Pattison v Schiffer
[2004] FMCA 171
•19 March 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PATTISON v SCHIFFER | [2004] FMCA 171 |
| BANKRUPTCY – Summary disposal of judgment – income assessment contributions according to reasonable remuneration figure – bankrupt fails to pay assessed contributions to bankrupt estate – bankrupt fails to exercise review rights – duties of bankrupt – application dismissed. |
Bankruptcy Act 1966 (Cth), ss.30(1)(b), 77, 139U, 139W, 139X, 139Y, 139ZG, Division 4B
Federal Magistrates Court Rules 2001 (Cth), r. 13.07
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
General Steel Industries Ltd v Commissioner for Railways (1964) 112 CLR 125
Re: Gareth John Ellis Ex parte; Phillip Gregory Jefferson and Jay Arscott Stevenson No. QB1914 of 1993 Federal Court No. 81/95 Bankruptcy
Salemi v Minister for Immigration and Ethnic Affairs (1976) 177 CLR 388
| Applicant: | PAUL ANTHONY PATTISON |
| Respondent: | HORST DIETER SCHIFFER |
| File No: | MZ 1345 of 2003 |
| Delivered on: | 19 March 2004 |
| Delivered at: | Melbourne |
| Hearing date: | 15 March 2004 |
| Judgment of: | Connolly FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Cull |
| Solicitors for the Applicant: | Mendelsons |
| Counsel for the Respondent: | Mr Irlicht |
| Solicitors for the Respondent: | Irlicht and Broberg |
ORDERS
That the respondent pay to the applicant the sum of $96,961.74 together with interest therein pursuant to statute.
That the cross-application be dismissed.
That the respondent pay the applicant’s costs herein in an amount to be agreed failing agreement to be taxed pursuant to the Federal Court Rules.
Liberty to apply.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 1345 of 2003
| PAUL ANTHONY PATTISON |
Applicant
And
| HORST DIETER SCHIFFER |
Respondent
REASONS FOR JUDGMENT
The proceedings
These proceedings arise as a result of an application filed on
28 November 2003 seeking an order in effect pursuant to section 139ZG of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) that the respondent pay to the applicant $96,961.74 together with interest and costs. The applicant filed an amended statement of claim on
19 January 2004 and a notice of motion on 4 March 2004 seeking to have the matter disposed of by a summary judgment pursuant to rule 13.07 of the Federal Magistrates Court Rules 2001 (Cth).
The respondent filed a notice of defence and counter-claim on
6 February 2004 supported by an affidavit sworn on 10 March 2004. The respondent’s defence and counter-claim were reliant on him obtaining a declaratory order pursuant to section 30(1)(b) of the Bankruptcy Act.
History
The applicant was appointed Trustee in bankruptcy of the respondent’s bankrupt estate pursuant to a sequestration order of 17 May 1995. On 10 November 1995, the applicant received from the respondent an annual statement of income, dated 9 November 1995, disclosing an income of $6,000 per annum expected for the next twelve months. The statement is silent as to much of the other information sought by the applicant although it does indicate that the respondent was married to his employer. On 10 November 1995, the applicant, pursuant to sections 139W, 139X and 139Y of the Bankruptcy Act, assessed the income that the respondent was likely to derive during the contribution assessment period of 8 December 1994 to 7 December 1995 as being $74,655 per annum. This was determined in accordance with the salary and wages of the Industry Group in the same field as the respondent.
On 10 November 1995, the applicant notified the respondent in writing of the said assessment made on 10 November 1995. The letter advised him that he was liable to pay contributions to his bankrupt estate in the sum of $24,583.50. The said assessment letter was accompanied by a document entitled “Explanation of Words Used in Assessment”. The explanation advised the respondent, inter alia, that if he disagreed with the applicant’s decision about the contributions or assessments he could apply to the Inspector General for review of that decision. The said explanation set out the procedure the respondent should use to commence that review, and alternatively, that he could file an appeal in the Administrative Appeals Tribunal (“the AAT”).
On or about the 19 April 1996, the respondent contacted a member of the applicant’s staff requesting certain information with respect to the income contribution assessment. That information was provided.
Between 10 November 1995 and 10 July 1998 the applicant forwarded eight letters to the respondent demanding, inter alia, payment of the income assessment amount of $24,583.50 and requesting completion of further annual statements of income. The respondent has not paid any amount in reduction of the outstanding income assessment dated 10 November 1995.
On 7 July 1998, the applicant filed a Notice of Objection to Discharge of the Respondent’s Bankruptcy on the grounds, inter alia, that the respondent had failed to pay the income assessment amount of $24,583.50 and had failed to co-operate with the applicant by providing further Annual Statements of Income. By virtue of the applicant’s Objection to Discharge the Respondent’s Bankruptcy, the respondent’s bankruptcy was extended until 13 July 2003.
On 28 August 1998, the respondent sought to review the applicant’s decision to object to his discharge from bankruptcy through the AAT. On 20 July 1999, the AAT affirmed the applicant’s decision to object to the discharge of the respondent’s bankruptcy.
On or about 19 October 1999, the respondent appealed the decision of the AAT dated 20 July 1999 to the Federal Court of Australia.
In a decision dated 10 August 2001, Justice Kenny in the Federal Court of Australia dismissed the respondent’s appeal. On 26 June 2003, the applicant wrote to the respondent and advised him that he had made further income assessments for the following contribution assessment periods:
a)8 December 2000– 7 December 2001;
b)8 December 2001 – 7 December 2002; and
c)8 December 2002 – 13 July 2003.
The applicant had determined that the respondent was liable to pay contributions to his bankrupt estate for those periods totalling $72,378.24. In conjunction with the outstanding income assessment amount of 10 November 1995, the respondent was liable to pay the sum of $96,961.74. The applicant had determined his income in the subsequent income assessments based on the reasonable remuneration figure used in the income assessment dated 10 November 1995 with adjustments for changes in the Consumer Price Index. The applicant adopted this approach on the basis that the respondent had failed to complete and return annual statements of income for the period of his bankruptcy.
The letter forwarded to the respondent on 26 June 2003 was accompanied by a document entitled “Explanation of Words Used in Assessment”. The explanation advised the respondent, inter alia, that if he disagreed with the applicant’s decision about the contributions or assessments, he could apply to the Inspector General for review of that decision, or alternatively, he could file an appeal with the AAT.
The respondent has not filed an application for review by the Inspector General in respect of the subsequent income assessments. The respondent has not paid any amount in reduction of the outstanding income assessments totalling $96,961.74.
On 28 November 2003, the applicant issued a Certificate of Outstanding Contribution pursuant to section 139ZG(4) of the Bankruptcy Act. The Certificate was filed with the Federal Magistrates’ Court Registry on 15 January 2004.
The Law
The applicant seeks orders for disposal of the proceedings by summary judgment pursuant to rule 13.07 of the Federal Magistrates Court Rules 2001 (Cth) as set out in paragraphs 1 and 2 of the relevant rule:
RULE 13.07 Disposal by summary judgment
(1) This rule applies if, in a proceeding:
(a) in relation to the whole or part of a party's claim there is evidence of the facts on which the claim or part is based; and
(b) either:
(i) there is evidence given by a party or by some responsible person that the opposing party has no answer to the claim or part; or
(ii) the defence or reply to the claim discloses no answer to the claim or part.
(2) The Court may give judgment on that claim or part and make any orders or directions that the Court considers appropriate.
Both parties conceded that the settled principles which prevent a party pursing a claim or defence according to the ordinary course of procedure should only be made in a very clear case. See Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Ltd v Commissioner for Railways (1964) 112 CLR 125; Salemi v Minister for Immigration and Ethnic Affairs (1976) 177 CLR 388.
The applicant has pursued what he says is in effect a simple debt recovery action. Firstly he has established that he was a validly appointed Trustee with certain powers, duties and obligations under the Bankruptcy Act. Secondly, pursuant to the Bankruptcy Act, he has made a number of assessments. Thirdly, those assessments remain unpaid. The applicant relies on the Certificate pursuant to sections 139ZG(4) and (5) of the Bankruptcy Act as prima facie evidence of the existence of the debt and the amount of the debt.
As I have already indicated, the respondent, although his application does not say so, seeks to rely on a declaratory order pursuant to section 30(1)(b) of the Bankruptcy Act for both his defence and counter-claim. Counsel for the respondent in that regard referred me to the decision of Drummond J in the unreported case Re: Gareth John Ellis Ex parte; Phillip Gregory Jefferson and Jay Arscott Stevenson No. QB1914 of 1993 Federal Court No. 81/95 Bankruptcy. I refer in particular to paragraphs 5, 6, 7, 8 and 9 of that decision as follows:
5. Mr. Ellis challenges the validity of the notice and the assessment made by the trustees reflected in the notice on three grounds. He contends that in making the assessment, firstly, the trustees simply ascribed to him income earned by his employer as Mr. Ellis’ own income. The trustees did not use information, so it is said, available to the trustees to identify Mr. Ellis’ own income, and it is also said that the trustees did not invoke s. 139Y as they could have, if they considered Mr. Ellis performed services for his employer that should have returned him more than he was paid by his employer in the form of wages. Secondly, the trustees, in making their assessment, failed to make any allowance for expenses incurred by Mr. Ellis in earning income and (insofar as s. 139L(f) is relevant) for expenses incurred by his employer in connection with the services rendered by Mr. Ellis to, and paid for by, clients of the employer. Thirdly, it is said the trustees failed to make any allowance for income tax, contrary to s. 139N (a)(i).
6. Mr. Ellis contends that the Court has jurisdiction under s. 30 (1)(b) to grant the declaratory relief sought. His solicitor submitted that the fact that the Act sets up a system specifically providing for review of a trustee's decision to make a contribution assessment by the Inspector-General and by the Administrative Appeals Tribunal ("the AAT") under ss. 139ZA and 139ZF does not exclude the Court's power to grant the declaration that is sought. It is well established that the Court will not infer that its jurisdiction to make declarations is excluded by a statute, except by clear intendment. See P.W. Young, Declaratory Orders, 2nd Ed., 1984, paragraph 501. I accept that Subdivision G of Division 4B of the Act, which provides for review of a trustee's decision in relation to contribution assessments by the Inspector-General and by the AAT, does not show any clear intention to exclude the Court's declaratory jurisdiction under s.30(1) of the Act. However, the grant of declaratory relief is always discretionary. In Burwood Municipal Council v Sydney Legacy Appeals Fund (1980) 39 LGRA 299 at 302, Hunt J said: "The exercise of the court's discretion to grant that relief is however another matter. That discretion is always described as a very wide one."
7. And then (I omit a few words) his Honour continued: "In Sutherland Shire Council v Leyendekkers, an appeal to the Court of Petty Sessions against the validity of the Council's general rate had not been determined when this Court was approached to grant such relief. Street J, as he then was, recognized the existence of another tribunal as a factor to be weighed in the exercise of a Court's discretion. Although he thought it was not decisive, it was nevertheless a matter of importance."
8. I attach considerable importance to the fact that in the scheme contained in Division 4B, the Parliament has made detailed provision for review of a trustee's assessment decision. The solicitor for Mr. Ellis intended to seek a review of the trustees' decision under these provisions. It may be that time has precluded this. But I do not know. The notice was served on 18 January, 1995 and I would not assume, without evidence, that the Inspector-General, or the AAT, could not dispose of such a review application as a matter of urgency, in any particular case. Mr. Ellis has offered no explanation, however, for coming to the Court rather than to one of these other bodies, which are designated by the Legislature as the appropriate ones, prima facie, for the purpose. That is one consideration that tells against exercising the discretion in his favour, even if he can raise a question as to the validity of the notice.
9. If I were satisfied, in the circumstances of this case where Mr. Ellis wishes to travel overseas, that the trustees had exercised their power of assessment arbitrarily, or capriciously, or in bad faith, and that the assessment and notice were therefore bad, I would regard that as an important matter in favour of the grant of declaratory relief. The solicitor for Mr. Ellis initially disclaimed any suggestion of bad faith on the part of the trustees, although he did later make such a suggestion. He here relied on the width of the trustees' demands in the s. 77C notices directed to the bankrupt and his employer, and said they were so wide as to be invalid. But even assuming (without deciding it) that that is right, that is a long way from amounting to evidence of bad faith on the part of the trustees in the making of their assessment. The main argument was directed to the three complaints I have already set out, and to which I now turn.
Conclusions and findings
The applicant, as I have said, relies in effect on the Certificate filed pursuant to section 139ZG(5) of the Bankruptcy Act for prima facie proof of the existence and amount of the debt and, in the absence of any contradictory evidence, that would be the end of the matter.
The respondent, as did the bankrupt in Ellis’ case, seeks to ground his relief on challenging the validity of the notices and assessments on three grounds. I will come to those arguments in due course. However the declaratory order sought is discretionary, and as his Honour determined in Re Ellis, considerable importance attaches to the fact that Parliament in Division 4B of the Bankruptcy Act has made detailed provisions for review of the applicant Trustee’s assessment decision. The respondent has not availed himself of those review opportunities despite the fact that he was made aware of the opportunities to challenge the validity of the assessments in letters from the applicant on 10 November 1995 and 26 June 2003, as well as in a conversation with Ms Favero, a member of the applicant’s staff, on 16 April 1996 (see paragraph 9 of applicant’s affidavit which is uncontradicted).
At page 10, paragraph 26 of the judgment of her Honour Justice Kenny, reference is made to a letter dated 5 July 1996 from the applicant to the respondent; the letter states in part:
“I understand from your answers to the income questionnaire that you wish to appeal the income assessment dated 10 November 1995 in the sum of $24,583.50. I suggest that you apply to the Inspector General to have the assessment reviewed. This can be done by writing to the Official Receiver and attaching a copy of the assessment and any documents you rely on to support your view. Alternatively you can file your appeal with the Administrative Appeals Tribunal.
In the meantime, you are still liable to make a contribution to your estate in respect of this amount. I request that you provide me with your cheque in the sum of $24,583.50 by 30 July 1996.”
It is also apparent, by virtue of paragraph 18 at page 7 of her Honour’s reasons for judgment, that the respondent knew of the rights of review and applied to the Inspector General for a review but later failed to respond to the Inspector General’s request for further information.
And in paragraph 30 of her judgment at page 11, her Honour said as follows:
30 After Mr Schiffer was sworn, the Deputy President referred to the two grounds of objection in the respondent's first notice of objection (noting the mistakes mentioned above) and the documents before the Tribunal. The Deputy President then asked Mr Schiffer about the assessment. In response to the question "What do you say in regard to that assessment?", Mr Schiffer said:
Well, what I say to that is basically I never earned the money; you know, it's absolute nonsense. I told them that at the time when I got the notice in the first place, and that was the end of it. I mean, you haven't got the money, you just can't pay it.
This led the Deputy President to ask, "when that assessment was made back in 1995 and there were also some subsequent assessments made in the following years, did you ever seek to have those reviewed, those assessments?". Mr Schiffer replied:
Well, I sent - they told me that I should send some letters to [ITSA] or to some other place, actually to this place here. And I sent a letter to [ITSA] and then they said, well, you have got to put so much more extra stuff in it and I just didn't do it because I told them it's all nonsense.
Finally, at paragraphs 48 and 49 of her judgment at page 15, her Honour said:
48 As already noted, the material in the documents before the Tribunal made it plain enough that the respondent had informed Mr Schiffer that he had separate rights of review in respect of the assessment and the first notice of objection. Mr Schiffer had, moreover, conceded that he had already invoked review rights in respect of the assessment, although he had not pursued them.
49 In the circumstances of the case, the Tribunal did not fail in any duty to inform Mr Schiffer about his review rights. (It is unnecessary to deal with a further contention that it would have been open to the Tribunal to have granted an extension of time pursuant to s 29(7) of the AAT Act, to enable it to review the decision to issue the assessment.)
It was argued by Counsel for the respondent that he had initially co-operated with the applicant. In my view nothing could be further from the truth. On nine out of the ten occasions he was requested to provide a statement of income and failed to do so. Indeed he has had the opportunity in his affidavit to provide some sort of explanation for his non co-operation and has failed to do so. However, in determining the respondent’s motivations in this regard, I am considerably assisted by the findings of the AAT made on 20 July 1999:
“It is abundantly clear from Mr Schiffer’s evidence that he has no intention of making any payments towards the contribution assessment or of co-operating with his trustee generally. Objective evidence of this intention is to be found in the material lodged with the Tribunal. In addition Mr Schiffer’s responses to questions asked of him further illustrate the point that he does not intend to make payment of the income contribution, nor respond to requests for information by the trustee in relation to his income and property. Additionally, the evidence also revealed Mr Schiffer has failed to disclose his interest in the AMP shareholding or adequately explain what happened to the proceeds of the sale of these shares.”
Sections 77 and 139U of the Bankruptcy Act set out the general duties of the bankrupt, including his duty to disclose all his assets and income and his duty to co-operate with the trustee, as follows:
Section 77 - Duties of bankrupt as to discovery etc. of property
(1) A bankrupt shall, unless excused by the trustee or prevented
by illness or other sufficient cause:
(a)forthwith after becoming a bankrupt, give to the trustee:
(i)all books (including books of an associated entity of the bankrupt) that are in the possession of the bankrupt and relate to any of his or her examinable affairs; and
(ii) the bankrupt's passport, if any; and
(b)attend the trustee whenever the trustee reasonably requires; and
(ba) give such information about any of the bankrupt's conduct
and examinable affairs as the trustee requires; and
(bb) as soon as practicable after becoming a bankrupt, advise
the trustee of any material change that occurred between
the time the bankrupt lodged his or her statement of affairs
and the time the bankrupt became a bankrupt; and
(bc) if a material change occurred later, advise the trustee of
that change as soon as practicable after the change occurs;
and
(c)attend a meeting of creditors whenever the trustee requires; and
(d)at each meeting of creditors at which the bankrupt is present, give such information about any of the bankrupt's conduct and examinable affairs as the meeting requires; and
(e)execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and
(f)disclose to the trustee, as soon as practicable, property that is acquired by him or her, or devolves on him or her, before his or her discharge, being property divisible amongst his or her creditors; and
(g)aid to the utmost of his or her power in the administration of his or her estate.
(2) In this section:
material change means a change in the particulars contained in the bankrupt's statement of affairs, where the change could reasonably be expected to be relevant to the administration of the bankrupt's estate.
Section 139U - Bankrupt to provide evidence of income
(1) A bankrupt must, as soon as practicable, and in any event not
later than 21 days, after the end of a contribution assessment
period, give to the trustee:
(a)a statement:
(i)setting out particulars of all the income that was derived by the bankrupt during that contribution assessment period; and
(ia) setting out particulars of all the income that was derived
by each dependant of the bankrupt during that
contribution assessment period; and
(ii)indicating what income (if any) the bankrupt expects to derive during the next contribution assessment period; and
(iii) indicating what income (if any) the bankrupt expects each dependant of the bankrupt to derive during the next contribution assessment period; and
(b) such books evidencing the derivation of the income referred to
in subparagraph (a)(i) as are in the possession of the
bankrupt or the bankrupt can readily obtain.
Penalty: Imprisonment for 6 months.
(2) The particulars that a bankrupt is required to include in a
statement given to the trustee under subparagraphs (1)(a)(i)
and (ia) are all the particulars that are known to the bankrupt
and any particulars that the bankrupt can readily obtain.
(3) Without limiting the generality of paragraph (1)(b), the books
that a bankrupt is required to give to the trustee under that
paragraph in respect of a contribution assessment period
include:
(a) if the bankrupt received from his or her employer one or more pay slips or other documents evidencing salary or wages paid to him or her by that employer during that period—that document or each of those documents; and
(b) any copy of a group certificate or payment summary (within the meaning of section 16-170 in Schedule 1 to the Taxation Administration Act 1953) in the possession of the bankrupt that relates in whole or in part to that period; and
(c) any statement provided to the bankrupt by an ADI or other financial institution that shows periodic payments made during that period to an account kept by the bankrupt (either alone or jointly with any other person) with that institution; and
(d) any notice of assessment issued to the bankrupt under the Income Tax Assessment Act 1936 in respect of a year of income in which that period is included; and
(e) if the bankrupt is in receipt of a pension, allowance or other benefit under a law of the Commonwealth, of a State or of a Territory—any letter or other document sent or given to the bankrupt by the Department or authority that administers the legislation or scheme under which the benefit is provided.
Given that the respondent has failed to avail himself of the statutory opportunities to review the assessments over a long period of time, the fact that he has not co-operated in any way with the Trustee as required by the legislation and having regard to the findings of the AAT that he did not intend to make payment of the income contribution nor to respond to requests for information from the Trustee about his income or assets, I reject absolutely the proposition that the respondent’s application for declaratory remedies should be entertained. I am satisfied in these circumstances that it would be grossly unfair to the applicant to allow the respondent to be permitted to rely on the position so contributed to by his actions to his own advantage. Nor do I see why the applicant should be put to further expense.
And in any event the objections made with respect to the notices and assessments, on the face of the material before me, do nothing to disclose a defence or counterclaim.
Counsel for the respondent says it was inappropriate to assess him on the basis that before bankruptcy he had been effectively the managing director of a group of companies that made substantial amounts of money. He says that it does not follow that he will be able to earn in that capacity after bankruptcy. However that argument overlooks the fact that he is employed by his wife, has failed to provide the details requested for his income statement and has not co-operated with the Trustee. The respondent’s affidavit does nothing to address the nature or value of the work that he does for his wife; it simply refers to the taxable income for the relevant years. The respondent’s argument does not come to grips with the fact that the applicant assessed the respondent on what his reasonable remuneration should be in the circumstances.
The second complaint relates to the fact that the initial contribution assessment shows a nil amount for tax actually paid. However given the respondent’s complete lack of co-operation with respect to the applicant’s ability to assess what his reasonable remuneration should be and the appropriate assessment of tax, I do not consider the notice of contribution is invalid on that basis.
The final complaint is with respect to the more recent assessments and relies on the same arguments as the previous two, as well as an objection to the increases provided for by way of the Consumer Price Index adjustment. I am satisfied that there is nothing in the respondent’s affidavit which in any way tarnishes or diminishes the basis of the applicant’s assessment.
Accordingly I propose to make the orders sought by the applicant and dismiss the respondent’s defence and counter-claim.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Connolly FM
Associate: N. Lane
Date: 19 March 2004
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