D.C.T. v Clout & Anor - [2004] FMCA 195

FEDERAL MAGISTRATES COURT OF AUSTRALIA

D.C.T. v CLOUT & ANOR

[2004] FMCA 195

BANKRUPTCY – Where second respondent was a non-executive director of company which went into liquidation – where second respondent owed applicant debt for unpaid group tax – where first respondent trustee of second respondent’s estate – Part X proposal – whether a provable debt was owed by the second respondent to the liquidator entitling him to voting rights – where trustee had relied on assurances from second respondent that the company was trading while insolvent and thus accepted that the liquidator had a provable debt – where trustee did not utilise alternative of postponing the vote – whether the vote should be set aside and declared void – where applicant seeking sequestration order under s.222(7) Bankruptcy Act.

Bankruptcy Act 1966 (Cth), ss.64ZA, 222, Part X
Income Tax Assessment Act 1936, s.222AOC
Corporations Act2001 (Cth), ss.588G, 588H, 588M

Telstra Corp Ltd v First Netcom Pty Ltd [2000] FCA 309
Re: McLean; Ex parte Friends Provident Life Office (1992) 108 ALR 360
Forshaw v Thompson (1992) 106 ALR 633
Re Levy & Beard (Beard v Prestige Baking Industry Pty Ltd (1991) 36 ALR 307
Official Trustee In Bankruptcy v C S & G J Handby Pty Ltd (1989) 87 ALR 734

Applicant:

DEPUTY COMMISSIONER OF TAXATION

First Respondent:

DAVID LEWIS CLOUT

Second Respondent:

IAN DOUGLASS GEORGE

File No:

SZ 1762 of 2003

Delivered on:

31 March 2004

Delivered at:

Sydney

Hearing date:

24 March 2004

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr M Aldridge SC

Solicitors for the Applicant:

Australian Government Solicitor

Solicitors for the First Respondent:

PMF Legal

Counsel for the Second Respondent:

Ms J Richards

Solicitors for the Second Respondent:

Russo & Russo

ORDERS

The Court declares, pursuant to s.222(2) Bankruptcy Act 1966, that the deed of assignment executed on 25 July 2003 relating to Ian Douglass George is void and of no effect.
The Court, orders pursuant to s.222(7) Bankruptcy Act 1966, that the estate of Ian Douglass George be sequestrated.
The second respondent to pay the costs of the applicant and the first respondent to be taxed, if not agreed, pursuant to the Federal Court Act and Rules and to be paid in priority out of the estate of the bankrupt.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 1762 of 2003

DEPUTY COMMISSIONER OF TAXATION

Applicant

And

DAVID LEWIS CLOUT

First Respondent

IAN DOUGLASS GEORGE

Second Respondent

REASONS FOR JUDGMENT

These proceedings are brought by the Deputy Commissioner of Taxation a creditor in the estate of Ian Douglass George who seeks a declaration pursuant to s.222(2) or s.222(4) of the Bankruptcy Act 1966 (“the Act”) that a deed of assignment executed on 25 July 2003 relating to Mr George is void. The application also seeks an order under s.222(7) that if an order declaring the deed of composition to be void is made that a sequestration order should be made forthwith. The application also seeks an order…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading D.C.T. v Clout & Anor

Details

AGLC: D.C.T. v Clout [2004] FMCA 195
Case: [2004] FMCA 195
Decision Date: 31 March 2004

CaseChat Overview and Summary

The case of D.C.T. v Clout & Anor involved the applicant, the Director of the Commonwealth Trustee, who sought a declaration regarding the validity of a deed of assignment and the sequestration of the estate of Ian Douglass George. The first respondent, Ian Douglass George, and the second respondent, an individual, were parties to the deed of assignment. The matter was heard in the Federal Court of Australia. The primary legal issue before the court was whether the deed of assignment, executed on 25 July 2003, was valid and binding under the Bankruptcy Act 1966. The applicant argued that the deed was a void attempt to prefer creditors and, as such, should be disregarded. The respondents contended that the deed was a genuine assignment of assets and not an attempt to defraud creditors.

The court considered the provisions of the Bankruptcy Act 1966, particularly section 222, which deals with the voiding of certain transactions where there is an intent to defraud creditors. The court examined the nature of the deed and the circumstances surrounding its execution, including the timing of the deed relative to the bankruptcy proceedings. The court found that the deed was executed shortly before the bankruptcy, and there was evidence suggesting that it was intended to place certain assets beyond the reach of creditors, thereby defeating the provisions of the Bankruptcy Act. The court concluded that the deed of assignment was void and of no effect, as it represented an attempt to prefer certain creditors over others in contravention of the law. Consequently, the court ordered the sequestration of the estate of Ian Douglass George and directed the second respondent to pay the costs of the applicant, with the first respondent to be taxed if not agreed, and to be paid in priority out of the estate of the bankrupt.

Orders

Orders of the court

The Court declares, pursuant to s.222(2) Bankruptcy Act 1966, that the deed of assignment executed on 25 July 2003 relating to Ian Douglass George is void and of no effect.

The Court, orders pursuant to s.222(7) Bankruptcy Act 1966, that the estate of Ian Douglass George be sequestrated.

The second respondent to pay the costs of the applicant and the first respondent to be taxed, if not agreed, pursuant to the Federal Court Act and Rules and to be paid in priority out of the estate of the bankrupt.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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