Riaz and Inspector-General in Bankruptcy
[2021] AATA 3027
•24 August 2021
Riaz and Inspector-General in Bankruptcy [2021] AATA 3027 (24 August 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2020/5339
Re:Amar Riaz
APPLICANT
AndInspector-General in Bankruptcy
RESPONDENT
DECISION
Tribunal:Senior Member D O'Donovan
Date:24 August 2021
Place:Canberra
The Tribunal affirms the decision under review.
…………………[sgd]……………….
Senior Member D O'DonovanTaxation and Commercial – Bankruptcy – notice of objection to discharge – decision by delegate refusing to undertake a review of a notice of objection to discharge – statutory question to be addressed when deciding whether to review
Administrative Appeals Tribunal Act 1975 s 29
Bankruptcy Act 1966 ss 77(1)(G)(ii), 149(4), 149D(1)(d), 149D(1)(e), 149D(1)(g)(i), 149D(1)(g)(ii), 149D(i), 149D(1)(ia), 149K, 149N(1)
Arbon and Comcare [2017] AATA 2870
Frugtniet v Australian Securities and Investments Comission (2019) 367 ALR 695
General Steel Industries Inc v Comr for Railways (NSW) (1964) 112 CLR 125
Neffati v Inspector-General in Bankruptcy [2016] AATA 1108
Neffati and Inspector General in Bankruptcy [2017] AATA 1108 No 2
Shi v Migration Agents Registration Authority (2008) 235 CLR 286Webster v Lampard (1993) 177 CLR 598
REASONS FOR DECISION
Senior Member O'Donovan
24 August 2021
The applicant is a bankrupt. The sequestration order against his estate was made by the Federal Court of Australia on 4 May 2017. In the usual course he would have been discharged from bankruptcy three years after he filed his statement of affairs (which was filed on 22 May 2017).
However, the Bankruptcy Act 1966 (the Act) provides for the trustee in bankruptcy to object to discharge by the filing of a notice. An objection to discharge was filed by the trustee on 19 May 2020 (the Notice). The effect of the trustee’s decision to file the Notice was that the applicant will remain an undischarged bankrupt for a further period of up to 5 years.
Section 149K of the Act gives the Inspector-General (the respondent) a discretion to review a decision of the trustee to file a notice of objection:
(a)if requested to do so by the bankrupt; and
(b)the reasons for the request appear to the Inspector-General to be sufficient to justify such a review.
The applicant made a request for review on 8 June 2020.
A delegate of the respondent considered that request and made further inquiries into the circumstances surrounding the trustee’s decision. On 10 August 2020, the delegate decided, pursuant to section 149K(5) not to review the trustee’s decision to file the Notice. The decision was made on the basis that ‘there [were] insufficient grounds to justify a review’.[1]
[1] T3, page 10.
The Applicant filed an application for review in this Tribunal on 3 September 2020. Since the filing of his application, the applicant has provided some additional evidence which casts further light on issues which the trustee in bankruptcy raised. The matter came before me for hearing on 28 January 2021. Following the hearing further submissions were sought on a question of law.
The applicant’s primary contention is that unless I am satisfied that the application is without merit or vexatious, then I should decide that there are sufficient grounds to justify the review. The parties are in agreement that if I decide that there are sufficient grounds to justify a review, then I must remit the matter back to the respondent so that he can conduct the review.
For the reasons explained below, I am not satisfied that the reasons advanced by the applicant in his request for review (and at hearing) appear sufficient to justify review and the decision under review should be affirmed.
The matter does however raise a number of interesting questions about how the Inspector-General should approach his task when deciding whether to conduct a review. In particular, it raises questions about what material the Inspector-General should consider when deciding whether to undertake a review and how thoroughly the issues raised by the parties should be examined. It is appropriate to consider these questions before dealing with the more specific issues on review.
Legal Framework
The Act provides a framework for the trustee in bankruptcy to take steps to extend a person’s bankruptcy beyond the usual period. If the trustee takes those steps, the Act provides for the decision of the trustee to be reviewed.
Extending the bankruptcy
If a trustee in bankruptcy files a notice of objection prior to discharge of a person from bankruptcy and the objection is entered in the National Personal Insolvency Index then the bankruptcy is extended.
Section 149C regulates the form of the notice of objection. Section 149D specifies the grounds on which a trustee may object to discharge and section 149F imposes notice requirements on the trustee.
Once the objection is entered into the index it extends the bankruptcy for a specified period.
The trustee must end bankruptcy if grounds of objection cease
If at any time before the expiry of the further period of bankruptcy, the trustee ceases to object on one or more of the grounds specified in the notice, the trustee must give the Official Receiver a notice specifying the ground or grounds on which he no longer objects. If there is no longer an objection on any ground in the notice, then the objection ceases to have effect (s 149H) and the bankrupt is discharged.
Review of the decision of the trustee to object
If, upon being given notice of objection to discharge, a bankrupt disagrees with the decision of the trustee to file the notice, he can seek review of that decision. However the review is not as of right and is constrained in its form.
The relevant provisions are as follows:
149K – Internal review of objection
(1) The Inspector-General may review a decision of the trustee to file a notice of objection:
(a) …; or
(b) if requested to do so by the bankrupt for reasons that appear to the Inspector-General to be sufficient to justify such a review.
(2) ….
(3)A request by the bankrupt to the Inspector-General for the review of such a decision must:
(a)be in writing and given to the Inspector-General not later than 60 days after the day on which the bankrupt is notified of the trustee's objection; and
(b) be accompanied by:
(i) a copy of the notice of objection; and
(ii) any documents on which the bankrupt relies in support of the request.
(5) Within 60 days after the request is received, the Inspector-General must:
(a) decide whether to review the decision; and
(b) if the Inspector-General decides to review the decision--make his or her decision on the review.
Section 149N – Decision on review
(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 subsection (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), (ia), (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.
There are a number of observations about this statutory scheme which are worth making at the outset:
(a)The Inspector-General cannot conduct a review at the initiation of the bankrupt unless requested to do so for reasons that appear to the Inspector-General to be sufficient to justify such a review. In other words, it is the Inspector-General’s subjective assessment of the appearance of the reasons for the request that is determinative of whether the discretion to conduct a review is available;
(b)It is the grounds of objection specified in the original notice which are the subject of review. It is irrelevant that there might be other grounds available which the trustee could have relied on but didn’t. The content of the Notice has enduring significance for considering whether a review should be conducted;
(c)A review is not a de-novo merits review of the trustee’s decision to file the notice of objection. If certain matters are established on review in relation to the trustee’s grounds or reasons, the Inspector-General must cancel the objection. If the grounds of objection specified in the notice include a ‘special ground’, the Inspector-General is prohibited from cancelling the objection if two other statutory requirements are met. The limited nature of any review has consequences for deciding whether the reasons put forward appear to justify undertaking a review;
(d)It would be open to the Inspector-General to decide whether to conduct a review based only on a consideration of the reasons included in the bankrupt’s request. There is no obligation on the Inspector-General to undertake further investigation of the claims made in the request and the documents filed with it. If on their face the reasons proffered in the request appear on the material supplied to justify a review, the Inspector-General can proceed with a review. If on their face they do not appear to justify a review, then a decision can be made not to proceed with a review. If however, the Inspector-General pursues a more elaborate process, or the matter ends up in the Tribunal, then the bankrupt can continue to add reasons which may be sufficient to justify review;
(e)Judging the appearance of the reasons for the request is inevitably affected by what information is known to the decision maker. Reasons proffered to a decision maker who knows nothing about the bankruptcy more generally may appear to justify a review. If the decision-maker knows more about the circumstances of the bankruptcy, the reasons proffered may have a very different appearance;
(f)Finally, the statute draws a distinction between deciding whether to conduct a review and the review itself. This has consequences for how a decision on whether to conduct a review is reached and how a review is conducted. Because the Inspector-General and the Tribunal are judging the appearance of the reasons in deciding whether to conduct a review, this imposes a limitation on the depth of the analysis which it is appropriate to undertake. It is not, for example, appropriate to make adverse findings of credit or make findings on contested questions of fact which require close analysis to resolve in deciding whether to conduct a review.
These principles inform the analysis which follows.
Evidence
The material before the Tribunal consisted of:
(a)The T Documents;
(b)The R Documents as filed by the Respondent on 13 July 2021;
(c)Chronology filed by Respondent dated 6 January 2021;
(d)Email of Ms Anitra YU dated 28 November 2019;
(e)Letter of GG Woodgate dated 10 July 2018;
(f)Letter of GG Woodgate dated 4 May 2020;
(g)Emails of Mr Angus Bailey dated 16 & 12 May 2017;
(h)Letter of GG Woodgate dated 8 May 2017;
(i)Letter of GG Woodgate dated 9 May 2017;
(j)Letter of GG Woodgate dated 17 July 2017;
(k)Certificate of Appointment of Trustee dated 8 May 2017;
(l)Email of Mr Angus Bailey dated 18 July 2017;
(m)Letter of GG Woodgate dated 26 July 2017;
(n)Email of Applicant attaching Car Valuation Certificate dated 24 October 2017;
(o)Emails of Mr Angus Bailey dated 8 November, 24 October & 9 October 2017;
(p)Email of Mr Angus Bailey dated 6 November 2018;
(q)Email of Mr Angus Bailey dated 28 August & 12 July 2018;
(r)Letter of GG Woodgate dated 4 May 2020;
(s)Email of Ms Anitra Yu dated 27 May 2020.
(t)Loan Agreement between Ms Shazia Qamar and the Applicant dated 20 June 2014.
(u)Email Correspondence of Ms Anitra Yu and Ms Christine Smith dated 1 July, 26 June & 19 June 2020.
Procedural History and Submissions
The grounds which can be relied upon by a trustee in objecting to a bankrupt’s discharge are enumerated in section 149D of the Act. In the applicant’s case the grounds relied upon by the trustee in the Notice filed were:
(a)The bankrupt intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in a property (s149D(1)(ma));
(b)A transfer of a particular property was void against the trustee because of section 120 or section 122 of the Act (s149D(1)(aa));
(c)After the date of bankruptcy, the bankrupt intentionally provided false or misleading information to the trustee (s149D(1)(da)).
The facts identified as supporting the grounds in the Notice were as follows:
(a)The applicant failed to disclose that he had contributed $2400 towards the purchase of a property at 29 Bendigo Drive Tarneit Vic (the Bendigo Property) (the First Ground) by his wife, Ms Shazia Qamar;
(b)The applicant transferred a property which he owned at 21 Tallinga Street Tarneit Vic (the Tallinga Property) to his wife on 5 January 2017 in consideration for ‘natural love and affection’ which constituted an undervalued transaction for the purposes of section 120 (the Second Ground);
(c)The applicant:
(i)Gave ambiguous answers given to the trustee in a meeting held on 26 May 2017 concerning the nature of his relationship with Ms Shazia Qamar and in particular the description of her as a ‘previous partner’;
(ii)failed to disclose in his statement of affairs and in an interview with the trustee on 26 May 2017 that he had transferred the Tallinga Property to Ms Qamar on or about 5 January 2017 to the trustee;
(the Third Ground).
On 8 June 2020 the applicant submitted an application for review of the objection.[2]
[2] T4, page 24 and following.
The applicant complied with the requirements in section 149K. He submitted a request for review which made serious allegations against the trustee, including that the trustee had deliberately delayed raising the issues which underpinned the Notice to the last possible moment. He asserted that there were no grounds for the trustee to extend his bankruptcy and contended that he had not been given an opportunity to explain. He requested that the he be contacted for an interview to explain his case thoroughly.[3]
[3] T4, page 26.
The request for review also included a document (an email of David Brown dated 28 May 2020) setting out arguments responding to the various grounds which the Notice had raised. In broad terms the arguments were:
(a)In relation to the Bendigo Property, the bankrupt had offered to pay the trustee well in excess of $2400 to discharge the bankruptcy;
(b)In relation to the Tallinga Property, the property was transferred to his wife because the equity was being used to repay a $30,000 loan she made to the applicant in 2014;
(c)Any misleading information provided was provided because of language difficulties in understanding the bankruptcy process.
The document also enclosed:
(a)a loan agreement entered into in June 2014 between the applicant and his wife pursuant to which Ms Qamar loaned the applicant $30,000; and
(b)a settlement statement in relation to the Tallinga Property dated 1 July 2014.
Upon receipt of the application for review the Respondent, as required by section 149K, proceeded to consider whether to conduct a review.
Whether the Inspector-General undertakes a review in response to a bankrupt’s request is a matter left to the discretion of the Inspector-General. The threshold is not a demanding one. In making the decision to proceed with a review, the focus is on assessing how the reasons given by the bankrupt for requesting the review appear. It may well be that on close examination none of the reasons advanced by the bankrupt have any substance, but that is of no significance. If the reasons appear in the subjective perception of the Inspector-General sufficient to justify a review, then the discretion to proceed with a review is available.
Whether, having satisfied himself that the reasons appear to justify a review, the Inspector-General does proceed with a review depends on the exercise of the discretion imported by the word ‘may’ in the chapeau of s149K(1).
The Tribunal must apply the same test as the Inspector-General when deciding whether to conduct a review.[4]
How the Inspector-General Decided Whether to Conduct Review
[4] However, in contrast to the power of the Inspector-General, if the Tribunal forms the view that a review should be proceeded with, the Tribunal cannot proceed to conduct the review. The Tribunal must remit the matter to the Inspector-General to conduct the review, rather than proceeding with the review itself - See Neffati v Inspector-General in Bankruptcy [2016] AATA 1108.
The task of the Tribunal is de-novo merits review and so usually there is little value in examining closely the decision under review. However, in the present case, because there is a contest about the way in which I should approach the task, I have found it useful to examine how the decision below was made and whether it conformed to the statutory requirements. It is also the case that a considerable amount of evidence was obtained in the course of the delegate’s consideration of whether to review the decision to file the Notice. This material is relevant to whether a review should be conducted.
It is fair to say that the way the delegate of the Inspector-General approached the task of considering whether or not to review the matter went well beyond an examination of the appearance of the reasons for which the review was requested.
Following receipt of the Application for Review of Objection on 8 June 2020, the delegate sought documents from the trustee in bankruptcy which were duly provided (T5). On 26 June 2020 the delegate also sought information concerning whether notices for production had been requested by the trustee. The delegate was provided with a copy of the notice issued to the applicant’s estranged wife Shazia Qamar (T6). On the same day the delegate sought further information from the trustee including seeking detail on how the trustee was satisfied that the requirements of s120 of the Act were satisfied (T7), a response to which was received on 1 July 2020. In it the trustee explained various matters including the difficulties associated with getting information about Ms Qamar. The response included more than 50 pages of attachments most of which were blank forms (T8). On 8 July 2020 the delegate spoke to an employee of the trustee in bankruptcy and got more details about the applicant’s conduct. These are recorded in a file note (T9). On 17 July 2020 the delegate sought proof from the applicant’s representative (beyond the loan agreement already provided) that $30,000 was advanced by Ms Qamar to the applicant (T10). The applicant responded advising that the $30,000 was received as a cash advance and was used towards the purchase of the Tallinga Property (T11). The delegate then chased up the applicant’s representative for a response (T12 and T13). On 31 July 2020 the delegate contacted an employee of the trustee who confirmed that the Tallinga Property transfer to Ms Qamar was an undervalued transaction because it was transferred for ‘love and affection’ (T14).
On 31 July 2020, the delegate and an associate had a telephone conversation with the applicant. The contents of that discussion are recorded in a file note (T16). The applicant conceded that he had not disclosed the $2400 he had contributed to the purchase of the Bendigo Property because ‘he wasn’t aware he had to’. The applicant also claimed that the ‘trustee never asked him about these issues’ in his interviews with the trustee. The applicant said that ‘the trustee was punishing him by lodging an objection’.
In relation to the Tallinga Property the delegate explained that it had been transferred by the applicant to the applicant’s wife, Ms Qamar for ‘natural love and affection’ on 5 January 2017. The applicant explained that he was separated from Ms Qamar and the reason the property was transferred to her was that Ms Qamar is ‘involved in a business where she buys land off the plan. She has her own ABN and she runs a property business… from time to time she asks him to do things…he said that she gave him $30,000 to buy the property…he got $30,000 from her and he had to pay her back.’ In relation to his failure to disclose the transaction in his statement of affairs, the applicant said ‘he didn’t know he had to’.
In relation to the claim that ‘after the date of bankruptcy [the applicant] intentionally provided false or misleading information to the trustee’, the delegate explained that according to the trustee, when he inquired about the applicant’s relationship with Ms Qamar, the applicant had given differing accounts as to their relationship, leaving the trustee unclear about the nature of the relationship.
The applicant indicated that he was separated from Ms Qamar and they had stopped living together since he became bankrupt.
Delegate’s Decision
The respondent’s delegate made a decision on 10 August 2020 that:
‘insufficient reasons and evidence have been made available to perform a review and therefore my decision is to refuse to conduct a review.’[5]
[5] T3, page 8.
The total absence of focus on the reasons for the request made by the bankrupt and how they ‘appear’ strongly suggests that the delegate was asking herself the wrong question. This is confirmed to a degree in the following paragraph of the delegate’s reasons:
Ultimately as you are the party requesting the review, the onus is on you to satisfy me as the delegate that there are reasons for performing the review and likewise adequately articulate why the grounds should not be confirmed or cancelled.
[emphasis added]
That phraseology suggests that the delegate was considering the matter by reference to a burden which the applicant did not have - namely to affirmatively establish that there are reasons for performing the review.
The delegate then applied section 149K(1)(b) and determined that ‘insufficient reasons and evidence have been made available to perform a review and therefore my decision is to refuse to conduct a review’.[6] Then, in the immediately following passage the delegate states:
I have decided not to conduct a review as your reasons for requesting a review do not appear to justify conducting a review and no errors are apparent on the face of the Trustee’s notice of objection which could give rise to a review.
[6] T3, page 17.
This is a more accurate expression of the delegate’s task.
I note these various formulations only for context. It is clear that a decision was made not to conduct a review and that decision was made after a thorough investigation of the matter. The decision not to review was not based on how the request appeared at first blush, but was based on what was revealed by significant further inquiries. It is in some ways difficult to reconcile this approach with the statutory formulation directing the respondent’s attention to how the request appears - but it is not impossible. In my assessment it was permissible (though perhaps not advisable) for the respondent to go beyond the contents of the request for review in considering whether to proceed with a review. The respondent was entitled to consider all of the reasons advanced by the applicant for seeking the review including any reasons advanced as the request proceeded through the respondent’s decision-making processes. In considering whether a review appeared to be justified the respondent was entitled to take into account whether those reasons appeared justified in light of the evidence available when the decision was made.
Following the decision, the applicant applied to the Tribunal for review.
Submissions and Evidence before the Tribunal
On 16 November 2020, the applicant’s representative filed submissions and evidence in support of the application for review.
Some of that material, which related to the circumstances which led to the applicant’s bankruptcy, was not relevant to this review. The applicant did however submit that ‘the three grounds on which [the trustee] has objected to discharge from bankruptcy is a wrongful imputation on the Applicant of an intention to withdraw or falsify information and/or mislead the Trustee of Bankruptcy.’ In relation to the three grounds raised by the trustee to support the Notice of Objection the following submissions were made.
In relation to the $2400 contributed to the deposit for the Bendigo Property, the applicant submitted it was an amount he owed his wife, Shazia Qamar. He had borrowed the sum in 2013 or 2014 and she requested the money to be re-paid when she purchased the Bendigo Property. He did not think he had to disclose this sum in his statement of affairs.
In relation to the transfer of the Tallinga Property the applicant submitted that he did not receive any financial advantage. He and Ms Qamar were separated. He said that he transferred the property because he could not make payments on it and he owed Ms Qamar $30,000 lent to him in 2014 when he purchased the property. When Ms Qamar insisted he repay the debt, he transferred the property to Ms Qamar to discharge the debt with the equity in the property. No stamp duty was payable because they were still married. He disagreed that this was an undervalued transaction.
In relation to the claim of providing misleading information to the Trustee, the applicant conceded that Ms Qamar is his wife. However, he also filed evidence which established that at present they are separated but not divorced. She lives in Sydney and he lives in Dubbo. The applicant submitted that from the outset he did say to the trustee that Ms Qamar was his wife, although due to the separation he may not have wanted to call her his wife. He stated that Ms Qamar represented different roles in his life including business partner and the trustee may have misunderstood him.
The applicant submitted that he did not have any beneficial interest in the relevant properties. To the extent that any information was withheld it was the fault of the person he hired as a debt solutions facilitator. He re-iterated his belief that the identified transactions did not need to be disclosed.
In support of these submissions the applicant filed evidence consisting of:
(a)Correspondence between him and the trustee in bankruptcy;
(b)A statutory declaration signed by Shazia Qamar dated 12 November 2020, which confirmed the points made in the applicant’s submission; and included a copy of a loan agreement;
(c)An email from an employee of the trustee to the delegate dated 1 July 2020 answering the delegate’s questions.
The respondent filed a statement of facts issues and contentions (respondent’s SFIC) on 8 January 2021. He also filed a bundle of further documents on 13 January 2021 as follows:
(a)Creditor’s petition dated 19 December 2016;
(b)Statement of Affairs dated 22 May 2017;
(c)An email from an employee of the trustee to the applicant dated 27 May 2020 seeking the mobile phone number of Ms Qamar and the applicant’s response;
(d)The statutory declaration of Ms Qamar dated 12 November 2020; and
(e)The applicant’s written submissions filed 16 November 2020.
The respondent’s SFIC
On 8 January 2021 the respondent filed an amended SFIC. The respondent contended that in light of what was known about the three grounds there was no sufficient reason to perform a review of the objection to discharge.
In relation the first ground, being the beneficial interest which the applicant may have in the Bendigo property, the respondent in its written submissions did not address whether as a consequence of the $2400 payment which the applicant made, he acquired a beneficial interest in the Bendigo property. Instead, the respondent’s submission focussed on whether the omission of details of the transaction from the statement of affairs was deliberate. Consequently, an essential element of the ground relied upon by the trustee went unaddressed – namely, whether the applicant had a beneficial interest in the Bendigo Property as a result of the $2400 contribution.
In relation to the Second Ground, concerning the transfer of the Tallinga Property, the respondent in its written submissions did not invite me to choose between the competing factual claims about the transfer of the property – the respondent’s claim that it was transferred for love and affection, and the applicant’s claim that it was transferred to settle an existing debt. The respondent submitted that if the applicant’s current version of events is believed (where the property was transferred to discharge a pre-existing debt) then it is a void preference under section 122 of the Act. Alternatively, if the transfer is taken at face value and in fact the property was transferred for ‘natural love and affection’ then it is an undervalued transaction pursuant to section 120 of the Act.
The respondent submitted that because:
(a)the ground of objection takes in both ss 120 and 122; and
(b)the applicant did not have a reasonable excuse for not providing the information that would allow the trustee to classify the transaction appropriately,
the applicant’s reasons for requesting review are not sufficient to justify undertaking one. If this submission is accepted, there is no factual issue which needs to be resolved to maintain the ground of objection.
In relation to the Third Ground, alleging that the applicant intentionally provided false or misleading information to the trustee, the respondent submitted that it was confirmed that Ms Qamar is the wife of the applicant (although Ms Qamar’s evidence is that they have been living separately since December 2017). This renders his answer to question 4 in his statement of affairs ‘do you have a spouse/partner’ to which he answered ‘no’, false or misleading. Further, given that the applicant was still living with his wife at the time the statement of affairs was filled out, the respondent contended that the answer was intentionally false. Consequently, on material available, the trustee’s Third Ground for objection was sound and no review was justifiable.
In addition, the respondent submitted, the applicant failed to disclose the transfer of the Talinga Property in his statement of affairs and he had no reasonable excuse for that failure. Accordingly, there was sufficient evidence to support the Third Ground and the reasons for request did not appear to justify review.
The respondent urged on the Tribunal a thorough examination of the facts of the case in order to determine whether a review should be conducted.
Submissions at the hearing
Applicant’s submissions
At the hearing, the applicant took a slightly different tack to the approach he had taken previously.
He urged the Tribunal to approach the matter on the basis that the question which it had to determine at this stage of the process was whether the request for review was ‘frivolous or vexatious’ or ‘without merit or without foundation’. Only applications for review devoid of merit should be denied review at this stage of the process. The Applicant appeared to accept that this required some preliminary examination of the merits using the evidence now available to the Tribunal, but not the same examination that would be conducted on review. In particular it should not involve attempts to resolve factual matters involving questions of credit.
In relation to the grounds set out in the Notice of Objection, the applicant made submissions about why there were doubts about whether each could be made out. These doubts were different to the reasons given for seeking review in the original application for review (as set out in the email of David Brown dated 28 May 2020) but in my view nothing turns on that. As noted at paragraph [17] above, in deciding whether a review appears to be justified I am entitled to have regard to any additional reasons or evidence advanced by the applicant.
In the applicant’s original request for review, the essence of the applicant’s complaint about the trustee asserting that he had a beneficial interest in the Bendigo Property was not that the interest did not exist but that he had offered to pay more than $2400 to the trustee to secure his discharge. At the hearing (and in the submissions filed), a different point was pursued in relation to the First Ground. The applicant pointed out that merely contributing to a deposit does not necessarily establish a beneficial interest in the property, and not in circumstances where the payment discharged a debt. Accordingly, if the applicant was believed, there was no beneficial interest in the property as claimed by the trustee.
In relation to the Second Ground of objection, the applicant claimed in his original request for review, that a finding that the transfer of the Tallinga Property was void on the basis that it was transferred for less than market value could not be sustained. The Applicant claimed that it passed for full value because it was transferred to discharge a debt he owed to his wife.
At the hearing, the applicant supplemented this contention with a further argument. At hearing the Applicant’s focus was on the reasons the trustee relied on for advancing the ground.
The reason given by the trustee for objecting was in the following terms:
The reason for objecting to the discharge of the bankrupt on all grounds is to encourage the bankrupt to co-operate with his Bankruptcy Trustee in reaching a settlement of the Trustee’s claims.
The applicant contended that this reason did not justify the making of the objection because the trustee had no plan to take action in relation to the void transaction on account of the fact that he lacked the financial means to take action. Securing greater co-operation from the applicant would not lead to action being taken in relation the setting aside of the Tallinga Property transaction and so extending the bankruptcy was not critical to whether or not the trustee could pursue the asset held by Ms Qamar.
The applicant also continued to argue that the transaction was not void under s120 as the property had not passed for less than market value, but to discharge a debt.
The applicant also argued that the Tribunal was bound by the Notice and the evidence which establishes the ground referred to in the notice. Consequently, I could not reformulate the ground, evidence and reasons so as to rely on s122 as providing the basis for the objection in the Notice on the ground that the transaction described was a voidable preference.
In relation to the Third Ground, the applicant contended that it could not be inferred that the applicant provided false information intentionally from a mere failure to provide information. The applicant contended that there was no evidence that he provided false information concerning Ms Qamar and in any event, this was effectively a summary dismissal process so the Tribunal should not resolve that contested question of fact.
This was a different point to the one made in the original application for review, which effectively relied upon the complexity of bankruptcy proceedings and language difficulties leading to misunderstandings as the reason for non- disclosure.
The Applicant also argued that there is a factual question about the relationship between Ms Qamar and the Applicant at any given time, and about the applicant’s intention to mislead, and that this question should only be considered and resolved in a final review.
The applicant accepted that if one of the grounds relied on by the trustee could be sustained at the appropriate standard then the decision under review must be affirmed.
Respondent’s submissions at hearing
The respondent contended that the test that I should apply in this matter was the same as the one outlined in Neffati and Inspector General in Bankruptcy [2017] AATA 1108 No 2 at [15] – namely - whether the reasons for the request are “sufficient to justify a review”. Whether they do will depend on what is provided by the applicant including any further reasons advanced for the request and further information provided in response to a request by the respondent.
In relation to the First Ground, the respondent focussed on non-disclosure by the applicant but never addressed the question of whether as a matter of fact I could be satisfied he had a beneficial interest in the Bendigo Property.
In relation to Second Ground, the respondent dealt with the applicant’s challenge to the reasons given by the trustee for objecting on the Second Ground. As noted above the reason given by the trustee for objecting was ‘to encourage the bankrupt to co-operate with the trustee in reaching settlement of the trustee’s claim.’ The applicant contended that this reason did not justify the making of the objection because the applicant’s co-operation was not the key factor in whether the trustee would or could set aside the disposal of the asset. In response, the respondent pointed out that there were practical difficulties for the trustee caused by the applicant’s lack of co-operation. In particular, there was difficulty serving the applicant’s wife with notices to provide information which would assist in recovering the assets. Consequently, any failure to act in relation to the void transactions could not be ascribed simply to the absence of funding to pursue the matter. The respondent contended that it was now clear that the notice of objection had resulted in greater information being secured concerning Ms Qamar’s relationship to the applicant and the status of the properties transferred. Accordingly, the objection to discharge was achieving its purpose of greater cooperation from the applicant, and the Tribunal could be satisfied that the reasons given for objecting on the Second Ground did justify the making of the objection.
In relation to Ground Three, the respondent pointed out evidence which supported the conclusion that the applicant deliberately failed to disclose the transfer of the Tallinga Property in his statement of affairs and made misleading statements about his wife. This, it was submitted, also established that the applicant conducted himself in a way which deliberately stymied the investigation of his affairs. For example, the fact that the applicant said he couldn’t provide the phone number of his wife (who he was living with at the time[7]) when asked to supply her mobile number by the trustee, supported the conclusion of deliberate non-co-operation.
[7] R3, page 14.
The respondent submitted that the failure to disclose was a pattern and I should be satisfied that the ground concerning the intentional provision of false or misleading information was made out.
The respondent pointed out that the evidence established that Ms Qamar is the wife of the applicant although they have been living apart since December 2017 and that the applicant gave a positively false answer in his statement of affairs in answer to question 4. In his answer the applicant denied having a spouse. Accordingly, it was not the case (as the applicant had asserted) that the applicant simply failed to disclose these matters. He positively gave misleading information to the trustee.
The respondent noted that there is a discretion whether to conduct a review.
In subsequent submissions, both parties urged me to determine the matter by reference to the additional material before me.
Framing Issues for Decision
To a large extent the submissions of the parties were unhelpful in framing the task which the Tribunal must undertake. While they did reflect earlier decisions of the Tribunal, the framework proposed did not conform closely with the words of the statutory provisions.
The applicant’s approach to the issues was to focus on words used in other contexts such as ‘vexatiousness’ or ‘without merit’ thus placing a gloss on the statutory words used by Parliament when it conferred the statutory function.
The respondent’s approach was no better. Its submissions effectively ignored the word ‘appearance’ in the statute and invited the Tribunal to ask itself a much more general question being whether on the material before it, the applicant’s reasons were sufficient to justify review.
Neither party paid close attention to the words of the statutory test and the residual discretion it contains. I have outlined at paragraph [17] above the framework which I consider is appropriate.
To dispose of the matter I must do the following:
(a)Consider whether the bankrupt’s reasons for requesting review, as included in the original request and supplemented throughout the review process, appear to me to be sufficient to justify a review;
(b)In considering whether those reasons appear to justify a review, I must consider how those reasons appear in light of all of the evidence available to me, and consider the residual discretion if the statutory threshold is passed;
(c)In considering whether those reasons appear to justify review, I must have regard to the limited nature of any review that would be undertaken, noting that it would be conducted by reference to the limitations in section 149N and by reference only to the grounds of objection set out in the Notice.
In asserting that a review appears to be justified, the reasons and material advanced by the applicant in relation to grounds which meet the statutory definition of special grounds (in this case Ground One and Ground Three) must have some prospect of supporting the conclusion:
(a)That there is not sufficient evidence to support the existence of at least one special ground in the objection; or
(b)That the applicant had a reasonable excuse for the conduct or failure which constituted the special ground.
In relation to Ground Two, for a review to be justified, the reasons and material advanced by the applicant must have some prospect of supporting the conclusion:
(a)That there is insufficient evidence to support the existence of the Second Ground specified in the Notice (section 149N(1)(b)); or
(b)That the reasons given for objecting on any non-special ground did not justify the making of the objection on that ground (section 149N(1)(c)).
If he cannot do that, then the Tribunal could not be satisfied that the request for review is made for reasons that appear to justify a review.
If I am satisfied that the reasons for the request appear to justify review, then I need to consider whether I should exercise the residual discretion which is available, and allow a review to proceed.
In considering these issues I accept the submission made by the applicant that I should not resolve questions of credit or seriously contested questions of fact when considering such a preliminary question. In other statutory contexts there are certainly times where, because of the nature of the power being exercised, a full examination of the merits of a case is not appropriate. In the Tribunal context an application for an extension of time to file an application is one example where it is clear that although the underlying merits of the case is relevant, an application for an extension of time to file is not the appropriate context to reach a fully informed view about the merits of the case.[8]
[8] See, for example, Arbon and Comcare [2017] AATA 2870.
When seeking summary dismissal of matters in a court, it is well established that great caution should be taken in the exercise of the power to terminate an action summarily where the ultimate outcome of the case depends upon the resolution of some disputed issue or issues of fact.[9] However, a court is not precluded from hearing arguments ‘even of an extensive kind’, in determining whether or not the plaintiff’s case is untenable.[10]
[9] Webster v Lampard (1993) 177 CLR 598 at [603].
[10] General Steel Industries Inc v Comr for Railways (NSW)(1964) 112 CLR 125 at [130].
In circumstances where the question the Tribunal has to decide is whether the reasons for the request appear to justify review, that carries an indication that something short of a full consideration of the matter is called for. I am satisfied that given the self-evidently preliminary nature of the question I am considering, restraint should be exercised in resolving factual matters particularly where questions concerning the credibility of a witness are involved.
It is with this framework in mind that the issues in this matter must be determined.
Consideration
The First Ground
Since his initial request for review, the applicant has sought review of the First Ground on two bases.
First, during the life of the bankruptcy he offered to pay more to the trustee to resolve his bankruptcy than the sum he contributed to the deposit. Second, the $2400 paid was to discharge a debt he owed to his wife and accordingly it did not create a beneficial interest in the property.
The first argument is without merit. The fact that the applicant has sought to negotiate his way out of bankruptcy would not in any way justify his failure to disclose any beneficial interest he may have in a property to the trustee. This reason does not address the criteria in section 149N by reference to which a review would be conducted and accordingly it does not appear to justify a review.
The second argument does have merit. If it is indeed the case that the applicant paid the sum to discharge a debt, then there was no beneficial interest which he was obliged to disclose. Accordingly, it is possible that there is insufficient evidence to support the existence of the ground. While I am sceptical that the $2400 payment discharged a debt, the resolution of that factual question is best left until the review is conducted. At this point in time it appears that there is a genuine contest on the evidence which if it were resolved in the applicant’s favour would result in the ground not being made out. In relation to this ground a review appears to be justified.
The Second Ground
The applicant seeks review of this ground on the following bases.
First, the transfer of the Tallinga Property was not an undervalued transaction. The applicant contends that it was transferred so that the equity he had in the property could be applied to a debt which he owed to his wife. As the property was transferred for fair value it was not an undervalued transaction.
I have doubts about whether the applicant did indeed transfer the property to discharge a debt, but that is a question that should await determination if and when a review is conducted. The problem for the applicant is that if his story is accepted then there was a transfer of property in favour of a creditor which had the effect of giving the creditor an advantage over other creditors and is therefore void against the trustee.
Consequently, there is no version of the facts which undermines the ground of objection relied upon by the trustee. The transfer was, on any version of the facts, void against the trustee under either s 120 or s 122. Accordingly, it cannot be said that there is insufficient evidence to support the existence of the ground of review.
Now it is true as the applicant submits that the trustee in the ‘Evidence’ section of the Notice, relied on the transaction being an undervalued transaction pursuant to s 120 of the Bankruptcy Act. However, while I accept that the Inspector-General is bound by the grounds relied upon by the trustee in the Notice (so much is plain when regard is had to section 149H which confirms the enduring significance of the grounds identified in the notice of objection) I am not satisfied that he is bound in the same way by the evidence relied upon. It has been the assumption of both parties that the evidence on which I can rely in making my decision is quite different to what was available to the trustee and quite different to the evidence available to the Inspector-General. In those circumstances, if the evidence establishes that on any view of the evidence the ground relied on by the trustee can be made out, it cannot be the case that the trustee’s failure to avert to the evidence which establishes the ground in an alternative way cannot be relied upon by me.
That being the case I am satisfied that on review it would not be possible to reach the conclusion that there is insufficient evidence to support the existence of this ground. Accordingly, unless the applicant can establish that the reasons given for objecting on this ground do not justify the making of the objection, then a review is not justified.
On this question, the argument put is that whether steps are taken by the trustee in relation to the Tallinga Property depends upon the trustee being funded. The applicant’s co-operation and continued bankruptcy are not necessary for the trustee to take steps in relation to the Tallinga Property and so ‘encouraging the bankrupt to co-operate’ with the trustee is not a good enough reason to take the step of objecting to discharge.
I do not accept that argument. The objection to the bankruptcy on this ground has made a material difference to the trustee’s ability to secure the applicant’s co-operation with his work. There is no real dispute that the applicant was not clear with the trustee about the nature of his relationship with Ms Qamar and that the effect of this was to inhibit the trustee’s attempts to understand whether he had rights to recover the Tallinga Property.[11] The trustee now knows the exact nature and status of the relationship between the applicant and Ms Qamar, the basis of the parties’ dealings, and what options are open to him to take steps to recover the property transferred to Ms Qamar. None of this information was available to him before taking steps to extend the bankruptcy. I am satisfied that objecting to discharge has secured greater co-operation and the reasons given for objecting on this ground remain sound and fully justified the making of the objection.
[11] See, for example: R3, page 14; T6, page 71; T8, page 83.
In light of these conclusions, the reasons advanced by the applicant do not appear sufficient to justify undertaking a review.
The Third Ground
The applicant claims that he did not intentionally provide false or misleading information to the trustee. The applicant accepted that there had been a failure to disclose the full nature of his relationship with Ms Qamar and transactions with her, but, it was submitted, inadequate disclosure is insufficient to amount to the provision of false or misleading information.
Further, the applicant says that to the extent that there was false or misleading information in his statement of affairs it was the product of language difficulties or mistakes on the part of the person who assisted with the filling out of the statement.
In the original Notice, the trustee relied on a number of pieces of evidence in support of the ground that the bankrupt intentionally provided false or misleading information to the trustee.
The first was:
In the bankrupt’s Statement of Affairs, he failed to disclose that he had transferred the property at 21 Tallinga Street, Tarneit, Vic 3029 to Ms Qamar on or about 5 January 2017
There is no dispute that the property was transferred as alleged. It is also clear that the applicant should have disclosed it in response to question 33 in his Statement of Affairs as a property which was ‘sold, transferred or given away’ in the last 5 years.
Accordingly, the questions which arise are whether this answer amounted to the provision of misleading information to the trustee and, if so, whether it was intentional?
In answering these questions it is important to note that the ultimate question when a review is conducted is not whether the Inspector-General or the Tribunal would, on the same evidence, reach the same conclusion as the trustee. The questions to be addressed in relation to a special ground are:
(a)Is there sufficient evidence to support the existence of the ground specified;
(b)Has the bankrupt established that he had a reasonable excuse for the provision of false or misleading information which he provided.
If the answers to these questions are yes and no respectively, then the reviewer is prohibited from cancelling the objection. Accordingly, before a finding can be made that the reasons for a request for review appear to be justified, it is necessary for there to be some prospect of these questions being answered favourably to the applicant.
As noted above there is strong evidence that the applicant provided misleading information to the trustee after the date of the bankruptcy.
In summary the following factual conclusions are uncontroversial:
(a)the Tallinga Property was transferred on 5 January 2017;
(b)the property was transferred to the applicant’s then wife;
(c)the applicant’s equity in the property had a value of approximately $30,000;
(d)the applicant was made bankrupt on 4 May 2017;
(e)following that, the applicant filled out his Statement of Affairs with the assistance of Alex Humphries who certified that he was satisfied that the applicant had read and understood the information and questions;
(f)the statement of affairs includes no mention of the Tallinga Property;
(g)the statement of affairs discloses the transfer of another property.
I am satisfied that the failure to include the Tallinga Property on the list of properties responding to question 33 involved the provision of misleading information. Providing an incomplete list in response to the question does involve providing misleading information to the trustee. In the context of a Statement of Affairs it amounts to a positive representation that the listed properties are a complete list of properties sold, transferred or given away in the relevant period. In that context, the information provided was misleading.
The question which then arises is, was it intentional? The applicant denies that it was. In submissions he has stated that ‘it did not even occur to him that he was required to disclose the transactions’[12].
[12] Applicant’s undated submissions on letterhead of MIC Lawyers, page 4.
The evidence on this question is to a degree incomplete. The applicant gave no formal evidence about it. That failure would almost certainly be fatal in a final review. However, in circumstances where the Tribunal is only judging whether the reasons proffered appear to justify review, the circumstances are different. As I do not consider it appropriate to make adverse credit findings at this stage of the process, the question of whether the failure to include the Tallinga Property transfer in answer to question 33 involved an intentional attempt to mislead, is not a question that is appropriate to resolve at this stage.
In those circumstances there is a prospect that the conclusion could be reached at a final review that the omission was not intentional.
Unconvincing as the applicant’s denials are, in circumstances where I am not conducting the review but merely considering whether the reasons advanced appear to justify a review, I am not prepared to make the adverse findings on credit necessary to dismiss the proposition.
The trustee also claimed that the applicant provided intentionally false information about the nature of his relationship with his wife Shazia Qamar.
On the uncontested evidence before me, I am satisfied that that is the case.
Ms Qamar has confirmed the following matters in in a statutory declaration filed by the applicant:
(a)She is the wife of Amar Riaz;
(b)She has lived separately from him since December 2017;
(c)The couple have three children ranging in age from 11 to 18 all of whom live with Ms Riaz, but who also spend time with their father.
From other evidence the following is established.
The applicant filled out the Statement of Affairs in May 2017.
In answer to question 4 the respondent denied having a spouse/partner, denied living with his spouse/partner and denied living with any dependent children.
Based on the statutory declaration of Ms Qamar I am satisfied that in May 2017 the applicant was:
(a)Legally married to Ms Qamar, although potentially the marriage was the subject of a one roof separation;
(b)The applicant’s children also lived with him at that time.
The applicant’s answers to question 4 were at the very least misleading and, at least insofar as the answer concerning his children is concerned, positively false.
The applicant has given no real explanation for providing false information in relation to his answers to question 4. I am satisfied that there is sufficient evidence to support the ground relied upon by the trustee and no reasonable excuse has been offered for the conduct that constituted the special ground.
Consequently, there is no prospect that a review will result in a favourable outcome. Accordingly, the reasons advanced by the applicant do not appear to be sufficient to justify conducting a review.
Proceeding on the basis that I am assessing the appearance of the reason given, the reasons advanced by the applicant for seeking review do not rise to the level of appearing to justify review.
Conclusion
In summary I am satisfied that the reasons which the applicant has advanced for requesting a review do not appear to justify a review of the trustee’s decision to object to the discharge of bankruptcy on grounds 2 or 3. The applicant has advanced a reason which suggests that a review appears to be justified in relation to the asserted beneficial interest in the Bendigo Property.
The applicant conceded at the hearing that if even one of the grounds of objection was clearly maintainable, then the Tribunal could not be satisfied that the reasons advanced were sufficient to justify a review. Therefore, in circumstances where I am satisfied that a review could not reach a different outcome in respect of the second or third ground then the reasons for the requested review (including all of the reasons added after the original request) do not appear to justify conducting a review.
I do however want to note that the approach taken by the respondent to this matter is somewhat baffling. The applicant put forward a request for review which on its face, suggested that the trustee may have misunderstood the true nature of some of the transactions on which he relied. On that material, in the absence of the better evidence which ultimately emerged, a review did appear justified. However, rather than making a quick decision on that question and proceeding to the review, the delegate chose to use her powers to investigate whether a review was justified and effectively took all the investigative steps one would expect to be taken if a review were conducted.
This approach has at least two regrettable side effects. First, opting to decide not to conduct a review after conducting a process as thorough as a review meant there was potential for the matter to go to the Tribunal twice – once for review of the decision not to conduct the review and once to review the outcome of any review conducted. In each case the Tribunal would be addressing almost identical questions but through slightly different lenses.
Second, it allowed the delegate to resolve the matter by reference to a discretionary power to decide not to review, rather than the highly structured decision-making framework provided for in section 149N. In my view it would be preferable for the Inspector-General to approach the gateway provision in a more practical and less labour intensive way, focused on the fact that a request need only ‘appear’ to justify review before a review is conducted.
DECISION
Notwithstanding my reservations about the way in which the Inspector-General has approached this matter, the decision under review is affirmed.
I certify that the preceding 138 (one hundred and thirty eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member Damien O’Donovan.
.......................................[sgd]................................
Associate
Dated: 24 August 2021
Date(s) of hearing:
28 January 2021
Date final submissions received
3 March 2021
Counsel for Applicant: Mr Damien Allan Solicitors for Applicant:
MIC Lawyers
Solicitors for Respondent:
Mr Mark Findlay, Australian Financial Security Authority
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