Pascoe ATF the Bankruptcy Estate of Franz Boensch and Inspector-General in Bankruptcy and Anor
[2009] AATA 952
•11 December 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 952
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/5616
GENERAL ADMINISTRATIVE DIVISION )
ReScott PASCOE atf the Bankrupt Estate of Franz Boensch
Applicant
AndInspector-General in Bankruptcy
First Respondent
AndFranz BOENSCH
Second Respondent
DECISION
TribunalThe Hon B J M Tamberlin QC, Deputy President
Date11 December 2009
PlaceSydney
DecisionThe decision under review is affirmed.
....................[Sgd]...................
The Hon B J M Tamberlin QC
Deputy President
CATCHWORDS
BANKRUPTCY – notice of objection to discharge cancelled – failure to disclose any particulars of income or expected income a special ground – whether sufficient evidence to support existence of special ground – whether bankrupt established reasonable excuse for conduct or failure – decision under review affirmed.
Bankruptcy Act 1966 (Cth) ss 139L(1)(v), 139U(1), 149D(1)(e), 149N(1A), 149Q(a)
Fringe Benefits Tax Assessment Act 1986 (Cth) s 26
Wharton v Receiver in Bankruptcy (2001) 107 FCR 28
REASONS FOR DECISION
| 11 December 2009 | The Hon B J M Tamberlin QC, Deputy President |
This is an appeal from a decision of the First Respondent, the Inspector-General in Bankruptcy, to cancel a notice of objection to the discharge from bankruptcy of Franz Boensch, the Second Respondent (the bankrupt), by the Applicant, Mr Scott Pascoe as trustee for the bankrupt estate of Franz Boensch (the Trustee).
This Tribunal has the power to review the decision of the Inspector-General in Bankruptcy made on 31 October 2008 under s 149Q(a) of the Bankruptcy Act 1966 (the Act).
The Trustee lodged the notice of objection on 22 August 2008 based on the ground specified in s 149D(1)(e) of the Act, that the bankrupt failed to disclose any particulars of income or expected income as required by a provision of the Act. Under s 149N(1A), an objection to the discharge must not be cancelled if the objection specifies at least one “special ground” and there is sufficient evidence to support the existence of such ground and the bankrupt fails to establish that he or she had a reasonable excuse for the conduct or failure that constituted the special ground.
Failure to disclose “any particulars” of income or expected income as required is a “special ground” of objection under s 149N(1A).
The issues for this Tribunal, standing in place of the Inspector-General in Bankruptcy as decision-maker, are:
(a)whether there is sufficient evidence to support the existence of at least one special ground; and if so,
(b)whether the bankrupt has established that he had a reasonable excuse for the conduct or failure that constituted the special ground.
The Trustee alleges that the bankrupt failed to comply with s 139U(1) of the Act, which requires the bankrupt to give to the Trustee not later than 21 days after the end of the contribution assessment period a statement setting out particulars of all the income that was derived by him during that period. More specifically, the Trustee asserts that the bankrupt failed to provide particulars of income of the type referred to in s 139L(1)(v) of the Act, being a “benefit” within the meaning of the Fringe Benefits Tax Assessment Act 1986 (the FBT Assessment Act), at the value as worked out under that Act as modified by the Bankruptcy Regulations. The Trustee claims the bankrupt failed to disclose particulars of certain housing fringe benefits and residual fringe benefits received by him in the nature of food and other support given to him from time to time.
The Inspector-General decided that there was insufficient evidence to support the existence of the special ground specified in s 149D(1)(e) and, in making its decision, the Inspector-General relied on a number of matters. The first was that the value of the bankrupt’s alleged housing fringe benefit, if any, had not been established and could not be quantified because the subject property in which he resides was, and is, in an un-rentable state. Also, the value of the other alleged residual fringe benefit was either nil or insignificant as it comprised a very small amount of money and provision of other support was non-ongoing. The Inspector-General considered that the bankrupt had in fact sufficiently disclosed in Affidavit dated 21 February 2006, the nature and amount of monetary assistance and food items received from the bankrupt’s ex-wife and friends, and that the bankrupt had not failed to disclose in his letter to the Trustee dated 28 February 2006 sufficient details of the accommodation in which he resided. The Inspector-General therefore considered that it was reasonable on the material before him to infer that having provided this information to the Trustee previously, and there having been no material change in his circumstances, the bankrupt was entitled to answer in the negative to the question whether he had received income.
Furthermore, the Inspector-General decided that even if there was sufficient evidence that the bankrupt had failed to disclose particulars of income or expected income, he had a reasonable excuse for such conduct arising from communication problems between the bankrupt and the Trustee and the fact that the requirement of s 139U of the Act was not brought specifically to his attention.
In addition, the Inspector-General considered that such information as the bankrupt did not provide concerning fringe benefits, could not reasonably have been expected to have been provided by him and that he could or would not reasonably be expected to have knowledge of the value or amount of any such benefit.
The type of approach which should be taken on appeal to the making of an objection to the discharge of a bankrupt was expressed by Weinberg J in Wharton v Receiver in Bankruptcy (2001) 107 FCR 28 at [77] in these terms:
Section 149A is an important provision. It provides a strong incentive to bankrupts to cooperate with their trustees during the administration of their estates. In some circumstances, an incentive of that type is plainly necessary. However, unless the section is construed in a sensible manner, it is capable of operating oppressively. It is reasonable to assume that trustees who make requests for information from bankrupts, including those concerning their income, will make due allowance for what might be regarded as the ordinary exigencies of life. Requests for information are often not met in as timely a manner as they ought to be. Some delays may be regarded as excusable while others will properly give rise to the filing of notices of objection. A bankrupt cannot ignore requests from his or her trustee. A particularly lengthy delay in responding to a request may trigger a notice of objection to discharge which is entirely justifiable. A relatively short delay in answering a request may be a different matter. Section 149D(1)(d) must be construed in the light of the requirement in s 149B(2)(b) that the trustee must believe that the filing of a notice of objection is the only way to induce the bankrupt to discharge his duties under the Act. It is plainly a course of last resort.
These comments are applicable to the circumstances of the present case.
housing benefit
Under s 26 of the FBT Assessment Act, the value of a housing fringe benefit is the market value of the current housing right, which in this case is the market rental value if the premises were leased.
The premises in question are located in Victoria Road, Rydalmere, within an industrial area which has been reclassified to a Business and Transport Centre Zone. This description is taken from a proposal for the disposal of the property made by Laing & Simmons dated 1 June 2005. While the property has the benefit of a Victoria Road address, its frontage is limited to some 12 metres, which has restricted advertising appeal and many disadvantages. There is in evidence an appraisal by Messrs Kohler Bird dated 17 August 2005, which notes at page 2 that there is erected on the site an older style two-storey building comprising basement-level workshops and a first-floor factory/showroom area, which is presently used as a residence. It is worth noting that this area was apparently not designed or built to provide accommodation. The building has a reinforced concrete flooring system to the basement and ground-floor level. The building improvements were said to be, as at 17 August 2005, generally in fair to poor order and added little value to the land. The upper level was said to be very basic and there were noted to be impact fractures to the asbestos cement wall cladding and evidence of roof leaks. Messrs Kohler Bird acknowledged that they were not qualified to speak on structural stability. The valuation of the property on the basis of direct comparison with sales evidence analysed on a rate per square metre of land only was estimated to be $880,000 with no valuation being given in respect of the section of the building used as a residence by the bankrupt.
There are nine coloured photographs in evidence which show the building being described as “workshop 255” and being a “car service centre”. On the upper level, the photos show rooms which are unattractive in the extreme and which resemble a junkyard shed. There are some internal photographs of the premises which show stains and cracked walls and an extremely neglected and unattractive interior with very poor furniture and primitive appliances. The building has all the appearance of a run down industrial building, and the land looks like a junkyard.
It is evident that the market value of the property having regard to its zoning lies in the potential for redevelopment of the land. The appraisal by Messrs Kohler Bird contains a detailed analysis of comparable sales in the area in arriving at a valuation for the property based on the value of the land alone as a redevelopment site.
The Trustee relies on a number of matters in support of the case that the premises has some rental value as a residence.
The first of these is a correspondence from a real estate agent made on the basis of meagre details of the property, to the effect that without an inspection and based on information supplied, the agent would generally estimate the property leasing for $350 a week. The agent was asked “What would be the average rental price of a two-bedroom apartment in the Rydalmere area?” The agent enquired after the street name, the age of the building, whether there was air-conditioning, a dishwasher, a lockup garage or any other facilities. The agent was told that the premises were on Victoria Road, was more than 10 years old and that there were none of those facilities referred to.
I do not regard the correspondence with the estate agent as providing any useful indication whatsoever of the market rental value of the premises as accommodation for residential purposes. I prefer the more detailed market analysis approach taken by Messrs Kohler Bird, and note the fact that they assigned no residential value to the building or site.
The Trustee also referred to some correspondence from the bankrupt clearly written in the context of a redevelopment of the site wherein reference is made to the rental income potential as being $1,600 per week. However, considering the correspondence and development proposals as a whole, I am satisfied that these statements were made in the context of what could be achieved if there was a redevelopment. They do not provide any useful indication as to the present rental value of the premises as a residence prior to the contemplated redevelopment.
Also, reference was made to a letter of 16 June 2005, by the Trustee, which refers to the bankrupt paying $400 for the upper floor, which is described as the prime residence of himself and his children, with a garage downstairs, and which refers to other tenants paying $400 each for a garage downstairs, including parking space. These suggestions were made with a view to obtaining finance for future development.
Having regard to the photographs and the condition of the premises, these statements by a non-expert cannot in my opinion be taken to be any reliable indication of the objective market or rental value of the premises for fringe benefit purposes or of any significant value to the bankrupt.
The Trustee also, in an attempt to establish rental value, referred to statements by the bankrupt that he is permitted to reside on the premises on the basis that his presence provides some degree of security protection for the premises. In light of this, the Trustee obtained a generalised quotation from a security service based on a general ground patrol at any construction site in the Rydalmere area referring to a rate of $27.50 per hour and the Trustee contended that this is an indication of the value of the benefit, which the bankrupt was deriving from the premises in return for his presence in the form of security protection for the premises.
In my opinion, while it is true the presence of the bankrupt may provide some deterrent to vandals and theft, it is no indication of the market or rental value of the premises to establish that, in general, security services in the area cost $27.50 per hour. There is no indication in this figure as to the type of security provided or as to the nature or extent of the security provided nor as to the times and by whom such service is provided.
In addition, there is also correspondence between the bankrupt and Custom Finance Pty Limited in relation to the redevelopment of the property, wherein it is made clear in an email of 5 August 2005 that the ability of income to service a loan will be a major consideration and reference is made to rental income of approximately $1,600 per week. It is evident from this that the rental figure of $1,600 per week referred to above related to the proposed redevelopment rental value and not its present or past value.
In my view, the evidence in this matter does not support a conclusion that the bankrupt has any right or interest in relation to the subject property of any amount which constitutes a fringe benefit and therefore there was and is no obligation on him to disclose such an amount nor any failure on his part to do so within the meaning of the Act.
Another matter relied on by the Trustee in support of the objection is the provision of some general benefit to the bankrupt by way of residual fringe benefit in the nature of food and small out-of-pocket expenses, the latter financed by borrowings from friends of approximately $100 per month and based on verbal arrangements. I am not satisfied that these payments amount to a “fringe benefit” because there is no evidence that he has any right or entitlement to the provision of any said benefit nor has the value of the benefits been established with any precision sufficient to quantify the amount.
I am satisfied on the evidence that the bankrupt made adequate and reasonable disclosure in his Affidavit of 21 February 2006 as to the nature and amount of monetary assistance and food items received from his ex-wife and friends, and that in his letter of 28 February 2006 to the Trustee he disclosed the nature and value of the accommodation in which he resided sufficient to comply with the requirements of the Act, so far as could reasonably be expected in relation to housing and residual fringe benefits.
Furthermore, I am satisfied on the evidence that there was a reasonable excuse in the circumstances for the bankrupt not providing further details, if it should be found, contrary to my conclusion, that there was conduct or failure that constituted a “special ground”.
A question of construction was raised by the Trustee as to the meaning of the word “any particulars” of income where referred to in s 149D(1)(e) of the Act. In my opinion, a special ground exists where “any” material particulars of income has not been disclosed. It is not sufficient for a bankrupt simply to supply some but not all relevant material particulars known to the bankrupt and to contend that provision of any particular whatsoever is sufficient to satisfy the provision. The reference to failure to disclose any particulars of income or expected income means all material particulars relating to income. In this case, I am of the view that there was no fringe benefit provided on the evidence which did or could constitute a failure to provide the information and therefore there had been no failure to disclose.
decision
For the above reasons, I am satisfied that the correct and preferable decision is to affirm the decision of the Inspector-General in Bankruptcy to cancel the objection made by the Trustee.
I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon B J M Tamberlin QC, Deputy President
Signed: .......................[Sgd].........................
Associate: Jennifer Wong
Date of Hearing: 27 August 2009
Date of Decision: 11 December 2009
Solicitor for the Applicant: Ms K McLean
Advocate for the First Respondent: Mr M Findlay
Counsel for the Second Respondent: Mr M Heath
Solicitor for the Second Respondent: Mr M Wright
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