McPhee and Inspector-General in Bankruptcy

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 322

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/5514

GENERAL ADMINISTRATIVE DIVISION		)
Re		MICHAEL MCPHEE

Applicant

And INSPECTOR-GENERAL IN BANKRUPTCY

Respondent

DECISION

Tribunal Mr A Sweidan, Senior Member  

Date13 May 2011

PlacePerth

Decision The Tribunal affirms the decision under review.

(sgd) Mr A Sweidan........

Senior Member

27.     On 10 June 1998 the shares in Luxer Holdings Pty Ltd held by associates of retired partners Messrs Pynt, Clarke and Martin were transferred to the applicant.  The units in Luxer Unit Trust held by associates of Messrs Pynt, Clarke and Martin were transferred to Mrs McPhee.  In his oral evidence the applicant described this as tidying up outstanding matters with former partners.

28.     On 1 November 1999 the applicant registered for an ABN as an individual sole trader using the trading names – MJ McPhee Barrister & Solicitor and Michell Sillar McPhee.

29.     On 18 August 2008 the applicant ceased registration as a person carrying on business under the name Michell Sillar McPhee and on 11 October 2009 Luxer Holdings Pty Ltd dissolved.

30.     In cross-examination the applicant stated that on dissolution of the Michell Sillar McPhee partnership there was no valuation done of his partnership interest and that Mrs McPhee did not call for a valuation to be done.  The applicant stated that no assets were to be sold and the management fee arrangement with the Luxer Unit Trust continued. From 21 April 1998 he conducted legal practice as a sole practitioner with Luxer Holdings Pty Ltd providing the administrative functions for the legal practice as it had done for the former partnership.  Management fees paid to Luxer Holdings Pty Ltd for these services were distributed to Mrs McPhee as the unit holder in the Luxer Unit Trust until the time of bankruptcy when the applicant arranged a service agreement with another entity associated with his son.

The Tribunal’s Findings

The assessed income was derived by the applicant

31. Section 139J of the Bankruptcy Act 1966 requires a bankrupt who derives income during the bankruptcy to pay contributions towards the bankrupt estate.  For the purposes of an income contribution assessment, “income” in relation to a bankrupt is defined in s 139K and s 139L of the Bankruptcy Act 1966 and has its ordinary meaning, subject to the qualifications in s 139L none of which are relevant here. 

32.     The ordinary meaning of income as used in s 139L connotes income of the bankrupt according to ordinary usages and concepts whether derived, received or earned from any source: Inspector-General in Bankruptcy v McGushin (2009) 178 FCR 27 at [12]-[19], [37]-[38] and Re Mann and Inspector-General in Bankruptcy (2001) 67 ALD 557 at [30]-[35]. Plainly the meaning of income is wide enough to embrace fees received by the applicant as a sole legal practitioner from providing his professional services by his own skills and exertion: cf Commissioner of Taxation v Firstenberg (1976) 11 ALR 377 at 392.5, 394.5, 396.7; Commissioner of…