Deputy Commissioner of Taxation v Tomlin
[2007] FMCA 222
•13 February 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v TOMLIN | [2007] FMCA 222 |
| BANKRUPTCY – Contested creditor’s petition – asserted solvency – ability of debtor to meet his liability dependent upon litigation only recently commenced. |
| Bankruptcy Act 1966 (Cth), s.52 |
| Tomlin & Ors v Ford Credit Australia [2005] NSWSC 540 |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | MARIO TOMLIN |
| File number: | SYG3334 of 2006 |
| Judgment of: | Driver FM |
| Hearing date: | 13 February 2007 |
| Delivered at: | Sydney |
| Delivered on: | 13 February 2007 |
REPRESENTATION
| Solicitors for the Applicant: | Mr C Bevin Hunt & Hunt |
| Counsel for the Respondent: | Mr S Golledge |
| Solicitors for the Respondent: | Hewitts Commercial Lawyers |
ORDERS
A sequestration order be made against the estate of Mario Tomlin.
The applicant creditor’s costs be fixed in the sum of $2,092.91 and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth), all proceedings under the sequestration order be stayed until 6 March 2007 on the undertaking of the respondent given by his counsel that he will not, during the term of the stay, withdraw, charge or deal in any manner with any funds in which he has an interest held in the trust account of Hewitt’s Commercial Lawyers and on condition that he will make out and file his statement of affairs in accordance with s.54 of the Bankruptcy Act.
THE COURT NOTES THAT:
The date of the act of bankruptcy is 24 October 2006.
A consent to act as trustee has been signed by Steven Nicols dated 3 November 2006 and has been lodged with the Official Receiver in Sydney.
Under the Bankruptcy Regulations, a copy of this order be given to the Official Receiver in Sydney within two days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3334 of 2006
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| MARIO TOMLIN |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me a creditors’ petition filed on 15 November 2006 seeking a sequestration order against the estate of Mario Tomlin. The petition is supported by the affidavit of Susanne Leonie Vihm, forming part 2 of the petition, and also by the affidavits of Matthew Ellsmore going to service, Candice Janine Nahnsen in relation to search, and a second affidavit by Susanne Leonie Vihm updating the evidence in relation to liability. I note that there is a consent to act as trustee presented by Steven Nichols of Nichols & Brien. I also accept as exhibits two documents relating to the costs of the petition.
The petition is opposed by the debtor only on the basis of asserted solvency. The assertion of solvency is in turn based upon litigation which Mr Tomlin has commenced against his former solicitors at the end of last year in the New South Wales Supreme Court. That claim arises out of earlier litigation in which Mr Tomlin was unsuccessful against another party. The opposition to the creditors’ petition is supported by affidavits of Mr Tomlin himself and also Mr Phillip Hewitt, a solicitor. The gist of the opposition is that Mr Tomlin asserts that he has a good claim against his former solicitors in relation to their conduct of the earlier litigation, which led to a judgment against him in the New South Wales Supreme Court in the matter of Tomlin & Ors v Ford Credit Australia [2005] NSWSC 540.
It is certainly arguable that that litigation was unwisely commenced. Observations by the Court in its judgment at [237]-[240] would tend to suggest that it should have been apparent before the commencement of the litigation that the litigation would fail. It does not follow from that, however, that there was any fault leading to a claim for damages against the solicitors conducting the litigation. Mr Tomlin was also represented by senior counsel in that litigation and failed on the issue of liability, to which the Court’s observations to which I have referred do not appear to have been determinative.
It is significant that the litigation against his former solicitors upon which Mr Tomlin relies was only recently commenced. Nothing will occur in that litigation until May this year. His current solicitor, Mr Hewitt, thinks there are good prospects of a successful outcome and good prospects of a mediated outcome shortly after the return date in May of this year. That, however, is far from certain. The Deputy Commissioner of Taxation contends that a successful outcome in the litigation is a matter of speculation and I am inclined to agree. I note also that Mr Tomlin has a costs liability arising out of the judgment in Tomlin & Ors v Ford Credit Australia which is at present unresolved.
Sequestration orders serve a public purpose of regularising the affairs of debtors so that their estates can be managed in an orderly fashion for the benefit of all creditors. It is open to a trustee in bankruptcy to continue litigation commenced by a debtor for the benefit of creditors. I do not rule out the possibility that if Mr Tomlin is made bankrupt, his trustee might elect to continue the litigation against his former solicitors should it appear at that time to have good prospects of success. However, the mere existence of that litigation in its present early and uncertain state does not provide a persuasive reason not to make a sequestration order against him. The simple fact is that Mr Tomlin cannot pay the debt that has led to the creditor’s petition and his only hope of paying it depends upon the recently commenced and uncertain litigation against his former solicitors. That is far from sufficient to establish solvency.
I am satisfied that the debtor committed the act of bankruptcy alleged in the petition and I am satisfied with the proof of the other matters of which sub-s.52(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) requires proof. I make a sequestration order against the estate of Mario Tomlin. I will also order that the applicant creditors’ costs be fixed in the sum of $2,092.91 and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act. The Court notes that the date of the act of bankruptcy is 24 October 2006. The Court further notes that consent to act as trustee has been signed by Steven Nichols and has been lodged with the Official Receiver in Sydney.
Mr Tomlin seeks a stay of proceedings under the sequestration order while he considers his position. I accept the undertakings proffered by him in relation to money in his current solicitor’s trust account and as to the completion of a statement of affairs. I will order pursuant to s.52(3) of the Bankruptcy Act that all proceedings under the sequestration order be stayed until 6 March 2007.
I certify that the preceding seven (7) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 28 February 2007
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