Deputy Commissioner of Taxation v Olney-Fraser
[2018] FCCA 2855
•17 August 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v OLNEY-FRASER | [2018] FCCA 2855 |
| Catchwords: BANKRUPTCY – Creditors petition – application for sequestration order – personal insolvency agreement – special circumstances – application allowed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.156A, 188, 208 Federal Circuit Court Australia Act 1999 (Cth), s.104(4)(a) |
| Cases cited: Beaman v Bond [2014] FCWA 21 |
| Applicant: | DEPUTY COMMISSION OF TAXATION |
| Respondent: | DARREN STUART OLNEY-FRASER |
| File Number: | MLG 2135 of 2017 |
| Judgment of: | Judge McNab |
| Hearing date: | 17 August 2018 |
| Date of Last Submission: | 17 August 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 17 August 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms C. Mavroudis |
| Solicitors for the Applicant: | Australian Taxation Office |
| Solicitors for the Respondent: | Walpole Menzies (Mr A. Stops) |
ORDERS
Pursuant to section 208 of the Bankruptcy Act 1966 (Cth), the property of the Respondent debtor Mr Darren Stuart Olney Fraser is released from control of Mr Anthony Cant under Part X of the Bankruptcy Act 1966 who was appointed by authority signed 16 August 2018.
The Respondent Debtor’s Notice to Produce dated 12 July 2018 is set aside.
The estate of the Respondent debtor Mr Darren Stuart Olney Fraser be sequestrated under the Bankruptcy Act 1966.
The Applicant Creditor’s costs fixed in the sum of $12,279.12 be paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.
NOTATION
A.The date of the act of bankruptcy is 9 May 2017.
B.The Court also notes that a consent to act as joint and several trustees signed by Mrs Alice Fay Ruhe and Mr Kenneth Stewart Sellers has been filed under section 156A of the Bankruptcy Act 1966.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2135 of 2017
| DEPUTY COMMISSION OF TAXATION |
Applicant
And
| DARREN STUART OLNEY-FRASER |
Respondent
REASONS FOR JUDGMENT
(DELIVERED EX-TEMPORE – REVISED FROM TRANSCRIPT)
Introduction
The Deputy Commissioner of Taxation, by way of a creditor’s petition, applies to the Court for a sequestration order to be made against the Respondent. The claims of the Applicant, extracted from the amended originating application filed 8 February 2018, are as follows:
a)The Respondent debtor owes the Applicant creditor $3,351337.17. It is noted, however, that as at 16 August 2018, this amount had been reduced to a total debt of $815,546.36.[1]
b)The Applicant creditor does not hold security over the property of the Respondent debtor;
c)The Respondent debtor was a resident of Australia at the time when an act of bankruptcy was committed; and
d)
The Respondent creditor committed an act of bankruptcy within six months of the presentation of the creditor’s petition, namely signing an authority appointing a controlling trustee pursuant to
s 188 of the Bankruptcy Act 1966 (‘the Act’) on 9 May 2017.
[1] Affidavit of debt of Benjamin Dakis sworn 16 August 2018 [5].
The Respondent filed a notice stating grounds of opposition to the petition on 28 March 2018. It stated that the Respondent sought to oppose the petition on the ground of solvency, without further particulars.
On 16 August 2018, the Respondent executed an authority pursuant to
s 188 of the Act authorising Mr Tony Cant to be his controlling trustee. The Applicant seeks an order pursuant to s 208 to have the property of the Respondent be released from control under Part X of the Act and for a sequestration order to be made.
Procedural History
This matter has been adjourned a number of times. The matter was first before the Court on 29 March 2018 and adjourned by consent. The Respondent agreed to file and serve an affidavit setting out his financial position, including details of all assets, liabilities, income and expenses by 30 April 2018.
On 10 May 2018 the matter was again adjourned by consent. The Respondent again agreed to file an affidavit containing the same information noted above by 17 May 2018. The hearing was adjourned to 28 June 2018.
On 27 June 2018 the Respondent filed and served the affidavit referred to above.
On 28 June 2018, Registrar Ryan referred the further hearing of the Creditor’s Petition to Judge Riley on 19 July 2018, pursuant to s 104(4)(a) of the Federal Circuit Court Australia Act 1999 (Cth).
At the hearing on 19 July 2018, the Respondent sought an adjournment of the hearing of the creditor’s petition. The affidavits in support of the application for an adjournment went into some detail so as to try and establish solvency and. In particular, I refer to the Respondent’s affidavit sworn on 27 June 2018. In that affidavit at [9], he stated:
I believe I am solvent because I am the owner and developer of an asset situated substantially in the United Kingdom of a business known as Aero. I believe the value of this asset exceeds the value of my debts.
At [15], he stated:
I believe I am solvent because I believe that the value of this asset is at least $2 million.
Similarly, at [20] of that affidavit, he deposed that he considered that he could prove solvency on the basis of the value of the asset in Aero Cards Limited (‘Aero’).
The value of that asset was challenged directly by an affidavit of
Mr Benjamin Dakis sworn on 11 July 2018. At [10] of that affidavit,
Mr Dakis refers to a search of the United Kingdom Registrar of Companies and states that:
Documents obtained from Companies House on 9 July 2018 in relation to Aero Cards Limited contain, amongst other matters, the following information:
(a)the company Aero Cards Limited was incorporated on 27 March 2015;
(b)the company is a private company that is limited by shares;
(c)the company’s sole director is the Respondent;
(d)the company’s sole shareholder, holding one share, is the Respondent;
(e)the respondent, in his capacity as sole director of the company, approved the company’s balance sheet as at 31 March 2018 on 30 May 2018;
(f)the company’s balance sheet as at 31 March 2018 was lodged with Companies House on 14 June 2018; and
(g)the company’s balance sheet as at 31 March 2018 shows the following 2018 key financials:
total current assets: £15,000;
total current liabilities: £953,641.00; and
net worth: - £938,641.00.
Notwithstanding the matters raised by the Applicant and the objection to the grant of an adjournment, the matter was adjourned on 19 July 2018 to 27 July 2018 for hearing before Judge Riley. A transcript of that hearing, which is extracted in the submissions of the Applicant dated 17 August 2018, states:
If your client does not put forward a bank cheque or (bring) a case forward as to why he can come up (with) a bank cheque within a short period of time and if we’re again left with all, sort of, what might be described as smoke and mirrors, then there will be a sequestration order. Mr Galvin, you’ve heard everything that the Commissioner has to say. That will all be taken into account on the next hearing. People are not going to have to repeat everything that they have said today and I will be making, either as you say, an order adjourning the matter if I’m satisfied that your client will be able to come up with a bank cheque within a relatively short period of time, or I will be making a sequestration order, so long as everybody understands that.
On 27 July 2018, the matter was adjourned by consent to be heard on
17 August 2018. A notation was provided in the orders made 27 July 2018, stating that ‘the Applicant provided its consent to the adjournment on the basis of representations made by the Respondent that he will pay $821,316.53 to the Applicant by 15 August 2018’.
An affidavit sworn by Mr Dakis on 16 August 2018 indicates that the Respondent failed to pay the amount specified to the Applicant by
15 August 2018.
Affidavit material
The Respondent has previously deposed that his share in Aero was worth AU$2 million.[2] Subsequently, he deposed that the value of that share in Aero was worth at least $1 million from an urgent sale.[3] After this, he deposed that he sold his share in Aero for the sum of $500,000 to a
Mr Troost with settlement taking place on 31 July 2018. He also deposed that the sale was unconditional.[4]
[2] Affidavit of Darren Olney-Fraser sworn 27 June 2018 [9], [15], [20].
[3] Affidavit of Darren Olney-Fraser sworn 19 July 2018 [24].
[4] See affidavit of Darren Olney-Fraser sown 27 July 2018.
The Respondent swore two affidavits on 16 August 2018. In the first affidavit, at [15], he states the following in relation to the sale of Aero:
In my affidavit sworn 25 July 2018, I deposed to selling my interest in Aero Cards Limited to Mr Troost for $500,000. I arranged that sale between the 19 July and 27 July hearings in this proceeding. On 1 August 2018, I went to Sydney to complete the settlement of that transaction.
Mr Troost said he wanted to vary the transaction to include my wife’s interest in a business in Singapore called Tigereum and would pay the sum of $820,000 so I could pay the applicant in full. I agreed to that change as I considered it to be in the best interests of creditors. At 11 am yesterday, he told me that he did not wish to proceed with the transaction. The substance of his concern was that since the applicant had imposed its DPO upon me, there had been upgrades in the software that runs the banking implementation of Aero. As a consequence of that, he could not be sure that the software infrastructure still works and because I could not travel to the UK to show him or fix it as the case may be, he was not going to proceed with the transaction.
I note that he had previously sworn that the transaction was complete.
In this first affidavit sworn on 16 August 2018, Mr Olney-Fraser deposed that on 16 August 2018, he had executed an authority pursuant to s 188 of the Act authorising Mr Tony Cant to become “my controlling trustee”.[5] He exhibited the authority and the consent for Mr Cant to become trustee, which was executed on 16 August 2018. He also referred to a receipt of lodgement from the Australian Financial Security Authority. A note of search conducted by the Applicant of the register maintained by that body did not indicate that any authority or a s 188 agreement had been lodged as at 2:00pm this day.
[5] Affidavit of Darren Olney-Fraser sworn 16 August 2018 [1].
The second affidavit of the Respondent was filed on 16 August 2018 and that exhibited the following documents:
a)the personal insolvency agreement (‘PIA’) checklist;
b)the draft personal insolvency agreement;
c)a statement of prescribed information; and
d)the Respondent’s statement of affairs.
In the proposed PIA, it was proposed that :
[6.1]The debtor covenants with the trustee to pay to the trustee the debtor’s contribution, being the amount of $820,000, to be paid as follows:
(i)the sum of $100,000 has been paid into the trust account of the trustee. The $100,000 is to be transferred to the PIA account following the passing of the special resolution of creditors;
(ii)the instalment of $100,000 per month for a period of seven months commencing on or before the expiration of 30 days of the execution of the PIA; and
(iii)one instalment of $20,000 prior to the expiration of the eighth month.
The statement of affairs which was lodged with the draft PIA noted the summary of expected income for the next 12 months was zero.[6] In terms of employment status, the Applicant indicated he was not currently employed, had been unemployed for three years and that he had no income. In terms of assets, he stated that he had no cash, no moneys in bank accounts, no tools of trade, no superannuation and no real estate. He did have a motor vehicle worth $7,500. In terms of shares, he stated that he had one share in Aero with a market value of $1.00.
[6] See Affidavit of Darren Olney-Fraser sworn 16 August 2018.
The exhibits to the second affidavit sworn 16 August 2018 identified new creditors that had not been previously named by the respondent in relation to his financial affairs. These newly identified creditors and the amounts owed to them are:
a)Joy Olney, the Respondent’s mother - $15,000;
b)Robin Geoffrey - $30,000;
c)Ross Smith - $10,000;
d)Simon Dickson - $50,000;
e)Tom Sergeant - $50,000; and
f)Mr Stops, the Respondent’s solicitor - $30,000.
According to the Respondent’s proposal and draft PIA, all of the aforementioned creditors (except for Mr Stops) are entitled to vote at the meeting of creditors but will not be entitled to prove for a dividend. The value of those new creditors totals $185,000. The Respondent deposed on oath that he had not incurred any further liability since the creditors’ meeting held on 17 June 2017.
Consideration
In my view, the Applicant’s conduct in filing this material and submitting this draft PIA amounts to a special circumstance as that expression is used in s 208 of the Act. Section 208 of the Act provides:
The Court may make an order releasing the debtor’s property from control under this Division if:
(a)an interested person applies to the Court for such an order; and
(b)the Court is satisfied that special circumstances justify making the order.
I was referred to the decision of Beaman v Bond [2014] FCWA 21. At [102] of that decision, the Court stated:
Whilst the term “special circumstances” can and often does include an abuse of process, there is nothing to suggest that an abuse of process is pivotal to a finding of special circumstances. Special circumstances are simply those which are out of the ordinary.
Where a sophisticated person has sworn numerous affidavits in relation to his financial position and has failed to make reference to these newly identified creditors, has asserted solvency, and has been provided by the Court with the opportunity to establish solvency, the filing of this PIA naming these new creditors constitutes a special circumstance such as to warrant an order releasing the debtor’s property from control under that Division.
In my view, the Respondent has been given every opportunity to establish solvency and the material that has been put before the Court by the Respondent is not such as to persuade the Court that it is in the interests of justice to adjourn the matter further. The Respondent sought an adjournment until about 28 September 2018, which would take the matter beyond the first meeting of creditors to be held to consider the proposed PIA.
Conclusion
Given the matters I have raised in relation to the circumstances; the lack of any evidence as to how a personal insolvency agreement is to be funded; the fact that there is such a conflict in the evidence as to the value of any assets that the respondent has, and the varying evidence as to the realisation of the value of the assets as it has proceeded through each of the hearings, I conclude that the circumstances warrant an order pursuant to s 208 of the Act and that a sequestration order be made.
I certify that the preceding twenty six (26) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 4 October 2018
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