Deane-Spread v DCOT
[2008] FMCA 8
•11 January 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DEANE-SPREAD v DCOT | [2008] FMCA 8 |
| BANKRUPTCY – Sequestration order – application for review of Registrar’s decision and annulment of bankruptcy – whether debt owing – whether debt settled. |
| Bankruptcy Act 1966 (Cth) ss.43, 44, 47(1), 52(1), 153B Federal Magistrates Act 1999 (Cth) s.104(2) & (3) |
| Harris v Deputy Commissioner of Taxation [2001] NSWSC 550 O’Meara v Hitwise Pty Ltd & Another (2007) 160 FCR 518 J.D. Heydon, Cross on Evidence. Seventh Australian Edition (Sydney: LexisNexis Butterworths, 2004) |
| Applicant: | DAVID KEVIN DEANE-SPREAD |
| Respondent: | DEPUTY COMMISSIONER OF TAXATION |
| File Number: | PEG 194 of 2007 |
| Judgment of: | Lucev FM |
| Hearing date: | 19 December 2007 |
| Date of Last Submission: | 19 December 2007 |
| Delivered at: | Perth |
| Delivered on: | 11 JANUARY 2008 |
REPRESENTATION
| Applicant: | Mr D K Deane-Spread on his own behalf |
| Counsel for the Respondent: | Mr J C Vaughan |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
That the Application be dismissed.
That the Applicant’s pay the Respondent’s costs which, if not agreed, be taxed under 0.62 of the Federal Court Rules by a Registrar of this Court.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 194 of 2007
| DAVID KEVIN DEANE-SPREAD |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Respondent
REASONS FOR JUDGMENT
Application
On 3 October 2007 David Kevin Deane-Spread made application[1] for review of a sequestration order[2] made on 13 September 2007 by Registrar Jan.
[1] “Application”.
[2] “Sequestration Order”.
The Application seeks annulment of the Sequestration Order, and annulment of the Applicant’s bankruptcy. The Application asserts that “Annulments arise due to debt being settled out of court”.[3]
[3] Application, part D, point 8.
The Applicant’s bankruptcy arises from a judgment against the Applicant in the Magistrates Court of Western Australia on 6 January 2006[4] which, less credits, but inclusive of costs and interest, gives rise to a debt of $49,763,59[5] allegedly owing by the Applicant to the Deputy Commissioner of Taxation.[6]
[4] Affidavit of Jayaratne, sworn 10 May 2007, para. 4, verifying para. 1 of the Creditor’s Petition.
[5] “Debt”.
[6] “Respondent”.
Issues
The issues which arise on the Application are:
a)whether the Sequestration Order ought to have been made;
b)whether the Applicant’s bankruptcy ought be annulled; and
c)whether the Debt allegedly owing has been settled.
Law
Under s.104(2) of the Federal Magistrates Act, 1999 (Cth)[7] the Registrar’s exercise of power to issue the Sequestration Order may be the subject of an application for review. Under s.104(3) of the FM Act, this Court “may make any order or orders it thinks fit in relation to” the Registrar’s exercise of power in issuing the Sequestration Order.
[7] “FM Act”.
The review proceeds by way of a hearing de novo,[8] and the Court may receive as evidence any affidavit or exhibit tendered before a Registrar, and may, with leave, receive further evidence.[9] It is open to the Court to make an order for annulment of bankruptcy[10] when reviewing a sequestration order.[11]
[8] Pattison v Hadjimouratis (2006) 155 FCR 226 at 230-231 per Nicholson J and 237 per Jacobson J; [2006] FCAFC 153 at paras. 10-11 per Nicholson J and para. 59 per Jacobson J (“Hadjimouratis”); Travaglini v Raccuia (2007) 211 FLR 127 at 133 per Lucev FM; [2007] FMCA 777 at para. 21 per Lucev FM.
[9] Federal Magistrates Court Rules 2001 (Cth), r.20.03(a)-(c) (“FMC Rules”).
[10] Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”), s.153B.
[11] Hadjimouratis, FCR at 230-231 per Nicholson J and 237 per Jacobson J; FCAFC at paras. 10-11 per Nicholson J and para. 63 per Jacobson J.
Because the Application is a fresh proceeding, albeit by way of review, the Respondent (as petitioning creditor) must prove all matters necessary for the making of a sequestration order.[12] The Court may make a sequestration order upon proof of the matters set out in s.52(1) of the Bankruptcy Act, and subject to the jurisdiction to make sequestration orders under s.43 of the Bankruptcy Act and the conditions on which a creditor may petition under s.44 of the Bankruptcy Act being met.
[12] Hadjimouratis, FCR at 235 per Jacobson J and 252 per Lander J; FCAFC at para. 43 per Jacobson J and para. 156 per Lander J; O’Meara v Hitwise Pty Ltd & Another (2007) 160 FCR 518 at 521 per Kiefel, Sundberg and Gyles JJ; [2007] FCAFC 114 at para. 9 per Kiefel, Sundberg and Gyles JJ.
The Respondent as petitioning creditor is also obliged to put before the Court affidavits:
a)verifying the petition;[13]
b)as to search of the records of the Court and the Federal Court as to any application in relation to the bankruptcy notice;[14]
c)of service of the bankruptcy notice;[15]
d)of service of documents required to be served under FMC (Bankruptcy) Rules, r.4.05; [16]
e)of search of the National Personal Insolvency Index no earlier than the day before the hearing date for the petition;[17] and
f)of debt on which the creditor still relies as owing.[18]
[13] Bankruptcy Act, s.47(1); Federal Magistrate’s Court (Bankruptcy) Rules 2006 (Cth), r.4.02 (“FMC (Bankruptcy) Rules”).
[14] FMC (Bankruptcy) Rules, r.4.04(1)(a) and (2).
[15] FMC (Bankruptcy) Rules, r.4.04(1)(b).
[16] FMC (Bankruptcy) Rules, r.4.06(2).
[17] FMC (Bankruptcy) Rules, r.4.06(3).
[18] FMC (Bankruptcy) Rules, r.4.06(4).
Fresh affidavits of search and debt must, unless an order waiving compliance has issued, be filed on an application for review.[19]
[19] Martin v Commonwealth Bank of Australia (2005) 217 ALR 634.
The Court has jurisdiction to go behind the judgment giving rise to the Debt to determine if the Debt really is owed by the Applicant to the Respondent, with the onus being on the Applicant, as debtor, to demonstrate that there exists a reason for questioning the Debt.[20]
[20] Wolff v Donovan (1991) 29 FCR 480 at 481 per Davies J and 485-487 per Lee and Hill JJ.
Evidence
The Court is satisfied as to the matters required to be proved for the making of a sequestration order, save as to whether the Debt is still owed, which is dealt with further below. Specifically, the Court accepts that there is:
a)an affidavit verifying the petition;[21]
b)an affidavit of search of court records;[22]
c)an affidavit of service of the bankruptcy notice;[23]
d)an affidavit of service of relevant documents;[24]
e)an affidavit of search of the National Personal Insolvency Index;[25] and
f)an affidavit of debt still owed, subject to the discussion which follows concerning whether the Debt is still owed.[26]
[21] Affidavit of Jayaratne, sworn 10 May 2007.
[22] Affidavit of Bolt, sworn 14 May 2007.
[23] Affidavit of Kerr, sworn 27 March 2007.
[24] Affidavit of Kerr, sworn 28 May 2007.
[25] Affidavit of Iffler, sworn 12 September 2007; Affidavit of Iffler, sworn 19 December 2007.
[26] Affidavit of Iffler, sworn 12 September 2007; Affidavit of Iffler, sworn 19 December 2007.
The Respondent did not cross-examine any of the Applicant’s witnesses. Save for where the Applicant is on notice that the Respondent challenges that evidence, the Court is obliged to accept the Applicant’s evidence, nothing having been put to the contrary.[27]
[27] See generally J.D. Heydon, Cross on Evidence. Seventh Australian Edition (Sydney: LexisNexis Butterworths, 2004) at pp.537-541, paras [17435] – [17445].
The Applicant was arguably on notice that the Respondent asserted that his debt to the Respondent had been settled. The matter was:
a)the subject of correspondence between the Applicant and Respondent between 2005 and 2007;[28]
b)expressly adverted to, albeit briefly, in the Application;[29] and
c)alluded to, albeit barely and without particularisation, in an affidavit filed on behalf of the Respondent.[30]
[28] See, for example, the matters and correspondence referred to in paras. 18-19 and 26-28 below.
[29] See para. 2 above.
[30] Affidavit of Murie, sworn 28 September 2007, para. 3.
In order to understand whether or not the Debt has been settled it is necessary to set out some further relevant facts.
On 6 January 2006 the Applicant obtained judgment against the Respondent for $49,285.09 and costs and interest of $436.85, a total of $49,721.94, plus interest at 6% per annum on the judgment debt (including costs) if the judgment debt, or part thereof, remained unpaid.[31] The Bankruptcy Notice claimed that the Applicant owed the Respondent a debt of $49,763.59, having given certain credit since the date of judgment and adding interest accrued since the date of judgment.[32] Following service of the Bankruptcy Notice on the Applicant on 25 March 2007[33] and the Applicant’s failure to comply with the Bankruptcy Notice[34] the Respondent issued a creditors’ petition on 17 May 2007. Ultimately, the Sequestration Order was made by Registrar Jan on 13 September 2007. The Applicant led no evidence in the hearing before the Registrar.
[31] Affidavit of Kerr, sworn 27 March 2007, Annexure A (Certificate of Judgment dated 19 January 2006 from the Magistrates Court of Western Australia).
[32] Affidavit of Kerr, sworn 27 March 2007, Annexure A (Bankruptcy Notice dated 14 March 2007).
[33] Affidavit of Jayaratne, sworn 10 May 2007; Affidavit of Kerr, sworn 27 March 2007.
[34] Affidavit of Jayaratne, sworn 10 May 2007.
The Applicant filed one affidavit in support of the Application. That was an affidavit of Ian Barrie Murie, a Notary Public. Murie’s affidavit evidence, on which he was not cross-examined, was that:
a)he maintained a public record in the form of a Register of Notary Acts in which he recorded all notary acts conducted in the course of his duties;[35]
b)in the Register he had recorded notary acts performed by him in relation to the Applicant and Respondent between April and May 2006 and March and April 2007;[36] and
c)that he was “an independent third party witness to the stipulations granted to” the Applicant by the Respondent “relating to the settlement of debt owed to” the Respondent by the Applicant, and that he could testify to the same if called upon to do so.[37]
[35] Affidavit of Murie, sworn 28 September 2007, para. 1.
[36] Affidavit of Murie, sworn 28 September 2007, para. 2.
[37] Affidavit of Murie, sworn 28 September 2007, para. 3.
Murie was subpoenaed by the Applicant to give evidence at the hearing. Murie was called, and over objection from the Respondent, further evidence was adduced from him. Through Murie the Applicant put into evidence:
a)a Notice of Protest and Opportunity to Cure dated 2 May 2006 sent from Murie to the Respondent;[38] and
b)a Certificate of Protest dated 20 April 2007 signed by Murie.[39]
[38] Exhibit A1 (“Notice of Protest”).
[39] Exhibit A2 (“Certificate of Protest”).
The Notice of Protest is, relevantly, in the following terms:
“Dear AUSTRALIAN TAXATION OFFICE
On the April 21st, 2006, I sent you a Notice of Dishonour, Ref: DKDS-ND&OC-21042006, as the designated receiver, regarding the presentments of April 5th, 2006 ref: DDS_LR_ATO_050406 and DDS_LR_Afidavit_ATO_050406, copies of which were attached, via Registered Mail RD50937298.
You failed to perform, after receiving these presentments from David-Kevin: Deane-Spread although you have sent me notification that you have received David-Kevin: Deane-Spread’s correspondence of 21st April 2006 referred to above.
For your information a copy of the Registered Mail receipt notification is enclosed.
You are now in default to the stipulated terms of David-Kevin: Deane-Spread’s presentments of April 5th, 2006 through your dishonour.
You have the right to cure this default and perform according to the said terms within seventy-two hours of the receipt of this Notice. Should you elect to remain silent and/or fail to cure the dishonour, I will issue a CERTIFICATE OF PROTEST as a Public Record of your failure to rebut and/or perform in accordance with the terms of the draft and have thereby stipulated to the draft made in the presentments of David-Kevin: Deane-Spread of April 5th, 2006.”
The Certificate of Protest dated 20 April 2007 is in the following terms:
“On March 14th 2007 and on March 29th 2007 and on April 12th 2007, maritime drafts bearing a duty to respond were delivered for David-Kevin: Deane-Spread to the following, and/or their agents, notwithstanding numerous other drafts, all of which sought a stipulation that there were no outstanding unsettled and/or unresolved claims, charges/terms and/or conditions between DAVID K DEANE-SPREAD and payee/beneficiary/ies, agent/s named below.
AUSTRALIAN TAXATION OFFICE
The records show that the agents acting for the principals, all of whom received copies of the above-referenced drafts, elected to so stipulate, as to the fact that no unresolved claims remain outstanding, which would prevent an order from issuing to permanently close and settle the cases cited on the drafts. The stipulation is sustained on the grounds that the agents had a duty to provide notice to the principal, and the principal had a duty to notice their agents, as to the lack of response and the resultant agreement.
This Certificate of Protest reflects this Notary’s personal knowledge that said agents failed to respond, certifying the stipulation sought was granted. This Notary now has personal knowledge that all parties named above, as recipients, elected to not respond to the draft a second time, when sent by this Notary, and neglected to cure, via response to the Notice of Protest, what could have been construed as a dishonour, had the terms and conditions failed to clearly designate the terms and conditions the silence would manifest, particularly:
(A) that the exemption discharged all ‘debts’ in relation to this matter;
(B) that the ‘debt’ was forgiven as the second option available under Public Policy;
(C) the exemption and/or instrument was converted; or,
(D) one of the previous three, but the option was not disclosed to the preferred stockholder discharging the debt of the ‘debtor’;
(E) that all of (A) (B) and (C) above were earlier established by virtue of the Certificate of Protest dated May 15th 2006 ref: DKDS-COP150506;
(F) that the Australian Taxation Office as of this date has failed to take action to correct a public record despite being given all opportunity to do so;
(G) that the Australian Taxation Office accepts that the aforementioned earlier established point (E) above is correct and that public record they refer to is incorrect.
Therefore, the undersigned declares, by tending this Certificate to the drawer of the draft(s), that this Notary has title to the stipulation, and is prepared to testify to same, as third-party witness, should any question arise as to the validity of the stipulation.”
The Notice of Protest does not prove that the Debt has been settled. The Notice of Protest does no more than:
a)refer to a Notice of Dishonour sent to the Respondent;
b)say that the Notice of Dishonour referred to certain presentments;
c)allege that the Respondent failed to perform after receipt of the presentments;
d)assert that the Respondent is in default of stipulated terms in the presentments through the alleged dishonour; and
e)says that the Respondent has the right to cure the default and perform, failing which a Certificate of Protest concerning the Respondent’s failure to rebut or perform, and to have thereby stipulated to the draft made in the presentments, would be issued by Murie.
There is no evidence before the Court of the Notice of Dishonour or the presentments referred to in the Notice of Protest. There is no evidence that they referred, in any way, to the Debt, or settlement of the Debt. There is therefore no basis on which this Court can conclude, on the basis of the Notice of Protest, that the Debt has been settled, as alleged by the Applicant.
In relation to the Certificate of Protest the gist of the document appears to be that certain “maritime drafts” and “numerous other drafts” sought stipulations that there were “no outstanding unsettled … unresolved claims” between the Applicant and Respondent, and that the failure of the Respondent to so stipulate in response to the drafts has the effect that any outstanding claims (seemingly including the Debt) are thereby discharged.
It is not clear what the precise terms of the various drafts referred to in the Certificate of Protest were, or what the relevant stipulations were. They are simply not in evidence. Thus, as a matter of fact, it is impossible for this Court to draw the conclusion that the effect of the various drafts and stipulations was as it is asserted to be in the Certificate of Protest. Murie’s statements and conclusions in the Certificate of Protest about the effect of the drafts and stipulations are not evidence but conclusions about matters of law, which are matters for the Court to reach a conclusion on, but which it cannot do because the drafts and stipulations are not in evidence before the Court.
It is significant that the Applicant himself gave no evidence in these proceedings concerning the alleged settlement of the Debt. The Applicant did not expose himself to cross-examination by the Respondent in relation to the alleged settlement of the Debt, even when it must have been evident to him that the Respondent was asserting that the alleged Debt had not been settled and was still owed by him. The Court is entitled to infer that the Applicant’s failure to give evidence concerning the settlement of the alleged Debt is because that evidence would not have assisted the Applicant in his case,[40] and the Court draws that inference in the circumstances of this case.
[40] Jones v Dunkel (1959) 101 CLR 298.
The Respondent led evidence that there has been no settlement of the Debt and that the Debt is still owed by the Applicant to the Respondent.
On 14 November 2005 the Respondent sent a letter to the Applicant referring to an offer by the Applicant to pay his tax related liabilities[41] by methods including:
a)quoting a purported exemption number;
b)providing a promissory note post dated 23 October 2010; and
c)offering the Applicant services in the form of workshops.
The Respondent made it clear that there was no acceptance of the Applicant’s offer to pay outstanding tax liabilities by any of the methods proposed.[42]
[41] Together with those of a company associated with the Applicant.
[42] Affidavit of Bolt, sworn 16 November 2007, Annexure TB1 (being a letter from the Respondent to the Applicant dated 14 November 2005).
On 3 January 2006 the Respondent wrote to the applicant in response to correspondence from the Applicant purporting to appoint an officer of the Respondent as a fiduciary for the Applicant. The Respondent expressly refused the purported appointment as a fiduciary, and referred to a judgment of the New South Wales Supreme Court in support of the proposition that the Respondent owed no fiduciary duty to the Applicant.[43] The 3 January 2006 letter made it clear that the Respondent intended to proceed with legal action to recover the Debt.[44]
[43] Harris v Deputy Commissioner of Taxation [2001] NSWSC 550 at para. 12 per Grove J. The Court notes that the passage referred to in the judgment in question did not refer to fiduciary liability but tort liability, specifically in negligence. Nevertheless, the Respondent expressly refused the purported appointment as a fiduciary.
[44] Affidavit of Bolt, sworn 16 November 2007, Annexure TB3 (being a letter dated 3 January 2006 from the Respondent to the Applicant).
In further correspondence dated 2 August 2006, 27 April 2007 and 5 March 2007 the Respondent continued to assert that the Debt remained owing.[45]
[45] Affidavit of Bolt, sworn 16 November 2007, Annexures TB4, TB5 and TB6 (being letters dated 2 August 2006, 5 March 2007 and 7 April 2007 from the Respondent to the Applicant).
Having considered:
a)the evidence led by the Applicant, and the nature of that evidence;
b)inferred that the Applicant’s failure to himself give evidence was because his evidence would not have assisted his case; and
c)the unchallenged evidence of fact led by the Respondent,
the Court accepts the evidence of the Respondent that there has been no settlement of the Debt, and that the Debt is still owed.
Conclusions
The Court therefore concludes that:
a)there has been no settlement of the Debt, and the Debt is still owing;
b)given the conclusion in paragraph (a), and the fact that all the other requirements for the making of a Sequestration Order have been met, and were met in the hearing before the Registrar, there is no basis for concluding that the Sequestration Order ought not to have been made; and
c)no other basis on which the Applicant’s bankruptcy ought be annulled has been established.
It follows from the conclusions expressed that the Application must be dismissed. The costs of the Respondent should be paid from the Applicant’s estate.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 11 January 2008
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