Deputy Commissioner of Taxation v Steuer

[2014] FCCA 773

FEDERAL CIRCUIT COURT OF AUSTRALIA

DEPUTY COMMISSIONER OF TAXATION v STEUER [2014] FCCA 773

Catchwords:
BANKRUPTCY – Creditors petition – whether requirements for creditors petition met.

BANKRUPTCY – Personal insolvency agreement – whether conditions met.

PRACTICE AND PROCEDURE – Adjournment.

Legislation:

Bankruptcy Act 1966 (Cth), Part X, ss.43, 44, 47(1), 52(1) and (2)(a) and (b), 188(1) and (2C)

Federal Circuit Court (Bankruptcy) Rules2006 (Cth), rr.4.02, 4.04(1)(a) and (b), (2), (3) and (4), 4.05, 4.06(2), (3) and (4)

Re Sanders (2003) 1 ABC(NS) 408; [2003] FCA 1079

Sanders v Knudsen & Yates trading as The Hargreaves Practice [2004] FCAFC 305

Applicant: DEPUTY COMMISSIONER OF TAXATION

Respondent: GEOFFREY JOSEPH STEUER

File Number: PEG 192 of 2013

Judgment of: Judge Antoni Lucev

Hearing date: 14 April 2014

Date of Last Submission: 14 April 2014

Delivered at: Perth

Delivered on: 14 April 2014

REPRESENTATION

Counsel for the Applicant: Ms M-J de Reus

Solicitors for the Applicant: Australian Government Solicitor

Counsel for the Respondent: Mr T Yeh

Solicitors for the Respondent: e.Law Solicitors

ORDERS

1. The Respondent’s oral application for an adjournment of the creditors petition is dismissed.

2. A sequestration order be made against the estate of Geoffrey Joseph Steuer (“the Respondent”).

3. The Applicant Creditor’s costs of this application be fixed in the sum of $6,360.20 and be paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966 (Cth).

AND THE COURT NOTES that the date of the act of bankruptcy is 6 February 2013.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PERTH

PEG 192 of 2013

DEPUTY COMMISSIONER OF TAXATION

Applicant

And

GEOFFREY JOSEPH STEUER

Respondent

REASONS FOR JUDGMENT

(Edited extempore reasons)

Application for adjournment

1. There is before the Court an application under the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) for a creditors petition by the Deputy Commissioner of Taxation against the respondent, Geoffrey Joseph Steuer (“Mr Steuer”).

2. Mr Steuer sought an adjournment of the creditors petition this morning, which was refused for reasons which follow.

3. Whether or not an adjournment is granted is a discretionary decision by the Court having regard to all of the circumstances in relation to the adjournment application.

4. In relation to the litigation history of this matter a creditors petition was filed on 29 July 2013 in relation to a judgment debt in favour of the Deputy Commissioner of Taxation in the District Court of Western Australia in November 2012, which, with interest, is now a debt in the sum of $212,110.77 (“the Debt”).

5. The matter went before a Registrar of this Court on four occasions (10 September 2013, 8 October 2013, 29 October 2013 and 12 November 2013), and on each of the first three occasions an adjournment was granted, and on the last occasion orders were made in the following terms:

   1.The Respondent file and serve a notice of opposition supported by affidavit/s by 26 November 2013.

   2.The Applicant file and serve any answering affidavits(s) by 3 December 2013.

   3.The Petition be adjourned to a judge on a date and time to be fixed after 3 December 2013.

   4.Costs of today be reserved.

6. On 17 December 2013 the matter came before the Court, and the Court made an order adjourning the matter to 2.00pm on 20 December 2013. The hearing scheduled for 20 December 2013 was subsequently vacated, and the hearing of the Petition adjourned to a date to be fixed, today being fixed as the date and the parties notified accordingly on 24 January 2014.

7. The history of the matter since it was last before the Court is set out in the affidavit of Mandee-Jean de Reus, affirmed 14 April 2014 (“Ms de Reus’ Affidavit”) in which she deposes that:

   a)between 3 February 2014 and 10 April 2014 she made five attempts to correspond or speak with Mr Paul Hunt (“Mr Hunt”) of e.Law Solicitors, the solicitors acting for Mr Steuer, to discuss Mr Steuer’s proposal to pay out the Debt to the Deputy Commissioner of Taxation as deposed to in Mr Steuer’s affidavit, sworn and filed on 16 December 2013 (“Mr Steuer’s December 2013 Affidavit”);

   b)as at 14 April 2014 Mr Hunt had not returned any of Ms de Reus’ telephone calls or responded to any of her emails;

   c)on 14 March 2014 Ms de Reus received a telephone call from Mr Steuer, returning an earlier telephone call from Ms de Reus. Ms de Reus says that Mr Steuer said he had no idea of where he was or what he was doing in relation to the matter. Ms de Reus told Mr Steuer that she had endeavoured to contact Mr Hunt but that he did not return her emails or phone calls;

   d)on 4, 7 and 10 April 2014 Ms de Reus made three attempts to speak with Mr Steuer and on each occasion left her telephone number for Mr Steuer to return her call;

   e)on 11 April 2014 at approximately 2.40pm Perth time, Ms de Reus returned a telephone call to Mr Tony Yeh (“Mr Yeh”) of e.Law Solicitors. Ms de Reus says that Mr Yeh told her that Mr Hunt was going into hospital that day to have his gall bladder removed, and that Mr Yeh knew nothing about the case and wanted to know what the Deputy Commissioner of Taxation wanted from his client. Ms de Reus suggested that Mr Yeh get in contact with Mr Hunt or Mr Steuer and get instructions for today’s hearing. Mr Yeh again asked what the Deputy Commissioner of Taxation wanted to do, and Ms de Reus said that the Deputy Commissioner of Taxation wanted the outstanding creditors petition paid in full, failing which, the hearing would proceed. There was then some discussion as to whether or not there would be an application by Mr Steuer’s solicitors to adjourn the matter today, but no definite outcome was conveyed to Ms de Reus by Mr Yeh during the call. The Court notes that Mr Hunt’s illness, whilst unfortunate, does not account for the failure to contact the Deputy Commissioner of Taxation’s solicitors for a period of over two months in the face of regular endeavours by the Deputy Commissioner of Taxation’s solicitors to speak to Mr Steuer’s solicitors;

   f)at approximately 4.23pm Perth time on 11 April 2014 Ms de Reus received a telephone call from Mr Steuer who indicated that he knew Ms de Reus had been trying to contact him. Mr Steuer indicated he had been trying to get hold of his solicitors, unsuccessfully, and that he wanted an adjournment of today’s hearing. Ms de Reus told Mr Steuer that she had received a call from Mr Yeh, and asked if Mr Yeh had called Mr Steuer. Mr Steuer advised that Mr Yeh had not been in contact with him. Mr Steuer further indicated that he had not been able to contact his solicitors to find out what to do. There was some discussion concerning other solicitors and the possibility of an adjournment if other solicitors were to represent Mr Steuer today; and

   g)at approximately 5.02pm Perth time on 11 April 2014 Ms de Reus again spoke to Mr Steuer who indicated that had been trying to contact Mr Hunt and was told that he was in hospital, and that his solicitors could not do anything unless he gave his word he was not going to show up to the hearing. Mr Steuer said he did not know whether he would attend the hearing, and asked whether it would make a difference. Ms de Reus indicated that she could not advise him or represent him.

8. The evidence shows that the Deputy Commissioner of Taxation’s solicitors have been endeavouring to contact Mr Steuer’s solicitors for over two months, and that until mid-afternoon last Friday, being the working day before the hearing, there had been no response.

9. When the matter was called today Mr Yeh appeared for Mr Steuer. At the outset Mr Yeh indicated that an hour previously Mr Steuer had entered into an “arrangement” under Part X of the Bankruptcy Act 1966 (which relates to personal insolvency agreements). That “arrangement” had not been forwarded to the Court, or to the Deputy Commissioner of Taxation’s lawyers, under cover of an affidavit or otherwise. The Court adjourned, and the Part X “arrangement” was forwarded to the Court forthwith. Upon examination it appeared that that part of the Controlling Trustee authority form required to be completed by Mr Steuer authorising a registered trustee, solicitor or the Official Trustee, to call a meeting of creditors to consider the proposal for a personal insolvency agreement and to take control of Mr Steuer’s property in accordance with Part X of the Bankruptcy Act 1966 had not been completed. Apart from Mr Steuer’s signature, and last Friday’s date, it was completely blank. Put simply, Mr Steuer had not authorised a specific or named trustee. The part of the form required to be signed by the Controlling Trustee appears to have been signed by a Mr Wily of Armstrong Wily, a Sydney chartered accountancy firm, earlier today. Mr Steuer did not however nominate, and therefore did not authorise, Mr Wily to be trustee.

10. The failure to authorise a specific or named trustee means that the requirements of s.188(1) of the Bankruptcy Act 1966 which allow a debtor to “sign an authority in accordance with the approved form naming and authorising a registered trustee, a solicitor or the Official Trustee to call a meeting with the debtor’s creditors and to take control of the debtor’s property” has not been complied with. Furthermore, there is no evidence, and none was able to be produced, that Mr Steuer, as debtor had produced “before the person authorised consents to exercise the powers given by the authority”, a statement of the debtor’s affairs and a proposal for dealing with them under Part X of the Bankruptcy Act 1966, contrary to the requirements of s.188(2C) of the Bankruptcy Act 1966. The effect of the failure to give those documents to the “person authorised”, in this case purportedly Mr Wily, before the consent of Mr Wily, means that authority signed by Mr Steuer is “not effective”: s.188(2C), Bankruptcy Act 1966.

11. In those circumstances, the Court is of the view that the authority to appoint the Controlling Trustee is not effective. Therefore, there is, and can be, no Part X personal insolvency agreement in place.

12. The conduct of Mr Steuer’s solicitors both toward the Deputy Commissioner of Taxation’s solicitors, and their client, in the period leading up to this hearing, and their conduct in producing what was purported to be a Part X personal insolvency agreement at this hearing to the Court in the circumstances described above, was manifestly unprofessional. Furthermore, what little action was taken was too little action taken too late.

13. The creditors petition was filed over eight months ago. There have been four Court attendances on a Registrar of this Court, and one Court attendance on a Judge of this Court prior to today. Effectively there have been five adjournments at the behest of Mr Steuer in order that his affairs may be put into order. Mr Steuer’s affairs have not, however, been put into order, and the Debt to the Deputy Commissioner of Taxation remains wholly outstanding.

14. Mr Steuer’s solicitors and Mr Steuer, have not done anything since the matter was last before the Court on 17 December 2013 which has had the effect of putting Mr Steuer’s affairs properly in order, or to pay the amount of the outstanding Debt.

15. The litigation history of the matter, does not favour an adjournment of the proceedings.

16. In relation to the merit, the Deputy Commissioner of Taxation has a District Court judgment in his favour. The current Debt arising from that judgment is $212,110.77. Mr Steuer’s December 2013 Affidavit, and an affidavit filed by Mrs Steuer on 16 December 2013 (“Mrs Steuer’s December 2013 Affidavit”), indicated that the Debt might be paid, but that has not happened, and the reasons why that has not happened have not been put before the Court, on affidavit or otherwise.

17. Mr Steuer’s case is devoid of merit. Any further adjournment would be to further prejudice the Deputy Commissioner of Taxation by reason of further delay in this matter.

18. The merits of the case do not favour an adjournment of the proceedings.

19. In all of the circumstances, the adjournment application, made orally this morning, is dismissed.

Creditors petition

1. This is a creditors petition application by the Deputy Commissioner of Taxation seeking a sequestration order against Mr Steuer.

2. The application is opposed by Mr Steuer. Mr Steuer has not however filed a notice stating grounds of opposition (“Notice of Opposition”) to the creditors petition as ordered by the Registrar on 12 November 2013.

3. The application for a sequestration order is based upon the Debt, which arose from a judgment debt obtained by the Deputy Commissioner of Taxation in proceedings in the District Court of Western Australia for an amount of $211,832.96. According to the most recently filed Affidavit of Debt that amount, with interest, has now become $212,110.77, and remains wholly due and unsatisfied: Affidavit of Debt, deposed by Matthew Cross, 11 April 2014, para.4.

4. There is no dispute that that the Debt is owing to the Deputy Commissioner of Taxation by Mr Steuer. Mr Steuer filed an affidavit, sworn 11 November 2013 (“Mr Steuer’s November 2013 Affidavit”) in which he explains the circumstances in which the Debt arose. The Debt arose by reason of the failure of Mr Steuer’s accountants to file relevant personal tax returns and Business Activity Statements in the years leading up to 2012, notwithstanding representations from Mr Steuer’s accountants that they had done so: Mr Steuer’s November 2013 Affidavit, paras.4-23. Accountants now engaged by Mr Steuer have apparently lodged all outstanding returns and Business Activity Statements with the Australian Taxation Office: Mr Steuer’s November 2013 Affidavit, paras.24-26.

5. Negotiations were entered into with a view to obtaining finance to enable Mr Steuer to pay the debt owed to the Deputy Commissioner of Taxation. Essentially, those negotiations revolved around a refinancing of the equity that Mr Steuer has in his primary residence, which he owns as a tenant in common in equal shares with his wife. In this regard Mr Steuer’s December 2013 Affidavit relevantly says as follows:

   3.I intend to pay the debt that is the subject of the Petition in full. To do this I need to sell my family home which is at 3 Goldie Way, Baldivis, WA.

   4.My wife Paulyne Steuer has offered to purchase the family home from me. Today my wife informed me that she has obtained an offer from Westpac for $464,000 which will provide sufficient funds to pay the mortgagee ANZ Bank and the debt set out in the Petition.

   5.I request that the court allow an 8 week adjournment to allow time for the sale to be effected.

   (Mr Steuer’s December 2013 Affidavit at paras.3-5).

6. Mrs Steuer’s December 2013 Affidavit relevantly says as follows:

   2.I am married to the Respondent. My husband and I live at 3 Goldie Way, Baldivis, Western Australia (the “property”) which we own as tenants in common in equal shares.

   3.….

   4.My husband and I have a joint loan from ANZ Bank, with a mortgage over the property. As at today the loan amount is $264,331.03.

   5.….

   6.I have agreed with my husband to purchase the property outright and to provide funds towards the debt which is the subject of the Petition.

   7.Today I received an offer of finance from Westpac Banking for $464,000.

   8.I request that the court allow an 8 week adjournment to allow time for the sale to be effected.

   (Mrs Steuer’s December 2013 Affidavit at paras.2-8).

7. Mr Steuer has still not filed and served a Notice of Opposition.

Law

1. The Court may make a sequestration order upon proof of the matters set out in s.52(1) of the Bankruptcy Act 1966, subject to the jurisdiction to make sequestration orders under s.43 of the Bankruptcy Act 1966 and the conditions on which a creditor may petition under s.44 of the Bankruptcy Act 1966, being met.

2. The applicants, as petitioning creditors, are also obliged to put before the Court affidavits:

   a)verifying the petition: Bankruptcy Act 1966, s.47(1); Federal Circuit Court (Bankruptcy) Rules2006 (Cth), r.4.02 (“FCC (Bankruptcy) Rules”);

   b)as to search of the records of the Court and the Federal Court as to any application in relation to the bankruptcy notice; FCC (Bankruptcy) Rules, r.4.04(1)(a) and (2);

   c)of service of the bankruptcy notice: FCC (Bankruptcy) Rules, r.4.04(1)(b);

   d)of service of documents required to be served under the FCC (Bankruptcy) Rules, r.4.05: FCC (Bankruptcy) Rules, r.4.06(2);

   e)of search of the National Personal Insolvency Index no earlier than the day before the hearing date for the petition: FCC (Bankruptcy) Rules, r.4.06(3); and

   f)of debt on which the creditor still relies as owing: FCC (Bankruptcy) Rules, r.4.06(4).

3. The Court may decline to issue a sequestration order if:

   a)it is not satisfied with the proof of any of the above matters: Bankruptcy Act 1966, s.52(2); or

   b)it is satisfied by Mr Steuer that:

   i)he is able to pay his debts: Bankruptcy Act 1966, s.52(2)(a); or

   ii)for other sufficient cause a sequestration order ought not be made: Bankruptcy Act 1966, s.52(2)(b).

Consideration

1. The Court is satisfied as to the matters required to be proved for the making of a sequestration order. Specifically, the Court accepts that there is:

   a)an affidavit verifying the petition: Affidavit of Darrell Cunneen, affirmed 26 July 2013;

   b)an affidavit of search of court records: Affidavit of Faye Heather Maxtas, sworn 26 July 2013;

   c)an affidavit of service of the bankruptcy notice: Affidavit of Shane Hedley Shaw, sworn 17 January 2013;

   d)an affidavit of service of relevant documents: Affidavit of Cheryl Lorraine Harrison, sworn 2 September 2013;

   e)an affidavit of search of the National Personal Insolvency Index: Affidavit of Benjamin Michael Pisano, affirmed 11 April 2014; and

   f)an affidavit of debt still owed: Affidavit of Matthew Cross, affirmed 11 April 2014.

2. A petitioning creditor who has made out the requirements set out above has a prime facie right to a sequestration order unless very special circumstances are shown to justify the Court departing from its usual practice: Re Sanders (2003) 1 ABC(NS) 408; [2003] FCA 1079 (“Re Sanders”), affirmed on appeal in Sanders v Knudsen & Yates trading as The Hargreaves Practice [2004] FCAFC 305 at para.14 per Whitlam, Branson and Sackville JJ. No submissions in opposition to the creditors petition were made on behalf of Mr Steuer.

3. There is no proof before the Court that Mr Steuer is able to pay the Debt. The position that Mr Steuer finds himself in, if the facts in the affidavits filed on his behalf are correct, is:

   a)firstly, the result of the professional negligence and incompetence of his former accountants; and

   b)secondly, his inability to secure sufficient finance to pay the Debt owing to the Deputy Commissioner of Taxation, or if finance was obtained in the manner set out in Mr and Mrs Steuer’s December 2013 Affidavits, a failure to pay all or any of the amount of the finance so obtained toward the Debt.

4. Mr Steuer, for present purposes, remains indebted to the Deputy Commissioner of Taxation in the sum of $212,110.77, and has no present means to pay the Debt.

Conclusion

1. In the circumstances set out above the creditors petition will be granted, and a sequestration order will issue. The Deputy Commissioner of Taxation’s costs should be paid out of the estate of the bankrupt, Mr Steuer, in accordance with the Bankruptcy Act 1966 in the sum of $6360.20. The date of the act of bankruptcy is 6 February 2013.

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev

Associate:

Date:  14 April 2014