Deputy Commissioner of Taxation v Appleby
[2006] FMCA 1898
•20 December 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v APPLEBY | [2006] FMCA 1898 |
| BANKRUPTCY – Sequestration order – complicated by the operation of s.120 and s.121A – conduct of the debtor constituted a conveyance – act of bankruptcy has been committed as alleged. |
| Bankruptcy Act1966, ss.40(1)(b)(i), 52, 121(1), 121A Tax Administration Act 1953, (TAA1953) |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | GRAEME PHILLIP APPLEBY |
| File number: | BRG909 of 2006 |
| Judgment of: | Burnett FM |
| Hearing date: | 15 December 2006 |
| Date of last submission: | 15 December 2006 |
| Delivered at: | Brisbane |
| Delivered on: | 20 December 2006 |
REPRESENTATION
| Solicitors for the Applicant: | Ms Penson |
| The Respondent appeared on his own behalf |
ORDERS
A sequestration order be made against the estate of Graeme Phillip Appleby.
The Applicant’s costs of and incidental to the petition including reserved costs, if any, be taxed in accordance with the Federal Court Rules and paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG909 of 2006
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| GRAEME PHILLIP APPLEBY |
Respondent
REASONS FOR JUDGMENT
Introduction
In this application the petitioner creditor, Deputy Commission of Taxation seeks a sequestration order against Graeme Phillip Appleby in respect of indebtedness in the sum of $988,028.27 less security to the value of $240,000.
Background
As at 26 November 2006 each of the respondent debtor and his wife Gayle Marlene Appleby were partners of a partnership between them (The Appleby Partnership) which traded as Aushay.
Following various assessments of the partnership’s affairs, notices of assessment of net amounts and notices of assessment of having a tax shortfall amount were issued to the partners with respect to their liability as partners of the Appleby Partnership for GST. Furthermore, following an audit of the Energy Grants Credit Scheme (EGCS) and Diesel Fuel Rebate Scheme (DFRS) liabilities of the Appleby Partnership in respect of over claimed rebates and grants was also assessed. The total of the liabilities assessed in respect of the reassessment was $998,028.27 (including administrative penalties).
The sum of $998,028.27 was payable by the respondent debtor to the applicant creditor as at 26 November 2006.
In about September 2006 the respondent debtor and Gayle Appleby entered a contract to sell a property owned by them at Mount Isa to Dan James Toia for the price of $208,000. At or about the same time the respondent debtor and Gayle Appleby entered into a contract to sell a property at 548 Tatham Road to Jason Francis Cumming and Kylie Anne Cumming for a price of $425,000.
In respect of each of those sales, the respondent debtor gave notice in accordance with section 260-5 of Schedule 1 of the Tax Administration Act 1953 (TAA 1953) permitting the applicant creditor to garnishee the surplus of the sale price of the two properties less payments due to the registered mortgagees in respect of each allotment together with selling costs such as real estate agents commissions. The estimate of value of the garnishee is $240,000.
Act of Bankruptcy
On 11 September 2006 the respondent debtor disposed of assets of the Appleby Partnership to Allan’s Property Services Pty Ltd trading as Gadak Farming Stock. Tax invoices issued by Aushay dated
11 November 2006to Gadak Farming were issued in respect of various items of equipment particularised in those invoices. The total sum received from that transaction was $75,120.20.
Gadak Farming was the trading name for Allan’s Property Services Pty Ltd. Allan’s Property Services Pty Ltd was a company limited by shares. One share was issued in the company and its sole director was Daniel Phillip Appleby. Although there was no direct evidence to establish any relationship between the respondent creditor and Daniel Phillip Appleby there is a basis for a strong suspicion of some relationship particularly because they share a common middle name and a common surname.
Although the invoices were issued in favour of Gadak Farming a letter forwarded by facsimile on 19 September 2006 under the hand of the respondent debtor appears to suggest that in fact there was another underlying transaction in fact taking place. The letter was addressed to Mr Stephen Pinchin. It refers to the “sale of machinery and cattle” and the particulars are noted in the letter appear to correlate precisely with the invoice issued by Aushay to Gadak Farming in respect of the equipment and also roughly accord with a valuation in respect of cattle.
The letter continues,
“2 (sic) invoices were issued buy (sic) myself, numbers 483 and 484 (copies attached) for the sale of all equipment and cattle as per instructions a cheque was to be made out to Mrs D. Appleby for payment of monies loaned.
Mrs D. Appleby has accepted this as full payment instead of $80,000 as borrowed.
A cheque was received by Mrs D. Appleby and a letter of confirmation was attached.”
The letter makes no reference to any transaction by Gadak Farming.
Although I accept that the assets were disposed of by the debtor, I am not entirely certain of the status of the transaction concerning Gadak Farming. It does not appear to have paid the consideration nor does it appear to have received the machinery and stock. Its involvement has all the hallmarks of a sham transaction. However, in the result nothing turns upon that part as the funds due to be received by the debtor for the sale were diverted to Mrs D. Appleby in discharge of a debt due to her. Despite the absence of direct evidence of the matter I assume she too has some family relationship to membership of the partnership.
Legal Principles
In its application the Commissioner relies upon an act of bankruptcy committed pursuant to section 40(1)(b)(i) which provides that a debtor commits an act of bankruptcy if in Australia he makes a conveyance or other disposition of his property or any part of his property that would, if he became a bankrupt, be void against the Trustee.
Section 121(1) of the Act provides:
“121(1) Transfers that are void. A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the Trustee and the Trustee in the Transferor’s bankruptcy if:
a.the property would probably have become part of the Transferor’s estate or would probably have been available to creditors if the property had not been transferred;
b.the transferor’s main purpose in making the transfer was:
i. to prevent the transfer of property from becoming divisible among the Transferor’s creditors - -”
Section 121A proceeds to provide:
“Transactions where consideration given to a third party
(1) This section applies if:
(a) a person who later becomes a bankrupt (the transferor) transfer property to another person (the transferee); and
(b) the transferee gives some or all of the consideration for the transfer to a person (a third party) other than the transferor.
(2) Sections 120 and 121 apply as if the giving of the consideration to the third party were a transfer by the transferor of the property constituting the consideration.
(3) If the giving of the consideration to the third party is void against the trustee in the transferor’s bankruptcy under section 120 or 121, the trustee has the same rights to recover the property constituting the consideration as the trustee would have if the giving of the consideration had actually been a transfer by the transferor of the property constituting the consideration.”
Discussion
This case is one clearly complicated by the operation of s120 and s121A. The conduct of the debtor constituted a conveyance in terms of s.40(1)(b)(i). That would be void as against the Trustee in the event of his bankruptcy. In my view an act of bankruptcy has been committed as alleged in the creditor’s petition.
I am satisfied that in all other aspects the application is a proper application, all procedural requirements of s.52 have been regularly attended to and the debt remains outstanding. A sequestration order should be made.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Burnett FM
Associate: Bev Schmidt
Date: 20 December 2006
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