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Federal Court of Australia |
Last Updated: 2 March 2001
Wharton v Official Receiver in Bankruptcy [2001] FCA 96
STEPHEN LYNNE WHARTON v OFFICIAL RECEIVER IN BANKRUPTCY
V 482 OF 2000
WEINBERG J
1 MARCH 2001
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
V482 of 2000 |
BETWEEN: |
STEPHEN LYNNE WHARTON APPLICANT |
AND: |
OFFICIAL RECEIVER IN BANKRUPTCY RESPONDENT |
JUDGE: |
WEINBERG J |
DATE OF ORDER: |
1 MARCH 2001 |
WHERE MADE: |
MELBOURNE |
THE COURT DECLARES THAT:
The applicant be deemed to have been discharged from bankruptcy on 31 May 1999.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
V482 of 2000 |
BETWEEN: |
STEPHEN LYNNE WHARTON APPLICANT |
AND: |
OFFICIAL RECEIVER IN BANKRUPTCY RESPONDENT |
JUDGE: |
WEINBERG J |
DATE: |
1 MARCH 2001 |
PLACE: |
MELBOURNE |
1 When this judgment was delivered on 20 February 2001, my preliminary view was that the applicant should be regarded as having been discharged from bankruptcy on 31 May 1999, three years after the date on which he filed his statement of affairs.
2 The respondent was afforded an opportunity to make further submissions in relation to this issue but, having considered the matter, has indicated that he does not disagree with the view which I previously expressed.
3 The applicant seeks a declaration to that effect. In my view it is appropriate that I grant the declaratory relief sought. Accordingly I will declare that the applicant is deemed to have been discharged from bankruptcy on 31 May 1999.
I certify that the preceding three (3) numbered paragraphs are a true copy of the Supplementary Reasons for Judgment herein of the Honourable Justice Weinberg. |
Associate:
Dated: 1 March 2001
Wharton v Official Receiver in Bankruptcy [2001] FCA 96
BANKRUPTCY - objection to discharge from bankruptcy by trustee under s 149D(1)(d) of the Bankruptcy Act 1966 (Cth) - whether bankrupt failed to provide written information to trustee - whether pro bono legal services constitutes "benefit" - whether bankrupt knew of arrangement with regard to pro bono legal services - whether provision should be construed strictly - whether any requirement that information provided is true and accurate for purposes of objection provision.
Bankruptcy Act 1966 (Cth) ss 136L, 149A, 149B, 149C, 149D(1)
Fringe Benefits Tax Assessment Act 1986 (Cth) s 136
Acts Interpretation Act 1901 (Cth) s 15AA
Administrative Appeals Tribunal Act 1975 (Cth) s 44
McGoldrick v Official Trustee (1993) 47 FCR 547 at 553-554 referred to
Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67 referred to
Hill v Holmes [1999] FCA 760; (1999) 92 FCR 120 followed
Win v Minister for Immigration and Multicultural Affairs [2001] FCA 56 referred to
Re Woodman and Inspector General in Bankruptcy (1996) 40 ALD 800 referred to
Browne v Dunn (1894) 6 R 67 referred to
Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at 355-356 referred to
Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at 394 referred to
M Aronson and B Dyer Judicial Review of Administrative Action (2nd ed 2000) at 158-162
STEPHEN LYNNE WHARTON v OFFICIAL RECEIVER IN BANKRUPTCY
V 482 OF 2000
WEINBERG J
20 FEBRUARY 2001
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
BETWEEN: |
STEPHEN LYNNE WHARTON APPLICANT |
AND: |
OFFICIAL RECEIVER IN BANKRUPTCY RESPONDENT |
JUDGE: |
WEINBERG J |
DATE OF ORDER: |
20 FEBRUARY 2001 |
WHERE MADE: |
MELBOURNE |
1. The appeal be allowed.
2. The notice of contention be dismissed.
3. The notice of objection dated 26 May 1999 and issued by the respondent with respect to the applicant's discharge from bankruptcy be set aside.
4. The decision of the Administrative Appeals Tribunal given on 8 June 2000 be set aside.
5. The respondent pay the applicant's costs of and incidental to the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
VICTORIA DISTRICT REGISTRY |
BETWEEN: |
STEPHEN LYNNE WHARTON APPLICANT |
AND: |
OFFICIAL RECEIVER IN BANKRUPTCY RESPONDENT |
JUDGE: |
WEINBERG J |
DATE: |
20 FEBRUARY 2001 |
PLACE: |
MELBOURNE |
4 This is an appeal under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") from a decision of a Deputy President and two members of the Administrative Appeals Tribunal ("the Tribunal") given on 8 June 2000. That decision affirmed the decision of a delegate of the respondent to object to the discharge of the applicant from bankruptcy by filing a notice under s 149B of the Bankruptcy Act 1966 (Cth) ("the Act"). The effect of that decision is to extend the applicant's period of bankruptcy for a further five years, to 31 May 2004. In the absence of a notice of objection being filed, the applicant would have been discharged from bankruptcy on 31 May 1999, three years after he filed his statement of affairs.
5 The grounds of appeal are:
(1) That the Tribunal erred in law in deciding that the provision of pro bono legal services by the applicant's solicitor constituted a "benefit" to the applicant for the purposes of question 14 of the income questionnaire.
(2) That the Tribunal erred in law in deciding that the payment by the applicant's mother of private school fees with respect to two of the applicant's children constituted a "benefit" to the applicant for the purposes of question 14 of the income questionnaire.
(3) That the Tribunal erred in deciding that the manner of completion of question 14 of the income questionnaire constituted a failure to provide written information to the respondent pursuant to a request in writing for information as to the applicant's property, income or expected income, within the meaning of s 149D(1)(d) of the Act.
6 During the course of the hearing before me Mr Galvin, counsel for the respondent, conceded that his client did not wish to contest the school fees ground raised by the applicant. As a result, only the issue of the pro bono legal assistance remained for consideration.
7 It is incumbent upon the applicant in an appeal of this nature to show that it was not open to the respondent to have relied upon the issue of pro bono legal assistance as a basis for objecting to the discharge of the applicant from bankruptcy, and that the Tribunal erred in law in concluding that the applicant had failed to provide the information sought.
8 In addition to the notice of appeal filed by the applicant, the respondent filed a notice of contention seeking to review a number of the findings made by the Tribunal, if it should transpire that I was otherwise minded to allow the appeal. I will return to the notice of contention later in these reasons for judgment.
Relevant legislative provisions
9 Under s 149(4) of the Act, which came into effect on 1 July 1992 through the Bankruptcy Amendment Act 1992 (Cth), a bankrupt is automatically discharged three years from the date on which he or she filed a statement of affairs. However, the bankruptcy of a person may be prolonged if an objection is lodged against the discharge.
10 Section 149B(1) of the Act provides:
"(1) Subject to the following provisions of this Subdivision, at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee may file with the Official Receiver a written notice of objection to the discharge, or the Official Receiver may file such a notice on the Official Receiver's own initiative."
11 Such a notice must be filed if the trustee believes that doing so will cause the bankrupt to do something which he is required to do by law, and there is no other way that the trustee is able to induce the bankrupt to do so: s 149B(2).
Section 149C relevantly provides:
"(1) A notice of objection must:
(a) set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and
(b) refer to the evidence or other material that, in the opinion of the trustee or Official Receiver, establishes that ground or each of those grounds; and
(c) state the reasons of the trustee or Official Receiver for objecting to the discharge on that ground or those grounds.
..."
12 The ground of objection relied upon by the respondent in the notice of objection was that the applicant had failed to provide information in such circumstances that s 149D(1)(d) of the Act was applicable. Section 149D(1) provides:
"(1) The grounds of objection that may be set out in a notice of objection are as follows:(a) the bankrupt has, whether before, on or after the date of the bankruptcy, left Australia and has not returned to Australia;
(b) after the date of the bankruptcy the bankrupt continued to manage a corporation as mentioned in section 91A of the Corporations Law without having been given leave to do so under section 229 of that Law;
(c) after the date of the bankruptcy the bankrupt engaged in misleading conduct in relation to a person in respect of an amount that, or amounts the total of which, exceeded $3,000;
(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;
(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;
(f) the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG;
(g) at any time during the period of 5 years immediately before the commencement of the bankruptcy, or at any time during the bankruptcy, the bankrupt:
(i) spent money but failed to explain adequately to the trustee the purpose for which the money was spent; or
(ii) disposed of property but failed to explain adequately to the trustee why no money was received as a result of the disposal or what the bankrupt did with the money received as a result of the disposal;
(h) while the bankrupt was absent from Australia he or she was requested by the trustee to return to Australia by a particular date or within a particular period but the bankrupt failed to return by that date or within that period;
(i) the bankrupt has failed, whether intentionally or not, to disclose to the trustee a liability of the bankrupt that existed at the date of the bankruptcy;
(j) the bankrupt failed to comply with subsection 80(1);
(k) the bankrupt refused or failed to sign a document after being lawfully required by the trustee to sign that document;
(l) the bankrupt failed to attend a meeting of his or her creditors without having first obtained written approval of the trustee not to attend or without having given to the trustee a reasonable explanation for the failure;
(m) the bankrupt failed to attend an interview or examination for the purposes of this Act without having given a reasonable explanation to the trustee for the failure;
(n) the bankrupt failed, whether intentionally or not, to disclose to the trustee the bankrupt's beneficial interest in any property."
13 The only grounds which may be relied on in an objection are those set out above. It is plain that the grounds referred to in s 149D(1) are intended, in a broad sense, to encourage bankrupts to co-operate with their trustees.
14 Under s 139W of the Act the trustee of a bankrupt is required to make periodic assessments of the bankrupt's income and of the contribution (if any) that the bankrupt is liable to pay in respect of each contribution assessment period under s 139S of the Act. For the purposes of such assessments, the word "income" is defined in s 139L to include various sorts of notional income.
15 Section 139L(a)(v) provides:
"In this Division:income, in relation to a bankrupt, has its ordinary meaning, subject to the following qualifications:
(a) the following are income in relation to a bankrupt (whether or not they come within the ordinary meaning of "income"):
...
(v) the value of a benefit that:
(A) is provided in any circumstances by any person (the "provider") to the bankrupt; and
(B) is a benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986 ...."
16 Under s 139U a bankrupt is required, in relation to each contribution assessment period, to give the trustee a statement setting out particulars of the income derived by him or her during that period, and indicating what income (if any) he or she expects to derive during the next contribution assessment period. Section 139V provides that the trustee has the power to give the bankrupt a written notice requiring that he or she provide further information if the trustee has reasonable grounds to suspect that any particulars in the s 139U statement are false or misleading in a material respect, or that any material particulars have been omitted from the statement.
17 Section 77(ba) provides that a bankrupt has a duty only to give the trustee "such information about any of the bankrupt's conduct and examinable affairs as the trustee requires". Section 77(g) provides that a bankrupt shall "aid to the utmost of his or her power in the administration of his or her estate".
Factual background
18 A sequestration order was made on 16 November 1994 as a result of the applicant's failure to comply with a bankruptcy notice. The Official Trustee ("the trustee") became the trustee of the applicant's estate. The bankruptcy is administered by the Official Trustee's representatives, the Official Receiver and the officers of Insolvency and Trustee Service, Australia ("ITSA"). The commencement of the date of bankruptcy was 23 March 1994. A statement of affairs was filed on 30 May 1996. In the absence of any objection to his bankruptcy, the applicant would have been discharged three years after that date.
19 The effect of an objection having been made by the Official Receiver on the basis of s 149D(1)(d) is that, unless the objection is withdrawn or cancelled, the date of discharge from bankruptcy is extended to eight years after filing the statement of affairs (pursuant to s 149A(2)(a)(i)). If the objection is withdrawn or cancelled, s 149A(3) provides that it is taken never to have been made, and the bankrupt is taken to be discharged immediately the withdrawal or cancellation takes effect.
20 At an interview on 6 November 1998 Mr Byrden, an officer of ITSA, handed to the applicant a blank form of questionnaire for completion. This was a request in writing by the trustee to the applicant for written information about the applicant's property, income or expected income, within the meaning of s 149D(1)(d) of the Act. The applicant completed and returned the questionnaire on 14 December 1998, the day before the first meeting of creditors called for the purpose of considering the applicant's proposal for a composition under s 73 of the Act.
21 Question 14 of the questionnaire was as follows:
"14. Do you receive, or expect to receive, any other benefit or entitlement from any other person or entity?EXAMPLES of benefits include:
- car & car running expenses |
- doctors or chemist bills |
- rent or board |
- children's education expenses |
- low interest loans |
|
No U Yes U If Yes, answer the following:
Include benefits where you make some contribution towards their cost
Type of benefit |
Who receives the benefit? |
Value of benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
22 In response to that question the applicant ticked the "No" box, put a diagonal line through the space provided for details of the benefits, and wrote against the diagonal line "NA", presumably meaning "not applicable".
The Tribunal's decision
23 The Tribunal firstly considered whether or not question 14 constituted a request to provide written information "about the applicant's...income or expected income" within the meaning of s 149D(1)(d). The Tribunal noted that by virtue of sub-paragraph (a)(v) of the definition of "income" in s 139L of the Act, certain low-interest loans, interest-free loans, and gratuitously provided benefits all constitute income for the purposes of s 139W. The Tribunal noted that the definition in s 139L is stated to apply only to Div 4B of Pt VI of the Act but was of the view that the reference to "income" in s 149D(1)(d) ought to be interpreted as referring to the extended definition of income in s 139L.
24 With respect to the question of whether the solicitors' pro bono work constituted a "benefit", the Tribunal found that, based on the definition of "benefit" in s 136(1) of the Fringe Benefits Tax Assessment Act 1986 (Cth) ("the FBTA Act"), the provision of such services was clearly a benefit, within the meaning of the definition of "income" in s 139L(a)(v) of the Act. In the opinion of the Tribunal, question 14 was wide enough to cover the solicitors' pro bono work.
25 The Tribunal found that the applicant had an ongoing arrangement with his solicitors that they would provide their services in relation to his bankruptcy on a pro bono basis. The Tribunal said:
"They were acting for him in relation to the proposal for a composition with his creditors, with a meeting of creditors due to be held to consider that proposal on 15 December 1998, only five days after the return of the questionnaire....
In our view the provision of the solicitors' pro bono work and the school fees paid by the applicant's mother were clearly benefits within the meaning of sub-paragraph (a)(v) of the definition of "income" in s 139L of the Act."
26 The Tribunal went on to find that the applicant's failure to disclose that he was receiving these "benefits" constituted a failure to provide written information within the scope of s 149D(1)(d). The Tribunal said:
"There is nothing ambiguous about Question 14. The applicant has no excuse for not disclosing the benefits he was receiving from his solicitors and his mother....
By failing to answer Question 14 of the income questionnaire properly, the applicant failed to provide information that was potentially very significant in circumstances where he had no reasonable excuse for not providing that information."
27 The Tribunal took the view that the applicant must have been aware that the answer which he gave to question 14 was, at best, misleading.
The applicant's submissions
28 Mr Hyde, counsel for the applicant, submitted that the principal issue in the appeal was that whether, by answering question 14 of the questionnaire in the manner which he did, the applicant had contravened s 149D(1)(d) of the Act. He submitted that on no view of the evidence had the applicant failed to comply with any request in writing by the trustee that he provide written information about his "property, income or expected income". Nor had he failed to comply with the request that he answer question 14 which was, in terms:
"Do you receive, or expect to receive any other benefit or entitlement from any other person or entity?"
when he answered that question by ticking the "No" box, putting a diagonal line through the space provided for details of the benefits and writing against that diagonal line "Not applicable".
29 Mr Hyde submitted that as a matter of grammar, as a matter of logic and as a matter of law, it could not be said that the applicant had failed to comply with the trustee's request for information. He had provided written information about his income, as requested. It was not to the point to suggest that the information might be false (which the applicant in any event denied). That might give rise to other consequences, and might have given rise to other bases upon which a notice of objection could have been filed, but it could not constitute a contravention of s 149D(1)(d).
30 Mr Hyde also submitted that not only had the applicant provided written information as requested, but there was no evidence or other material to suggest that he did not genuinely believe that his answer to question 14 was true. Moreover, the applicant's belief was reasonable in the circumstances which prevailed on 14 December 1998.
31 Mr Hyde submitted that from the evidence before the Tribunal it could not be concluded that the applicant had any actual knowledge as to whether or not the services provided to him by his solicitors were being provided on a pro bono basis. However, the Tribunal said:
"Although the applicant not give [sic] evidence that he knew his solicitors were doing their work in connection with his bankruptcy on a pro bono basis, we infer from the evidence of his solicitor that he must have known that that was the arrangement."
32 Mr Hyde submitted that there was no evidence whatever to support this conclusion. There was nothing to suggest that when the applicant completed the questionnaire he was aware of any "ongoing arrangement" with respect to the provision of his solicitors' services on a pro bono basis. He submitted that it followed that there could not have been any such "arrangement".
33 During the course of the hearing before the Tribunal the applicant's solicitor, Mr Davies, a partner at Oakley Thompson & Co, was cross-examined as to the nature of the services he was providing to the applicant. Mr Davies was asked the following questions:
"Mr Davies, your firm has been acting for Mr Wharton in connection with his bankruptcy matters on a pro bono basis, is that correct? --- Yes.I would like to hand to you a letter to the Official Trustee. It is dated 28 March 2000. Would you just confirm that that is the letter which you sent to the Official Trustee's office? --- Yes, it is.
...
The annotated schedule of legal expenses,...refers to various payments to your firm? --- Correct.
Were those payments on account of disbursements? --- Yes, they would have been. I can't give you a breakdown of them but they may have been - yes. I assume the answer is yes. ...
Not fees though? --- No."
34 The respondent also drew attention to a letter dated 28 March 2000 in which Mr Davies stated:
"1.1 No legal expenses have been incurred or paid. Oakley Thompson & Co agreed to act on a pro bono basis.1.2 An amount of $250 has been paid to Oakley Thompson & Co on account of disbursements. Oakley Thompson & Co act on a pro bono basis.
1.3 An amount of $755 has been paid to Oakley Thompson & Co on account of disbursements. Oakley Thompson & Co act on a pro bono basis."
35 It was this evidence which, after it emerged, led the respondent to rely, for the first time, upon this ground as a basis for an alleged contravention of s 149D(1)(d). The pro bono services point had not been alluded to in the notice of objection as originally filed.
36 Mr Hyde submitted that whatever may have been Mr Davies' state of mind or belief about his arrangements with the applicant in 1998, this was irrelevant when determining whether or not the applicant had answered truthfully when he answered question 14 as he did. He submitted that what was critical was what the applicant himself believed to be the position as at that date.
37 Mr Hyde submitted that to make matters worse, it was never put to the applicant in cross-examination that Mr Davies was acting for him on a pro bono basis. The issue arose for the first time after the applicant had completed giving his evidence, basically because of the answers which Mr Davies had given in cross-examination. In these circumstances, Mr Hyde submitted, the Tribunal ought not, as a matter of basic fairness, have drawn an inference adverse to the applicant.
38 Mr Hyde also submitted that the Tribunal fell into error in determining that the term "benefit" appearing at question 14 was properly to be interpreted by reference to the definition of "income" set out at s 139L(a)(v) of the Act. The term "benefit" was not defined in any way in question 14; only examples were provided, which included "low interest loans" and "children's education expenses", but not the provision of pro bono services. Further, there was no definition of the term "benefit" contained anywhere else in the questionnaire, and there was no reference in the questionnaire to the provisions of the Act or to the FBTA Act.
39 Mr Hyde submitted that the Tribunal erred in accepting that the term "benefit" contained in question 14 was synonymous with, and to be read in precisely the same way as, the term "income" as defined at s 139L(a)(v). The Tribunal correctly noted that the definition of "income" in s 139L of the Act is expressed to apply only to Div 4B of the Act, but fell into error in determining that that definition should also apply to s 149D(1)(d), which is contained in a different division.
40 It should be noted that the definition of the term "benefit" set out s 136(1) of the FBTA Act provides that a "benefit" includes any
"right, privilege, service or facility that is or is to be provided under an arrangement for in relation to the performance of work (including work of a professional nature...)".
41 Mr Hyde submitted that the status of bankruptcy should be regarded as having far-reaching consequences for the bankrupt, the bankrupt's family and the bankrupt's affairs and property. He submitted that bankruptcy imposes onerous obligations upon the bankrupt, and exposes him to all sorts of potential liabilities, civil and criminal. Even in this day and age bankruptcy carries a measure of stigma. It can be traumatic for the bankrupt and for the bankrupt's family and associates.
42 Mr Hyde submitted that the filing of a notice of objection is a serious matter and must be controlled: McGoldrick v Official Trustee (1993) 47 FCR 547 at 553-554. A bankrupt ought not to be exposed to the possibility of having the period of his bankruptcy extended by up to five years upon the basis that he failed to comply with the requirements of s 149D(1)(d) unless that ground is established, fully and completely.
43 Finally, Mr Hyde submitted that it was against both the letter and the spirit of the Act, and profoundly unjust, that the applicant be required, potentially, to remain in bankruptcy for an extra five years merely because he may have failed to appreciate that one possible interpretation to be accorded to the word "benefit" in question 14 resulted from the combined operation of s 139L(a)(v) of the Act and s 136(1) of the FBTA Act.
The respondent's submissions
44 Mr Galvin's primary submission was that by his answer to question 14 of the questionnaire, the applicant had failed to comply with the trustee's request concerning the receipt of other benefits or entitlements, and to provide "written information" within the meaning of s 149D(1)(d) of the Act. He submitted that, on the material, it had been open to the Tribunal to infer that when the applicant completed the questionnaire he was aware that he was receiving a "benefit" in the form of the pro bono legal services.
45 Mr Galvin submitted that the evidence showed that Oakley Thompson & Co had, at all material times, provided the firm's professional services to the applicant in respect of various matters arising out of and in connection with his bankruptcy on a pro bono basis. He referred to the evidence given to the Tribunal by Mr Davies during cross-examination in relation to legal expenses paid by entities with which the applicant was associated, as set out earlier in this judgment.
46 Mr Galvin submitted that in concluding that
"...the applicant had an ongoing arrangement with his solicitors that they would provide their services in relation to his bankruptcy on a pro bono basis"
the Tribunal had made a finding of fact which was open on the material before it, and which could not be the subject of any challenge in this Court. It had also been open to the Tribunal to find that the applicant had been aware, at all relevant times, that such an arrangement existed.
47 Mr Galvin referred to the evidence given by Mr Davies concerning this arrangement, and in particular to Mr Davies' role in connection with the proposed composition with the applicant's creditors which was under consideration in the latter part of 1998. Mr Galvin conceded, however, that he had not put to the applicant, as he ought in hindsight to have done, the suggestion that an arrangement of this type existed. He accepted that the applicant could have been recalled to enable this suggestion to be put to him.
48 Mr Galvin submitted that the pro bono services provided by Oakley Thompson & Co to the applicant had been considerable. He further submitted that the applicant's failure to provide information regarding the provision of those services was, as the Tribunal said, "sufficiently serious to warrant his discharge from bankruptcy being objected to".
49 Mr Galvin submitted that the pro bono services constituted a "benefit" within the meaning of that term in question 14. His reasoning was as follows. Notwithstanding that the that the definition of "income" within s 139L(a)(v) of the Act was expressed to apply only to Div 4B of Pt VI, and did not, therefore, encompass s 149D(1)(d) (which is in Div 2 of Pt VII), that definition, which picks up the concept of a "benefit" within the meaning of the FBTA Act, should be applied, by analogy, to an objection to the discharge of a bankrupt. It followed, he submitted, that a failure to disclose a "benefit" as defined in the FBTA Act constituted a failure to disclose "income" within the meaning of s 149D(1)(d).
50 Mr Galvin frankly conceded that this approach to the construction of s 149D(1)(d) might be regarded as somewhat strained. He conceded too that it would be quite unreasonable to expect a bankrupt, in normal circumstances, to have any appreciation that there might be a link between the word "income" in s 149D(1)(d) and the word "benefit" in s 139L(a)(v).
Respondent's notice of contention
51 As mentioned previously, the respondent filed a notice of contention. This notice of contention was to be considered only in the event that I found in favour of the applicant on one or more of the principal grounds relied upon in the appeal.
52 The notice of contention claimed that the Tribunal had erred in failing to conclude that the applicant had failed to comply with requests for information contained in a series of letters which the respondent had sent to him.
53 The Tribunal rejected this submission by the respondent. It concluded that whatever errors there may have been in the applicant's response to these letters, including in particular a letter sent by the respondent on 11 December 1997, were "inadvertent". The respondent submitted that the Tribunal's conclusion in that regard was erroneous.
54 The Tribunal also concluded that the applicant's failure to respond in a timely manner to the various requests made of him by the respondent did not constitute a contravention of s 149D(1)(d) which was of sufficient gravity to warrant the filing by the respondent of a notice of objection. This conclusion too was challenged.
55 Finally, the Tribunal had concluded that it was not sufficient for the purposes of s 149D(1)(d) for the respondent to have delivered requests to the applicant's solicitor, rather than to the applicant personally. This conclusion was also said to be erroneous.
56 Mr Galvin submitted that regard should be had to the underlying policy of the Act. This he described as being that the period of bankruptcy should be extended when an objection to discharge was filed in circumstances where the trustee's requests for information, particularly those concerning income or other benefits to the bankrupt, had not been met in an accurate and timely manner. He submitted that it was not sufficient for a bankrupt simply to provide information when it suited him. It was necessary that the bankrupt do so within the time required by the trustee.
57 Mr Galvin noted that until 1992 the Act had provided that a notice of objection could be filed in circumstances where it was alleged merely that the bankrupt had failed to co-operate with the administration of his estate, or that his conduct had been unsatisfactory. Although s 149D(1) now contained a series of more specific grounds of objection, and the broader provisions had been repealed, there was nothing to suggest that the grounds set out in s 149D(1) were intended to alter in any fundamental way the principles governing objections to discharge. He relied in support of this submission upon the judgment of the Full Court in Inspector-General in Bankruptcy v Nelson (1998) 86 FCR 67.
58 Mr Galvin submitted that it was clear from the correspondence that Mr Davies had been authorised by the applicant to communicate generally with the trustee in relation to the provision of information by the applicant in response to the trustee's requests. He submitted that in these circumstances it had not been open to the Tribunal to conclude that it had not been sufficient for the purposes of s 149D(1)(d) for the trustee to have delivered requests for information to the applicant's solicitor rather than to the applicant personally.
59 Mr Galvin submitted, finally, in support of the notice of contention, that whatever view be taken about the merits of the applicant's principal claims on the appeal, he ought not to be discharged from bankruptcy until the trustee's enquiries into the matter of his legal expenses had been completed, and appropriate assessments, or reassessments for income contribution, had been issued.
Findings on the appeal
60 The first issue to be considered is whether, even assuming that he gave false information to the respondent in answer to question 14, the applicant thereby contravened s 149D(1)(d) of the Act. More specifically, when requested in writing by the trustee to provide written information about his "property, income or expected income", had he "failed to comply with the request"?
61 I assume for present purposes that a request by the trustee as to whether the applicant received, or expected to receive, "any other benefit or entitlement" from any other person or entity is relevantly a request to provide information about his "property, income or expected income". Nevertheless, on one view of the proper interpretation of s 149D(1)(d), all that this provision requires of the bankrupt is that he provide "information" about these matters, and not that the information which is provided be complete or accurate.
62 In Hill v Holmes [1999] FCA 760; (1999) 92 FCR 120, a doctor was given a notice under s 104(2)(b) of the Health Insurance Act 1973 (Cth) to attend a hearing of a Professional Services Review Committee and to give evidence. The doctor attended the hearing and made an affirmation to tell the truth. The members of the Committee then questioned her. She did not co-operate with the Committee, and in answer to many of the questions put to her she responded that she could not remember. Subsequently the Committee issued a notice to the Director of Professional Services requiring action to be taken against the doctor on the basis that she had failed to comply with the notice. She was disqualified by the Director, which meant that her patients were unable to obtain Medicare benefits in respect of services provided to them by her.
63 Goldberg J said at 134:
"In my opinion, the expression "appear at the hearing and give evidence to the Committee" in s 104(1)(a) is to be construed as a reference to turning up at the hearing and going through the procedure of giving evidence rather than as a reference to giving meaningful and responsive answers to the committee."
64 His Honour continued at 136:
"...as the applicant articulated answers to the questions put to her by the members of the committee there was no evidence or other material to justify the decision that the applicant had failed to give evidence or had failed to answer a question asked by the committee for the purposes of s 104(2)(b) and the chairperson was not entitled ...to give the director the notice which she gave...."
65 Mr Hyde submitted that the reasoning of Goldberg J in Hill v Holmes was applicable, by analogy, to the present case. He submitted that the policy of the Act is that, prima facie, a bankrupt is entitled to the benefit of a discharge by operation of law. He submitted that each of the grounds set out in s 149D(1) should be construed strictly because of the potentially harsh consequences which could flow from an extension of bankruptcy when objection was made.
66 Mr Hyde noted that there were other grounds of objection, quite apart from s 149D(1)(d), which the trustee might have sought to invoke in the present case in support of his notice of objection. He drew attention to s 149D(1)(c) and s 149D(1)(e) in that regard. However, when the pro bono services issue arose, the trustee had sought simply to include the matters surrounding that issue within s 149D(1)(d) rather than invoking some other more appropriate ground of objection. The trustee should be bound by the choice which he made.
67 In my view, Mr Hyde's submission should be accepted. I note that the Macquarie Dictionary defines the word "information" as follows:
"1. Knowledge communicated or received concerning some fact or circumstances; news. 2. Knowledge in various subjects, however acquired."
68 The Oxford English Dictionary (2nd ed, 1989) includes among its definitions of "information":
"3.a. Knowledge communicated concerning some particular fact, subject or event; that of which one is apprised or told."
69 As these definitions show, "information" is capable of different shades of meaning, depending on the context. In my opinion the word "information" in its ordinary sense is not confined to material that is reliable or has a sound factual basis: Win v Minister for Immigration and Multicultural Affairs [2001] FCA 56. Perhaps the legislature ought to have so defined that word in a manner which makes it clear that the information which a bankrupt must provide is information which is both complete and accurate. However, it has not done so expressly. Nor, in my view, has it done so by necessary implication.
70 The availability of other grounds of objection in s 149D(1) which focus upon the accuracy of information provided by a bankrupt, including in particular the ground that the bankrupt "engaged in misleading conduct" in s 149D(1)(c), and the ground that the bankrupt failed to disclose "particulars of income" in s 149D(1)(e), provides telling support for this construction of s 149D(1)(d). This provision seems to me to require no more than that the bankrupt must provide what can properly be described as "information" about the matters therein identified, and not that this "information" have any quality of accuracy or reliability. This interpretation of s 149D(1)(d) accords with the reasoning of Goldberg J in Hill v Holmes, although his Honour's conclusions must be understood against a different legislative background.
71 In my view, in construing legislation of this type it is not for this Court to do what the legislature itself might easily have done had it considered it appropriate to do so. Neither the dictates of principle, nor of policy, justify reading into s 149D(1)(d) words which manifestly are not there, at least in circumstances where those words are not necessary to render the provision intelligible, or to give effect to the evident purpose underlying the enactment of s 149D(1) as a whole.
72 In arriving at this conclusion I should not be taken to express doubts about the proposition expressed in Re Woodman and Inspector General in Bankruptcy (1996) 40 ALD 800 that:
"... the notion of failure in s 149D(1)(d) should be construed in the sense of imposing strict liability on the bankrupt ..."
73 Strict liability is one thing. Imposing liability in circumstances where the events giving rise to the ground of objection are not made out at all, is another. The applicant was required by s 149D(1)(d) to provide written information about his "property, income or expected income". In my view, he did precisely that. The fact that the trustee now contends that the information so provided was incomplete, or even false, is not to the point. A purposive approach to the construction of s 149D(1)(d), as mandated by s 15AA of the Acts Interpretation Act 1901 (Cth), requires the Court to construe this provision, not to rewrite it.
74 Even if I am incorrect in my interpretation of s 149D(1)(d), I would nonetheless allow this appeal. In my view there was a distinct paucity of evidence before the Tribunal that, at the time that the applicant completed the answer to question 14, he was party to, or aware of, any ongoing arrangement with his solicitors concerning the provision of services to him on a pro bono basis. The fact that Mr Davies may have had such an arrangement in mind at the relevant time cannot, without something more, be sheeted home to the applicant. The problem is exacerbated when one has regard to the fact that the Tribunal was prepared to draw an inference of knowledge on the part of the applicant without affording him the opportunity to rebut that suggestion: Browne v Dunn (1894) 6 R 67.
75 I should emphasise that my conclusion does not involve merely a disagreement with a finding of fact made by the Tribunal. My finding is that the Tribunal acted upon the basis that the applicant was party to, and therefore aware of, a pro bono arrangement of the type Mr Davies had in mind in circumstances where there was no evidence properly capable of sustaining any such conclusion. An error of that kind on the part of the Tribunal can, in my opinion, properly be described as an error of law: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at 355-356 per Mason CJ; Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at 394; and M Aronson and B Dyer, Judicial Review of Administrative Action (2nd ed 2000) at 158-162.
76 It follows from all that I have said that the applicant has made good his contention that the Tribunal erred in law in deciding that the provision of pro bono legal services by his legal representatives constituted a "benefit" for the purposes of question 14 of the questionnaire. It also follows that the Tribunal erred in deciding that the manner in which the applicant completed question 14 constituted a contravention of s 149D(1)(d) of the Act.
Findings on the notice of contention
77 Turning to the notice of contention, it seems to me that no appellable error is disclosed by the Tribunal's decision to treat the applicant's response to ITSA's letter dated 11 December 1997 as containing inaccuracies which were "inadvertent". That conclusion was properly open to the Tribunal in relation to that response, and I would not be disposed to interfere with it.
78 Nor would I regard the failure by the applicant to comply with the requests for information contained in that letter by the date specified, as constituting a contravention of s 149D(1)(d) of sufficient gravity to warrant being included in a notice of objection. The bankrupt provided the information sought, albeit with some inaccuracies, within approximately three months of the request being made. He was certainly casual, if not dilatory, in his approach to the request. However, the fact remains that the information sought had been provided to the respondent well before the notice of objection was lodged. The Tribunal considered that the applicant's tardiness hardly justified extending the period of his bankruptcy by anything up to five years. That conclusion was plainly open to the Tribunal to reach.
79 Similarly, it was open to the Tribunal to conclude that other relatively minor delays in the applicant's responses to other letters sent by the trustee did not constitute contraventions of s 149D(1)(d) of sufficient gravity to warrant extending his bankruptcy.
80 Section 149A is an important provision. It provides a strong incentive to bankrupts to co-operate with their trustees during the administration of their estates. In some circumstances, an incentive of that type is plainly necessary. However, unless the section is construed in a sensible manner, it is capable of operating oppressively. It is reasonable to assume that trustees who make requests for information from bankrupts, including those concerning their income, will make due allowance for what might be regarded as the ordinary exigencies of life. Requests for information are often not met in as timely a manner as they ought to be. Some delays may be regarded as excusable while others will properly give rise to the filing of notices of objection. A bankrupt cannot ignore requests from his or her trustee. A particularly lengthy delay in responding to a request may trigger a notice of objection to discharge which is entirely justifiable. A relatively short delay in answering a request may be a different matter. Section 149D(1)(d) must be construed in the light of the requirement in s 149B(2)(b) that the trustee must believe that the filing of a notice of objection is the only way to induce the bankrupt to discharge his duties under the Act. It is plainly a course of last resort.
81 The fact that the trustee may cease to object or withdraw an objection prior to the expiry of that eight year period offers scant comfort to a bankrupt who may be involved in a bitter and protracted dispute with the trustee about a host of matters connected with his bankruptcy. The proper approach to the construction of s 149A is to ensure that the grounds upon which a notice of objection is filed are sufficient to justify taking that course.
82 Finally, I turn to the Tribunal's conclusion that the letters sent by the trustee to the applicant's solicitors did not constitute requests in writing to the applicant to provide written information. Here I consider that the Tribunal erred in law. The evidence made it plain that Mr Davies was authorised by the applicant to receive such requests. It was expected that they would be forwarded to him, and not necessarily to the applicant directly. I can see nothing in the language of s 149D(1)(d) which requires requests in writing to be delivered personally to the bankrupt.
83 My conclusion in this regard does not mean that I consider it appropriate to affirm the Tribunal's decision to uphold the notice of objection upon this ground. Nor does it mean that it is appropriate to remit this issue to the Tribunal for further consideration.
84 Section 44(1) of the AAT Act provides that a party to a proceeding before the Tribunal may appeal to this Court on a question of law from any decision of the Tribunal in that proceeding. Section 44(4) provides that this Court shall hear and determine the appeal "and may make such order as it thinks appropriate by reason of its decision". Section 44(5) provides that the orders that may be made by this Court on an appeal include an order affirming or setting aside the decision of the Tribunal, and an order remitting the case to be heard and decided again.
85 The Tribunal erred in concluding that it was not sufficient for the purposes of s 149D(1)(d) for the trustee to have delivered requests to the applicant's solicitor rather than to the applicant personally. However, that error was not, in my view, responsible for the Tribunal's decision to reject the failure to comply with the requests contained in those letters as a basis for setting aside the notice of objection. There was a quite separate and independent basis for that rejection.
86 The Tribunal found that the requests in those particular letters were not relevantly requests for information of a type embodied within s 149D(1)(d). That conclusion seems to me to have been correct. Moreover, the failure to provide the information sought within the time specified was not, in the case of those letters, of sufficient gravity to warrant forming the basis for a ground of objection. It follows that the Tribunal's error was of a kind which might be described as "harmless". There is no point remitting this matter to the Tribunal so that it may deal with the failure to comply with the requests contained in the letters because the Tribunal will inevitably conclude that s 149D(1)(d) was not relevantly contravened.
Conclusion
87 The Tribunal found that there were two separate bases for its conclusion that there had been a breach of s 149D(1)(d). I have concluded that it erred in law in deciding that the provision of pro bono legal services by the applicant's solicitor constituted a "benefit" to the applicant for the purposes of question 14. It follows that the applicant did not fail to comply with the requirements of the section.
88 The respondent has all but acknowledged, correctly in my view, that the Tribunal erred in law in deciding that the payment by the applicant's mother of private school fees with respect to two of his children constituted a "benefit" to him for the purposes of that question. The respondent has not sought, in any event, to support the decision upon that ground.
89 In these circumstances it would be oppressive to the applicant to remit this matter to the Tribunal to be heard and determined again. I note that the applicant has been a bankrupt since 1994. While he is partly responsible for his own misfortune in having been a bankrupt for that extraordinarily lengthy period, having not filed his statement of affairs until 1996, the fact remains that seven years of bankruptcy is a very long time. The respondent originally objected to the discharge on a ground which he has subsequently abandoned, and on grounds which the Tribunal considered to be inadequate. It was only during the course of the hearing before the Tribunal that the pro bono services ground emerged. In my opinion, the respondent should not now be afforded an opportunity to rectify the defects in his notice of objection, or to raise some other ground upon which to support that notice, as he did when the matter was previously heard.
90 In my view, both the notice of objection dated 26 May 1999 and the decision of the Tribunal given on 8 June 2000 should be set aside.
91 There was some debate before me as to whether, in the event that I allowed the appeal, the applicant's period of bankruptcy should be regarded as having expired on the date upon which he would automatically have been discharged from bankruptcy but for the filing of the notice of objection by the respondent, or whether the bankruptcy should be regarded as having continued up to and including the date of this judgment.
92 My preliminary view is that the applicant should be regarded as having been discharged from bankruptcy on 31 May 1999, three years after the date on which he filed his statement of affairs. However, if the respondent is of a different opinion, he may within seven days file written submissions in support of any such contention. The applicant may respond to any such written submissions within a further seven days. I will then make any further orders, or grant any declaratory relief, which might be necessary or appropriate in the light of those submissions.
93 The appeal must be allowed and the notice of contention dismissed. The respondent should pay the applicant's costs.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. |
Associate:
Dated: 20 February 2001
Counsel for the Applicant: |
Mr DF Hyde |
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Solicitor for the Applicant: |
Oakley Thompson & Co |
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Counsel for the Respondent: |
Mr M Galvin |
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Solicitor for the Respondent: |
Deacons |
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Date of Hearing: |
1 November and 8 December 2000 |
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Date of Judgment: |
20 February 2001 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2001/96.html