Re Lennon, Anthony Graham Ex Parte Deputy Commissioner of Taxation

[1995] FCA 1097

IN THE FEDERAL COURT OF AUSTRALIA      )
GENERAL DIVISION  )
   No. QP 687 of 1995
BANKRUPTCY DISTRICT OF THE            )
STATE OF QUEENSLAND                   )

RE:ANTHONY GRAHAM LENNON

EX PARTE:DEPUTY COMMISSIONER OF TAXATION

MINUTES OF ORDER

JUDGE MAKING ORDER:     Spender J

DATE OF ORDER:          15 December 1995

WHERE MADE:            Brisbane

THE COURT ORDERS THAT:

1. The petition of the Deputy Commissioner of Taxation is adjourned until 9.30 am on 5 February 1996.

1. The costs of the Deputy Commissioner of Taxation of today be his costs in his petition.

THE COURT GRANTS liberty to the Deputy Commissioner of Taxation to list the petition for hearing on five working days' notice.

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 687 of 1995
BANKRUPTCY DISTRICT OF THE            )
STATE OF QUEENSLAND                   )

RE:ANTHONY GRAHAM LENNON

EX PARTE:DEPUTY COMMISSIONER OF TAXATION

CORAM:    Spender J
DATE:     15 December 1995
PLACE:    Brisbane

REASONS FOR JUDGMENT

This is an application by Anthony Graham Lennon for the adjournment of a creditor's petition against him brought by the Deputy Commissioner of Taxation.

The chronology of events shows that Mr Lennon has been indebted to the Deputy Commissioner of Taxation for a very long time in respect of group tax obligations.  A plaint was issued on 31 July 1995 for group tax payments over a period extending as far back as July 1992.  In respect of that summons a default judgment was obtained on 31 August.  A bankruptcy notice was served on 20 September and default in complying with that bankruptcy notice constituted an act of bankruptcy which occurred on 18 October.

A creditor's petition by the Deputy Commissioner of Taxation was issued on 15 November and the material shows that it was not until 12 December, shortly before the first return day of that petition, that Mr Lennon executed, or purported to execute, an authority under s 188 of the Bankruptcy Act 1966 ('the Act') to call a meeting of his creditors. It appears from the material now before me that it is proposed to offer to the creditors a sum of $23,000.00 which Mr Lennon will obtain from his mother for the consideration of the creditors. He applies for the adjournment of the hearing of the creditor's petition until his creditors have the opportunity of considering his proposal.

The application for the adjournment is opposed by the Commissioner.  It is said by Mr Hack, counsel for the petitioner, that the efforts and the offer by Mr Lennon is too little and too late.

The material shows that Mr Lennon is a solicitor practising on his own account in Cairns and has been a solicitor since August 1982.  He was in partnership between 1986 and 1991 with two other persons, practising under the firm name of Lennon & Woosnam, and employed 14 staff.  That partnership dissolved in 1991 and, according to his affidavit, left large debts, including a large debt owed to the Australian Taxation Office.

His affidavit says that the other partners had little or no assets to satisfy creditors.  Mr Lennon deposes that all his assets, apart from his residence, were realised to pay creditors of the Lennon & Woosnam legal partnership and
he refinanced his house to 95% of its value to attend to payment of those creditors.

Material, however, suggests that he has had unhappy relationships with officers of the Australian Taxation Office in an attempt to resolve the longstanding and significant debts owed in respect of group tax arrangements.  As opposed to that, material shows that Mr Lennon was elected alderman of the Cairns City Council in 1990 and that his membership of the Cairns City Council between 1990 and 1994 was his only outside activity apart from his family life, which I infer is considerable because he has seven children aged between 13 months and 11 years.

The position is that when a debtor seeks to have the hearing of a petition adjourned, there is no entitlement to an adjournment of the hearing so as to enable a meeting of creditors under Part X of the Bankruptcy Act to be convened.  The Full Court, in Field v The Commercial Banking Company of Sydney Ltd (1979) 37 FLR 341, held that there was no general practice of the Court to adjourn a hearing of a creditor's petition when the debtor had executed an authority under s 188 of the Act. The execution of such an authority is, of course, a relevant consideration but it is merely one of many.

No special particular prejudice has been pointed to by the Commissioner, although the fact is that he, as well as other creditors, is entitled to and has a right to have the petition heard.  CA Sweeney J, who presided in the Full Court hearing of Field said at 349-350:

"It would be unwise to attempt to draw up an exhaustive catalogue of the circumstances to which the Court should pay regard in considering an application for an adjournment of a creditor's petition.  However, to illustrate the point that the one circumstance of the execution of an authority should be looked at in the general context of each individual case, one may usefully refer to some other relevant considerations in such a case, as for example: 1. the course of dealings between the parties, from the time when the obligation to the petitioning creditor is said to have arisen to the date of the hearing; 2. the attitude to the application of the petitioning creditor, as prima facie, on proof of the matters mentioned in s 52(1) of the Bankruptcy Act 1966, the court will proceed to make an order for sequestration (see Rozenbes v Kronhill (1956) 95 CLR 407); 3. the general financial position of the debtor; 4. the relation between the debt of the petitioning creditor and the total liabilities of the debtor, as it may be seen, for example, that the petitioning creditor's opposition would be sufficient to defeat any special resolution proposed to a creditors' meeting; 5. any attitude to the application disclosed by other creditors; 6. any evidence bearing upon the question whether it would be for the advantage of the creditors that the debtor's affairs be administered under Pt X of the Act; 7. the likelihood that the debtor would be able to place before a meeting of creditors a particular proposal, or evidence of his general circumstances, calculated to persuade them to vote for the administration of his affairs under Pt X.  It will at once be obvious that many of these circumstances will be within the knowledge of the debtor, rather than of the petitioning creditor, and it will be for the former to give evidence of them.  Such evidence should, where practicable, be in affidavit form. "

The question of an adjournment is a matter for the Court's discretion and clearly, is not a matter to be granted as of course or as of right.  Here, however, I am persuaded that there are circumstances which provide a proper basis for me to grant the adjournment sought by Mr Lennon.  It may very well be that at a meeting of creditors the attitude and vote of the Deputy Commissioner will be decisive.  That is a factor which I have considered.  As opposed to that, there does not seem to be in this case any artificial debtors, if I may so describe them, which one sometimes experiences, particularly in the context of Part X arrangements.

It seems to me that the views of what might be said to be the smaller but genuine creditors also have to be considered.  The main reasons for my granting the adjournment is the fact that as a sole solicitor, the making of a creditor's petition today would undoubtedly wreak serious prejudice to Mr Lennon.  He would not be able to practise as a sole solicitor and whether anything might be salvaged from the sale of his practise would be debateable.  He is presently working as a solicitor and has two staff employed by him and their interests are not irrelevant.

If, at a meeting of creditors, and in the application of the requirements of the Bankruptcy Act, the proposal by Mr Lennon is not accepted and ultimately a sequestration order is made against his estate, then so be it, but it seems to me, on the whole of the material before me, including his health and his family circumstances, as well as his business concerns, it would not be unjust to accede to the request for the adjournment for a short time.

However, in the event that there is any want of diligence in the prosecution of the creditors' meeting, there ought to be granted liberty to restore the petition to the list, notwithstanding the upcoming vacation, where the matter could be speedily disposed of.

In the circumstances, I adjourn the petition of the Deputy Commissioner of Taxation until 9.30 am on 5 February 1996.

I grant liberty to the Deputy Commissioner of Taxation to list the petition for hearing on five working days' notice.  The intention of that order is to require Mr Lennon to proceed with all due dispatch to the calling and convening of a meeting of creditors to consider what should happen to him.

I order that the costs of the Deputy Commissioner of Taxation of today be his costs in his petition.

I certify that this and the preceding five (5) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate
  Date: 15 December 1995

Counsel for the applicant debtor     :        Mr R Lilley
instructed by                  :        Watkins Stokes Templeton

Counsel for the Deputy
Commissioner of Taxation          :        Mr P Hack
instructed by                  :        Austn Govt Solicitor

Date of Hearing                 :        15 December 1995