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Objecting to the decision to discharge of Salim Mehajer – Administrative review
CASE REPORTS
Objecting to the decision to discharge of Salim Mehajer – Administrative review
PERSONAL INSOLVENCY
OBJECTION TO DISCHARGE
The Administrative Appeals Tribunal recently conducted a review of a decision by the Inspector-General in Bankruptcy (Inspector-General) to confirm an objection under s 149N
of the Bankruptcy Act 1966 (Cth)
(the Act) to the discharge of Mr Salim Mehajer’s bankruptcy. The objection was lodged by Mr Mehajer’s trustee in bankruptcy. The objection was based on grounds relating to Mr Mehajer’s failure to pay the trustee amounts he was liable to pay and also a failure to provide written information about the bankrupt’s property, income or expected income when requested in writing by the
trustee: Weston and Inspector-General in Bankruptcy [2022] AATA 1252.
4/07/2022
Contributors:
JONATHON TURNER, Partner, Norton Rose Fulbright JAMES DAINTON, Lawyer, Norton Rose Fulbright
KEY TAKEAWAYS
• Under s 149N(1A) of the Act, an objection must not be cancelled under subsection 149N(1) if the objection specifies at least one special ground; there is sufficient evidence to support the existence of at least one special ground specified in the objection; and the bankrupt fails to establish that the bankrupt had a reasonable excuse for the conduct or failure that constituted the special ground. • When considering the operation of s 149N of the Act, the proper and preferred approach is to proceed directly to consideration of subsection 149N(1A) rather than first considering s 149N(1).
This adopts the approach in Stolyar and Inspector
General in Bankruptcy [2021]
AATA 3398 and Jones and Inspector‑General in
Bankruptcy [2018] AATA 3260. • The only decisions the
Inspector‑General is able to make under the Act are to cancel or confirm an applicant’s decision to lodge a notice of objection.
There is no separate decision in respect of a ground of objection.
Consequently, the AAT can only make a decision pursuant to s 43 of the Administrative Appeals
Tribunal Act (1975) (Cth) to affirm, vary, set aside and substitute or remit for reconsideration with directions or recommendations, the Respondent’s decision under subsection 149N(3) of the Act to confirm or cancel a decision to file an objection.
BACKGROUND
Sydney businessman and former Auburn deputy mayor Salim Mehajer became bankrupt pursuant to a Sequestration Order made by the Federal Circuit Court on 18 March 2018. The period of bankruptcy was due to end on 5 May 2021. The case concerned whether the period of bankruptcy of Mr Mehajer should be extended.
The Applicant, the trustee in bankruptcy, lodged a written notice of objection to discharge from bankruptcy on 11 November 2020 pursuant to s 149B of the Act under the grounds specified in paragraphs 149D(1)(f) and 149D(1)(d) of the Act (Objection).
The ground in paragraph 149D(1)(f) was that the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under s 139ZG of the Act. The ground in paragraph 149D(1)(d) was 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.
On 13 November 2020, Mr Mehajer applied to the Respondent, the Inspector‑General, pursuant to s 149K of the Act requesting a review of the Objection on all grounds.
On 12 January 2021, a delegate of the Respondent decided to confirm the ground of objection contained in paragraph 149D(1)(f) (the Confirmed Ground) and to cancel the ground of objection in paragraph 149D(1)(d) (the Cancelled Ground) (the Reviewable Decision). As stated in the Reviewable Decision, the effect of the decision pursuant to subsection 149A(2) of the Act was that Mr Mehajer would remain bankrupt until 4 May 2026.
The Applicant applied to the Administrative Appeals Tribunal (AAT) for a review of the Reviewable
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Decision pursuant to s 149Q of the Act, specifically in respect of the Cancelled Ground, being that Mr Mehajer failed to provide information to the trustee when requested in writing to do so. Mr Mehajer applied to be made a party to the proceedings and also sought review of the Confirmed Ground. As such, the AAT considered both the Confirmed Ground and the Cancelled Ground.
DECISION
Under subsection 149N(1A) of the Act, the Objection was not cancelled under subsection 149N(1) because: 1. the Objection specified two “special grounds”; 2. there was sufficient evidence to support the existence of both special grounds; and, 3. in respect of both special grounds, the bankrupt, Mr Mehajer, had failed to establish that he had a reasonable excuse for the conduct or failure that constituted the special ground.
Therefore, the Respondent’s decision to confirm the trustee’s decision to file the notice of objection was affirmed.
Matters raised at the beginning of the hearing
Before consideration of the primary issues, there was an issue in dispute as to the AAT’s jurisdiction. Mr Hutchins for the Respondent submitted that under the Act, the Respondent could only determine whether or not to cancel or confirm the trustee’s decision to lodge a notice of objection. There was no separate decision in respect of a ground of objection. Consequently, the AAT could only make a decision pursuant to s 43 of the Administrative Appeals Tribunal Act (1975) (Cth) to affirm, vary, set aside and substitute or remit for reconsideration with directions or recommendations, the Respondent’s decision under subsection 149N(3) of the Act to confirm the Applicant’s decision to file the Objection.
Ultimately, both the Applicant and Respondent were asking the AAT to affirm the Reviewable Decision. Mr Mehajer was seeking to have the Reviewable Decision set aside and the decision substituted that the trustee’s Objection be cancelled.
Mr Hutchins stated near the beginning of the hearing that in accordance with the Respondent’s duty, the Respondent had a better understanding of the issue in respect of the Cancelled Ground, intended to work with the AAT, and, certain material having come to light, it may not have had reasons for cancelling that ground.
The proper approach to applying s 149N of the Act in this case
The relevant law in this case is s 149N of the Act. The Court undertook analysis of this section by considering three cases. The Court considered whether, as the Applicant contended, the proper approach as set out in Rimanic and Inspector‑General in Bankruptcy [2010] AATA 875 was first to apply the criteria in subsection 149N(1) to the facts of the case and, then if applicable, apply the criteria in subsection 149N(1A). The AAT preferred to adopt the approach in Stolyar and Jones which meant proceeding directly to consideration of subsection 149N(1A).
In any case, the AAT made observations about s 149N(1) and concluded that only s 149N(1)(b) might apply on these facts. In this case both the Confirmed Ground and the Cancelled Ground are “special grounds” pursuant to subsection 149N(1A). The appropriate course is to consider the sufficiency of the evidence in respect of each ground separately as required by paragraph 149N(1A)(b), and if there is sufficient evidence, whether Mr Mehajer had a reasonable excuse pursuant to paragraph 149N(1A)(c). Mr Mehajer was required to succeed on both grounds to achieve the outcome he sought. If he was unsuccessful, the Objection must not be cancelled. If he was successful, it would be necessary to consider the application of paragraph 149N(1)(b).
The issues to be determined
By reference to s 149N(1A), the issues were: 1. Is there sufficient evidence to support the existence of at least one special ground specified in the Objection? 2. If the answer to (a) is yes, has
Mr Mehajer failed to establish that he had a reasonable excuse for the conduct or failure that constituted the special ground? 3. If Mr Mehajer has established a reasonable excuse for the conduct or failure that constituted the special ground, paragraph 149N(1)(b) must be considered.
Consideration of the Confirmed Ground
There was no dispute that Mr Mehajer had not paid the contributions. Therefore, there was sufficient evidence to support the existence of a failure to pay income contributions. The AAT then considered whether Mr Mehajer had established a reasonable excuse for the non‑payment. Mr Mehajer maintained that he had never been advised that he was liable to pay and had never received the relevant notice. The AAT considered various claims of Mr Mehajer including that a member of the Respondent’s staff had told him that he did not have to pay while the review was underway. There was no corroborative evidence. The AAT did not accept that this occurred.
The AAT also considered claims that Mr Mehajer suffered depressive downfalls that last several weeks that make him feel worthless and unable to physically move. However, Mr Mehajer did not claim that this condition led to his belief that he did not have to pay the contribution while the Respondent was reviewing the assessment.
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Dr Henderson, consultant forensic psychiatrist, had previously provided an opinion in relation to the impact of the diagnosed condition on Mr Mehajer’s behaviour in respect to previous charges that had been laid. The doctor did not address the issues before the AAT or Mr Mehajer’s behaviour relating to either of the grounds, including his claimed belief in respect of this ground. The AAT was not satisfied that the evidence established that he had a reasonable excuse for failing to pay the contributions. At its highest, Mr Mehajer’s claim was that he had a genuine belief that he did not have to pay the contribution while the review was before the Inspector General. There was no basis for that belief because he had received a copy of the notice of 28 July 2020 which set out the amount owing and a schedule for payments, and warned that non‑payment was a ground of objection and that a request for review did not affect his liability to pay the contribution. He had applied for review to the Inspector‑General as the notice had specified.
Pursuant to subsection 149N(1A) the objection was not cancelled under subsection 149N(1). The Reviewable Decision was affirmed. That finding was sufficient to dispose of the matter. However, the parties were of the view that the AAT should address both grounds of objection.
Consideration of the Cancelled Ground
In relation to the Cancelled Ground, Mr Mehajer claimed that he had cooperated and done all he could to provide the documents the Applicant requested and to maintain communication with the Applicant because the finalisation of his bankruptcy was in his best interest. Mr Mehajer referred to searches carried out by the Applicant pursuant to warrants of Mr Mehajer’s residential property, the offices of his solicitor and accountant, and the offices of work colleagues and family members. The Applicant confiscated all books and records including data from electronic devices. After that, Mr Mehajer claimed that he strongly believed the Applicant had possession of all his books and records. Mr Mehajer also claimed that he was unreasonably denied an extension of time within which to provide information that he had already provided because he was ill. This position led to a similar consideration of whether there was sufficient evidence to support the claim that Mr Mehajer failed to comply with a request and whether Mr Mehajer had established a reasonable excuse for the conduct or failure that constituted the Cancelled Ground.
The AAT considered correspondence between Mr Mehajer and the Applicant in relation to the production of documents. This correspondence included a request for two extensions by Mr Mehajer, which were granted. When a further extension was sought, the Applicant refused the request and advised that no further extensions of time would be given, noting that a period of 6 weeks was “more than adequate”. The Objection was filed the following day. Mr Mehajer adduced evidence in relation to sickness including evidence from a neuro surgeon and spinal surgeon that “I understand that he has court requirements, but in his current state, his attendance will need to be postponed until approximately 2 weeks post‑surgery.”
In relation to whether there was sufficient evidence to support the existence of the Cancelled Ground, the AAT stated:
“[Mr Mehajer’s] claims are two‑fold and contradictory. He maintains that he has provided, directly or by way of search warrants, all documentation and information he has. He claims that he would have to use subpoenas to obtain other material. At the same time, he stated that he was going to provide more material, sought extensions of time within which to do so, and eventually did provide material which he maintained had already been provided. Doing the best I can, I understood [Mr Mehajer’s] position was that he provided previously provided information to demonstrate that he was doing his best to co‑operate with the Applicant.
The only issue between the Applicant and Respondent was whether [Mr Mehajer] had a reasonable excuse for his non compliance.”
The AAT was also not satisfied that Mr Mehajer had a reasonable excuse for failing to provide the requested information. In making this decision, the AAT referred to the long period of time in which Mr Mehajer had to provide information. He was granted two extensions by the Applicant, the last a week longer than requested. The AAT stated:
“He was made aware sufficiently of the consequences of not providing the information requested. He initiated two court proceedings not long after receiving the 22 September 2020, was involved in another court proceeding, and was concerning himself with his real property interests in the period given to comply with the request. That [Mr Mehajer] spent time on those other matters in October 2020 demonstrates that he was not prioritising complying with the Applicant’s request.”
The AAT also considered an argument from the Applicant and Respondent that no correspondence from Mr Mehajer after 11 November 2020 may be taken into account pursuant to subsection 149N(1B). The AAT agreed with this argument but in any case, it made no difference to the outcome.
Accordingly, the AAT determined that pursuant to subsection 149N(1A) of the Act, the Objection was not be cancelled under subsection 149N(1) of the Act. As such, the Reviewable Decision must be affirmed.
Read the decision.
