Deputy Commissioner of Taxation v Sproule
[2012] FMCA 1188
•14 December 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v SPROULE | [2012] FMCA 1188 |
| BANKRUPTCY – Creditor’s petition – dispute between the parties is in relation to the form and method of payment – debtor attempted to use a bill of exchange to satisfy debt – refused by creditor – notice stating grounds of opposition to petition filed – no grounds made out and notice dismissed – sequestration order made. |
| Bankruptcy Act 1966 (Cth), ss.43, 44, 47, 52, Bills of Exchange Act 1909 (Cth) Bankruptcy Regulations 1996 (Cth) reg.16.01 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.4.02, 4.04, 4.05, 4.06 |
| Lavine v Bank of Adelaide (1875) 9 SALR 119 |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | DARRYN STUART SPROULE |
| File Number: | SYG 262 of 2012 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 10 September 2012 |
| Delivered at: | Sydney |
| Delivered on: | 14 December 2012 |
REPRESENTATION
| Solicitors for the Applicant: | Ms M. Kijirah of ATO Legal Services |
| The Respondent: | The Respondent appeared in person with the assistance of a lay advocate Mr M. Andrews |
| Solicitors for the Supporting Creditor: | Mr Wirth for Capital Finance Australia Limited |
ORDERS
The Interlocutory Application for order for summary judgment handed up on 10 September 2012 be dismissed.
The Notice Stating Grounds of Opposition to the Petition filed on 28 August 2012 be dismissed.
A sequestration order be made against the estate of the Respondent Debtor, Darryn Stuart Sproule.
The Applicant Creditor’s costs, including reserved costs if any, be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966 (Cth).
A copy of the Sequestration Order be given to the Official Receiver in Sydney within two (2) days.
THE COURT NOTES THAT:
The date of the act of bankruptcy is 1 November 2011.
Updated affidavits of final debt and final search are to be filed on the date of this judgment.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 262 of 2012
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| DARRYN STUART SPROULE |
Respondent
REASONS FOR JUDGMENT
Introduction
On 7 February 2012 the applicant creditor, the Deputy Commissioner of Taxation (the “DCT”), filed a creditor’s petition in this Court against the respondent debtor, Darryn Stuart Sproule, pursuant to a judgment of the District Court of New South Wales, entered on 18 May 2011, of which the balance owing to the DCT by the respondent is $436,472.14. On 28 August 2012 the respondent filed a Notice Stating Grounds of Opposition to the Petition, supported by an affidavit. The registrar, before whom the matter came on 10 September 2012, referred the proceedings to this Court to be heard on the same day.
Ms Kijirah, appearing for the applicant, indicated that it was the DCT’s intention to proceed with the petition. Mr Sproule had filed a notice stating of grounds of opposition to the petition alleging that the liability, that is the subject of these proceedings, had been paid. Ms Kijirah stated that was the main dispute between the parties and could be heard in no more than half an hour. Mr Sproule indicated that he believed that his submissions were quite intricate and would not be addressed in such a short time. Ms Kijirah responded that the dispute between the parties was in relation to the form of payment and suggested that if Mr Sproule believed that the subject matter was quite complex it may appropriate to file submissions before the matter was finally heard. Mr Sproule stated that a Notice to Admit Facts had been filed and served and the Notice had not been complied with, so he moved on summary judgment. He stated that he had forwarded to the Court Registry, by facsimile, an interlocutory application seeking an order for summary judgment. Ms Kijirah submitted that the application was not relevant to these proceedings.
Mr Sproule informed the Court that he and Mr Andrews, a friend of the respondent’s, had travelled from Queensland for the hearing and sought to proceed on that day. I stated that I would adjourn the matter until 2.15pm that afternoon and the parties indicated that was a suitable course for them. On resumption, Mr Sproule stated that he sought to have Mr Andrews address the Court on his behalf. Mr Andrews indicated that he appeared as amicus curiae. This claim was also contained in Mr Sproule’s written submissions. Mr Andrews made no claim to be legally qualified and he did not appear to fully understand the function and role of amicus curiae. I stated that I would consider his appearance as that of a lay advocate. Mr Sproule informed the Court that he was suffering from a medical condition and required some assistance. As there was no objection to this course I allowed the matter to proceed on this basis.
During the adjournment there was an attempt by Mr Sproule to file a further document. Ms Kijirah objected to this on the basis of relevance, as the document related to the interlocutory application and did not relate to the subject matter of the proceedings, nor did it form part of the dispute between the parties. Further, it did not support the evidence and grounds filed in relation to the notice stating grounds of opposition to the petition. I noted the document sought to be filed in court would not be admitted.
Mr Andrews stated that the respondent had endeavoured to settle the matter with the DCT without success. Consequently, he relied on his affidavit sworn 23 August 2012 and the two notices to admit facts filed 21 August and 4 September 2012, respectively. Both of these documents are part of the approach taken by Mr Sproule to issue bills of exchange to settle his outstanding debt to the Australian Taxation Office (“ATO”). This is considered in more detail below, however, simply put Mr Sproule tendered two bills of exchange to the ATO as payment of his liability. He believed that the delivery of the bills of exchange was affected and he nominated a neutral business office for the purpose of permitting the presentation of the bills of exchange for payment and the discharge of his liability. Nobody from the ATO appeared so Mr Sproule appears to have believed that the failure of anybody to appear discharged his taxation liability. He then embarked on issuing a certificate of protest, followed by the notice to admit facts, requiring a notice of dispute to be filed within 14 days. The failure to issue a notice of dispute, within the specified time, was to be taken as admission of fraud and the authenticity of each document.
At this point, and in the absence of any objection from Ms Kijirah, there did not appear to be any point to enter into a detailed analysis of admissibility of the notices to admit facts because they were deeply interwoven with the whole issue of the central dispute concerning the method of payment of Mr Sproule’s taxation liability. Consequently, the Affidavit of Darryn Sproule sworn 23 August 2012 and the two Notices to Admit were read. The contents of the Notices to Admit do provide some insight to the approach taken by Mr Sproule to adapt a bill of exchange as his method of payment.
It should be noted that the respondent debtor, Mr Sproule, has been referred to on documents filed in these proceedings on behalf of both the applicant and respondent as having the given name “Darryn”, as well as “Darren”. This is apparent on the affidavits of the respondent where both spellings have been used. The creditor’s petition has been filed naming “Darryn Stuart Sproule” as the respondent debtor and, accordingly, I intend to use this spelling of the respondent debtor’s name in these reasons.
Evidence
The DCT sought to rely on the following evidence at the hearing of the petition:
a)Affidavit of Leopoldo Valdez sworn on 3 February 2012 (as Part 2 of the Creditor’s Petition);
b)Affidavit of Marian Kijirah sworn 10 September 2012; and
c)Affidavit of Gregory Phillips sworn 10 September 2012.
The respondent sought to rely on the following evidence:
a)Affidavit of Darryn Stuart Sproule sworn 23 August 2012;
b)Affidavit of Darryn Stuart Sproule sworn 6 September 2012.
Notice Stating Grounds of Opposition
The respondent’s notice stating grounds of opposition to the petition states the following grounds:
1. Payment of the outstanding amount of the claim was effected/ made to applicant creditor on or about 8 or 9 August 2012
2. This was despite NOT being afforded a remedy by the applicant creditor by way of their refusal to provide respondent a statement showing the actual outstanding balance of the claim despite Respondent’s numerous written and verbal requests for same
3. Respondent offered many times to pay the amount of the Applicant creditor’s claim upon both, proof of their claim and upon attaining a statement showing the outstanding account balance even prior to the judgment. Payment was made despite Applicant creditor providing the particulars sought by Respondent.
Respondent’s Submissions
On 20 September 2012 Mr Sproule filed in the Court Registry written submissions setting out his claims and argument. These written submissions were addressed by Mr Andrews in oral submissions at the hearing on 10 September 2012 and which are referred to below. They state:
1. On the 7th August 2012 Respondent received a Bankruptcy Notice dated 21 September 2011 from the Australian Government Insolvency and Trustee Service Australia
2. The account number on the order to allow the Notice was 2011/[xxxxxx]
3. The Notice showed an outstanding balance of $436.472.14
4. Respondent requested, on at least four occasions in writing by email, from the Applicant’s employee Hilda Cheng and Marina Kijirah on 15 August 2012, 23 August 2012 and other days for a statement of account on Applicant’s letter head so as to verify the amount of the outstanding liability to Respondent
5. On every occasion Respondent’s request was denied and rejected by Applicant’s employees
6. The Respondent was denied his equitable remedy by Applicant
7. The Bankruptcy Notice containing a statement of outstanding account was accepted by Applicant to the value of $500,000 in lieu of the absence of a Statement of account on a letter head from the Applicant
8. A postage stamp attained from Australia Post Office was affixed to a Bill of Exchange as sufficient alternative consideration to constitute a simple contract (S32 Bill of Exchange Act (‘BOE’) Act 1909 (Cth))
9. The ONE AUSTRALIAN DOLLAR, being one of the missing particulars in the Australian Taxation Office’s inchoate instrument, provided sufficient consideration to cover a $500,000 liability
10. The ONE AUSTRALIAN DOLLAR EXACTLY amount was the lesser or least of the two numbers shown on the face of the statement and is sufficient discharge the liability of the whole, being the ONLY sum ordered to be paid by the bill (BOE Act 1909 (Cth) S14(2))
11. The Notice of account, being an inchoate instrument, was duly completed by drawer/indorser (BOE Act 1909 (Cth) S25)
12. The Bill of Exchange was attached to the completed statement of account, thus forming a NOT NEGOTIABLE contract
13. On 10 July 2012 or there abouts Respondent posted Applicant at locked bag 1793 Penrith NSW 1793 by registered mail RD 513301268012 containing the contract and Bill of Exchange – number BOE513182156019, the Bill of Exchange conforming to Sections 8(1)(2)(3)(4), 13, 14, 21, 25(1)(2), 37(f), 44(1)(2)(4), 47, 50(1)(2)(a)(b)(c)(e)(h), 56, 59(a), 60(1)(a),69(2), 73(7), 97(1)(2), 100 and Second Schedule of the Bills of Exchange (BOE) Act 1909 (Cth), dated 5 July 2012
14. A Bill of Exchange may be used as alternative satisfaction to discharge a liability (Bills of Exchange Act 1909 (Cth)
15. The Bill of Exchange was tendered by applicant (drawer/indorser) in good faith and in full satisfaction according to the tenor of it acceptance
16. Delivery of the Bill of Exchange was effected
17. On 17 July at 4.55pm Respondent attended a neutral business office at 1 Railway Street, Coominya, Queensland
18. This was for the purpose of permitting payee’s presentment of the Bill of Exchange for payment
19. Respondent remained there until after 5.10 pm
20. During that time the said Bill of Exchange numbered BOE513301268012 was not presented for payment by payee or its agents or assigns nor was it returned to drawer-indoser
21. Failure of Applicant (payee) to present the Bill of Exchange for payment discharged all liability against applicant (drawer/indorser)(Section 50(1)(2) BOE Act 1909)
22. The failure of the Applicant to present the Bill of Exchange for payment is evidence of its dishonour and admission / confession that the Bill of Exchange was sufficient to discharge the liability
23. By tender of payment with a Bill of Exchange is evidence of Respondents honourable intent to discharge the liability to Applicant
24. satisfaction The discharge by a different performance, or some other substitute consideration, of a personal obligation, instead of strict performance. Unless the requirements of the Judicature Act 1876 Queensland S5.11, are complied with, payment of a sum of money will not operate as satisfaction of a larger sum owing; but payment in any other form, for example, even by cheque or bill of exchange, will. The Constitution, provides that an acknowledgement in writing in that behalf, of the receipt of a part of his debt or her debt in satisfaction of the whole debt shall operate as a discharge of the debt
26. By virtue the Applicant or its agents did not present the Bill of Exchange for payment, discharged all liability against the Respondent
27. On 16 August 2012 or thereabouts Respondent posted Applicant a registered mail envelope containing a Certificate of Protest – Default – Dishonour numbered 150820121700 dated 17 July 2012
28. Acceptance is completed by delivery or notification (Bill of Exchange Act 1909 (Cth) S4)
29. The Certificate of Protest protested the dishonour of the Applicant in its failure to present for payment the previously delivered Bill of Exchange BOE513182156019 in accordance with Section 4, 5(2), 8(1)(2)(3)(4), 13, 14, 25(1)(2), 26, 28, 32(1)(2), 37(f), 40, 44(1)(2)(4), 47, 50(1)(2)(a)(b)(c)(e)(h), 56, 59(a), 60(1)(a), 61, 69(2), 70, 73(7), 100 and Second Schedule Bills of Exchange (BOE) Act 1909 (Cth)
30. A Notice of Payment was duly mailed to the District Court of New South Wales, Sydney registry on 16/8/2012
31. This Notice of Payment cause a lawful estopple (sic) on any proceeding in this matter
32. A Notice to Admit Facts dated 16 August 2012 was emailed to the Federal Magistrates Court on 16 August 2012 and a copy emailed to the Applicant and a court stamped copy emailed to the Applicant on the 17 August 2012
33. The Applicant failed to dispute the facts listed on Respondents Notice to Admit Facts
34. Respondent made Interlocutory Application for Order for Summary Judgment and faxed it on 6 September 2012 to court
35. On the morning of the hearing 10 September 2012 Respondent attended the registry to speak with a court clerk who confirmed that the documents faxed by Respondent on 6 September 2012 were received by a clerk of the court on 7 September 2012
36. The clerk volunteered that Respondent’s documents, including the Interlocutory application for Order for Summary Judgment had not been filed because of staff shortages
37. Respondent’s Amicus Curiae was witness to the conversation at the court registry and is prepared to testify to it
38. Applicant failed to answer and rebut both of Respondent’s two affidavits served upon it
39. Applicant failed to dispute Respondent’s two Notices to Admit Facts
40. By failing to rebut Respondent’s affidavits and disputing Respondent’s Notices to Admit Facts Applicant has acquiesced and agreed it has NO cause of action
41. Applicant has also agreed its claim is vexatious and frivolous
42. Applicant has also agreed it claim is embarrassing
43. Applicant has also agreed its claim is an abuse of process
44. The Applicant’s legal counsel failed to present any case at the hearing of 10 September 2012
45. The Applicant’s legal counsel failed to rebut the facts in Respondent’s affidavit at the hearing 10 September 2012
46. The Applicant’s legal counsel failed to dispute the facts with the Respondent’s Notice to Admit Facts at the hearing of 10 September 2012
47. The Applicant’s legal counsel failed to produce evidence before the court that a Bill of Exchange tendered for payment was insufficient alternative satisfaction o discharge any liability (‘The principle is that a bill, cheque or note is given and taken in payment as so much cash, and not as merely given a right of action for the creditor to litigate a counterclaim’ (see Jackson v Murphy [1887] 4 T.L.R. 92). “We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary” (see per Lord Denning M.R. in Fielding & Platt Ltd v Selim Najjar [1969] 1 W.L.R. 357 at 361; [1969] 2 All E.R. 150 at 152, CA)
48. The Applicant’s legal counsel failed to produce evidence to support any claim that Respondent’s Bill of Exchange tendered for payment was deficient, defective or insufficient to discharge the liability to Applicant
49. The Applicant’s legal counsel failed to produce evidence to support any claim that Respondent’s Bill of Exchange was NOT a Bill of Exchange
CONCLUSION
1. The evidence before the court is overwhelmingly in favour of Respondent
2. Applicant failed to produce any substantive evidence to support its claim that the liability was NOT discharged prior to the hearing by payment by Respondent of Bill of Exchange
3. The application ought to be upheld to preserve and protect the inherent rights of the Respondent, particularly in the situation whereby there is a question of law and fact regarding the validity and legality of a Bill of Exchange such that the benefit of doubt must lie in favour of the Respondent until such time as the question of law regards the validity of payment by a Bill of Exchange is decided
4. As the Respondent reserved his inherent rights, he seeks an equitable remedy such that if the Honourable Court lacks jurisdiction to hear and adjudicate matters concerning Bills of Exchange, he humbly requests and instructs the Honourable Court to step the matter down and to reconvene the matter in a court with sufficient and appropriate jurisdiction to head and adjudicate matters concerning Bills of Exchange, in order to preserve and protect Respondent’s inherent rights
5. There would be a travesty of justice if Respondent’s application was not upheld and failed
Applicant’s Submissions
Ms Kijirah referred the Court to the affidavit of debt sworn by Gregory Phillips on 10 September 2012 at Annexure GP1, line reference 53 (page 7) which lists the judgment interest as $60,419.67. At page 12 line reference 112 the balance of the account owed by Mr Sproule to the DCT as $376,052.47. The total of these two amounts on pages 7 and 12 are calculated in the Creditor’s Petition as being $436,472.14 both of which remains due and payable to the applicant creditor as at the day of the hearing. It is the respondent’s submission these liabilities have been discharged. Ms Kijirah contends that the affidavit evidence that has been filed by the applicant demonstrates that this is not the case. The argument advanced on behalf of Mr Sproule is that a bill of exchange for the value of $1 AUD is sufficient consideration to discharge a Commonwealth liability of $436,472.14. Ms Kijirah contends that this is a grossly disproportionate consideration.
Ms Kijirah submits that the respondent also seeks to contend that a contract has been entered into between the applicant and the respondent, but no such contract has been entered into. There has been no acceptance by the DCT therefore there is no valid consideration in these circumstances. What is before the Court is an applicant creditor seeking to rely upon the remedial avenues available pursuant to a judgment and pursuant to an act of bankruptcy. There is a statement of account which illustrates and refutes the respondent’s submissions. There is also a supporting creditor which illustrates that there are other factors, particularly the solvency of the respondent.
Ms Kijirah contends that in response to the submissions made by Mr Andrews on behalf of Mr Sproule in respect to the statements of account in the affidavit of Darryn Sproule affirmed 6 September 2012 at [11], it states:
11. On or about 4 July 2012 I received a Statement of Account from the Australian Taxation Office dated 16 June 2012.
Then at [14]:
14. A Statement of account was accepted by me to the value of $320,000.
Ms Kijirah submits that at least part of the liability has been accepted by the respondent.
Mr Andrews submitted that Mr Sproule had had no correspondence provided to him in response to his letter to the Australian Taxation Office (“ATO”) dated 11 November 2011. Ms Kijirah sought to tender correspondence sent to Mr Sproule dated 26 July 2012 in response to his letter and drew the Court’s attention to the last paragraph on the first page of that correspondence. In that paragraph Mr Sproule was put on notice that a bill of exchange was not an accepted method of payment by the Commissioner of Taxation. Formal notice was given to Mr Sproule by way of that correspondence and informally on numerous occasions orally. The parties had been in communication. That correspondence advised Mr Sproule that statements of account had been provided to him by way of postal service to his post office box. Ms Kijirah contends that Mr Sproule cannot put to the Court that he was not aware that a bill of exchange was not an accepted method of payment to satisfy his liability or that the liability remains undischarged.
Ms Kijirah submits that requirements suitable to seek discretion of the Court to obtain a sequestration order have been satisfied. Ms Kijirah indicated that she moves on that application and would rely upon not just the affidavit of liability that was filed at the beginning of the hearing, but also would move upon the support of the application by the supporting creditor, which also demonstrates that there are other liabilities which the respondent has not addressed.
Mr Wirth, acting for Capital Finance Australia Ltd, supporting creditor, indicated to the Court there is a judgment in favour of his client against the respondent in the sum of $82,255.37 entered on 12 April 2011. There was an attempt to pay that debt, similarly by way of bill of exchange, but that was not accepted by his client and a letter advising accordingly was forwarded to Mr Sproule. No payments have been made to reduce that judgment debt. Mr Wirth indicated that he sought leave to tender four documents. One document detailed the judgment debt, and the other a notice of order filed by the respondent indicating that a bill of exchange had been filed and therefore the judgment should be set aside. The second document has subsequently been rejected by the District Court which is evidenced by copy of those orders. Those documents were marked SP1 is the notice of orders made; SP2 is the time sensitive estoppel; SP3 is the letter with the repayments attached; SP4 is an email with a Kemp Strang letter attached.
Consideration
In the respondent’s affidavit sworn 6 September 2012 at Annexure “DSS1” is a photocopy of the Australian Taxation Office Running Balance Account (“RBA”) statement issued to the respondent on 16 June 2012. At the bottom of that document is a payment slip preaddressed to “ATO Locked Bag 1793, Penrith, N.S.W. 1793”. On the back of the payment slip the methods of payment are set out which include B-Pay, EFT direct debit, direct debit (excluding credit cards), cheques or money orders by mail and the Australia Post facility which can be paid by cash, cheque of EFTPOS. The methods of payments section warns that payments cannot be made by credit card or in person at any Australian Taxation Office branch or ATOaccess site.
The argument being advanced on behalf of the respondent is that because of the absence of any reference to bills of exchange on the “methods of payment” contained on the back of the payment slip that method of payment cannot be excluded. Without entering into a detailed analysis of the Bills of Exchange Act 1909 (Cth), which is long, detailed and prescriptive in nature, being divided into five parts and having over 100 sections. Part II of the Act deals specifically with Bills of Exchange and is divided into a number of divisions relating to the form and interpretation of bills, capacity and authority of parties to bills, consideration of bills, negotiation of bills general duties of holders of bills, liabilities of parties to bills, discharge of bills, acceptance and payments for honourable bills, lost instruments, bills in a set and conflict of laws. A convenient summary provided by Butterworth Australian Legal Dictionary, Lexis Nexis Butterworth states that a Bill of Exchange is:
An unconditional order in writing addressed by one person (drawer) to another, (the drawee) signed by the drawer, will claim the drawee to pay on demand, or at a fixed future time, a sum of money to a specified person or to the bearer (CTH) Bills of Exchange Act 1909 s.8; Lavine v Bank of Adelaide (1875) 9 SALR 119. In a business transaction, a person takes a bill being akin a legal tender; the order to pay must be free from any preconditions or contingencies. A bill of exchange is a negotiable instrument. After a bill has been written by a drawer it is presented to the drawee for acceptance. By signing the face of the bill the drawee (now the acceptor) affirms that the bill will be paid on maturity. The specified person or payee indorses the bill by signing the back of it.
Mr Andrews, in oral submissions, indicated that Mr Sproule essentially relied on the notices to admit facts established that the two payments to the DCT accepted or assented that the DCT had liability for the instrument (the bill of exchange for the sum certain of $1 AUD exactly) and that the liability against the drawer was discharged. That was the reason on 7 September 2012 an interlocutory application for an order for summary judgment was attempted to be filed in the Registry by facsimile on the basis that payments had already been made. Mr Andrews informed the Court he relied on [31] – [34] of Mr Sproule’s affidavit, sworn 6 September 2012, which state:
31. This Bills of Exchange are in accordance with the Bills of Exchange Act 1909.
32. The Bills of Exchange were tendered in good faith and in full satisfaction according to the tenor of its acceptance.
33. Acceptance of the Bills of Exchange was effected by delivery and notification (Section 4 BOE Act 1909 (Cth)
34. The Deputy Commissioner of Taxation (payee) accepted the payment by virtue it took possession of and accepted the Bills of Exchange.
Mr Andrews also relied on [43] – [47] and [48] of Mr Sproule’s affidavit sworn 6 September 2012, which state:
43. Failure of applicant (payee) to present the Bills of Exchange for payment discharged all liability against respondent (drawer/ indorser)(Section 50 of the BOE Act 1909)
44. The Bills of Exchange, Numbered BOE 5138215619 and BOE 13301368012 were not returned to drawer – indorser nor was presentment (sic) for payment made on drawer-indorser at the stipulated neutral place of business pursuant to section 50(1)(2) BOE Act 1909 (Cth)
45. The failure of payee to present the two Bills of Exchange for payment is evidence of its dishonour and admission/ confession that the Bills of Exchange was sufficient to discharge the liability against respondent drawer/ indorser
…
47. By virtue of my having issued the two Bills of Exchange to the payee the liability to payee was discharged – satisfied
48. By virtue the drawee or its agent did not present the two Bills of Exchange for payment discharged all liability of the drawer/ indorser (BOE Act 1909 (Cth)(S50)
Mr Andrews did not offer any further explanation as to Mr Sproule’s election to use a bill of exchange. Without embarking on a detailed historical and legislative review of the Bills of Exchange Act 1909 (Cth), a bill of exchange, most simply put, is a financial document that requires an individual or business that is addressed in the document to pay a specific amount of money on the date that it cites within the text of the document. Considered to be a negotiable instrument the date for the demand to pay generally ranged from the current date to some date in the future. A bill of exchange will also require the authorising signature of the drawee, if accepted then the acceptor (debtor) in order to be considered legal and binding. There is no evidence that the DCT has accepted the bill of exchange. Without explanation, Mr Sproule has embarked on this very novel and misguided use of this negotiable instrument.
On the structure of the documentation before the Court, Mr Sproule has prepared a bill of exchange with a face value of $1 AUD and forwarded that to the ATO seeking acceptance as settlement for an outstanding debt of $436,472.14. Logic as to why the DCT would accept that document is completely unexplained by either Mr Sproule or Mr Andrews. The ATO has advised Mr Sproule that it did not accept bills of exchange as settlement of taxation indebtedness; Affidavit of Marian Kijirah sworn 30 July 2012, Annexure “MK2”, facsimile transmission Kijirah to Sproule, 30 July 2012, 9:23am which contains the following:
I note your intention to address the liability by way of a bill of exchange and reiterate once again that this is not a method of payment accepted by the Australian Taxation Office.
A mechanism that appears to be promoted by Mr Sproule is that the failures of the DCT to either accept a bill of exchange or present for payment was some type of admission that the bills of exchange were sufficient to discharge Mr Sproule’s liability to the DCT. There was no attempt to explain this aspect of Mr Sproule’s approach.
The nature of the material contained in the various documents tendered by Mr Sproule indicates that there has been considerable attention focused on the various sections of the Bill of Exchange Act, however, the basic concept and mechanism of this financial instrument appears to be totally misunderstood or misconceived. In the normal course a bill of exchange is prepared by a party who is advancing a line of credit to another with the expectation that the indebtedness of the party to whom it has been given will settle that amount either when some event occurs, such as supply of goods, or at some specified date which is mutually agreed between the parties and accepted by the party that is incurring the liability. The use of the bill of exchange proposed by Mr Sproule is either a complete misunderstanding of the use of the instrument or some cynical ploy to avoid the debt. In the absence of any logical explanation of how Mr Sproule intends to resolve his indebtedness to the ATO this whole approach for this form of settlement is misconceived and should be dismissed.
Evidence in Support of a Sequestration Order
Ms Kijirah submits that the petition before the Court is based upon non-compliance with a bankruptcy notice within 21 days of being served with it (the notice having been issued on 21 September 2011). The amount owing on the Bankruptcy Notice is $436,472.14 and is based upon a District Court Judgment which was obtained on 18 May 2011. No application has been made by the respondent to set aside that judgment. The bankruptcy notice was served on the debtor on 11 October 2011. The affidavit relied upon is that of David James Abbey sworn 22 January 2012 and filed in this Court on 7 February 2012. The act of bankruptcy relied upon was committed on 1 November 2011. It is that act of bankruptcy in which the DCT seeks to rely upon and moves on the creditor’s petition.
As at 7 February 2012, being the date that the Creditor’s Petition was filed commencing these proceedings before this Court, the respondent was indebted to the applicant in the sum of $436,472.11. The Petition was verified by the affidavit of Leopoldo Valdez sworn 3 February 2012 and filed on 7 February 2012. These documents were served on the respondent on 2 August 2011 pursuant to substituted service orders made by this Court on 1 August 2012 and are supported by the applicant’s affidavit of Gregory Phillips sworn 10 September 2012. Ms Kijirah indicated that she particularly relied upon [8] of Mr Phillips’ affidavit which states:
The said search shows there is no record of payment of the amount of $436,472.14 being the amount outstanding by the respondent debtor in this matter in relation to Creditor’s Petition No. SYG790 of 2011 and thus the said amount is still wholly due and unsatisfied.
At [10] of Mr Phillips’ affidavit there is a reference to Annexure “GP1” page 7, reference line 52 and page 12, reference line 112. These statements of account illustrate the balance of the amount in the Creditor’s Petition consisted of two separate liabilities, being a superannuation and a RBA deficit. Line reference 53 illustrates that the liability due and payable on this account is $60,490.67 and line reference 112 illustrates that the balance of this statement is $376,052.47. Both amounts are totalled in the Creditor’s Petition and together are $436,472.14. Both amounts remain due and payable to the applicant creditor. Ms Kijirah submits that the matters suitable to seeking the discretion of a Court to obtain a sequestration order have been satisfied and the applicant creditor seeks to move on that application.
Formal Requirements for Issuance of a Sequestration Order
The Court may make a sequestration order upon proof of the matters set out in s.52(1) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”), and subject to the jurisdiction to make sequestration orders under s.43 of the Bankruptcy Act and the conditions on which the creditor may petition under s.44 of the Bankruptcy Act being met.
Section 52(1) of the Bankruptcy Act provides as follows:
(1)At the hearing of a creditor’s petition, the Court shall require proof of:
(a) The matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient),
(b) service of the petition; verified by an affidavit of service,
(c) the fact that the debt or debts on which the petitioning creditor relies or is still owing;
And, if it is satisfied with the proof of these matters, may make a sequestration order against the estate of the debtor.
Section 43 of the Bankruptcy Act provides that the Court may make a sequestration order when:
(a)A debtor has committed an act of bankruptcy (Bankruptcy Act s.43(1)(a)); and
(b)Relevantly, at the time when the act of bankruptcy was committed, the debtor was personally present and an ordinarily resident in Australia (Bankruptcy Act s.43(1)(b)(i)).
Section 44 of the Bankruptcy Act provides that the creditor’s petition is not to be presented, unless:
(a) The debt is more that $5,000;
(b)The debt is a liquidated sum due at law and payable immediately (Bankruptcy Act s.44(1)(b)); and
(c)The act of bankruptcy in which the petition is founded was committed within 6 months before the presentation of the petition (Bankruptcy Act s.44(1)(c)).
The applicant creditor is also obliged by the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) (“the FMC (Bankruptcy) Rules”) to put before the Court affidavits:
a)Verifying the petition (Bankruptcy Act s.47(1), FMC (Bankruptcy) Rules r.4.02);
b)As to search of records of the Court and of the Federal Court as to any application in relation to the Bankruptcy Notice (FMC (Bankruptcy) Rules rr.4.04(1)(a) and 4.04(2));
c)Of service of the Bankruptcy Notice (FMC (Bankruptcy) Rules r4.04(1)(b));
d)Of service of the documents required to be served under the FMC (Bankruptcy) Rules r.4.05 (FMC (Bankruptcy) Rules r.4.06(2));
e)A search of the National Personal Insolvency Index no earlier that the day before the hearing date of the petition (FMC (Bankruptcy) Rules r.4.06(4)); and
f)Of debt which the creditor still relies as owing (FMC (Bankruptcy) Rules r.4.06(4)).
Some of the requirements under the FMC (Bankruptcy) Rules overlap with those under the Bankruptcy Act.
In relation to the matters requiring formal proof the Court finds as follows:
a)The matters stated in the petition are supported by the:
i)Affidavit of David Charles Abey sworn 22 January 2012 accompanying the petition (Bankruptcy Act ss.47 and 52(1)(a) FMC (Bankruptcy) Rules r.4.02). The bankruptcy notice was served on the respondent on 11 October 2011 at 5.45pm;
ii)Affidavit of Leopoldo Valdez sworn 3 February 2012 attached to the Creditor’s Petition verifying paragraphs 1, 2, 3 and 4 of the Creditor’s Petition; and
b)The debt upon which the DCT relies is still owing (Bankruptcy Act s.52(1)(c));
c)The respondent has committed an act of bankruptcy (Bankruptcy Act s.42(1)(a)) committed on 1 November 2011 pursuant to s.40(1)(g) of the Bankruptcy Act;
d)At the time the act of bankruptcy was committed the respondent:
i)Was ordinarily present in Australia; and
ii)Ordinarily resided in Australia (Bankruptcy Act s.43(1)(b);
e)Debt owed by the respondent is $436,472.14, being a sum more than $5,000 (Bankruptcy Act s.44.(1)(a));
f)The debt of $436,472.14 is a liquidated sum payable immediately (Bankruptcy Act s.44(1)(b));
g)The respondent, Darryn Stuart Sproule, failed to comply on or before 1 November 2011 with requirements of the Bankruptcy Notice, served on him on 11 October 2011;
h)Searches of the records of this Court and the Federal Court have been made and no application has been made in either Court in relation to the Bankruptcy Notice;
i)The Bankruptcy Notice Number BN 7084 of 2011 was served on the respondent, Darryn Stuart Sproule, by leaving a sealed copy of the Bankruptcy Notice in the letterbox addressed to Darryn Stuart Sproule, being an address located in Wollongbar in the state of New South Wales in accordance with 16.01(1)(c) of the Bankruptcy Regulations 1996 (Cth);
j)That at least five days before the date fixed for a hearing of the Petition the:
i)Petition (FMC (Bankruptcy) Rules, r.4.05(a)); and
ii)A copy of an affidavit verifying the Petition (FMC (Bankruptcy) Rules, r.4.05(c)); and
iii)A copy of the affidavit of search of the court records (FMC (Bankruptcy) Rules, r.4.05(c)); and
iv)A copy of the affidavit of service of the Bankruptcy Notice (FMC (Bankruptcy) Rules, r.4.05(d)).
Were served on the respondent, Darryn Stuart Sproule, in accordance with the orders made by Registrar Ng on 1 August 2012 which stated;
1. Personal Service of the Creditor’s Petition is dispensed with;
2. A signed and sealed copy of the petition, copies of the affidavit verifying the petition, affidavit of service of the Bankruptcy Notice together with any consent of the registered trustee, and a sealed copy of this order is served on the respondent:
a) By sending them by pre-paid ordinary post address of the respondent at PO [xxx] Coominya, QLD, 4311 and also;
b) By scanning them and sending by email to the respondent at [user ID]@bigpond.com.
3. A text (SMS) message to be sent to the respondent on mobile number (mobile number) stating that the applicant(s) has filed a creditor’s petition with the Court, and the documents have been sent to or left at post office box [xxx] Coominya, QLD, 4311 and [user ID]@bigpond.com and the Creditor’s Petition would be heard in Court on 28 August 2012.
4. The Creditor’s Petition should be deemed to be served on the respondent seven (7) days after the service in accordance with orders 2(a), (b) and 3, whichever is the later.
5. Hearing date for the creditor’s petition be amended to 2pm on 28 August 2012, Law Court Building, Queens Square, Sydney, 2000.
These details are contained in the affidavit of service of Marian Kijirah, sworn 7 August 2012.
k)The National Personal Solvency Index was searched on 10 September 2012 (same business day the Petition was heard) (FMC (Bankruptcy) Rules, r.4.06(3)) and the details of the references, in that index, to the respondent, are before the Court (FMC (Bankruptcy) Rules, r.4.06(3)(a)).
l)The copy of the relevant extract of the index is attached to the affidavit of final search of Marian Kijirah sworn 10 September 2012 (FMC (Bankruptcy) Rules, r.4.06(3)(b)(i)).
m)There is an affidavit of final debt of Gregory Phillips sworn 10 September 2012, being a person with knowledge of the facts sworn on the day of the hearing of the Petition, that the debt on which the applicant creditor relies is still owing (FMC (Bankruptcy) Rules, r.4.06(3)(c)).
No consent to act as trustee has been filed.
As set out above the formal requirements for the issuance of a sequestration order have been met and a sequestration order should be made against the estate of the respondent debtor and the applicant’s costs should be taxed and paid from the estate of the respondent debtor.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Associate:
Date: 14 December 2012
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