Shea and Inspector-General in Bankruptcy
[2003] AATA 351
•17 April 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 351
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2002/2
GENERAL ADMINISTRATIVE DIVISION
)
Re GERARD SHEA Applicant
And
INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal Ms N Isenberg, Member Date17 April 2003
PlaceSydney
Decision The Tribunal sets aside the decision under review.
[SGD] Ms N Isenberg Member
CATCHWORDS
Bankruptcy – whether fees due to the Official Trustee should be waived or remitted – whether payment would impose undue hardship on the applicant – whether there were exceptional circumstances – decision set aside.
LEGISLATION
Bankruptcy Act 1966 s163
Bankruptcy Regulations 1996 (as in force October 2001) reg. 16.07, 16.10
Bankruptcy Regulations 1996 (as in force 6 November 2002) reg. 16.13A
CASE LAW
Judith Ann Exell and Inspector-General in Bankruptcy [2000] AATA 13
Peets and Inspector-General in Bankruptcy [2002] AATA 486
Cook v Inspector-General in Bankruptcy [2000] AATA 30
Ayoub and Insolvency and Trustee Service Australia (Inspector-General in Bankruptcy) [2002] AATA 465
Esber v Commonwealth (1991) 101 ALR 35
Esber v Commonwealth (1992) 174 CLR 430
Gorton v Repatriation Commission (2001) 63 ALD 723
Repatriation Commission v Gorton (2001) 110 FCR 321
Faulkner v Inspector-General in Bankruptcy [1998] AATA 632
REASONS FOR DECISION
Ms N Isenberg, Member
Decision Under Review
1. The decision under review before the Administrative Appeals Tribunals (“the Tribunal") is the decision of the Inspector-General in Bankruptcy (“the Respondent”) dated 7 November 2001 (T7) to refuse to waive the Official Trustee’s fees imposed in the administration of Mr G. Shea’s (“the Applicant) bankrupt estate.
Appearances
2. At the hearing in Wauchope before the Tribunal on 25 February 2003 the Applicant was self-represented and the Respondent was represented by Mr T Begbie of the Australian Government Solicitor.
Background
3. On 23 March 1998 the Applicant became bankrupt. At that time he had debts totalling over $93,000 (T7). Unsecured debts were found to be approximately $34,000 and, when assets were realised, there was an amount slightly in excess of $12,000 to be distributed. The dividend rate to his creditors was 35.7830% (Exhibit R3). At that time the fees associated with administration of the estate were estimated to be $7,272.50 plus GST, although final calculations make that amount now $8,389.20 (Exhibit R3).
4. The Applicant initially sought waiver of the fees on 12 October 2001 on the basis that payment would amount to extra hardship and that his position was one of exceptional circumstances (T4). On 7 November 2001, the Respondent advised that the application for waiver had been denied (T7). The Applicant then sought review in the Tribunal on 27 January 2002.
Issue
5. The issue before the Tribunal is whether the Applicant is entitled, pursuant to Regulation 16.10 of the Bankruptcy Regulations, to have the Official Trustee’s fees waived or remitted, whether wholly or in part, on the basis that:
(a) payment of the fee would impose undue hardship on the Applicant; or
(b) because of other exceptional circumstances, it is proper and reasonable to do so.
Legislation
6. The relevant legislation in this matter is the Bankruptcy Act 1966(“the Act”), in particular section 163. That section, so far as is relevant, provides as follows:
(1) The Official Trustee is to be remunerated as prescribed by the regulations.
(2) An amount equal to each amount of remuneration received by the Official Trustee shall be paid into the Consolidated Revenue Fund.
Note: The prescribed remuneration may be in respect of work the Official Trustee does as trustee of the estate of a bankrupt or in respect of work done in any other situation under this Act (such as where the Official Trustee acts as a trustee as a result of a deed of arrangement).
7. Regulation 16.07 of the Bankruptcy Regulations 1966 (“the Regulations”) as in force at the time of the Applicant’s request for waiver, sets out the formula by which fees are calculated:
(1) Subject to subregulation (2), the fees specified in Schedule 10 are payable to the Official Trustee, by way of remuneration under subsection 163(1) of the Act, in respect of the matters in relation to which they are so specified.
(2) If the total amount of fees payable, in respect of a particular bankruptcy, for matters that are specified in Schedule 10 would, apart from this subregulation, be less than $265, a fee of $265 is payable for those matters.
(3) Where the Official Trustee:
(a) acts as trustee of the estate of:
(iii)a bankrupt;
…
a fee is payable to the Official Trustee, subject to regulation 16.08, as follows:
…
(d) if the prescribed amount in respect of the estate or the debtor exceeds $4,000 but does not exceed $50,000 – a fee equal to the sum of $4,000 and an amount equal to 15 percent of the amount by which the prescribed amount exceeds $4,000.
…”
8. Regulation 16.10 makes provision for the Inspector-General to waive or remit the whole or part of the fee in the following circumstances:
(2) A fee may only be waived or remitted, whether wholly or in part, if the Inspector-General is reasonably satisfied that:
(a) payment of the fee by the person liable to pay it has imposed, or would impose, undue hardship on the person; or
(b) because of other exceptional circumstances, it is proper and reasonable to do so.
9. In November 2002 the regulations were amended and Reg 16.10 was replaced by Reg 16.13A in relation to waiver and remission of fees. Insofar as is relevant that regulation provides:
…
(2) A fee may only be waived or remitted, whether wholly or in part, if the Inspector-General is reasonably satisfied that:
(a) payment of the fee by the person liable to pay it has imposed, or would impose, undue hardship on the person; or
(b) because of other exceptional circumstances, it is proper and reasonable to do so
(3) For paragraph (2)(a), undue hardship means hardship that is unusual or exceptional in comparison to the hardship arising in the normal course of bankruptcy.
Evidence: Documents
10. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence.
11.In addition, the following documents were tendered:
Exhibit
Description
Date
A1
Statement of Mr G. Shea
13 January 2003
A2
Statement of Mrs S. Shea
13 January 2003
A3
Supplementary Information to Official Statements of Mr G. Shea and Mrs S. Shea
5 February 2003
A4
Account of school fees at St Agnes Parish School, Port Macquarie, for Grant Shea
15 January 2003
A5
Account from Mayne Health Diagnostic Imaging
17 January 2003
A6
Pay Advice for Mr G Shea from the Health Insurance Commission
13 February 2003
A7
Letter from Centrelink to Mrs S Shea
10 January 2003
A8
Account for Family Assistance issued by the Family Assistance Office to Mrs S. Shea
13 February 2003
A9
Account for Family Assistance issued by the family Assistance Office to Mrs S. Shea
18 February 2003
A10
Account from Port Macquarie Brake & Clutch Pty Ltd issued to Mrs S. Shea
7 February 2003
A11
Sample HECS Statement
Undated
A12
Statement of Ms P. Attwells
5 February 2003
A13
Report of Dr M. C. Hinds
4 June 2000
R1
Respondent’s Statement of Issues
15 May 2002
R2
Respondent’s Statement of Facts and Contentions
17 June 2002
R3
Calculation of Debtor’s Petitions for Mr G. Shea
23 March 1998
R4
Letter from Mr G. Shea to the Australian Government Solicitors enclosing financial and medical documentation
18 August 2002
R5
Letters from the Australian Government Solicitor to Mr G. Shea
9 January 2003, 20 September 2002, 27 August 2002, 31 July 2002, 17 June 2002
R6
Letter from the Australian Government Solicitor to Mr G. Shea
21 February 2003
R7
Letter to Mr G. Shea detailing hours of work at the Health Insurance Commission
25 March 2002
R8
Letter to Mr G. Shea detailing hours of work at the Health Insurance Commission
8 July 2002
R9
Schedule of prescriptions
Undated
R10
Complete Medical Records for Mr G. Shea
18 February 2003
R11
Quotations from Hastings Day Surgery
6 February 2003
R12
Complete Medical Records for Mrs S. Shea
18 February 2003
R13
Employee pay records for Mr G. Shea from 10 July 1997 to 5 December 2001
Undated
R14
Letter from Mr G. Shea to the Australian Government Solicitor
26 May 2002
Evidence: The Applicant
12. The Applicant gave evidence and was cross-examined by the Respondent. Questions were also put to the Applicant by the Tribunal.
13. The Applicant told the Tribunal about some of the events leading up to his application for Bankruptcy (as set out in Exhibits A1 to A3). The only real asset he held at the time was a third share in his mother’s house (which she had sold to the family because she needed the money). This had been sold by the Official Trustee, although the Applicant thought that it had been arranged by one of his brother’s.
14. The Applicant also gave evidence regarding his current debts. He said that his Bankruptcy was discharged in March 2001. This process had managed some of his debts, however, debts owed to the Commonwealth in the nature of HECS, OLDPS and financial supplement scheme repayments amounting to between $13,000 and $17,000 were not extinguished. The Tribunal notes that these are not repayable until his income reaches a certain threshold.
After his discharge he learned that he also had a Centrelink overpayment of nearly $6,500. This has now been reduced to about $5000. His bankruptcy had no effect upon his wife’s Centrelink debt of $13,000 which had been re-assessed at $11,000 and now stands at about $8000 (Exhibit A2). His other debts include:
Car repairs $599 (Exhibit A10)
Pre-school fees $1030(Exhibit A2C)
Previous telephone $309
15. Further to the car repair expenses already incurred, major repairs to the motor vehicle have been foreshadowed, (but not yet costed), as required before the vehicle will be able to be registered in May. The vehicle actually belongs to the Applicant’s mother and is 18 years old. The car is required because the Applicant lives about 2.5 – 3 kilometres from his place of work. When required, his wife drops him off at work, and then takes their son to pre-school. Mrs Shea’s family lives in Sydney and the car is needed, particularly in times of family crisis, as when Mrs Shea’s grandmother, with whom she was very close, was recently terminally ill. Several trips to Sydney were required, on one of which the battery needed replacing. When the alternator was damaged the Applicant attended to that himself to save money.
16. The Applicant also gave evidence, and referred to Exhibit R14, about the following fortnightly expenses:
Rent $390 $20 (arrears) Electricity $45 (including arrears) Current school fees $40 Groceries $150 - $200 Petrol etc $40 His Centrelink $40 Wife’s Centrelink $60- $70 Total $785 - $845
17. There was considerable discussion about the Applicant’s income. He is the family’s breadwinner. He works part time at the Health Insurance Commission (Medicare). He is classified as ‘permanent part time’. His actual hours are subject to negotiation. His ‘standard’ hours are 7 hours 51 minutes per fortnight and he is paid about $19.50 per hour.
18. Annexed to the Applicant’s statement (Exhibit A1) was a copy of what the Applicant described in evidence as a ‘typical’ pay record (Exhibit A1B). It showed gross earnings of $763.57. The solicitor for the Respondent tendered a Print-out of the Applicant’s pay records from July 1997 to December 2001 (Exhibit R13). Of the 25 pays recorded for 2001 only 6 showed a gross income of less than the ‘typical’ pay. The Applicant produced a recent pay advice (Exhibit A6) wherein he was recorded as having received $839.08 gross, however, because the pay included some adjustments arising from prior pay periods, the gross recorded for work undertaken in that pay fortnight was actually $805.56. The document showed that in the year to date, that is, from 1 July 2002, the Applicant had earned $17,561.89 gross during the 16 pay periods to that date, which amounted to nearly $1100 per pay. The Applicant said the discrepancies occurred because, while he officially works only 7 hours 51 minutes per fortnight, he is often called to fill in for people who are absent. He attends training courses and has also performed higher duties. In early 2002 he was asked to do an extra day per fortnight for 2-3 months. It was extended for a further 2-3 months. In recent times, however, Medicare has been laying off people by not replacing them when they leave. As a result, he is back to his standard hours with little prospect of additional hours.
19. In addition to his work with Medicare, on his ‘days off’ the Applicant is attempting to run a small computer repair business. To date he has had only about 6 jobs. His income from this is nil.
20. The Applicant also gave evidence that other than his income, the family receives Centrelink benefits in the form of Family Tax benefits to a maximum of ($126.70 +$75.88) = $202.58 per fortnight (Exhibit A2A). Parenting payment is also available up to a maximum of $338.10. In her statement (Exhibit A2) Mrs Shea stated, however, that the maximum parenting payment she receives is $191.00 due to her husband’s income. In addition, Mrs Shea stated that receives $100 rent assistance and her maximum gross income is $493.00 per fortnight. She also produced a ‘typical’ statement as to her Centrelink payments (Exhibit A2B) showing rental assistance of $106.26 and family tax benefit totalling $178.78.
21. The Applicant also gave evidence, and was cross-examined at length, about his assertion that as his income increases his wife’s benefits reduce. He stated that their net position in fact worsens as he earns more, and it is not until he earns about $45,000 that the family would be better off for his extra work. In his statement (Exhibit A3) he explained this as follows:
… my situation is exacerbated by the current income tests applied to the Family Tax Benefits and Parenting Payment that my wife and I receive. For example when I earn over a specific amount, approximately $28,000 per annum, for each additional dollar I earn we lose 30c in tax, 30c in FTB and 70c in Parenting Payment. At this point I begin paying $1.30 for each gross $1.00 that I earn. This is a financially impossible situation and is important enough for the Federal Minister for Employment to raise in the media recently.
22. Mr Shea told the Tribunal that when his income reached about $945 his wife would receive no parenting allowance at all. This meant that the payments from Centrelink continually fluctuate and they are required to undergo continual adjustments depending on his income in any given fortnightly period. Often this means they have to re-apply over and over again. They receive up to 3 letters from Centrelink each week.
23. Further, on the family’s financial situation, the Applicant stated that their resources are so limited that they have sought assistance from St Vincent de Paul. They had hoped for assistance in negotiating extensions of time to pay bills. In fact, St Vincent de Paul paid the balance of their Telstra bill. Telstra has declined the family STD access and Mrs Shea is no longer able to speak to her mother daily.
24. They have been given food coupons. Mr Shea said the family shops at the cheapest supermarket they can and buys the cheapest food. Presently they have only half a dozen eggs and a loaf of bread. The night before the hearing their son had to stay with the Applicant’s sister because they had no food for him for dinner. They never eat out and neither he nor his wife smoke. Occasionally they may have a drink. They clothe themselves and their son from Op Shops and hand-me-downs. New clothes are reserved for birthdays and Christmas.
25. As for his health, the Applicant told the Tribunal that since about 1990 he has suffered irritable bowel syndrome, nausea and tension headaches. Symptoms associated with depression have now been alleviated. He requires daily medication for the irritable bowel syndrome – Atrobel – and he is able to purchase this without prescription, at a cost of about $4 every 3-4 months. He also receives medication if his bowels bleed. He requires painkillers and a packet of about fifty will last approximately 2 months. He suffers a lot of hayfever and his Rhinocort costs about $25 every 2 months. He also suffers a lot of ear, nose and throat infections.
26. The solicitor for the Respondent tendered the Applicant’s medication schedule provided by the Applicant’s GP, Dr Dainius (Exhibit R9). This schedule shows that Dr Dainius prescribed only 4 scripts for the Applicant in 2002. Also tendered were the doctor’s treatment records in respect of the Applicant since 2000, and referring to past treatment since 1975 (Exhibit R10). This showed that the Applicant consulted the doctor only 4 times in 2002. The Applicant did not dispute that these records were correct and stated that Dr Dainius bulk-bills so there is no expense associated with a consultation.
27. The records include a referral to Dr Gillespie for review of the Applicant’s ongoing gastric problems. Also tendered was information from Hastings Day Surgery, where Dr Gillespie operates, (Exhibit R11) advising that the cost of an initial consultation is $144 with a rebate of $104. The cost of a colonoscopy was said to total $510. The Applicant said that he could not afford a further consultation with Dr Gillespie, nor the colonoscopy if it were recommended.
28. As to his wife’s health, the Applicant noted that she had been in a motor vehicle accident in 1993. She has tried working but has been unable to cope, especially with lifting. He said (Exhibit R14) that his wife had to undergo ‘continuing medical and pharmaceutical treatment for the injury’. In referring to Dr Dainius’ records for Mrs Shea (Exhibit R12) the solicitor for the Respondent invited the Applicant to comment on the treatments received by Mrs Shea during the past year, none of which appeared to be associated with ongoing complaints about injuries received in the motor vehicle accident. The Applicant said that his wife’s main problems were of a psychiatric kind for which she takes Zoloft. The last script was in March 2002 and had 2 repeats. The Applicant said he and his wife have been trying to conceive so she does not always take the medication because she believes it may be harmful. When she does take it, a packet may last a month, at a cost of $25. She had not pursued further psychiatric treatment as the psychiatrist had uncovered features of Mrs Shea’s childhood which she found too distressing to deal with.
29. In relation to Mrs Shea’s psychiatric problems there was evidence before the Tribunal that she suffered from postnatal depression (Exhibits A2D-H). Also before the Tribunal (Exhibit A13) was a report from Dr Hinds dated 4 June 2000. In this report, Dr Hinds stated that Mrs Shea suffered from psychiatric disturbances which had manifested themselves in violence and sadistic tendencies. The family had come to the attention of DOCS as a result of her actions, but these concerns were now in the past. The Applicant described his wife’s current condition as ‘volatile’ and stated that she is continually on the verge of ‘losing it’. She is constantly ‘sad’ and is never able to be happy. She no longer lashes out at their child but may lash out at him. The main triggers are their financial concerns and their failure to conceive.
30. The Applicant stated that he and his wife have been experiencing problems in their relationship. He advised the Tribunal that they had organised an appointment with a marriage guidance counsellor but were unable to fund the $15 fee so the appointment was cancelled.
Applicant’s Submissions
31. The Applicant provided detailed written submissions which are contained in Exhibits A1 and A3. In essence his case was that both he and his wife have ongoing medical problems and that they are experiencing financial hardship, to which the Trustee’s fees add an extra burden amounting to undue hardship.
32. The Applicant invited the Tribunal’s attention to two cases he considered relevant. The first is Judith Ann Exell and Inspector General In Bankruptcy [2000] AATA 13 (Exell), where Deputy President Forrest states (at paragraph 26):
“Hardship may impact in a number of ways. At a personal level a person may suffer an emotional drain, loss of enjoyment of life or social dislocation … It may, in the case of a person suffering from a physical or mental disability or condition, impact adversely on coping strategies or on a treatment regime for the disability”.
33. The second is Peets and Inspector General in Bankruptcy [2002] AATA 486 (Peets) where Member Cowdroy states (at paragraph 56) that one of the factors causing the applicant “undue hardship” was that:
The applicant’s relationship with his wife is disharmonious due to their financial situation.” (Exhibit A3)
Respondent’s Submissions
34. The Respondent also provided detailed written submissions responding to the matters raised by Mr Shea as being relevant to the question of whether the Trustee’s fees should be waived or remitted. Those matters, and the responses by the Respondent as to why they do not constitute undue hardship for the purposes of Mr Shea’s claim, can be grouped into 3 main categories.
A.Outstanding debts
(i) Centrelink
35. Mr Shea stated that a debt of $6,396.67 is being repaid to Centrelink at the rate of $40 per fortnight. The Respondent, however, submitted that there was no direct evidence as to the present amount of that liability and no evidence from Mr Shea that Centrelink is taking action to recover this amount at a rate greater than $40 per fortnight. Further, it was submitted that regardless, Mr Shea has had the benefit of that overpayment for the relevant period.
(ii) Unpaid rent
36. Mr Shea stated that he has rental arrears of approximately $1,000 and is repaying this amount on a fortnightly basis. The Respondent submitted that there was no evidence that Mr Shea has had to vacate the property or that rent remains unpaid.
(iii) Motor vehicle expenses
37. Mr Shea stated that his vehicle is in need of ‘significant repairs’. The Respondent submitted that Mr Shea’s evidence did not indicate that public transport is inadequate and cited the decision of Peets in support of his claim that without evidence of this there was not undue hardship.
(iv) HECS
38. Mr Shea refers to “HECS debt repayments” in his letter to the Tribunal of 26 January 2002 (T1 p5). The Respondent submitted that there is no evidence that Mr Shea in fact has to make any such repayments.
B.Mr Shea’s health
(i) Conditions covered by Comcare
39. Mr Shea referred to a decision of the Tribunal dated 24 July 1996 (Exhibit A1I) in relation to a range of conditions, but the solicitor for the Respondent pointed out that these conditions were not determined to give rise to a permanent impairment.
(ii) Irritable bowel syndrome
40. Mr Shea stated that his irritable bowel syndrome has continued since the 1996 Tribunal decision. He relied upon certificates from Dr Gurr and Dr Dainius (Exhibits A1J and A1K). The most recent evidence of that problem is 10 June 1999 at which time Dr Dainius referred Mr Shea to Dr Gillespie. The Respondent submitted that there was no medical evidence that the condition has continued for the 3‑4 years since that time, so it was unlikely to remain a problem for the Applicant.
(iii)Colonoscopy
41. Mr Shea stated that he is required to have a colonoscopy and is unable to afford that procedure. The Respondent, however, submitted that the evidence shows no more than that his general practitioner referred him to Dr Gillespie for a colonoscopy should Dr Gillespie consider that advisable. There was no evidence that Dr Gillespie considered that procedure advisable; that Mr Shea took any steps to have an initial consultation with Dr Gillespie; or that Mr Shea made any enquiries as to the cost of such an initial consultation or as to the cost of a colonoscopy. In any event, a colonoscopy does not constitute treatment and is only a diagnostic tool.
(iv)Peeling fingers
42. Mr Shea stated that he has suffered with a skin complaint whereby the tips of his fingers peel. He stated that he is unable to afford specialist treatment for this condition (Exhibit A1M). Dr Danius’ referral suggests that, as at 27 June 2001, Mr Shea had experienced peeling of his right index and middle fingers. The Respondent submitted that there was no evidence as to the severity of that condition, that the condition continued after 27 June 2001 or that Mr Shea has taken any steps at all since that time to seek treatment for the condition. Further, it was submitted there was no evidence that Mr Shea has ascertained the costs of an initial consultation with Dr Hamann; or that the costs of any such consultation or treatment would be prohibitive as Mr Shea suggested.
C.Mrs Shea’s health
43. Mr Shea referred to his wife’s depression and 1993 motor vehicle accident as being relevant circumstances for the determination of hardship (T1 p6). The Respondent conceded that Mrs Shea’s injuries from the motor vehicle accident may still cause her “trouble” (Exhibit A2, paragraph 13) but submitted that there was no suggestion that she presently incurs any expenses relating to that accident.
44. In relation to her depression, Mrs Shea stated that she still requires ‘constant medical and pharmaceutical treatment’ (Exhibit A2, paragraphs 14-17). Further, Dr Hinds noted in 2000 that ‘from the history it seems possible that this woman has had an episode of major depression which is now treated’ (Exhibit A2G).
45. The Respondent submitted that the medical records annexed to her statement do not make clear the frequency of her treatment, the nature or extent of medication that she takes, or the costs of any such treatment or medication.
46. In summary, it was submitted, Mr Shea’s circumstances lack the uncommon, unusual or exceptional features which regulation 16.10 requires be present before the discretion to remit or waive fees can be exercised. In the Respondent’s submission, none of the circumstances outlined by Mr Shea, considered either separately or collectively, show that payment of the fee would impose “undue hardship” on him; nor do they amount to “other exceptional circumstances”.
47. The evidence in support of the various matters to which Mr Shea referred, was, in the Respondent’s submission, inadequate. This aside, it was the Respondent’s submission that regardless, those matters do not indicate an appropriate case for waiver or remission on either of the alternative bases provided for in subregulation 16.10(2). In the Respondent’s view, the Applicant’s debts are typical of the liabilities that a bankrupt or former bankrupt would be expected to experience, and he does not suffer health problems which are unusual or substantially burdensome. His circumstances are to be contrasted with the debilitating and expensive health problems suffered by the applicant in Exell.
48. Further, the Respondent stated that it is not open to the Tribunal to remit or waive the Trustee’s fees on the basis that they would impose undue hardship on Mrs Shea, and cited Cook v Inspector-General in Bankruptcy [2000] AATA 30 (Cook) in support. The evidence did not show, it was submitted, that Mrs Shea’s present health is impacting upon Mr Shea in a way which is exceptional or is causing him undue hardship.
49. Finally, it was suggested that Mr Shea has the support of an extended family who have assisted him. In support of this statement, the Respondent referred to Ayoub and Insolvency and Trustee Service Australia (Inspector-General in Bankruptcy) [2002] AATA 465 (Ayoub), in particular paragraphs 49, 63 and 65, where it stated that such support is relevant to a finding of undue hardship.
Consideration and Findings
50. In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.
51. The first issue for the Tribunal concerns the appropriate legislation to be applied. In 2002 the regulations were amended and a new subregulation (3) was added as follows:
3) For paragraph (2) (a), undue hardship, means hardship that is unusual and exceptional in comparison to the hardship arising in the normal course of bankruptcy. The question was whether the Tribunal should apply the old regulation 16.10 or the new regulation 16.13A.
52. The solicitor for the Respondent referred the Tribunal to sections 8 and 50 of the Acts Interpretation Act 1901 and to the decisions in Esber v Commonwealth (1991) 101 ALR 35; Esber v Commonwealth (1992) 174 CLR 430; Gorton v Repatriation Commission (2001) 63 ALD 723 and Repatriation Commission v Gorton (2001) 110 FCR 321. In the Respondent’s submission application of either regulation produces the same result. The Tribunal agrees with this view, as earlier decisions of the Tribunal gave paragraph 16.10(2)(a) an interpretation which is consistent with the interpretation now introduced by subregulation 16.13A(3).
53. The next issue for the Tribunal was whether the Applicant’s circumstances amounted to ‘undue hardship’ or ‘other exceptional circumstances’ as required by subregulations 16.10(2). The solicitor for the Respondent had helpfully referred the Tribunal to a number of decisions providing guidance on the meaning and application of these provisions. These cases include Faulkner v Inspector-General [1998] AATA 632 (Faulkner); Cook; ; Ayoub; Exell’s; and Peets. The Tribunal notes that the Applicant also referred to the latter two cases.
54.The Tribunal turned first to consider the concept of ‘undue hardship’.
55. In Faulkner, Senior Member Ettinger acknowledged that Mr Faulkner had experienced suffering but was not reasonably satisfied that his hardship could be characterised as ‘more unusual, uncommon or exceptional’ than that of comparable bankrupts. Given the absence of evidence regarding ‘any further illness, injury or tragedy in his life’, the Senior Member found that he had not suffered ‘undue hardship’ within the meaning of regulation 16.10. In that case, the Applicant had an (unextinguished) Child Support Agency debt of less than $4000. His pension was $200 per week and he lived in a flat with his son. There does not appear to have been any other debts or ongoing expenses and there was no evidence of any health issues.
56. In Exell, Deputy President Forrest was required to consider the meaning of the word “hardship” in s 283 of the Act. The Deputy President contrasted the concept of “hardship” in s 283 of the Act with the narrower concepts in sub-regulation 16.10(2) of “undue hardship”. In so doing the Deputy President stated (at paragraph 23) that:
It is not a requirement of [s 283] that the hardship be “undue” which has a similar meaning to “excessive” or that it be exceptional.
In coming to this conclusion, the Deputy President relied upon Rukat v Rukat [1975] Fam 63 at 73 where Lawton LJ said:
In my judgment, the ordinary sensible man would take the view that there are two aspects of ‘hardship’ - that which the sufferer from the hardship thinks he is suffering and that which a reasonable bystander with knowledge of all the facts would think he was suffering.
57. Adopting this approach, the Deputy President noted that ‘hardship’ was not limited to financial hardship, and could encompass a range of factors including a person’s age and state of health. He further observed at paragraphs 25 and 26:
“While due wait must be given to the policy objective of the legislation that cost recovery is to be achieved wherever possible, this has to be counter-balanced by the consideration contained in the legislation that the application of this policy does not cause hardship. Hardship is gauged by an examination of individual circumstances. In some circumstances a realisations charge of $6,905 may produce negligible hardship whereas in other circumstances it may be oppressive.
Hardship may impact in a number of ways. At a personal level a person may suffer an emotional drain, loss of enjoyment of life or social dislocation. A person’s age and state of health may be relevant factors. It may, in the case of a person suffering from a physical or mental disability or condition, impact adversely on coping strategies or on a treatment regime for the disability. These are not only subjective perceptions or hardship but in my view matters which an informed bystander would take into account. Put another way, the question of whether hardship exists is not necessarily answered simply by considering a person’s financial position and examining a statement of assets and liabilities.” (page 327)
58. In Ayoub Senior Member Ettinger further considered the decisions in Faulkner and Exell and stated that the regulations required:
“… something above and beyond the general hardship caused by the usual consequences of bankruptcy. There is no doubt that any person involved with bankruptcy experiences suffering and is in straitened circumstances.” (paragraph 47)
It should be observed that in Ayoub the evidence was that although the Applicant’s husband was a pensioner who spent his money drinking and gambling, she had joint title to the family home and was therefore found to be in a better position than ‘the usual bankrupt’.
59. In the present case, the solicitor for the Respondent had submitted that the undue hardship must be imposed because of the requirement to pay the fee and that it is not enough that the person simply be suffering undue hardship; the undue hardship must be caused by the imposition of the relevant fee. The Tribunal could find no authority for this proposition. The Tribunal agrees that in virtually all cases a bankrupt’s circumstances could be alleviated by having the fee waived or remitted but rejects the Respondent’s submission that it is not sufficient for a person seeking waiver or remission of fees to simply be in circumstances which could be said to amount to ‘undue hardship’: Peets.
60. The Tribunal also does not accept the Respondent’s contention that the impact of the fee on the Applicant’s wife is irrelevant. In all cases to which the solicitor for the Respondent referred there was mention of the circumstances of other members of the bankrupt’s immediate family. In this case the evidence is that the Applicant is the breadwinner for the family and the Tribunal accepts that, for all intents and purposes, the family’s circumstances are his circumstances.
61. Further, the Tribunal does not accept the Respondent’s submission that the Applicant has substantial family support as in Ayoub.. It is true that the Applicant had a share in his mother’s house but his evidence was that she had sold it to the family, as she needed the money. His old car remains in his mother’s name. There was no evidence that his mother was able to give or lend the Applicant any money beyond the loan of the car. In fact, the evidence tended to suggest that Mrs Shea senior is herself somewhat impecunious.
62.The Tribunal found Peets particularly instructive as regards the following:
· Firstly, in Peets, the Applicant had debts which he did not include in his bankrupt estate and which he was endeavouring to repay in full. In this case, Mr Shea currently has unextinguished debts of between $18,000 and $22,000 and is additionally endeavouring to meet his wife’s debt of $8000.
· Secondly, in neither Peets, or this case, was there evidence that the Applicant was being pressed to repay the debts. The Tribunal observes, however, that in Peets the debts were due to family and friends (rather than the Commonwealth) who may be less likely to press for repayment.
· Thirdly, in Peets the Applicant also lived in the country where the impact of lack of public transport, or an unreliable vehicle as was the evidence in this case, was said to be ‘more drastic’ than for an applicant living in a major city.
63. The Applicant was extensively cross-examined. Much was made of the inadequacy of the Applicant’s evidence. The Tribunal observes that it is to conduct proceedings with as little formality and technicality, and as much expedition, as is possible, in order to allow proper consideration of the matters before it and to comply with the requirements of all relevant legislation: section 33(1)(b) Administrative Appeals Tribunal Act 1975. Further, the Tribunal is not bound by rules of evidence and may inform itself of any matter as it thinks appropriate: section 33(1)(c) AAT Act. For these reasons the Tribunal places little weight on the inadequacies in the Applicant’s documentary evidence as perceived by the Respondent. In fact, the Tribunal considered that Mr Shea, as an unrepresented party, had put his case together very satisfactorily.
64. In the course of the hearing there were allegations to the effect that the Applicant had been selective in his production of financial information. However, the Tribunal accepts the Applicant’s explanation that his salary is paid in erratic amounts and that in recent times he has worked extra hours whenever available. This does not detract from his base or standard salary which, at less than $20 per hour, would make his fortnightly income about $800. His efforts to work additional hours are to be commended.
65. The Tribunal also accepts that the family’s benefits from Centrelink vary according to the Applicant’s salary and that this may occur with some regularity. The continual monitoring and liaising with Centrelink, described by the Applicant would in itself, in the Tribunal’s view, create some family tensions, and budgetary uncertainties.
66.The Tribunal makes the following findings:
· The Applicant had endeavoured to address his deteriorating financial situation through the bankruptcy process. He found, at the end of the process, he still had significant debts remaining (currently about $20,000) which were not extinguished.
· As the breadwinner for his family he also feels responsible for his wife’s debts (currently about $5,000).
· His fortnightly expenses are between $785 - $845.
· The only work he has been able to obtain is ‘permanent part time’ although he endeavours to work as many hours as he can. This financial year he has been earning about $1100 per fortnight but he is now back to his standard hours and the gross is likely to revert to about $806 per fortnight.
· The Applicant’s family receives Centrelink benefits to a maximum gross of $493.00 per fortnight but this reduces as the Applicant’s income increases.
· The family’s financial situation is so limited that they have sought charity assistance.
· Their lifestyle is fairly abstemious.
· The Applicant's relationship with his wife is disharmonious largely due to their financial situation.
· The Applicant does not reside in a city where public transport is readily available.
· The family car, his transport to work, is in need of repair and is unreliable.
· The Applicant suffers irritable bowel syndrome for which he requires daily medication. Investigation of the Applicant’s ongoing gastric problems has not occurred as he cannot afford the $40 contribution.
· In addition, the Applicant suffers nausea and tension headaches, occasional bleeding bowels, hayfever and ear, nose and throat infections.
· Mrs Shea is unable to work due to both physical and emotional problems.
67. The Tribunal accepts that there is no doubt that every person involved with bankruptcy experiences suffering and is in straitened circumstances (Ayoub). However in the present matter the Tribunal is of the view that the Applicant’s circumstances are worse than the usual bankrupt (Ayoub). His financial situation has been only partially relieved by his bankruptcy, unlike the bankrupt whose debts are largely extinguished. His family and ongoing financial circumstances are more akin to those of the Applicant in Peets.
68.The Tribunal is, therefore, satisfied that the Applicant’s circumstances, in combination, are persuasive to a finding that the imposition of the fee presents an "undue hardship" to the Applicant.
69.Having come to this view it is not necessary to consider if there are ‘other exceptional circumstances’ under paragraph 16.10(2)(b).
Decision
70.The Tribunal therefore sets aside the decision under review.
I certify that the 70 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N. Isenberg.
Signed: .......................................................................................
AssociateDate of Hearing 25 February 2003
Date of Decision 17 April 2003
Applicant Self-representedSolicitor for the Respondent Australian Government Solicitor
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