D.C.T. v Khor - [2005] FMCA 1741

FEDERAL MAGISTRATES COURT OF AUSTRALIA

D.C.T. v KHOR

[2005] FMCA 1741

BANKRUPTCY – Review of Registrar’s Sequestration Order – whether Court can go behind taxation assessment – whether any basis to set aside sequestration – whether Court should go behind judgment – solvency – other debts.

Deputy Commissioner of Taxation v Van Thong Chiem [1999] VSC 537
(9 December 1999)
F.J. Bloeman Pty Ld v Federal Commissioner of Taxation (1991) CLR 360

Applicant:

DEPUTY COMMISSIONER OF TAXATION

Respondent:

TIM H. KHOR

File Number:

MLG1657 of 2004

Judgment of:

McInnis FM

Hearing date:

21 November 2005

Delivered at:

Melbourne

Delivered on:

21 November 2005

REPRESENTATION

Counsel for the Applicant Creditor:

Mr S. Gardiner

Solicitors for the Applicant Creditor:

Australian Taxation Officer – Legal Services Branch

Respondent Debtor:

In person

Solicitor for the Trustee:

Ms C Dwyer

Solicitors for the Trustee:

Wisewoulds

ORDERS

The application for review filed 4 November 2005 be dismissed.
The costs of the Deputy Commissioner of Taxation of and incidental to the application for review, be taxed pursuant to order 62 of the Federal Court rules, and be included as part of the costs as petitioning creditor, and be given such priority as required by law pursuant to s.109(1)(a) of the Bankruptcy Act 1966.
The trustee's costs of and incidental to the application for review be taxed and paid out of the estate of the debtor.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG1657 of 2004

DEPUTY COMMISSIONER OF TAXATION

Applicant

And

TIM H. KHOR

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

This is an application for review of a sequestration order made by a registrar on 17 October 2005. The sequestration order was made upon the filing of a creditor's petition via the Deputy Commissioner of Taxation of the Commonwealth of Australia. That petition relied upon a bankruptcy notice, which in turn relied upon a default judgment which had been obtained by the Deputy Commissioner against Tim Huat Khor (the Debtor) on 9 October 2003 in the Supreme Court of Victoria.
The total amount of the judgment and orders obtained was $1,127,808.26. It is clear from the material that there was an additional amount of interest leading to a total debt owing of $1,247,485.59. No application has been made by the debtor to set aside the default judgment. There has been no further material provided by the applicant until recently in these proceedings.
I note that on a number of occasions the petition has been adjourned. Orders were made on 10 March 2005 adjourning the petition to

24 March 2005. On 24 March 2005 the application was further adjourned to 2 May 2005. On that occasion, the Registrar also ordered the debtor to file and serve a notice of opposition and any affidavits in support by 14 April 2005. No further material was filed or served by that due date.
When the matter came before a registrar on 2 May 2005, the application was further adjourned to 20 June 2005. On 20 June 2005, the petition was again adjourned to 15 August 2005, and on that occasion it is noted that a registrar made a further order that the debtor file and serve a notice of opposition and any affidavits in support, by

5 August 2005. That order was not complied with by the Debtor.
The matter having been adjourned to 15 August 2005, once again on that date, it was adjourned to 5 September 2005. A further hearing before a registrar occurred on 5 September 2005, again resulted in the adjournment of the petition, this time to 17 October 2005. On

17 October 2005, a sequestration order was made against the estate of the debtor.
It is clear from the chronology that up to and including the date the sequestration order was made, no notice of opposition nor affidavit material was filed for and on behalf of the applicant for review, that is the debtor. I do notice from the file that a notice of withdrawal of practitioner was filed by the solicitors formerly acting for the Debtor and it would appear that the notice of intention to withdraw was provided to the debtor.
In any event the debtor claims, notwithstanding that notice of withdrawal of practitioner, and perhaps somewhat significantly, notwithstanding that he has received significant accounts from the solicitors, he was not aware that the matter was to be heard on

17 October 2005. On that date he did not appear, and was not represented.
Upon discovering that a sequestration order had been made, it would appear that the debtor then filed the application for review on

4 November 2005. I have made due allowance for the fact that the debtor is unrepresented, and indeed, despite his non-appearance before the learned Registrar on 17 October, 2005, I have permitted him to rely upon a photocopy of an affidavit sworn by him 18 November, 2005.
There are other affidavits before the court which relevantly set out the history of this matter, and in particular I note that two affidavits have been recently filed by the trustees, one from Stephen Michell sworn 18 November 2005, and a second affidavit by Philip Newman affirmed on 18 November 2005. It has been submitted by Mr Gardiner for the petitioning creditor that the material currently before the court does not address the relevant issue of solvency. In any event, in this case, essentially the debtor appears to be challenging the taxation assessment, which forms the foundation stone for the default judgment to which I have just referred.
It is submitted, and I accept, as a matter of law, that this court does not have a right to go behind that assessment. And I note and apply the decision of Deputy Commissioner of Taxation v Van Thong Chiem [1999] VSC 537 (9 December 1999) a decision of Beach J, where His Honour applies and follows the decision of F.J. Bloeman Pty Ld v Federal Commissioner of Taxation (1991) CLR 360. I accept that in the present circumstances, this court cannot go behind the assessment which is sought to be challenged by the Debtor.
Further, in any event, I am satisfied that on the material before me, that this court would not in normal circumstances go behind the default judgment obtained in this matter in October 2003 in the Supreme Court of Victoria. During the course of his submissions to the court, the Debtor sought to argue that he was able to prove solvency, and further sought to claim that he had in his possession other documents and material which would provide support for the matters set out in annexure A to his affidavit sworn 18 November 2005.
Putting it at its highest, however, and even if one were to accept as stated by the Debtor that he has documentary material which would support the assertions in annexure A, it is clear to me that that annexure seeks to challenge the assessment. In his own affidavit in paragraph 16, where reference is made to the annexure, the debtor states the following:
“16.On the SUMMARY OF TAX LIABILITIES as Marked A that I have prepared, it shows that I only have a liabilities to the Commissioner of $230,500 plus future penalties and interests to be determined.”
Leaving aside for the moment assertions from the bar table by the debtor as to his asset position, which apparently is, to some extent, related to family trusts, it is noteworthy from the affidavit of Steven Mitchell, to which I referred earlier, that at a meeting with the debtor which occurred on 17 November 2005, reference was made to other information which included other debts. Those other debts include amongst a number, a debt to Yarra Bank Developments, where a judgment debt, I am told, was obtained last year, for $500,000.
There are other smaller debts which I do not need to mention at this stage. It is noteworthy that at the very least, even in that meeting on

17 November 2005 the Debtor conceded an amount owing to the Australian Taxation Office of $200,000. In his recent affidavit, as indicated, he refers to the amount of $230,000. In my view, there is simply no evidence before this court, which would provide any appropriate basis upon which a sequestration order could be resisted.
It seems clear to me that the court does not have power to go behind the tax assessment, and nor in the circumstances, would it in any event, go behind the default judgment. Nor is there any material before this court which would establish solvency. The only issue which seems to me to be agitated by the debtor is an attack to be made by him on the assessment and the grievance expressed clearly by him that he has not received adequate information which might assist him to prepare further materials which would provide the basis of his attack on the assessment.
Noting, however, the judgment that was entered in October 2003 has not been the subject of any application to set it aside and having regard to the authorities to which I have referred in relation to this court's power to behind the assessment, and further having regard to the lack of any other evidence which would persuade the court that there is any material upon which this court could act to avoid a sequestration order, it is my view that in this matter the appropriate order is the application for review should be dismissed.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 21 November 2005