Goldspink, Re R.L. Ex Parte Commissioner of Taxation

BankruptCV - exerclse of Court's dlscretlon to dlsmlss or

ad~ourn

petltlon - default Judgment

obtamed In Supreme Court agalnst

debtor for unpald Income tax and addltlonal taxes

- d btor earned

lncome as commissions for promotlng tax avoldance schemes - stay

of executlon In Supreme Court upon

terms that sum

of $?SO,OOO.OO

be applled Ln satlsfactlon of debts

- propertles of a cornpan17

controlled b7 the debtor mortgaged to petltionlng credltor

debtor defaulted on terms

- stay partlalljr llfted by Supreme

Court - whether s.41(3)(b) prevented issue of bankruptcy notlce

;:hether

Supreme Court Judgment obtained by false pretences

debtor belng prosecuted under Crimes Act

(Cth) - effect of close

relatlonship between

tax office and D.P.P. - whether amount of

tax debt overstated - effect of onus on debtor imposed by

s.l90(b) Income Tax -4ssessment Act

- effect of payment of

commisslons lnto trust account - effect of mortgages by debtor's

company to petltionlng credltor

- whether petltlon should be

stood o7er untll determlnation of crlmlnal proceedlngs.

Bankruptcv Act 1966 ss.41(3)(b),

44(1).

Income Tax Assessment Act 1936

ss.19, 51, 16?(b), 190(b).

I.O.C. Australia Ptv. Ltd. v. Mob11 Oil Australia Ltd. (1975) 49 A.L.J.R. 176.

Trautweln v. Federal Commlssloner of Tasatlon (1936) 56 C.L.R.

63.

Re Lewln; Ex parte Milner, Plncus

J., unreported, 24 Aprll,

1386.

Re Vella; Ex parte Sevmour (1983) 48 A.L.R.

420.

Re Verma; Ex parte Deputv Commlssloner of Taxatlon

(1984)

4 F.C.R. 181. Full Court, unreported

2 2 February7 1985.

McMahon v. Gould (1982) 7 A.C.L.R. 202.

Ahern v. The Commlssloner of Taxatlon, Ryan	J., Supreme Court of
Queensland, 17 Aprll 1986.

Re O'Learv;

Ex parte Bavne (1985) 61 B.L.R. 674.

RE: RICHARD LINDSAY GOLDSPINX: EX PAPTE DEPUTY COMMISSIONER OF

TAXAT

No. F1987 of 1985

Beaumont ,	J.
2:gdney

11 June 1986

IJ THE FEDEP-a COURT OF AUSTP-ILIA	I
J
GENERAL DIVISION	I

RVJKRUFTCY DISTRICT	OF r m SOUTH GIALES	J	m.	~ 1 9 8 7	of 1985
I

1JJE THE

.WUSTPJILIP,N

CAPITAL

TEP,RITORY

R E :

R I C K U D

LINDSAY

GOLDSPINK

Ijebtor

M PARTE:

DEPUTY

COMMISSIONER

OF TAXATION

Fetltlonlng Credltor

MINUTES OF ORDEF.

Judge maklnq order: Beaumont, J.

Date order made:	11 June 1986
[*ere made :	Sydney
THE COURT ORDEPS THAT:

1. I make a sequestratlon order agalnst the

estate of tne debtor.

I order that the costs

of the petltlonlnq

creditor, lncludlng

reserved

costs,

taxed and pald accordlnq to the

Act.

3 .

I order that the operatlon

of orders 1 and

2 be suspended up to and lncludlng

2 July

1386.

4. I reserve liberty to the debtor to apply,

on two days' notlce, for the resclsslon of

orders 1 and

2 .

P J o t e :

Settlement and entry

of orders is dealt

71th m Bankruptcy Pule

124.

D 1 THE	FEO RAL	COURT	OF AUSTFALIB	)
J

GEMERG DIVISION

PJANKEUPTCY DISTRICT OF NEW SOUTH WALES

I	No. P1987 of 1985

PJID THE

AUSTPALIAN

CAPITAL

TERRITORY

)

R E :

RICHARD

LINDSAY

GOLDSPIMX

Debtor

Ex PARTE:

DEPUTY COMMISSIONEF OF T.LXATION

Petitlonlng Credltor

COPSA:	Beaumont , S.
D=:	l1 June 1956

By his petltion dated 23 December 1?85, the Fetltlonlng

credltor seeks a sequestratlon order aqalnst the estate of the debtor. He clalms that the debtor is lndebted to hlm in the sur

of $3,155,939.16

and $150.00 for costs under a default ~udq-men~

obtained In the Supreme Court

of New South Wales on

1 7 January

1984.

The petltlon

1 s opposed by

the debtor, xho appeared

person, on varlous dlscretlonary grounds.

stay of

executlon on the ludgment

xas granted by

consent by

the Supreme Court on

27 February

1984 upon terms but

xas removed

part

Lee J. on 30 October 1985, in

circumstances to be mentioned later,

so as to permlt executlon

to an amount of $625.000.00.

The act of bankruptcy relled on 1 s

the debtor's fallure to comply wlth

a 14

day bankruptcy notlce

served on hlm on 21 November

1985. Although s.41(3)(b)

of the

Bankruptcv Act

1966 prohlblts the lssue of a

bankruptcy notlce

;There executlon on a ~udgment

has been stayed, In

the case of a

partlal

stay,

the

prohlbitlon

I n s.41(3)(b)

should,

oplnlon, be read down so as

to permlt the lssue

of a notlce In

respect of that part

of'

the judgment on which executlon 1s not

stayed. It

follows, In

my view, that the bankruptcy notlce 1s

not Invalldatsd by s.41(3)(b).

The compllcated hlstory of the matter commences wlth the

Issue, on 16 September

1983, of notices of assessment for lncome

tax and addltlonal tax for late payment

in the total sum of

$3,024,098.35 In respect of assessable lncome claimed

t o have

been derlved by the debtor In the years endlng

30 June 1979, 30

June l9EO and

30 June 1981 ("the sublect assessments"1.

The

basls of assessment was that the debtor had earned

commissions as

the promoter

of certain tax avoldance schemes but had falled to

dlsclose the recelpt of the commissions In hls return of income. The Commissloner therefore soursht to Invoke hls power to make a default assessment pursuant to s.l67(b) of the Income Tax

Assessment Act 1936.

On 28 October 1983, the

petltlonlng

credltor filed a statement of clalm m the Supreme Court

clamlng

payment of the sum of $3,024,098.35 together

wlth addltlonal tax.

On l? November 1983. the debtor lodged

ob~ectlons In respect of

the sublect assessments. On 15 December 1983, the petltlonlng

3 .

creditor

notified

the

debtor

that

had lsallowed

his

oblectlons.

As has been said. on

January 1984, default ludgment

zas entered

In the sum of $3,155,939.16 together with costs of

$150.00.

On 31 January

1984, the debtor appealed to the Supreme

Court to challenge the assessments. On

27 February 1984, a stay

esecutlon,

upon

terms,

vas

greed

upon

the

'--

parties. Pursuant

to that agreement, on

27 February 1984, the

debtor gave undertakmgs to the Court

as follows:

that he would

supply to the petltlonlng

credltor detalls of

assets owned by

hlm or

by hls famlly or by companles wlth whlch	he
or hls famlly was associated:

that he would ensure that Lamore Pty.

Ltd.,

a company controlled by

hlm, would grant to

the petltionmg credltor a flrst mortgage

over certaln propertles to secure payment

of the sum of $780.000.00 on certaln terms;

that he would wlthln 150 days, In discharge

of the

securlty, pay to the petitlonlng

credltor the sum of $780,000.00;

that he would dillgently prosecute hls

appeals ln the Supreme Court In respect of

d number of

assessments for lncome tax.

lncludlng the sublect assessments;

that he would produce to the petltlonlng

credltor records under hls control relatlng

the

conduct

a tax

minimlsatlon

buslness:

that

would

co-operate

In the

lnvestlgatlon

by the petltlonlng credltor

of the	affalrs	of	the	debtor	and	his
family;

that, untll further order, he would not

dlspose of

the

assets

of hlmself,

hls

family or associated

companles

except,

lnter alla, wlth

the consent of the

petitloning credltor or in the dlscharge of

debts In the ordlnary course

of buslness.

For hls part, the petltlonlng credltor then agreed

m t h

the debtor to apply the sum of

$780,000.00:

(1) first, towards

satlsfaction

the

llabllity, If any, of Thalla Goldsplnk, the wlfe of the debtor, under the Tasatlon (Unpaid Companv Tax) Assessment Act 1982 In respect of the sale of shares m Baker

Ijraftlng Sernces

Pty. Ltd., Alpha Bootes

Fty. Ltd. and Earstool Bandlt Pty.

Ltd.,

whlch were companles apparently controlled

by the debtor;

(11) secondly, towards the satlsfaction

of the

11abLblllty.

If any, of the

trustees of

certaln

trusts,

presumably

under

the

Taxatlon (Unpald Company	Tax)	Assessment
m:

(lil)as to the balance, towards satlsfactlon of

the 1lablllt.y of the debtor to lncome tax

or vendor's

recoupment

under

the

aforesald assessments.

The petltlonlng

credltor

further

agreed

that.

upon

payment to hlm wlthln 150 days of part of the sald sum of

$780,000.00, he would by way of partlal dlscharge, release hls

security. For

this

purpose,

the

parties

attrlbuted

the

several propertles then secured by Lamore the followlnq values:

(1)	A property at Ultlmo - $450,000.00.
til)	A property at Kingsford - $55,000.00.

(iil) A property at Xosevllle

- $100,000.00.

( 1 ~ )

A property

Paclflc

Highway,

Karuah,

M.S.M. - $250,000.00.

Upon noting these undertaklngs and agreements, Lee J.,

on 2 ? February 1984, ordered that executlon

of the Supreme Court

~udgment be stayed untll

flnal determlnation of the aforesald

appeals. Llberty to apply was reserved.

On 28 March 1984,

a deed was entered Into between Lamore

and the petltlonlng credltor.

It recited the terms

of the stay

of executlon. Under the deed, Lamore.

as surety for the debtor,

agreed to mortgage the aforesald propertles upon the footlng that

it had no personal llability except

as mortgagor.

On 15 December 1984, apparently by consent, Ma.well J.

extended the perlod of

150 days mentioned m the order made on

February 1984, to 31 January 1985. On

15 August 1984 and 15

January

1985

respectlvely,

completlon

the

sale

o I the

Xosevllle and Klngsford propertles took

place.

On settlement the

petitionlng

credltor eceived

the

sums

of $lOO.OOO.OO

and

$55,000.01 respectively

m partlal satlsfactlon of the debtor's

llabllity of $780,000.00.

The other propertles secured by Lamore

have

n o t

yet been sold. Recent valuatlons suggest that the

present value of the Ultlmo

slte, assumlng its present zonlng

continues, is

In the order of $360,000.00, although thls flgure

lncludes In

the land valued one lot whlch was

not mortgaged by

Lamore.

The

Karuah

slte

appears

now

orth

about

$250.000.00 if sold

In three separate lots as a motel

slte, a

caravan park slte and

a cabln slte respectively.

6 .

On 30

October 1985. the debtor having defaulted under

the condltlons of the existlng stay of executlon, Lee J. ordered

that the stay

"be removed in part to permit the Cpetltionlng

creditor3

execute

the

ludqment

amount

$625.000.00."

November 1985, the petitlonlng creditor applled

Court debtor, Lamore, Thalla Goldsplnk and the debtor's sollcltors.

f o r "mareva"

~n~unc'tlons agalnst

the

Supreme

19 December 1985. for the reasons he then

gave, Lusher

J. granted

the in~unctlons

sought.

On 17 December 1985, the petltlonlng credltor Issued

amended assessments

In respect of the taxable Income of

the

debtor for the

1979,

1980 and 1981 years

Income In the total

sum of $2,990,677.65.

It appears that these assessments, whlch

xere for less than the assessments lssued

m September 1983.

accepted that the debtor was to be allowed

a deduction under 5.51

of the Income Tax Assessment Act In respect

of outgolngs pald to

thlrd partles who had acted

as sub-agents In the transactlons In

whlch

the debtor had earned commlsslons. On

17 February 1986,

the debtor

ob~ected

to these amended assessments. On

2 April

1986, the

p tltlonlng

credltor

dlsallowed

the

debtor's

ob~ectlons.

In May

1986, the appeals prevlously lodged by the

debtor were listed In the Supreme Court for the purpose of flxlng

a hearlng date. In response to the debtor's request, no

hearmg

date was flxed. The debtor gave as the reason for hls request

I .

the pendency of certaln crlmlnal charges agalnst hlm

dealmg, to

some extent at least. wlth matters the sub~ect	of the assessments
under appeal.

In	urging the Court to exerclse Its dlscretlon to

ad~ourn or

dismiss

the

petltion,

the

debtor

challenged

the

sublect assessments as “arbitrary”. He

also contended that the

Supreme

Court ~udgment was

obtalned

“false

pretences”,

although no clear statement of thls argument was ever made by the

debtor. It w111 suffice to say that nothing emerged at the

hearmg to suggest that the ~udgment

now sought to be enforced

xas llable to be set aslde on the ground that lt was obtalned by

fraud (see Halsburv’s Laws of Ensland 4th ed., V01.26 at p .285) .

He further claimed that the present proceedlngs were, In some

;lay, talnted by reason

of the proximltjr

of the relationship

between the office of the petitlonlng credltor, the offlce of the

Special Prosecutor

(appointed under the Speclal Prosecutors Act

1982) and the offlce of the Dlrector of Publlc Prosecutlons.

also submitted

that these proceedings should,

In any event, be

stood

over

pendlng

the

hearlng

crlmlnal

charges

brought

agalnst hlm

by the Director of Publlc Prosecutlons.

In his case, the debtor called a

number of offlcers of

the

petltlonlng

creditor

and

of the Dlrector of Publlc

Prosecutlons who had dealt wlth the affalrs of the debtor. Some

these

offlcers

had

been

transferred

from

the

Taxation

Department to the offlce

the Speclal Prosecutor and then to

the office of the Director of Public Prosecutions. Some of these

officers, whllst In the office

of the Speclal Prosecutor, had

been concerned wlth

clnl recovery proceedmgs agau-kz the debtor

as well

as wlth the lnitlatlon of crlmlnal prosecutlons agalnst

hlm. Reference was made by the debtor,

thls connectlon, to

the scope of the statutory functions of the Speclal Prosecutors wlth respect to both the lnstitutlon of crlminal prosecutlons and

the taklng of clvll remedies on behalf of the Commonwealth (see

Speclal Prosecutors Act, s.6(l)(a) and (b)).

In thls context. the debtor relled on the fact that, on

8 July 1985. on the mformatlon of

the Director

of Public

Prosecutlons.

the

debtor

was

charged

wlth

two

offences

consplracy under s.36 of the Crlmes Act

1914.

The offences

alleged were, flrst,

consplracy

prevent

defeat

the

executlon or

enforcement

of a law of the

Commonwealth

(s.86(l)(b)); and. secondly,

consplracy

defraud

the

Commonwealth

(s.96(l)(e)).

According

partlculars

the

charges furnished in a letter wrltten by the Dlrector

of Publlc

Prosecutions on 11 July 1985, the glst of each charge

1s that the

debtor, In concert

wlth

the

other

defendants

and

others,

knowlngly partlclpated in schemes of "pre-tax proflt-strlpplng"

whereby large number5

of companles were strlpped of

all thelr net

tanqlble assets as a result of which the Commlssloner of Taxatlon

xas hlndered.

obstructed,

delayed

defeated

collectlnq

lncome tax payable by such companles on proflts made by them, The partlculars further allege that the debtor was aware that assets

9 .

of the strlpped companles were used to pay commissions to, inter allos, the debtor. The commlttal proceedlngs In respect of these

charges are fixed for

a hearmg to commence on 16 June 1986

before Mr. Butler S.M.	The hearlng 1 s estlmated to contlnue for
some months.

The evldence establlshed that, In the course of

thew

respectlve

duties,

officers

the

Department

Taxatlon

communlcated wlth offlcers of the Speclal Prosecutor and wlth

officers of the Dlrector of Fubllc Prosecutions about the

debtor,

and. In particular,. about the crlmlnal and

cl-~ll

proceedlngs now

pendlng agalnst

hlm.

There

1 s also evldence that. although

personal lmproprlety could be suggested, those officers felt

partlcular goodwlll towards the debtor.

It appears that those

offlcers formed

the new that because the debtor

was, In thelr

bellef. Involved m the "tax avoidance Industry" on

a large

scale, they,

on behalf of the Commonwealth, should not shlrk from

what they percelsred to be

thew

responslblllty to instltute any

proceedlng, clcl1 or crlmlnal, properly available

to be brought

agalnst the debtor by reason of hls actlvltles. But

it does not

that the petltlon should be dlsmlssed because of such

attltudes. To borrow

the

language

of Gibbs J. In I.O.C.

Australla Ft-7.

Ltd. v. Mob11 Oil Bustralla

Ltd. (1475) 49

B.L.J.R.

176 at p.182, "it 1 s not the law that only a credltor

who

feels

qoodwlll

towards

hls

debtor

1 s

entltled

[sequestration3 order."

I U .

The debtor did not give evidence in these proceedings

because he sald that he wlshed to malntaln hls "rlght of sllence" debtor sald that he had no unencumbered assets, explalning that the home In whlch he and his wife llved was owned by her. He

also tendered, wlthout ob~ection, a llst of creditors.

The list

omltted the petltlonlng credltor.

Indicated that the debtor

owed

$3,761.00

unsecured

credltors.

Westpac

Banklng

Corporation

1 s owed

total of $2,912.00 on several accounts.

The balance 1 s owed to tradesmen and

a medical practltioner. The

debtor also sald that he owed $15,200.00 by way of

a loan from a

relatlsre, Mr. T.B. Wlnyard.

The

loan 1s sald to be secured by a

blll of sale over furniture and a car owned by the debtor. The

car was sald by the debtor to have

a value of only

$5,000.00.

The events leadlng

up to the maklng of the assessments

In September 1983 commenced wlth

a memorandum dated 13 September

1983 wrltten by Mr.	T.	Malone,	an	officer of the Taxatlon
Department as follows:

"RICHARD LINDSAY GOLDSPIPm

Informatlon has been recelved that as a result

of destruction. by

fire, of bulldings owned by

an entlty of Rlchard Lindsay Goldsplnk, thls

entlty is to recelve an Insurance pay out of

$800,000.

An investlgation of

the

affalrs

Rlchard

Lindsay Goldsplnk has not, as yet, been carrled

out and consequently It

1 s not known what assets

are avallable to

meet any amended assessments.

4s the Department 1 s now aware

of the pendlng

payment of $800,000 to one of Goldsplnk's

11.

entities,

its

consldered

that

mended

assessments should be lssued in order to	lay
claim to thls amount.

Information

obtained from deal sheets slezed

from the office

of John Walker Wynyard shows

that Goldsplnk derived commlsslon, from the sale

of tax-avoldance schemes, whlch have not been

returned as Income.

These commissions are a s follows:-

1979 $ 28,062

1980 $1,607,927

1981 $ 48,088

As these comlr

llsslons

repre

sent the

total

received In respect of 1366 companles and in

fact some

2020 companies were Involved. It

submitted

that

the

above

commissions be

proportlonately Increased.

It is therefore submltted that the taxpayer's

1479, 1980, and 1981 assessments be amended to

Include the followlng

commissions:-

1979

41,497

$2,377,754

1980

1981

71,111"

Another officer, Mr.

Bourke, 9 supervlsor, responded

by a memorandum dated 14 September 1983 as follows:

"IIICOME TAX

: RICHARD L. GOLDSPINK

The

taxpayer was not Involved In all the

2 0 2 0

"Wynyard" strlpped companles but he recelved

fees/commlsslons from 182 of the 1366 strlps

ldentlfled from the dlal (sic) sheets inspected.

The method of calculation of the estimated total

commlssions

recelved

the

taxpayer

supported.

Submlsslon re Penaltv

The taxpayer S addltlonal

ncome

was

net

feesfcommlsslons from the promotion

of Income

tax avoldance schemes. A penalty of 100% of the

tax avoided, in

terms

s . 2 2 6 ( 2 ) ,

recommended and that

100% has been calculated in

accordance

wlth

the

uuidellnes

set

out

Taxation Rulins No. I.T. 2012 as follows:-

40%	culpabllity component of the Baslc

Penalty,

20% Interest

component

the

Baslc

Penalty. The total Interest at 10%

p.a. from 8 Aprll

1982

February 1983 and at

20% p.a. from

14 February 1983 to 16 September

1983 computes to

2 0 . 3 % flat,

40%

in view of the fact the taxpayer was

a tax advlser/scheme promotor - see

attached.

Only one of the

"deal"

sheets mentioned by Mr. Malone

was

tendered

evldence.

It showed that,

respect

of a

transactlon In June

1980 involvlng the strlpplng of the assets

Hesleyslde

Pty.

Llmlted

(the "target

company"),

"agent's

commlsslon" of $4,830.00

gas pald to "R.L. Goldsplnk and Co.

Trust Account". The debtor sald that,

the course of hlc

practlce as an accountant. he malntalned

a trust account. He

also claimed that amounts were pald out of

the trust account to

thlrd partles who acted

as sub-agents In the transactlon.

For

Instance, the debtor adduced documentary evldence showlng that In

January, February and March 1980, amounts totalling

$8,181.00

were pald to

Mr. G. Dltfort. The debtor clalmed that, pursuant

to s.51 of the Income Tax

Assessment Act, he should be allowed

deductlon In respect of such outgolngs.

The

response of the

petitlonlng creditor was to accept such an allowance

I prlnclple

but to dispute the amount claimed. The petltionlng credltor says

that the amount of any such deductlons has already been reflected

13.

In the amended assessments Issued

In December 1985.

From such

general assertlons on both sldes, It

1s only posslble to conclude

that. In the absence of any detalled documentatlon. the debtor

has falled to discharge the onus Imposed upon

h m by s.l9O(b) of

the Income Tax Assessment -4ct to establlsh that he should be allowed any deductlon beyond those accepted by the petltroning

credltor in the assessments made

In December 1985.

The

debtor

also

arcrued

that he

dld

not

earn

the

commissions personally.

He sought to obtaln comfort from the

circumstance

that

the

commlsslons

were

pald

Into

hls

trust

account. But the mere

nommatlon

by the debtor of

trust

account as

the reclplent of Income earned by hlm would not lead

to the result

that, for taxatlon purposes, the debtor dld not

derlve that Income {see Income Tax Assessment Act,

s.19).

The debtor also attacked the assessments by reference to

the approach taken

by Mr. Malone and by

Mr. Bourke. He argued

that their memoranda lndlcated that the assessments were qulte

arbltrary. He slngled out for speclal crlticlsm the attempt to

lncrfase the debtor's income by the assumptlon that he had been

Involved In strlpplng the assets of	2020	"target" companles
rather than 1366 of such companles.

There

1s force In

the debtor's submlsslon that the

several assessments Issued

the petltlonlng credltor have at

least

overstated

the

amount

his

lncome

the

form

14.

commlsslons derlved by hlm. But the debtor has not been able. on the materlal in evldence. and in dlscharge of the onus cast upon

by s.l90(b) of the Income

Tax Assessment Act, to establish that

no such Income was earned by him

(see Trautwem v . Federal

Commlssloner of Taxatlon (1936) 56 C.L.R. 63 at p.111; Re

Lewln;

Ex parte Mllner, Plncus

J.,

unreported, 24 Aprll 1986). On the

contrary, the evldence, sketchy as

It is, lndlcates that

It IS

probable

that,

in the years In questlon, the debtor earned

substantial commlsslons.

It IS true that

it is dlfficult to

quantify the amounts Involved and that, In the

end, the amount

found to be due

to the petltionlng credltor

b:? way of Income tax,

as distlnct from addltional tax. may even be less than the value

of the securltles offered by Lamore. Yet, as has been sald. the

debtor has no assets. The evldence suggests that he 1 s Indebted

to the petltionlng credltor for an amount well

In excess of the

amount ghlch must be owed before

credltor

may present

petltlon (see Bankruptcy Act, s.44(1)).

He has already commltted

an act of bankruptcy; and even

his appeals to the

Suprem

Court were allowed and the assessments were set

a lde, the act

bankruptcy would remaln (see Re Vella;	E h parte Sevmour (1983) 48
-1.L.R. 420).

It follows that. technlcally at least, the debtor

1 s

msol-u7ent. Further,

in my

mew, the debtor has failed to make

out a

case that the Court,

the exerclse of Its dlscretlon.

should decllne to proceed to sequestratlon

(see Re Verma;

parte

Deputv

Commlssloner

TaxatLon

(1984) 4 F . C . R .

181;

15.

affirmed on appeal by Full Federal

Court,

Fox, McGregor and

Wllcox JJ., 22 February 1985, unreported). On the other hand, It

1s posslble that, wlth the ald of professlonal advice, the debtor

may

be able to dlscover the

existence of

documentary evldence

vhlch may establish that the assessments Issued should be wholly set aslde. It appears unllkely that such evldence does exlst but the debtor should be given a last opportunlty to seek advlce on

these matters, as well

as on the questlon

of the beneflclal

ownershlp of

the assets held by Lamore.

It 1 s

posslble that,

contrary to the debtor S assertlons, the beneflclal ownershlp of that company's assets may belong to the debtor. If that were so,

It may

be necessary

to r e n e w the questlon

of the debtor's

lnsolvency in the llght of the dlsclosure of

fresh assets which,

It appears. are of

substantial value.

It was Impllclt,

not

expllclt

the

several

arguments advanced

by the

debtor, that the petltion should be

adlourned untll the determlnatlon of the crlminal proceedlngs.

In a

proper case, the

Court, In Its discretlon, may stand over

the petltlon In order that the debtor can malntaln hls "right

silence" (see McMahon

v. Gould ( 1 9 8 2 ) 7 A.C.L.R.

202:

Ahern v.

The Commlssloner

Tsxatlon

- Xyan J., Supreme

Court

Queensland, 17 Aprll

1986,

unreported).

But,

m the

present

case,

It 1s

not clear how the debtor's oral testlmony could

lmprove h15 posltlon.

From

the llttle materlal tendered,

seems that the

"deal" sheets mentloned by Mr. Malone are the

relevant

source

documents.

However, nelther

party

sought

16.

tender

these

cruclal

documents

other

than

the

one already

mentioned.

In other words, on the material avallable, It appears

that the fate

the appeals In

the Supreme Court will depend

upon the documentatlon

In the form

of the

"deal" sheets rather

than upon oral evldence

of the debtor.

In	these rather speclal clrcumstances. the debtor has

falled to demonstrate that the Court should, In its discretlon,

defer the

hearmg

of the petitlon untll after the crlmlnal

proceedmgs have been concluded.

Finally, It should

noted

that m the

petltlon,

reference was made to the securlty granted	by Lamore	m these
terms :

"2.

The debtor 1 s ~ustly

and truly lndebted to

me under a f m a l judgment obtalned on 17 January 1984 agalnst the debtor I n the Supreme Court of New South Wales In the sum of $3,155,939.16 and $150.00 costs, bemg a ~udgment upon which a stay of execution granted on 27 February 1984 was on 30 October 1985 removed In part pursuant

to an order made by hls Honour Mr. Justlce Lee

to permlt me to execute the ~udgment up to an

amount of $625.000.00 only.

3 .

I do not, nor does any person on my

behalf,

hold any securlty over the property of the debtor or any part of It for the payment of the

amount

speclfled

In the

last

precedlng

paragraph. Alternatively

I hold securlty over

the

property of the

debtor In the form of

mortgages

over

the

property

Lamore

Pty.

Limlted.

company duly Incorporated

I n l7ew

South

Wales,

but

the

present

value

of the

security

is less than the amount specified

the last preceding paragraph."

The fact that Lamore granted

securltjr to the petltlonlng

. .

17.

credltor is not, of itself, a reason for decllning to make

sequestration order.

The assets charged were

not, of course,

liquld and,

on the debtor's case, were not assets In whlch he

could clalm any Interest. On the other

hand,

the grant of

securlty could properly be taken Into account

the debtor's

favour as

clrcumstance polnting agalnst the exerclse

of the

Court's discretion to make

sequestration order. Its weight,

however, must be mlnlmal (see Re O'Learv;

Ex parte Bavne (19851

61 A.L.H.

6 7 4 ) .

For these reasons.

I propose to make

a sequestratlon

order, but to suspend the operatlon of such order for

a perlod of

21 days, reservlnq liberty to the debtor to apply In that perlod

for the resclssion

of the sequestratlon order.

It follows from

what has prevlously been sald that an appllcatlon for resclss1on

would only be entertalned on the grounds,

flrst, that fresh

evldence,

whlch

presumably

would be

documentary

form,

established that the assessments should be wholly set aside;

or,

secondly, that the debtor

15, In truth, the beneflclal owner of

the assets held by Lamore, In whlch event those assets would be

taken

Into

account

assesslng

the

debtor's

solvency.

I make the followlnq orders:

1.	I make	a sequestratlon order aoalnst the estate	of the
debtor.

18.

7 I order

that

the

costs

of the petitioning creditor,

lncludlng reserved costs, be taxed and pald accordlnq to

the Act.

3 .

I order

that

the

operatlon

orders

1 and 2 be

suspended up to and lncludlng

2 July 1986.

4 .

I reserve llberty to the debtor to

apply, on two days’

notlce, for the resclssion

f orders 1 and 2.

Ijebtor appeared in person

Counsel

and

Solicltors

Mr.

Darvall,

Q.C. wlth

for Petltlonlng Credltor: Mr.

P. Urquhart, Instructed by

Australian

the

Government

Sollcltor.

--.	Gates of hearlnq:	4, 5 and 6 June	1986
.
Ijate Judgment Dellvered:	11 June 1986.

[1986] FCA 226

6 Nov 1986