FEDERAL COURT OF AUSTRALIA
Bertram v Naudi (No 2) [2024] FCA 1239
File number(s): SAD 87 of 2021 Judgment of: O'SULLIVAN J Date of judgment: 25 October 2024 Catchwords: BANKRUPTCY — application by bankrupt for three contribution assessments to be set aside on the basis that they are void or invalid — where applicant is a discharged bankrupt — where the Trustee found the bankrupt received a benefit in the form of payment of legal services within the meaning of s 139L(1)(a)(v) of the Bankruptcy Act (1966) (Cth) — whether the applicant received a benefit within the meaning of s 136 of the Fringe Benefits Tax Assessment Act (Cth) — whether the Trustee erred in law and/or fact in concluding the applicant received a benefit and thereby income for the purposes of ss 139L(1)(a)(v) of the Act — whether the Trustee erred in law and/or in fact in concluding in the alternative that the bankrupt received the value of a loan for the purposes of s 139L(1)(a)(vi) of the Act — whether the Trustee was satisfied for the purposes of s 139W(2) of the Act that the income that was derived by the bankrupt during the relevant period was greater or less than the amount of that income as assessed by the last preceding assessment in respect of that period — where the Trustee cross-claims for the amounts due under the three contribution assessment periods — where the Trustee disregarded information provided by the applicant pursuant to s 139X of the Act — where information provided by the applicant was false — where other information provided by the applicant was incorrect — application dismissed — judgment for the respondent on its cross claim. Legislation: Administrative Appeals Tribunal Act 1975 (Cth), s 44
Bankruptcy Act 1966 (Cth), ss 81, 139L(1)(a)(v) & (vi), 139W, 139W(1), (2) & (4), 139X, 139Z, 139ZA, 139ZF, 149, 149J, Schedule 2
Fringe Benefits Tax Assessments Act 1986 (Cth), ss 45, 50, 136
Insolvency Practice Rules (Bankruptcy) 2016 (Cth)
Cases cited: Bond v Trustee of Property of Bond (a bankrupt) (1994) 52 FCR 304; (1994) 34 ALD 385
Djokovic v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCAFC 3; (2022) 289 FCR 21
Frost v Sheahan [2009] FCAFC 20
Ibrahim v Minister for Home Affairs [2019] FCAFC 89; (2019) 270 FCR 12
In Moore v Macks [2007] FCA 10
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Macchia v Nilant [2001] FCA 7; (2001) 110 FCR 101
Mehajer v Weston [2020] FCA 924
Metropolitan Gas Company v Federal Commissioner of Taxation [1932] HCA 58; (1932) 47 CLR 621
Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240…
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Details
- AGLC
- Bertram v Naudi (No 2) [2024] FCA 1239
- Case
- [2024] FCA 1239
- Decision Date
CaseChat Overview and Summary
The Bertram v Naudi (No 2) case involved an application by the bankrupt, Bertram, to set aside three contribution assessments made by the trustee, Naudi. The dispute centred on whether these assessments were void or invalid, particularly in relation to whether Bertram received a benefit that constituted income under the Bankruptcy Act (1966) (Cth). The court had to determine if Naudi erred in concluding that Bertram received a benefit that amounted to income under section 139L(1)(a)(v) of the Act, and if he erred in concluding that Bertram received the value of a loan under section 139L(1)(a)(vi) of the Act. Additionally, the court examined whether Naudi was correct in concluding that the income derived by Bertram was greater than the amount assessed in the preceding assessment under section 139W(2) of the Act. The Trustee also cross-claimed for the amounts due under the three contribution assessment periods, arguing that the information provided by Bertram under section 139X of the Act was false and incorrect.
The court found that Naudi did not err in law or fact when concluding that Bertram received a benefit that constituted income under section 139L(1)(a)(v) of the Act. The court upheld Naudi's conclusion that the benefit Bertram received equated to income. Regarding section 139L(1)(a)(vi), the court held that Naudi correctly distinguished between the provision of a benefit and the value of a loan, as the provision itself does not reference the Fringe Benefits Tax Assessment Act (FBTA Act). The court found that Naudi was not required to value any loan in accordance with the FBTA Act and correctly assessed the benefit under section 139L(1)(a)(v) and the value of any loan under section 139L(1)(a)(vi). The court also upheld Naudi’s conclusion under section 139W(2) that the income derived by Bertram was greater than the amount assessed in the preceding assessment.
The application by Bertram to set aside the contribution assessments was dismissed, and the court found in favour of Naudi on the cross-claim, ordering Bertram to pay Naudi the sum of ONE HUNDRED AND SIXTY TWO THOUSAND, NINE HUNDRED AND SIXTY EIGHT DOLLARS AND THIRTY FOUR CENTS ($162,968.34) plus pre-judgment interest. The parties were required to provide orders reflecting these reasons within 7 days, and the court reserved the question of costs for a later hearing.
The court found that Naudi did not err in law or fact when concluding that Bertram received a benefit that constituted income under section 139L(1)(a)(v) of the Act. The court upheld Naudi's conclusion that the benefit Bertram received equated to income. Regarding section 139L(1)(a)(vi), the court held that Naudi correctly distinguished between the provision of a benefit and the value of a loan, as the provision itself does not reference the Fringe Benefits Tax Assessment Act (FBTA Act). The court found that Naudi was not required to value any loan in accordance with the FBTA Act and correctly assessed the benefit under section 139L(1)(a)(v) and the value of any loan under section 139L(1)(a)(vi). The court also upheld Naudi’s conclusion under section 139W(2) that the income derived by Bertram was greater than the amount assessed in the preceding assessment.
The application by Bertram to set aside the contribution assessments was dismissed, and the court found in favour of Naudi on the cross-claim, ordering Bertram to pay Naudi the sum of ONE HUNDRED AND SIXTY TWO THOUSAND, NINE HUNDRED AND SIXTY EIGHT DOLLARS AND THIRTY FOUR CENTS ($162,968.34) plus pre-judgment interest. The parties were required to provide orders reflecting these reasons within 7 days, and the court reserved the question of costs for a later hearing.
Orders
Orders of the court
1. The application is dismissed.
2. There will be judgment for the respondent on the cross-claim in the sum of ONE HUNDRED AND SIXTY TWO THOUSAND, NINE HUNDRED AND SIXTY EIGHT DOLLARS AND THIRTY FOUR CENTS ($162,968.34) plus pre-judgment interest to be calculated.
3. The parties are to provide orders reflecting these reasons within 7 days.
4. I will hear the parties on the question of costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
The applicant has not demonstrated that Mr Naudi erred in law and/or fact.Conclusion on s 139L(1)(a)(v) The Trustee’s conclusion that the applicant had received income within the meaning of s 39L(1)(a)(v) to the value of the benefit provided to him worked out in accordance with the provisions of s 139L(1)(a)(v) was correct as a matter of law and/or fact.Section 139L(1)(a)(vi) The applicant submits that Mr Naudi did not see the need to distinguish between the provision of a benefit under s 139L(1)(a)(v) or (vi) and that Mr Naudi’s approach in treating the assessed benefit under either of these two provisions as the same is flawed by reference to s 18 of the FBTA Act which provides:Taxable value of loan fringe benefits(1)Subject to this Part, the taxable value, in relation to a year of tax, of a loan fringe benefit provided in respect of the year of tax is the amount (if any) by which the notional amount of interest in relation to the loan in respect of the year of tax exceeds the amount of interest that has accrued on the loan in respect of the year of tax. The applicant submits that the effect of this provision is that a loan fringe benefit is not to be valued at the face or capital value of the loan, but by references to an assessment of the extent to which the interest payable on the loan in an annual period is less than the notional market rate of interest. Mr Naudi accepted there was a difference between the definition of income in s 139L(1)(a)(v) and (vi) but considered that irrespective of whether the applicant’s income came within s 139L(1)(a)(v) or (vi), the result is the same. I do not accept the applicant’s submission. Section 139L(1)(a)(vi) makes no reference to the FBTA Act. The provision refers to the value of a loan and includes a loan that is not enforceable at law or in equity. To that extent, there is a broad definition of what may be deemed to be a loan. It was put to Mr Naudi in cross-examination that he made no attempt to value any loan in accordance with the FBTA Act, however he was not obliged to do so. The end position is that in the circumstances of this matter the value of the benefit under s 139L(1)(a)(v) and the value of any loan under s 139L(1)(a)(vi) is the same and Mr Naudi was correct in reaching that conclusion as a matter of law and/or fact.Section 139W On its terms, s 139W(2) provides, relevantly:(2) If…(a)the trustee is satisfied that the income that is likely to be derived, or was derived, by the bankrupt during that [contribution assessment period] is or was greater or less than the amount of that income as assessed by the last preceding assessment in respect of that period;(b)…;(c)…The trustee is to make a fresh assessment of the income that is likely to be derived, or was derived, by the bankrupt during that period, of the actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made and of the contribution (if any) that the bankrupt is liable to pay in respect of that period.
Ratio Decidendi
Legal Principle Established
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