In summary, Mr Frost has provided our client with little information in relation to CAP's 1, 2, 3 and 4, and precious few supporting documents.
44 In the absence of clear evidence to the contrary, I accept those statements as accurate statements of the information provided by the applicant to the respondent in relation to the period from 2000 to 2004.
45 When the matter was before Lander J in the middle of 2005, the question of compliance with the first ground in the fourth notice of objection appears, so far as can be gleaned from his Honour's reasons, to have been given little, if any, prominence by the parties. His Honour did not make an express finding on the matter. Having said that, I note that in the context of considering whether there were proper discretionary reasons for allowing the administration of a bankrupt estate to continue, his Honour found that ongoing inquiries may be made into whether income contributions that had been made to date had been adequate and he said (at [133]):
Those investigations may reveal that increased contributions should be made.
46 As I understand it, the applicant submits that the provision of his income tax returns on 6 March 2008, including those for the financial years ended 30 June 2001 to 30 June 2004 inclusive, puts the question of whether he has substantially complied with s 139U in relation to the period from 2000 to 2004 beyond doubt.
47 The position in relation to the period from 2004 to 2007 is clearer than it is in relation the earlier period. As I understand it, the applicant did not provide any information in relation to that period before 6 March 2008 when he provided income tax returns for the financial years ended 30 June 2005 to 30 June 2007 inclusive, and an estimate of his income for the financial year ended 30 June 2008.
48 The applicant submitted that by providing his income tax returns he has substantially complied with his obligation in s 139U. He referred to the fact that substantial penalties attend the making of false statements in income tax returns. In one sense there can never be even substantial compliance with s 139U by the provision of income tax returns because, leaving aside the time limit, the information is not being provided in a manner and form contemplated by the section. Once the obligation in the section has not been met, substantial compliance may be viewed as requiring a bankrupt to provide sufficient information for the purposes for which the obligation is imposed in the first place and that is to facilitate a proper assessment by a trustee. I do not think that the applicant has done that and therefore I do not think there has been substantial compliance. If I am wrong and the provision of the income tax returns constitutes substantial compliance, nevertheless there are good discretionary reasons, based on the failure of the applicant to provide information as to his income to the respondent, in favour of a decision refusing to withdraw the objections.
49 In order to explain my reasons for reaching these conclusions it is necessary to consider the respondent's reasons for refusing to withdraw the objections and the evidence given by the applicant.
50 The respondent has given evidence that he wishes to conduct further investigations into the income earned by the applicant from the date of bankruptcy to the present. In particular, he wishes to examine Mr Richardson and Mr Jennings concerning the employment arrangements in place between the applicant and Ambrose Baker Taxation Pty Ltd. Mr Richardson is a director of Ambrose Baker Taxation Pty Ltd and he conducts his legal practice from the Angas Street property, being the same property from which the applicant practises. Mr Frederick Jennings is the other director of Ambrose Baker Taxation Pty Ltd. The respondent also wishes to investigate the nature and question of the accountancy fees charged by the company and the profits it has earned after legitimate overheads of the accountancy practice are met. He also intends to seek relevant documentation, including the financial returns of the company, through a summons issued under s 81 of the Act. He states that depending on the answers given by Mr Richardson or Mr Jennings and the documents produced, he may need to re-examine the applicant. He states that he has grounds to suspect that the applicant may not have disclosed the true level of his income.
51 The applicant gave his evidence in chief by way of a number of affidavits. He was cross-examined at length on a number of topics. There are features of his evidence and conduct which lead me to conclude that I cannot be confident that his evidence, or at least his evidence on significant points, was reliable. Before setting out these features, I should say something about the background.
52 The applicant is deeply resentful about the fact that he is bankrupt. He attributes the fact of his bankruptcy to the conduct of his solicitor in two Supreme Court actions. In 1994, he and others were sued in two actions in the Supreme Court of South Australia. It is unnecessary to set out the details of the two actions which were brought by people I will call the "Micarones" and the "Becahras", respectively. It was alleged by the plaintiffs in those actions that the applicant had failed in his professional duty in various respects. The applicant had a professional indemnity insurance policy with FAI General Insurance Company ("FAI"). He was represented by the firm Minter Ellison Baker O'Loughlin and, in particular, by Mr P Heinrich. After a long trial, the applicant was found liable for a sum of about $1 million. He claims that Mr Heinrich did not represent him properly and that, had he done so, he, the applicant, would not have been held liable. The insurer did not indemnify the applicant. An appeal to the Full Court of the Supreme Court failed, as did an application for special leave to appeal to the High Court. At some point in the appeal process, the applicant engaged Mr Paul Richardson to act as his solicitor. Mr Richardson is the applicant's solicitor in this proceeding and he is also the applicant's friend. Eventually, the applicant was made bankrupt on a creditor's petition presented by the Micarones.
53 In 2003, the applicant issued a proceeding against Mr Heinrich and the other partners of the firm of which he was a member in the Supreme Court of South Australia. The claim he made was for professional negligence and it was not limited to loss and damage for personal injury or wrong done to the applicant (see s 116(2)(g) of the Act). Eventually, it was so limited and the claim has recently been settled. The applicant claims that some time in the year 2000, and before his bankruptcy, he assigned to Mr Richardson the cause of action against Mr Heinrich and others for loss and damage not consisting of personal injury or wrong done to him. He claims that he intends to repurchase that cause of action from Mr Richardson.
54 The applicant is also involved in legal proceedings in the Family Court of Australia. The other parties are his former wife and the respondent. The dispute concerns, among other things, two properties, the Angas Street property and the Mayflower Crescent property. As I have said, the applicant asserts that the Angas Street property is held on trust by Ambrose Baker and Partners (Holdings) Limited for the Frost Family Trust. The shareholders claim that the company holds the Angas Street property both legally and beneficially. Alternatively, Mrs Frost claims that the trust is the "alter ego" of the applicant and does not stand in the way of appropriate orders under the Family Law Act 1975 (Cth). Mrs Frost also claims that the mortgages over the Mayflower Crescent property in favour of Mr Richardson should be set aside.
55 With this background in mind, my reasons for concluding that I cannot be confident that the applicant's evidence was reliable, at least on significant points, are as follows. First, as a general observation the applicant was not forthcoming in his evidence and he was guarded in a number of his answers. Secondly, the applicant's letter to the respondent dated 6 August 2007 was not sent by the applicant with the intention of giving the respondent a genuine opportunity to withdraw his objection, bearing in mind that the applicant instituted this proceeding on 8 August 2007. Thirdly, the applicant was closely questioned about his action in the Supreme Court against Mr Heinrich and others. He was asked about the unexecuted and undated (except for a reference to the year 2000) Deed of Assignment of Chose-in-Action between himself and Mr Richardson. He was asked about his understanding of the scope of the deed, its purpose, its relevance to the proceeding in the Supreme Court against Mr Heinrich and others and his future intentions. In my opinion, the applicant's evidence on those matters raised more questions than it answered. Fourthly, the applicant did not explain in a satisfactory way the reasons he did not attempt to obtain his income tax returns between his examination on 31 August 2006 and October 2007. Nor was the applicant's evidence as to when and how he received his income tax returns from the Australian Taxation Office at all convincing. Fifthly, the applicant's reasons for taking the funds from the ANZ Bank account were unconvincing, and I think he took the funds knowing that it may cause difficulties for the respondent in terms of compliance with the ANZ Bank's mortgage over the Cullen Bay property. Finally, the applicant's evidence as to the identity of the trustee of the Frost Family Trust was confusing.
56 The applicant was cross-examined about his income. His income tax returns, leaving aside rent and deductions in relation to the Cullen Bay property in the early part of his bankruptcy, reveal the receipt of consulting fees in the financial years ended 30 June 2001 and 2002, and for the financial years ended 30 June 2003 to 30 June 2007 inclusive, wages from Ambrose Baker Taxation Pty Ltd and consulting fees. The applicant's annual taxable income for the first two years of the period was around the $6,500 mark and for the last five years around the $25,000 mark.
57 The income shown in the income tax returns is a low, if not a very low, income for a man of the applicant's qualifications and experience.
58 There was considerable cross-examination of the applicant about his expenses. No precise finding is possible, but it is true to say that the applicant has, and has had, a number of expenses of a type to be expected together with some expenses associated with the legal actions in which he has been or is involved. It is not for me to determine if the applicant has not disclosed his true income in his income tax returns; it is sufficient for me to conclude that there are reasonable grounds to think that he may not have done that and I so conclude. I think the manner in which he has been paid his salary and consulting fees reinforces this conclusion. Initially, it was unclear from the applicant's evidence whether he was saying that he was paid in cash or by cheque made payable to cash. He clarified that and said that he had been paid by way of cheques, that is, cheques that he had cashed and that he had never paid the cash into a bank account. He agreed that there was no record kept of the amount of cash he had been paid over the last three years. That evidence of the applicant was given in a context where it is apparent that he has received a sum of about $100,000 over a period of four years.
59 The applicant sought to meet the argument that there was a proper basis for concluding that further investigations into his income were necessary by making a number of submissions. First, he submitted that the respondent's powers do not end on the applicant's discharge from bankruptcy and he referred, by way of example, to the power of examination in s 81 of the Act, and the continuing obligation on the applicant to assist the respondent under s 152 of the Act. Those matters may be acknowledged, but they are insufficient to suggest that in not withdrawing his objections the respondent should be subject to an order of the Court under s 178. Secondly, the applicant submitted that the respondent had not administered the estate with the diligence required of a reasonably competent trustee in bankruptcy. In the previous proceeding, Lander J made a number of observations about the applicant's failure to co-operate with the respondent in a way which would facilitate the timely administration of his estate (at [5]-[21] and [73]-[92]). I refer to and rely on those findings. Since the previous proceedings the applicant took no steps to provide his income tax returns until 6 March 2008 and he has not provided any group certificates or assessments to the respondent for the financial year ended 30 June 2005 or since. He has been examined on a number of occasions, and on the last occasion, being 31 August 2006, the respondent was still asking the applicant for details of his income. Thereafter, the applicant made no immediate inquiries for his income tax returns allegedly because of health problems. In those circumstances, the greater part of any delay has been caused by the applicant, and, if there has been any delay by the respondent, it is not of such a nature to overcome the other reasons supporting the respondent's decision not to withdraw the objections.
60 In conclusion, the first ground in the fourth notice of objection and the ground in the fifth notice of objection have not been substantially complied with. In those circumstances, the application should be dismissed. In the alternative, further investigations into the applicant's income since the commencement of his bankruptcy, or at least from 2004 to date, are warranted and that conclusion, when considered with other discretionary matters, in turn leads to the conclusion that the application should be dismissed. Before identifying those other discretionary considerations, I should deal with the second ground in the fourth notice of objection.
61 The second ground of objection in the fourth notice of objection is based on s 149D(1)(f) of the Act and is the failure by the applicant to make payments he was liable to pay under s 139ZG. This ground was the subject of a good deal of evidence but only brief submissions from counsel for the respective parties. As I understand it, it is common ground that as at the date of the fourth notice of objection, that is, 14 July 2004, the applicant was liable to pay the respondent the sum of $4,217.67 by way of income contribution, that is, under s 139ZG. It is common ground that by letter dated 28 November 2004 the applicant forwarded the sum of $4,217.67 to the respondent stating that he wished to discharge that liability. The respondent accepted the payment and the applicant submitted that the liability was thereby discharged. The respondent contended that he was entitled to and did apply the money in partial discharge of the applicant's liability to the respondent in the sum of $10,560 and that the liability for $4,217.67 for income contribution remains extant.
62 These contentions raise a number of issues. The first issue is whether the applicant was at any time liable to the respondent for the sum of $10,560. The second issue, assuming the answer to the first question is yes, is whether the liability was satisfied, in whole or in part, by the settlement between the respondent and the ANZ Bank. The third issue, assuming the answer to the second question is no, is whether the respondent was entitled to "allocate" the payment of 28 November 2004 to the sum of $10,560 rather than to outstanding income contributions.
63 As to the first issue, there is no dispute that the applicant caused a transfer of the sum of $10,560 from the ANZ Bank account to his own bank account. The applicant proffered various reasons for doing that including some matters relevant to taxation and a belief that the respondent had abandoned his claim over the Cullen Bay property. It was not suggested that those reasons constituted a legal justification for the applicant's conduct and it is difficult to see how they could. On the balance of probabilities, I find that there was no justification for the applicant's conduct and that the conduct gave rise to liability in the applicant to repay the sum of $10,560 to the respondent.
64 As to the second issue, there is no doubt the respondent made a claim for $10,560 from the ANZ Bank on the basis that he had advised the ANZ Bank that the applicant was bankrupt and should not be permitted to deal with funds in the ANZ Bank bank account and yet the applicant was able to transfer the sum of $10,560 from the account. As I understand it, the transfer of those funds by the applicant caused the mortgagor to default in payments under the mortgage. The ANZ Bank denied liability for the amount. Eventually, there was a settlement between the ANZ Bank and the respondent concerning the proceeds of the sale of the Cullen Bay property. A Deed of Settlement and Release between the ANZ Bank and the respondent dated 10 May 2004 was put in evidence. The recitals to the Deed include the following:
G. The Trustee maintains that ANZ is not entitled to the full balance owing in respect of the Loan Agreement and the Mortgage as ANZ has permitted Frost access to funds that were otherwise available to make payments due in respect of the Loan Agreement and the Mortgage without the authorisation of the Trustee. The Trustee maintains that the defaults alleged by ANZ in respect of the Loan Agreement and Mortgage arose as a consequence of ANZ's own actions and that consequently ANZ should bear any losses associated with those actions.
H. ANZ maintains that it would be successful in any proceedings issued for possession of the secured premises and that it is entitled to the full balance owing in respect of the Loan Agreement and the Mortgage. ANZ denies that it is liable to the Trustee for the losses claimed by the Trustee in respect of the alleged unauthorised withdrawals.
I. When reaching the terms of settlement of the dispute between the parties to this deed as set out in Recitals F - H inclusive, it was agreed between the parties to this deed that: