject of the impugned transfer or institutes proceedings to recover that property.
The Tribunal agrees with Deputy President Hanger’s approach and finds that the fact that the Trustee has not called for delivery or revesting of the property the subject of the transfer or instituted proceedings to recover that property, does not mean that the transaction is not void for the purposes of section 121 of the Act.
Was the Applicant’s main purpose in making the transfer to prevent the transferred property from becoming divisible among the Applicant’s creditors or to hinder or delay the process of making property available for division among the Applicant’s creditors?
The Applicant did not provide any new evidence at Hearing in relation to what the main purpose was for the transfer of the transferred property into the LNDN Discretionary Trust. The Applicant maintained that he acted in accordance with the advice given to him by his accountant and that he really did not see it as a transfer as he did not see the funds from the sale of the B Property as being his as they were being spent on legal fees. The Applicant maintained that he did not transfer the fund to avoid creditors.
As provided above it is not clear why the property was transferred to the LNDN Discretionary Trust. There is no evidence of a loan of which was subsequently repaid, the trust continued to meet the Applicant’s expenses well after receiving the transferred property and to an extent that far exceeded the value of the transferred property. As such the Tribunal is not convinced that the transferred property was transferred in return for any consideration.
Given the use of the Applicant of trust structures to run his business and to hold property and his continual referral to his reliance upon his accountant, the Tribunal finds it difficult to believe that he would have been using a discretionary trust structure for any reason other than for asset protection and taxation purposes.
While the Applicant’s contention was that the B Property was sold as the mortgage was in arrears and he needed to sell it before the bank did is evidenced by bank statements, and that the property may well have been on the market for sale for some time prior to contract for sale being entered into, this does not alter the fact that Applicant would have likely been aware of the issues that led to the letter of demand being issued prior to or at the very least on 18 July 2014. The Applicant told the Tribunal that he agreed that in all litigation there was a risk of losing. As such by the time the sale of the B Property settled the Applicant was well aware that he was being pursued for a large sum of money and chose to place the surplus funds of that sale into the LNDN Discretionary Trust rather than to expend it on legal fees himself. The Applicant gave evidence that the lawyers did not want to deal with him and it was Mrs LNDN who had the agreement with them at the time, so she had to pay the bills. That could, however, have occurred without the funds being placed into LNDN Discretionary Trust as at the time of transfer in 2014 the Applicant was still in control of the business and the LNDN Discretionary Trust.
The LNDN Discretionary Trust held at that time the CIW Property of which, was where the Applicant and his family resided.
Consequently, the Tribunal finds that for the purposes of section 121(1)(b) of the Act on balance, the evidence before it, points towards the Applicant’s main purpose for making the transfer of the surplus fund from the sale of the B Property to the LNDN Discretionary Trust was to prevent those funds from becoming divisible among the Applicant’s creditors.
This finding is supported by section 121(2) of the Act that provides that the Applicant’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the Applicant was, or was about to become, insolvent.
The sequence of events are summarised by the Respondent in the reviewable decision saw the Applicant being issued with a letter of demand on 18 July 2014 for $252,468.40, entering into a contract of sale for the B Property on 10 September 2014, having court proceedings against him commenced on 22 September 2014 and the B Property settling on 23 October 2014 with the surplus funds of $43,782.13 (due to the Applicant personally) being paid directly into the LNDN Discretionary Trust. On 1 August 2016 the District Court of South Australia made a finding against the Applicant who submitted his Debtors Petition which was received by the Respondent on 28 November 2016.
As such at the time of the transfer of the transferred property, the Applicant was relying on winning the District Court proceedings and had he of done so, it may have been unlikely that he would have found himself in a position to need to enter into bankruptcy. However, he had been issued with a letter of demand which appears to have far outweighed his assets. As such he could have been considered to have been insolvent or about to become insolvent at the time of the transfer. Therefore, pursuant to section 121(2) of the Act, the Tribunal finds that the requirements of section 121(1)(b)(i) were satisfied as at the time of the transfer of the property.
Did the LNDN Discretionary Trust act in good faith?
Section 121(4) of the Act provides that despite a transfer being found for the purposes of section 121(1) to be void, it will not be void against the trustee if:
(a)     the consideration that the transferee gave for the transfer was at least as     valuable as the market value of the property; and
(b)     the transferee did not know, and could not reasonably have inferred, that the          transferor’s main purpose in making the transfer was the purpose described in paragraph (1)(b); and
(c)     the transferee could not reasonably have inferred that, at the time of the      transfer, the transferor was, or was about to become, insolvent.
As per the discussion above there is no direct or clear evidence that the LNDN Discretionary Trust gave the Applicant consideration in relation to the property transferred.
As the Applicant was controlling the LNDN Discretionary Trust at the time that the transferred property was transferred the Tribunal does not accept that the Trust did not know or could not have reasonably inferred the purpose for which the transfer was made or that the Applicant was, or was about to become insolvent.
Consequent the Tribunal finds that the exception found in section 121(4) of the Act is not satisfied.
Conclusion
For the purposes of sections 149N(1)(a) and (1A)(a) of the Act, as set out above the Tribunal finds that the grounds on which the Objection was made specified at least one special ground, being that provided by section 149D(1)(ab) of the Act.
Based on the above findings the Tribunal considers that for the purpose of sections 149N(1)(b) and (1A)(b) of the Act that there is sufficient evidence to support the existence of at least one special ground being that provided by section 149D(1)(ab) of the Act as specified in the Objection.
Did the Applicant have a reasonable excuse for the conduct or failure that constituted special ground 149D(1)(ab)?
The Tribunal must now consider whether the Applicant has failed to establish that he had a reasonable excuse for the conduct or failure that lead to the transfer of the proceeds of the sale of the B Property to the LNDN Discretionary Trust.
The Applicant submitted evidence of past examination transcripts,[57] medical letters[58] and submissions outlining statements made in the decision of the District Court of South Australia[59] to demonstrate that he has been experiencing stress and mental health issues.
[57]    Exhibit 2, Tribunal Book, TB4, pages 20-34, Transcript of Examination conducted on 4 February 2019.
[58]    Exhibit 2, Tribunal Book, TB4, page 11, Letter form Dr Gerry Flynn dated 5 March 2020,
[59]    Exhibit 2, Tribunal Book, TB5, page 71-73, Applicant’s Response to documents submitted by the Respondent, reference being made to the 8 July 2016 judgement in the District Court of South Australia.
The Applicant in both written submissions and at Hearing made reference to the strain the events leading up to and subsequent to his bankruptcy have had upon his mental health. This was a very real concern for Mrs LNDN in particular who expressed worry about the Applicant. While it was clear to the Tribunal at Hearing that the Applicant is in fact having a difficult time, the Applicant has not provided any independent supporting evidence in relation to his health. The Applicant gave evidence that he has not regularly attended his general practitioner and was given a mental health plan however had not actioned it. The Applicant confirmed that he has not seen a psychologist or a psychiatrist. Mrs LNDN gave evidence that she approached the Applicant’s general practitioner for a report however said he declined to provide a report due to his workload.
The Applicant’s evidence was consistent in that he says he took the actions he did in relation to the surplus funds from the sale of the B Property, completing his Statement of Affairs and the provision of documents, upon the advice of his accountant.
In finding that the Applicant failed to establish that he had a reasonable excuse of the conduct or failure that constituted the special ground of objection, the Respondent provided:[60]
I have already found that [the Applicant’s] purpose in transferring the money was to prevent the money becoming divisible amongst his creditors. I acknowledge that [the Applicant] asserts that the transfer was done in the ordinary course of business, and would have been expended in the course of life over the time period but I do not accept that this was the main purpose. The money was only transferred into the [LNDN] Discretionary Trust after PDB issued a formal letter of demand and after proceedings were commenced. There was also the prospect of an adverse costs order getting made in the relation to the District Court proceedings Any other line of argument appears to be subordinate to the protection from creditors generally for debts that were presently due and payable at the date of the transfer. Given the nature of the void transfer for which I have found evidence (i.e., that the transaction took place, and a finding as to the main purpose), a finding as to reasonable excuse would not seem to sit well with this. An incongruity would arise.
When asked to provide contemporaneous evidence to support your client’s mental illness claim, you provide some evidence. While mental unfitness may provide a reasonable excuse for some grounds of objection, the series of actions and events that gave rise to this ground of objection appear sufficiently complex as to require a heightened level of mental acuity. Where mental illness may provide a sufficient excuse for non-compliance with provision of information or a number of reactive circumstances where timeliness or, or response are necessary I am not satisfied that mental illness could be used as a reasonable excuse in this case.
Similarly, I also believe that the De La Hunty principal of lack of warning could not apply to create a reasonable excuse. At paragraph 8 of De La Hunty v Inspector-General in Bankruptcy [2006] AATA 610 the AAT found that the fact that the bankrupt was not warned about the prospect of an objection may constitute a reasonable excuse. However, as the action that gave rise to the objection is not able to be rectified, and as such, a warning would not be effective in this circumstance.
I confirm the ground of objection.
[60] Exhibit 1, T Documents, T2.1, page 65, Respondent’s Reasons for Decision.

It was clear at the Hearing and in reviewing the material before the Tribunal that the circumstances that lead to the Applicant’s bankruptcy and the subsequent extension of his bankruptcy period have put strain on both the Applicant and his family. The issue for the Tribunal however is that the Applicant has not provided any evidence in relation to his mental health at the time that the conduct in question took place – being the time around October 2014 when the surplus funds from the sale of the B Property were transferred to the LNDN Discretionary Trust. The doctors letters provided are dated well after the event and provided little information. The transcript provided of the District Court Proceedings were also well after the event. Further around the relevant time and up to the time of bankruptcy the Applicant continued to run the business which suggests a high level of functioning at that time.
As such the Tribunal has no doubt that the lead up to the end of 2014 was stressful for the Applicant and that together with the events of subsequent years it has all taken its toll on the Applicant’s mental health. However, there is no corroborating evidence before the Tribunal that leads it to be satisfied that he had a mental health condition at the time of the conduct in question that give rise to the establishment of a reasonable excuse for his conduct.
While the Applicant contented that he transferred the surplus proceeds from the sale of the B Property into the LNDN Family Trust on the advice of his accountant, there is no supporting evidence of that fact. The Applicant did not call the accountant in question, or any accountant for that matter to give evidence before the Tribunal either by way of a written statement or orally at Hearing. The Applicant’s accountant may have given him such advice however the nature of that advice and whether it was for a reason other than asset protection or taxation purposes has not been explored. As such the Tribunal is not satisfied that the Applicant’s contended reliance on advice from his accountant constitutes the establishment of a reasonable excuse for his conduct.
The Tribunal agrees with the Respondent’s contention that the principle of lack of warning could not apply to create a reasonable excuse in this matter as the action that gave rise to the objection is not able to be rectified, and as such, a warning would not be effective in this circumstance.
Based on the above findings the Tribunal considers that for the purpose of section 149N(1A)(c) of the Act the Applicant failed to establish that he had a reasonable excuse for the conduct or failure that constituted the special ground being that provided by section 149D(1)(ab) of the Act as specified in the Objection.
Conclusion
For the reasons set out above, the Tribunal finds that:
(a)All grounds on which the Objection was made were grounds specified in subsection 149D(1) of the Act.
(b)No previous objections had been made on the grounds specified in the Objection, as such no previous objection on those grounds had been cancelled.
(c)All grounds on which the Objection was made were special grounds, being grounds pursuant to sections 149D(1)(d), (da), (ma) and (ab) of the Act.
(d)There is sufficient evidence to support the existence of special ground 149D(1)(ab) of the Act as specified in the Objection.
(e)The Applicant failed to establish that he had a reasonable excuse for the conduct that constituted the existence of special ground 149D(1)(ab) of the Act.
DECISON
The decision under review is affirmed.

I certify that the preceding 105 (one hundred and five)paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

.............[SGD]....................................................
Associate
Dated: 21 June 2021

Hearing:

18 December 2020

Applicant:

By Microsoft Teams

Counsel for the Respondent:

Solicitor for the Respondent:

Mr Michael Heath

Mr Stephen Bonnor