Grapsas v DCOT - [2010] FMCA 338

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GRAPSAS v DCOT

[2010] FMCA 338

BANKRUPTCY – Application to annul bankruptcy or review sequestration order of Registrar – made eighteen months after order – application to travel to Greece – opposed by Trustee – all applications dismissed.

Bankruptcy Act 1966, ss.153B, 178

Khan v Melluish [2010] FMCA 119

Applicant:

KONSTANTINO GRAPSAS

Respondent:

DEPUTY COMMISSIONER OF TAXATION

File Number:

MLG 434 of 2010

Judgment of:

Burchardt FM

Hearing dates:

12 & 14 April 2010

Date of Last Submission:

29 April 2010

Delivered at:

Melbourne

Delivered on:

18 May 2010

REPRESENTATION

The Applicant:

In person

Counsel for the Respondent:

Mr Malcolm

Solicitors for the Respondent:

ATO Legal Services Union

Counsel for the Trustee:

Mr A. Serong

Solicitors for the Trustee:

Serong Legal

ORDERS

All of the Applicant’s applications be dismissed.
The Applicant pay the costs of the Trustee and of the Respondent, to be taxed in accordance with the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 434 of 2010

KONSTANTINO GRAPSAS

Applicant

And

DEPUTY COMMISSIONER OF TAXATION

Respondent

REASONS FOR JUDGMENT

In this matter, the applicant Mr Grapsas seeks relief in a variety of respects. Although it will be necessary to examine his various applications in more detail, it is sufficient for these purposes to say that in the ultimate what he really seeks is that:
(a)
the sequestration order by which he was made bankrupt on

14 August 2008 be annulled; and
(b)he be permitted to travel overseas.
For the reasons that follow, I think that Mr Grapsas’ case is wholly devoid of any merit whatsoever. I will not be making the orders he seeks and will rather be making those sought by his trustee in bankruptcy, Kenneth Wayne Lamb.

The Procedural History

Although the sequestration order originally made by the Court is not exhibited in any of the materials before me, it seems clear enough that it was 14 August 2008 when that order was made (see affidavit of Linda Nawavakaca, paragraph 7).
Mr Lamb was appointed as the trustee in bankruptcy on the same day (see exhibit KWL1 to the affidavit of Mr Lamb filed 9 April 2010).
On or about 19 September 2008 Mr Grapsas filed his statement of affairs with ITSA (exhibit T1) and in that document disclosed as creditors only Dr John Finkelstein (in the sum of $40,000) and Mr Fred Wilson (in the sum of $23,000) although on the last page under the heading Declaration the following words are contained: “exept for RTO debt”.
The applicant reads and writes English fluently, although not always grammatically correctly or with good spelling. I would infer in Mr Grapsas’ favour that this last excerpt was a reference to the alleged debt against him in favour of the Australian Taxation Office (“ATO”).
The applicant was indeed bankrupted on a debt owed to the ATO following proceedings in the County Court in the sum of $273,880.29, the judgment being obtained on 5 November 2007 (affidavit of

Ms Nawavakaca – paragraph 8).
On 24 March 2010, over 18 months after the sequestration order,

Mr Grapsas filed his originating application. That application sought that the bankruptcy be annulled and also that Mr Grapsas be permitted to travel to Greece to see his ailing mother. There was a reference in the application to a refusal on the part of the trustee to release accounting figures, invoices and receipts. The applicant also filed an affidavit on 25 March 2010 and I will return to that affidavit and his other affidavits filed on 29 March, 7 April 2010 and 13 April 2010 and to his oral evidence and submissions in due course.
On 7 April 2010 Mr Grapsas filed an amended application. This application said, in terms:
“This is an application for an order under the Bankruptcy Act, 1966 (Cth) s178. That I be permited to travel overseas, on Humaniterian and, or compassionate grounds and:
have notice number VN218/2008 annued or reviewed due to fresh avidence…” [sic]
That application said, relevantly, that he sought interim orders:
“permission to travel overseas. To pursue my legitimate or personal desires or duties.
to unnal or review my bankruptcy due to profit and loss statement supplyd.” [sic]
The respondent, Deputy Commissioner of Taxation (“DCOT”), filed a notice of opposition on 8 April 2010 together with the affidavit of

Ms Nawavakaca. The trustee likewise filed a notice of opposition on

9 April 2010, together with substantial affidavit material.
I have set these matters out at some length although generally I try to avoid copious recitations of procedural history. In this case, however, I think it is necessary to set out the above recitation because the way in which the applicant has presented his case has in many ways been extremely difficult to follow, albeit that its substantive purport is clear.
It is important to note that the applicant has had every reasonable opportunity to prepare and present his case.
For these purposes I make it clear that I have treated the various applications, including those implicit in Mr Grapsas’ oral submissions, as comprising applications for relief in the alternative amounting to:
(a)an application that the sequestration order made against him be annulled. (Mr Grapsas has referred to various sections of the legislation but, in substance, what he seeks is an annulment pursuant to s.153B of the Bankruptcy Act 1966);
(b)in the alternative, an application for an extension of time and, if granted, a review of the decision of the Registrar to make the sequestration order; and
(c)an application to review the decision of the trustee not to permit Mr Grapsas to travel overseas, pursuant to s.178 of the Bankruptcy Act.

The Facts

It should be stated at the outset that Mr Grapsas was extremely difficult to follow. The accounts he gave of various events were so convoluted and indeed changed from time to time in such a way as to make any determinative conclusions as to what may have taken place extremely difficult. Once again, although it is not generally desirable, as with the procedural history, there is no avoiding a traversal of the evidence in detail in the order in which it was given.
In his first affidavit, filed on 25 March 2010, Mr Grapsas relevantly deposed that he had sold his shop on 29 January 2010 and had sent $22,000 of the sale proceeds to his sister in Greece. The affidavit asserts that he borrowed money from his sister to repay Dr Finkelstein and Mr Fred Wilson. The original of the document annexed to his affidavit (exhibit A2) contained what purports to be, as it were, a reconstruction, as best Mr Grapsas was able, of the takings and outgoings of his bakery business from 2003 to 2010.
It is immediately apparent that the takings of this business were at times substantial, such as $36,000 in March 2004. It is also noteworthy that from about June 2003 onwards Mr Grapsas was paying himself $4,200 per month in wages and this continued, with only occasional and minor diminution, until the bankruptcy.
It should also be noted that on the page numbered 106 there is a reference to a Mr Winkler, being it would appear the former landlord of Mr Grapsas’ business, obtaining an award in his favour at the Victorian Civil and Administrative Tribunal, albeit allegedly, according to

Mr Grapsas, through false and misleading information. At page marked 114 it is clear that the business was sold for $30,000, of which $22,000 was sent to the applicant’s sister in Greece. It would appear $5,000 was paid to creditors, $1000 was given to a son of one of his friends and $2,000 was retained for his own use.
It should be noted that at page 118 the applicant asserts that his wages were $350 per week but that figure does not, it seems to me at least, correspond in any meaningful way with the earlier extracts showing personal wages of $4,200 on a monthly basis.
The burden of Mr Grapsas’ document, exhibit A2, is that he was taxed on his gross income not his net income after deduction of business expenses.
This position was added to by the applicant’s affidavit, filed on 29 March 2010, when relevantly Mr Grapsas asserted that his trustee,

Mr Lamb, had been satisfied that Mr Grapsas had not, as he could have done, sought to offset against his GST liability from time to time the GST credits generated by the conduct of his bakery business. It is of course a fact that sales of bread are GST exempt.
In his next affidavit, filed on 7 April 2010, the applicant made reference to the death of his father in 2006 and the fact that his mother was ill. He said:
“My late father’s estate and my mother’s needs to be sorted out and I am required to be there in order for this to take place.”
He went on to say that he has no next of kin in Australia, save for a son and daughter who do not care for him, and he went on to say:
“After selling the machinery of the business I was running in Bayswater and reason for my bankruptcy, I send the money $22,000, to my sister who had bought and paid out Mr Fred Willson who had been the owner of the machinery. I was left with $1,500 that was the bond money held in trust by the agents”

(of the shopping centre where the shop was).
It is common cause that Mr Lamb took that bond money from the applicant.
The applicant went on to say, “He also refused me to travel overseas to see my ill mother” and “My trustee also refused to release documents relating to my business so that I may give a truer understanding of my business financial affairs.”
He went on further to say that he had no estate or assets of any kind and was in receipt of Newstart Allowance.
It is clear from the affidavit of Ms Nawavakaca that the applicant has not filed tax lodgements for tax years ending June 2002, 2006, 2007, 2008 and 2009, nor any BAS statements from 2006 to 2008.
In a short affidavit filed on 9 April 2010 Mr Lamb deposed that he had not in fact received any application from Mr Grapsas to travel overseas and had not refused it, but that he opposed permission for overseas travel in any event.
In another affidavit with numerous annexures filed on the same date, Mr Lamb set out the relevant history of the matter. It should be noted that although provided every opportunity to do so, Mr Grapsas did not seek to cross-examine Mr Lamb, who was in court and available for cross-examination. I approach Mr Lamb’s evidence in the light of that fact.
Mr Lamb has deposed that he has sent twelve separate letters to Mr Grapsas between 2 October 2008 and 19 January 2010, to which he has had no reply. I accept that that is so.
Mr Lamb further deposes at paragraph 14:
“On 9 February 2010 I had a further meeting with the Applicant who told me that despite his earlier statements to the contrary and the contents of his Statement of Affairs, Fred Wilson and John Finkelstein were not creditors. The Applicant now contended that they had been paid out prior to the bankruptcy in 2007 with funds obtained from his sister in Greece and that his sister was a creditor of the Bankrupt Estate.”
I accept that that was what Mr Grapsas told Mr Lamb at that time.
I also note paragraph 29 of the affidavit in which Mr Lamb deposes that on 9 February 2010:
“The Applicant did indicate to me that he would be desirous of leaving Australia and at that time he provided to me a copy of certain documents that I understand from him he had also made available to the Child Maintenance Authority for the same purpose.”
This, in fact, is a reference to an ongoing dispute involving child support payments, pursuant to which it seems clear that the Child Support Agency has placed a bar upon overseas travel by Mr Grapsas.
By further affidavit filed on 12 April 2010 Mr Lamb denied that he had in any way refused to release any books required by the applicant, and I accept that denial.
On 13 April 2010 Mr Grapsas’ next affidavit made numerous other assertions. In part he said that Mr Winkler had never actually been his landlord.
More importantly, however, he exhibited as exhibit B to that affidavit a letter to him from Peter Polites of the firm then known as Polites & Carroll.
That letter, dated 4 February 2005, makes it quite clear in my opinion that the sum of $60,000 was advanced to Mr Grapsas by Peter Polites on or about that date. The sum represented a part of the proceeds of the sale of his parents’ (probably the father’s alone) home in Hawthorn. The characterisation of that sum, which plainly came from his parents and not his sister, was unclear but it is clear that that is where the $60,000 referred to in his case came from.
Also exhibited to this affidavit were tax assessments for the years 2003 to 2005, albeit all issued in March 2010. It is not in any way clear what data was used to construct the assessments.
In his oral submissions before me, Mr Grapsas said that he knew he should have completed his BAS forms. He said that he had transferred machines to a new owner and then to his sister, and that his sister gave a cheque to Mr Polites, who then gave him the $60,000. This evidence was given on Monday, 12 April 2010.
Mr Grapsas also referred to a child support dispute of $50,000. He provided to the Court exhibit A1, which is a document from Dr Finkelstein which purports to show that the majority of moneys lent by Dr Finkelstein to Mr Grapsas were repaid in about February or March 2005. He also subsequently provided exhibit A3, which is a letter dated 29 January 2010, purporting to represent a transfer by Mr Wilson to Mr Grapsas’ sister of all claims then extant on Mr Wilson’s part for a final payment of $600.
Under cross-examination it became clear that the machinery had been sold for $30,000 exactly. It is not at all clear who paid the $30,000, nor is it clear the manner in which the machinery, which seems to have constituted the main part of the purchase price, if not all of it, was released from some sort of lien on the part of Mr Wilson. The only thing that is clear is that $22,000 arising from that sale was sent to the applicant’s sister in Greece.
It seems likewise reasonably clear that there is a debt owed to

Mr Winkler as a result of the VCAT proceedings and in evidence,

Mr Grapsas quantified that as $8,000.
The applicant confirmed that he has not bought any tickets to go overseas, and indeed cannot do so. He confirmed that he had worked as a baker, however, in Lefkas when he was there in 1997 to ’98. The purport of his evidence made it clear to me that he would actively contemplate staying in Lefkas, if not permanently at least for an appreciable period of time, if he were permitted to travel.

Findings as to the Facts

The transcript will not fully reveal just how bad a witness Mr Grapsas was. By way of illustration only of the inadequacy of his evidence, I would point to the fact that whereas on Monday he was adamant that his sister had advanced the $60,000 that had, by and large, paid out

Dr Finkelstein and Mr Wilson, on the Wednesday he had to recant completely when faced with his own documentation which showed that it plainly came from the sale of his father and/or mother’s house.
While I accept that he may have had difficulties in recollection, this was a striking one.
It was extremely difficult to follow the thread of Mr Grapsas’ narrative, because he was extremely prone to circumlocution both when he was in submissions and in the witness box. He showed a marked tendency to ramble and to provide great detail about matters that were essentially irrelevant.
To the extent that anything turns on credit in this case, I would have to record that the written documentation and Mr Grapsas’ evidence were riddled with inconsistencies relating to, amongst other relevant considerations:
a)when Dr Finkelstein and Mr Wilson were paid the sums they appear to have been paid to discharge the debts owing to them;
b)the sources of the funds made available to do so (particularly the funds that finally appear to have paid out the debts to Mr Wilson in January 2010);
c)what had happened to the proceeds of the sale, although in the end I think I have been able to deal with this as I describe above;
d)the debt to Mr Winkler; and
e)the blatant inaccuracies in Mr Grapsas’ statement of affairs.
I am prepared to go, not without reservation, as far as saying:
a)Mr Grapsas bought his business in about 2003 and appears to have borrowed a total of some $60,000 from Dr Finkelstein and Mr Wilson to do so;
b)Dr Finkelstein and Mr Wilson were repaid the vast bulk of those borrowings at some intermediate point. It is possible this was reasonably proximate to the provision of $60,000 to Mr Grapsas by Mr Polites in 2005, but it is not certain that that is so;
c)whenever the repayment was (and exhibit T2 suggests it may have been in 2007 or possibly even 2008) some small amount was left over, which in some wholly unexplained way was felt to constitute a lien to the benefit of Mr Wilson;
d)that lien was discharged in some fashion completely undisclosed, and this enabled the applicant to sell his machinery to unidentified parties in January 2010 for $30,000;
e)the applicant sent $22,000 of that sum to his sister in Greece; and
f)the remaining moneys were paid to other creditors of the applicant, given to the son of one of his friends, and a very small amount appears to have been extracted by Mr Lamb.
I find that it is more probable than otherwise that the sister in Greece is simply a stakeholder for the applicant. She did not provide him with $60,000 as the applicant first claimed. His parents did. Given that she did not lend him $60,000, the alleged repayment of $22,000 and ? default of $32,000 is in my view a fiction invented by the applicant to benefit himself.
In this regard I should say that while I found Mr Grapsas a very unbelievable witness and while I accept that his command of spelling and grammar in English is poor, he is not unintelligent. He struck me as being very alert to his own best interests and keenly aware of them.
The applicant has comprehensively failed to co-operate with the trustee and the details are given in Mr Lamb’s affidavit, not the least being Mr Grapsas’, in my view, wholly unexplained failure to correspond to numerous letters sent to him.
The applicant failed to disclose his debt to the ATO in his statement of affairs. He failed to disclose other creditors to whom he discharged amounts arising out of the sale sum of $30,000. He failed to disclose the debts owing to Mr Winkler.
Although the applicant asserts he does not owe any money to the ATO, this statement defies belief. Even if one were to accept in his favour that he did not have an extant GST liability because the credit inputs might have outweighed the percentage of sales, bearing in mind that a significant proportion was GST-exempt bread, his own material shows he was paid $4,200 per month over a very substantial period.
He has not paid any tax for any of the years, as I understand it, from 2003 to the present.
Even on his own figures he plainly has a personal income tax liability to the ATO.
I have not sought to detail each and every one of the very many matters of which the trustee makes complaint. I would only say that they are recorded in some detail in the trustee’s affidavits, which were not challenged by cross-examination.
There is no doubt in my mind that the applicant owes the ATO a sum of money, although it is not possible for me to say how much. I accept that the judgment entered in the County Court is still extant, and has not been at any time the subject of any application for it to be set aside or challenged by way of appeal.

Disposition of this Case

It is readily apparent that there is no proper basis on which to extend time to the applicant to review the original decision of the Registrar insofar as that is what he seeks. Although Mr Grapsas says that he has only recently been able to work out that he, as he puts it, does not owe the ATO any money, I do not accept that explanation.

Furthermore, there is no basis to annul the bankruptcy. The trustee is correct so to submit. The reality is that it is clear on the applicant’s own admissions that he is hopelessly insolvent. He has debts due to the ATO which, even if they are not in the sum for which judgment was entered, are clearly extant. He also owed Mr Winkler money, on his own evidence, even though he disputes the debt. He has taken no steps to challenge the ATO’s rulings given from time to time through the various mechanisms available to him, nor would it appear has he made any endeavours to challenge the VCAT ruling in favour of Mr Winkler of which he complains.
On his own evidence the applicant has no assets or resources and is therefore not in any way able to pay his debts. There is nothing to suggest for a moment that he was able to pay any such debts at the time at which the sequestration order was made. On the other hand, there is everything to suggest that he then owed the moneys that he still owes.
Accordingly, the application for annulment and the application for review of the Registrar’s decision must be dismissed.
Even if I were otherwise satisfied of the applicant’s claims, I would not be minded to exercise the Court’s discretion to overturn the sequestration order. The abject failure of the applicant to comply with his obligations as a bankrupt I have already referred to. His contumelious disregard of the interests of his creditors in selling his business and sending the money (mainly) offshore to his sister as an agent is a matter which of itself alone would in my view properly require the continuation of the administration of his estate by his trustee.

The Desire to Travel

Issues in relation to travelling overseas were dealt with in a decision of Barnes FM in Khan v Melluish [2010] FMCA 119. I generally adopt her Honour’s reasoning in that case.
Here relevant matters are as follows:
a)I have no reason to doubt that the applicant does indeed intend to go to Greece if he is permitted to do so;
b)the applicant has no family in Australia other than two children from whom he is estranged, all the rest of his family being in Greece;
c)the applicant wishes to visit his elderly mother, whom he says is in poor health,
d)if he goes to Greece, the applicant is highly likely to be able to obtain not only $22,000 from his sister, but also a proportion of his father’s estate;
e)the father’s estate was not disclosed in paragraph 32, being the relevant paragraph of the statement of affairs;
f)as a result of all these matters, the applicant is certainly an outstanding flight risk;
g)he has failed comprehensively to co-operate properly with the administration of his bankrupt estate;
h)the absence of the applicant would render the administration of the estate completely impossible; and
i)I have some doubt as to whether the estate will prove to be capable of proper administration anyway, given the likely ongoing lack of co-operation of the applicant in any event.
I note that the trustee has deposed without material challenge that he has not in fact refused to allow the applicant to go overseas, but it is clear that he would refuse if he were asked.
I would therefore approach this matter on the footing that refusal has been sufficiently indicated for the applicant to have grounds to pursue his application under section 178 of the Act to review the trustee’s decision. The circumstances of this case, as I have set them out above, lead overwhelmingly to the conclusion that the applicant not be permitted to travel.
I did canvass with counsel for the trustee whether in the ultimate it might be thought more in the interests of this community that the applicant be permitted in fact to go to Greece, in the hope that he would become a charge upon their welfare system rather than the Australian one. That suggestion was not put as a matter of humour. There is something to be said for it.
However, I accept the submissions of the trustee that to reach this conclusion would be to reward the applicant for his disgraceful failure to properly comply with his obligations as a bankrupt person. It would bring the administration of the scheme of bankruptcy legislation into disrepute. It is in the ultimate quite clear that the applicant, who bears the onus of proving his case, comprehensively fails to do so on all fronts.
It follows that this application should be dismissed.
In the unusual circumstances of the case, I accept that I should order that the applicant pay the costs of the proceeding personally, both of the respondent and of the trustee.

I certify that the preceding seventy-one (71) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Ms B. Evans

Date: 18 May 2010

ADDENDUM

Since these reasons for judgment were dictated, the applicant forwarded on 29 April 2010 a further affidavit with nine pages of hand-written material and copies of what are said to be tax returns for the years 2003, 2004 and 2005.
The applicant says:
“On the 22nd of April I received copies of 203 to 2005 income tax returns. They shed no more light than the copies of notice of assessment I supplied to the Court marked EXHIBIT E, A & B. They are void of expenditures in the day to day running of my business.”
He went on to make other complaints about the tax returns.
The applicant has not indicated where these documents came from nor who prepared them. In my view, they add nothing to the disposition of the case save to confirm the general miasma of confusion that surrounds Mr Grapsas’ affairs generally.