Deputy Commissioner of Taxation v Voyka
[2008] FMCA 67
•29 January 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v VOYKA | [2008] FMCA 67 |
| BANKRUPTCY – Bankruptcy notice – service – debtor in prison. BANKRUPTCY – Creditor’s petition – proof of amounts owing – onus of proving solvency – deeming provisions of taxation statutes. |
| Bankruptcy Act 1966, ss. 41(6A), 44(1), 52 Bankruptcy Regulations, 4.02A, 16.01 Taxation Administration Act1953, ss. 8AAA, 8AAH, 8AAZI Superannuation Guarantee (Administration) Act 1992, ss. 36, 37, 75 |
| Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 Guss v Johnstone (2000) 74 ALJR 884 |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | JOHN VOYKA |
| File Number: | BRG 682 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | 2 November 2007 |
| Date of Last Submission: | 2 November 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 29 January 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Redmond |
| Solicitors for the Applicant: | ATO Legal Service |
| Counsel for the Respondent: | N/A |
| The Respondent in person: | Mr Voyka |
ORDERS
A sequestration order be made against the estate of JOHN VOYKA.
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.
T.G. Van Der Velde and P.D. Sweeney shall be appointed trustees of the estate of the respondent debtor.
The Court notes that the date of the act of bankruptcy is 7 December 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 682 of 2007
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| JOHN VOYKA |
Respondent
REASONS FOR JUDGMENT
On 9 November 2007 I made a sequestration order against the respondent. I indicated that my reasons would be published at a later date. These are the reasons for my decision.
By creditor’s petition filed 9 May 2007, the applicant sought a sequestration order against the respondent, relying on an act of bankruptcy committed when the respondent failed to comply with a bankruptcy noticed that was served on him on 16 November 2006. That bankruptcy notice sought the payment of $89,084.09, being the balance due under a judgment of the Supreme Court of Queensland. The judgment, given on 13 December 2001, was originally in the amount of $1,439,533.48, but the applicant subsequently allowed the respondent a credit of $1,350,449.39.
The first two grounds in the Notice Stating Grounds of Opposition are:
a)The bankruptcy notice has not been properly served in accordance with the Bankruptcy Regulations;
b)No act of bankruptcy has been committed by the respondent.
The service of bankruptcy notices is dealt with by Bankruptcy Regulations 4.02A and 16.01. The latter regulation provides:
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
(a) sent by post, or by a courier service, to the person at his or her last‑known address; or
(b) left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person’s name, at the last‑known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.
(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(a) in the case of service in accordance with paragraph (1) (a) or (b) — when the document would, in the due course of post or business practice, as the case requires, be delivered to the person’s address or document exchange facility; and
(b) in the case of service in accordance with paragraph (1) (c), (d) or (e) — when the document is left, delivered or transmitted, as the case requires.
At the time the bankruptcy notice was served, the respondent was a prisoner at the Lotus Glen Correctional Centre at Mareeba. That fact is to be inferred from the judgment of the Queensland Court of Appeal, exhibited to the affidavit of the respondent’s former solicitor, in which it is recorded that:
a)On 29 June 2006 the respondent was sentenced to three and a half years imprisonment after being convicted of five counts of defrauding the Commonwealth;
b)The criminal proceedings concerned the respondent’s alleged failure to deduct PAYE tax to the Commissioner of Taxation in the financial years 1995/6 to 1999/2000;
c)An issue at the trial was whether workers engaged by the respondent were properly classified as employees or whether they were subcontractors;
d)The appeal against conviction and sentence was dismissed.
The conclusion is further supported by the affidavit of Jennifer Ann Crump, filed on behalf of the applicant, who swore that the respondent was at the Lotus Glen Correctional Facility, and did so, on the basis of correspondence from that facility. That affidavit was filed in support of an application for substituted service of the creditor’s petition. Such an order was made, permitting service of the creditor’s petition on the general manager of the same corrective facility.
The bankruptcy notice was served by William Arnold Smith, whose affidavit to that effect was filed on 9 May 2007. He swears that he served the bankruptcy notice on 16 November 2006. Mr Smith handed the documents to Allan Farrell, the general manager of the correctional facility.
The fact that the respondent was a prisoner does not impact on his ability to be served with a bankruptcy notice, nor does it affect the time for compliance with that notice: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137.
In my view, the correctional facility was the last known address of the respondent. Documents could be served upon him there pursuant to Regulation 16.01(1)(c). In my view, the failure to depose to the documents being placed in an envelope or similar packaging, marked with the respondent’s name is a formal defect or irregularity that should be excused pursuant to s.306(1) of the Act. No substantial injustice has been caused. The respondent has not sworn that he was not given the documents. His brother, Danny Voyka, who was acting on his behalf, certainly had them towards the end of November 2006.
It follows, in my view that the bankruptcy notice was properly served on the respondent on 16 November 2006.
The respondent then had until 7 December 2006 to comply with the bankruptcy notice, or apply for an extension of time within which to do so, pursuant to s.41(6A) of the Act. Such an application was not made.
The respondent’s brother, Danny Voyka, contacted the applicant at its Townsville Office and spoke to Ms Lisa Everingham. He submitted a repayment proposal on 1 December 2006. That related to the amount claimed in the bankruptcy notice. He says that a couple of days later he contacted Ms Everingham to see what was happening. He was aware of the time limit imposed by the bankruptcy notice. There is a dispute as to what, if anything, Ms Everingham said to Mr Danny Voyka between 1 December and 7 December (being the last day for compliance with the bankruptcy notice). Mr Danny Voyka says, at paragraph 8 of his affidavit:
“Ms Everingham then assured me that as I had contacted the ATO within the twenty-one days they wouldn’t be proceeding on the Bankruptcy Notice as I was negotiating a payment arrangement with them and they would extend the time frame until the end of January 2007.”
Ms Everingham, in her affidavit filed 20 September 2007 does not refer to this conversation. She does not expressly deny that it occurred. She does however exhibit a letter from the applicant to Mr Danny Voyka dated 12 December 2006 in which a higher amount is claimed ($1,726,427.15) and his repayment proposal is rejected. That tends to suggest that the conversation referred to by Mr Danny Voyka is unlikely to have occurred.
In my view, even if a conversation occurred as alleged by Mr Danny Voyka, it does not assist the respondent’s position. The applicant did not have power to extend the time for compliance with the bankruptcy notice. Here, the requirements of s.41(6A) were not satisfied before 7 December 2006. There was no means therefore for the respondent to secure an extension of time within which to comply with the notice: Guss v Johnstone (2000) 74 ALJR 884 at [62].
If it was sought to be argued that the applicant was somehow precluded from proceeding with bankruptcy action because of the representation allegedly made by Ms Everingham, the respondent would need to show that it is unconscionable for the applicant to do so, and precisely what representation is relied upon. The respondent’s brother paid, under protest, the sum of $89,084.09, being the amount claimed in the bankruptcy notice, on 31 January 2007. By that date it was abundantly clear that the applicant was seeking a payment of a significantly higher sum. There is no evidence that the applicant would accept a payment of the lesser sum. Its letter of 12 December, addressed to Mr Danny Voyka made that clear. There is no evidence that the applicant agreed to withhold bankruptcy action forever, or even indefinitely. At best it agreed to do so until the respondent’s repayment plan was submitted and considered. The only proposal that was made was rejected unequivocally.
It follows in my view that an act of bankruptcy occurred on 7 December 2006.
The remaining three grounds in the notice stating grounds of opposition to the petition are as follows:
a)The applicant has failed to provide any affidavit evidence in accordance with ss.44(1) and 52 Bankruptcy Act to show there is in fact a debt that is due and owing by the respondent to the applicant;
b)The respondent disputes the debts that the applicant claims are due and owing;
c)The respondent is solvent as he is able to pay his debts as and when they fall due.
The amount sought in the petition was $1,598,104.36 said to be an additional debt due and payable pursuant to the Taxation Administration Act 1953 and the Superannuation Guarantee (Administration) Act 1992, particularised as follows:
a)$1,470,191.20 being Superannuation Guarantee Charge incurred in respect of the years ended 30 June 1993 to 30 June 2000 inclusive, plus interest thereon;
b)$81,804.84 being judgment interest having accrued on the balance judgment together with interest thereon;
c)$46,108.32 being goods and services tax and PAYG amounts together with interest thereon.
The applicant has allowed a credit for the payment made by Mr Danny Voyka of the amount claimed in the bankruptcy notice. The claims, particularly for the superannuation guarantee charge arise out of the same matters for which the respondent was convicted and sentenced to a term of imprisonment.
The affidavit of Ms Everingham filed 21 September 2007 exhibits Superannuation Guarantee default assessments for the years ended 30 June 1993 to 30 June 2000. The assessments were issued on 24 April 2003. They total $583,860.77. Interest has been claimed on these assessments. Ms Everingham swears that an objection was lodged by the respondent on 30 April 2003 that was disallowed. It was not taken further. Ms Everingham’s evidence was not challenged by the respondent. She was not required for cross examination.
In a further affidavit filed 21 September 2007 Ms Everingham affirmed that the amount claimed in the creditor’s petition was still outstanding. She exhibited documents explaining how the applicant’s claim was calculated, including the claims for interest.
The production by Ms Everingham of the respondent’s running balance account is prima facie evidence that the account was properly kept and that the amounts and particulars in the statement are correct: s.8AAZI Taxation Administration Act1953.
Sections 75(1) and (2) Superannuation Guarantee (Administration) Act 1992 (“the SGA Act”)provide:
(1) The mere production of:
(a) a notice of assessment; or
(b) a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of a notice of assessment;
is conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amounts and all of the particulars of the assessment are correct.
(2) A document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of a document issued or given by the Commissioner, a Second Commissioner or a Deputy Commissioner is prima facie evidence that the second-mentioned document was so issued or given.
Such documents were exhibited to Ms Everingham’s affidavit. The sums are payable on the day each assessment was made: ss.36 and 37 SGA Act.
Sections 8AAA to 8AAH Taxation Administration Act provide for the charging and recovery of interest on overdue tax amounts.
Therefore, the argument that the applicant has not produced evidence to show that debts are owing to it must be rejected.
The respondent has not adduced any evidence (as opposed to assertion) to dispute the debts claimed by the applicant. In his affidavit filed by leave at the hearing on 2 November 2007, the respondent stated that he has filed an application with the Administrative Appeals Tribunal to review the decisions regarding superannuation debts. No further particulars are given of the basis of the challenge. This ground of opposition must also be rejected.
The evidentiary onus of establishing that he is able to pay his debts lies on the respondent. To this extent he relies on two affidavits of William Wight, who has purported to give opinion evidence of the respondent’s solvency. Putting aside the fact that the evidence on which Mr Wight gives his opinion has not been proved by the respondent (which alone is sufficient to decide this ground against the respondent), there is a more fundamental difficulty. In his affidavit filed on 20 July 2007 Mr Wight quite properly states, at paragraph 1.2, that the opinion he has expressed is qualified by uncertainty in relation to certain contingent liabilities of the respondent, in which he includes the amounts claimed by the applicant. He says at paragraph 2.5 that he has not been engaged to attend to the respondent’s GST obligations at any stage. He says, at paragraph 3.1 of his affidavit that from his analysis of the documents provided to him, the respondent has approximate net assets of $1,755,621.20 excluding his contingent liabilities. At paragraph 3.3 he says that the net asset position is calculated on the basis that the respondent’s wife makes her interest in any property available. There is no evidence of her willingness to do so.
Mr Wight then refers to the amount claimed by the applicant (totalling $8,735,324.10) and proceeds to argue why it is not owing. Mr Wight is not qualified to do so. However, at paragraph 3.12.5 of his report, Mr Wight says
“Based upon the expanded definition of employee under the Superannuation Guarantee (Administration) Act 1992 it is likely that for the purposes of this Act that more subcontractors are deemed to be employees than is the situation with group tax. Consequently there is a greater likelihood of there being a liability for the superannuation guarantee charge as contractors. In order to properly assess Voyka’s liability, a detailed analysis of the circumstances for each subcontractor needs to be undertaken. To conduct this analysis I would require comprehensive access to all documentation including information in the possession of the Australian Federal Police and the ATO in relation to any superannuation that has already been paid by subcontractors”.
Mr Wight says that the situation of 1016 individuals needs to be analysed. This has not been done.
Mr Wight is not able to give evidence of whether the amount claimed in the creditor’s petition is capable of being disputed. He concedes that further evidence is needed to enable opinion to be given about this. If the amount claimed only in the creditor’s petition is included as a contingent debt, the respondent’s financial position is precarious. If the total amount claimed by the applicant is included, the respondent is hopelessly insolvent.
The evidence as it is presented does not satisfy me that the respondent is able to pay his debts.
The remaining grounds of opposition to the making of a sequestration order are therefore rejected. No other ground for not making a sequestration order was advanced. I therefore propose to make such an order.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 29 January 2008
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