Riaz and Inspector-General in Bankruptcy - [2021] AATA 3027

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'Donovan
Taxation 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 286
Webster 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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] AATA 3027
Decision Date: 24 August 2021

CaseChat Overview and Summary

This matter concerned an application for review of an objection to a bankrupt's discharge, brought by the applicant, Riaz, against the Inspector-General in Bankruptcy. The Inspector-General had relied on three grounds for objecting to the discharge, as enumerated in section 149D of the *Bankruptcy Act 1966* (Cth): the bankrupt's intentional failure to disclose a beneficial interest in a property, a void transfer of a property to his wife, and the bankrupt's intentional provision of false or misleading information to the trustee. The applicant sought review of these grounds, arguing that the evidence did not support their existence.

The court was required to determine whether the applicant's request for review of the grounds of objection appeared to justify a review, as contemplated by section 149N of the Act. Specifically, the court had to consider whether there was a genuine contest on the evidence regarding the applicant's beneficial interest in a property and whether the transfer of another property to his wife was void against the trustee. The court also had to consider the extent to which the Inspector-General was bound by the specific evidence relied upon by the trustee in the initial notice of objection.

Regarding the first ground, the court found that the applicant's argument that the payment was to discharge a debt owed to his wife, rather than creating a beneficial interest, had merit, suggesting insufficient evidence to support the ground. Therefore, a review of this ground appeared justified. However, concerning the second ground, the court determined that even if the property transfer was to discharge a debt, it would still be void against the trustee as a transfer in favour of a creditor that gave an advantage over others. Thus, on any version of the facts, this ground could be made out, and a review was not justified on this basis. The court also noted that while the Inspector-General was bound by the grounds of objection, they were not necessarily bound by the specific evidence relied upon by the trustee, particularly where new evidence was available.

Ultimately, notwithstanding reservations about the Inspector-General's approach, the decision under review was affirmed. The court indicated a preference for a more practical and less labour-intensive approach to the gateway provision for review, focusing on whether a request "appear[ed]" to justify review.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

It is with this framework in mind that the issues in this matter must be determined. ConsiderationThe 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.