McCreanor, K.T. v Deputy Commissioner of Taxation

[1991] FCA 597

. .

JUDGMENT No.

IN THE FEDERAL COURT OF AUSTRALIA	)	-ON 1~3w~)anr
GENERAL DIVIEZQtj	1
BANKRUPTCY DISTRICT OF THE	)	No. QP1621 of 1990
STATE OF OUEENSLAND	1

RE :	KEVIN THOMAS McCREANOR
EX PARTE:	DEPUTY COMMISSIONER OF TAXATIOH

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	5 FEBRUARY 1991
WHERE MADE:	BRISBA~E
THE COURT ORDERS THAT:

1.    The matter be adjourned to Monday, 13 May 1991 at

9.15 a.m.

2 .    Costs of and incidental to today be reserved.

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i	NOTE:	Settlement and entry of orders is dealt with in Rule
124 of the Bankruptcy Rules.
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IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE

STATE OF OUEENSLAND

RE:	KEVIN THOMAS MCCREANOR
EX PARTE:	DEPUTY COMMISSIONER OF TAXATION

LRAM: PINCUS J.

PLACE: BRISBANE

- DATE: 5 FEBRUARY 1991

EX TEMPORE REASONS FOR JUDGMENT

This is a petition for bankruptcy against h. K.T. HcCreanor, which is opposed. The notice of opposition trhich was filed relies upon an application £or release from liability made under s.265 of the Income Tax ~ssebsment Act 1936, the judgment debt relied on being one for income tax. When the matter came before the Court, m. webb, who appeared for the debtor, informed me that at least primarily he wished

to urge that the matter be adjourned; and in substance the

case has been argued on that basis.

The debtor had occasion to apply for relief against tax liability in 1986. That application was unsuccessfdl. It related, as seems to be common ground, to a debt which is included in but is the lesser portion of the debt on which the present petition is founded.

The debtor applied in his second application in a way which was initially urged by hr. Hack (who appeared for the petitioning creditor) to be invalid, but was subsequently conceded to be valid. The terms of s.265, which I do not propose to read out, do not say how one applies, or indeed to whom one applies, for relief. It appears that the practice is to do what this debtor did; on 28 February 1990 he applied to the local Deputy Commissioner and in view of the concession which is made by Mr. Hack, it is unnecessary for me to go into the question of what implication should reasonably be made as to the proper recipient of the application under s.265.

After the application was made, the ~eputy

Commissioner replied informing the debtor that he should fill in a form which is used in connection with such applications although it has no statutory warrant. The evidence is that the debtor did not fill in the form. He had briefly explained the basis of his application for relief in the letter making the application and he says, and it is not contradicted, that he had spoken to the Australian Government Solicitor	concerning the use of the statutory form, and told the	officers there that he would supply the necessary information
prior to the hearing. He expected the hearing might be somewhat delayed.
The application made by Mr. Webb on behalf of the debtor is based on the suggestion that, although there is d substantial debt due, the Court should adjourn the matter rather than make a sequestration order, becdhse otherwisk the debtor will be substantially deprived of the benefit of 6.265. Of course, it may be that if dn order is made in favodr of the petitioning creditor, nevertheless relief will shbsequently be granted, but that might seem a little improbable.
However, Mr. Hack has drawn my attention to what I said about the more general problem in McGuire v. DepIity Federal Commissioner of Taxation 88 A.T.C. 4990, at page
4994. I do not quote it, but I drew attention to the decision of the Full Court in Ahern v. Deputv ~omrrlissioner of Taxatioq 1Old.l (1987) 76 A.L.R. 137 as to the desirability of adjourning proceedings for sequestration of debtors' estates when an appeal is pending against the judgment relied oni and mentioned the question whether that principle applied where an doplication is made under s.265.
Since the matter came on for hearing this morning, I have given fupther consideration to that point and have looked
Commissioner of Taxation 89 A.T.C. 4728. It seems to me that at the decision of Lee J. in Re Grav: Ex varte Deptitv Federal in general one should not apply the principle of Ahernrs case
(supra) to instances in which debtors have applied under 6.265 for relief from tax liability. As is pointed otlt by h. Hack; such relief is very much discretionary. 1t is not by any means a matter of right, whereas in cases such as Ahern it may emerge, of course, that there is no liabiiity at all as a matter of law.

I therefore hold, in accordance with Mr. ~ a c k ~ s 1,

submissions, that there is no general principle that applications for sequestration orders should be adjourned when based upon a tax liability which is the subject of a s.265 application. Indeed, I would go further and suggest that ordinarily a proper exercise of discretion would be to refuse to adjourn a matter merely on that ground.

Mr. Webb, however, has taken a narrower point which needs to be disposed of and which has somewhat troubled me. It appears that the recipient of the application for relief treated it as ineffective because it was not made in accordance with the form which was in use. he form is admitted to have no statutory sanction, but no doubt its use is convenient. Whether convenient or otherwise; however; the absence of use of the form did not justify the course taken which was to treat the application, apparently, as ineffective.

I deduce that it was treated as being ineffective, because if it was a proper application then because the amount	of tax was more than $i0,000, the obligation of the Board was
to refer the application to the Tribunal. The subseqdenk obligation was for the President of the ~dministrative Appeals Tribunal to designate a person to deal with the application, unless she had already designated person to deal with a class of applications, including such applications as this.

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As I have mentioned, Mr. Hack very'usefully conceded that the application was a good one. 1t seems to me to follow that the obligation to refer the matter to the Tribunal under s.265(3) arose on receipt of the application, and the dates need to be kept in mind. The application for relief was made on 28 February 1990, nearly a year ago, and there has not yet been done that which the statute requires.

The narrower submission of Mr. ebb, then, is in substance that whatever may be the general position, if ik appears that there has been a failure to discharge what is now

I think in substance conceded to be the obligdtion under

s.265(3), then there may be a better case for an adjournmenti the argument being that had the Board performed its statutory obligation then by now the applicant may well have had relief or at least had his application for relief dealt with.

Mr. Hack has very properly not attempted to try to predict what the Board would do if the matter came before it,

but has, I think, thrown some cold water on the prospects of	success in the application for relief. It seems to me that
unless the application is frivolous - and it is not suggested to be - the better couFse is for me to say nothing about the prospects which the applicant might have. hat i b particularly so here where, with all due respect to the applicant, the information supplied with the applicationi although concise and clear, was not very detailed, so that I decide the application for adjournment without forming any view as to whether the application for relief is or is not likely to succeed.
Mr. Hack told me in substance that if an application of this sort were made and it were pushed, it would perhaps be dealt with fairly quickly in the Tribunal. The figures which I quoted in dealing with McGuirels case (supra) suggested that at that time there might have been some considerable delay. I refer to the report at page 4995. The length of the delay is at present unknown, but from what Mr. Hack tells me it would seem that if the course which s.265(3) requires were taken, and if it were explained that there has already been nearly a year's delay and that the matter is before the court, the s.265 application could be dealt with fairly speedily; and one, indeed, would expect that to happen.
I have had some concern about the principle to which both counsel referred, namely that ordinarily the Courts will not stand in the way of the Commissioner seeking to enforce liability under an assessment, and I have also taken into
Ahernrs case (supra), that is, the view I hold that Ahernls account the view which I have mentioned has been formed about
case does not apply where the reason for the application for an adjournment is merely an application for relief under s.265 from tax liability.
I have, however, come to the conclusion that in piew of the fact that there does seem to be a real possibility,

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even perhaps likelihood, that but for the failure to carry out what seems to me to have been a clear obligation under s.265(3), the application would have been dealt with by now. In those circumstances there is a sufficient case for an adjournment. I should add that the reference to McGuirePs case (supra) by Mr. Hack was unaccompanied by any suggestion that this case is really comparable with it.

There was some faint suggestion of lack of candour on the applicant's part, but there seems nothing in that. It is really a straightforward case of an application for relief which was not forwarded on, as it should have been, to the Tribunal. The course I propose to take, then, is to express the view, not by way of binding any person, of course, that in the peculiar circumstances of this case it wodld now be desirable if the requirements of s.265(3) were immediately satisfied, that is, if the matter was sent to the Tribunal immediately and if it were pointed out to the Tribunal that in the Court's view there has been some unwarrantable delay and that the matter should be dealt with promptly. Again without

debtor to supply the information which wis desired, although,	binding any person, it would seem to me very sensible for the	of course, he is not obliged to fill in the form as he says.
The course I propose to take is to adjourn the matter for about two months. I say about two months because of the hope or expectation that by then the matter would have been before the Board, if people do what I want them to do. I suppose it is probably simplest, rather than send it to the bankruptcy day, if it comes back before me.

I will adjourn the matter to 9.15 am on Monday, 13

May. I assume that there will not be much of an argument on that day one way or the other.	I will reserve the costs of
today.
I certify that this and the
seven preceding pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Pincus.
k- Associate