Pascoe and Inspector-General in Bankruptcy and Anor
[2006] AATA 665
•31 July 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 665
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/807
GENERAL ADMINISTRATIVE DIVISION ) Re SCOTT PASCOE Applicant
And
INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
PETER GEORGE HUDSON
Party Joined
DECISION
Tribunal Senior Member M D Allen Date31 July 2006
PlaceSydney
Decision The decision under review is AFFIRMED.
(Sgd) M. D. ALLEN
........................................
Senior Member
CATCHWORDS
BANKRUPTCY – Applicant is Trustee of the Bankrupt Estate – application for review of a decision of the Respondent to cancel the Applicant’s objection to the bankrupt’s discharge – grounds of objection included insufficient reasons for objecting – what constitutes adequate reasons – residual discretion of the Tribunal – decision under review affirmed.
Bankruptcy Act 1966 - ss 139U, 149B, 149C, 149D, 149N
Ansett; Exparte Ansett v Pattison (1995) 56 FCR 526
Prentice v Wood (2002) 119 FCR 296
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
De Domenico v Marshall (1999) 94 FCR 97
Adams v Lambert (2006) 225 ALR 396
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Secretary Department of Family and Community Services v Brown [2006] FCA 532
Jebb v Repatriation Commission (1988) 80 ALR 329
Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67
REASONS FOR DECISION
31 July 2006 Senior Member M D Allen 1. By application made the 27th day of June 2005, the Applicant sought review of a decision of the Respondent to cancel the objection by the Applicant as Trustee of the Bankrupt Estate of Peter Hudson, the party joined, to the Bankrupt’s discharge from bankruptcy.
2. The grounds for the cancellation were that the Notice of Objection to the discharge from bankruptcy did not sufficiently set out the Applicant’s reasons for objecting to the discharge and that the grounds given for the making of the objection did not justify the making of the objection.
3. There is no dispute that the Bankrupt was made bankrupt on his own petition on 21 January 2000, and that at a creditor’s meeting held on 8 November 2001, it was resolved that the Trustee of the Bankrupt’s estate be changed from the Official Trustee to the Applicant.
4. Mr Hudson was, pursuant to order made the 16th March 2006, joined as a party to these proceedings. Exhibit PJ1 is a bundle of documents forwarded by Mr Hudson to the Tribunal, however I consider that the issues raised by Mr Hudson in that material are not germane to the issues before me in these proceedings.
5. The provisions of the Bankruptcy Act 1966 applicable to these proceedings are those in force prior to the 5th of May 2003 as the Notice of Objection was lodged with the Official Receiver on 11 February 2003 (see Bankruptcy Legislation Amendment Act 2002 at item 223).
6. So far as is relevant the provisions of the Bankruptcy Act 1966 read:
SEC 149B
(1) [Trustee may file written notice] Subject to the following provisions of this Subdivision, at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee may file with the Official Receiver a written notice of objection to the discharge, or the Official Receiver may file such a notice on the Official Receiver’s own initiative.
(2) [When trustee must file written notice] The trustee of a bankrupt's estate must file a notice of objection to the discharge if the trustee believes:
(a)that doing so will help make the bankrupt discharge a duty that the bankrupt has not discharged; and
(b)that there is no other way for the trustee to induce the bankrupt to discharge any duties that the bankrupt has not discharged.
SEC 149C
(1) [Ground, reasons, evidence etc] A notice of objection must:
(a) set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and
(b) refer to the evidence or other material that, in the opinion of the trustee or Official Receiver, establishes that ground or each of those grounds; and
(c) state the reasons of the trustee or Official Receiver for objecting to the discharge on that ground or those grounds.
(2) [Notice not invalid] A notice of objection is not invalid merely because it does not state the ground or grounds of objection precisely as set out in subsection 149D(1) provided that the ground or grounds can reasonably be identified from the terms of the notice.
SEC 149D
(1) [Grounds] The grounds of objection that may be set out in a notice of objection are as follows:
…
(e) the bankrupt failed to disclose any particulars of income or expected income as required by a provision of this Act referred to in subsection 6A(1) or by section 139U
(f)…
(g) at any time during the period of 5 years immediately before the commencement of the bankruptcy, or at any time during the bankruptcy, the bankrupt:
(i) …
(ii) 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.
…
SEC 139U
(1) [Not later than 21 days – statement etc, books etc] A bankrupt must, as soon as practicable, and in any event not later than 21 days, after the end of a contribution assessment period, give to the trustee:
(a) a statement:
(i) setting out particulars of all the income that was derived by the bankrupt during that contribution assessment period; and
(ii) indicating what income (if any) the bankrupt expects to derive during the next contribution assessment period; and
(b) …
(2) …
SEC 149N
(1)[Inspector-General must cancel objections – grounds] 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.
(2) …
(3) …”
7. The first ground of objection was that the Bankrupt had failed to disclose any particulars of income or expected income as required by s 139U of the Bankruptcy Act contra to paragraph 149D(1)(e). This ground was rejected by the Respondent on the basis that the Bankrupt had forwarded the said particulars to the Inspector-General’s office, who had on forwarded these to the Trustee. The Trustee denies this in his Statement of Facts and Contentions, however the said documents are contained in the documents prepared for the Tribunal pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 and I have no reason to reject the statement by the Respondent that the particulars were forwarded to the Trustee. Further, I reject the submission by the Applicant that s 139U requires direct contact with the Trustee by the Bankrupt. If the particulars are forwarded to a third party such as the Respondent who then on forwards them to the Trustee, then there has been compliance with the requirement that information be given to the Trustee.
8. Two other grounds of objection based upon paragraph 149D(1)(g) and (m) were rejected by the Respondent and no issue was raised regarding those matters in these proceedings.
9. The remaining ground of objection was pursuant to paragraph 149D(1)(g) alleging that the Bankrupt had failed to explain what he had done with the sum of $4,209.43, being the balance of funds obtained from the sale of a houseboat.
10. The houseboat had been sold for the total sum of $30,000.00 and the Bankrupt has explained how the balance of those funds has been expended.
11. The Respondent found that there was sufficient evidence to support the existence of the ground but went on to find that reasons given for the objection were not sufficient reasons for the purposes of paragraph 149C(1)(c).
12. That the reasons stated in a Notice of Objection must be framed with specificity was clearly stated by Olney J in Ansett; Ex parte Ansett v Pattison (1995) 56 FCR 526 at 530:
“The legislative policy seems to be clear enough. Section 149D(1) sets out some 14 grounds upon which an objection may be based. The mere existence of an available ground does not automatically give rise to an extension of the bankruptcy. To achieve that end the trustee must give notice setting out the ground he relies upon, the evidence which establishes that ground and the reason why he objects to the discharge on that ground. The latter requirement suggests that the trustee must address the relevance of the bankrupt’s conduct in relation to the ground of objection in the context of the administration of the estate and to make a judgment as to whether that conduct provides a basis or reason for the bankruptcy to be extended. Further, the trustee is required to expose his reasoning in the notice.”
The decision of Olney J in Ansett (supra) was specifically referred to by the Full Court of the Federal Court in Prentice v Wood (2000) 119 FCR 296 at 300. After commenting at paragraph 19 that the power to prevent a discharge from bankruptcy is a very great power, the Court went on to state:
“[22] Thus, a Trustee would not be bound to lodge a Notice of Objection on the s 149D(1)(f) ground if the failure to pay was due to some circumstances outside the control of the bankrupt, or was trivial in amount. Equally, if the failure to pay was contumelious or unexplained, then a statement by the Trustee that he was objecting to the discharge on the s 149D(1)(f) ground for that reason would satisfy s149C(1)(c), inasmuch as the reason (good or bad) for objecting on that ground has been given. That would enable a review to take place of whether the reasons given for objecting on that ground justify the making of the objection.
…
[24] A notice is liable to cancellation if the reasons given for objecting on the ground specified in the notice do not justify the making of the objection, but a notice is not invalidated on that account. However, the passage relied upon in the notice does not state reasons for objecting to the discharge on the ground assigned. Rather, it simply records the consequence of an objection having been made, it being a consequence which is of equal application to all the grounds specified in s 149D. Section 149C(1)(c) is not a requirement that the Trustee state the reason or reasons for objecting to a bankrupt's discharge; rather it specifies the more particular requirement that the Trustee give the reason or reasons for objecting to the discharge of the bankrupt on the ground or grounds set out in the notice. The mandatory requirement of s 149C(1)(c) is to enable the bankrupt to know the answer to the question "why are you objecting on this ground to my discharge?" The so-called "reason" does not relate to the ground relied upon, hence it is not a reason for objecting to the discharge on that ground.
[25] Counsel for the Trustee called in aid the decision of Einfeld J in Re Harris, ex parte Harris [1997] FCA 627 (6 June 1997) as establishing that it is sufficient to comply with s149C(1)(c) for the Trustee to disclose the "purpose or goal designed to be achieved by the objection". That was, however, in the context of a statement in the notice:"... and it is considered that more accurate information concerning the application of these funds may be provided by the bankrupt ..."as being the reason for objecting to the discharge, and his Honour's observation is readily understandable in that context. However, a purpose or goal of extending the term of the bankruptcy would not of itself be a statement of a reason for objecting to the discharge on the s 149D(1)(f) ground.”
13. Paragraph 3 in the Notice of Objection sets out the “reasons” for the objection on the paragraph 194D(1)(e) and (g) grounds and reads:
“…
a) The bankrupt’s failure to complete and lodge Income Questionnaires has not allowed me to ascertain whether he is required to make compulsory income contributions for the benefit of creditors of his estate.
b) The failure of the bankrupt to provide information concerning the sale of the houseboat and the whereabouts of the purchaser, Ms MacKenzie, have hampered my efforts to properly investigate the sale and the recovery of a potential asset for the benefit of creditors.
...”
14. As to what may or may not constitute adequate reasons, there have been numerous decisions of both the High Court the Federal Court. In the now classic statement of how the question of adequate reasons should be approached, the High Court majority decision in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 279, stated that a court reviewing reasons for a decision should not be “concerned with looseness in the language nor with unhappy phrasing of the decision maker” and further stated “the reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error”.
15. A further case where the obligation to give adequate reasons was discussed was the Full Federal Court decision of De Domenico v Marshall (1999) 94 FCR 97. At p 117 Madgwick J said:
“It is well established that the failure of an administrative body makes findings of material fact constitutes an error of law…
In Copperart at 327; 377 at first instance [Copperart v Commissioner of Taxation (Cth) 1993 26 ATR 327], Hill J said:
“The parties are entitled to know what evidence the Tribunal accepted and what evidence it took into account. Likewise, the parties are entitled to know what evidence the Tribunal rejected. Without this knowledge the parties will have but an incomplete idea of the Tribunal’s process of reasoning and a lessened respect for the Tribunal’s decision-making process.”
A failure to make findings of sufficient particularity in all the circumstances is but a special case of the breach of the duty to make findings about the material facts. In Ansett Transport Industry (Operations) Pty Ltd Wraith (1983) 48 ALR 500 at 507, Woodworth J said:
“The decision-maker should set out his understanding of the relevant law, any findings of facts on which his conclusions depend (especially if those facts have been in dispute), and the reasoning processes which led him to those conclusions. He should do so in clear and unambiguous language, not in vague generalities or the formal language of legislation.”
For the Applicant it was submitted that not only on a fair reading of the objection was it sufficient but that strict compliance with the provisions of the Act was not required following the decision of the High Court in Adams v Lambert (2006) 225 ALR 396.
16. In that case the High Court said in relation to a Bankruptcy Notice that s 306 of the Bankruptcy Act rendered the approach to be taken as being one of substantial rather than strict compliance. By analogy, the approach in this matter should be to read the reasons and ask whether they fairly brought to the attention of the Bankrupt why the Notice of Objection had been lodged.
17. The Applicant also submits that following Adams and Lambert (supra), a purposive interpretation should be given to the Bankruptcy Act, and referred to the High Court reference to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355.
18. A purposive approach to statutory interpretation vis a vis strict adherence to the words of the statute was discussed by Bennett J in Secretary, Department of Family and Community Services v Brown [2006] FCA 532 commencing at paragraph 23:
“Mr Smith submits that the ‘modern approach to construction of statutes’ requires that regard be had to the purpose of the statute or section, which is ascertained by having regard not only to the grammatical meaning of the words but also to the broad context. He submits that CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 and Newcastle City Council establish that, regardless of clear words, a strained construction of actual words is permitted in order to fulfil the purpose of the provisions.
[24] A particular statutory provision is construed in its context, so that it is consistent with the language and purpose of all the provisions of the statute… Context or purpose can thus justify a court in giving a ‘strained construction’ to cure the mischief the provision was intended to cure or to achieve its clear legislative purpose: see Newcastle City Council at 113. (Authorities omitted)
[25] It is impermissible, however, as Newcastle City Council makes clear at 113 and as reiterated in Rieson v CCT Consulting Services Pty Limited [2005] FCAFC 6 to use purpose or context to give a provision a construction which, in light of the language used, is unreasonable or unnatural. As Jacobson J observed in Comcare Australia v Pires (2005) 143 FCR 104 at [33]; ‘This is not to say that resort to extrinsic material can override the language of the statute’. Where the ordinary meaning of the provision is clear, it is not ambiguous or obscure and does not lead to a result that is manifestly absurd or is unreasonable, s 15AB of the Interpretation Act does not permit the use of extrinsic material to arrive at the construction contended for…
[26] In order to construe s 541B(1)(a)(ii) in accordance with Mr Smith’s ‘restricted purpose’, the provision would have to be given an unnatural construction. As Mason CJ, Wilson and Dawson JJ observed in Re Bolton: Ex parte Beane (1987) 162 CLR 514 at 518:
‘It is always possible that through oversight or inadvertence the clear intention of Parliament fails to be translated into the law. However unfortunate it may be when that happens, the task of the Court remains clear. The function of the Court is to give effect to the will of Parliament as expressed in the law.’
The ordinary meaning of s 541B(1) is clear. It is not ambiguous or obscure and does not lead to a result that is manifestly absurd or unreasonable.”
19. Notwithstanding that a purposive interpretation should be given to the legislation in question, I am of the opinion the requirement in s 149C to give reasons must be approached applying the line of authority with regard to what constitutes adequate reasons as discussed in Prentice v Wood (supra) and De Domenico v Marshall (supra). There is a difference between interpreting an Act so as to effect its purpose and ascertaining whether the reasons for a decision constitute adequate reasons.
20. Taking the purported reasons in their context, I can only conclude that they state conclusions as to the effect of the defaults. The purported reasons do not state why the prolongation of Mr Hudson’s bankruptcy status is necessary and what is intended to be effected as a result. The reasons contain no explanation capable of enabling the Bankrupt to understand why the objection was made and on what particular bases.
21. That the reasons proffered for the objection were not adequate reasons would be enough to affirm the decision of the Respondent in this matter, however s 149N(1) invests in the Respondent and hence in this Tribunal, a residual discretion whether to cancel the objection or not.
22. Here the Applicant has issued a further Notice of Objection against the Bankrupt and that objection, being lodged post 5 May 2003, contains a “special ground”, meaning reasons for the objection on that ground do not have to be given.
23. A review by the Administrative Appeals Tribunal is part of a continuum in the administrative process, see Davies J in Jebb v Repatriation Commission (1988) 80 ALR 329 at 333, so that later proceedings can be taken into account. Also as was pointed out in Inspector-General v Nelson (1998) 86 FCR 67 at 78, to “keep a person in bankruptcy beyond the ordinary period, a trustee would need to have reasons directed to achievement of a purpose in the law of bankruptcy”.
24. On the material before me I cannot ascertain what purpose the Trustee hopes to achieve by extending the bankruptcy of Mr Hudson apart from the punishment of a recalcitrant Bankrupt. Punishment of itself is not a valid reason for an objection.
25. But in any event, there is a subsisting valid Notice of Objection. The notice in this matter is therefore otiose.
26. The decision under review is affirmed.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen.
Signed: (E.Pope) .....................................................................................
AssociateDate of Hearing 13 July 2006
Date of Decision 31 July 2006
Solicitor for the Applicant Ms S Nash, Sally Nash & Co Solicitors
Solicitor for the Respondent Mr M Murray, Australian Government Solicitor
Party Joined Self Represented
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