By Bonnie McMahon an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group
In the recent decision of Jones and Inspector-general in Bankruptcy  AATA 3260 (“Jones”), the Administrative Appeals Tribunal has made it clear that a trustee in bankruptcy who files a notice of objection to discharge, needs to comply strictly with the requirements of the s 149D(1) of the Bankruptcy Act 1966 (Cth) (“the Act”), otherwise it is likely that the decision will be cancelled on review, either by the Inspector-General in Bankruptcy or the Tribunal.
In Jones, the trustee in bankruptcy (“the Trustee”), had filed a notice of objection to discharge, on the ground set out in s 149D(1)(d) of the Act, 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.”
As identified by the Tribunal, this provision contains five equally important elements which are as follows:
- The request must be to the bankrupt (“element 1”);
- The request must be in writing (“element 2”);
- The request must be by the trustee (“element 3”);
- The request must be to provide written information (“element 4”); and
- The information requested must be about the bankrupt’s property, income or expected income (“element 5”).
The Trustee’s Evidence
The evidence before the Tribunal included 26 communications, which the Trustee claimed comprised the relevant requests for information.
However, after reviewing the communications the Tribunal ultimately found that none of the communications were a request complying with the requirements of s149D(1)(d) of the Act, for the following reasons:
- Element 2 was not satisfied in relation to two requests which had been made by telephone;
- Element 3 was not satisfied in relation to five communications which were sent by the Australian Financial Security Authority, rather than the Trustee;
- In relation to Element 3, the Tribunal was also critical of the fact that none of the communications were signed by the Trustee himself and also that no evidence had been provided to the Tribunal confirming that the Trustee’s staff who had made some of the requests, had done so with the authority to act on behalf of the Trustee. However, the Tribunal ultimately found that this element was satisfied in respect of the communications which were signed on behalf of the Trustee’s firm “for the Trustee”.
- Element 4 was not satisfied in relation to any of the communications, as the requests did not specifically stipulate that the information sought had to be provided by the bankrupts in writing.
As none of the communications met the requirements of s 149D(1)(d) of the Act, which is a “special ground” pursuant to s 149N(1A), the Tribunal cancelled the notice of objection, finding that strict compliance with the requirements of the provision is essential for the following reasons:
“given the serious consequences of the failure to provide the information requested pursuant to s 149D(1)(d) of the Act there needs to be strict compliance with the requirements of s 149D(1)(d) of the Act. In that regard, the consequences of a failure to comply with a request under s 149D(1)(d) of the Act are not dissimilar in seriousness to failure to comply with the statutory requirements for a bankruptcy notice.”
Whilst the Tribunal’s decision deals specifically with the ground in s 149D(1)(d), trustees in bankruptcy should ensure that they strictly comply with all of the elements of each of the grounds of objection set out in s 149D(1), in order to ensure that a notice of objection will not be cancelled on review.
With the proposed introduction of 1 year bankruptcies by the Federal government, trustees will have much less time to lodge objections to discharge and will need to have efficient systems in place to ensure that the requirements for lodging an objection are properly met. We therefore suggest that if you have any concerns about how to comply with the strict requirements of each ground of objection, you consider contacting our office to obtain specialist insolvency legal advice, before filing a notice of objection.
Read the Tribunal’s decision here.
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Bonnie McMahon at email@example.com or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or firstname.lastname@example.org
Stephen Mullette on (02) 9806 7459 or email@example.com.