Miller and Inspector-General in Bankruptcy
[2004] AATA 794
•26 July 2004
Administrative
Appeals
Tribunal
ORAL DECISION AND REASONS FOR DECISION [2004] AATA 794
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V2003/1359
GENERAL ADMINISTRATIVE DIVISION ) Re MAXINE MILLER Applicant
And
INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal Mrs Joan Dwyer, Senior Member Date26 July 2004
PlaceMelbourne
Decision The Tribunal sets aside the decision under review. In substitution, the Tribunal, under s 149ZK of the Bankruptcy Act 1966 (“the Act”), cancels the determination dated 6 October 2003 and directs the Official Trustee to sign a certificate under s 149ZF of the Act in relation to Ms Miller.
The Tribunal specifies, under s 43(5B) of the Administrative Appeals Tribunal Act 1975, that the decision is not to come into operation until 26 August 2004.
[sgd] Joan Dwyer
Senior Member
BANKRUPTCY – application for review of decision not to allow early discharge of bankruptcy – whether applicant’s unsecured liabilities exceed 150% of income in year immediately before bankruptcy – amount of unsecured liabilities – legal dispute as to whether any rent due – Tribunal not satisfied that any unsecured liability to pay rent – amount of income in the year immediately before bankruptcy – finding that income be determined from 2002 and 2003 tax returns – finding that unsecured liabilities did not exceed 150% of income – applicant not disqualified from early discharge under s 149Y of the Bankruptcy Act 1966 – decision under review set aside.
Administrative Appeals Tribunal Act 1975 ss 37, 43(5B)
Bankruptcy Act 1966 ss 55, 149S, 149Y, 149ZF, 149ZK
REASONS FOR DECISION
26 July 2004
Mrs Joan Dwyer, Senior Member
1. This is an application under s 149ZM of the Bankruptcy Act 1966 (“the Act”) for review of a determination of the Inspector‑General in Bankruptcy ("the Inspector‑General") made 14 November 2003 (T6 p58) confirming the decision of the Official Trustee in Bankruptcy made 6 October 2003 (T9 pp66‑67) to reject Ms Miller's application for early discharge from bankruptcy.
2. Mr Livingston, a chartered accountant, appeared and gave evidence for Ms Miller. After an adjournment, Ms Miller, also gave evidence. Mr Linden, a solicitor with the Australian Government Solicitor, appeared for the Inspector‑General. At the suggestion of the Tribunal, he called Mr Driscoll, a property manager with Knight Frank, who gave telephone evidence. The Tribunal had before it the documents (“the T Documents”) lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”) and the exhibits taken into evidence during the hearing.
3. Ms Miller lodged her statement of affairs and a debtor's petition on 21 March 2003 and became an undischarged bankrupt on that day. I am somewhat surprised that the petition and statement of affairs (T12 & R1) were accepted without any inquiry as to their adequacy (s 55(3)(c) of the Act). Ms Miller applied for an early discharge from bankruptcy under s 149S of the Act on 2 September 2003. The application was lodged as soon as possible, as s 149S of the Act does not allow an application to be made in the first six months after the bankrupt filed her statement of affairs.
4. Under s 149Y of the Act, a bankrupt is disqualified from early discharge if the bankrupt's unsecured liabilities exceeded 150 per cent of the income derived by the bankrupt in the year immediately before the date of the bankruptcy. Section 149Y of the Act provides:
149Y Unsecured liabilities exceeding 150% of income
(1) Subject to subsection (2), a bankrupt is disqualified from early discharge if the bankrupt’s unsecured liabilities exceeded 150% of the income that the trustee determines to have been derived by the bankrupt during the year immediately before the date of the bankruptcy.
(2) Subsection (1) does not apply where:
(a)the unsecured liabilities were wholly or principally attributable to a tort committed by the bankrupt; and
(b) the bankrupt was not insured against liability for that tort.
(3) The trustee may determine any matter referred to in subsection (1) on the basis of the information provided to the trustee by the bankrupt, whether in the bankrupt’s statement of affairs or otherwise.
(4) The trustee may also have regard to any other information in the possession of the trustee but is not required to seek any such information.
5. It is necessary to determine, first, the amount of Ms Miller's unsecured liabilities, and second, the income she derived during the year 22 March 2002 to 21 March 2003.
6. Ms Miller, in her statement of affairs stated that she owed money to Toyota Financial Services ("Toyota") in respect of the lease of a motor vehicle. At the time when she lodged the petition she estimated the amount of the unsecured liability as $12,000. That has proved to be close to correct. Exhibit R2 shows that the unsecured liability was $11,173.97.
7. The more difficult issue concerns a second possible unsecured creditor. When Ms Miller lodged her petition she wrote (T12 p79) that she had a “contentious potential legal dispute”. In explanation, she attached a letter from Minter Ellison, lawyers, to Messrs Fernandez Canda Gherkins, solicitors, who were apparently acting on her behalf.
8. From that letter it is clear that there was a dispute between Ms Miller and her former landlord as to whether she was legally bound to take a new lease of business premises. When the primary decision was made rejecting Ms Miller's application for an early discharge, it took no account of any possible liability to Ms Miller's landlord. Nor did the reviewable decision, although there was a request in that letter for more information as to that issue. The Official Trustee, in the primary decision, set out the amount of the Toyota debt. Mr Linden explained that the reason there was no reference to the issue as to the rent, was because the primary decision‑maker was acting on the basis of Ms Miller having no income at all in the relevant year. That was what she had put in her statement of affairs.
9. I am not persuaded by the evidence that Ms Miller has an unsecured liability to her former landlord. The transfer of lease (R3) shows that she took a transfer of a lease of the relevant premises from 2 August 2002 to 28 February 2003. She paid all the rent due in respect of the period covered by her transfer of lease. The lease states that it is for a term of two years, but the rent is specified as being payable from 1 March 2001 until 31 March 2003, (T3 p42). It appears that there is an error in the Schedule.
10. Ms Miller vacated the premises, and gave notice to the landlord that she was doing so on 24 February 2003, within the period of her lease. She had provided a letter of intention to exercise her option (R7) for a further term of two years in September, 2002. But that was before she knew what rent she was being asked to pay. When she found out that a substantial increase of 31% was proposed from 1 March 2003, she took legal advice. Acting on that advice, she declined to go on with negotiations for a new lease.
11. Ms Miller's solicitors claimed, by letter dated 27 February 2003 to Minter Ellison (T12, pp91-92), that there had been an inaccuracy in the disclosure statement, which they claimed entitled Ms Miller to withdraw her request for a new lease.
12. The evidence does not establish to my satisfaction that Ms Miller had any obligation to make further payments of rent after the expiry of her lease. There is evidence of a dispute between Ms Miller and her former landlord. In order to make a finding that there was a further unsecured liability in respect of that matter, I would need to know that the dispute had been arbitrated or litigated or otherwise resolved.
13. On the material before me, it looks as though there was a potential dispute but nothing more than that. The evidence was that neither the landlord, nor the agents or lawyers for the landlord, had sent any letter of demand to Ms Miller at her private address or to her lawyers, who they knew had been acting for her, claiming that she had a liability to pay further rent.
14. The respondent tendered statements A1 and R4 from Knight Frank.
15. Statement A1 is a statement of outstanding amounts addressed to Lakeview Serviced Offices, Attention Mr Craig Richardson. Ms Miller said that is the name of her former tenants, who she understood remained in occupation after she vacated the premises and took over the lease directly from her former landlord. The statement is very confusing. The first entry dated 16 May 2003 is a reverse of an incorrect credit of $6488.70. There are then entries indicating rent reductions by way of rate change from 1 April 2003. In August 2003, nine "unallocated" rent cheques are receipted.
16. Ms Miller, in her statement A2, stated:
…
I immediately took steps to notify my current tenants who subsequently made their own arrangements to meet with Knight Frank, at my advice to them of 25th February, over the ensuing week. I understand from those meetings an agreement was reached with Knight Frank for their tenancy to continue past March 1st, on conditions negotiated between the parties, which I believe is still the case.
17. Mr Livingston questioned why rent for March 2003 had not been paid by the tenants who remained in occupation of the premises by agreement with the landlords.
18. The second statement from Knight Frank (R5) is dated 6 February 2004 and addressed to Ms Miller at the premises she had vacated a year earlier. It shows her to be owing one month's rent. There was no dispute about the fact that the statement (R5) was produced for the purposes of this hearing, and had not previously been forwarded to either Ms Miller (apart from at the address she had vacated) or her solicitor, or to the Official Trustee or the Inspector‑General.
19. Mr Linden called Mr Driscoll. His evidence was vague and in general terms. He said the financial statements (A1 and R4) showed that the landlord looked to Ms Miller for payment of the March rent. He did not explain why the tenant in possession had not been liable to pay that rent. He said generally, even if a tenant leaves at the end of their lease, they are obliged to give one month's notice of intention to vacate. His evidence did not refer to any relevant statutory provisions or to the provisions of the lease (see paragraph 10 on Overholding and Abandonment of the Premises). Nor did he give any evidence, or appear to have any personal knowledge of, the negotiations between the landlord and the tenants who took over the lease. When he was asked to explain why Ms Miller remained liable for rent after she vacated the premises, he said legal advice would be necessary on that issue.
20. I did not find Mr Driscoll's evidence persuasive. He was expressing a view. Had we had evidence from the lawyers for Ms Miller they no doubt would have expressed a contrary view. The fact that no written demand was ever sent to Ms Miller, at her home address which appeared on the transfer of lease, or to her lawyers or to the Official Trustee, seems to me to indicate that the landlord did not consider that it had a strong claim that Ms Miller was liable for any outstanding rent.
21. Mr Linden tendered a letter (R6) from Minter Ellison. That letter was as follows:
…
Maxine Miller
114 Alert Road, South Melbourne
We refer to the above matter and to your letter of 27 April 2004.
We are instructed to respond as follows:
1.$16,941.01 is calculated as follows:
(a)office rent $12,326.92 plus GST
(b)car parking rent $1,500.00 plus GST
(c)cleaning recovery costs $574.00 plus GST
2.The tenant's original lease ended on 28 February 2003. However, prior to that time, the tenant validly exercised its option. This gave rise to a further binding lease for the option term as set out in the original lease. When it became evidence that the tenant was not going to "take up" the option lease (despite having exercised the option), the owner elected to terminate the option lease.
3.As indicated above, the tenant did take up the option lease.
4.At the end of the tenant's occupancy (31 March 2003), the owner endeavoured to lease the property to an organisation called "Jumping Eagle". This proved to be unsuccessful. Note that Lakeview Serviced Offices was in fact the tenant's business name, not the name of the new organisation.
5.At this stage, we cannot confirm the appropriate person to provide a witness statement.
We trust this answers your queries: if you would like to discuss, please call.
[signed]
22. The whole issue as to whether or not Ms Miller was liable to pay further rent to her former landlord is confusing and inconclusive. I cannot find that Ms Miller has presently, or had as at the relevant period, an unsecured liability to pay rent to her former landlord. I find that the total of her unsecured liabilities was the figure of $11,173.97 owed to Toyota, as to which there was no dispute.
INCOME
23. The question as to Ms Miller's income in the 12 months preceding the lodging of her debtor's petition is also difficult. It appears that Ms Miller and Mr Livingston have given various different estimates of Ms Miller's income in the relevant year. In Ms Miller's statement which accompanied her petition (R1) she said she had no income whatsoever. In her statement seeking review of the refusal to grant her an early discharge (T8, p63), she said she had an income from a company (of which Mr Livingston said she was the sole shareholder, director and the secretary) of $20,883. Mr Livingston's statement of 9 December 2003 (T2 p10, para (c)) stated that Ms Miller's income in the relevant year was $16,607.
24. As I said during the hearing, it was apparent from Ms Miller's evidence that she had no idea what her income was in the relevant period. She seemed to rely totally on her accountant for the decision as to how the income from the company was distributed; and she did not appear to understand what had been done. On the basis of Mr Livingston's evidence and the tax returns, particularly T3 pp 17, 21 and 29, I find that Ms Miller's income in the year ended 20 June 2002 was $7500.00. Making the best approximation I can on the evidence, I find one quarter of that, approximately $1800.00, was received between 22 March and 30 June 2002, and thus in the relevant 12 months prior to the lodging of the petition on 21 March 2003. In the following year the tax return shows an amount of $10,000 as income paid to Ms Miller from her company activities. All of that, according to Mr Livingston's evidence was earned within the relevant period, as the business ceased to operate on 28 February 2003. After that Ms Miller received some Centrelink payments which were added to her annual income in the tax return, making the total income for the year ended 30 June 2003 $11,466.00.
25. I find that the total income in the year prior to the lodging of the petition of almost was $11,800.00, which is just a little more than the debt to Toyota of $11,173.97.
CONCLUSION
26. I am satisfied that Ms Miller was eligible to apply for early discharge and was not disqualified under s 149Y of the Act from early discharge. I will set aside the reviewable decision of the Inspector‑General made 14 November 2003. In substitution I will cancel the determination of the Official Trustee made 6 October 2003 and, pursuant to s 149ZK of the Act, will direct the Official Trustee to sign a certificate under s 149ZF of the Act in relation to the bankrupt.
27. On the application of Mr Linden, I will specify, under s 43(5B) of the AAT Act, that the decision is not come into operation until 26 August 2004.
I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Dwyer.
Signed: Josephine McKay
AssociateDate/s of Hearing 26 July 2004
Date of Decision 26 July 2004
Advocate for the Applicant Mr D Livingston
Solicitor for the Respondent Mr S Linden
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