DCT v Sandison
[2001] FMCA 26
•23 April 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
Deputy Commissioner of Taxation of the Commonwealth of Australia v Alexander G Sandison [2001] FMCA 26
BANKRUPTCY – Creditors Petition – Application for adjournment to allow payments to be made by Debtor in Application refused – other sufficient reason – Bankruptcy Act 1966 ss 40, 43 and 52
Radic v Bank of New Zealand (1993) 45 FCR 101, 112, 123.
Cain v Whyte (1933) 48 CLR 639
Ahern v DCT Queensland (1987) 76 ALR 137,
Applicant:Deputy Commissioner of Taxation of the Commonwealth of Australia
Respondent: Alexander G Sandison
File No:MZ327 of 2000
Delivered on: 23rd April 2001
Delivered at: Melbourne
Hearing Dates: 23rd April 2001
Judgment of: McInnis FM
REPRESENTATION
Applicant:Mr Nolan of Counsel instructed by Australian Government Solicitor
Respondent: Dr Sandison in person
ORDERS:
The estate of Alexander G. Sandison be sequestrated.
The petitioning Creditors costs including any reserve costs be taxed and paid in accordance with the Bankruptcy Act 1966 Commonwealth.
The court notes that the date of the act of bankruptcy was 26 June 2000.
IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
MELBOURNE REGISTRY
No MZ 327 of 2000
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Applicant
And
ALEXANDER G SANDISON Respondent
REASONS FOR JUDGMENT
The Deputy Commissioner of Taxation of the Commonwealth of Australia, (the Creditor), seeks a sequestration order pursuant to section 43 of the Bankruptcy Act 1966 (the Act) against the estate of Alexander G. Sandison, (the Debtor). The Debtor in person has sought an adjournment of the application for a period of six months in order to demonstrate that he can maintain an arrangement for the repayment of the debt to the Creditor. The date of the act of bankruptcy is 26 June 2000 and it's based upon noncompliance with a bankruptcy notice served upon the Debtor on 4 June 2000.
The bankruptcy notice was founded upon a final judgment obtained on 19 June 1998 in the County Court of Victoria in the sum of $74,024.48.
Leave was granted upon certain undertakings by Mr Nolan of counsel for the Creditor to file further affidavits in this matter, namely those relating to searches by Emma Clarris sworn 23 April 2001 and an affidavit of Corin Spizzo sworn 23 April 2001.
The current debt is said to be in the sum of $140,385.13 referred to in the Creditors petition and affidavit material. The Debtor does not challenge the amount of the debt or the fact that the debt is due.
The Creditor relies upon the following affidavits: the affidavit of Corine Spizzo sworn 18 December 2000; affidavit of Christopher W. Halliman sworn 21 December 2000; affidavit of Barry John Reaper sworn 29 January 2001; the affidavit of Anna Kisielewski, sworn 27 March 2001. As I have indicated the Creditor also relies upon the other affidavits where leave was granted upon the certain undertakings to file them today.
The Creditor does not rely upon an affidavit by Barbara Molloy filed and sworn 20 April 2001.
This application was first listed before a Registrar on 22 February 2001. It was adjourned to 22 March 2001 with a direction that the order be served on Mr Dennis Nelthorpe, a solicitor who had acted for the Debtor. The application was further adjourned on 22 March 2001 by the Registrar to 2 April 2001. An order was then made amongst others that the Debtor file and served a notice of opposition and affidavits in support by 4 pm, 28 March 2001. The Debtor appeared in person on that date and a direction was again given that a copy of the order be served by post upon Mr Nelthorpe.
On 2 April 2001 the hearing of the matter was further adjourned by the Registrar to 23 April 2001 when it was then referred to me. The Debtor relies upon an affidavit sworn by him on 28 March 2001. At the hearing before me the Debtor was assisted to a limited extent by Mr Nelthorpe who I permitted to address the court briefly on an issue of service of orders and otherwise I allowed the Debtor to consult during the course of submissions.
In his application for adjournment the Debtor essentially outlined his past financial history and sought to persuade the court that it should grant an adjournment of six months to show that he can maintain an arrangement to pay the Creditor $2500 per month, to pay current tax and interest on the current debt. He proposes at the end of 15 months to pay a minimum of $6500 each month.
The increase in payment after 15 months is said to be likely after the Debtor has increased mortgage payments to the Bank of Melbourne which holds a mortgage over the house of the Debtor at Mount Eliza. That house is held by the Debtor jointly with his wife. The Debtor intends to increase payments to the bank from $2000 to 3500 per month to reflect his greater income status.
The Debtor is a 71-year-old medical practitioner in general practice and earns an income which he describes as "recently approaching 8400 per month". I accept for the purpose of this application that the Debtor has at all times presented the material to this court in an honest and forthright manner. I accept that he has done his best as an unrepresented litigant to place before the court all relevant matters which he believes support the application for adjournment and which oppose the Creditors petition.
In particular, I have noted the extensive past history of the Debtor including his compliance with payments of taxation whilst paying tax on the PAYE system. I note in particular his general difficulty with debt seemed to have arisen after he commenced private practice. I note from the affidavit material and accept the significant difficulties occurred in relation to private practice at Hastings and further note that at present the Debtor appears to be successfully employed and engaged in private practice, and as I indicated has, by way of affidavit, advised the court that his income recently “approaches 8400 per month”.
I further accept that the Debtor at all times throughout this application has presented in a genuine manner in an endeavour to meet his commitments to the Taxation Office and I have no reason to doubt his sincerity in placing before this court material which he believes accurately reflects that endeavour. The Creditor and the Debtor agreed that in the absence of a notice of opposition I should take the Debtor's affidavit sworn 28 March 2001 as opposition to the application based upon showing other sufficient cause pursuant to section 52 of the Act. I should do this in the event that I decline to grant an adjournment and proceed to rely upon that affidavit on that basis. No other ground of opposition has been presented by the Debtor, and indeed, on the material before me it seems unlikely that any other ground of opposition could be raised.
The application for adjournment has been opposed by Mr Nolan for the Creditor who submits as follows. I mention these submissions briefly given this is an extempore judgment:
·It is not a matter for the court to look behind the commercial judgment of a Creditor who, when faced with an offer of periodic payments, pursues an order for sequestration. In any event the proposal is not going to have any or any significant impact upon the debt over the next six months save for reducing the interest component of that debt.
·There are significant deficiencies in the evidence concerning the value of the assets of the Debtor.
·The debt has accrued over several years and that much is conceded by both parties.
·The proposal by the Debtor would have the effect of increasing the Debtor's equity in the property at Mount Eliza and thereby increase the Debtor's wife's share in that property using funds which might otherwise be available to the Creditor.
·It is for the Debtor to establish that other sufficient cause exists, and once the formalities are established then the Creditor prima facie is entitled to pursue sequestration.
This is not a case where it is suggested there are no assets although even in situations where that has occurred the courts have been inclined to make orders for sequestration. In particular, I refer to a decision of Radic v Bank of New Zealand (1993) 45 FCR 101, 112, 123. That case authority of the proposition that it may only be after sequestration that a full examination by a trustee in bankruptcy including a possible public examination of the bankrupt and other persons that assets come to light.
I interpolate in the present case that it may only be after examination by a trustee of the assets that the full extent and nature of the assets may come to light given that I accept the criticism suggested by Mr Nolan that there is limited information concerning those assets.
During the course of submissions by Mr Nolan I was also referred to relevant law including a decision of the High Court of Australia in the case of Cain v Whyte (1933) 48 CLR 639, where the court said at page 646:
“It is for the Debtor to show some cause overriding the interest of the public and the stopping of an unremunerative trading and the rights of individual Creditors who are unable to get their debts paid to them as they become due. Something has to be put before the court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order”.
In relation to the adjournment application I accept in this matter the submissions made by Mr Nolan on behalf of the Creditor. I find that in the circumstances it would be inappropriate to adjourn this matter as proposed by the Debtor for the period of six months. I find that to do so would be simply to delay the inevitable; that in the circumstance of this case where the debts accrued over a significant period of time, where there is no real challenge to the debt or indeed, any other formalities in relation to the sequestration process, that is inappropriate to simply delay the matter further and to grant the adjournment.
Accepting the submissions made for and on behalf of the Creditor, and for the reasons I have just given, it is my view that this matter should not be adjourned. I therefore decline the Debtor's application for adjournment. That leaves the question of whether it is appropriate in the circumstances to proceed to make an order for sequestration. I am very conscious of the authorities that regard bankruptcy as a significant step. In particular, I refer to decisions that have been made by the courts in various cases, in particular, in the case of Ahern v DCT Queensland (1987) 76 ALR 137, where the court in that case at 149 said,
“….. before a person can be made a bankrupt the court must be satisfied that the debt on which the petitioning Creditor is due by the Debtor, and that if any genuine dispute exists as to the liability of the Debtor to the petitioning Creditor, it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi penal consequences”.
The court goes on to say:
“It will of course be observed that the principle is stated in terms which acknowledge the existence exceptions.”
I have already indicated that the ground in this case of opposition effectively is whether there is other sufficient cause. In the present case whilst I have accepted that the Debtor's affidavit material and the presentation of his submissions are genuine and I have no reason to doubt the honesty of the Debtor, it is my considered opinion that in this case there is no sufficient cause which would justify not making a sequestration order.
In this case it is clear that the debt is one that is genuinely owed. It is a case where the debt has been accrued over a number of years and it might easily be explained by the fact that the Debtor has encountered significant problems managing debt since he embarked upon private practice.
The court is not without considerable sympathy for the Debtor in this situation given his age and his present circumstances, and also given the fact that he has clearly made a genuine endeavour to meet this debt. However, applying the principles that I have previously enunciated and considering the issue of what might constitute other sufficient cause, it is my conclusion that in this case on the material before me there is not sufficient material to justify a finding that there is other sufficient cause. I find that the requirements of the act including section 52 have been otherwise satisfied.
Accordingly, the court orders:
1.The estate of Alexander G. Sandison be sequestrated.
2.The petitioning Creditors costs including any reserve costs be taxed and paid in accordance with the Bankruptcy Act 1966 Commonwealth.
The court notes that the date of the act of bankruptcy was 26 June 2000.
I certify that the preceding twenty three (23) paragraphs constitute a true copy of the Reasons for Judgment of McInnis FM
Associate:
Dated: 8th May 2001
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