Re Evans; Ex parte Sweeney v Evans - [1995] FCA 1147

CATCHWORDS

BANKRUPT - administration of bankrupt's property - tax refund for pre-bankruptcy tax years assessed and received after sequestration - application by trustee for directions - whether entitlement to the refund is a pre-bankruptcy asset that vested in the trustee - whether entitlement to refund depends upon assessment - whether refund is income earned post-bankruptcy and subject to income contribution assessment.

Bankruptcy Act 1966, ss 134(4), 30
Income Tax Assessment Act 1936 (Cth) s 221H(2)

Federal Commissioner of Taxation v Official Receiver (1956) 95 CLR 300
Re Mondin; Ex parte Bradshaw (1985) 60 ALR 439

RE: ROSS ALEXANDER EVANS (Bankrupt); EX PARTE: PAUL DESMOND SWEENEY (Applicant Trustee) and ROSS ALEXANDER EVANS, MELANIE JANE EVANS and JAMES E KERN & ASSOCIATES (Respondents)
No. QP 388 of 1992

SPENDER J
BRISBANE
3 NOVEMBER 1995

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )
  No. QP 388 of 1992
BANKRUPTCY DISTRICT OF THE       )
STATE OF QUEENSLAND              )

RE:ROSS ALEXANDER EVANS
Bankrupt

EX PARTE: PAUL DESMOND SWEENEY
Applicant Trustee

AND:ROSS ALEXANDER EVANS, MELANIE JANE EVANS and JAMES E KERN & ASSOCIATES
Respondents

MINUTES OF ORDER

JUDGE MAKING ORDER: Spender J

DATE OF ORDER: 3 November 1995

WHERE MADE: Brisbane

THE COURT DECLARES that the sum of $38,338.53 paid by the Commissioner of Taxation to the accountant for the bankrupt subsequent to September 1993 is an asset which vests in the applicant as trustee of the property of the bankrupt.

THE COURT GRANTS liberty to the trustee and to each of the respondents to apply to the court for any further orders that they might seek in respect of the payment of $3905.09 to a child support agency.

THE COURT ORDERS that the costs of and incidental to this application should be the costs of the trustee in the administration of the estate.

NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )
  No. QP 388 of 1992
BANKRUPTCY DISTRICT OF THE       )
STATE OF QUEENSLAND              )

RE:ROSS ALEXANDER EVANS
Bankrupt

EX PARTE: PAUL DESMOND SWEENEY
Applicant Trustee

AND:ROSS ALEXANDER EVANS, MELANIE JANE EVANS and JAMES E KERN & ASSOCIATES
Respondents

CORAM:    Spender J
DATE:     3 November 1995
PLACE:    Brisbane

REASONS FOR JUDGMENT

This is an application which was filed on 18 August 1995 by Paul Desmond Sweeney, a chartered accountant of Hall Chadwick, who is the trustee of the estate of Ross Alexander Evans. A sequestration order was made against the estate of Dr Evans on 19 February 1992 upon a creditor's petition. The application is brought pursuant to s 134(4) of the Bankruptcy Act 1966 ('the Act') which provides:

"The trustee may at any time apply to the Court for directions in respect of a matter arising in connexion with the administration of the estate. "

The application seeks directions as follows:

"1. Directions as to whether the refund of income tax received…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Evans; Ex parte Sweeney v Evans

Details

AGLC: Re Evans; Ex parte Sweeney v Evans [1995] FCA 1147
Case: [1995] FCA 1147
Decision Date: 3 Nov 1995

CaseChat Overview and Summary

This application before the Federal Court of Australia was brought by Paul Desmond Sweeney, the trustee of the bankrupt Ross Alexander Evans. The matter concerns a tax refund amounting to $38,338.53, which was paid to the bankrupt's accountant following his bankruptcy. The trustee sought directions from the court to determine whether this refund constitutes a pre-bankruptcy asset that vested in the trustee or if it represents post-bankruptcy income subject to an income contribution assessment.

The primary issue before the court was whether the tax refund, which was for income earned prior to the date of bankruptcy, should be considered a pre-existing asset that vested in the trustee upon the sequestration of the bankrupt's estate, or if it should be treated as post-bankruptcy income. This decision hinged on interpreting the Bankruptcy Act 1966 and the Income Tax Assessment Act 1936 (Cth) in conjunction with relevant case law.

Justice Spender, in delivering the judgment, held that an entitlement to a tax refund for income earned prior to bankruptcy is a chose in action that existed at the time of bankruptcy and therefore vests in the trustee. The court found that Dr Evans had misunderstood the effect of the High Court decision in Federal Commissioner of Taxation v Official Receiver, which held that refunds for post-bankruptcy income do not vest in the trustee without a specific order under the Bankruptcy Act. Spender J distinguished this from the present case, where the refund was for pre-bankruptcy income. The court further noted that while the refund of $3905.09 to a child support agency created some uncertainty, it did not alter the characterization of the refund as a vested asset.

The court declared that the sum of $38,338.53 was an asset which vested in the trustee. It granted liberty to the trustee and respondents to apply for further orders regarding the $3905.09 payment. The costs of the application were ordered to be the costs of the trustee in the administration of the estate.

Orders