Young and Inspector-General in Bankruptcy
[2006] AATA 502
•8 June 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 502
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2005/316
GENERAL ADMINISTRATION DIVISION ) Re PAUL WILLIAM YOUNG Applicant
And
INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal Mr S Penglis, Senior Member Date8 June 2006
PlacePerth
Decision The Tribunal affirms the decision under review. ............(sgd S Penglis)................
Senior Member
CATCHWORDS
BANKRUPTCY - Objection to automatic discharge of bankrupt - sufficient evidence held to support the existence of at least one special ground specified in objection - whether bankrupt can rely upon failures on the part of professional agent in order to establish "reasonable excuse" - whether depression/anxiety constitutes "reasonable excuse" - held that bankrupt failed to establish that he had a reasonable excuse for his own conduct that constituted a special ground.
AUTHORITIES
Bankruptcy Act 1966 (Cth) Sections 77, 139U, 149D (1) and 149(N)
Wharton v Official Receiver in Bankruptcy (2001) 107 FCR 28
Combe v Inspector-General in Bankruptcy [2004] AATA 1324 Affirmed on appeal at [2005 FCA 1101]
Alesci v Salisbury [2002] VFC 475
REASONS FOR DECISION
June 2006 Mr S Penglis, Senior Member BACKGROUND
1. The applicant was made a bankrupt on his own petition on 28 November 2001.
2. Mr Colin Ambrose was appointed as the Trustee of the applicant’s bankrupt estate on 13 December 2001.
3. By Notice of Objection to Discharge dated 23 November 2004(“Objection”), Mr Ambrose objected to the applicant’s discharge from bankruptcy by force of section 149B of the Bankruptcy Act (1966) (“Act”). The grounds stated in the Objection are as follows:
“Grounds for Objection:- Sections 149D(1)(d), 149D(1)(da), 149D(1)(e)
Ground 1
That the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request.
Reference
Section 149(D(1)(d)
This objection has the effect of extending the bankruptcy to 8 years from the date the Statement of Affairs was lodged with the Official Receiver.
Ground 2
After the date of the bankruptcy, the bankrupt intentionally provided false or misleading information to the trustee
Reference
Section 149D (1)(da)
This objection has the effect of extending the bankruptcy to 8 years from the date the Statement of Affairs was lodged with the Official Receiver.
Ground 3
The bankrupt failed to disclose any particulars of income or expected income as required by a provision of this Act referred to in subsection 6A (1) or by section 139U;
Reference
Section 149D(1)(e)
The objection has the effect of extending the bankruptcy to 8 years from the date the Statement of Affairs was lodged with the Official Receiver.”
4. The effect of the Objection was to extend the term of the applicant’s bankruptcy until 28 November 2009.
5. By letter dated 4 February 2004 from his then solicitors, the applicant sought a review by the respondent of the Objection.
6. By letter dated 24 March 2005, the respondent advised the applicant of the respondent’s decision to uphold the Objection. That is the review decision the subject of this application.
LEGISLATION
7. The grounds of objection to discharge relied upon by Mr Ambrose and affirmed by the respondent are set out in s 149D of the Act. The section relevantly provides:
“(1) The grounds of objection that may be set out in a notice of objection are as follows:
…
(d)the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request;
(da)after the date of the bankruptcy, the bankrupt intentionally provided false and misleading information to the trustee;
(e)the bankrupt failed to disclose any particulars of income or expected income as required by a provision of this Act referred to in subsection 6A (1) or by section 139U.”
8. For the purposes of paragraph 149D(1), the Bankruptcy Regulations 1966 relevantly provide, by Regulation 7.01A, that:
“For paragraph 149D (1) (d) of the Act, a bankrupt is taken to have failed to comply with a request to provide information if the bankrupt has provided information that is incomplete or inaccurate”.
9. A bankrupt’s general duties to provide information relating to his or her property is set out in paragraph 77 of the Act:
(1)A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause:
(a) forthwith after becoming a bankrupt, give to the trustee:
(i) all books (including books of an associated entity of the bankrupt ) that are in the possession of the bankrupt and relate to any of his or her examinable affairs; and
(ii) the bankrupt’s passport, if any; and
(b) attend the trustee whenever the trustee reasonably requires; and
(ba)give such information about any of the bankrupt’s conduct and examinable affairs as the trustee requires; and
(bb) as soon as practicable after becoming a bankrupt, advise the trustee of any material change that occurred between the time the bankrupt lodged his or her statement of affairs and the time the bankrupt became a bankrupt; and
(bc) if a material change occurred later, advise the trustee of that change as soon as practicable after the change occurs; and
(c) attend a meeting of creditors whenever the trustee requires; and
(d) at each meeting of creditors at which the bankrupt is present, give such information about any of the bankrupt’s conduct and examinable affairs as the meeting requires; and
(e) execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and
(f) disclose to the trustee, as soon as practicable, property that is acquired by him or her, or devolves on him or her, before his or her discharge, being property divisible amongst his or her creditors; and
(g) aid to the utmost of his or her power in the administration of his or her estate.
(2) In this section:
material change" means a change in the particulars contained in the bankrupt’s statement of affairs, where the change could reasonably be expected to be relevant to the administration of the bankrupt’s estate.”
10. A bankrupt’s duty to provide evidence of his or her income is found in s 139U of the Act, which relevantly provides:
“(1)A bankrupt must, as soon as practicable, and in any event not later than 21 days, after the end of a contribution assessment period, give to the trustee::
(a) a statement:
(i)setting out particulars of all the income that was derived by the bankrupt during that contribution assessment period; and
(ia)setting out particulars of all the income that was derived by each dependant of the bankrupt during that contribution assessment period; and
(ii) indicating what income (if any) the bankrupt expects to derive during the next contribution assessment period; and
(iii) indicating what income (if any) the bankrupt expects each dependant of the bankrupt to derive during the next contribution assessment period and
(b)such books evidencing the derivation of the income referred to in subparagraph (a) (i) as are in possession of the bankrupt or the bankrupt can readily obtain.
Penalty: Imprisonment for 6 months.
(2)The particulars that a bankrupt is required to include in a statement given to the trustee under subparagraphs (1) (a) (i) and (ia) are all the particulars that are known to the bankrupt and any particulars that the bankrupt can readily obtain”
11. In reviewing a decision by a trustee to lodge an objection to discharge, the Tribunal is bound by the requirements of s 149N of the Act, which relevantly provides:
“(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;
(e)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), (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) …
(3) ….”
The Issues
12. It was common cause before the Tribunal that each of the grounds specified in the Objection was “a special grounds” for the purpose of section 149N (1A) of the Act.
13. It was also common cause before the Tribunal that, by reason of that fact and the operation of ss 149N (1A), the Tribunal must not cancel the Objection pursuant to s 149N (1) of the Act if I find that there is sufficient evidence to support the existence of at least one of the grounds specified in the Objection and that the applicant fails to establish that he had a reasonable excuse for the conduct or failure that constituted such special ground.
14. I must then turn to consider each of the three grounds specified in the Objection to determine whether there is sufficient evidence to support their existence and, to the extent that I find that there is, whether on the evidence the applicant has discharged the onus upon him that he had a reasonable excuse for the conduct or failure that constituted such grounds.
15. I consider each ground in turn.
Ground 1
16. It was submitted on behalf of the respondent that the evidence makes out this ground for any of the following reasons:
·Mr Ambrose provided to the applicant an income questionnaire to complete and return within 14 days, requested him to “complete all relevant sections of the form, attach documentary evidence of … income, including payslips, tax assessment, PAYG summary slips”. The respondent contends that the applicant did not complete and return the questionnaire to Mr Ambrose within the 14 day period, or at all.
·A second request was made by Mr Ambrose for the applicant to complete an income questionnaire and to provide all documentary evidence of income. The applicant returned the questionnaire duly completed, but did not attach any documentary evidence of his income. Relying upon Regulation 7.01A, the respondent submitted that the applicant is taken to have failed to comply with the request to provide information to the extent that information provided to him is “incomplete or inaccurate”. The matters in respect of which the respondent submits information provided by the applicant was “inaccurate” are detailed under Grounds 2 and 3 below.
Ground 2
17. The respondent submits that the applicant “intentionally provided false or misleading information” to Mr Ambrose in the following respects:
· In the completed questionnaire which the applicant provided to Mr Ambrose, the respondent submits that the applicant did not disclose, that, in the prior 12 months, he had received approximately $32,000 by way of income and, further, that the applicant falsely claimed that he had paid $5,200 in the prior 12 months, and estimated that he would pay $5,200 in the next 12 months, by way of child support for his son, Mark.
· In a subsequent questionnaire which the applicant provided to Mr Ambrose, the respondent submits that the applicant falsely stated that he was not employed, derived no income from any employment or occupation and had been provided accommodation and meals from his son, Paul Victor Young. The respondent submits that the accommodation and meals were in fact provided by a company M W Young Pty Ltd.
· In respect of that same questionnaire, the respondent submits that the address given by the applicant as his “residential address” false.
Ground 3
18. The respondent submits that the applicant “failed to disclose any particulars of income or expected income. In the first questionnaire answered by the applicant, the applicant stated that he had derived income from Leonine Pty Ltd during the 12 months prior to completing the questionnaire in the sum of $32,000 and expected to derive the same amount in income over the next 12-month period. In the second questionnaire answered by the applicant, the applicant stated that he did not derive an income during the 12-month period prior to completing the questionnaire and did not expect to derive any income in the next 12 months.
19. The respondent submits, therefore, that
· it is open for the Tribunal to find that the applicant contravened s 139U of the Act by failing to provide documentary evidence in support of his employment and income by Leonine Pty Ltd, which information it was submitted was readily obtainable by him.
· the applicant provided no notice to Mr Ambrose of the applicant’s change in circumstances, relevantly the termination of his employment with Leonine Pty Ltd.
· the applicant failed to disclose that benefits and gifts were provided by M W Young Pty Ltd and failed to provide any documentary evidence relating to the value of those gifts and benefits, which information was readily obtainable by him.
FINDINGS
The failure to answer the first questionnaire
20. It is common cause that Mr Ambrose did not receive the information requested by him in his letter of 18 March 2002 within the period referred to in the letter. There is therefore sufficient evidence to support the existence of the first ground specified in the Objection.
21. The question then becomes whether or not the applicant has established that he had a reasonable excuse for that failure.
22. The applicant put his affairs in the hands of a professional advisor. There was no suggestion by Mr Uglesic, Counsel for the Respondent, that the applicant had acted unreasonably in that regard, including the applicant’s choice of advisor. The fact of the matter is that the applicant’s advisor failed to provide the completed questionnaire and documentation to Mr Ambrose. The applicant produced no evidence as to why that was so (as no good reason was ever given to the applicant by the advisor.)
23. The question thus becomes whether, when determining whether or not the applicant had a reasonable excuse for the failure, the conduct of the applicant’s advisor (that is, his agent) is to be visited upon him (which is the conclusion that the Tribunal has been invited to reach by Counsel for the respondent). Even if the applicant is not to be held responsible for his agent’s failure, Counsel for the respondent submitted that the applicant had not established a ”reasonable excuse” because where a bankrupt places his affairs in the hands of a professional advisor, it remains incumbent upon the bankrupt to ensure that the advisor has, as the bankrupt’s agent, discharged the bankrupt’s obligations. It was submitted that in such circumstances it was not good enough for the applicant to assume that the advisor had provided the completed questionnaire and documentation to Mr Ambrose and ought to have taken positive steps to ensure that that occurred (which the applicant did not do).
24. It is a trite proposition that in many facets of the law a principal is liable for the acts and omissions of his or her agent. That, however, is not determinative of the proper construction of s 149N (1A) of the Act.
25. It has been held that the object of s 149 A, in a broad sense, is to encourage bankrupts to co-operate with their trustees. The regime established by s 149A (and related sections) must be construed in a sensible manner so as to avoid operating oppressively: (see for example, the decision of Weinberg J in Wharton v Official Receiver in Bankruptcy 2001 (107) FCR 28).
26. The regime established by s 149A and its related sections, particularly s 149N (1A), is to focus on the conduct of the bankrupt to determine whether or not that conduct exculpates the bankrupt from the otherwise severe consequences of a special ground being established on the evidence. The focus therefore must be on the conduct of the bankrupt. If a bankrupt has in all regards acted reasonably, but an agent has nevertheless let him or her down, I find that the bankrupt may nevertheless be able to establish a “reasonable excuse” for his or her conduct or failure, even if the conduct of his or her agent is without reasonable excuse. I consider this conclusion to be consistent with the approach of this Tribunal in Combe and Inspector-General in Bankruptcy [2004] AATA 1324 (affirmed on appeal at [2005] FCA 1101) and, by analogy, Alesci v Salisbury [2002] VFC 475, a decision of Bongiorno J of the Supreme Court of Victoria relating to s 120 of the Civil and Administrative Tribunal Act, 1998.
27. The question then becomes whether or not the excuse proffered by the applicant for failing to comply with Mr Ambrose’s request of 18 March 2002 was ”reasonable”. I find as a fact that immediately upon receiving the request, the applicant arranged to meet his advisor to complete the form. The applicant and his advisor went through each question on the questionnaire and the applicant answered all of the questions to the best of his ability. The applicant then signed and dated the questionnaire and left it with his advisor to send, believing that he would do so, attaching whatever documentary evidence needed to be attached: the applicant having previously provided his advisor with all of his personal financial documents for the purpose of completing the earlier statement of affairs.
28. I find it is reasonable for the applicant, in the circumstances, to assume that his advisor would promptly do that which he had been engaged to do, namely that he would attach to the completed questionnaire the necessary documentation (which was in the advisor’s possession) and forward the same to Mr Ambrose. I do not accept the submission of Counsel for the respondent that the applicant was not acting reasonably by reason of his not having subsequently followed up his professional advisor to ensure that the material had been forwarded to Mr Ambrose.
29. Accordingly, I find that the applicant has established that he had a reasonable excuse for the failure to comply with the first request within the timeframe specified in Mr Ambrose’s letter of 18 March 2002.
Child Support
30. The applicant stated in the first questionnaire that he had paid $5,200 in the prior 12 months, and estimated that he would pay $5,200 in the next 12 months, by way of child support for his son, Mark. It was common cause before the Tribunal that this information was false. The applicant had no explanation as to why he signed the questionnaire containing information which he knew to be false.
31. The only evidence given by the applicant in this regard was as follows:-
“As to the question of the child support payments – at the time of completing the questionnaire for the first contribution assessment period I believe I would be paying child support of around $5,200 in respect of Mark. However, this did not eventuate and I ended up making no child support payments over the whole period and up until Mark reached 18”.
32. The applicant submitted that he had no intention to mislead or deceive Mr Ambrose in this regard. His evidence was that “at no time have I provided false or misleading information to the Trustee either intentionally or otherwise”.
33. All that needs to be established by the respondent is that the applicant “intentionally provided false or misleading information” to Mr Ambrose. The Act does not go on to further require proof of the purpose for which such conduct was undertaken, such as an intention to mislead or deceive the Trustee.
34. The provision of the false information with respect to the payment of child support, even giving the applicant the benefit of the doubt as to his purpose, was not accidental. It was intentionally included in the completed questionnaire which the applicant signed and which was provided to Mr Ambrose. The applicant has not suggested he was unaware of what the completed questionnaire said in this respect. Even accepting that the applicant believed that he would be paying child support of around $5,200 in respect of his son, Mark, the fact of the matter is that, contrary what was stated in the completed questionnaire, no amount had in fact been paid (let alone $5,200) in the prior 12 months towards child support for his son, Mark.
35. I therefore conclude that the applicant “intentionally provided false or misleading information” to Mr Ambrose by stating that, in prior 12 months, he had paid $5,200 by way of child support for his son, Mark, when, in fact, and to his knowledge, he had not done so.
36. I therefore now turn to consider whether the applicant has established that he had quite “a reasonable excuse” for this conduct.
37. I have already noted the entirety of the applicant’s evidence with respect to this aspect of the matter. I note that no evidence was produced as to whether the applicant’s evidence that he had a belief he would be paying child support for his son Mark, and that it would be $5,200, was reasonable. In this regard I note that the Act clearly places the onus upon the applicant to establish the existence of “a reasonable excuse”. Fundamentally, however, even if the applicant reasonably believed that he “would be paying child support” (ie. in the future), that belief cannot explain the applicant’s answer that he had paid $5,200 for child support in the prior 12 months.
38. On the issue of reasonable excuse, the applicant relied upon a psychological assessment report prepared by Andrew Brennan, a registered psychologist. Mr Brennan provided an opinion regarding Mr Young’s state of mind and the subject matter of compliance. I do not propose to reproduce that evidence in any detail. In essence, the opinion was to the effect that the applicant has undergone a great deal of loss since 1999 resulting in him becoming “dysfunctional”. However, nothing in the opinion touched upon, let alone sought to explain, the provision of false information to Mr Ambrose by reference to the applicant’s state of mind. In short, nothing in the opinion of Mr Brennan is capable of providing a “reasonable excuse” for this conduct.
39. It should also be noted that a letter authored by Mr Brennan in December 2004 with respect to the applicant’s mental condition that was before the Tribunal. In that letter Mr Osborne stated that, in his opinion, the applicant had not be capable of “applying himself or addressing commercial dealings to any reasonable degree of competency as a result of his loss of confidence and associated clinical depression and anxiety”. In another letter authored by Mr Brennan, dated February 2005, Mr Brennan stated the opinion that:
I think it is likely that because of his depression, Mr Young’s incapacitation with regards to matters of commercial administration could have been as much as (negative) 25 percentage at that time.
In cross-examination, Mr Brennan said he was referring to cognitive behaviour equivalent to commercial dealings such as administration.
40. Mr Brennan also wrote:
“ I am unprepared to be more specific re how this incapacitation or deficit may have affected Mr Young’s meeting of legal obligations with regard to the assessment of his bankruptcy other than to say it may well have reduced his attention to detail and the provision of detail and timely response to request for information. Any further qualification would be at best speculation”.
41. I therefore conclude that the applicant has failed to establish that he had a reasonable excuse for his conduct in this regard.
Applicant’s Address
42. It was common cause before the Tribunal that, in his answers to the second questionnaire provided by the applicant to Mr Ambrose, in response to the request to state the applicant’s current address, he wrote “151 Morphet St Morphetville”, and that this was false.
43. The applicant’s explanation for his conduct was that he had arranged to reside at 151 Morphet Rd Morphetville with his son, but that the arrangement did not come to fruition. He said that he always intended this address to be his contact address it was the best and most reliable place to be able to contact him within a reasonable amount of time.
44. The difficulty for the applicant with that explanation is that the requirement to provide “your current address” in the questionnaire only arose in the event that the answer to the preceding question, “is the address on page (1) your correct address” answered in the negative.
45. It is therefore abundantly clear that the question with respect to “current address” meant exactly that, the current address of the applicant; not the address to which communications is to be addressed.
46. I therefore conclude that the applicant “intentionally provided false or misleading information” to Mr Ambrose by stating that his “current address” as an address that was not his “current address”.
47. I further conclude that the applicant’s explanation for providing an address other than his “current address” does not constitute a “reasonable excuse” for this conduct and that nothing in the opinion expressed by Mr Brennan reasonably excuses such conduct.
Other Grounds
48. By reason of the Tribunal’s findings with respect to the applicant’s answers concerning child maintenance and his address, it is unnecessary for the Tribunal to consider the other grounds relied upon by the respondent.
CONCLUSION
49. For the reasons given above the Tribunal finds that the Objection filed by the applicant’s trustee in bankruptcy specified three special grounds, that there is sufficient evidence to support the existence of at least one of those grounds, and that the applicant has failed to establish that he had a reasonable excuse for the conduct or failure that constituted such ground.
50. It therefore follows that I have no discretion in the matter. It is not for the Tribunal to determine whether or not the matter is of such seriousness as to warrant the Objection being upheld. As noted above, and as made clear to the applicant during the course of his submissions, in the event that the Tribunal concludes that there is sufficient evidence to support the existence of at least one special ground specified in the Objection and the applicant fails to establish that he had a reasonable excuse for that conduct, s 149 (1A) mandates the Tribunal not to cancel the Objection.
51. The Tribunal therefore upholds the decision under review.
I certify that the ... preceding paragraphs are a true copy of the reasons for the decision herein of Mr S Penglis, Senior Member
Signed: .....................................................................................
AssociateDate/s of Hearing 9 May 2006
Date of Decision 8 June 2006
Counsel for the Applicant Applicant appeared in person
Counsel for the Respondent Mr D Uglesic
Solicitor for the Respondent Australian Government Solicitor
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