Stolyar and Inspector-General in Bankruptcy - [2021] AATA 3398

Stolyar and Inspector-General in Bankruptcy [2021] AATA 3398 (22 September 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2020/2623
Re:Ian Stolyar
APPLICANT

AndInspector-General in Bankruptcy
RESPONDENT

DECISION
Tribunal:Senior Member Linda Kirk
Date:22 September 2021
Place:Sydney

The Reviewable Decision is affirmed.
.........................SGD...............................................
Senior Member Linda Kirk
CATCHWORDS
BANKRUPTCY – notice of objection from discharge– objection to specify a special ground - failure by bankrupt to disclose beneficial interest – sufficient evidence to support special ground exists - bankrupt had requisite intent not to disclose beneficial interest – bankrupt does not have reasonable excuse for failure to disclose beneficial interest – decision affirmed
LEGISLATION
Bankruptcy Act 1966 (Cth)
Bankruptcy Legislation Amendment Act 2002 (Cth)
CASES
Adami and Inspector-General in Bankruptcy [2001] AATA 363
Cannane v Cannane Pty Limited; Cannane v Official Trustee in Bankruptcy as Trustee of the Bankrupt Estate of Cannane (1998) 192 CLR 557
Caruana and Inspector-General in Bankruptcy [2008] AATA 307
Combe v Inspector-General in Bankruptcy [2005] FCA 1101
Crofter Hand Woven Harris Tweed Co Ltd v Veitch and Anor [1942] AC 435
Fitzgibbon v Inspector-General in Bankruptcy [2000] FCA 1677
Lloyds Bank Ltd v Marcan [1973] 2 All ER 359
Michael John Fuller and Hugh Jenner Wily [1998] AATA 577
Puels v Exelerate Funding Pty Limited [2005] FCAFC 38
R v Helmhout [1980] 30 ACTR 1
Rimanic and Inspector-General in Bankruptcy [2010] AATA 875
SECONDARY MATERIALS
Explanatory Memorandum, Bankruptcy Legislation Amendment Act 2002 (Cth)
Inspector-General Practice Direction 7
REASONS FOR DECISION
Senior Member Linda Kirk
22 September 2021
BACKGROUND

On 29 September 2016, Ian Stolyar (‘the Applicant’) became bankrupt by a Sequestration Order. On the same day Andrew John Scott (‘the Trustee’) was appointed as Trustee of the Applicant’s estate.
On 24 December 2019 the Trustee issued a notice to objection from discharge (‘Notice of Objection’) pursuant to section 149D(1)(ma) of the Bankruptcy Act 1966 (Cth) (‘the Act’) on the ground that ‘the bankrupt intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in any property’. The effect of the Notice of Objection was to extend the Applicant’s bankruptcy discharge date from 21 February 2020 to 21 February 2025 unless the Objection is withdrawn or cancelled: sections 149A(2) and (3) of the Act.
On 20 January 2020 the Trustee issued a further notice to objection from discharge (‘Further Notice’) pursuant to section 149D(1)(f) of the Act on the ground that ‘the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG’. The effect of the Further Notice was to extend the Applicant’s discharge date from 21 February 2020 to 21 February 2025.
On 4 February 2020 the Applicant submitted an application to the Inspector-General in Bankruptcy (‘the Respondent’) for a review of the Trustee’s Notice of Objection and Further Notice.
On 3 April 2020, pursuant to section 139ZD of the Act, the Respondent confirmed the Trustee’s decisions of 24 December 2019 and 20 January 2020 (‘the Reviewable Decision’).
On 3…

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 3398
Decision Date: 22 September 2021

CaseChat Overview and Summary

This matter concerned an appeal by the Applicant to the Administrative Appeals Tribunal (AAT) regarding a decision by the Inspector-General in Bankruptcy to object to his discharge from bankruptcy. The objection was based on a special ground, namely the Applicant's alleged intentional failure to disclose a beneficial interest in property to his trustee. The core dispute revolved around whether the Applicant had indeed intentionally failed to disclose his beneficial interest in a Rolex watch and, if so, whether he had a reasonable excuse for this failure.

The Tribunal was required to determine two key issues. Firstly, whether there was sufficient evidence to support the ground relied upon by the Inspector-General, specifically whether the Applicant intentionally failed to disclose his beneficial interest in the Rolex watch to the trustee. Secondly, if such an intentional failure was established, the Tribunal had to consider whether the Applicant possessed a reasonable excuse for not disclosing the property.

In reaching its decision, the Tribunal considered the evidence presented, including the Applicant's possession of the Rolex watch during the execution of a section 77AA notice, an invoice for a similar watch in his name, and the Applicant's conflicting statements about ownership and value. The Tribunal found, on the balance of probabilities, that the Applicant had intentionally failed to disclose his beneficial interest in the Rolex watch. Applying the principles of bankruptcy law, which presume automatic discharge unless a valid objection is raised on specific grounds, the Tribunal concluded that the Applicant's explanations did not constitute a reasonable excuse for his non-disclosure. The Tribunal affirmed the Reviewable Decision.

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

The issues for determination by the Tribunal are:(a)whether there is sufficient evidence to support the existence of the ground relied upon, specifically whether the Applicant intentionally failed to disclose to the trustee the bankrupt’s beneficial interest in any property; and if so(b)whether the Applicant had a reasonable excuse for his failure to disclose the same.EVIDENCE BEFORE THE TRIBUNALExecution of section 77AA Notice On 19 June 2019, the Official Receiver executed a section 77AA notice on the Applicant.[1] During execution of the section 77AA notice, the Applicant was observed by the Trustee wearing a Rolex watch on his wrist, and he allowed a photograph to be taken of the watch when requested.[2] An invoice from J Farren-Price Jewellers issued in the name of the Applicant was also located.[3] [1] Exhibit R2, T8, pp. 50 – 56. [2] Exhibit R2, T8, pp. 55 – 56.[3] Exhibit R2, T9, p. 58; T12, p. 65. A file note of the Trustee relevantly records the discussion between him and the Applicant in relation to the watch and other items:[4]AS:There are numerous items we have identified throughout course of today which need to be delivered now to us. Starting with your Rolex watch [note: which was on his wrist].IS:This is an old watch I’ve had for many yearsAS:You purchased it for $45K. We’ve seen the invoice from J-Farren Price. Can I please take a photo?IS:Sure but I don’t believe you’re entitled. It’s also very old.…IS:… Regarding the watch I’m not sure it even works and it is not worth very much.[4] Exhibit R2, T8, p. 55. In his statement dated 5 April 2021 the Applicant wrote:[5][5] Exhibit A3. ‘On about 19 June 2019, Mr Scott, my Trustee in Bankruptcy attended at my mother’s home at Dumaresq Road, Rose Bay with a s77A notice. I was there at the time wearing a watch. The Trustee and I had a conversation to the following effect:AS: Can I have a look at the watch that you are wearing?IS: Sure, It is a very old watch.AS: I need to take it from you.IS: No, the watch is not mine, I cannot give it you I will need to get some advice.AS: O.K. Can I take a photo of the watch?I agreed to a photograph of the Rolex watch being taken.I do not own a Rolex watch. From memory my mother purchased the watch more than 10 years ago when she traded in my father's gold Rolex Daytona watch. I have no recollection of how much she paid for it and I have no knowledge of the watch's current location. On the 19 June 2019, I was wearing the watch as my own Tag Heuer watch needed to be repaired and my mother lent it to me for a week or so until my Tag Heuer was ready.I did not disclose the watch in my Statement of Affairs at section 37 or otherwise as I do not own a Rolex watch and have not paid for it.I refer to the documents which are at T12 and 13 of pages 65 and 66 of the T Documents. These invoices are in my name but they do not relate to any watch in my possession following my bankruptcy and they do not relate to the watch photographed by the Trustee on my hand.It is also not clear from the documents above that the watches were paid for at all.The Trustee and the Respondent have access to all my banking records going as far back as 2001.As far as I know the Respondent does not have any evidence that the Applicant made any payments to J Farren Price.On the contrary in fact, the Respondent has evidence in her possession, in the form of email exchange between Adam Treffiletti of PWC and Julian Farren Price, referred to in the document T15 pages 68-70, that there is no evidence that the watches were paid for and that Mr Price cannot confirm that the watch on the photograph was the same watch that was described on the invoices.…’

Decision

Reasons for decision

The Tribunal is also satisfied for the stated reasons that the Applicant did not have a reasonable excuse for his failure to disclose the same.DECISION The Reviewable Decision is affirmed.

Ratio Decidendi

Legal Principle Established

Having regard to the factual circumstances, the Respondent concluded, based on all the circumstances and on the balance of probabilities, that the Applicant had intentionally failed to disclose to the Trustee his beneficial interest in property, being the Rolex.[45][45] RSFIC at 39.CONSIDERATION AND REASONS It is a fundamental principle of bankruptcy law that bankrupts have a presumption of automatic discharge by operation of the law. In Michael John Fuller and Hugh Jenner Wily,[46] Deputy President Burns stated that when a trustee exercises the discretion whether to object to a discharge, ‘this presumption in favour of the bankrupt is uppermost in the mind of the decision maker to be carefully weighed against any reasons for objecting to discharge.’[47] Therefore, a trustee and, on a review, the Respondent must give due consideration to the ‘purpose, utility and relevance an objection has in the bankruptcy context.’[48] The decision-maker must be satisfied that the objects of the Act will be served and, where the ground relied upon is not a ‘special ground’[49] the reasons why.[50] The relevant objection in this proceeding concerns a special ground.[46] [1998] AATA 577 (31 July 1998). [47] Ibid, 84. [48] Inspector-General Practice Direction 7, [2.10].[49] See s 149C(1A) of the Act.[50] This is necessary to satisfy the requirements of s.149C(1)(c) of the Act. The role of the Tribunal in conducting a review of the Respondent’s decision is limited by the legislative regime, in particular s 149N of the Act. In Combe v Inspector-General in Bankruptcy,[51] the Federal Court observed that, ‘the Tribunal has no power generally to review the conduct of the trustee. The Tribunal stands in the shoes of Inspector-General whose powers are set out in s 149N’.[52] In Fitzgibbon v Inspector-General in Bankruptcy,[53] the Court recognised that the Tribunal ‘is not at large in this matter and is confined by the statutory criteria which applied to the Respondent when making the decision under review’.[54] As the Tribunal stated in Adami and Inspector-General in Bankruptcy,[55] ‘.. [there is] no inherent jurisdiction in this Tribunal to go outside the terms of section 149N of the Act’.[56][51] [2005] FCA 1101.[52] Ibid, 29.[53] [2000] FCA 1677.[54] Adami and Inspector-General in Bankruptcy [2001] AATA 363 at [4] citing Fitzgibbon v Inspector-General in Bankruptcy.[55] [2001] AATA 363; See also Young and Inspector-General [2006] AATA 502 and De La Hunty and Inspector-General in Bankruptcy [2006] AATA 610. [56] At [34] The Bankruptcy Legislation Amendment Act 2002 (Cth) (‘BLAA’) introduced ‘special grounds’ of objection into the Act. The Explanatory Memorandum to the BLAA stated that its objects included to:[57]‘Strengthen the objection-to-discharge provisions of the Bankruptcy Act 1966 (the Act) by making it easier for trustees to lodge objections to a person’s discharge from bankruptcy and harder for bankrupts to sustain challenges to objections.’[57] Explanatory Memorandum, Bankruptcy Legislation Amendment Act 2002 (Cth), 3.