Pattison and Inspector-General in Bankruptcy and Ogilby (Party Joined)

[2007] AATA 1517

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1517

ADMINISTRATIVE APPEALS TRIBUNAL                   N° V 200500113

GENERAL  ADMINISTRATIVE  DIVISION
Re:		PAUL ANTHONY PATTISON

Applicant

And: INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

And:PETER GEOFFREY OGILBY

Party Joined

DECISION

Tribunal:Mr B.H. Pascoe, Senior Member

Date:6 July 2007

Place:Melbourne

Decision:The Tribunal affirms the decision under review.

(sgd)   Mr B.H. Pascoe

Senior Member

BANKRUPTCY – objection to discharge – intentional failure to disclose beneficial interest in property – special ground – whether property of commercial value – whether intentional failure.

Bankruptcy Act 1966 s 149D(1)(ma)

Bankruptcy Legislation Amendment Act 2002

REASONS FOR DECISION

6 July 2007  Mr B.H. Pascoe, Senior Member

1. This application was made by Mr P. Pattison as trustee of the bankrupt estate of Mr P.G. Ogilby to review a decision of the Inspector-General in Bankruptcy to cancel the objection to discharge filed by the trustee. Subsequent to the filing of the application but prior to the hearing, the respondent Inspector–General determined that the material filed by the trustee with the Tribunal supported the grounds of objection and reversed his decision. Mr Ogilby made application to be made a party to the proceeding and, by order of the Tribunal was made a party to the proceeding as a person whose interests are affected by the decision pursuant to s 31(1A) of the Administrative Appeals Tribunal Act 1975.  As a consequence the hearing proceeded on the basis that it was then Mr Ogilby who was seeking review of the decision to object to his discharge from bankruptcy.

2.      At the hearing Mr Ogilby was represented by Mr M. Sanger of counsel.  The trustee, Mr Pattison was represented by Ms C. Gobbo of counsel and the Inspector-General by Mr J. Giacco of the Australian Government Solicitors’ Office.  Evidence was given by Mr Ogilby and Mr Pattison.

3.      Mr Ogilby became bankrupt on his own petition on 18 December 2001.  He completed his own statement of affairs.  Mr Ogilby said that he had made enquiries at the office of Insolvency and Trustee Services Australia (ITSA), researched its publications and obtained informal advice from solicitors prior to completing and filing the statement of affairs.  The major issue in this matter was the answer No to Question 37 on the statement.  This stated:

Other items of value

Other than your general household furniture do you own any other assets or items of value?

(e.g. jewellery, camera, artwork, antiques, copyrights)

Mr Ogilby said that he understood that only items which could be sold and after storage and commission costs, would realise net commercial proceeds were required to be included.

4. On 10 September 2003, the Australian Federal Police executed a search warrant at 3/90 Finch Street Malvern, Mr Ogilby’s residential address. Mr Ogilby was not home at the time with his wife alone at the residence. He returned during the course of the search. Some 52 items were seized by the police including $5000 in cash, jewellery, items of furniture, rugs and artworks. Both Mr and Mrs Ogilby were arrested and taken to the Melbourne Remand Centre. Both were retained overnight and released the next day on the signing of an undertaking to participate in an examination under s 81 of the Bankruptcy Act 1966 (the Act).

5.      Twelve of the items seized consisting of two rugs and eight pieces of furniture were valued by a firm of auctioneers and valuers on 4 March 2004 at a total of $5,980.  During the course of the hearing, the trustee Mr P. Pattison, provided details of items sold and the proceeds.  The bulk of the furniture, rugs and artworks were sold by various auction houses at sales on six occasions between 17 June 2004 and 12 September 2006 and realised a gross sale value of $9,085.  One item, an antique wooden framed mirror on detachable legs, realised $2,400.  Five items raised between $500 and $925 and 13 items raised $100 or less each.  The remainder were between $100 and $500.  There were 12 items of ladies jewellery seized consisting of two rings and 10 necklaces.  Initially, at the hearing, Mr Pattison was unsure as to the fate of the jewellery but, later in the hearing, advised that it was held in his office safe.  He was unsure of why it was still held or what, if anything, was proposed to be done with it. 

6. On 26 October 2004, Mr Pattison, objected to the discharge of Mr Ogilby from bankruptcy pursuant to s 149D(1)(ma) of the Act. He alleged that Mr Ogilby had intentionally failed to disclose to the Trustee the Bankrupt’s beneficial interest in any property. Under s 149B of the Act, a trustee may file a written notice of objection to discharge. Grounds of objection are set out in s 149D. Paragraph (ma) of subsection (1) of s 149D states:

The bankrupt intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in any property.

Under s 149K, a decision to file a notice of objection is reviewable by the Inspector‑General on his own initiative or at the request of the bankrupt.  Section 149N provides:

(1)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

(1A)     An objection must not be cancelled under subjection (1) if:

(a)the objection specifies at least one special ground; and

(b)there is sufficient evidence to support the existence of at least one special ground specified in the objection; and

(c)the bankrupt fails to establish that the bankrupt had a reasonable excuse for the conduct or failure that constituted the special ground.

For this purpose, special ground means a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (k), or (ma).

(1B)In applying subsection (1A), no notice is to be taken of any conduct of the bankrupt after the time when the ground concerned first commenced to exist.

(2)The cancellation does not take effect until:

(a)the end of the period within which an application may be made to the Administrative Appeals Tribunal for the review of the decision of the Inspector General; or

(b)if such an application is made--the decision of the Tribunal is given.

(3)If the Inspector General is not satisfied as mentioned in subsection (1), the Inspector- General must confirm the decision.

7. A consequence of these provisions is that the trustee relied upon s 149D(1)(ma) and, being a special ground, the objection could be cancelled if there was an intentional failure to disclose property and Mr Ogilby fails to establish a reasonable excuse for the failure.

8.      In his evidence Mr Ogilby denied any intentional failure to disclose property in his answer to Question 37 in his statement of affairs.  He maintained that the goods seized on 10 September 2003 fell into the following categories:

Cash provided by his father in 2003 well after the date of the statement

Property of his wife

Property belonging to his step son and held on his behalf

Property used as general household furniture

Property of sentimental but little commercial value

Paintings belonging to his father.

9.      In relation to the cash, Mr Ogilby said that this was given to him by his father prior to September 2003 but well after he had prepared his statement of affairs.  He said that $4,000 of the total of $5,000 was provided by his father to be held on behalf of his step-son to assist in funding of potential legal costs of the step-son.

10.     Mr Ogilby said that all of the jewellery seized was the property of his wife and included her engagement ring.  He said that any items of value were owned by his wife prior to their marriage and the bulk of the necklaces were costume jewellery and of little value.  Many of the art works were painting done by his wife whilst undertaking an art course and, with inadequate room for them to be hung were stored in bags in a storage area under the stairs.  Neither he nor his wife regarded them as having any commercial value. 

11.     Some 25 items seized from the residence of Mr Ogilby were said to be the property of his step-son Roger Bell-Ogilby.  These items consisted of rugs, furniture and artworks.  Mr Ogilby said that the items were either given to Roger by his grandmother prior to 1991, were gifts to Roger on his wedding in 1992 or were always his property.  It was said to have been agreed with Roger who commenced living in England in 1992 and married there, that these items would be retained for safe keeping by Mr and Mrs Ogilby until he was in a position to use them in England.  Initially they were retained at the Ogilby’s then larger house in Eltham.  The subsequent financial difficulties led to the sale of the house and occupation of smaller rental accommodation.  Mr Ogilby said that they managed to retain Roger’s property in that smaller accommodation with some difficulty and used several of the pieces of furniture as normal household furniture.  For example he said that one of the items, the antique wooden framed mirror, was used as the mirror in the bedroom and another, a table with drawers later sold for $420, was regularly used as a work desk by him.  On 23 January 2004, Roger provided a sworn statement that the items were his property and demanded their return.  Mr Ogilby said that Roger did not have the resources to pursue his claim further and the claim was rejected by the trustee.

12.     In his evidence Mr Ogilby gave several instances of alleged artworks that were simply framed printed reproductions of paintings, framed items from printed calendars or other prints having same sentimental value but, in his view, little or no commercial value.

13. It was submitted for the trustee that s 149D(1)(ma) makes no reference to value and a failure to disclose a beneficial interest in any property contravenes that provision even where such property may be considered by the bankrupt to be of little or no commercial value and, indeed, realise a small amount with no benefit to creditors. Two things need to be said in relation to this. Firstly, the provision requires an intentional failure to disclose it is not simply a failure.  Secondly, the means of disclosure are within the statement of affairs completed by the bankrupt.  The relevant section of that statement is Question 37 which asks whether you own any other assets or items of value – other than general household furniture.  Consequently, the question to be asked is whether Mr Ogilby was aware of assets or items of value and he formed the conscious intention not to disclose.  As such, the issue for the Tribunal is whether it can accept the assertion in evidence by Mr Ogilby that there was no such intention.

14. In relation to the credit of Mr Ogilby, the trustee raised four issues. The first was that, in his petition and statement of affairs, Mr Ogilby stated his address as 30 King Street, Prahran. It was subsequently clear that he had never lived at that address and he then continued to reside at 3/90 Finch Street, Malvern. Some two months later, at a meeting of creditors, Mr Ogilby again stated his address as 30 King Street Prahran. In his s 81 examination Mr Ogilby said that he had intended to move to that address and was reluctant to use his current address because of his wife’s’ ill health and a difficult relationship with his trustee. Before the Tribunal, Mr Ogilby maintained that, following discussions with the owner of the Prahran property he intended to move to that address at the time of his bankruptcy as he was having difficulty affording the Finch Street rent. He said that he was told by a clerk at ITSA to use the most appropriate address for future correspondence. He also acknowledge that, after some years of being pursued by banks and process servers he was reluctant to disclose his current address particularly because of concerns about the health of his wife who was suffering from severe anxiety condition.

15.     The second issue which was said to impinge the credit of Mr Ogilby was that, in cross examination on the final day of hearing, he was asked where is your father living now.  In response he stated current residential address is and always has been 641 Waverley Road, Chadstone.  Some two months later, and prior to the resumption of the hearing, his solicitor wrote to the other two parties seeking to clarify answers given in cross examination.  One of these was advice that Mr Ogilby’s father passed away on 30 November 2005, nearly eight months prior to that first day of hearing.  At the resumed hearing Mr Ogilby said that the error in his earlier evidence arose because he had difficulty coming to grips with his father’s death and he still answered questions about his father as though he was still alive.  Given that Mr Ogilby went on to state that he regularly tended the garden at his late fathers’ property and forwarded any mail to his late father’s solicitors, it is difficult to accept that he had overlooked the death at the time of his evidence.

16.     A third issue raised by the trustee was that Mrs Ogilby had sold by auction in March 2001 four items of furniture for a net $7,316.  It was said that this, at least must have alerted Mr Ogilby of the potential value of other items in his possession.  Mr Ogilby said that his wife sold the furniture to meet medical expenses.  They were the property of his wife prior marriage and he assumed that such sale need not be disclosed.

17.     The final issue was that Mr Ogilby was studying commercial law, accounting and business within a Business and Commerce Degree.  He had previously been a director and secretary of several companies.  As such, it was submitted that he possessed sufficient requisite knowledge of property and the need for full and true disclosure within his bankruptcy. 

18.     The introduction of special grounds of objection was by the Bankruptcy Legislation Amendment Act 2002.  The Explanatory Memorandum to the amendments to s 149D and s 149N stated:

164 When filing an objection, the trustee must set out the ground of objection, the facts relied on to support the ground and the reasons for filing an objection.  Case law establishes that punishing the bankrupt, of itself, is not a lawful reason.  The only valid reason for filing an objection has been held to be to advance the trustee’s administration of the bankruptcy.  This approach does not encourage bankrupts to cooperate with trustees.

Special grounds of objection

165 The amendments propose to address this weakness in the present law by identifying some existing grounds, and adding some new grounds, as special grounds.  In these special ground cases, the trustee will not need to show that filing the objection will advance the administration, only that the special ground existed.

It was submitted for the trustee that the ground exists if a bankrupt intentionally fails to disclose any beneficial interest in any property, irrespective of value.  It is difficult to accept this interpretation.  It implies that a bankrupt must disclose every item he owns if he is aware of its existence whether or not he believes it has a commercial or resale value.  As stated earlier, the statement of affairs provided by ITSA uses the expression other assets or items of value. Given that this form provides the means of disclosure to comply with s 149D(1)(ma) it is reasonable to accept that a bankrupt does not breach this section if he, even with forethought, does not include an item which he believes has no value. If an examination is made of dictionary definitions of asset it will be seen that the general legal use of the word involve an item of economic value available to meet the debts of a person.  For example Butterworth’s Australian Legal Dictionary states an item, whether tangible or intangible having economic value to its owner which, if not already in the form of money can be converted into money to the owner’s benefit.  Blacks Law Dictionary 8^th Ed defines an asset as:

1.An item that is owned and has value

3.(pl) All the property of a person (esp. a bankrupt or deceased person) available for paying debt or for distribution.

On balance I am satisfied that the question 37 in the statement of affairs in using the word assets rather than property correctly reflects the interpretation of the section to require disclosure of items of commercial value which should be available for creditors.

19. Notwithstanding some concerns in relation to the use of an incorrect residential address and the failure to, initially, acknowledge the death of his father, I accept the evidence of Mr Ogilby that there was no intentional failure to disclose a beneficial interest in any property. I accept his reasons in relation to the residential address without condoning that error. The death of his father occurred well after the commencement of bankruptcy and, in fact, after the date when, without the trustees objection, he would have been discharged. Whether legally correct or not, I accept Mr Ogilby’s view that much of the furniture and paintings seized and sold were the property of his step son. I accept also that he did not consider any of the remaining items as having any commercial value for the potential benefit of creditors. Consequently, I am of the view that there was no conscious intention of failing to disclose a beneficial interest in an asset and he did not breach s 149D(1)(ma).

20.     It would be easy in this matter to be critical of the trustee and to feel sympathy for Mr and Mrs Ogilby.  They were subject to a search warrant, property seizure, arrest and imprisonment in relation to items which realised a gross sale value of $9,085 over the next three years.  It was not until the hearing in 2006 that Mr Ogilby and the Tribunal were advised of this figure and that the jewellery was still stored in the trustee’s safe.  It is clear that the proceeds of sale will meet only a small part of Mr Pattison’s fees and not produce any funds for creditors.  Nevertheless, none of this affects the decision to be made on the relevant issues in this application nor whether the interests of the creditors or the public will be advanced by extending the bankruptcy of Mr Ogilby.

21.     The actual decision for which review was sought in this application was the cancellation of the objection by the trustee to the discharge or Mr Ogilby from bankruptcy.  As a consequence of the foregoing findings that decision should be affirmed.  It is recognised that the Inspector-General reversed his decision prior to the hearing and, to the extent that the subsequent decision could be seen to be before the Tribunal, it should be set aside and the objection cancelled.

I certify that the twenty-one (21) preceding paragraphs are a true copy of the reasons for the decision herein of

Mr B.H. Pascoe, Senior Member.

(sgd)             Lauren Spragg
  Clerk

Date/s of Hearing  17 July 2006, 12 October 2006 &
  10 November 2006
Date of Decision  6 July 2007
Counsel for the Applicant            Ms C. Gobbo
Counsel for the Respondent        Mr J. Giacco
Counsel for the Joint Party          Mr M. Sanger