Lockhart v Deputy Commissioner of Taxation
[2005] FMCA 641
•17 May 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LOCKHART v DCT | [2005] FMCA 641 |
| BANKRUPTCY – Application for annulment of Sequestration Order. |
| Taxation Administration Act 1953 Bankruptcy Act 1966 (Cth), s.153B |
| Re Papps; ex parte Tapp (1997) 78 FCR 524 |
| Applicant: | PETER BOWDEN LOCKHART |
| Respondent: | DEPUTY COMMISSIONER OF TAXATION |
| File Number: | PEG 26 of 2005 |
| Judgment of: | McInnis FM |
| Hearing date: | 14 April 2005 |
| Delivered at: | Perth |
| Delivered on: | 17 May 2005 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Ms D Vellotti |
| Solicitors for the Respondent: | Deputy Commissioner of Taxation, Legal Services Branch |
| Solicitor for the Official Trustee: | Ms L Mobilia |
| Solicitors for the Official Trustee: | Carles Solicitors |
ORDER
The Application filed 31 January 2005 be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 26 of 2005
| PETER BOWDEN LOCKHART |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Respondent
REASONS FOR JUDGMENT
In this matter Peter Bowden Lockhart (the debtor) by an application filed 31 January 2005 seeks annulment of a sequestration order made on 17 January 2005. In support of his application the applicant has relied upon an affidavit sworn by him on 19 January 2005 where he deposes as follows:-
“1.On January 17th 2005 a sequestration order was made out against me by the Taxation Office for $32,128.53.
2.On January 17th 2005 I paid by bank cheque the full amount of $32,128.53 which was accepted and I am solvent.”
Appearances were filed by the Official Trustee as trustee in the bankruptcy of the debtor and by the respondent who was the petitioning creditor.
Orders were made by the court on 11 February 2005 which required the respondent to file and serve a notice of opposition and any affidavits in support and for the applicant to file and serve any answering affidavits. No further material was received from the debtor.
The trustee in an affidavit of Sharyn Renee Faulkner sworn 8 February 2005 had annexed a report by the trustee pursuant to Rule 35.05 of the Federal Magistrates Court Rules 2001 (the Rules). In that report the trustee states the following:-
Mr Lockhart (the bankrupt) was made bankrupt by Sequestration Order in the Federal Magistrates Court in Perth on the petitioner the Deputy Commissioner of Taxation of the Commonwealth of Australia on the 17th January 2005. The bankruptcy number allocated was WA 33/5/5.
On the 17th January 2005 the bankrupt made the payment of $32,128.53 by bank cheque to the Deputy Commissioner of Taxation. This cheque was forwarded to the trustee on 20 January 2005 and the trustee was advised the amount owing to the Deputy Commissioner of Taxation was $51,923.73.
The bankrupt has not yet filed his Statement of Affairs.
In the absence of the bankrupt's Statement of Affairs, it is difficult for the Official Trustee to determine the assets and liabilities of the bankrupt. Based on inquiries with the Petitioning Creditor, property searches, company searches and a baycorp advantage search the trustee is not aware of any assets of the bankrupt and the only known liability is the debt to the Petitioning Creditor which is $51,923.73.
The bankrupt is the director of the company, 'Lockhart Corporation Pty Ltd'. The trustee does not yet have a copy of the financial statements for the company.”
The respondent relied upon affidavits of Kathleen Elliott sworn 25 February 2005 and a Notice of Intention to Oppose the application filed the same day. In the Notice of Intention to Oppose the application the respondent relies upon the following grounds in opposition to the application to annul the bankruptcy:-
“1.The Respondent, as a creditor, has not been paid the debt of $51,923.73 as at 17 January 2005 owed by the applicant.
(2)The Applicant is insolvent and is unable to repay his creditors. There is no evidence of solvency of the Applicant, either now or at the time the debtors petition was presented.
(3)There are no circumstances to warrant annulment of the bankruptcy pursuant to section 153B of the Bankruptcy Act 1966.”
The affidavit of Ms Elliott refers to the debtor's affidavit and significantly deposes as follows:-
“5.The Applicant has not repaid the debt owed to the Respondent. On 25 February 2005, I reviewed the Records and am aware that the debt owed by the Applicant has not been repaid to the Respondent.
6.From reviewing the Records, I verily believe that as at 17 January 2005 the Applicant is liable to the Respondent for the total sum of $51,923.73. This amount comprises of a judgment debt of $32,128.51 plus General Interest Charge (‘GIC’) of $9609.9, in the total sum of $41,738.42, plus income tax for the years ended 30 June 2001, 30 June 2002 and 30 June 2003 and GIC, in the total sum of $10,185.31.”
Reliance was placed upon a certificate issued pursuant to s.255‑45 of Schedule 1 of the Taxation Administration Act 1953 certifying that the amount of $51,923.73 is as at 17 January 2005 a debt in respect of tax due by the debtor to the Commonwealth of Australia. In her affidavit Ms Elliott refers to the debtor's affidavit and deposes that on 20 January 2005 an officer of the Australian Taxation Office prepared a covering letter to Ms Faulkner of the Insolvency and Trustee Service of Australia enclosing the bank cheque for $32,128.53 tendered by the applicant on 17 January 2005. The covering letter dated 20 January 2005 and sent the same day, omitting formal parts, provides:-
“Please find enclosed the bank cheque for the sum of $32,128.53 provided by the Respondent on 17 January 2005.”
The respondent submits that accordingly application for annulment should be refused on the grounds the debt has not been paid and that the debtor is insolvent. Hence, it is argued that there is no base upon which the court could exercise its powers under s.153B of the Bankruptcy Act 1966 (Cth) (the Act) to find that a sequestration order ought not to have been made.
The affidavit of Ms Faulkner sworn 6 April 2005 endeavours to update the material before the court previously provided by her in her affidavit sworn earlier on 8 February 2005. Reference is made to the debtor being requested to provide a statement of affairs and some attempt by the debtor to resolve the matter by seeking to pay out his bankruptcy. The deponent further states, relevantly, the following:-
“10.While the Bankrupt has expressed an intention to payout and annul his Bankruptcy, he has not approached the Official Trustee in order (to) progress that intention despite request. ... In particular, without the Bankrupt's statement of affairs I am unable to calculate the amount required to annul the bankruptcy, advertise a dividend or publish a notice calling for proof of debts as required by section 140 of the Bankruptcy Act.”
In her affidavit Ms Faulkner otherwise confirms that the earlier report annexed to her affidavit sworn 8 February 2005 remains accurate.
It seemed clear to me during the course of the hearing the debtor was simply seeking to achieve an outcome whereby the bankruptcy would be annulled, though in circumstances where he had not provided any further affidavit evidence as to his solvency or indeed any reason why he has not complied with a request to file a statement of affairs which would enable the matter to be progressed. No evidence was provided as to further attempts made by him to extinguish the debt claimed by the respondent or indeed to provide any material which would assist the application for annulment.
An order for annulment under s.153B of the Act requires the court to conclude that the sequestration order ought not to have been made. Although an amount of money was tendered after the sequestration order was made and reasons advanced as to the nonattendance of the debtor at the court hearing when the sequestration order was made, that does not of itself provide a basis upon which the court can conclude that at that date he was solvent and/or that the order should not have been made. I rely upon the decision of O'Loughlin J in Re Papps; ex parte Tapp (1997) 78 FCR 524 at 531 where His Honour said:-
“The test, when a person comes to court seeking an annulment, is one that is akin to 'full and true disclosure'. It is incumbent upon such applicant to place before the court all relevant material with respect to his or her financial affairs so that the court may properly be informed to make a judgment that is based on the full facts and circumstances. A person who seeks an annulment carries a heavy burden.”
In the present case, having regard to the lack of affidavit material and the deficiencies in relation to the financial affairs of the debtor, I am not satisfied that he has discharged the burden placed upon him in seeking annulment of the sequestration order. Whilst simplistically it may appear that he has endeavoured to pay out an amount of a debt claimed in a petition, that does not mean that he has actually paid the debt then owing to the respondent, a major creditor, nor is it possible to make any assessment of the true state of the debtor's financial affairs in order to make any assessment of whether or not it could properly be claimed, as he asserted from the bar table, that he is solvent.
In the circumstances I cannot see any basis upon which this Court in the exercise of its discretion could make an order under s.153B of the Act. It follows therefore that the application should be dismissed.
I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 17 May 2005
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