Neffati and Inspector-General in Bankruptcy
[2017] AATA 1108
•19 July 2017
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.
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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 The effect of such notice, unless it is cancelled or withdrawn, is to extend the period of bankruptcy: s 149A(1).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 the scope of the Tribunal’s power, in particular whether, if the Tribunal set aside the decision not to conduct a review, it had jurisdiction and power to conduct a review itself. In Neffati and Inspector-General in Bankruptcy [2016] AATA 941, the Tribunal determined that the answer to that question was “No” and that the Tribunal’s power was limited to reviewing the respondent’s decision to refuse to conduct a review.
The matter to be determined now is whether there are reasons sufficient to justify a review of the trustees’ decision to file the notice of objection.
Principles
Section 149K does not elaborate on what reasons might appear “sufficient to justify such a review” but the context in which that expression appears gives it meaning.
Review of a notice of objection to discharge is not as of right. Section 149K(1)(b) acts as a gateway, the purpose of which the Tribunal described in Jonathan Durrant Woodman and Inspector-General in Bankruptcy [1996] AATA 115 at [19], as follows:
The subject words have a purpose and in the view of the Tribunal they are there to ensure that requests of a frivolous nature or those which lack any substance, merit or foundation do not lead to unwarranted review of decisions by trustees or the official receiver to file a notice of objection. On the other hand, the subject words should not be interpreted in such a way as to preclude or impede a bankrupt from obtaining an appropriate internal review. Whilst a bankrupt has the right to have the decision of the trustee or Official Receiver reviewed by the Tribunal in any event that is no answer to an unwarranted denial of internal review by the Inspector-General.
Amendments to the Act since the decision in Woodman mean the Tribunal’s decision that a review should be conducted in that case, and to conduct the review itself, is no longer open to the Tribunal. However, the comments in Woodman about the purpose of the legislative scheme remain relevant.
In requiring that there be reasons “sufficient” to justify a review, s 149K(1)(b) sets a relatively low threshold not intended to preclude appropriate requests for internal review. Following Woodman, a review will be appropriate if it is not frivolous or if it cannot to be said to be without merit or foundation.
Counsel for Mr Neffati submits that the respondent’s delegate erred by, in effect, shifting the burden of proof onto Mr Neffati by statements such as “I do not consider your reasons for requesting the reviewer sufficient to justify conducting the review” and “You have not provided any evidence to support your request for review”.
The respondent disagrees and submits that s 149K(1)(b) in effect casts an onus on the bankrupt to identify some cogent reason for a review to be undertaken. Were it not so, the respondent submits, the bankrupt would be entitled to a review as of right.
It is well-established that there is no onus of proof in administrative review proceedings: McDonald v Director-General of Social Security (1984) 1 FCR 354; 6 ALD 6. However, it is only common sense to say that a person who seeks review of an objection notice must provide reasons for the request with some evidence to support them. Whether the reasons are “sufficient to justify a review” sought by a bankrupt will depend on what is provided by the bankrupt including any further information in response to a request by the respondent, and the circumstances of the case.
In Woodman, the Tribunal said at [23] that “…one must have regard to the whole of the circumstances surrounding the filing of the notice in the light of the relevant material now before the Tribunal”. The Tribunal took into account that five years was “…a significant extension of the period of time during which the applicant is obliged to carry out his various duties and obligations under the Act and during which his after-acquired property will vest in his trustee. It is such as to require, in our view, an examination as to whether such a period of time is warranted having regard to all of the relevant circumstances”: at [23].
The trustees’ reasons for lodging the notice of objection to discharge
A notice of objection must set out the ground, or each of the grounds, of objection, being a ground or grounds set out in s 149D(1), but not being the ground or grounds of a previous objection that was cancelled. It must refer to the evidence or material that, in the opinion of the trustee, establishes that ground or each of the grounds and to any evidence or other material that, in the opinion of the trustee, establishes that ground or each of those grounds: s 149C(1)(a) and (b).
Except where certain grounds in s 149D(1) are relied on, a notice of objection must state the reasons of the trustee for objecting to the discharge on that ground or grounds. The exceptions are where “special grounds” are relied on: s 149C(1A); and see s 149N(1A). It is uncontentious that the grounds relied on by the trustees in this case are “special grounds”.
The trustees’ notice set out the grounds of objection as follows.
Ground 1: subsection 149D(1)(g)(ii)
At any time during the 5 years immediately before the commencement of the bankruptcy, or at any time during the bankruptcy, the bankrupt disposed of property, but failed to explain adequately to the trustee why no money was received as a result of the disposal or what the bankrupt did with the money received as a result of the disposal.
The notice asserted that it appeared from the trustees’ investigations that Mr Neffati had disposed of properties in Tunisia after the date of his bankruptcy for less than market value. The notice identified the date of sale of two properties which it identified by their Tunisian Title Deed numbers, and it identified the purchaser. It identified the date of a third sale, and the relevant Title Deed number, to the same purchaser. Copies of the Title Deeds in Arabic with English translations were annexed to the notice.
Ground 2: subsection 149D(1)(ha)
The bankrupt intentionally failed to disclose to the trustee a liability of the bankrupt that existed at the date of bankruptcy.
The notice asserted that Mr Neffati failed to disclose, in his Statement of Affairs completed on 12 February 2013, that he had liability to creditors identified as Ms Lyrinna Wong, Risett Pty Ltd and PacRim Trading & Co. t/a All Crash Parts. A copy of the Statement of Affairs as completed by Mr Neffati was attached to the notice.
The notice further asserted that, on 6 August 2015, the Federal Circuit Court made an order reversing the previous trustee’s decision and acknowledging the claim of $1,490,510 by Lyrinna Wong into the bankrupt estate. A copy of the order was annexed to the notice. Also annexed was a copy of proofs of debt lodged by Risett Pty Ltd and PacRim Trading & Co. t/a All Crash Parts.
Ground 3: subsection 149D(1)(ma)
The bankrupt intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in any property.
The notice asserted that Mr Neffati did not disclose any interest in any property in his Statement of Affairs and later disclosed that he was entitled to three properties in Tunisia. A copy of email correspondence dated 16 April 2015 between Mr Neffati and the previous trustee was annexed to the notice.
The notice further asserted that Mr Neffati then disclosed that the properties were held as trustee of a family trust, but according to an independent expert report dated 3 November 2015 prepared by an Attorney and Counsel at Law in Tunisia, the concept of the family trust does not exist in that country and, accordingly the notice asserted, the properties were beneficially held by Mr Neffati.
Mr Neffati’s request for review of the notice of objection
Mr Neffati applied for review of the objection notice on 11 March 2016. By letter dated 15 March 2016 to his then solicitor, a delegate of the respondent acknowledged receipt of the request and advised that she would review the materials provided to date and contact him or the trustee if she required additional information.
By letter dated 1 April 2016 to Mr Neffati’s solicitors, the respondent’s delegate summarised the grounds of review. She referred to the matters in s 149N of the Act to be taken into consideration by the respondent on review of a decision by trustees in particular, whether there is sufficient evidence to support the ground of objection and whether the bankrupt had any reasonable excuse for his conduct or failure that constitutes that ground. She asked Mr Neffati for his reasons in relation to each ground of objection for requesting the review, with supporting documents, including:
(i)whether he disputed the existence of the evidence referred to by the trustee under the ground objection;
(ii)if so what were his reasons for disputing the evidence, with supporting documents; and
(iii)if the evidence to support the existence of the ground is made out whether he has a reasonable excuse for the conduct or failure, with supporting documents.
By letter dated 15 April 2016 in response, Mr Neffati’s representatives cited his request for review and attached materials, and submitted that the conduct of the trustee “…continues the administration and consequence [sic] interference with the legal status of [Mr Neffati]…” arising by virtue of his bankruptcy. They submitted that there was no apparent reason why the trustee ought to have exercised the discretion to lodge the objection. Finally, they submitted that the Act should not be applied by a trustee in a penal manner as it appeared to be in this case.
Mr Neffati subsequently confirmed that he did not wish to provide any further information or documentation in support of the request for the review.
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..
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.
Other than the emails in which Mr Neffati asserts that he owns (but also does not own) the properties, there is virtually nothing in the material before the Tribunal to suggest there is an answer the grounds in the objection or the questions raised in the delegate’s letter of 1 April 2016. Other than the Deed of Settlement, Mr Neffati has provided no documents that would answer the trustees’ objections. He has not offered any explanation. Rather, he asserts that the trustees had no ground for their objection and that, by saying he has provided nothing to support his application, the respondent seeks to shift an onus of proof on to him neither of which is a ground sufficient to conduct a review.
Conclusion
I am not satisfied that the information before the Tribunal discloses reasons sufficient to justify a review of the trustees’ decision to lodge the notice of objection.
For these reasons I affirm the decision under review.
I certify that the preceding 42 (forty-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey
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Associate
Dated: 19 July 2017
Date(s) of hearing: 24 March 2017 Counsel for the Applicant: Mr J Johnson Solicitors for the Applicant: Mr M Davies, Blackstone Waterhouse Lawyers Counsel for the Respondent: Mr S Golledge Solicitors for the Respondent: Mr S Mullette, Matthews Folbigg Pty Limited Solicitors
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