Moss and Inspector-General in Bankruptcy - [2024] AATA 3523

Moss and Inspector-General in Bankruptcy [2024] AATA 3523 (4 October 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s):2023/6875
Re:Jamie Moss
APPLICANT

AndInspector-General in Bankruptcy
RESPONDENT

DECISION
Tribunal:Senior Member D Benk
Date:4 October 2024
Place:Sydney

The Tribunal affirms the decision under review pursuant to section 43(1)(a) of the Administrative Appeals Tribunal Act 1975 (Cth).
.........................[sgd]...............................................
Senior Member D Benk
CATCHWORDS
BANKRUPTCY – whether Trustee was entitled to issue a notice of objection - statutory powers of Trustee – special ground of objection – falsehood – lack of credibility – caught out in a falsehood – explanation for mistruth – complete disregard for oath and undertaking – issues of credibility – bona fide transactions – sham – designed to defeat creditors – no reasonable excuse for the conduct – decision affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Bankruptcy Act 1966 (Cth)
Electronic Transactions Act 1999 (Cth)
CASES
Mulhern v Pearce (No.2) [2014] FCA 805
Neffati and Inspector-General in Bankruptcy [2016] AATA 941
Nguyen v Pattison [2004] FMCA 517
Rimanic and Inspector-General in Bankruptcy [2010] AATA 875
SECONDARY MATERIALS
Explanatory Memorandum, Bankruptcy Legislation Amendment Bill 2002 (Cth)
REASONS FOR DECISION
Senior Member D Benk
4 October 2024
Background

Mr Jamie Moss (the Applicant) was declared bankrupt on 26 August 2020. In the ordinary course of events, automatic discharge from bankruptcy would have occurred on 27 August 2023 (being three years and one day after the filing of his statement of affairs). However, the Trustee objected to discharge as it determined the Applicant had engaged in a number of transactions that were void against the Trustee in bankruptcy. The practical effect of this decision was to extend the bankruptcy by a period of five years.
A review of this decision was sought. The Respondent refused to change the decision maintaining that a ‘special ground’ of objection had been established and further the Applicant did not have ‘a reasonable excuse’ for his conduct.
The Applicant now seeks review by the Tribunal and requests that it set aside (reverse) the decision. He maintains he has evidence to establish he has been a victim of incompetent judges, legal practitioners and an unscrupulous Trustee. Further, he contends nothing is to be gained by maintaining his bankruptcy. He has nothing. He has lost it all. He needs to be discharged so that he can have standing in the Family Court to compel access to his child and seek redress from his ex-wife. He needs his passport back so that he can go overseas and meet someone. He needs his life back. He seeks independent review of the decision because;
(i)the Trustee had a conflict of interest caused by a pre-existing relationship with two key creditors;
(ii)the Trustee had failed to communicate with him during the bankruptcy until the report to creditors was issued;
(iii)the Trustee had not properly adjudicated the claims of two key creditors, (Grieff and Neale) allowing these creditors control of the voting outcome;
(iv)the claims of Joseph and Denise Moss…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] AATA 3523
Decision Date: 4 October 2024

CaseChat Overview and Summary

This matter concerned a review of the Inspector-General in Bankruptcy's decision to refuse to overturn a Notice of Objection to Discharge filed by the Trustee against the Applicant, who was bankrupt. The Applicant sought to have the objection set aside, but the Respondent had upheld the Trustee's decision.

The Administrative Appeals Tribunal was required to determine whether the Trustee was entitled to issue a notice of objection to the bankrupt's discharge on the grounds of falsehood and lack of credibility, stemming from the bankrupt's conduct and explanations regarding certain transactions. Specifically, the Tribunal had to consider whether the transactions were bona fide or a sham designed to defeat creditors, and whether there was any reasonable excuse for the bankrupt's conduct.

The Tribunal considered the protracted history leading to the bankruptcy, including various loan agreements and property transactions. It found that the Applicant had been caught in a falsehood and demonstrated a complete disregard for his oath and undertaking. The Tribunal concluded that the transactions in question were not bona fide, but rather a sham designed to defeat creditors, and that there was no reasonable excuse for the Applicant's conduct.

The Tribunal affirmed the Respondent's decision to uphold the Trustee's Notice of Objection to Discharge.

Orders

Orders of the court

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Background

Background to the litigation

I will now deal with the evidence as it relates to each of the issues identified. Background The history leading up to the insolvency is protracted but has been succinctly summarised by the Respondent in its outline of submissions. Relevantly;·On 15 October 2014, the Applicant’s parents Joseph and Denise Moss advanced $555,010 to the Applicant by taking out a mortgage against their property. The interest rate was 4.8% p.a.·On 15 October 2014, the Applicant and his parents execute a loan agreement for $555,010 secured against a Padstow Property. The loan agreement specified an interest rate of 15-30%. (the Respondent disputes that this is a bona fide transaction – discussed further below). ·On 6 March 2015, the Applicant purchased 25 Alliance Avenue, Revesby with an intention to subdivide the property into two residential lots.·On 24 March 2016, Creagh Investment Group Pty Ltd advanced $94,000 to the Applicant.·On 25 March 2016, the Applicant and L & J Property Developments Pty Ltd execute a loan agreement for $94,000 secured against both the Padstow and Revesby Property with an interest rate nominated between 25-60%. (the Respondent disputes that this is a bona fide transaction – discussed further below).·On 10 October 2016, Creagh Investment Group and L & J Property Developments Pty Ltd execute a deed of assignment to assign the benefit of the Applicant’s loan from Creagh Investment Group to L & J Property Developments Pty Ltd. (the Respondent disputes that this is a bona fide transaction – discussed further below).·On 8 March 2017, the ANZ mortgage against the Applicant’s parent’s property is discharged and repaid in full.·On 8 February 2018, the Applicant commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) against Bradley Neale and Matthew Grieff for breach of contract, misrepresentation, defective and incomplete building works with those proceedings being transferred to the District Court of New South Wales on 25 June 2018.·On 17 March 2020, the Applicant was unsuccessful in his proceedings in the District Court with judgement against him with an order that he pay the costs of the defendant’s, Neale and Grieff, ultimately assessed to be $630,348.00. The Applicant did not appeal these proceedings due to a lack of funds.·On 27 March 2020, the Applicant grants a mortgage over the Revesby and Padstow properties to his parents and L & J Property Developments Pty Ltd which are not registered against the titles. ·On 7 April 2020, L & J Property Developments Pty Ltd lodges a caveat over both the Revesby and Padstow Properties. ·On 26 August 2020, the Australian Financial Security Authority accepted the Applicant’s debtors petition and he becomes bankrupt.·On 21 April 2023, the Trustee filed a Notice of Objection to Discharge against the bankrupt (Applicant).·On 26 June 2023, the Applicant sought a review of the Notice of Objection to Discharge.·On 23 August 2023, following review, the Respondent refused to overturn the Notice of Objection to Discharge.·On 27 September 2023, the Applicant sought a review of the decision by the Administrative Appeals Tribunal. Consideration

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The history leading up to the insolvency is protracted but has been succinctly summarised by the Respondent in its outline of submissions. Relevantly;·On 15 October 2014, the Applicant’s parents Joseph and Denise Moss advanced $555,010 to the Applicant by taking out a mortgage against their property. The interest rate was 4.8% p.a.·On 15 October 2014, the Applicant and his parents execute a loan agreement for $555,010 secured against a Padstow Property. The loan agreement specified an interest rate of 15-30%. (the Respondent disputes that this is a bona fide transaction – discussed further below). ·On 6 March 2015, the Applicant purchased 25 Alliance Avenue, Revesby with an intention to subdivide the property into two residential lots.·On 24 March 2016, Creagh Investment Group Pty Ltd advanced $94,000 to the Applicant.·On 25 March 2016, the Applicant and L & J Property Developments Pty Ltd execute a loan agreement for $94,000 secured against both the Padstow and Revesby Property with an interest rate nominated between 25-60%. (the Respondent disputes that this is a bona fide transaction – discussed further below).·On 10 October 2016, Creagh Investment Group and L & J Property Developments Pty Ltd execute a deed of assignment to assign the benefit of the Applicant’s loan from Creagh Investment Group to L & J Property Developments Pty Ltd. (the Respondent disputes that this is a bona fide transaction – discussed further below).·On 8 March 2017, the ANZ mortgage against the Applicant’s parent’s property is discharged and repaid in full.·On 8 February 2018, the Applicant commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) against Bradley Neale and Matthew Grieff for breach of contract, misrepresentation, defective and incomplete building works with those proceedings being transferred to the District Court of New South Wales on 25 June 2018.·On 17 March 2020, the Applicant was unsuccessful in his proceedings in the District Court with judgement against him with an order that he pay the costs of the defendant’s, Neale and Grieff, ultimately assessed to be $630,348.00. The Applicant did not appeal these proceedings due to a lack of funds.·On 27 March 2020, the Applicant grants a mortgage over the Revesby and Padstow properties to his parents and L & J Property Developments Pty Ltd which are not registered against the titles. ·On 7 April 2020, L & J Property Developments Pty Ltd lodges a caveat over both the Revesby and Padstow Properties. ·On 26 August 2020, the Australian Financial Security Authority accepted the Applicant’s debtors petition and he becomes bankrupt.·On 21 April 2023, the Trustee filed a Notice of Objection to Discharge against the bankrupt (Applicant).·On 26 June 2023, the Applicant sought a review of the Notice of Objection to Discharge.·On 23 August 2023, following review, the Respondent refused to overturn the Notice of Objection to Discharge.·On 27 September 2023, the Applicant sought a review of the decision by the Administrative Appeals Tribunal. Consideration