DCOT v Vats
[2014] FCCA 1744
•13 August 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DCOT v VATS | [2014] FCCA 1744 |
| Catchwords: BANKRUPTCY – Application for review of a decision of a Registrar to make a Sequestration Order – matters in s.52(1) of the Bankruptcy Act not in issue – no attempt by applicant to prove solvency – application raising alleged deficiency in County Court order on which Bankruptcy Notice based – County Court order clearly valid – various misconceived submissions made by applicant – application for review dismissed. |
| Legislation: Bankruptcy Act 1966, ss.52(1), 52(2) Federal Circuit Court (Bankruptcy) Rules 2006, r.4.06 |
| Harris v Caladine (1991) 172 CLR 84 Dooney v Henry [2000] HCA 44 Cain v Whyte (1933) 48 CLR 639 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 Re; Finlayson; Ex parte Finlayson (1997) 72 ALJR 73 |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | PRAVEEN VATS |
| File Number: | MLG 480 of 2014 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 16 June 2014 |
| Date of Last Submission: | 16 June 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 13 August 2014 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Mr Rosewarne |
| Solicitors for the Respondent: | Australian Taxation Office |
ORDERS
The Application for Review filed on 24 April 2014 be dismissed.
The respondent’s costs of the Application for Review, including any reserved costs, be paid from the estate of the bankrupt with the same priority as if they were costs of the Creditor’s Petition.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 480 of 2014
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| PRAVEEN VATS |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an Application for Review of a decision of a Registrar. On
24 April 2014, Registrar Caporale made a Sequestration Order against the estate of Mr Vats, and a consequential costs order. It is the exercise of that power that the applicant seeks to review.
There is no dispute about the matters required to be proved pursuant to s.52(1) of the Bankruptcy Act 1966 (“the Act”), nor does the applicant seek to establish that he is able to pay his debts within the meaning of s.52(2). The only issue is whether there is other sufficient cause why a Sequestration Order ought not be made.
Although Mr Vats advanced a number of reasons why it is inappropriate to make a Sequestration Order, I am not persuaded that any of his propositions have any force whatever, and it is clearly appropriate that the Court exercise its discretion to make a Sequestration Order.
The Course of the Proceeding
The Creditor’s Petition was filed on 19 March 2014. It asserted a debt of over $401,000, consisting of a judgment debt, interest, and costs arising from a final judgment obtained in the County Court of Victoria, Melbourne, on 22 April 2013. An Affidavit of Search and an Affidavit of Service of the Bankruptcy Notice were filed contemporaneously with the Petition.
On 7 April 2014, an Affidavit of Service of the Creditor’s Petition was filed. In fact, the copy on the Court’s file is incomplete and does not, it seems to me, contain either the full text or the jurat details. Nonetheless, the copy on the Court’s file shows copies of the Petition, the Affidavit verifying the Petition, the Affidavit of Search, the Affidavit of Service of the Bankruptcy Notice, and the Bankruptcy Notice itself. The last page of the annexure to the Affidavit of Service of the Petition is a copy of a Certificate of Judgment, dated and sealed by the County Court of Victoria, 8 August 2013. It is signed by a Registrar of the court. Much of Mr Vats’ criticisms relate to that document.
On 15 April 2014, Mr Vats filed a Notice of Appearance, which was described as prepared by:
“Person’s Personal Representative of Person PRAVEEN VATS, in being.”
On 16 April 2014, Mr Vats filed a Notice stating grounds of opposition to Creditor’s Petition. The grounds asserted that he had not been provided with a valid court order which complies with the Australian Constitution and the Victorian Constitution Act s.76. He further asserted that by relying on a Certificate of Judgment and not a valid court order, the applicant creditor was attempting to pervert the course of justice and gain financial advantage by deception. The third matter asserted was that Mr Vats had the financial capacity to settle the alleged debt in full, and agreed to do so on the proviso that a court order which complied with the Australian Constitution and s.76 of the Victorian Constitution Act was provided.
An Affidavit filed by Mr Vats on the same day largely takes the matter no further. The affidavit does raise, additionally to the matters already identified, the proposition that the Australian Taxation Office (“ATO”) is not a legal entity, a matter alleged to have been conceded in the proceedings before Judge Kennedy in the County Court which gave rise to the original debt.
The Affidavit asserted, at paragraph 6, that the plaintiff, being the Deputy Commissioner of Taxation, was not a human being, rather an artificial person, and was thus incapable of bringing any proceedings against a natural person. Reference was made to Blackstone’s Commentaries.
Affidavits of Debt and Final Search were filed on 24 April 2014, together with a Statement of Costs and Disbursements filed in court on that date, and of course, as earlier recited, Registrar Caporale made the order now the subject of review.
The Application for Review was filed the same day, and an Application for a Stay was filed on 30 April 2014. It is not necessary to deal with that Application and Affidavit further, because on 12 May 2014, I dismissed the Application for a Stay and made orders to have the matter heard for trial on 16 June 2014.
A Notice stating grounds of opposition filed by Mr Vats on 19 May 2014 asserted that Mr Vats had never received the original County Court order with instructions to make any form of payment to the plaintiff (this would appear to be an assertion he had not been served with the Bankruptcy Notice). That assertion sits rather oddly with paragraph 2 of the Affidavit filed on 16 April 2014, which reads:
“and that, in identifying myself as Person PRAVEEN Vats to Andrew Gellie, Process Server of 214 Balaclava Road, Caulfield North 3161 in the state of Victoria, a mistake has been made by me. I was acting to accommodate Mr Andrew Gillie and hence made that mistake unwittingly.”
The second ground raised by the Notice stating grounds of opposition to Creditor’s Petition was:
“Certificate of Judgment’ provided by the plaintiff is allegedly reliant upon a Court Order. Upon a thorough search of the County Court records, the Respondent was unable to find any such order.”
The third ground was that the debt would be paid by Mr Vats when he was provided with an order which complied with the Victorian and Australian Constitutions.
The applicant’s Affidavit filed contemporaneously with the Notice of grounds of opposition does not take the matter any further, although I note that it is expressly conceded that Mr Vats received the Bankruptcy Notice. The Affidavit does suggest that the creditor may have obtained the Certificate of Judgment fraudulently, and acted dishonourably by purporting the Certificate of Judgment to be a court order, and by bringing forward bankruptcy proceedings, had engaged in abuse of process.
At paragraph 6, the applicant deposed:
“and that, I have the financial capacity to settle the alleged debt and am financially solvent. Consolidated income statements for last and current financial year attached, marked as Exhibit 1.”
Exhibit 1 is a Payments Summary Report showing gross amounts allegedly received by Mr Vats, who I understand to be an anaesthetist, of well in excess of half a million dollars a year.
It should be noted that Mr Vats had handed to the Court on 12 May 2014, income receipts in his practice, showing figures of this order. I had pointed out that I accepted that Mr Vats had very significant earnings, but had not disclosed his practice costs, or any other aspects of his finances that might support the proposition that he was solvent within the meaning of the Act. I noted that this would be a matter that would likely to be revisited in greater detail at the trial.
Leaving aside the formal Affidavits filed to comply with r.4.06 of the Federal Circuit Court (Bankruptcy) Rules 2006 (“the Bankruptcy Rules”), no other materials were filed, save for the creditor’s Outline of Submissions.
During the currency of the hearing Mr Vats complained of the late service of that document on him, but as I pointed out at the time, the assertions made in those submissions were relatively uncontroversial and straightforward, and were not such as to unfairly prejudice Mr Vats at all.
Matters Advanced During the Hearing
The proceeding began with an examination of the matters required to be addressed under s.52(1) of the Act. It should be noted that no issue was taken, nor could it be taken, as to the formal matters required to be established. Even if there was a technical deficiency in the Affidavit of Service of the Petition, the participation by Mr Vats at every stage of the Court’s proceedings shows that he clearly was served, and were it necessary to do so in any event, I note that pursuant to s.52(2) the Court may still make a Sequestration Order, even if not satisfied of proof of the matters contained in s.52(1) of the Act. In the circumstances of this case, this would be a case where those matters would not inhibit consideration of the Sequestration Order in any event.
Mr Vats complained of late service of some materials, but as the transcript would indicate, his concerns were either immaterial or misconceived. At P-8, Mr Vats confirmed that:
“… the whole issue is a creditor’s petition has been filed and the crux of the petition lies on the certificate of judgment. …”
At P-10, Mr Vats took the point referred to in Harris v Caladine ((1991) 172 CLR 84), and submitted that the judgment of the Registrar was meaningless and of no legal force.
The second issue also raised at P-10 was the force of s.76 of the Victorian Constitution Act that a court must be a court of record, and he complained that the “Royal Coat of Arms” was missing from the certified judgment annexed to the Bankruptcy Notice.
Mr Vats then took the Court to transcript (exhibit P1) in proceedings in the High Court heard before Callinan J involving, it would appear, quite a number of parties. During the course of the proceeding I indicated that I would endeavour to see if there was a version of the judgment possibly given by Callinan J available, and if so would forward it to the parties and invite written submissions.
At P-14 Mr Vats raised the prospect of notice given under the Judiciary Act 1903, s.78B. It should be noted that the s.78B point appears to have been the failure to comply with the Victorian Constitution Act 1975, s.76 (see P-14, line 10).
In submissions, counsel for the creditor referred, at P-19, to the way in which it comes to be that litigation is conducted on the part of the taxation authorities by deputy commissioners, and the delegation process that gives rise to that.
At P-21 the applicant confirmed, at line 43, that:
“what I’m seeking is not to prove my solvency today but the fact that the reliance of the respondent on evidence to prove its case is deficient. Firstly, sir, the taxation is a federal matter and for the respondent to proceed that matter in a County Court is – it’s – I’m not sure what the legal term for it is but it’s obviously incorrect for them to pursue a federal matter in a state court. Secondly, the non-legal status of the ATO is not in doubt. In fact, it was admitted by the presiding lawyer in the County Court. By their own admission, the ATO is not a legal entity and we don’t dispute that. …”
Mr Vats also took issue, at P-22, with the fact that the ATO is a department and not just an agency of the Federal Government. He further asserted that the Tax Administration Act 1953 had never received the royal assent, and its validity can be called in question. He also put in issue the delegation of power to the Deputy Commissioner who had instituted the proceedings.
He also raised, at P-23, the question of whether a corporation could pursue a case against an individual, a matter that I discussed with the applicant at P-23-P-24. At P-24, Mr Vats also said that a trial indictment of any offence must be by jury, and he requested that note be taken of that.
Consideration
It is clear that the matters required to be established pursuant to s.52(1) of the Act are established. Lest any overzealous purist seek to take the point about the deficiency of the Affidavit of Service of the Petition, I would indicate, as earlier stated, that there can be no doubt that Mr Vats was served, and even if he was not, the Court would forgive that omission, pursuant to s.52(2), because it is quite clear that Mr Vats has had proper notice of these proceedings, and indeed has participated in them at every occasion.
Likewise, notwithstanding the fact that I identified the difficulties in Mr Vats’ position as regards his solvency in the stay hearing, Mr Vats has expressly eschewed the opportunity to put on further material in any meaningful way, and it is quite clear that I cannot be satisfied that he has established that he is able to pay his debts as and when they fall due, within the meaning of the legislation.
The question therefore becomes, as I indicated at the outset, whether there is other sufficient cause why a Sequestration Order ought not be made.
The Point about the Certified Judgment
The certified copy of the judgment, which is the last page of the annexures to the Affidavit of Service (that of Mr Dunlop, sworn 3 April 2014), shows a certificate judgment in which the signature of the Registrar, the name of the Registrar and the seal of the Court are present. It is clearly wrong for the debtor, Mr Vats, to assert that it does not bear the royal coat of arms, because the royal coat of arms is clearly there on the seal. Nothing would turn on this matter in any event.
As the creditor’s written submissions correctly say, at paragraphs 17 and 18, the County Court of Victoria is established by s.4 of the County Court Act 1958 (“the County Court Act”), and consists of Judges, Associate Judges and Registrars, pursuant to s.4(1A) of the Act.
Section 78 of the County Court Act provides an express power for the Judges of the County Court to make rules in relation to the conduct of civil proceedings, and the County Court Civil Procedure Rules 2008 (“the Civil Procedures Rules”) have clearly been made pursuant to that power. Rule 60A of the Civil Procedure Rules deals with the authentication of judgments and orders of the court, and r.60A.02 provides that a judgment or order is authenticated when a form of the judgment or order is drawn up and lodged with the Registrar, and is then signed by a Judge or an Associate Judge, or sealed by the Registrar with the seal of the County Court and filed.
It is clear that the document about which Mr Vats complains so strongly complies with those rules, which are equally clearly validly made.
Pursuant to s.178 of the Evidence Act 1995 (“the Evidence Act”), and s.150 of the Evidence Act, it is quite clear that this Court may accept and rely upon such a certificate.
The Constitutional Point
As indicated earlier, I caused a copy of the decision of Callinan J in the matter to which the applicant had referred (Dooney v Henry [2000] HCA 44) (“Dooney v Henry”) to be forwarded to the parties, and sought written submissions from them about it. The creditor put forward written submissions which essentially submitted that neither the matters referred to in transcript, or the judgment of Callinan J were of the slightest assistance to the applicant.
In his Affidavit in response, filed 26 June 2014, at paragraph 3, Mr Vats appears to complain of my having made the judgment available, although I made it clear that I would do so, in circumstances where he himself relied upon the transcript in the proceeding. He repeated in his Affidavit his submission that the ATO is an illegal entity.
It would perhaps almost be sufficient to say that Mr Vats’ submissions are so obviously misconceived that it is not necessary to comment further. The fact is that I am not prepared to find that the relevant tax legislation has not received the royal assent. There is a common sense element of reality in that conclusion. It simply cannot be the case that all Australian citizens and corporations have paid tax pursuant to an instrument that has been invalid since its inception.
Insofar as the applicant sought to challenge the delegated power of the Deputy Commissioner to bring the original proceeding, I note that the same issue was considered in Dooney v Henry, and at [16]-[17] that:
“16. Whilst it is true that the administration of the Act is vested in the Commissioner and there is an express power of delegation with respect to some matters provided for in the Act, the nature of the Commissioner’s activities as discussed by Gibbs CJ and Wilson J in the passages set out above, and reg 170[24] of the Income Tax Regulations, made under the Act, make it clear that it would be impossible for the Commissioner, or indeed all of the Deputy Commissioners, to carry out personally the functions which have to be carried out in order to give the Act effective operation.
17. There is no reason to suppose, and indeed there is no allegation in the respondent’s pleadings that the officer who actually issued the Statutory Notice of Demand acted in any aberrant, unauthorised or otherwise unlawful manner. The respondent’s argument that there has been an unlawful delegation is therefore rejected.”
I note that Callinan J, in Dooney v Henry, at [19] disposed summarily, in any event, of the argument relating to the non-receipt of the royal assent of legislation.
Jury Trial
This is not a criminal proceeding, and there is therefore no substance in the point that Mr Vats seeks to make about the requirement for a jury trial.
An Action against an Individual
To the extent that the argument is pressed, it is immediately apparent that the Deputy Commissioner of Taxation is himself an individual, albeit suing on behalf of an organisation. Plainly, corporations can sue individuals, as can individuals. Mr Vats’ objections in this regard are hopelessly misconceived.
The Commonwealth Proceeding in a State Court
As I understood it, Mr Vats took complaint with the fact that the ATO was seeking remedies under federal legislation in a State court. It is immediately apparent that this point is totally misconceived.
Conclusion
The primary point stressed at all times by Mr Vats has been the alleged deficiency in the Certificate of Judgment accompanying the Bankruptcy Notice. It is, as I have indicated, a totally misconceived argument. All his other arguments are likewise totally misconceived. I regret to have to put the matter in such blunt terms, but the arguments are so devoid of legal force that there is really no escaping such a condign judgment.
The formalities have never been in issue, and the applicant has expressly not sought to show that he is able to pay his debts as and when they fall due, and such material as he has provided in this regard would certainly not satisfy the Court that he is indeed solvent.
In these circumstances, and given the total absence of force to the objections that Mr Vats has propounded, it is clear that I should exercise the Court’s discretion to make a Sequestration Order. The authorities (see Cain v Whyte (1933) 48 CLR 639 at [645]-[646], Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at [24]-[25]) show that a litigant who complies with s.52(1) is prima facie entitled to a Sequestration Order, and certainly in the circumstances of this case it is appropriate that the Registrar’s decision be affirmed. I will make orders accordingly, and costs orders as the respondent has sought.
The end of the hearing was not the end of Mr Vats’ correspondence to the Court. Significant tranches of material have been forwarded. They have included an Affidavit sworn on 26 June 2014, which in my view raises a series of considerations to which it is not necessary to reply. It included such assertions that the Court might be biased, because the Court, like the ATO, is paid by the State. Assertions of this sort, in my view, ought not be dignified with detailed response. Mr Vats also purported to file a s.78B Judiciary Act Notice. The nature of the constitutional matters asserted were, first, that the “County Court of Victoria Order … does not comply with Constitution of Victoria 1975, s.76”, a point I have already dealt with. The second makes reference to the decision of Callinan J in Dooney v Henry, which appears to repeat a point about Harris v Caladine earlier referred to. Mr Vats’ understanding of Harris v Caladine is misconceived. It is does not prohibit Registrars from hearing matters, as occurred in this case, but rather permits it.
Section 78B of the Judiciary Act provides relevantly that:
“(1) Where a cause pending in a federal court including the High Court or in a court of a State or Territory involves a matter arising under the Constitution or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys-General of the Commonwealth and of the States …”
As the submissions of the creditor rightly point out, the constitutional point alleged to arise is essentially under the Victorian Constitution Act, and that is not the legislation to which s.78B of the Judiciary Act refers.
It is immediately apparent that the constitutional point alleged is totally without validity. It is not a requirement of the Court to refer every matter asserted to be a s.78B point to the Attorneys-General. In Re; Finlayson; Ex parte Finlayson (1997) 72 ALJR 73, Toohey J said, at
P-74:
“In terms of s.78B, a cause does not “involve” a matter arising under the Constitution or involving its interpretation merely because someone asserts that it does. That is not to say that the strength or weakness of the proposition is critical. But it must be established that the challenge does involve a matter arising under the Constitution.”
It is a moot point whether, in particular circumstances in which Mr Vats has purported to issue his s.78B Notice, this case involves a “cause pending in a federal court”. Pending, as a matter of ordinary English, tends to imply some anticipatory quality. Here the case has been fully heard, and the only thing that remains is the judgment.
Assuming, in Mr Vats’ favour, that this is still a cause pending in this Court, I am nonetheless of the very clear view that Mr Vats’ s.78B purported Notice is so clearly not such as to raise a matter arising under the Constitution that I have declined to forward his Notice to the Attorneys-General and to further delay judgment.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 13 August 2014
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