Federal Court of Australia

McEwan v Official Trustee in Bankruptcy [2025] FCA 162

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicant pay the respondents’ costs incidental to the proceeding, to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

LOGAN J:

1    Ms Julie McEwan, previously known by the surname Van Eps, was made bankrupt by an order of the then Federal Circuit Court of Australia on 26 November 2019 on the hearing of a creditor’s petition filed by one Mr Giuseppe Pulitano, as trustee for the 4-8 Welwyn Crescent Trust.

2    On that day, and as a consequence of the sequestration order, Messrs Andrew Heers and Mark Pearce of Pearce & Heers became trustees of Ms McEwan’s bankrupt estate.  They remained trustees of that bankrupt estate until 7 July 2022.  At that time, and under s 181A of the Bankruptcy Act 1966 (Cth) (the Act), they were replaced as trustees by the Official Trustee in Bankruptcy (Official Trustee).  The Official Trustee remains the trustee of Ms McEwan’s bankrupt estate to this day.

3    In the ordinary course of events, Ms McEwan would have been discharged from her bankruptcy before now by effluxion of time, pursuant to s 149 of the Act.  That has not occurred.  That is because her former trustees, by notices dated 24 January 2022, gave notice of objection to her discharge from bankruptcy.  Those notices, if valid, had the effect of extending the period of Ms McEwan’s bankruptcy.  By her further amended application, filed by leave, Ms McEwan seeks an order declaring that one of the notices of objection - and I will detail that one shortly - is invalid and of no force and effect. Further, or alternatively, Ms McEwan seeks an order that the Official Trustee withdraw that particular objection to discharge.

4    As originally formulated, Ms McEwan’s application challenged the validity of each of the two notices of objection dated 24 January 2022, or alternatively, sought the ordering of the withdrawal of each of those notices, with the consequence that her discharge from bankruptcy operate per force of law on and from 5 May 2023.  Ms McEwan’s submissions also extended to a solicitation that the court review the merits of the objection remaining under challenge.

5    It is necessary to highlight the two notices of objection given to Ms McEwan on 24 January 2022.  One, and the only one now the subject of these proceedings, concerned what might compendiously be described as a failure to provide income information in response to a request.  The other concerned a failure to pay an amount of an income contribution as assessed by the former trustees.  It is the latter objection which, as a result of a notice given by Ms McEwan discontinuing in part her application, which is no longer at issue, either in terms of its validity or whether it should be withdrawn.

6    That is not, however, to say that the circumstances which disposed the former trustees to assess Ms McEwan in respect of income contributions are irrelevant to the request made of her by her former trustees for particular information.

7    In its material parts, the notice of objection which remains at issue is in these terms:

NOTICE OF OBJECTION TO DISCHARGE

Bankruptcy Act 1966 (Cth)

BANKRUPT ESTATE OF JULIE ANNE-MARIE VANEPS

ESTATE NO: QLD 4138 OF 2019/6

I, Andrew John Heers of Pearce & Heers Insolvency Accountants, Level 12, 127 Creek Street, Brisbane in the State of Queensland, joint and several Trustee of the bankrupt estate of Julie Anne-Marie Van Eps, object to the discharge from bankruptcy of Julie Anne-Marie Van Eps by force of Section 149B of the Bankruptcy Act 1966 (Cth) (“the Act”), as follows:

1.    Pursuant to Section 149C(l )(a) , J advise that the grounds for my objection are:

a)     Section 149D(l)(d) - the bankrupt, when requested in writing by the Trustee to provide written information about their property, income or expected income, failed to comply with the request.

b)    Section 149D(l)(e) - the bankrupt failed to disclose any particulars of income or expected income as required by a provision of the Act referred to in Section 6A( I) or by Section 139U of the Act.

2.    Pursuant to Section 149C(l)(b) of the Act, I advise that the evidence or material to establish the grounds of my objection are:

a)    On 28 October 2021, I wrote to the bankrupt and requested that she provide me with the following so that I could assess her income (“the Requested Income Information”):

i)    An income questionnaire.

ii)    Bank statements for all bank accounts which the bankrupt held for the period 26 November 2020 to 25 November 2021.

iii)    The bankrupt’s Income Tax Return for the financial year ended 30 June 2021.

iv)    All Notices of Assessment which the bankrupt received from the Australian Taxation Office for the financial year ending 30 June 2021.

v)    A copy of the bankrupt’s employment contract for the bankrupt’s current position (if currently employed).

vi)    All pay-slips the bankrupt received for the period 26 November 2020 to 25 November 2021.

vii)    A list of payments the bankrupt received from any of her related entities during the period 26 November 2020 to 25 o ember 2021, including but not limited to the following related entities:

*    Arana Biotechnology Pty Ltd;

*    Astra Nobel Pty Ltd;

*    Bionaturals Pty Ltd (formerly Apagein Holdings Pty Ltd);

*    Bionaturals Holdings Pty Ltd;

*    Carb Starver Pty Ltd;

*    Shastra Healthcare Pty Ltd;

*    Stockingham Pty Ltd;

*    Van Eps Family Trust- and

*    Venika Biotech Pty Ltd.

viii)    Notices or statements from Services Australia detailing social welfare payments the bankrupt received during the period 26 November 2020 to 25 November 2021.

b)     The bankrupt failed to provide the Requested Income Information.

c)     On 16 December 2021 , Johanna Bond of my office wrote to the bankrupt to follow up on my request to provide me with the Requested Income Information.

d)    The bankrupt failed to provide the Requested Income Information.

This objection has the effect of extending the bankruptcy to a period of eight (8) years from the prescribed date.

8    For the purpose of determining whether or not that notice of objection was invalid, the Court looks to the face of the notice: see Prentice v Wood (2002) 119 FCR 296 (Prentice).  Prentice must be read subject to an amendment made to the Act thereafter, seemingly in response to statements made in that case concerning a trustee’s reasons.  The amendment is s 149C(1A), which provides:

149C Form of Notice of Objection

…

(1A)    Paragraph (1)(c) does not apply to a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (ia), (k) or (ma).

…

9    As can be seen from the notice of objection and the terms of s 149C(1A), there was no need for the trustee, on the face of the notice, to set out reasons.  This is because the notice of objection filed by the trustee was on grounds specifically exempted from providing reasons, namely s 149D(1)(d) and s 149D(1)(e). Looking at the face of the notice, paragraph 1 complies, in my view, with the requirement found in s 149C(1)(a) of the Act, in that it sets out grounds of objection known to law, namely those found in s 149D(1)(d) and s 149D(1)(e).

10    There is a further requirement, flowing from s 149C(1)(b), that the trustee specify in the notice of objection the evidence or material to establish the grounds of objection.  As Thomas J highlighted in Farmakis v Lo Pilato (Trustee) [2023] FCA 1611, at [58], with reference to Prentice, at [18], the position in relation to a trustee’s recitation in a notice of objection of evidence is as follows:

However, the fact that the trustee referred to assessments which were never made as establishing the ground on which the notice was based is not a factor which goes to the validity of the notice.  Whether the reviewing authority would be satisfied that there was insufficient evidence to support the ground of objection if the true facts were established is a different question.

11    On the face of this notice, there is reference to the evidence or material said to establish the grounds of objection.  Having regard to Prentice, I am satisfied that, this having been done, the requirement of s 149C(1)(b) is met.  The notice is valid.

12    A reviewing authority in respect of the giving of “notice of a objection is the Inspector-General in the first instance.  If review by that official is sought within 60 days, further review by the Administrative Review Tribunal (Administrative Appeals Tribunal at the time in this case) (Tribunal) may review.  These officials or bodies may in the exercise of administrative power decide, having regard to whether there was occasion for the giving of the notice of objection, whether to cancel the notice.

13    The breadth of the bankruptcy jurisdiction and powers conferred by s 30 of the Act on this Court is such that it may well extend also to a review on the merits to the end of whether a notice of objection should be cancelled.  The respondent trustee accepted this.  However, and this was also part of the submissions made on behalf of the respondent trustee, in many cases, the existence of the right of administrative review on the merits would be such that the court would decline to exercise any review on the merits itself in the exercise of bankruptcy jurisdiction.

14    That is really a submission which puts forward a proposition similar in substance to the Court’s position in relation to judicial review, where there exists a right and adequate alternative remedy of merits review:  Swan Portland Cement Ltd v Comptroller-General of Customs (1989) 25 FCR 523.  Of course, the review sought by Ms McEwan, and accepted as possible in theory by the trustee, was not limited to review on the basis of jurisdictional error, but rather review on the merits as to whether cancellation should be ordered.  Even so, it seems to me there is substance in the trustee's submission, that, in many cases, the existence of that alternative administrative review remedy would sound in a peremptory dismissal of an endeavour to invoke judicial power to that same end.

15    As to administrative review, the evidence discloses that Ms McEwan did seek the Inspector-General’s review of this notice of objection, but she did so outside the statutory time limit.  She also instituted proceedings thereafter in the Tribunal.  Those proceedings were dismissed by the Tribunal on the basis that there had not been made a reviewable decision by the Inspector-General.  It should be recorded that the evidence discloses that Ms McEwan accepted that there was that jurisdictional flaw in her endeavour to secure review by the Tribunal.

16    A very great deal of evidence was led in relation to the administration of Ms McEwan’s bankrupt estate in relation to the making of the income contribution assessments and endeavours, thereafter, either by her former trustees or the official trustee, to obtain the information referred to in the notice of objection.

17    That evidence was not, for the reason which I have given, relevant to the validity or otherwise of the notice of objection, but it was relevant in relation to deciding whether or not to order the withdrawal of the notice.  Some of that evidence was also relevant to whether, notwithstanding the existence of a right of administrative review, the Court should embark upon a consideration of the merits of the objection.

18    A starting point in either instance is the letter which the former trustees sent to Ms McEwan explaining the rationale for the assessing of income contributions.  Income contributions were assessed in respect of two periods - one from 26 November 2019 to 25 November 2020, termed “CAP1” by the former trustees, and 26 November 2020 to 25 November 2021, termed “CAP2” by the former trustees.

19    Lengthy though the terms of that letter are, they provide a necessary foundation for consideration of whether there should be any embarking on a consideration of the merits of the notice - or whether, in the later events which transpired, it should be ordered that that notice be withdrawn.  Materially, the letter of 3 August 2021 to Ms McEwan stated:

Sections 139X and 139Z of the Act

6.    The following provisions of the Act have been used in preparing the assessment:

a.    Section 139X(1), which provides that an income assessment conducted by the Trustee may have regard to any information provided by the bankrupt or any other information in the Trustee’s possession.

b.    Section 139X(2), which provides that any information provided by the bankrupt that the Trustee considers to be incorrect may be disregarded and the Trustee can make an assessment on what the trustee considers to be correct information.

c.    Section 139Z, which provides that if a bankrupt does not provide information about whether they are likely to derive income or claims to either not derive income or be unlikely to derive income, but the Trustee has reasonable grounds to believe the contrary, then the Trustee may determine that the bankrupt is likely to derive income and may also determine the amount of that income.

Application of Section 139X of the Act

7.    Your advice and disclosures in relation to your income and employment has been inconsistent. Therefore, pursuant to Section 139X of the Act, and to assess your income, I have disregarded certain information you have provided. I have listed some examples of these inconsistencies below:

a.    In your Statement of Financial Position affirmed on 8 March 2019 that was filed in Supreme Court of Queensland proceeding number 2974/18 you stated the following:

i.    That you earned approximately $45,000 during the prior 12 months from Apagein Holdings Pty Ltd;

ii.    That you were receiving Centrelink payments totalling $525/week; and

iii.    That you expected to receive two lump sum payments in the future, being:

*    $125,000 in relation to a “Coles contract” expected to be received during December 2019; and

*    $750,000 in relation to a “Research project” expected to be received during mid to late 2020.

b.    Your Bankruptcy Form lodged with AFSA on 4 May 2020, contained the following responses which are inconsistent with those referred to in paragraph (a) above:

i.    You stated that you received an income of $56,000 in the preceding 12 months and expected to earn $46,000, including $15,000 from salary, wages, commission and bonuses from your employer, in the following 12 months; and

ii.    You stated that you were not employed.

c.    On 7 December 2020, you completed an Income Questionnaire and advised that you were unemployed and did not disclose any income in relation to employment or social security benefits.

d.    Your Income Tax Return for the financial year ended 30 June 2020 that you provided to me disclosed an income relating to “government pensions or benefits” in the amount of $28,600 and no other income was reported.

e.    Your bank statements evidence multiple social welfare payments received during the CAP 1 period. These payments totalled $37,669.28.

f.    Your LinkedIn social media profile lists your profession as “CEO and Founder at BioNaturals” which I understand to be a business that manufactures and / or sells therapeutic goods.

Application of Section 139Z of the Act

8.    You stated in the Income Questionnaire that you did not receive any income during the CAP 1 period.

9.    I consider that you have received income in the form of payments from Services Australia during CAP 1. These payments are evidenced in your bank statements and disclosed in your 2020 Income Tax Return.

10.    Furthermore, I consider that you have derived income as the result of employment or other work during the CAP 1 period on the basis that:

a.    On 8 March 2019, you affirmed on your verification of statement that the information disclosed in your Statement of Financial Position was correct. This information included your expected income and expected lump sum payments to be received in relation to your work for Apagein Holdings Pty Ltd (trading as BioNaturals) (“BioNaturals”).

b.    Your Bankruptcy Form discloses an expected income $15,000 in relation to salary, wages, commission and / or bonuses from your employer.

c.    Your LinkedIn social media profile as at 23 September 2020 represents you as currently working for BioNaturals in the capacity of “Founder and CEO.”

d.    There are deposits in bank accounts held in your name, in particular, the accounts numbered [NUMBER] and [NUMBER] record deposits that appear to be from BioNaturals received during the CAP 1 period that total $281,556.

Income Assessment for CAP 1

11.    During the CAP 1 period, you have received the following deposits to your bank accounts:

a.    $281,556 from BioNaturals; and

b.    $37,669.28 from Services Australia.

12.     I am of the view that some of the funds deposited into your bank account from BioNaturals likely constitutes reimbursement of business expenses and would not be income derived by you. For example, on 19 February 2020 you received a deposit of $5,600 from BioNaturals and on 20 February 2020, a payment of $5,600 was made from your bank account to the Therapeutic Goods Administration (“TGA”). Consequently, I have treated this payment and all other similar payments identified as not being income.

13.    Some funds that you have received into your bank account constitute income that has been derived by you. To establish the minimum amount received from BioNaturals that you have derived as income, I have totalled payments you have received and applied to a non-business expense, whereby each payment could only have been made due to the funds being received from BioNaturals i.e. there wouldn’t have been sufficient available funds in the bank account but for the funds received from BioNaturals.

14.    The deposits received from BioNaturals which I consider to be derived as income are listed as follows:

a.    On 29 November 2019, you received $14,000 from BioNaturals and paid $14,000 to Sibley Lawyers (a law firm specialising in criminal law) on the same day. Without the receipt of $14,000 from BioNaturals, there would have been insufficient funds to pay the legal fees. I consider the payment of $14,000 from BioNaturals to your bank account numbered [NUMBER] to be income derived by you.

b.    On 23 January 2020, you received $15,000 from BioNaturals and paid $15,000 in relation to school fees on the same date. At the time of the transfer, there was $241.05 in the bank account numbered [NUMBER].

c.    On 28 January 2020, you received $40,000 from BioNaturals and on the same date you paid $35,000 for school fees, $2,000 for rent and $3,000 was transferred to another account. As these subsequent payments match the total received from BioNaturals, I am of the view that the deposit was received for the purpose of paying school fees and residential rent. As such, the minimum income derived by you from this deposit is $37,000.

d.    On 6 February 2020, you received $12,500 from BioNaturals and paid $12,500 to Sibley Lawyers on the same day. At the date of the transaction, there was $964.38 in the bank account numbered [NUMBER].

e.    On 3 March 2020, you received $1,000 from BioNaturals, whereby the transaction description refers to ‘rent’ and made a payment of $1,000 to Prowealth Property Management (the property manager for your residence) on the same day. As the bank account description describes rent in the narration and the transactions take place on the same day. I consider this payment to be from BioNaturals and income derived as it is evidently not for a business-related expense.

f.    13 March 2020, you received $5,000 from BioNaturals and paid $5,000 in relation to legal fees on the same date. At the time of the transfer, there was $169.71 in the bank account numbered [NUMBER].

g.    On 13 July 2020, you received two deposits from BioNaturals totalling $5,400 and paid $5,000 in relation to school fees on the same day. Without the payment from BioNaturals, there would have been insufficient funds available to pay the school fees from the bank account numbered [NUMBER].

h.    On 21 July 2020, you received a $5,000 deposit from BioNaturals and on 22 July 2020 paid $4,217.50 to the Brisbane Mater Hospital. Both transactions were made within the bank account numbered [NUMBER] and if it were not for the receipt from BioNaturals, there would have been insufficient funds to make the payment. I have no reason to believe this payment would be a business expense and as such, consider $4,217.50 of the $5,000 receipt to be income derived by you.

i.    On 23 July 2020, you received two deposits from BioNaturals, being a deposit for $5,700 which refers to the TGA in its narration and $2,800 which refers to rent in its narration. On the same day, you paid $2,000 in respect of rent to Prowealth Property Management and on 24 July 2020, paid $5,700 to the TGA. I consider the payment of $2,000 paid from the account numbered [NUMBER] in respect of residential rent to be the minimum amount of income derived by you as the payment could not have been made without the receipt from BioNaturals. I note the payment of $5,700 appears to be reimbursement of a business-related expense.

j.    On 28 July 2020, you received two deposits from BioNaturals, being $3,646 ($3,646.80 was paid to Sibley Lawyers on the same date) and a further $19,000 ($18,480 was paid in relation to school fees on the same date). At the time of the transfer, there was $609.75 in the bank account numbered 74-6744.

k.    On 25 August 2020, you received $10,000 from BioNaturals and paid $10,000 in relation to school fees on the same date. There would have been insufficient funds available to pay the school fees without the deposit received from BioNaturals to the account numbered [NUMBER]. The receipt from BioNaturals appears to be clearly for a non-business-related expense as the receipt and subsequent payment are for identical amounts on the same date.

l.    On 2 September 2020, you received $10,500 from BioNaturals and paid $10,000 in relation to school fees on the same date. At the time of the transfer, there was $6,743.32 in the bank account numbered [NUMBER].

m.    On 6 October 2020, you received $1,000 from BioNaturals and paid $1,000 to Prowealth Property Management for rent on the same day. At the time of the payment of rent, there was $795.16 in the bank account numbered [NUMBER].

n.    On 30 October 2020, you received two deposits from BioNaturals totalling $1,300. On the same day, $1,000 was paid to Prowealth Property Management for rent. After the payment for rent was made, there was $501.29 in the bank account numbered [NUMBER].

o.    On 2 November 2020, you received three deposits from BioNaturals, totalling $8,500. On the same date, you paid $2,100 to Saint Laurent Australia (a retailer of luxury goods) and paid $5,564.35 in relation to school fees. Without the deposits from BioNaturals, there would have been insufficient funds to make the payments. All of these transactions took place within the bank account numbered [NUMBER].

15.    The above deposits received from BioNaturals listed in paragraph 14 total $147,508.65. Although the total receipts from BioNaturals amount to $281,566, I consider $147,508.65 to be the minimum amount that you have derived as income from BioNaturals.

16.    The total amount you received from Services Australia during the CAP 1 period totalled $37,669.28. Of this sum, only $5,772.35, being the Carer’s Allowance, is considered income for bankruptcy purposes pursuant to Section 35(b) of the Bankruptcy Regulations 2021 (“the Regulations”). The balance of $31,896.93 is not income for bankruptcy purposes pursuant to Section 35(a) of the Regulations.

17.    Your total income derived from Services Australia and BioNaturals is therefore $153,281.

Motor Vehicle Fringe Benefit

18.    My investigations indicate that you have the use of a Mercedes-Benz 2019 GLS 400D SUV, with registration JVE888 (“the Mercedes-Benz SUV”). This wasn’t disclosed by you in the income questionnaire you completed.

19.    The fringe benefit calculation as it relates to the Mercedes-Benz SUV has been calculated based on the following:

a.    The cost price of the vehicle is $151,300 according to RedBook

b.    The vehicle was purchased and made available for you to use on or around 30 June 2020.

c.    The Mercedes-Benz SUV is less than four years old. Therefore, the base price for the purpose of the fringe benefit calculation is equal to the cost price.

d.    The vehicle is available to you for 149 days of the CAP 1 period, being 30 June 2020 to 25 November 2020 and all of CAP 2.

e.    You do not pay any contributions in respect of your use of the Mercedes-Benz SUV.

20.    For the period of CAP 1 prior to the purchase of the Mercedes-Benz SUV, being  6 November 2019 to 29 June 2020, I have calculated the motor vehicle fringe benefit based on the following comments and assumptions:

a.    You have not disclosed any motor vehicles that you use.

b.    The motor vehicle you used would be equivalent cost-price as the 2019 Mercedes-Benz SUV, and therefore for the purpose of this assessment the cost price is $151,300.

c.    The motor vehicle used prior to the 2019 Mercedes-Benz SUV is at least four years old by the commencement of CAP 1. Therefore, the base price for the purpose of this calculation will be reduced and calculated as the cost price multiplied by two-thirds.

d.    The motor vehicle was available to you to use for 216 days of the CAP 1 period (preceding the purchase of the Mercedes-Benz SUV), being from 26 November 2019 to 29 June 2020.

e.    You did not pay any contributions in respect of your use of the motor vehicle.

21.    Pursuant to Section Section 139L(1)(v) of the Act the value of a motor benefit provided to a bankrupt is calculated in accordance with the Fringe Benefits Tax Assessment Act (1986) (“FBT Act”) as modified by Schedule 2 of the Act, by using the following statutory formula:

{0.2 x A x B} – D

C

Where: A is the base value of the vehicle, which is to be reduced by one-third after the vehicleis more than 4 old at the start of the contribution assessment period.

B is the number of days during the contribution assessment period on which the carfringe benefits were provided by the provider.

C is the number of days in the contribution assessment period.

D is the amount, if any, of vehicle expenses paid by you that meet the criteria in Schedule 2 of the Act.

22.    I have determined that the value of the motor vehicle fringe benefit which you have received during CAP 1 is $24,291 and have included this amount as income in the CAP 1 Assessment. The calculation is summarised as follows:

Income Tax

23.    Your income assessment has been calculated to reflect the income tax payable by you in accordance with Section 139N of the Act and the decision in Thomas Robbins and Insolvency Trustee Service Australia [1998] AAT 1003.

24.     Your ATO Notice of Assessment for the financial year ended 30 June 2019 disclosed your taxable income as $2,093 and having no liability to pay tax.

25.     Your ATO Notice of Assessment for the financial year ended 30 June 2020 disclosed your taxable income as nil and having no liability to pay tax.

26.     No tax appears to have been deducted from the payments you received from BioNaturals. Furthermore, a review of your bank statements indicates that you haven’t paid any tax to the ATO during the period.

27.     For the purpose of this income assessment I have estimated that you will pay no tax for the financial year ended 30 June 2021 or 30 June 2022.

Dependants

28.    You have advised in your Bankruptcy Form that you have 5 dependants. I have assessed your income contribution liability accordingly.

Income Assessment for CAP 2

29.    I have assumed your income and employment status for CAP 2 has remained unchanged from CAP 1. As such, your estimated income expected to be derived from Services Australia and BioNaturals during CAP 2 is the same as CAP 1 for the purpose of this income assessment.

30.    The income you will derive from the fringe benefit associated with the Mercedes- Benz SUV has been recalculated on the basis that it will be available to you to use for the entirety of CAP 2 ((0.2 x $151,300 x 365/365) – 0 = $30,260).

31.    My assessment of your income for CAP 2 is summarised as follows:

32.    I have assumed that you have 5 dependants throughout CAP 2.

Compulsory Income Contribution Liability

33.    I have assessed you to be liable to pay $48,285.54 in respect of CAP 1 and $51,270.04 in respect of CAP 2. I note this results in a total liability for both periods of $99,555.58.

34.    I have enclosed a Notice of Compulsory Income Contribution Assessment which itemises the calculation of your income contribution liability for CAP 1 and CAP 2.

35.    I have enclosed:

*    A Notice of the Compulsory Income Contribution Assessment for CAP 1.

*    A Notice of the Compulsory Income Contribution Assessment for CAP 2.

*    A document titled Explanatory Notes Regarding Income Contribution Assessment. Further information may be obtained from the Australian Financial Security Authority (“AFSA”) website www.afsa.gov.au.

Payment of Income Contributions

36.    In accordance with Section 139ZG of the Act, I require you to pay your income contribution liability of $99,555.58 for CAPs 1 and 2 by directly depositing funds into the following bank account held for your bankrupt estate:

[BANK ACCOUNT DETAILS EXTRACTED]

37.    I request that you pay the amount of $99,555.58 by 27 August 2021.

38.    If you are unable to pay the liability in full by 27 August 2021, please submit a payment proposal to pay the liability over time for my consideration.

Failure to Pay Income Contributions

39.    Please note that should you fail to pay required income contributions I may:

a.    Arrange for the Official Receiver from the AFSA to issue a Notice to your employer under Section 139ZL of the Act, requiring your employer to deduct amounts from your wages to forward to me in lieu of income contributions you are required to make.

b.    Lodge an objection to your discharge from bankruptcy pursuant to Section 149D of the Act, which will extend the period of your bankruptcy by up to eight (8) years from the date which you lodged your Statement of Affairs.

[sic - emphasis in original – footnote references omitted – account numbers redacted]

20    The evidence discloses that thereafter - and, for that matter, as recited in the notice of objection - the former trustees, by Mr Heers, wrote to Ms McEwan and requested exactly the information set out in the notice of objection.

21    In relation to whether the notice should be cancelled, I do no more than observe that I am well satisfied, on the evidence, that there was occasion for the making of the request for the information by the former trustees by letter of 28 October 2021.  It is apparent enough from the trustee’s letter of 3 August 2021 that that information request was directly keyed to the period termed CAP2, and further, that in respect of that period and at that time, the then trustees were operating against what one might term an information deficit in terms of particularity of what may constitute income under s 139L of the Act.  That provision states:

Meaning of income

(1)    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"):

(i)    an annuity or pension paid to the bankrupt from a provident, benefit, superannuation, retirement or approved deposit fund;

(ia)    an annuity or pension paid to the bankrupt from an RSA;

(ii)    a payment to the bankrupt in consequence of a termination of any office or employment;

(iii)     an amount of annuity or pension received by the bankrupt under a policy of life insurance or endowment insurance;

(iv)    an amount received by the bankrupt as a beneficiary under a trust to the extent that the amount was paid out of income of the trust;

(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 as in force at the beginning of 1 July 1992 (other than a benefit that would be an exempt benefit for the purposes of that Act if the provider were the employer of the bankrupt as an employee and the provider had provided the benefit in respect of the employment of the bankrupt);

being that value as worked out in accordance with the provisions of that Act but subject to any modifications of any provisions of that Act made by the regulations under this Act;

(vi)    the value of a loan made to the bankrupt by an associated entity of the bankrupt, including:

(A)    a loan under which the loan money is not paid to the bankrupt, but is paid or applied at the bankrupt's direction; and

(B)    a loan that is not enforceable at law or in equity;

(vii)    the amount of any money, or the value of any other consideration, received by a person other than the bankrupt from another person as a result of work done or services performed by the bankrupt, less any expenses (other than expenses of a capital nature) necessarily incurred by the first - mentioned person in connection with the work or services;

(b)    the following are not income in relation to a bankrupt (even if they come within the ordinary meaning of "income"):

(i)    an amount paid to the bankrupt:

(A)    from the Child Support Account established under the Child Support (Registration and Collection) Act 1988; or

(B)    from another source for the maintenance of children of whom the bankrupt has custody; or

(iv)    a payment to the bankrupt under:

(A)    a legal aid scheme or service established under a law of the Commonwealth or of a State or Territory; or

(B)    a legal aid scheme or service approved by the Attorney - General for the purposes of paragraph 2(4)(a) of the Federal Court of Australia Regulations; or

(C)    any other legal aid scheme or service established to provide assistance to people on low incomes;

(v)    a payment or amount that the regulations provide is not income of the bankrupt.

“pension” includes a pension within the meaning of the Superannuation Industry (Supervision) Act 1993 .

(2)    For the purposes of the application of the definition of income in subsection   (1) to Subdivision HA, a reference in that definition to a bankrupt includes a reference to a person who has been discharged from bankruptcy.

Note:    Subdivision HA deals with the supervised account regime.

22    As can be seen, s 139L includes but is not limited to what one might term income under ordinary concepts.  In the course of her submissions, Ms McEwan drew my attention to a judgment recently delivered by me in an income tax case, Cheung v Commissioner of Taxation [2024] FCA 1370 (Cheung).  That reference was not, with respect, irrelevant, in that, in Cheung, I canvassed and sought to apply authorities concerning what amounts to income under ordinary concepts for the purposes of income tax legislation.  But s 139L qualifies what constitutes income under ordinary concepts for the purposes of the Act.

23    To this day, Ms McEwan has not given to either her former trustees or the Official Trustee a meaningful response to that part of the request for information which seeks the information identified in the notice of objection in paragraph 2(a)(vii).  That is so, notwithstanding extensive exchanges which have occurred as between either former trustees, or, as the case may be, officers of the Official Trustee, and her since 28 October 2021. Ms McEwan made assertions concerning conflict of interest on the part of former trustees.  Whatever may be the case in that regard, those trustees made, in my view, a perfectly reasonable and understandable request for information on 28 October 2021.

24    Further, and more importantly, having succeeded the administration of her bankrupt estate, it is obvious from the evidence that the Official Trustee considered afresh and in good faith whether or not the information request should be pressed and whether or not it had been complied with.

25    Towards the end of the administration of the former trustees, Ms McEwan sent an email of 10 June 2022 in these terms:

Please find attached income assessment and bank statements.

You were already advised:

1.    I have not been earning an income;

2.     I have not been a director of any of the companies referred to in your letter;

3.     Most of companies listed except are no longer active (deregistered) which you would be able to confirm, not sure why you even included these in your letter;

4.    Apagein Biotech has never traded ever;

5.    I have no control over Bionaturals, the company has not been trading for a very long time and does not earn an income.

Please now reverse the further five years for the bankruptcy, it is inappropriate and malicious. As previously advised, due to the conduct of your clients and the ATO, there is no money…

26    In response, and as one of the last acts in the former trustees' administration, on behalf of those trustees, Ms Johanna Bond, by an email of 13 June 2022, stated:

I note the following:

1.    My letter (attached) requested copies of bank statements for all bank accounts you have held for the period from 26 November 2020 to 25 November 2021. So far you have only provided me with statements for Westpac account number [number redacted] for the period from 8/06/2021 onwards. You have not provided me with any statements for your Westpac account number [number redacted] or any other bank accounts you may hold, whether it be solely or jointly.

2.    My letter asks for you to include a list of payments you have personally received from any of your related entities from 26 November 2020 to 25 November 2021. I included a number of entities as examples of entities that we have identified that you are related to, however as set out in my letter this is not intended to be an exhaustive list. I included those entities regardless of whether they are deregistered or not trading. If you have not received any payments from them as a result of them not trading and/or being deregistered, nothing further is required with respect to this particular request. Where you have received payments from any of your related entities, please provide me with a list of all payments.

3.    Seeing as we are now almost 8 months on from the date my letter was sent, I request that all outstanding information is produced from 26 November 2020 to today and does not cease at 25 November 2021 as previously stated.

To summarise, and for your ease of compliance, the following information remains outstanding:

1.    Bank statements from 26 November 2020 to 8 June 2021 for Westpac account number [number redacted].

2.    Bank statements from 26 November 2020 to date for Westpac account number [number redacted].

3.    Bank statements from 26 November 2020 to date for any other bank accounts you may hold, including bank accounts you hold solely or jointly.

4.    A list of payments you have personally received from any of your related entities, including but not limited to the entities set out in my attached letter, for the period from 26 November 2020 to date.

5.    Notices or statements from Services Australia detailing the social welfare payments you received during the period from 26 November 2020 to date.

[emphasis in original]

27    Eventually, after much further correspondence and, for that matter, complaint by Ms McEwan, she came in the middle of last year to provide the Official Trustee with Westpac Bank statements covering the CAP2 period and beyond.

28    Both in evidence and submissions, Ms McEwan voiced as an explanation for not providing a list of payments as repeatedly requested on and from 28 October 2021 that she had no income, and that she understood the request for the list of payments to be a request for a detailing of income.  She cited by analogy a District Court case in which a lay person had been, in effect, found not to have breached a bail condition because that lay person's understanding, as a matter of ordinary English, of that condition - of the wording of that condition was not unreasonable, and open.  With all due respect to Ms McEwan, that analogy is not apt in the present case.  Payment, as used in the request for information, and as repeated by reminder thereafter, is not a word which, as read in context, in terms of the request, could be regarded as a synonym for income.

29    A consequence of a consideration by the Official Trustee (as with the former trustees) of a responsive answer to the request made for details of payments, in conjunction with a consideration of the bank statements and other material, may well lead to a conclusion that particular payments were or were not, in terms of s 139L of the Act, income as defined.  But that decision is not one for Ms McEwan to arrogate to herself.  Instead, in the first instance, it is for her to provide the requested detail to her bankruptcy trustee.  The Act confers rights of challenge upon a bankrupt in respect of an income contribution reassessment.  If upon a consideration thereof, Ms McEwan considers that the assessment or reassessment is flawed, then she is perfectly entitled to challenge that by the means allowed in the Act.

30    The case pressed for Ms McEwan by analogy, in terms of ordering the withdrawal of the matters of objection, was a judgment of Banks-Smith J in Duckworth v Field [2023] FCA 801 (Duckworth).  In Duckworth, at [49], through to and including [53], Banks-Smith J made these observations concerning the existence or otherwise of a power vested in this court to order the withdrawal of a trustee's objection to discharge:

49    It was well established that under s 178, the Court had a wide discretion to make such order as was appropriate in the circumstances of the case:  Re Tyndall; Ex parte Official Receiver (1977) 30 FLR 6 at 9 10 (Deane J); and see generally Frost FCAFC at [8].

50    In Booth v Offerman as trustee of the bankrupt estate of Geoffrey David Booth [2019] FCA 5 at [4], Robertson J observed that the jurisdiction in s 90-15 of the IPS used to be found in s 178 of the Bankruptcy Act.  His Honour continued:

[5]    For present purposes it is not necessary to compare the new and old bases of the Court’s jurisdiction.  It does not appear that any change was intended from the position described by Deane J in Re Tyndall; ex parte Official Receiver [1977] FCA 15; 17 ALR 182 at 186-187 to the effect that there is conferred upon the Court the widest possible discretion as to the appropriate order which should be made in the particular case and that the [Court] was empowered and obliged to make such order in the matter as it thinks just and equitable.  Deane J rejected the approach that the Court was only empowered to interfere with the trustee’s act, omission or decision if it was of the view that the trustee had acted absurdly or unreasonably or in bad faith.

51    I consider that the authorities with respect to s 178 continue to guide the exercise of the Court's jurisdiction under s 90-15 of the IPS.

52    As to standing, s 90-20 provides relevantly that a person with a financial interest in the administration of a regulated debtor’s estate may apply for an order under s 90-15.  Pursuant to the definition in s 5-30 of a ‘financial interest’, it is clear that Mr Duckworth as the bankrupt has standing under s 90-20 to apply for relief:  Frigger v Trenfield [2019] FCA 1746 at [12] (Jackson J).

53    Separately, I note that in Smith v Trustee of the Property of Richard John Smith, Collier J relied on s 30(1) of the Bankruptcy Act in declaring that a notice of objection to discharge issued under s 149B was invalid and of no effect.  Section 30(1) grants to the Court broad general powers in bankruptcy.  Whilst s 30(1) may well provide an alternative pathway to the relief Mr Duckworth seeks, as he has brought his application under s 90-15 of the IPS, and as many of the previous cases that address trustee's objections or refusals to withdraw objections were made exercising power under the repealed s 178, I prefer to approach this matter having regard to s 90-15 of the IPS.  I have no doubt that in an appropriate case it is open to me to order the withdrawal of an objection, exercising the power under s 90-15.

31    Suffice it to say, as was Banks-Smith J, I am well satisfied, particularly having regard to the judgment of Robertson J in Booth v Offerman as Trustee of the Bankrupt Estate of Geoffrey David Booth [2019] FCA 5, that the jurisdiction now found in the Act in s 90-15 of the Insolvency Practice Schedule is, in substance, no different to that once found in the former s 178 of the Act.  Like Banks-Smith J in Duckworth, and although I respectfully allow that an alternative source of power may be found in s 30 of the Act, I prefer to ground the existence of a power to order withdrawal in s 90-15 of the IPS.

32    As in Duckworth, the question becomes whether it is appropriate to make such an order?  I am not persuaded that the maintenance of the objection is without utility in the administration of Ms McEwan's bankrupt estate.  To the contrary, I am persuaded that the Official Trustee, as a result of Ms McEwan's particular refusals, is presently operating in an information deficit in relation to whether to reassess an income and contribution.  In many ways, looking as I have at the exchanges of correspondence as between former trustees and the Official Trustee and Ms McEwan and taking into account everything I heard for that matter from Mr Ng who has a particular responsibility within the Official Trustee’s office in relation to this estate's administration, Ms McEwan has been her own worst enemy.

33    In recording that, I make expressly no finding that Ms McEwan has acted in bad faith.  It is just that she has come to, and maintained, a particular view of what she had to provide, which is not a view reasonably open, in my view, in terms of a meaningful response to a readily comprehensible request made as far back as 28 October 2021.

34    I expressly record that it was no part of Ms McEwan's refusals that she did not understand what “related entities” in the request for information meant.  There may be value judgements which may be difficult for a lay person to make as to what was or was not or is or is not a “related entity”, but that is not the basis for the refusal.  Further, there were particular entities specified, and those entities, especially Apagein, have an obvious relationship with the assessment already made in respect of CAP2.

35    It, therefore, only comes to this.  Unlike in Duckworth, this is not, in my view, a bankruptcy administration where, having regard to the material that has already been provided and the level of compliance as disclosed on the evidence, and having regard to the period of bankruptcy which has already elapsed, it is futile for the bankruptcy to continue.

36    It may be, on provision of the information concerned, that the administration of this bankrupt estate reaches a point where a trustee forms a considered value judgment in relation to whether there is further income contribution or a lower income contribution to be made.  But that point, by virtue of the conduct of Ms McEwan, has not been reached.  I therefore conclude that the case is not one for the ordering of the withdrawal of the notice of objection.

37    Of course, a consequence of the partial discontinuance was that there was an extant notice of objection, which in itself sounded in a continuance of the period of bankruptcy. Ms McEwan’s aim was to clear off one of the notices of objection, in the hope and expectation that, by agreement with the Official Trustee, a position might be reached where the other objection was, in any event, withdrawn.  In my view, the best way of her achieving that end is to provide, insofar as she can and in writing and as soon as possible, the information requested.  For these reasons, the application will be dismissed.

38    A bankrupt has a duty to cooperate in relation to the furnishing of information as to income - see s 139U - but in this instance, the case is not one concerning the meaning and effect of s 139U as opposed to the meaning and effect of a request for information.

39    Upon the statement by me that the application should be dismissed, the respondents, by their counsel, made an application for costs on the basis that costs should follow the event of dismissal of the application.  Ms McEwan resisted any such order on the basis that the application was, in character, a defensive one made in circumstances where the conduct of the present trustee and, insofar as relevant, the former trustees was such that it was disentitling conduct such that no order as to cost should be made.

40    In that regard, she particularly pointed to what she submitted was a duty on the part of bankruptcy trustees to assist a bankrupt to understand obligations, especially in relation to the furnishing of a meaningful reply to this particular information request which became the subject on non-compliance of a notice of objection.

41    It suffices to say that, in my view, the former trustees and, if anything, even more so, the Official Trustee, either by particular officers or by the Official Trustee's solicitors, have made an earnest endeavour to bring home to Ms McEwan the nature and extent of what was required in terms of a response in respect the information requested.  The conduct, especially in the era when the Official Trustee came to have responsibility and which embraces, then, the period of institution of proceedings, has been conduct which, in my view, is quite within the confines of good administration of a bankrupt estate.

42    In making that observation, I am in no way critical of the conduct of the former trustees.  It is just that, when looking at what has transpired on and from 7 July 2022, both the Official Trustee and, for that matter, the Australian Financial Security Authority, in dealing in such a detailed, responsive way with Ms McEwan, has not engaged in disentitling conduct.  Rather, the reverse.  For these reasons, my view is costs should follow the event.

Associate:

Dated:    5 March 2025