Deputy Commissioner of Taxation v Sharma
[2008] FMCA 910
•24 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v SHARMA | [2008] FMCA 910 |
| BANKRUPTCY – Petition based on uncontested debt – debtor unable to pay debts within a reasonable time – further adjournment refused – sequestration order made. |
| Bankruptcy Act 1966 (Cth), ss.52(1), 52(2), 52(3), 52(5) Civil Procedure Act 2005(NSW) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) |
| Sandell v Porter (1966) 115 CLR 666 Stankiewicz v Plata [2000] FCA 1185 |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | ANIL KANT SHARMA |
| File Number: | SYG 1966 of 2007 |
| Judgment of: | Smith FM |
| Hearing date: | 24 June 2008 |
| Delivered at: | Sydney |
| Delivered on: | 24 June 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr T Le |
| Solicitors for the Applicant: | Australian Taxation Office, Legal Services |
| Counsel for the Respondent: | Respondent in person |
| Solicitors for the Respondent: | Hassett Dixon Solicitors |
ORDERS
A sequestration order be made against the estate of ANIL KANT SHARMA.
All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days.
The applicant creditor’s costs, including all reserved costs, fixed in the amount of $800.00 be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 30 April 2007.
The applicant must within 2 days give a copy of this order to the Official Receiver in Sydney.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1966 of 2007
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| ANIL KANT SHARMA |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This petition was lodged on 26 June 2007, and is due to expire in two days time unless the Court extends it after being satisfied that it is “just and equitable” to do so under s.52(5). The petition relies upon an uncontested debt owed to the Deputy Commissioner of Taxation in respect of taxation liabilities between the years 2000 and 2006, giving rise to a judgment entered on 12 December 2006 in the sum of $458,811.83. Since then, further interest has accrued under the Civil Procedure Act 2005 (NSW) in the sum of at least $55,670.43.
No payments on account of this debt have been made, and it is conceded that an act of bankruptcy has occurred in relation to Mr Sharma’s failure to pay the debt when served with a bankruptcy notice. The act of bankruptcy occurred on 30 April 2007. I am also satisfied as to the proof of the other matters required under s.52(1) of the Bankruptcy Act 1966 (Cth).
In relation to s.52(2), there is no evidence that Mr Sharma is able to pay his debts at all, and certainly not within a reasonable period of time. On his evidence to the Court there is joint equity in his home owned with his wife, and she has various assets, but payment of the debt could only be achieved by drawing upon their joint property, and not solely from his own property. There is no evidence before the Court that his wife is committed to participate in assisting the payment of this debt.
The petition has been adjourned by consent on numerous occasions before the Registrar. A chronology of these adjournments and the reasons for them is before the Court, and is not contested by Mr Sharma. A series of proposals have been put forward over that period for the house to be sold, or for borrowings to be made against the joint title, but none of these have come to fruition.
The last attempt to put the house up for auction failed to achieve a purchaser. Since that time, flooding in the house has caused damage which in the opinion of Mr Sharma needs to be rectified before the house can be put on the market again or used as collateral for further borrowing.
Mr Sharma today accepted that he could not oppose the making of a sequestration order, but sought a further adjournment of the petition to allow two months for him to repair the floor and make further efforts to raise money to pay the creditor. However, in view of the history of the past proposals, the Court can have no confidence at all that that will occur.
The petitioning creditor prima facie has a right to have the Court proceed to make an order for sequestration on proof of the matters in s.52(1), and the Court normally will proceed to make that order in circumstances such as the present, unless it is satisfied that there is a real prospect that the debt can be paid within a reasonable period of time, which has also been described as a “relatively short time” (see Stankiewicz v Plata [2000] FCA 1185 at [29]‑[30], referring to a well known passage in Sandell v Porter (1966) 115 CLR 666 at 670). In the present case I am certainly not satisfied as to that ability.
In my opinion, no further adjournment should be permitted. I am not satisfied in terms of s.52(5) that it is appropriate to extend the petition, and in my opinion it is appropriate to proceed to make the sequestration order today. All the formal requirements of the bankruptcy rules have been met.
I am prepared, however, to make an order under s.52(3) which will suspend the operation of the sequestration order for 21 days. That period cannot be extended by the Court, but will allow a window of opportunity for Mr Sharma, in discussions with his trustee and his family members, to consider whether it is possible to come to arrangements whereby his sequestration can be annulled without too much delay or expense.
I should note that before deciding to make a sequestration order, I gave particular thought to Mr Sharma’s concern that a sequestration order might affect his employment as general counsel for a corporation. The evidence as to this risk appears unclear, both as to whether he might lose his practising certificate or acquire a conditional certificate, and whether either of those eventualities would be unacceptable to his employer for the period until he is able to secure a discharge from his bankruptcy. However, in my opinion this uncertainty about his employment should not, on balance, cause me to decline to make a sequestration order today.
I shall therefore make a sequestration order in the normal terms.
I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 4 July 2008
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