Commissioner of Taxation v Stuart-Jones
[2000] FCA 1022
•4 AUGUST 2000
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Stuart-Jones [2000] FCA 1022
BANKRUPTCY – sequestration order – whether a restraining order made pursuant to s 10 of the Criminal Assets Recovery Act 1990 (NSW) acts as a stay of execution of the judgment under s 41(3)(b) of the Bankruptcy Act 1966 (Cth) – the restraining order did not relate to the whole of the debtor’s assets.
ADMINISTRATIVE LAW – application for an extension of time to file and serve a notice of appeal from the Administrative Appeals Tribunal.
Re Solomon; Ex parte Reid (1986) 10 FCR 423 followed
Penning v Steel TubeSupplies Pty Ltd (1988) 18 FCR 568 followed
Director of Public Prosecutions v Kunz (1993) 115 ALR 197 followed
Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 followed
Boscolo v Botany Council (Jenkinson, O’Loughlin and Sackville JJ, 16 October 1996, unreported) followed
Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131 referred to
Re Ling; Ex parte Enrobook Pty Ltd (1996) 142 ALR 87 followed
Ling v Enrobook Pty Ltd (1997) 143 ALR 396 followedAdministrative Appeals Tribunal Act 1975 (Cth) ss 42A(5) & 44(2A)
Criminal Assets Recovery Act 1990 (NSW) s 10
Bankruptcy Act 1966 (Cth) ss 40(1)(g) & 41(3)(b)DEPUTY COMMISSIONER OF TAXATION v SHIREEN JOY CHLORIS STUART-JONES
N 7602 of 1999SHIREEN JOY CHLORIS STUART-JONES v DEPUTY COMMISSIONER OF TAXATION
N 170 of 2000MATHEWS J
4 AUGUST 2000
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 7602 OF 1999
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION
APPLICANTAND:
SHIREEN JOY CHLORIS STUART-JONES
RESPONDENTN 170 OF 2000
BETWEEN:
SHIREEN JOY CHLORIS STUART-JONES
APPLICANTAND:
DEPUTY COMMISSIONER OF TAXATION
RESPONDENTJUDGE:
MATHEWS J
DATE OF ORDER:
4 AUGUST 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
In the matter of N 7602 of 1999:
1. A sequestration order be made against the estate of Shireen Joy Chloris Stuart-Jones.
2. The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
In the matter of N 170 of 2000:
1. The application for an extension of time to file and serve a notice of appeal is dismissed.
2. The applicant is to pay the respondent’s costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 7602 OF 1999
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION
APPLICANTAND:
SHIREEN JOY CHLORIS STUART-JONES
RESPONDENTN 170 OF 2000
BETWEEN:
SHIREEN JOY CHLORIS STUART-JONES
APPLICANTAND:
DEPUTY COMMISSIONER OF TAXATION
RESPONDENT
JUDGE:
MATHEWS J
DATE:
4 AUGUST 2000
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Background
The applicant creditor is seeking a sequestration order against the estate of the respondent debtor in reliance upon an act of bankruptcy said to have been committed on the 12 April 1999 when the debtor failed to comply with a bankruptcy notice served on 22 March 1999. The bankruptcy notice sought payment of $1,184,839.78 being the amount recoverable under a judgment obtained in the New South Wales Supreme Court on 22 September 1995 ($864,043.09) together with interest. No payments have been made under the judgment or pursuant to the bankruptcy notice. The interest component has thus increased significantly in the meantime.
The judgment debt relates to income tax said to have been payable by the debtor under notices of assessment issued for the taxation years 1986 to 1990 inclusive. On 18 September 1991 the debtor lodged notices of objection to these assessments. On 14 October 1992 the Commissioner of Taxation disallowed the objections. On 9 December 1992 the debtor lodged an application for review with the Administrative Appeals Tribunal (“the Tribunal”). On 5 March 1993 and 13 January 1994 the Tribunal made directions as to discovery and the conduct of the review. On 14 June 1994 the Tribunal purported to dismiss the debtor’s application pursuant to s 42A(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”). The decision was amended the next day so as to be under s 42A(5) of the same Act. On 15 August 1996 the debtor wrote to the Tribunal requesting that the applications be reinstated. On 20 August 1996 the Tribunal responded that it had no power to do so as it was functus officio. The debtor then requested that the matter be dealt with as an outstanding application. On 2 October 1996 the Tribunal advised that the matter would not be listed for hearing.
In late 1996 the debtor was arrested for drug related offences. She has since been convicted and sentenced, and she remains in custody. On 23 December 1996 the Supreme Court of New South Wales made a restraining order under s 10 of the Drug Trafficking (Civil Proceedings) Act 1990 (NSW) (which has since been renamed the Criminal Assets Recovery Act) (“the Assets Recovery Act”). On 22 March 1999 the bankruptcy notice presently under discussion was served on the debtor. On 1 June 1999 the present petition was presented, the act of bankruptcy relied upon being the debtor’s failure to comply with the bankruptcy notice. On 27 September 1999, the Supreme Court made a forfeiture order against the debtor. On 2 March 2000 the debtor filed an application for an extension of time to appeal from the decisions of the Tribunal made in June 1994.
At the hearing of the petition the creditor provided evidence of the various matters required to be proved in order to obtain a sequestration order. Two matters were raised by the debtor in opposition to the making of such an order. They were: first, that the bankruptcy notice was invalid under s 41(3) of the Bankruptcy Act 1966 (Cth) (“the Act”). Secondly, the debtor sought that the petition be adjourned in order to enable her to pursue her rights of appeal against the decision of the Tribunal made in 1994.
A stay of execution?
Under the first ground of opposition, the debtor relied upon the combined effect of ss 40(1)(g) and 41(3)(b) of the Act. Section 40(1)(g) provides that a debtor commits an act of bankruptcy by failing to comply with the requirements of a bankruptcy notice issued by a creditor “who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed … ” Section 41(3)(b) provides that a bankruptcy notice shall not be issued in relation to a debtor if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed.
The debtor’s contention is that the restraining order made by the New South Wales Supreme Court on 23 December 1996 operated as a stay of execution of the judgment obtained by the creditor, and thus rendered the bankruptcy notice invalid. The restraining order meant that the creditor was not in a position to issue immediate execution upon his judgment which was therefore deemed to be stayed under s 41(3)(b) of the Act.
The debtor relies on a line of authority, commencing in the United Kingdom in the nineteenth century, to the effect that an express stay of a judgment is not required in order for there to be a “stay” under bankruptcy legislation. The crucial issue under this line of authority is whether the creditor is in a position to issue immediate execution upon the judgment in question.
I shall briefly discuss the more recent authorities on this issue.
In Re Solomon; Ex parte Reid (1986) 10 FCR 423 (“Re Solomon”) Beaumont J found that a judgment had been “stayed” under s 41(3)(b) of the Act in circumstances where, prior to the service of the bankruptcy notice, the NSW Supreme Court had appointed a receiver of all the debtor’s property, both present and future. His Honour made the following observation:
“It is well established that, for the purposes of s 41(3)(b), execution is deemed to have been stayed where a judgment creditor is not ‘in a position to issue immediate execution upon it’: per Bowen LJ in Ex parte Ide; Re Ide (1886) 17 QBD 755 at 760; Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184 at 187-188; cf Re A debtor [1984] 1 WLR 1143 AT 1153-1154. It is also trite law that a judgment creditor may not, without leave of the court which appointed the receiver, levy execution against the property comprised in the appointment of the receiver: see O’Donovan, Company Receivers and Managers (1981), at p 321; Meagher, Gummow and Lehane, Equity Doctrines and Remedies (2nd ed 1983), at p 663. Any attempt to interfere with that property is an interference with an officer of the court in the performance of his functions. If done without leave of the court, it is a contempt of court. It will not be permitted even if the property concerned is not yet in the actual possession of the receiver: see Ames v The Trustees of The Birkenhead Docks (1855) 20 Beav 332 at 353; 52 ER 630 at 638.
It follows, in the light of the construction of the order by McLelland J, that it was not open to the petitioning creditor, at the time of issue of the bankruptcy notice, to execute against any of the property of the debtor without the leave of the Supreme Court, subject to one exception which is not here material.
………
Since, at the time of the issue of the bankruptcy notice, no leave has been obtained from the Supreme Court permitting the petitioning creditor to levy execution against any of the debtor’s property, it must follow that the prohibition contained in s 41(3)(b) applies with the consequence that the bankruptcy notice was bad.” (pp 425-26)
This approach was followed by the Full Court in Penning v Steel TubeSupplies Pty Ltd (1988) 18 FCR 568 (“Penning”). In that case a bankruptcy notice was held to be invalid when, before its issue, a creditor (not the creditor who had issued the notice) had obtained an order from the Federal Court appointing a Registered Trustee to take control of the property of the debtors. The Court found that execution of the petitioning creditor’s judgment was thereby deemed to have been stayed and the bankruptcy notice was accordingly invalid.
A similar finding was made in Director of Public Prosecutions v Kunz (1993) 115 ALR 197. In that case the Commonwealth Director of Public Prosecutions had obtained restraining orders under the Customs Act 1901 (Cth) restraining dealings in the debtor’s property and vesting his property in the Official Trustee in Bankruptcy. The Deputy Commissioner of Taxation subsequently obtained judgment against the debtor and sought to have the restraining orders varied in order to enable it to issue a bankruptcy notice. It was accepted by Ryan J, who granted leave to vary the restraining orders, that the existing order operated as a stay of execution under s 41(3)(b) of the Act. There was no difference in principle, he said, between the appointment of the Official Trustee in that case and the appointment of the receiver in Penning.
The debtor in the present case relies particularly upon the judgment of the Full Court (von Doussa, Moore and RD Nicholson JJ) in Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 (“Wiltshire-Smith”). In that case a receiver and manager had been appointed by the Family Court to a newsagency business operated by the appellant. Following the applicant’s non-compliance with a subsequent bankruptcy notice a sequestration order was made against him. He applied to the Court to set aside the sequestration order upon the basis that the Family Court’s appointment of a receiver and manager operated as a stay of execution which invalidated the bankruptcy notice. One of the matters the Court was required to consider was whether a restraining order over part only of a debtor’s property might constitute a stay of execution for the purposes of s 41(3)(b) of the Act. The Court made the following observations:
“Once it is recognised that a petitioning creditor may be disqualified from issuing a bankruptcy notice by reason of a restraint imposed by order of a court on all the property of the judgment debtor thereby removing his ability to make payment, there is no reason why a court order imposed on some only of the property of the judgment debtor which has the same practical effect should not be recognised as a relevant circumstance sufficient to disentitle a judgment creditor from proceeding immediately to execution. In our opinion such an order will have this consequence where in practical reality, although not strictly in law, the order ‘in any way prevent(s) the debtor from paying his debt’ (Re Bond; Ex parte Capital and Counties Bank Ltd at 991) or where it deprives or may well deprive the judgment debtor of assets which he could otherwise use to pay the judgment creditor and thus comply with the bankruptcy notice’ (Wallace v Trade Credits Ltd at 254). To adapt the test proposed by Lord Esher MR in Re Sedgwick; Ex parte Sedgwick cited above, the factual inquiry to determine the practical effect of the order is whether in the eyes of ordinary fairness in business it will be said that the order has in a business sense prevented the debtor from paying.” (p 586)
The Court in that case found, as a matter of fact, that on the date when the bankruptcy notice was issued there was no order of the Family Court which prevented the appellant in any relevant way from paying the judgment debt. Accordingly it found that the sequestration order had been correctly made.
A similar issue arose in Boscolo v Botany Council (Jenkinson, O’Loughlin and Sackville JJ, 16 October 1996, unreported) (“Boscolo”). The respondent debtor had been restrained by an order of the Family Court from “transferring, assigning or further encumbering” a particular parcel of land. It was submitted that this constituted a stay of execution upon his property so as to invalidate a subsequently issued bankruptcy notice. Jenkinson J, with whom O’Loughlin J agreed, referred to the part of the judgment from Wiltshire-Smith quoted above with apparent approval. However on the facts of that case it was found that the debtor had not established that at the time of issue of the bankruptcy notice the restraining order prevented him from paying the amount claimed in the bankruptcy notice, this being a matter as to which the debtor bore the onus of proof.
Sackville J, whilst reaching the same ultimate conclusion, expressed reservations as to whether a court order restraining dealings with some only of a debtor’s property might amount to a stay of execution under s 41(3)(b) of the Act. His Honour said:
“In Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 (FCA/FC), at 586-587, the Full Court accepted the proposition that a court order imposed on some only of the debtor’s property, which has the ‘same practical effect’ as the appointment of a receiver, should be ‘recognised as a relevant circumstance sufficient to disentitle a judgment creditor from proceeding immediately to execution’. These comments were dicta only, since the Full Court found, on the facts of that case (at 590), that at the relevant dates there was nothing which had the practical effect of preventing the debtor from paying the judgment debt.
In my opinion, I do not think it is inevitable that the principle applied in Re Solomon and Penning v Steel Tube Supplies should extend to a case where the practical effect of a court order ‘in a business sense’ is to prevent the debtor from paying. In Re Solomon, Beaumont J pointed out (at 425) that a judgment creditor cannot, without the leave of the court appointing a receiver, levy execution on property comprised in the appointment of the receiver. In Penning v Steel Tube Supplies, the Full Court considered that the appointment by a court of a trustee to take control of the property of a debtor was indistinguishable, for present purposes, from the appointment by a court of a receiver of the debtor’s property. The test formulated in Wiltshire-Smith v Mellor Olsson takes the matter further. It makes the fate of a creditor’s petition founded on non-payment of a judgment debt, where the judgment itself has not been stayed, dependent on a factual inquiry that is likely to be difficult and, from the creditor’s perspective, uncertain. It is one thing to deem a judgment to be stayed where a court order prevents execution being levied on any of the debtor’s property. It may be another to deem a judgment stayed where a court order affects only part of the debtor’s property. In the second case, the impact of the court order on the debtor’s ability to pay his or her judgment debts may well depend on facts and circumstances that are incapable of ascertainment by the creditor, short of a prolonged court hearing.”
In a separate line of cases the effect of a Mareva injunction on a subsequently issued bankruptcy notice has been discussed. Current authority indicates that the existence of such an injunction will not operate as a stay of execution under s 41(3)(b). In Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131 an issue arose as to whether a Mareva injunction obtained by a petitioning creditor prevented the debtor from applying his property towards satisfaction of a warrant of seizure issued by the creditor. Heerey J, after referring to the judgments in Re Solomon and Penning, made the following observations:
“The existence of a Mareva injunction does not in my opinion impose similar restrictions on execution. As to the nature and function of Mareva relief, I respectfully adopt what was said by Hedigan J in granting the injunction against the present debtor: Deputy Commissioner of Taxation v Ousley (unreported, Supreme Court, Vic, 23 March 1992) at p 11:
‘The principle underlying Mareva injunctions is to prevent the court’s process being frustrated or abused by the dissipation of assets so as to affect the enforcement of orders lawfully made by the court. This description emphasises the limited scope of the Mareva injunction which exists to enable a court to protect its process from abuse in relation to the enforcement of its orders and not to create additional rights. As Jackson v Sterling Industries Ltd (1987) 162 CLR 612 demonstrates, it is neither a species of anticipatory execution nor a method to give a form of security in advance for a judgment which might ultimately obtained. Moreover the plaintiff does not obtain any rights in the assets, the subject of the order, as a consequence of any Mareva injunction granted, prior to the obtaining of judgment. A plaintiff may later acquire such rights if he obtains judgment and successfully levies execution upon them, but until that event occurs the plaintiff’s only rights are against the defendant personally. Put another way, it creates rights in personam but not in rem.’
It is well established that one of the functions of a Mareva injunction is the aid of execution. Thus an injunction can be continued in force in aid of execution after judgment has been obtained: Stewart Chartering Co Ltd v C & O Managements SA [1980] 1 WLR 460 at 461; [1980] 1 All ER 718 at 719. This is what happened, to the knowledge of the debtor and without his protest, in the present case. An injunction can also be granted after judgment and before execution: Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac(UK) Ltd [1984] 1 WLR 1097; [1985] 3 All ER 747.” (p 138)
In Re Ling; Ex parte Enrobook Pty Ltd (1996) 142 ALR 87 (“Re Ling”) Lehane J concluded that the issue of a Mareva injunction did not constitute a stay of execution under s 41(3)(b) so as to invalidate a subsequent bankruptcy notice. His Honour referred to the judgment of the Full Court in Wiltshire-Smith (quoted earlier at para 12). He went on to make the following comments:
“Their Honours proceeded to hold that it had not been demonstrated that the appointment of the receiver had the practical effect referred to and consequently the appeal was dismissed. The language used by the court is, however, obviously capable of meaning that the principle established by Solomon and Penning is to be regarded as extending beyond cases in which a receiver, trustee or other official is appointed by the court to take control of a debtor’s property to any case where there is ‘a restraint imposed by order of a court on all the property of the judgment debtor thereby removing his ability to make payment’ or, in certain cases, such an order relating to some only of the debtor’s property. The case, however, was one in which a receiver had been appointed under the authority of an order of the court: what their Honours said, so far as it extends beyond receivers and similar officials, may properly, I think, be regarded as obiter though of course, if not strictly binding, highly persuasive. With great respect, however, two comments may be made. First, Solomon and Penning do not put the proposition that the appointment of a receiver or trustee operates as a stay of execution on the footing that it prevents the debtor from making payment; it operates as a stay because interference with the receiver’s (or trustee’s) possession, including by way of an attempt to levy execution, is a contempt. Secondly, the principle in Re Bond, which clearly is a separate principle, is to the effect that a creditor whose own actions have prevented the debtor from paying may not issue a bankruptcy notice; thus a judgment creditor who has levied execution on the property of the judgment debtor may be precluded from having a bankruptcy notice issued. But that principle does not prevent any other judgment creditor (who has not taken such action) from issuing a bankruptcy notice.”(p 90)
Lehane J proceeded to discuss a number of the cases on the subject. He continued his analysis as follows:
“The authorities to which I have referred to at some length thus do not (with the possible exception of Ousley) either consider or decide the question with which I am confronted though of course they offer substantial guidance. It is important, in my view, to bear in mind the precise character of Mareva relief such as the order made by Lockhart J. It is referred to in the passage from the judgment of Hedigan J quoted by Heerey J in Ousley. A number of particular aspects of it are important for present purposes. It deprives the party subject to its restraint neither of title to nor of possession of the property to which it extends. It does not create a security interest, confer priority or in any sense rewrite insolvency law (A J Bekhor & Co Ltd v Bilton [1981] 2 All ER 565 at 579, 580 per Ackner LJ; Jackson v Sterling Industries at CLR 625 per Deane J); it is an order in personam restraining the party to whom it is directed from disposing of assets or removing them from the reach of creditors. The administration of the property is not placed in the hands of a receiver, trustee or other officer of the court, nor is it assumed by the court itself. For those reasons, to speak of a Mareva injunction as ‘freezing’ assets may, with respect, be somewhat misleading: it operates as a personal restraint against the party to whom it is directed. It is perhaps not insignificant that in Wiltshire-Smith, a case where a receiver had been appointed, the court’s observations were directed to orders which imposed ‘a restraint … on … property of the judgment debtor.
Thus it would be an odd conclusion that the existence of a Mareva injunction of the kind now under consideration prevented a mortgagee or chargee of property, the mortgagor of which is restrained from dealing with it, from taking possession of the property, selling it and using the proceeds to discharge the secured debt. I know of no authority suggesting such a conclusion and cannot see how it could be supported in principle. By contrast, although the authorities are sparse and ancient, it seems to be clear that unless the order appointing a receiver expressly preserves the rights of mortgagees, a mortgagee of property in the possession of a receiver appointed by the court may not, without leave, take possession of the property or sell it: see, eg Underhay v Read (1887) 20 QBD 209 at 218, 219 per Fry LJ.
More importantly, however, the purpose of a Mareva injunction is to prevent a defendant from dissipating assets, or putting them beyond the reach of creditors, in circumstances where there is a real fear that, unless restrained, the defendant will do so. Its purpose is not to prevent creditors from exercising their rights. And the way in which such an injunction is commonly framed - the way in which Lockhart J's order is framed - reflects the limited purpose: all it does in terms is restrain, in this case, Mr Ling from dealing with assets. There appears to be no good reason why the exercise or enforcement of a creditor's rights, including by execution, where no dealing by Mr Ling is required to effect it, should be regarded as contrary to the order” (pp 92-93)
The debtor in Re Ling unsuccessfully appealed to the Full Court (Ling v Enrobook Pty Ltd (1997) 143 ALR 396) (Davies, Wilcox and Branson JJ). The Court in that case, after quoting from the judgment in Wiltshire-Smith (the passage quoted in para 12) made the following observations:
“However, the comments of their Honours should be read in the context with which their Honours were dealing. Their Honours were considering a receivership. This had been brought about by a creditor other than the judgment creditor. Thus, no ‘equity’ arose by reason of the conduct of the judgment creditor. However, as their Honours pointed out, once the receiver had been appointed, the judgment creditor could not levy execution upon the assets which were in the receiver’s hands. The particular point with which their Honours dealt, in the passage we have cited, is that, although the receiver had not been appointed to take control of all the assets of the debtor, the receivership covered sufficient of the debtor’s assets to prevent payment of the judgment debt.”(p 404)
With this background I return the circumstances of the present case. The restraining order dated 23 December 1996 was made on the application of the New South Wales Crime Commission. That application, and the subsequently made orders, related to the property of the debtor and four other persons or corporations. The relevant order in relation to the debtor was in the following terms:
“Pursuant to section 10 of the Drug Trafficking (Civil Proceedings) Act 1990 that no interest in property (within the meaning of “interest in property” as defined in section 7 of the Drug Trafficking (Civil Proceedings) Act 1990) of Shireen Joy Chloris Stuart-Jones (also know as Shireen Joy Toro), in the property described in Part One of the Schedule hereto is to be disposed of, or otherwise dealt with, by Shireen Joy Chloris Stuart-Jones (also known as Shireen Joy Toro) or by any other person.”
Part 1 of the Schedule described the property to be restrained as “the whole of the property described in Folio Identified 21/589352, also known as 468 Bronte Road, Bronte”.
Section 10(1) of the Assets Recovery Act describes a restraining order in the following terms:
“10 Restraining orders
(1)A restraining order is an order that no person is to dispose of or attempt to dispose of, or to otherwise deal with or attempt to otherwise deal with, an interest in property to which the order applies except in such manner or in such manner or in such circumstances (if any) as are specified in the order.”
Section 10(4) provides that when the Court makes a restraining order it may, if it considers that the circumstances so require, order the Public Trustee to take control of some or all of the interests in property to which the restraining order relates. No such order was made in this case.
Section 10(8) provides as follows:
“If a restraining order is in force in respect of an interest of a person in property, the restraining order does not prevent:
(a)the levying of execution against the property in satisfaction, or partial satisfaction, of the debt arising under a proceeds assessment order in force against the person, or
(b)with the consent of the Supreme court, the sale or other disposition of the interest to enable the proceeds to be applied in satisfaction or partial satisfaction of that debt, or
(c)with the consent of the Supreme Court, the application of the interest in satisfaction or partial satisfaction of that debt.”
A “proceeds assessment order” is, under s 27 of the Assets Recovery Act, an order that the person pay to the Treasurer an amount assessed by the Court as the value of the proceeds derived by the person from an illegal activity which took place within the preceding six years.
It is, in my view, at least arguable that a restraining order under s 10 will have the effect of preventing the levying of execution against the person’s property in circumstances outside those described in subs(8). If this were so, the existence of a restraining order against the whole of a debtor’s property would mean that a judgment creditor was not in a position to issue immediate execution upon it. As such, a restraining order would bear a closer resemblance to the appointment of a receiver or trustee than to a Mareva injunction, with the result that it may well constitute a stay of execution under s 41(3)(b) of the Act. However, it is not necessary for present purposes to reach a concluded view on this matter. For, as the judgment creditor points out, the restraining order taken out in this case applied to part only of the debtor’s property, namely her interest in the property at 368 Bronte Road, Bronte. Put at its highest this might, in accordance with the majority judgment in Boscolo, operate as a stay of proceedings so long as, in a practical and business sense, it prevented the debtor from paying the judgment debt. The onus of proving this matter lies squarely upon the debtor.
The debtor has not discharged this onus of proof in this case. Indeed no affidavit has been sworn by her in these proceedings. Her solicitor, Mr Whitfield, swore an affidavit on 11 August 1999 which included the following paragraph:
“I am informed by John Weller solicitor that the respondent debtor being incarcerated in Townsville has no available funds to defend these proceedings and an application will have to be made to the New South Wales Crime Commission or to the Supreme Court to release funds to be paid towards her application to dismiss this petition and to take further proceedings in relation to her setting aside the finding in relation to her income tax liability.”
Counsel for the debtor sought to rely on this material as establishing that the debtor has had access to no property other than that which was subject to the restraining order. However this statement is clearly inadequate to prove that matter. Amongst other difficulties it consists of double hearsay and is open ended as to the time it describes.
In the result I find that the restraining order over the debtor’s interest in the property at 368 Bronte Road, Bronte did not operate as a stay of execution under s 41(3)(b) of the Act. The challenge to the validity of the bankruptcy notice therefore fails.
Should time be extended to appeal from the AAT decision?
As mentioned earlier, the taxation assessments which formed the basis of the judgment debt relied upon in this case arose from assessments issued for the years of income ended 30 June 1986 to 30 June 1990 inclusive. In September 1991 the debtor objected to these assessments. In October 1992 the applicant disallowed the objections. On 8 December 1992 the debtor applied under s 29 of the AAT Act for review of these decisions. On 14 June 1994 her application was dismissed on the ground of her failure “to comply with the Directions of this Tribunal made on 13 January 1994”. The order purported to be made under s 42A(2) of the AAT Act. However the following day, 15 June 1994, a corrigendum was issued amending the Tribunal’s decision by substituting s 42A(5) for the previously named section. Section 42A(5) was clearly the relevant provision, given the terms of the Tribunal’s decision. That sub-section provides as follows:
“42A (5) If an applicant for a review of a decision fails within a reasonable time:
(a)to proceed with the application; or
(b)to comply with a direction by the Tribunal in relation to the application;
a presidential member or senior member, on behalf of the Tribunal, may dismiss the application without proceeding to review the decision.”
On various occasions over the next two years or so, the debtor, through her solicitor, sought to have her application to the AAT reinstated. However there is no power for the AAT to reinstate a decision dismissing an application under s 42A(5). On 2 October 1996 the associate to the AAT Senior Member who had dismissed the debtor’s application wrote to the debtor’s solicitors declining to take any further action in the matter. This was the last communication from the Tribunal in relation to the matter.
On 2 March 2000 the debtor lodged an application for an extension of time to file and serve a notice of appeal from the AAT. This application, N170 of 2000, was placed into my docket and, by consent, dealt with together with the bankruptcy petition. The parties agreed that the most convenient course would be for me to adjudicate on both issues at the same time.
Under s 44(2A) of the AAT Act an appeal is to be lodged within 28 days after the person has been furnished with the Tribunal’s decision or within such further time as the Federal Court might allow. The operative “decision” was clearly the decision made on 14 June 1994 dismissing the debtor’s application pursuant to s 42A(5) of the AAT Act.
No explanation has been provided by the debtor as to the very extensive delay between the giving of that decision and the application for an extension of time to appeal from it, made nearly six years later. The mere fact that the debtor has been in prison since 1996 is, on its own, an inadequate explanation for such a lengthy delay. Nor is there any substantive material before the Court going to the merits of the debtor’s application to the AAT. Mr Whitfield, who appeared for the debtor before me, was granted adjournments on several occasions to enable him to place such material before the Court. However, he eventually said that, despite having made numerous attempts to obtain instructions from the debtor he was unable to adduce any further evidence in support of this application. Indeed he informed the Court that he intended to withdraw his appearance. This avenue is available to Mr Whitfield pursuant to Order 45 rule 7 of the Federal Court Rules, but to date it has not occurred.
In the absence of any substantive material supporting the application for extension of time, I have no choice but to refuse the application. No other matter has been raised in opposition to the making of a sequestration order. The applicant creditor having proved all requisite matters, I therefore make a sequestration order against the estate of the debtor.
The formal orders are as follows:
In the matter of N 7602 of 1999:
1. A sequestration order be made against the estate of Shireen Joy Chloris Stuart-Jones.
2. The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
In the matter of N 170 of 2000:
1. The application for an extension of time to file and serve a notice of appeal is dismissed.
2. The applicant is to pay the respondent’s costs.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mathews .
Associate:
Dated: 4 August 2000
Counsel for the Applicant:
Solicitor for the Applicant:
R Quinn of Australian Government Solicitor
Counsel for the Respondent:
M Aldridge SC
Solicitor for the Respondent:
Whitfields Solicitors
Date of Hearing:
6 March 2000
Date of Judgment:
4 August 2000
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