FEDERAL CIRCUIT COURT OF AUSTRALIA
| PELED v ROUFEIL | [2017] FCCA 2342 |
| Catchwords: BANKRUPTCY – Application by bankrupt in respect of his trustees’ decision to issue contribution assessments and objecting to his discharge from bankruptcy. |
| Legislation: Bankruptcy Act 1966, ss.33, 139J, 139W, 139WA, 139Y, 139ZA, 139ZG, 149B, 149C, 149D, 178 Home Building Act 1989 (NSW) |
| Applicant: | NIR PELED |
| Respondent: | MARK DAMIAN CHARLES ROUFEIL |
| File Number: | SYG 3095 of 2016 |
| Judgment of: | Judge Altobelli |
| Hearing dates: | 17 - 18 July 2017 |
| Date of Last Submission: | 15 August 2017 |
| Delivered at: | Sydney |
| Delivered on: | 31 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Scruby |
| Solicitors for the Applicant: | John Lloyd & Co. |
| Counsel for the Respondent: | Mr Golledge |
| Solicitors for the Respondent: | Matthews Folbigg Lawyers |
ORDERS
Within seven (7) days, the parties are to submit a joint minute of order consistent with paragraph [78] of these reasons.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3095 of 2016
| NIR PELED |
Applicant
And
| MARK DAMIAN CHARLES ROUFEIL |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain the Orders that the Court has made in this case. By way of an Amended Application dated 12 May 2017, the Applicant, a bankrupt, challenges two related aspects of the conduct of his Trustee in bankruptcy, the Respondent. The first is the Trustee’s decision to issue contribution assessments under section 139W of the Bankruptcy Act 1966 (Cth) (the Act). The second is the Trustee’s decision to issue a notice of objection to discharge on the basis that the Applicant did not pay the contribution assessments under challenge. The Respondent Trustee opposes the orders sought by the bankrupt Applicant.
Background
A sequestration order was made against the Applicant’s estate on 3 April 2014. The Applicant is a builder by trade. The sequestration order arose in connection with an unsuccessful unrelated business venture. The Applicant lives with his wife and three children in a house in Sydney’s eastern suburbs. The Applicant’s wife, Ms Mekler-Peled, and her sister, Ms Mekler, also gave evidence in this case. The Applicant’s wife and her sister are found by the Court to be experienced business people who have the benefit of an inheritance from their parents. Their father also worked in the construction industry. The two sisters inherited what was their father’s shares in a company known as Bulkara Holdings Pty Limited (Bulkara Holdings).
It is an uncontentious fact that since 2013, the role of Bulkara Holdings has been to manage 12 units and 4 shops in a building complex that it owns. It is uncontentious that Ms Mekler manages the day-to-day administrative operations of the business conducted by Bulkara Holdings.…
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- AGLC
- Peled v Roufeil [2017] FCCA 2342
- Case
- [2017] FCCA 2342
- Decision Date
CaseChat Overview and Summary
The central legal issue before the court was whether the trustee had correctly applied section 139Y of the *Bankruptcy Act 1966* (Cth) in deeming the bankrupt to have received reasonable remuneration for his work. Specifically, the court had to determine if the conditions of section 139Y(1)(a) and (b)(ii) were met, requiring an assessment of whether the remuneration received was less than what might reasonably be expected for similar work performed in an arm's-length transaction.
Judge Altobelli found the evidence of the respondent trustee to be credible and reliable. While accepting the evidence of the applicant's wife as truthful, the court noted that her testimony did not appear to be entirely complete or conclusive, leaving a "lingering impression" that she possessed further relevant information. The court also expressed surprise at the apparent lack of involvement of the applicant's wife in the business affairs of a company of which she became the sole director after the applicant's bankruptcy, particularly during the contribution assessment period. The court's findings regarding the credibility of the witnesses and the overall evidence informed its consideration of the reasonableness of the trustee's assessment.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The Respondent Trustee in issuing its assessment relies on section 139Y, which is, in effect, a deeming provision. The section states:- (1) If:(a) the bankrupt is engaging or has engaged during a contribution assessment period in employment or other work or in activities that resemble employment or other work; and(b) the bankrupt does not receive or did not receive any remuneration in respect of the employment, work or activities or receives or received remuneration that is less than the remuneration (in this subsection called the reasonable remuneration) that:(i) in the case of employment where an industrial instrument prescribes rates or minimum rates of salary or wages for the employment—might reasonably be expected to be or to have been received by the bankrupt in respect of the employment by virtue of the industrial instrument; or(ii) in any other case—might reasonably be expected to be or to have been received by a person who engaged in similar employment, work or activities where there was no relationship or other connection between that person and the person for whom the employment, work or activities were carried out;then, for the purpose of making an assessment, the trustee may determine that the bankrupt receives or received the reasonable remuneration in respect of the employment, work or activities. The Respondent’s case is that sections 139Y(1)(a) and (b)(ii) are activated in this case. The Trustee thus contends that throughout the course of his bankruptcy, the Applicant was engaged during a contribution assessment period in employment or other work, and he did not receive a remuneration in respect of that employment or work which might reasonably be expected to have been received by a person who engaged in similar employment or work where there was no relationship or other connection between the bankrupt and the person for whom the employment or work was carried out. The Applicant does not dispute that he was working during the contribution assessment period, but he does dispute the reasonableness of the Respondent’s conclusion as to the amount or the value of the work performed by him. It is necessary to make some observations in relation to credit findings. Each of the Applicant, Ms Mekler-Peled, and the Respondent Trustee, Mr Roufeil, gave evidence and was cross-examined. The Court is comfortably satisfied that there are no issues about the evidence given by the Respondent Trustee, Mr Roufeil. He was at all times responsive, cooperative, willing to make sensible concessions, and gave his evidence directly and in a matter-of-fact manner. Whilst the Court is prepared to state that it accepts his evidence, that should not be interpreted as an acceptance of the correctness of the Respondent’s actions. The evidence of the Applicant’s wife, Ms Mekler-Peled, the Court accepts, was truthful, though not necessarily complete or conclusive. The Court was left with a lingering impression that she knew far more than what she was required to say. She became the sole director of Hopetoun after the Applicant’s bankruptcy. When the aggregated evidence is reviewed in its entirety, the Court finds it surprising, therefore, that so little of the business affairs of that company during the contribution period appeared to be related to her, or seem to involve her.