Re Khadem, H.

[1995] FCA 487

IN THE FEDERAL COURT OF AUSTRALIA   )
  )
GENERAL DIVISION                  )   No. NP 813 of 1995
  )
BANKRUPTCY DISTRICT OF THE STATE OF )
  )
NEW SOUTH WALES                   )

RE:HASSAN KHADEM

Debtor

EX PARTE:  DEPUTY   COMMISSIONER OF TAXATION

Applicant

CORAM:    Beaumont J.

DATE:     9 May 1995

REASONS FOR JUDGMENT

This is an application to continue the appointment of a receiver appointed by an order made by Sackville J. pursuant to s.50(1), of the Bankruptcy Act 1966. In support of the application the Deputy Commissioner of Taxation relies upon the evidence in three affidavits.

In the first affidavit Mr Whyson states, and it is not in issue, that in July 1990 assessments of income tax were issued by the Commissioner in respect of the years of income ended 30 June 1985, 1986, 1987 and 1989, in the total sum of $322,036.  The assessments were payable by 28 August 1990.  The assessments were issued to the debtor, Hassan Khadem, care of a tax agent, Mr K. Shockair, who carries on his profession at Punchbowl.  However, in May 1990, prior to the issue of the assessments, Mr Shockair had written to the Australian Tax

Office informing it that, in response to a request that the debtor furnish a return for the year ended 30 June 1989, the debtore was currently residing overseas permanently and, therefore, he was unable to forward the letter of request on to Mr Khadem, as his address overseas was unknown.

In his affidavit Mr Whyson also states, and it is not in issue, that on 20 December 1990, the Commissioner obtained default judgment against the debtor in the sum of $338,893 plus costs, in respect of the years of income assessed.  The affidavit goes on to refer to the issue of the Bankruptcy Notice in this matter in February 1995 and to state that the notice was served in March 1995 and that subsequently on 5 April, the Deputy Commissioner presented a Creditor's Petition which is presently returnable on 8 June 1995.

In his affidavit Mr Whyson gives some details with respect to the ownership by the debtor of a property at Croydon Park, and this again is not in dispute.  Mr Khadem is the registered proprietor of the property No 11, Lennartz Street, Croydon Park, which he acquired in December 1985.  Mr Whyson also points out, by reference to copies of the deemings annexed to his affidavit, that the debtor was previously the registered proprietor of another property in Lennartz Street, No 15, but that he was one of three proprietors of joint tenants in that case.  The other joint tenants were Jamil Khadem, his son, and Najah El-Khadem.

Annexed to the affidavit is a copy of a transfer dated 30 November 1993, by which the debtor transferred to Sahd Khadem that interest for a consideration of $53,333.  The transfer was executed on behalf of the debtor by Mr Jamil Khadem, pursuant to a power of attorney, although it may be noted that by letter dated 8 May 1995 (after the commencement of this hearing), the power of attorney was revoked.

Also annexed to Mr Whyson's affidavit is a copy of the record of the Department of Immigration and Ethnic Affairs, showing movement details of the debtor and of his wife, Najiah, in the periods January 1985 to February 1995, and January 1980 to January 1995, respectively.  In summary, those records show that in the four years or so in question, the debtor spent only about five or six months in this country.  This circumstance is confirmed by other evidence that the debtor resided in Lebanon during this period, and in a notice of objection to the assessment in respect of the 1989 year, the debtor asserted that he was not a resident of Australia.

There is exhibited to Mr Whyson's affidavit, a copy of the transcript of proceedings in the Administrative Appeals Tribunal, by way of review, of the decision of the Commissioner to disallow the debtors' objections to the assessments for the years in question.  Although I was taken to parts of that transcript by counsel for the Commissioner, I have been unable to obtain from that material any clear impression of the issues in those proceedings, let alone any likely outcome.

However, it should be mentioned at this stage that those proceedings have been adjourned, part heard, pending the outcome of proceedings recently instituted in this Court, which seek to prohibit their continuation on the footing that it is alleged that there has been a denial of natural justice in that, so the debtor claims, the member of the tribunal hearing the review application is biased.  The proceedings in this court are listed for a directions hearing later this month.  As a result, the tribunal hearing has not continued and at the moment is fixed to resume on 21, 22 and 23 August 1995.

In his affidavit, Mr Whyson goes on to say that on 27 February 1995, he was advised by Westpac Banking Corporation that in respect of the mortgage over the property, 11 Lennartz Street, Croydon Park, a balance of $1754.48 was owing at that date. 

Finally, Mr Whyson refers in his affidavit to correspondence between the parties' solicitors written in March 1995.

In their letter dated 14 March 1995, the debtor's solicitors acknowledged receipt of the bankruptcy notice and, referring to the application for review before the Administrative Appeals Tribunal and its adjournment until August 1995, sought an undertaking that no further proceedings, consequent upon the service of the bankruptcy notice, would be taken.

By letter dated 17 March 1995, the Australian Government solicitor informed the debtor's solicitors that the Commissioner intended to present a Creditors Petition if there was no compliance with the Bankruptcy Notice, but that no application would be made for a sequestration order until a decision by the tribunal is made, or the matter before the tribunal is otherwise disposed of, including a disposition by settlement or withdrawal.

The next affidavit relied upon by the Commissioner is the affidavit of Mr Greenwood, sworn on 2 May 1995, and that affidavit, in compliance with Rule 17(1) of the Bankruptcy Rules, purports to give particulars of the property of the debtor as known to the applicant.  There are only two items mentioned.  First, a small amount of $889 in a joint bank account with Jamil Khadem, but more importantly, the property, number 11, Lennartz Street, Croydon Park, upon which is erected a two storey brick house.

There is annexed to the affidavit a copy of a loan application made by the debtor in July 1986 to the ANZ Bank, in which it is stated that the present value, at that time, of the property, was $300,000.  However, it should be noted at this stage, that there was evidence before the Administrative Appeals Tribunal to the effect that, in more recent times, the building on the property had been demolished and the two storey brick house presently on the premises, subsequently erected.

The third affidavit relied on is a further affidavit of Mr Greenwood, sworn 4 May 1995.  In that affidavit reference is made to correspondence between the Australian Tax Office and Westpac Banking Corporation and in particular, to a letter from the bank dated 1 May 1995, stating that the debtor held a total sum of $63 to his credit in a passbook account held at the Croydon Park branch, that the term loan was to be closed that day and that Mr Jamil Khadem -

"recently made an informal loan inquiry for a business loan which involved security to be taken over 11 Lenartz Street, Croydon Park.  Loan did not proceed."

However, on behalf of the debtor there was read an affidavit sworn on 5 May 1995 by Sid Ford, the Manager of Westpac Banking Corporation, Maroubra Junction Branch and the author of the letter of 1 May 1995.  In his affidavit, Mr Ford states that there was an error in the letter in that the last sentence of the letter should have referred to 15 Lennartz Street and not number 11.
         In his second affidavit, Mr Greenwood further refers to correspondence with Mr Ford seeking to clarify some aspects of the reference to the recent loan application made by Mr Jamil Khadem.  By his response dated 3 May 1995, Mr Ford says that the inquiry was made about three weeks ago; that it was made by telephone; that the certificate of title and discharge of mortgage were handed to Mr Jamil Khadem on the recent clearance of the loan; and that no further approach had been made to that branch of the bank.

The debtor did not give evidence, but during the course of submissions, I inquired whether the debtor and his son, Mr Jamil Khadem, were prepared to give an undertaking on an interim basis, not to dispose of any interest in the property, number 11, Lennartz Street, Croydon Park.  As a consequence, both gave undertakings to the court not to transfer mortgage or otherwise dispose of the property, number 11, Lennartz Street, Croydon Park, or any interest therein, without first giving to the Australian Government solicitor, reference Mr Stokes, by certified mail, 14 days notice of any intention to do so and providing details of any transaction proposed in that connection.

The question for the court in any application under Section 50 subsection (1), is whether it has been shown to be necessary in the interests of the creditors, to direct the official trustee or other trustee to take control of the
property of the debtor.  This is a question of fact and judgment and of course, must depend upon the particular circumstances of the case.  Were it not for the giving of the undertakings that I have mentioned, there would have been much, in my opinion, to support the view urged upon me on behalf of the Deputy Commissioner, that it had been shown to be necessary in the interest of creditors to freeze any dealings with the Croydon Park property.

However, I have come to the view on the scant material before me, and I emphasise the absence of any real evidence in this area, that there being no suggestion of any need to protect the interests of any creditor other than the Deputy Commissioner, the giving of the undertakings which I have mentioned has the effect that at this stage at least, it has not been shown to be necessary in the interests of the creditors that the court should give the direction in question.

Of course, none of this is to say that on another occasion, or on other material, another view may not be open, but looking at the material now before me which I have described as scant, I am not persuaded that the Deputy Commissioner has discharged the burden placed upon him by the statute in this connection, in order to justify the taking of such an extreme step.  I note that the undertakings which were given to the Court were explained to the debtor and to Mr Jamil Khadem in my presence and in the case of the debtor, with the benefit of an interpreter. 

I order that the application to continue the appointment of a receiver appointed by the order made by Sackville J. on 4 May 1995 be refused. 

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Court.

Associate

Dated:   9 May 1995