Plant and Insolvency and Trustee Service Australia
[2004] AATA 407
•21 April 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 407
ADMINISTRATIVE APPEALS TRIBUNAL )
)No W2002/370 - 371
GENERAL ADMINISTRATIVE DIVISION ) Re GRAHAM REGINALD PLANT
SUSAN CAROLYN PLANTApplicants
And
INSOLVENCY AND TRUSTEE SERVICE AUSTRALIA
Respondent
DECISION
Tribunal Mr M Allen, Member Date21 April 2004
PlacePerth
Decision The Tribunal affirms the decisions made on 11 September 2002 to object to the discharge from bankruptcy of the applicants pursuant to s 149B of the Bankruptcy Act 1966.
............(sgd M Allen)...........................
Member
CATCHWORDS
BANKRUPTCY – objection to discharge from bankruptcy – consideration of whether evidence establishes the grounds of objection – whether failure to provide information to trustee – whether failure to explain adequately the purpose for which money was spent or why no money was received on the disposal of property – whether failure to disclose beneficial interests in property – whether sufficient reasons for objecting to the discharge – decision under review affirmed
Administrative Appeals Tribunal Act 1975 ss 34B, 37
Bankruptcy Act 1966 ss 19AA, 77, 77C, 149A, 149B, 149C, 149D
Re Harris: ex parte Harris and Official Trustee [1997] FCA 627
Re Hall [1994] 14 ACSR 488
Wharton v Official Receiver in Bankruptcy [2001] FCA 96
Re Ansett [1995] 56 FCA 526
Inspector General v Nelson (1998) 86 FCR 67, (1998) 168 ALR 340, (1998) 27 AAR 231
REASONS FOR DECISION
21 April 2004 Mr M Allen, Member 1. On 11 September 2002 an officer of the Insolvency and Trustee Service Australia (“ITSA”) as delegate of the Official Trustee in Bankruptcy made decisions to object to the discharge from bankruptcy of Graham Reginald Plant and his wife Susan Carolyn Plant (who are referred to individually as “Mr Plant” or “Mrs Plant” respectively and together as “the applicants”) pursuant to s 149B of the Bankruptcy Act 1966 (“the Act”), specifying various grounds of objection pursuant to s 149D of the Act. The applicants have applied for review of the decisions affecting each of them.
2. When the matter came on for hearing Mr Plant represented the applicants and Mr Carles represented the respondent. The parties agreed that the review could be determined on the papers and without a hearing in accordance with s 34B of the Administrative Appeals Tribunal Act 1975 (the AAT Act) and I agreed that was an appropriate way to proceed. Accordingly, the hearing did not proceed and I have conducted the review by considering the documentary material lodged with and provided to the Tribunal.
3. The Tribunal had before it the documents filed pursuant to s 37 of the AAT Act (T1-T47), letters from the applicants to the Tribunal dated 20 December 2002 with annexures (A1), and 15 July 2003 (A2), and a bundle of documents submitted to the Tribunal by the respondent (R1), as well as the written submissions made by the parties – which, in the case of the applicants, had a number of attached documents.
4. The background to the matter is that for some years prior to 2001 the applicants conducted a house-building business in partnership in the regional centre of Geraldton, trading as Graham Plant Homes.
5. In 1999 the applicants incorporated a company named Jaeger Nominees (WA) Pty Ltd (“Jaeger”) which also traded as Graham Plant Homes. For reasons that are not relevant in the present proceedings no steps were taken to formally transfer the business that was previously conducted in partnership to Jaeger, nor did Jaeger become the registered owner of the business name associated with the partnership business.
6. Towards the end of the year 2000 and in the early months of 2001 both Jaeger and the applicants personally experienced severe financial difficulties. In February 2001 the applicants instructed a firm of accountants (Hall Chadwick) to take action to voluntarily liquidate Jaeger and liquidators were subsequently appointed to Jaeger pursuant to resolutions passed at meetings of the company’s members and creditors.
7. A number of secured and unsecured creditors of the applicants subsequently petitioned for their bankruptcies and on 25 June 2001 sequestration orders were made in respect of both applicants based on an act of bankruptcy on 30 March 2001 (T10). The applicants filed statements of affairs with the trustee on 13 July 2001 and in the ordinary course would have been discharged from bankruptcy 3 years after that date. However, the effect of the objections made by the trustee was, pursuant to s 149A of the Act, to extend the period of bankruptcy from 3 years to 8 years.
Legislative framework
8. Section 149A of the Act provides that if an objection is made to the discharge of a bankrupt then the date of discharge of the person from bankruptcy is extended from 3 years to, depending on the grounds of the objection, 5 years or 8 years. Section 149B of the Act relevantly provides that at any time before a bankrupt is discharged the trustee may file a written notice of objection to the discharge and that such a notice must be filed if the trustee believes that doing so will cause the bankrupt to do something which he or she is required to do by law, and there is no other way the trustee is able to induce the bankrupt to do so.
9. Section 149C of the Act relevantly provides that 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 sub-section 149D(1) but not being a ground or grounds for the 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.”
10. Section 149D(1) of the Act specifies the grounds of objection that may be set out in a notice of objection. The relevant grounds in the present proceedings are as follows:
“(1) …
(d)the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request;
…
(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)spent money but failed to explain adequately to the trustee the purpose for which the money was spent; or
(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;
…
(n)the bankrupt failed, whether intentionally or not, to disclose to the trustee the bankrupt’s beneficial interest in any property.”
11. Section 77 (ba) provides that a bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause, “give such information about any of the bankrupt’s conduct and examinable affairs as the trustee requires”. Section 77(g) similarly provides that a bankrupt shall “aid to the utmost of his power in the administration of his estate.”
12. Section 77C of the Act relevantly provides that the official receiver, by written notice given to a bankrupt or other person, may require the person:
‘(a)to give to the official receiver such information as the official receiver requires for the purposes of the functions of the official receiver or a trustee under this Act; and
(b)to attend before the official receiver or before an officer authorised in writing by the official receiver to exercise powers under this paragraph, and
(i)give evidence; and
(ii)produce all books in the possession of the person;
relating to any matters connected with the performance of the functions of the official receiver or a trustee or this Act.”
13. On 21 November 2001 the official receiver gave notice to both applicants under s 77C that they were required to attend before an authorised ITSA officer to give evidence “relating to any matters involving their examinable affairs”, and to produce the books and documents listed in the Schedule to that notice (T36). The Schedule specified that bank statements and other records were to be produced relating to several specified transactions involving dealings with several assets, the receipt by the applicants of amounts of money and the subsequent disposal of that money. The applicants subsequently provided some information in writing and orally.
14. On 26 April 2002 the applicants were both examined before a Deputy Registrar of the Federal Court about their affairs and bankruptcies by representatives of the trustee and various creditors. The notices of objection (T4 and T5) followed in September 2002.
Notices of objection
15. In Re Harris: ex parte Harris and Official Trustee [1997] 627 FCA, Einfeld J observed that a failure of a notice of objection to comply with the requirements of s 149C(1) of the Act either strictly or substantially will render the notice invalid and not avoid the automatic discharge of the bankrupt. His Honour referred to the observation of Branson J in Re Hall [1994] 14 ACSR 488 at [20]:
“I consider that Section 149C is intended to give a bankrupt a comparable entitlement to be fully informed by notice of objection to discharge from bankruptcy as to the bases upon which such notice has been filed. He or she must determine whether to take the matter further, and if so, whether to make representations to the trustee or official receiver, seek an internal review by the Inspector General or an external review by the Administrative Appeals Tribunal or proceed in an appropriate court of law.”
16. The two notices of objection issued to the applicants were in similar terms. In relation to the grounds of objection, both notices set out the terms of sub-sections 149D(1)(d), (g) and (n), following the terms of the Act. In my opinion the notices clearly set out the grounds that are relied upon and I am satisfied that the two applicants would have understood the grounds of the trustee’s objection. I am therefore satisfied that the two notices of objection complied with the requirements of s 149C(1) (a).
17. In relation to s 149C(1)(b), Branson J observed in Re Hall that:
“[24] … a reference to such evidence or other material must at the least, I consider, identify such evidence or other material in an unambiguous way.
[25]the notice of objection should put the bankrupt in a position where he or she can identify, and if necessary search out, the evidence or other material relied upon for the purpose of the objection. Only if the bankrupt is in a position to do this can he or she sensibly determine:
(a)whether to make representations to the party who filed the notice of objection concerning such evidence or the use made of it;
(b)whether it would be appropriate to seek a review to allow the accuracy of such evidence or other material to be challenged;
(c)whether, on any review, the weight accorded to such evidence or other material should be questioned;
(d)whether there may be answering evidence or material which might fruitfully be sought out for the purposes of any review.”
18. In relation to the evidence or material relied upon to establish the specified grounds, the notices dealt with each of the grounds separately. The notices set out some two and a half pages of material, identifying 6 specified categories of transactions and receipt and expenditure of moneys, including transactions involving various specified motor vehicles, horses, a caravan and substantial sums of money from building customers. The applicants have raised no issue about whether the statement of evidence satisfies the requirements of s 149C(1)(b) in terms of the specificity or extent of information referred to. In my opinion, and I so find, the applicants were provided with a description of the evidence or material relied upon by the trustee that was sufficient to enable them to identify that evidence and material and make informed decisions about what action to take next. In that respect I note that immediately upon receipt of the notices of objection the applicants wrote a 5 page letter plus attachments to the respondent (dated 23 September 2002, T47), dealing with the matters referred to in the notices of objection. At the same time they lodged their applications for review with the Tribunal.
19. I therefore turn to consider whether the material before me demonstrates that the grounds specified in the notices are made out. The respondent advised the Tribunal that it did not seek to rely on several of the issues specified in the notices in relation to several grounds of objection, namely:
·s 149D(1)(d) - failure to provide information about ownership of the business of Graham Plant Homes
-failure to provide information about the receipt and expenditure of $36,267 from Mr and Mrs Lucas
-failure to provide information about the source of $12,000 paid in respect of a horse “Go Cantra”
·S 149D (g)(i) - failure to explain expenditure of $32,267 received from Mr and Mrs Lucas
I take that advice to represent a withdrawal by the respondent of those grounds of objection and I will not consider those issues further in these reasons.
20. Of the remaining matters, because there is some overlap between the specified grounds of objection in relation to some transactions it is convenient to deal with all the grounds relating to each asset or transaction together.
Datsun (Nissan) sports car
21. The notices of objection asserted that the applicants had, despite correspondence, not provided information that explained adequately the “purchase, ownership, and sale or disposition” of a sports car, contrary to s 149D(1)(d). The vehicle was not disclosed in the statements of affairs and in a letter of 13 August 2001 the respondent asked if the applicants had ever owned or used the Datsun vehicle and, if so, what happened to it; if it was sold, to whom had it been sold and for what amounts and what happened to the funds.
22. Document T20 at page 149 contains notes made by an officer of the respondent at a meeting with the applicants on 20 August 2001. The notes made concerning the Datsun vehicle were as follows:
“A 1992 motor vehicle. Sold it mid 1998 for $35,000 (received $34,008). Used the funds to pay Giant Autos Pty Ltd … . The [applicants] had bought a boat (cruiser) for $58,000 with small loan from Esanda finance. Used part of the money to pay back Esanda and almost (sic) of the rest to pay back overdraft with [National Australia Bank]. Proof of this (receipt) with Hall Chadwick (their company liquidator).”
23. The s 77C notice issued in November 2001 sought the production of bank statements and other records to show the amount received on the sale of the vehicle and that part had been used to discharge a loan to Esanda and the rest used to pay back an overdraft with the bank. The notice referred to the information provided on 20 August 2001 and that Hall Chadwick had informed the respondent that it only held records of the applicant’s financial affairs from July 2000 and held no records relating to this particular matter.
24. Mr Plant, in a letter of 29 November 2001 (T38) to the respondent, referred to this issue as follows:
“There is confusing information in regard to a Nissan sports car … the knowledge I have is more in line with a boat (cruiser) Leeder 710 Deluxe sold November 2000. Information supplied herewith. The full balance of the cheque refund was deposited to the bank account overdraft of [Jaeger].”
25. Mr Plant was asked about the Datsun vehicle in his examination in April 2002. He advised that he had purchased the vehicle in 1992 for $49,000 and had sold it in August 1998 because he had a “surplus of vehicles” and a “passion for a Leeder 23 boat. So I traded that in and bought the boat.” He said that the motor dealer with whom he dealt had not taken the vehicle on consignment but had purchased the vehicle outright and gave him a cheque for $35,000, which he had applied to part payment of the boat (T docs – pages 274-275).
26. Mr Plant was also asked at the examination about the purchase and sale of the boat and provided the information set out below at [97]. It is apparent from the questions asked of Mr Plant that counsel representing the respondent had access to a bundle of documents relating to the boat and the disposition of the proceeds.
27. The respondent’s submission in relation to this issue was that Mr Plant had failed to provide the written information sought in the s 77C notice in the form of bank statements and other records to show that he received $34,000 from the sale of this vehicle and that he used part of the funds to pay Esanda, and that he used the rest of the funds to pay a National Australia Bank overdraft.
28. In my opinion the respondent’s submission perpetuates the confusion that is apparent from the interview notes of 20 August 2001, in which the proceeds of the sale of the Datsun vehicle in 1988 are confused with the proceeds of the sale of the boat in 2000.
29. Mr Plant in his letter of 29 November 2001 may have attempted to rectify that confusion but may, in the end, have served only to further cloud the issue.
30. In my opinion, by no later than the time of Mr Plant’s examination in April 2002, the respondent was aware that the proceeds of the sale of the Datsun vehicle in 1998 had been used to part pay for the boat that was purchased at that time and that the proceeds of the sale of the boat had been used partly to repay the loan from Esanda (that had been obtained to part fund the purchase of the boat) and partly by way of deposit in Jaeger’s overdrawn bank account.
31. In my opinion, neither applicant failed to provide information to explain adequately how the proceeds of sale of the Datsun had been disposed of and I find that this ground of objection is not made out.
Toyota Land Cruiser
32. Mr Plant’s Statement of Affairs at question 28 disclosed that he owned a 1997 Toyota Land Cruiser with an estimated resale value of $32,000 but on which an amount of $31,000 was owed. The respondent’s letter of 13 August 2001 to the applicants sought information about this vehicle similar to that sought in relation to the Datsun referred to at [21] above. The interview notes in relation to the information provided by the applicants on 20 August 2001 records, in relation to this vehicle, that:
“This is a leased vehicle with Toyota Finance Australia. Value is about $29,000 and about $28,000 is owing … nil equity.”
33. By letter dated 9 November 2001 (T33) the respondent requested the applicants obtain a written appraisal of the vehicle from a registered motor vehicle dealer. In his reply of 19 November 2001 (T35) Mr Plant simply stated that the vehicle was leased from Toyota Finance with no equity in it and made no reference to obtaining an appraisal of its value. At his examination in April 2002 Mr Plant confirmed that the vehicle was being leased from Toyota Finance at a cost of approximately $1,100 per month and that it was used as a family vehicle by he and his wife. He was not asked questions about the value of the vehicle or why he did not obtain an appraisal as requested.
34. In a report made pursuant to s 19AA(2) of the Act dated 16 April 2002 (T43) by the respondent, reference is made to the Toyota vehicle with a reference that “there is no equity in it for the Trustee to effect realisation”.
35. On the evidence before me I find that the applicants did not provide an appraisal of the value of the vehicle from a registered motor vehicle dealer, and in that respect they failed to provide information requested of them. I find therefore that in relation to this asset the ground specified in the notices of objection under s 149D(1)(d) is made out.
Ford Falcon Utility
36. In his Statement of Affairs Mr Plant disclosed that he had disposed of this vehicle on 11 June 2001, that it was worth $18,000 and that he had received that amount for it. He said that the vehicle had been transferred to a David Knox.
37. The respondent’s letter of 13 August 2001 sought information about this vehicle similar to that sought in relation to the other vehicles referred to above. The interview notes of the information provided on 20 August 2001 by the applicants recorded as follows:
“This was sold on 11 June 2001 for $18,000 to a David John Knox. Of this amount the [applicants] paid $6,000 to Jackson McDonald and about $7,000 to Hall Chadwick, rest living expenses.”
38. In a letter dated 7 November 2001 (T31) to Mr Plant the respondent referred to that information and sought confirmation that Jackson McDonald (a firm of solicitors) had represented the applicants in the bankruptcy applications until shortly before the petitions were heard and that Hall Chadwick had acted in relation to the liquidation of Jaeger. The letter stated that the payments to the two firms might be preferential under s 122 of the Act and recoverable by the Trustee. Accordingly, the letter asked that Mr Plant provide the respondent with copies of bank and other records to show that he had received $18,000 and to show that he had made the two payments to the two firms (including exact amounts paid and actual dates of payment) and copies of the accounts issued by the two firms which led to the payments. The letter also sought confirmation that the applicants, at the time of the payments to the two firms, were both unable to meet their debts as they became due and that the two firms were aware of the insolvency and impending bankruptcy. The letter also sought information about whether the firms had sent any letters of demand or threatened any legal action for payment and why the applicants had made payments to those two firms only, and not to other unsecured creditors.
39. In his letter dated 19 November 2001 (T35) Mr Plant informed the respondent that the Ford vehicle had been sold before he had been made bankrupt and that he had been advised by his solicitors that he could sell this vehicle in order to pay his personal debts. The letter said that the purchaser of the vehicle had paid $18,000 by a bank cheque which Mr Plant had cashed and spent on living expenses as they fell due up to the date of the letter.
40. The s 77C notice issued on 21 November 2001 sought bank statements and other records to show the receipt of the money from Mr Knox and the payment of the two amounts to the two firms mentioned above.
41. In a letter dated 29 November 2001 (T8) from Mr Plant to the respondent he stated that the bank cheque received from Mr Knox had been cashed and the proceeds used for “personal debt and living”.
42. In his examination in April 2002 Mr Plant confirmed that on 11 June 2001 when he sold the vehicle to Mr Knox he and his wife had already received creditors’ petitions seeking their bankruptcy. Once again, it is apparent from the transcript of the examination (T documents at pages 240 – 244) that counsel representing the respondent had access to documentary material regarding the motor vehicle. That documentary material is not before me. The transcript of the examination reveals that the Ford vehicle had been purchased with funds from trading in two other vehicles, and the payment of a further amount of cash. Mr Plant said that he had advertised the Ford for sale over a period of 3 or 4 months in newspapers and that Mr Knox had responded to an advertisement. Payment had been by bank cheque but the cheque had not been deposited into any bank account. Mr Plant said that he had cashed the cheque at a bank in Geraldton and the resulting cash had been spent on monthly living expenses and commitments. Mr Plant was asked extensively to identify how the money had been spent, but was unable to do so other than to say that their monthly living expenses were in the vicinity of $6,000 - $7,000 -but he acknowledged that that was an estimate that he had “plucked out of the air”. He said that the cash had been kept at home, that he had not given any of the money to anybody else (including Mrs Plant) and that the money had all been spent within 2 or 3 months after June 2001. He agreed that although he had told the trustee about the sale of the vehicle he did not disclose to he Trustee that he had the $18,000 or part thereof in cash.
43. The respondent submitted that Mr Plant had not complied with the request in the s 77C notice to provide bank statements and other records to show that he received the money from Mr Knox and where the money was deposited and how the moneys were spent.
44. It is apparent that Mr Plant did provide some information about the receipt and expenditure of the moneys for the sale of the vehicle, but that information was not all that the respondent thought was needed in order to gain a full understanding of what had happened. From Mr Plant’s evidence, the bank cheque had been cashed and spent without passing through any bank accounts. Accordingly, there would not have been any bank statements or other records that would record the movement of funds in a way that identified the receipt and expenditure of the funds as being the proceeds of the sale of the vehicle.
45. As Weinberg J observed in Wharton v Official Receiver in Bankruptcy [2001] FCA 96 at [69], the word “information” is capable of different shades of meaning, depending on the context. In its ordinary sense the word is not confined to material that is reliable or has a sound factual basis and Parliament has not defined the word in a manner that makes it clear that the information a bankrupt must provide is information that is both complete and accurate. The availability of other grounds of objection in s 149D(1) that focus on the accuracy of information provides support for that construction. Weinberg J concluded at [70] that s 149D(1)(d) requires no more than that the bankrupt must provide what can properly be described as information, and not that this information have any quality of accuracy or reliability.
46. In my opinion Mr Plant did provide information regarding the sale of the vehicle and the disposition of the proceeds, even though that information was not helpful to the respondent in terms of gaining a reliable understanding of the expenditure. I find therefore that the ground of objection contained in s 149D(1)(d) in relation to this matter is not made out.
47. However, the notice of objection also nominated the ground contained in s 149D(g)(i) in that Mr Plant failed to adequately explain how the $18,000 proceeds were spent despite the request for this information in the s 77C notice and the questions at his public examination. In my opinion the information provided by Mr Plant in his various letters to the respondent and his answers to the questions in his examination about how the proceeds of the sale of the vehicle were disposed did not provide an adequate explanation of the purposes for which the money had been spent. The advice given on 20 August 2001 that about $13,000 of the proceeds had been paid to Jackson McDonald and Hall Chadwick is inconsistent with the statement in the letter of 19 November 2001 that the proceeds were used for living expenses, and also inconsistent with the information provided by letter of 29 November 2001 in response to the s 77C statement that Hall Chadwick had been paid an amount from a Jaeger bank account and a payment made on a visa card, and that Jackson McDonald had been paid by monthly accounts from October 2000 until the last payment on 1 June 2001 when their services were terminated. In other words, there were no payments to Jackson McDonald after the date of receipt of the proceeds of the sale of the vehicle.
48. The answers given in the examination by Mr Plant were vague and evasive, in my opinion. He conceded that he had plucked the figure of $6,000 or $7,000 per month living expenses out of the air and he did not identify with any particularity how the money had been spent.
49. In my opinion, the ground specified in the notices that the applicants failed to adequately explain the purposes for which the $18,000 was spent is made out.
Caravan
50. No mention was made of a caravan in the Statements of Affairs as either an asset of the applicants at that time, or as an asset that had been transferred, given away or sold worth more than $1,000 in the last 5 years.
51. The respondent’s letter of 13 August 2001 to the applicants sought information about the caravan in similar terms to the other assets referred to above and the interview notes for the meeting on 20 August 2001 record that the applicants informed the respondent that the caravan “was owned by them for about 3 years and parked at their home. It was sold on 27 April 2001 for $8,000 which went towards living expenses (they had no income for 9 months and two children to support) and had to pay mortgage repayments of about $2,500 per month.”
52. The respondent’s letter of 7 November 2001 to Mr Plant referred to that information, noting that Mr Plant had provided copies of a vehicle transfer document showing that the caravan had been transferred into the name of his mother (Mrs Catherine Plant) and a receipt dated 27 April 2001 showing that his mother had paid $8,000 for the caravan. The letter asked that Mr Plant provide “basic documentation (e.g. bank records) to show or prove that the $8,000 came from your mother’s own account (i.e. that she actually paid for it from her own moneys), and also copies of bank statements to show where the $8,000 were (sic) deposited.”
53. Mr Plant’s response (by letter of 19 November 2001) was that the caravan “was sold on 27 April 2001, two months prior to my being made bankrupt, sold legally and legitimately.”
54. The s 77C notice requested bank statements and other records to prove that the $8,000 had come from Mrs Catherine Plant’s own bank account or other financial resources and to show where the proceeds of $8,000 were deposited and how the moneys were spent. In his response to that notice (letter of 29 November 2001) Mr Plant advised the respondent that the caravan had been sold to his mother “for the amount of $8,000 cash (moneys from her own cash funds) with the request made by herself that upon payment of such a large payment, she required the caravan as security for her own purpose. She will vehemently defend this action in court if required to do.”
55. Document T39 is a note made by an officer of the respondent of information provided by the applicants at a meeting on 12 December 2001. In relation to the caravan the note records that the applicants advised that Mrs Catherine Plant had provided the purchase moneys from her own funds and claimed that “she mostly kept the cash at home and it is not illegal to keep cash at home. They cannot supply bank statements to show that the funds came from the mother. Of the $8,000 received from the mother the [applicants] kept $2,000 for their expenses and put $6,000 into their National Australia Bank account on 4 May 2001.”
56. By letter dated 4 February 2002 (T40) the respondent put a number of specific questions to Mrs Catherine Plant concerning the purchase of the caravan and the method of payment. By letter dated 15 February 2002 (T41) Mrs Catherine Plant informed the respondent that Mr Plant had informed her that he was having difficulties paying his bills at the time, that he was advertising his caravan for sale and needed money urgently. She had agreed to buy the caravan for $8,000 and paid $8,000 in cash and obtained a receipt for the payment. She had not been aware of the business problems of Mr and Mrs Plant or any bankruptcy proceedings at that time. She stated that she had never received any money from Mr or Mrs Plant at any time, and that she kept substantial amounts of cash at her home.
57. In his public examination Mr Plant said that the caravan had been owned only by him and that he had advertised it for some months at a price in excess of $8,000 before agreeing to sell it to his mother at that price. Mr Plant was referred to a letter dated 19 November 2001 that he said was in his wife’s handwriting but signed by his mother. The transcript of the examination (T documents at page 270) records Mr Plant as reading the text of the letter as follows:
“Upon request for money from my son Graham, I paid $8,000 cash to him on 27 April, and as explained to him then I required some form of security when he offered his personal caravan.”
58. Notwithstanding the reference to his mother requiring some form of security, Mr Plant insisted in response to questioning that the transaction had involved an outright sale of the caravan to his mother and was not some form of a loan from his mother to him, secured by the caravan.
59. Mr Plant’s response to questions at his examination were somewhat contradictory in relation to how the amount of $8,000 had been arrived at and whether he had or had not asked for payment in cash (transcript of examination at T documents page 273). Mr Plant said that he had placed $6,000 into his personal bank account, and had kept $2,000 in cash which he had spent on personal expenditure, but could not recall what that expenditure was. He acknowledged that he had not disclosed receipt of the $8,000 to the trustee in his Statement of Affairs.
60. The applicants’ dealings in relation to the caravan are the subject of two grounds of objection. The first is that, pursuant to s 149D(1)(d), Mr Plant failed to provide information by way of bank statements and other records (as requested by the s 77C notice) to prove that the $8,000 paid for the caravan by his mother came from her own bank account or financial resources. It is apparent from the evidence outlined above that information was provided by Mr Plant, and corroborated by independent enquiries by the respondent of his mother, that the funds had been paid in cash by Mrs Catherine Plant from her own financial resources. Whether that information is reliable or not, it is for the reasons outlined at [45] above information that, in my opinion, satisfies the requirement of s 149D(1)(d). In my opinion, this ground of objection is not made out.
61. The second ground of objection is pursuant to s 149D(1)(n), namely that Mr Plant failed to disclose to the trustee an interest in property. At question 34 of his Statement of Affairs Mr Plant answered “yes” to the questions “Have you transferred, given away or sold any asset worth more than $1,000 in the last 5 years?” At question 50 of the Statement he provided details of that response by listing the Ford vehicle and boat referred to above, but failed to disclose the caravan, which had been sold in April 2001, or two months prior to the date of bankruptcy.
62. There is no doubt that Mr Plant failed to disclose his interest in the caravan or the proceeds of its sale. None of the documents before me provide any kind of explanation as to why that failure occurred, or whether it was intentional or otherwise. I find that the ground of objection under s 149D(1)(n) is made out in relation to Mr Plant.
$55,540 received from Mr and Mrs Ley
63. The applicants’ Statements of Affairs made no reference to receipt of an amount of $55,540 paid by Mr and Mrs Ley on 22 March 2001 by bank cheque to complete their home that was then under construction. The respondent’s letter of 13 August 2001 to the applicants referred to that payment and stated that the applicants were required to give “an accounting as to what you have done with the money. Where did you deposit the funds? How did you use or spend the moneys? Please provide me with full details of your use of the funds.” The interview notes for the meeting on 20 August 2001 record the following information as having been provided by the applicants:
“They put the money into CBA account 6512 10248871 (Streamline Account) on advice of their accountant Hall Chadwick. Took out $40,000 cash on 9 April 2001 to pay off some personal debts, telephone, fuel, maintenance of motor vehicles, visa cards, etc.”
64. The respondent’s letter to the applicants of 3 September 2001 asked that the applicants provide “a written accounting of how the moneys were spent. I appreciate that you have told me that you withdrew $40,000 from the bank in cash on 9 April 2001. But I need a written accounting from you as to what has happened to the moneys (e.g. names and addresses of the various creditors, or trades suppliers) to whom you made payments etc.”
65. On 8 November 2001 the respondent sent a further letter to Mr Plant, referring to the amount received from Mr and Mrs Ley and another amount, and noting that the funds were said to have been used for various purposes including paying off some personal debts etc. The letter stated that the payments may be preference payments and recoverable by the trustee for the benefit of the estate. The letter referred to copies of bank statements from two banks but noted that the statements provided only cheque butt numbers and did not provide information that would enable the party who received the payments to be identified. The letter requested information and supporting documentation about to whom the payments had been made, and invoices and accounts from trade creditors so that the respondent could attempt to recover the moneys. Mr Plant’s letter of 19 November 2001 to the respondent, in relation to the cheque received from Mr and Mrs Ley and another party, stated that “the two cheques in question … have been explained the best I can previously to yourself. Again I mention we do not have any business books in our possession. Hall Chadwick are the guardians of these books.”
66. The s 77C notice issued to the applicants sought a list of creditors (names and addresses) who were paid from a specified bank account. Specifically, the notice referred to 7 cheques for various amounts dated between 26 March 2001 and 10 May 2001, and sought the production of the specified cheque butts and the relevant invoices and documents that led to these payments.
67. The file note made by an officer of the respondent of a meeting held with the applicants on 21 November 2001 recorded in relation to the production of books of accounts, bank statements etc that the officer had informed the applicants of their responsibility to provide these documents because Hall Chadwick had told the officer that some of the documents were not held by them. The applicants undertook to look into the matter and obtain the required documents.
68. In his response to the s 77C notice dated 29 November 2001 Mr Plant referred to how another cheque from a building customer had been dealt with, but made no reference to the request for information regarding the cheque received from Mr and Mrs Ley.
69. The file note made by an officer of the respondent concerning information provided by the applicants at a meeting on 12 December 2001 (T39) noted in relation to the funds paid by Mr and Mrs Ley that the funds had been paid into the applicants’ personal bank account on the advice of the liquidator of Jaeger, because the company accounts were frozen and that the applicants still had to pay the expenses of some suppliers.
70. At his examination Mr Plant confirmed that the cheque for $55,540 had been paid into his personal account on 20 March 2001 and that an amount of $40,000 had been withdrawn in cash on 9 April 2001. He was referred to a letter dated 7 September 2001 that he had written to the respondent in which he said that “$40,000 was reclaimed by myself as I was professionally advised by two sources to do so.” I note that this letter is not included in the T documents and I am unaware of what other information it may have contained. Mr Plant was adamant that he had not misunderstood what he had been told by the representatives of the accounting and legal firms that he had spoken to, and that he was sure that he had been able to claim what he considered to be his “own personal money” and that he had not considered the fact that he may have owed over $100,000 to trade creditors at the time. It appears from the transcript of the examination (T documents page 308) that the $40,000 was supposed to represent moneys that Mr Plant believed belonged to him personally because they were the part proceeds of the sale of the boat and the caravan (notwithstanding from the evidence set out above that the moneys received for the caravan were not received until at least 27 April 2001).
71. Mr Plant’s evidence at the examination was that he had spent the $40,000 on “months of living” after April. The transcript records that Mr Plant was not sure whether he had spent all of the $40,000 between 9 April 2001 and the date of the bankruptcy orders on 25 June 2001. He confirmed that none of the money had been paid to trade creditors and that it was all used for personal living expenses. He agreed that a number of regular financial commitments (such as lease payments on the Toyota Land Cruiser) were being paid from that bank account and were not paid from the cash that he had withdrawn. He was not able to identify any specific individual transaction of material size that was paid from the $40,000 cash. He agreed that he had substantially most of the $40,000 left at the time that he received the money from his mother for the caravan, and he agreed that he had not disclosed the existence of the $40,000 in cash to the trustee upon his bankruptcy.
72. In her examination Mrs Plant said that the amount of $40,000 withdrawn was her husband’s money as far as she knew and she didn’t know what the circumstances of the withdrawal were, or whether it was in cash or by cheque. She said that Mr Plant had informed her that he was withdrawing some money out of the bank but because he was the person in the family who did all the banking she never questioned him about it.
73. In relation to this matter again there are two grounds of objection. The first is pursuant to s 149D(1)(d) - that the applicants had not provided a full accounting as to what was done with the $55,540 and, particularly, the $40,000 cash that had been withdrawn from the bank account.
74. Once again, I consider that the applicants have provided information about the expenditure of the $55,540 even though it has not been provided in a complete and reliable form as required by the respondent. In my opinion, the ground of objection under s 149D(1)(d) is not made out.
75. However, the second ground of objection in relation to this matter is pursuant to s149D(g)(i) - in that the applicants failed to explain adequately the purpose for which the $40,000 in cash that was withdrawn from the bank was spent.
76. In my opinion the evidence set out above demonstrates that the applicants have failed to provide any kind of meaningful or comprehensive explanation as to how and why the amount of $40,000 in cash was spent. Neither Mr Plant nor Mrs Plant made any meaningful effort to explain the expenditure of those funds and I find that the ground of objection under s 149D(g)(i) is made out in relation to both applicants.
Payments to Hall Chadwick
77. Hall Chadwick is the firm of accountants engaged by the applicants in February 2001 to give advice and arrange the liquidation of Jaeger. No references were made to payments to that firm in either of the Statements of Affairs filed by the applicants. As noted above, on 20 August 2001 the applicants informed the Trustee that $7,000 had been paid to Hall Chadwick out of the proceeds of the sale of the Ford vehicle that had been sold on 11 June 2001 for $18,000 (T20). In response to the respondent’s request for further information about the payments (T31) Mr Plant informed the respondent by letter of 19 November 2001 (T35) that Hall Chadwick’s accounts had been paid in March 2001, the applicants having approached the firm in January or February 2001. The letter said that Mr Plant had paid Hall Chadwick personally because he had engaged the firm to act on his behalf. The s 77C notice sought documentary evidence showing the amounts paid to Hall Chadwick and copies of invoices, and letters of demand relating to any payments.
78. The applicants informed the respondent at a meeting on 21 November 2001 (T37) that Hall Chadwick had been paid $5,000 in February 2001 because it was necessary to do so to obtain the liquidation of Jaeger. However, Mr Plant’s letter to the respondent of 29 November 2001 (T38) informed the respondent that the money paid to Hall Chadwick had been paid by Jaeger in March 2001 to cover the cost of winding up the company, and that a balance of $2,000 had been paid to Hall Chadwick by way of a visa card.
79. At his examination Mr Plant was not asked questions specifically concerning the details of payments to Hall Chadwick but did confirm that he had paid at least one amount to the firm via a visa card. Once again it is apparent from the transcript of the examination that various documents were tendered and discussed at the examination, but those documents do not form part of the T documents. From the documentary evidence before me it is by no means clear precisely how much money was paid to Hall Chadwick, when it was paid, whether invoices issued from the firm in respect of the amounts paid, and whether it was Jaeger or the applicants personally who paid the amounts. The explanations offered by the applicants changed over time and the position remains unclear. Nevertheless, I do not consider that it can be said that the applicants failed to provide information in the way that is required by s 149D(1)(d), even though the information that was provided was not consistent and not comprehensive. On balance, I consider that this ground of objection is not made out against either applicant.
Payments to Jackson McDonald
80. Jackson McDonald is a firm of solicitors that was consulted by the applicants during 2000 in relation to disputes that had arisen in connection with GST payments on several building contracts, in relation to a possible claim against the accountant who had been engaged to incorporate Jaeger for the purpose of having the company take over the partnership business, and eventually in relation to insolvency matters. No reference was made to previous payments to that firm in either of the Statements of Affairs filed by the applicants but the firm was shown as an unsecured creditor for $5,000, with “01/01” being nominated as the month and year the debt was incurred. As was the case in relation to payments to Hall Chadwick, the applicants initially informed the respondent (T20) that $6,000 had been paid to Jackson McDonald out of the proceeds of the sale of the Ford vehicle. Once again the respondent sought further information by letter of 7 November 2001 (T31) concerning details of payments made to Jackson McDonald and on 19 November 2001 (T35) Mr Plant informed the respondent that payments had been made to Jackson McDonald from October 2000, and that the amount paid for the Ford vehicle was not the source of the funds. The s 77C notice sought documentary evidence regarding the amounts paid, copies of invoices and receipts and also confirmation as to whether the firm was aware that the applicants were insolvent at the time the various payments were made.
81. The applicants informed the respondent on 21 November 2001 (T37) that they had made several payments to Jackson McDonald without being put under pressure to make those payments, and it was Jackson McDonald who had advised the applicants to consult Hall Chadwick regarding putting Jaeger into liquidation. In his letter to the respondent of 29 November 2001 (T38) Mr Plant informed the respondent that Jackson McDonald had been paid by way of monthly accounts from October 2001 until a final payment on 1 June 2002. However, according to document T39, the applicants informed the respondent on 12 December 2001 that the payments to Jackson McDonald had in fact been made by Jaeger, rather than the applicants personally and hence no question of any preferential payment by the applicants should arise.
82. In his public examination Mr Plant confirmed the payment of monthly amounts to Jackson McDonald and appeared to confirm that the proceeds of sale of the Ford vehicle had not been the source of funds for those payments. It is apparent from the transcript of the examination (T documents page 256) that Mr Plant at some stage did produce a number of invoices from Jackson McDonald and (T documents page 257) undertook to produce further invoices. Whether he did or not is not disclosed in the T documents.
83. Once again it is clear that the applicants, and in particular Mr Plant, provided confused and confusing information about the payments made and the source of those payments. Nevertheless, he did provide information about the payments even though it was not complete and, on balance, I do not consider that the evidence before me makes out the ground for objection specified under s 149D(1)(d) in relation to either applicant.
Ownership and disposal of 3 race horses
84. In their Statements of Affairs the applicants did not disclose any ownership or recent disposal of horses. By letter of 21 September 2001 (T23) the respondent asked the applicants to advise whether they had owned race horses now or in the past and, if so, to provide full details of ownership, value, present location. Specifically, they were asked if they or any child or relative had an interest in a horse name Go Cantra. By letter of 28 September 2001 (T24) Mr Plant advised the respondent that he owned a race horse named Barter Boy, which he had tried to sell between December 2000 and February 2001, and which would now be worth “$100 if a buyer could be found”. The horse Go Cantra was owned by his mother and Mr Plant said that he had no interest in the horse. He estimated the value of Go Cantra at $1,000. Document T25 records information obtained by the respondent from the W A Turf Club on 5 October 2001 to the effect that the applicants continued to own Barter Boy, and had disposed of Go Cantra (on 17 August 2001 to Mr Plant’s mother) and a third horse, Kaicello’s Magic, on 1 December 2001 to a Mr Williams and Mr Ryan. By letter of the same date (T26) the respondent informed the applicants of the above information (referring to prize money recently won by Go Cantra) and seeking an explanation of why there had been a failure to disclose to the trustee the interest in these horses and the race winnings. Information was sought regarding the amount of the winnings, how the money had been disposed of, and details of the transactions by which Go Cantra and Kaicello’s Magic had been disposed of. By letter of 8 October 2001 (T27) the respondent sought information from Mrs Catherine Plant regarding her acquisition of Go Cantra on 17 August 2001 and confirmation of the amount and whereabouts of the race winnings.
85. Mrs Catherine Plant replied to the respondent by letter of 14 October 2001 (T28) advising that she had had no knowledge of any intending bankruptcy and thought about her son’s offer that she take over ownership of the horse (which had been made in April or May 2001) and decided to accept ownership and responsibility for what was described as “our family’s pet horse”. A receipt for the transaction was provided which showed no sale amount, and advice was given that the horse’s two wins had resulted in stake money of $14,280 before deductions for trainer and jockey. The balance was said to have been spent on all the expenses created by a race horse with no funds left over for bank deposits. At an interview on 18 October 2001 the applicants provided the respondent with a valuation for Barter Boy and Go Cantra from a licensed valuer. Barter Boy was valued at $500 and Go Cantra at $10,000, the value of the latter having increased because of recent race wins.
86. By letter of 9 November 2001 (T33) the respondent sought from the applicants advice as to the source of funds from which they had paid various expenses relating to Go Cantra totalling $6,800 - $7,000. Mr Plant replied to that letter on 19 November 2001 (T35) advising that Go Cantra was “encumbered and paid for by his own resources i.e. stake winnings”. Reference was made to a letter from the respondent dated 26 October 2001 (a copy of which is not in the T documents) and a statement is made by Mr Plant that “he will have no further interest in the above thoroughbred”.
87. At his examination Mr Plant confirmed that he and his wife had purchased Go Cantra, “possibly” in January 2000 although it may have been purchased in 1998 or 1999. The purchase price had been $12,000 and confirmed that the horse had winnings during its career (including the period prior to when it was owned by the applicants) of approximately $69,000. He said that the transaction with his mother was not really a sale, rather the horse was transferred to her because he couldn’t afford to pay training, feed and fees. He confirmed that his mother had subsequently paid $12,000 to the respondent in respect of Go Cantra.
88. In relation to Barter Boy Mr Plant confirmed at his examination that he had purchased the horse for $4,000 in 1999, that he still owned the horse, and that it was being trained by a trainer at the trainer’s expense. He thought that the horse was worth $500 and said that he had advertised it for sale some time ago. He confirmed that the ownership of the horses had not been disclosed to the trustee.
89. In relation to Kaicello’s Magic, Mr Plant confirmed to the respondent in a letter of 23 September 2002 (T47) that this horse had been owned in partnership with two other persons, one of whom was the trainer. He said that he had relinquished “my partnership” because of a personal dispute with the trainer and subsequently the horse had been injured and never raced again.
90. Against the above background, the notices of objection specified two grounds of objection as follow:
·s 149D(1)(g)(ii) - failure to explain adequately why no consideration was received for the transfer of Go Cantra and Kaicello’s Magic
·s 149D(1)(n) - failure to disclose to the trustee a beneficial interest in Go Cantra and Barter Boy
91. It is apparent from the evidence set out above that at the time the Statements of Affairs were filed with the respondent, Mr Plant owned Barter Boy and the applicants together owned Go Cantra. No disclosure was made of those interests in the Statements of Affairs and the only explanation offered by the applicants is that horses are generally regarded as a “liability” rather than an “asset” because in the long run it is not possible to make money from them. On the evidence I do not believe that that is a convincing explanation for the failure to disclose, but in any event s 149D(1)(n) specifically provides that it does not matter whether the failure to disclose was intentional or not. I find that the applicants did fail to disclose their interests in the 2 horses to the trustee, and the grounds of objection under s 149D(1)(n) is made out.
92. In relation to the ground specified under s 149D(1)(g)(ii) the only explanation that has been advanced by Mr Plant as to why ownership of Go Cantra was transferred to his mother in August 2001 was that the applicants could not afford to continue to meet the costs of maintaining the horse. It is apparent from the evidence that shortly before that transaction the horse had won substantial prize money and its value increased because of those winnings. In those circumstances an explanation as to why the horse was transferred without consideration was needed by the trustee and, in my opinion, no satisfactory explanation was or has subsequently been provided by the applicants.
93. The same can be said for Kaicello’s Magic, although it appears that that horse may have had a significantly lower value. In my opinion the information provided by Mr Plant to the respondent was meagre at best and additional information was required before it could be said that an adequate explanation had been provided as to why no consideration was received.
94. I find that the applicants failed to provide the trustee with an adequate explanation as to why no money was received in relation to the disposal of Go Cantra and Kaicello’s Magic.
Sale of boat
95. The Statement of Affairs filed by Mr Plant disclosed that a boat had been disposed of on 29 November 2000 to a Mr Abraham, that the boat had been valued at $48,000 and had been sold for that amount. The Statement, in response to a question as to whether Mr Plant had “paid a total amount of more than a $1,000 over and above your normal repayment or surrendered any assets to a creditor?” also disclosed that in December 2000 a boat having a value of $34,000 had been surrendered to the National Australia Bank. By letter dated 27 July 2001 (T documents at page 37) the respondent asked Mr Plant to advise what had happened to the $48,000 disclosed as having been received in respect of the boat. The s 77C notice issued to the applicants did not seek specific information regarding the proceeds of sale of the boat but, as has been seen above, that appears to reflect confusion about the proceeds of sale of the Datsun sports car that had been sold in mid 1998 and the proceeds used as part payment for the boat.
96. As I have already noted above, Mr Plant’s response of 29 November 2001 to the s 77C notice may have attempted, but failed, to clarify that confusion (T38). The s 19AA(2) report prepared by the respondent in April 2002 did not refer to the proceeds of the sale of the boat.
97. At his public examination Mr Plant confirmed that he was the owner of the boat and that it had been purchased in 1996 for $60,000 with $20,000 borrowed from Esanda Finance. He confirmed that the boat was sold in November or December 2000 to Mr Abraham for $48,000, that $12,740 had been paid to Esanda and the balance of $35,260 was paid into Jaeger’s bank account. He said that he had paid the money into the company’s account to “help the company, help me survive in the building industry” (T documents page 261). Mr Plant was then asked what had happened to the money that had been deposited in the bank account and he said that he had redrawn it in March 2001 in cash. However, when subsequently asked to clarify this, he said that he had not withdrawn the money from the company account at all and that it had remained in that account. Because it was his personal money (i.e. from the sale of a personal asset) the money was in effect owed to him by the company.
98. The T documents and Exhibit R1 do not contain bank statements for Jaeger for all of the relevant period. Exhibit R1 contains a bank statement for Jaeger’s account from 1 March 2001 until 9 March, and then from 31 March until 30 April 2001, none of which shows a withdrawal of approximately $35,000.
99. The examination of Mr Plant appears to have proceeded on the basis of an assumption that the proceeds of sale of the boat had been deposited to Jaeger’s account and not withdrawn by Mr Plant subsequently. Mr Plant’s initial evidence that he had withdrawn the money from the bank account may have been the result of confusion with the withdrawal of $40,000 in cash that he had made from the applicants’ personal account at the Commonwealth Bank on 9 April 2001. In the circumstances, on balance, I do not consider that the applicants have failed to provide an adequate explanation of what was done with the proceeds of sale of the boat. It is clear that part of the proceeds were used to repay a loan from Esanda and the balance was paid into the Jaeger bank account.
100. I find that this ground of objection is not made out.
Reasons for objecting
101. In the analysis above I have concluded that the evidence before me is sufficient to make out the following grounds of objection:
·s 149D(1)(d) - failure by Mr Plant to provide information regarding the value of the Toyota Land Cruiser vehicle
·s 149D(g)(i) - failure by Mr Plant to explain adequately how the $18,000 proceeds of sale of the Ford vehicle were spent
-failure by both applicants to explain adequately how the $40,000 in cash that was withdrawn from a Commonwealth Bank was spent
·s 149D(1)(g)(ii) - failure by both applicants to explain adequately why no consideration was received for the disposal of interests in the horses Go Cantra and Kaicello’s Magic
·s 149D(1)(n) - failure of both applicants to disclose their beneficial interest in the horses Go Cantra and Barter Boy
-failure by Mr Plant to disclose a beneficial interest in a caravan.
102. The notices of objection specified the following as the reasons for objecting to the discharge of the applicants from bankruptcy:
“(i) the failure to provide an adequate explanation of how proceeds of sale of assets had been spent prevented the Trustee from exercising the proper administration of the estates;
(ii)failure to disclose interests in the horses and the sale of the other assets may have deprived creditors from being paid a dividend or a more substantial dividend;
(iii)the Trustee believes that lodging the objections will encourage the applicants to discharge properly their duties under the Act;
(iv)by dealing with their assets and financial affairs in breach of the Act, the applicants have caused a financial loss to their creditors and the local business community.”
103. As Weinberg J observed in Wharton at [30], the grounds referred to in s 149D(1) “are intended, in a broad sense, to encourage bankrupts to co-operate with their trustees”. His Honour also observed at [80] that “Section 149A is an important provision. It provides a strong incentive to bankrupts to co-operate with their trustees during the administration of their estate. 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.” His Honour also observed that the filing of a notice of objection is a course of last resort.
104. In Re Ansett [1995] 56 FCA 526 at 530, Olney J observed 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 whether that conduct provides a basis or reason for the bankruptcy to be extended”. The Full Federal Court in Inspector General v Nelson (1998) 86 FCR 67, (1998) 168 ALR 340, (1998) 27 AAR 231 at FCR 78 said that in order to keep a person bankrupt beyond the ordinary period “a trustee would need to have reasons directed to achievement of a purpose of the law of bankruptcy.” The court also noted that an objection that would serve no purpose other than to penalize the bankrupt would not be a purpose of the discretion given to the trustee to object.
105. In the present case, in my opinion, the material before me reveals an administration that has been prejudiced by the failure of the applicants to disclose in a timely way interests in various assets and, more importantly, to provide any adequate explanation of how substantial sums of money were disposed of. The evidence reveals that interests in horses, (that subsequently realised $12,000) and a caravan (that realised $8,000) were not disclosed and the applicants have provided no adequate explanation about how they spent sums of $2,000 and $18,000 (the cash proceeds of the sale of the caravan and the Ford vehicle respectively) and the sum of $40,000 withdrawn from a bank account. Those amounts are not insignificant in the context of this total administration, and one consequence is that creditors may well have been deprived of a dividend or a more substantial dividend. In the s 19AA(2) report of April 2002 the respondent made the following comment:
“Although the bankrupts have usually replied to correspondence and provided some documentation and information to the Trustee whenever requested, it is generally felt that they have not made a full disclosure of all their financial affairs and dealings to the Trustee. Their answers to questions at times appear to be dubious and contradictory. They have failed to provide the Trustee with a proper accounting of their disposal of funds. In general the bankrupts do not appear to have been fully co-operative with the Trustee on their financial and business affairs. Furthermore, the bankrupts may have committed certain bankruptcy offences under the Act.”
106. The evidence before me confirms those conclusions. In my opinion an extension of the applicants’ period of bankruptcy would not be for the purpose of penalising them. It is evident that in a period of less than 6 months from the end of 2000 the applicants apparently disposed of in excess of $60,000 cash. How that money was disposed of is of ongoing relevance to the trustee because there may be other assets that the estate should have the benefit of and there may have been preferential payments made that could be recovered for the benefit of creditors. The applicants carried on business in a regional community and many of the unsecured creditors were from within that community. Any failure to realise all the properly available assets of the applicants will ultimately be to the disadvantage of the creditors generally, and the extension of the applicants’ bankruptcy will contribute to the possibility of improving the amount realised.
107. On the evidence before me, I conclude that an extension of the applicants’ bankruptcy will assist in achieving the purposes of the Act and is the correct and preferable decision. Accordingly, I affirm the decision under review to object to the discharge from bankruptcy of the applicants on the grounds that I have found to exist.
I certify that the 107 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M Allen, Member
Signed: ..............(sgd V Wong)..........................................
AssociateDate of Hearing 15 August 2003
Date of Decision 21 April 2004
Counsel for the Applicant Mr G Plant
Counsel for the Respondent Mr F Carles
Solicitor for the Respondent Carles Solicitors
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