Neffati and Inspector-General in Bankruptcy - [2017] AATA 1108

Neffati and Inspector-General in Bankruptcy [2017] AATA 1108 (19 July 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number: 2016/2868
Re:Moncef Neffati
APPLICANT

AndInspector-General in Bankruptcy
RESPONDENT

DECISION
Tribunal:Senior Member J F Toohey
Date:19 July 2017
Place:Sydney

The Tribunal affirms the decision under review.
............................[sgd]............................................
Senior Member J F Toohey
CATCHWORDS
BANKRUPTCY – notice of objection to discharge lodged by trustees – request by applicant for review of notice – special grounds – whether sufficient grounds to conduct review of trustees’ decision to lodge notice of objection – decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975
Bankruptcy Act 1966 (Cth), s 149A, 149B, 149C, 149D, 149K, 149N, 149Q
CASES
Jonathan Durrant Woodman and Inspector-General in Bankruptcy [1996] AATA 115
McDonald v Director-General of Social Security (1984) 1 FCR 354; 6 ALD 6
Neffati and Inspector-General in Bankruptcy [2016] AATA 941
REASONS FOR DECISION
Senior Member J F Toohey
19 July 2017
Background

On 14 February 2013, Moncef Neffati became bankrupt on a Debtor’s Petition and a trustee of his estate was appointed. In October 2015, joint trustees were appointed.
In the ordinary course of events, Mr Neffati would have been discharged from bankruptcy after three years but, on 14 January 2016, the trustees filed a notice under s 149B(1) of the Bankruptcy Act1966 (the Act) objecting to his discharge. The effect of such notice, unless it is cancelled or withdrawn, is to extend the period of bankruptcy: s 149A(1). In Mr Neffati’s case, the effect was to extend the period of his bankruptcy until 15 February 2021.
Section 149K(1) of the Act provides that the Inspector-General in Bankruptcy, the respondent in these proceedings, may review a decision of a trustee to file a notice of objection on his or her own initiative or if requested to do so by the bankrupt for reasons that appear to be “sufficient to justify such a review”: s 149K(1)(b).
Section 149K(5) provides:
Within 60 days after the request is lodged, the Inspector-General must:
(a)decide whether to review the decision; and
(b)if the Inspector-General decides to review the decision – make his or her decision on the review.
On 11 March 2016, Mr Neffati requested the respondent to review the trustees’ decision to file the notice of objection. On 10 May 2016, the respondent decided not to review the decision on the ground that Mr Neffati had “not provided sufficient reasons to justify conducting the review”.
By s 149Q of the Act, an application may be made to the Tribunal for the review of:
(a)a decision of the Inspector-General on the review of a decision of the trustee to file a notice of objection; or
(b)a decision of the Inspector-General refusing a request to review a decision of the trustee to file a notice of objection.
On 31 May 2016, Mr Neffati sought review by the Tribunal of the respondent’s decision not to conduct a review as requested. His application raised a preliminary question concerning…

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: [2017] AATA 1108
Decision Date: 19 July 2017

CaseChat Overview and Summary

This matter concerned an application by Mr Neffati for a review of the Inspector-General in Bankruptcy's decision to refuse to conduct a review of the trustees' objection to his discharge from bankruptcy. The dispute arose from the trustees' lodging of a notice of objection to Mr Neffati's discharge, which Mr Neffati sought to have reviewed. The decision was made by J F Toohey SM.

The primary legal issue before the court was whether Mr Neffati had provided sufficient grounds to justify a review of the trustees' decision to lodge the notice of objection. This involved determining whether Mr Neffati had adequately explained or articulated the basis for his argument that the trustees' decision was flawed, particularly in relation to allegations of receiving money for property disposition and intentionally failing to disclose liabilities or beneficial interests in property.

The court considered the grounds for the trustees' objection, including the failure to disclose what happened to money received for property disposition and the intentional failure to disclose liabilities or beneficial interests in property. The court noted that while a finding of intention sets a high bar, a bankrupt can provide an explanation, such as a misunderstanding or oversight. However, Mr Neffati had not offered such an explanation. The court found that Mr Neffati's Statement of Affairs, which indicated no ownership of land or buildings, and his subsequent responses regarding Tunisian properties, were not entirely clear but did not excuse non-disclosure. The court also found that the settlement of Federal Circuit Court proceedings was irrelevant to the present review.

The court affirmed the respondent's decision to refuse to conduct the review. It concluded that Mr Neffati had not provided sufficient particulars or reasons to justify a review of the trustees' decision to lodge the objection, nor had he adequately explained the basis for his argument that the trustees' decision was flawed.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 4 and 5 May 2016, examinations of Mr Neffati and examinable persons were held before a Registrar of the Federal Court. A transcript of the examination is before the Tribunal. It shows that Mr Neffati acknowledged that he did not tell Mr McDonald before transferring five properties in Tunisia but said that was because they were not his.The respondent’s decision refusing to conduct the review By letter dated 10 May 2016 (incorrectly stated as 2015), a delegate of the respondent notified Mr Neffati of the decision to refuse to perform a review on the ground that he had not provided sufficient reasons to justify conducting the review. The letter identified the information to which the delegate had regard in reaching his decision and what he identified as the “relevant facts”. It set out the reasons the delegate did not consider Mr Neffati’s reasons for requesting the review were sufficient to justify the respondent conducting the review.Submissions Mr Neffati submits that it appears the present trustees are seeking to “agitate enquiries and possible proceedings” in order to obtain relief from an order made in the Federal Circuit Court on 6 August 2015 which recorded the terms of settlement of proceedings brought by the former trustee on 7 May 2015 against properties apparently recorded in Mr Neffati’s name in Tunisia. He further contends that it was incumbent on the present trustees to refer to the Deed, but they failed to do so and, the claims against the identified property having been compromised, there is no need for the trustees to have objected to his discharge from bankruptcy. The respondent submits that the settlement of the Federal Circuit Court proceedings is irrelevant to the present proceedings and nothing in Mr Neffati’s submissions demonstrates why it is relevant. I agree that the Deed of itself has no direct relevance to the question before the Tribunal. The respondent further submits that, despite being expressly invited to provide further particulars of his request in accordance with s 149M of the Act, Mr Neffati has not done so and has failed to disclose reasons sufficient to justify a review of the trustees’ decision to lodge the objection. Further, that he has failed to explain or articulate, other than at a level of generality, the basis for his argument that the trustees’ decision was flawed.Consideration As to the first ground of objection, the respondent says Mr Neffati has provided no information or response to the trustees’ proposition in the objection that he received money for the disposition of property and has not disclosed what happened to that money. Nothing in the information before the Tribunal shows otherwise. Grounds 2 and 3 of the objection are made out if a bankrupt intentionally failed to disclose to the trustee a liability of the bankrupt that existed at the date of bankruptcy or failed to disclose a beneficial interest in any property. For Mr Neffati it is argued that a finding of intention sets the bar high, and I agree. However, a bankrupt can answer an allegation of intentional failure by an explanation as simple as saying that he or she misunderstood a question, or overlooked to provide information. It might not be considered sufficient in the circumstances, but it is an explanation nevertheless. Mr Neffati has not offered an explanation that might answer the allegation..

Ratio Decidendi

Legal Principle Established

The respondent further submits that, despite being expressly invited to provide further particulars of his request in accordance with s 149M of the Act, Mr Neffati has not done so and has failed to disclose reasons sufficient to justify a review of the trustees’ decision to lodge the objection. Further, that he has failed to explain or articulate, other than at a level of generality, the basis for his argument that the trustees’ decision was flawed.Consideration As to the first ground of objection, the respondent says Mr Neffati has provided no information or response to the trustees’ proposition in the objection that he received money for the disposition of property and has not disclosed what happened to that money. Nothing in the information before the Tribunal shows otherwise. Grounds 2 and 3 of the objection are made out if a bankrupt intentionally failed to disclose to the trustee a liability of the bankrupt that existed at the date of bankruptcy or failed to disclose a beneficial interest in any property. For Mr Neffati it is argued that a finding of intention sets the bar high, and I agree. However, a bankrupt can answer an allegation of intentional failure by an explanation as simple as saying that he or she misunderstood a question, or overlooked to provide information. It might not be considered sufficient in the circumstances, but it is an explanation nevertheless. Mr Neffati has not offered an explanation that might answer the allegation.. The Statement of Affairs filed by Mr Neffati with the trustees on 12 February 2013 asked whether he owned or was buying any land or buildings on Australia or overseas including “any interest in vacant land, house, unit or commercial property”. Mr Neffati responded “No”. The questions that followed concerning the address of any property, date of acquisition, whether it was vacant and so on, were broad and could leave little room for misunderstanding. An exchange of emails around April to June 2013 between Mr Neffati and then trustee, Mr McDonald, shows that Mr McDonald asked Mr Neffati for details of any property he owned in Tunisia, and for details of three properties in particular. It appears the properties had been discussed for some time. Mr McDonald was evidently trying to establish the nature of Mr Neffati’s interest in them. Mr Neffati wrote that he did not have any property in his name in Tunisia, that he had two properties but there was a dispute over them between his former wives, his children and his grandchildren in Tunisia. His responses were not altogether clear but he provided what appear to be addresses of the properties and gave the contact details for his eldest son in Tunisia. A question as to the nature of Mr Neffati’s interest in the properties in Tunisia appears to be raised by the written opinion of an independent expert dated 15 November 2015 concerning ownership of land and family trusts in Tunisia but I cannot see how it assists Mr Neffati. The Deed of Settlement in the Federal Circuit Court proceedings, while not itself directly relevant for present purposes, shows in its recital that Mr Neffati had deposed to the effect that his father and great-uncle owned various of the properties in Tunisia and another was not a property but rights under a development application; further, that he was no longer the trustee of the Neffati Family Trust which had now passed to a family company. I accept that the nature of Mr Neffati’s interest in the properties may not be entirely clear but I do not accept that was reason not to disclose them to the trustees.