Willox and Inspector-General in Bankruptcy - [2000] AATA 1153

DECISION AND REASONS FOR DECISION [2000] AATA 1153

ADMINISTRATIVE APPEALS TRIBUNAL )

) No W2000/230

GENERAL DIVISION         )
           Re      Judith Maree Willox
  Applicant
           And    Inspector-General in Bankruptcy
  Respondent

DECISION

Tribunal Mr R D Fayle, Senior Member

Date22 December 2000
PlacePerth

Decision Pursuant to s43 of the Administrative Appeals Tribunal Act 1975, the decision of the Official Trustee in Bankruptcy, dated 3 February 2000, is affirmed.

...........(sgd RD Fayle).........
Senior Member
CATCHWORDS
Bankruptcy – Early discharge – Disqualification for failure to disclose liability – Interpretation of the Act –Whether general provision circumscribed by specific provision – Meaning of phrase "at any time" – Bankruptcy Act 1966 (Cth), s149ZA.
Re Patterson and Inspector-General in Bankruptcy [2000] AATA 325
Freddy Enrique Chavez and Inspector-General in Bankruptcy [2000] AATA 1018
Administrative Appeals Tribunal Act 1975 ss37 & 43
Bankruptcy Act 1966 s149ZA

REASONS FOR DECISION

22 December 2000 Mr R D Fayle, Senior Member

Ms Judith Willox ("the applicant") has applied to this Tribunal to review a decision of the Inspector-General in Bankruptcy ("the respondent") disqualifying her from early discharge from bankruptcy.
The applicant attended the hearing and gave evidence. The respondent was represented by Mr Joe Lenczner, barrister. The Tribunal had before it documents filed pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the T documents"), and two further documents were taken into evidence (exhibits A1 and A2).
The facts were not in dispute. On 9 June 1999, the applicant filed for bankruptcy by presenting to the Official Receiver a petition against herself pursuant to s55 of the Bankruptcy Act 1966 ("the Act"). A Statement of Affairs, which she had completed without assistance, accompanied the petition. At the time the applicant was not working due to illness. On advice she had gone to reside with her elderly mother in a Victorian country town. Prior to filing, she had telephoned the Insolvency and Trustee Service Australia, Victorian Branch ("ITSA"), inquiring as to what was needed to file for bankruptcy. Advice was provided and she attended the ITSA Melbourne office on 9 June 1999 to file her petition and statement of affairs. That disclosed a list of unsecured creditors which she totalled $7,437.43. On or about 6 July 1999 the applicant discovered that she had omitted to disclose two unsecured creditors, Ahearnscard for $444.61 and Myercard for $600.09. The applicant promptly telephoned ITSA to report the omission and then followed instructions to provide immediate written confirmation. The omission was due to inadvertence and was brought to the attention of ITSA as soon as it was discovered.
The Tribunal accepts, and it understands also that so too does the respondent, that when she completed her statement of affairs the applicant did so unaided and to the best of her ability at a time when she was not in good health and due to that, somewhat distracted.
On 3 February 2000 the respondent's delegate notified the applicant that her application for early discharge dated 20 January 2000 had been rejected. His reason was that she had "failed to disclose a liability in [her] Statement of Affairs and does not meet the tests which must be satisfied to obtain an early discharge", (T9). The delegate further advised in context that she be disqualified from early discharge by the provisions of s149ZA of the Act. That provision states:
149ZA Failure to disclose liability
(1)       A bankrupt is disqualified from early discharge if the bankrupt has at any time failed, whether intentionally or not, to disclose to the trustee any liability of the bankrupt that existed at the date of the bankruptcy.
(2)       The trustee may determine that the bankrupt has failed to disclose a liability as mentioned in subsection (1) if:
(a)       a person has lodged with the trustee a proof of debt that has been accepted by the trustee; and
(b)       the bankrupt's statement of affairs:
(i)did not disclose that the person was a creditor; or
(ii)did not disclose the debt claimed by the person or disclosed part only of that debt.
Mr Lenczner drew the attention of the Tribunal to two conflicting Tribunal decisions relevant to that provision. The first is a decision of a Deputy President and the more recent is a decision of a Member, who referred to the former in reaching a contrary decision where the facts were similar. It is therefore for this Tribunal to consider which of those to follow. Mr Lenczner took the Tribunal through the former decision pointing to what he believed to be an error of law, later addressed by the latter and, he submitted, corrected.
The relevant issues, as this Tribunal understands them are twofold. Firstly, whether subsection 149ZA(2) limits the scope of subsection 149ZA(1); and secondly, what is the proper construction of s149ZA(1) in any event.
Mr Lenczner submitted that subsection (1) [of s149ZA] is expressed in mandatory terms. It is not discretionary and the intentions or reasons for a bankrupt to have failed to make the requisite disclosures are irrelevant. He submitted that subsection (1) should not be read as subject to subsection (2). Subsection (2), he submitted, is but one example, albeit specific, of when a determination may be made that the bankrupt in question has failed to disclose a liability and therefore activating subsection (1). His respectful submission is that the learned Deputy President was wrong in his conclusion, in Patterson and Inspector-General in Bankruptcy 31 AAR 217, at 221 where he states:
"… If s149ZA(2) is not superfluous, it seems to me that its purpose must be to define the circumstances in which a bankrupt 'has failed to disclose a liability as mentioned in subsection (1)'. In doing so it limits the circumstances in which a person may be found to have 'failed to disclose a liability as mentioned in subsection (1)' to those set out in s149ZA(2)."
This Tribunal agrees with respect, with the submission of Mr Lenczner, and previously adopted independently by the learned Member in the subsequent case, that the learned Deputy President's decision depended on that construction. For without that conclusion the Tribunal could not have reached the decision to set aside the decision there under review.
In this Tribunal's respectful opinion subsection 149ZA(1) is not qualified by subsection 149ZA(2) but the latter operates as a specific circumstance which brings into being a decision that the bankrupt failed to disclose to the trustee a relevant liability. One must look to the words of s149ZA(1) to decide their literal meaning. In the respectful opinion of the Tribunal, that provision is neither obscure nor ambiguous and its literal interpretation promotes the purpose of the Act (see later discussion).
Mr Lenczner submitted, and the Tribunal agrees, that the phrase "at any time" as used in s149ZA(1) can only mean "at any time since the bankrupt became bankrupt". If the phrase "at any time" is removed from the provision then it takes on an entirely new meaning. That meaning, in the Tribunal's opinion, accommodates the decision reached in Patterson where, as in this case, the liabilities were disclosed to the trustee after the presentation of the statement of affairs and within six months thereof. By removing that phrase then the provision would read: "A bankrupt is disqualified from early discharge if the bankrupt has failed … to disclose to the trustee any liability of the bankrupt that existed at the date of the bankruptcy". That interpretation would provide wide scope for bankrupts to omit from their statement of affairs (which must be filed with the petition to commence the bankruptcy) any liability so long as some time within the six month period they rectified that omission. It would create uncertainty in the administration of their bankrupt estate, even in cases like the present where the bankrupt has no realisable property or any prospect of paying a dividend to her creditors. That cannot be consistent with a fundamental purpose of the Act, to administer efficiently and fairly the estates of bankrupts and given certain conditions, discharge them.
For those reasons, it was submitted, one has to read the provision, s149ZA(1) in its context – it provides for early discharge from bankruptcy in cases where the bankrupt has filed a complete statement of affairs and there is no good reason to maintain their state of bankruptcy. For example, the bankrupt may have no realisable property nor any prospect of making a contribution from his or her income to provide a dividend to creditors, they have made a full disclosure of their income, they have not engaged in misleading conduct, nor managed a corporation or refused or failed to give their passport to the trustee. The Tribunal accepts that the applicant meets all the above criteria and except for the apparent breach of s149ZA she would qualify for early discharge.
Mr Lenczner submitted that the phrase "at any time" as used in s149ZA(1), could only be read as qualifying the failure to disclose a liability at a time after becoming bankrupt. That is, upon presentation of the petition, it is fatal to an application for early discharge if a bankrupt has, at that time, failed to disclose a liability. In the present case there is an interregnum of nearly a month since the petition for bankruptcy was filed on 9 June 1999 (commencing the bankruptcy) and the disclosure of the two mentioned liabilities on or about 6 July 1999. So, during that interregnum there was a failure to disclose liabilities that existed at the date of bankruptcy. In the Tribunal's respectful opinion that is the only reasonable interpretation of that provision. The trustee is appointed on the date of the commencement of bankruptcy and it is from then that the time period referred to in s149ZA(1) begins. And this failure to disclose, in the Tribunal's respectful opinion, cannot be cured by disclosing voluntarily a further liability of any amount at a time there after. Literally speaking, disclosure of a liability existing at the date of the bankruptcy at a time thereafter, no matter how brief the delay, satisfies s149ZA(1). Subsection 149ZA(1), in the Tribunal's opinion, imposes a strict temporal test.
For the above reasons the Tribunal declines to follow the decision of the learned Deputy President in Paterson (above). In the Tribunal's opinion s149ZA(1) alone circumscribes the basis for disqualification from early discharge from bankrupt in cases where, not withstanding any other circumstance, the bankrupt has not disclosed at the date of the bankruptcy all liabilities.
In passing and not as part of its reasons in this matter, the Tribunal did explore with Mr Lenczner whether there were any provisions in the Act that might operate to cancel a previously granted early discharge. It especially mentioned in this regard, circumstances where subsequent events show that had the trustee full knowledge, especially of undisclosed debts, early discharge would not have been granted. Mr Lenczner, after taking instructions, informed the Tribunal that his instructors are not aware of any such provisions. He directed the Tribunal to the various offences under that Act which go to failure to disclose etc. So, administratively, the respondent depends on full and true disclosure by bankrupts of all relevant matters, for the proper administration of the Act. Early discharge is a privilege and that privilege is jeopardised by a failure, whether innocent, inadvertent or otherwise, to make that true and full disclosure at the date of bankruptcy. Having reached the decision that it has in this matter, the Tribunal though is minded to make a gratuitous comment. That is, because of the applicant's present circumstances and prospects, no apparent purpose is going to be served by keeping her in the state of bankruptcy until automatic discharge. Her honesty and integrity was never in question, not by the respondent nor this Tribunal. The Tribunal acknowledges that neither it nor the respondent has any discretion in the matter. This may well be an isolated instance of a technical breach resulting in a mandatory decision with a perceived unintended harsh effect. The Tribunal cannot speak for the respondent in this respect nor does it. However, this is an occasion where the Tribunal may have appreciated some discretion such as an opportunity to consider special circumstances, as that term has become to be understood in Administrative law. Having said that, the Tribunal is mindful that where there exists a strict regime intended to protect the public, to impose relevant responsibilities on individuals and to grant benefits to them in limited circumstances, then to provide administrative discretion may be counter to the purpose of the relevant legislation. Bankruptcy law may well fall into that category.
Decision
For the above reasons, and pursuant to s43 of the Administrative Appeals Tribunal Act 1975, the decision of the Official Trustee in Bankruptcy, dated 3 February 2000, is affirmed.
I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R D Fayle, Senior Member
Signed:         (- sgd W.Treasure- )
           .....................................................................................
  Associate
Date/s of Hearing  15 December 2000
Date of Decision  22 December 2000
Counsel for the Applicant        Unrepresented
Counsel for the Respondent    Mr Joe Lenczner, Barrister