Re Phillips and Inspector-General in Bankruptcy - [2012] AATA 788

ADMINISTRATIVE APPEALS TRIBUNAL )

) 2010/0557
GENERAL ADMINISTRATIVE DIVISION ) 2011/4931
Re:STEVE PHILLIPS
Applicant

And:INSPECTOR-GENERAL IN BANKRUPTCY
Respondent

CORRIGENDUM TO DECISION [2012] AATA 788

The Tribunal amends its decision of 13 November 2012 as follows:

1.by deleting the ellipsis found in footnote:
(a)320 and by inserting “273”;
(b)358 and by inserting “329”; and

2.by deleting the ellipsis found in footnote 414 and by inserting “184” and by inserting after that reference “and [162]” and by adding “s.” to the word provision in that footnote.

(sgd) S A Forgie
Deputy President

CATCHWORDS – BANKRUPTCY – objection to discharge on three grounds including special grounds – whether evidence supports grounds – whether applicant had a reasonable excuse for conduct or failure constituting special ground.

BANKRUPTCY – contribution assessments – whether remuneration assessed as being received less than reasonable remuneration.

CORPORATIONS – interpretation of s 206A – offences of strict liability distinguished from offences in which strict liability applies to a particular physical element of the offence – determining fault element for other physical elements – offences distinguished from earlier formulations of offences under uniform Corporation Codes.

PRACTICE AND PROCEDURE – standard of proof – balance of probabilities – relevance of Briginshaw v Briginshaw principles in considering whether contravention of s 206A for the purposes of making an administrative decision.

PRACTICE AND PROCEDURE – whether Tribunal made decision to extend time for lodgement of application without power – whether issue can be reconsidered under appropriate head of power.

PRACTICE AND PROCEDURE – decision deemed to have been made under Bankruptcy Act – whether application for review lodged within reasonable time – whether special circumstances justifying Tribunal’s entertaining application – meaning of “entertaining” – distinguished from an application’s having been “made”.

PRACTICE AND PROCEDURE – jurisdiction – whether determined by Tribunal’s power to entertain or whether application must be “made”.

Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 170 FLR 1
Administration of the Territory of Papua New Guinea v Daera Guba (1973) 130 CLR 353
Adsett v Berlouis (1932) 37 FCR 201; 109 ALR 100
Angus Fire Armour v Collector of Customs (1988) 9 AAR 421
Attorney-General (Cth) v Breckler [1999] HCA 28; (1999) 197 CLR 83
Attorney-General (NT) v Kearney (1985) 158 CLR 500
Australian Communications and Media Authority v Clarity1 Pty Ltd [2008] FCA 1449
Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253
Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267; (2005) 53 ACSR 305
Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; (2007) 160 FCR 35
Australian Securities and Investments Commission v Forge [2003] FCAFC 274; (2003) 133 FCR 487
Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 286 ALR 501; 86 ALJR 522
Australian Securities and Investments Commission v Reid [2005] FCA 1275; (2005) 55 ACSR 152
Australian Securities and Investments Commission v Somerville [2009] NSWSC 1149
Beadle v Director-General of Social Security (1985) 60 ALR 225; 7 ALD 670
Bennett v Minister for Public Works (NSW) (1908) 7 CLR 372
Blair v Curran (1939) 62 CLR 464
Briginshaw v Briginshaw (1938) 60 CLR 336
Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 238 FLR 384
Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853
Civil Aviation Safety Authority v Boatman [2006] FCA 460
Civil Aviation Safety Authority v Alligator Airways Pty Ltd (No 3) [2012] FCA 601
Combe v Inspector-General in Bankruptcy [2005] FCA 1011
Commissioner for Corporate Affairs v Bracht [1989] VR 821
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466; 242 ALR 643
Dwyer v Lippiatt [2004] QSC 281; (2004) 50 ACSR 333
Everest Capital Ltd v Trust Company Ltd [2010] NSWSC 231; (2010) 238 FLR 246
Ferguson v Federal Commissioner of Taxation [1979] FCA 29; (1979) 26 ALR 307; 37 FLR 310; 79 ATC 4,261
Frost v Sheahan [2008] SASC 1073; (2008) 249 ALR 538
George v Rockett (1990) 170 CLR 104
GIO General Ltd t/as GIO Australia v Newcastle City Council (1996) 134 ALR 605; 38 NSWLR 558
Griggs v Australian Securities Commission (1999) 75 SASR 307
Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125; 248 ALR 609; 82 ALJR 1259
Heine Management Ltd v Australian Securities and Investments Commission (1993) 12 ASCR 578
Helton v Allen (1949) 63 CLR 691
Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422
Johnston v Director of Public Prosecutions (1989) 97 FLR 424
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; 32 ALJR 395
Kowalski v Trustee, Mitsubishi Motors Australia Ltd Staff Superannuation Pty Ltd [2003] FCAFC 18
Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363
McDonald v Director-General of Social Services [1984] FCA 57; (1984) 1 FCR 354; 6 ALD 6
Kyriackou v ACE Insurance Limited [2012] VSC 214
Major Engineering Pty Ltd v CGU Insurance Limited [2011] VSCA 226
Miller v University of New South Wales (2003) 132 FCR 147
Minister for Community Services and Health v Chi Keong Thoo [1988] FCA 54; (1988) 78 ALR 307; 8 AAR 245
Minister for Immigration and Citizenship v SZQOY [2012] FCAFC 131
Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597
Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323; 180 ALR 1; 62 ALD 225
Minister for Immigration and Multicultural Affairs v QAAH of 2004 [2006] HCA 53; (2006) 231 CLR 1; 231 ALR 340; 81 ALJR 304; 92 ALD 513
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Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449; 67 ALJR 170
NOM v Attorney-General for the State of Victoria and Secretary of the Department of Health [2012] VSCA 198
Norman v FEA Plantations Ltd [2010] FCA 1274; (2010) 191 FCR 39
Phillips v Inspector-General in Bankruptcy [2011] FCA 612; (2011) 121 ALD 562
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Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
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Purden Pty Ltd v Registrar in Bankruptcy (1982) 64 FLR 306
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Rashed v Perpetual Trustees Victoria Ltd [2010] FCA 1046
Re Buggy and Inspector-General in Bankruptcy (1995) 40 ALD 373
Re Conway and Inspector-General in Bankruptcy [1996] AATA 422
Re Custodial Limited and Australian Securities and Investments Commission [2005] AATA 775
Re De Brett and Australian Fisheries Management Authority [2004] AATA 704; (2004) 82 ALD 163
Re De Groot and Lumsden [1998] AATA 25
Re Johanson and Civil Aviation Safety Authority [2012] AATA 239
Re Jebb and Repatriation Commission [2005] AATA 470
Re Phillip Morris Limited and Prime Minister [2011] AATA 556; (2011) 122 ALD 619
Re Phillips and Inspector-General in Bankruptcy [2011] AATA 25; (2011) 54 AAR 132; 120 ALD 134
Re Phillips and Inspector-General in Bankruptcy [2011] AATA 288
Re Phillips and Inspector-General in Bankruptcy [2011] AATA 432
Re Proctor and Commissioner of Taxation [2005] AATA 389
Refjek v McElroy (1965) 112 CLR 517
Repatriation Commission v Smith (1987) 74 ALR 537; 15 FCR 327; 12 ALD 798; 7 AAR 17
Ridelagh v Horsefield [1994] Ch 205
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Acts Interpretation Act 1901, ss 2C, 13, 23, 29, 33
Administrative Appeals Tribunal Act 1975, ss 25, 27, 29, 29A, 32, 33, 35, 37, 41, 43, 70
Administrative Appeals Tribunal Amendment Act 1993, Act No. 31 of 1993, s 9
Administrative Appeals Tribunal Amendment Act 1977, Act No. 58 of 1977, ss 19, 36
Administrative Appeals Tribunal Amendment Act 2005, Act No. 38 of 2005, s 3, sch 1 and items 96, 98 and 99
Bankruptcy Act 1966, ss 5, 6A, 54, 58, 77A, 81, 121, 139D, 139E, 139J, 139P, 139S, 139T, 139W, 139X, 139Y, 139Z, 139ZA, 139ZC, 139ZD, 139ZE, 139ZF, 139ZG, 139ZI, 149, 149B, 149C, 149D, 149F, 149K, 149M, 149N, 149P, 149Q, 156A, 188, 194, 304A
Building Act 1993 (Vic), s 170
Child Support (Assessment) Act 1989
Civil Aviation Act 1988, ss 30DB, 30DC, 30DE
Corporations (Victoria) Code, s 227
Corporations Act 2001, ss 9, 12, 15, 16, 180, 206A, 206B, 206F, 206G, 1308A, 1332
Corporate Law Economic Reform Program Act 1999, s 3, sch 1, item 1
Crimes Act 1914, s 70
Criminal Code Act 1995, ss 1.1, 2.1, 3.1, 3.2, 4.1, 4.3, 5.1, 5.2, 5.4, 5.6, 6.1, 9.2, 13.1, 13.2, 13.3, 13.4,
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Marriage Act 1928, s 80
Migration Act 1958, s 360
Social Security Act 1991
Superannuation Guarantee Charge Act 1992
Territories Law Reform Act 2010
Workers’ Compensation and Rehabilitation Act 1981 (WA)

Administrative Appeals Tribunal Regulations 1976, rr 5, 19, sch 3
Bankruptcy Regulations 1996, r 6.15A
Building Regulations 2006 (Vic), r 1503 and sch 7, item 17

Administrative Appeals Tribunal Amendment Bill 1992
Access to Justice (Federal Jurisdiction) Amendment Bill 2011, cl 3 and sch 5 and item 2

Black’s Law Dictionary, 6^th edition, 1990
Chambers 21^st Century Dictionary, 1999, reprinted 2004, Chambers
Macquarie Dictionary, revised 3^rd edition, 2001, The Macquarie Library Pty Ltd

DECISION AND REASONS FOR DECISION [2012] AATA 788

ADMINISTRATIVE APPEALS TRIBUNAL     )
  )          2010/0557
GENERAL ADMINISTRATIVE DIVISION     )          2011/4931

ReSTEVE PHILLIPS
Applicant

AndINSPECTOR-GENERAL IN BANKRUPTCY
Respondent

DECISION

Tribunal: Deputy President S A Forgie

Dr R McRae, Member
Date: 13 November 2012
Place: Melbourne

Decision:For the reasons we have given:

in relation to the applicant’s application lodged on 8 February 2010 (first application) for review of the Inspector-General’s decision dated 21 January 2010 confirming a decision by the trustee dated 4 September 2009 to file a notice of objection to the applicant’s discharge from bankruptcy, we affirm the decision; and
in relation to the applicant’s application lodged on 18 November 2011 (second application) for review of a decision by the trustee, we:
(1)determine that the application is an application for review of decisions deemed to have been made by the Inspector-General:
(a)under s 139ZE(6) of the Bankruptcy Act 1966 confirming the trustee’s decision made on 29 March 2010 to issue income assessments in respect of three Contribution Assessment Periods; and
(b)under s 149P(6) of the Bankruptcy Act 1966 confirming the trustee’s decision made on 17 April 2010 to file a notice of objection on the ground specified in s 149D(1)(f); and
(2)have formed the opinion that there are special circumstances justifying our entertaining the second application within the meaning of ss 29(4) and 29(6) of the Administrative Appeals Tribunal Act 1975;
(3)have decided that, until the applicant pays the lesser application fee of $100 payable under s 29(6) of the Administrative Appeals Tribunal Regulations 1976:
(a)the second application has not been made; and
(b)under s 25(5) of the Administrative Appeals Tribunal Act 1975, the Tribunal does not have power to review any decision of which the second application seeks review;
(4)if the applicant pays the lesser application fee in respect of the second application by close of business on 12 December 2012 or within such further time, if any as the Tribunal allows, the Tribunal will decide:
(a)in relation to the Inspector-General’s decision deemed to have been made under s 149P(6) of the Bankruptcy Act 1966 confirming the trustee’s decision made on 17 April 2010 to file a notice of objection on the ground specified in s 149D(1)(f) to:
(i)set aside that decision; and
(ii)substitute a decision:
(A)setting aside the trustee’s decision made on 17 April 2010 to file a notice of objection on the ground specified in s 149D(1)(f); and
(B)cancelling the trustee’s objection; and
(b)in relation to the Inspector-General’s decision deemed to have been made under s 139ZE(6) of the Bankruptcy Act 1966 confirming the trustee’s decision made on 29 March 2010 to issue income assessments in respect of three Contribution Assessment Periods to:
(i)set aside the decision of the Inspector-General deemed to have been made to confirm the trustee’s decision to issue contribution assessments for each of the three contribution assessment periods (CAPs); and
(ii)remit the matter to the trustee to reassess the contribution assessments on the basis that:
(A)the applicant’s total income for each of the

periods was:

CAP 1 (Aug 2006-2007)	CAP 2 (Aug 2007-2008)	CAP 3 (Aug 2008-2009)
$178,285.71	$178,285.71	$89,142.00

(B)the applicant’s total income is adjusted having regard to the following additional matter:
(i)the applicant’s total income is to be reduced by the amount of any payments he made, or was liable to make, in each CAP under the Child Support (Administration) Act 1989;

(C)the applicant’s actual income threshold amount is adjusted having regard to:
(i)the applicant’s son being a dependent in each CAP; and
(ii)an assessment’s being made of whether the applicant’s younger daughter is dependent or partially dependent on him in all or any of the CAPs and, if so, whether her income, if any, is below the threshold of $2,500.00 per annum; and

(D)the Inspector-General otherwise adopts the figures in the contribution assessments as originally made.
S A Forgie
Deputy President

REASONS FOR DECISION

Mr Phillips became bankrupt on 28 August 2006 when a sequestration order was made against his estate.[1] Mr Gess Rambaldi and Mr Andrew Yeo were appointed as joint and several trustees of Mr Phillips’ bankrupt estate. Had s 149(4) of the Bankruptcy Act 1966 (Bankruptcy Act) been left to take its course, Mr Phillips would have been discharged from bankruptcy on or about 21 September 2009 i.e. three years from the date on which Mr Phillips lodged his Statement of Affairs. That has not been the case because, on 4 September 2009, Mr Yeo filed a notice of objection to his discharge from bankruptcy.[2] That had the effect of extending his bankruptcy to 21 September 2014. A delegate of the Inspector-General in Bankruptcy (Inspector-General) confirmed Mr Yeo’s decision in her own decision dated 21 January 2010.

[1] Exhibit 15 at AY-13 The Applicant Creditor was Stolar Joinery (Aust) Pty Ltd. Mr Phillips’ appeal from that order was dismissed by Marshall J on 20 December 2006: Exhibit 15 at AY-14

[2] Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents), T136 at 742

This is the fourth decision relating to the application Mr Phillips then lodged on 8 February 2010 for review of the Inspector-General’s decision.[3] Of the three earlier decisions, one has been solely concerned with summonses,[4] one with identifying the decision under review[5] and the last with summonses and the inter-relationship between ss 149N(1) and (1A) of the Bankruptcy Act 1966 (Bankruptcy Act).[6]
[3] Application No. 2010/0557
[4] Re Phillips and Inspector-General in Bankruptcy [2011] AATA 25; (2011) 54 AAR 132; (2011) 120 ALD 134 Appeal dismissed Phillips v Inspector-General in Bankruptcy [2011] FCA 612; (2011) 121 ALD 562 per Dodds-Streeton J
[5] Re Phillips and Inspector-General in Bankruptcy [2011] AATA 288
[6] Re Phillips and Inspector-General in Bankruptcy [2011] AATA 432

The substantive issues that remain for consideration relate to the review of both grounds of objection set out in the trustee’s objection i.e. the grounds under ss 149D(1)(b) and (da) of the Bankruptcy Act. That requires us to consider whether, after the date of his bankruptcy on 28 August 2006, Mr Phillips contravened s 206A of the Corporations Act 2001 (Corporations Act) by engaging in conduct that might broadly be described as managing a corporation (s 149D(1)(b)) or by intentionally providing false or misleading information to the trustee (s 149D(1)(da)). We have decided that both grounds have been made out. As the ground specified in s 149D(1)(da) is a special ground, we have also considered whether Mr Phillips had a reasonable excuse for intentionally providing false or misleading information.[7] We have decided that he did not and have also decided that the reasons Mr Yeo gave for filing the notice of objection specifying the ground in s 149D(1)(b), as well as that under s 149D(1)(da), justify its making. Therefore, we have decided to affirm the decision of the Inspector-General dated 21 January 2010 affirming the trustee’s decision to file a notice of objection on those two grounds on 4 September 2009.
[7] Bankruptcy Act, s 149N(1A)(c)

On 18 November 2011, and during the course of the hearing, Mr Phillips lodged a second application[8] in which he described the decision of which he sought review in this way:
“Application for review lodged within time. ITSA has remained silent & failed to act contry to in accordence with Australian Government regulation of bankruptcy trustee’s & debt agreement administration in Australia, version dated 29 March 2010.”
[8] Application No. 2011/4931

We have decided that Mr Phillips’ second application is seeking review of the trustee’s decision to issue certain income assessments on 29 March 2010 and to file a notice of objection to the discharge of his bankruptcy when he failed to pay the amounts assessed. The notice of objection was dated 17 April 2010 and was made on the ground specified in s 149D(1)(f) of the Bankruptcy Act i.e. that Mr Phillips had failed to pay the trustee an amount that he was liable to pay under s 139ZG of that Act.[9] It had the effect of extending the period of Mr Phillips’ bankruptcy to 21 September 2014.
[9] Exhibit 16

The Inspector-General’s delegate characterised Mr Phillips’ request as limited to the trustee’s decision to file a notice of objection and decided not to review the decision. In a letter dated 11 June 2010, she wrote to advise Mr Phillips of that decision. She did so on the basis that Mr Phillips had not given sufficient reasons to justify a review as the material he provided related more specifically to the income assessments issued by the trustee on 29 March 2010. Mr Phillips could, if he wished, request the Inspector-General to review those income assessments under s 139ZA. As it turned out, we find that Mr Phillips did not receive the letter and so was out of time when he lodged it.

By consent given during the hearing, we extended the time within which it could be made but there are several issues that have subsequently arisen in relation to that second application. The first is whether we had power to extend the time under s 29(7) or whether we should have considered it under ss 29(4) and (6) on the basis that no time had been prescribed for lodging the application. That issue required consideration of whether the Inspector-General had given written notice of the decision and, if not, whether she was deemed to have made a decision under the Bankruptcy Act or under s 25(5) of the Administrative Appeals Tribunal Act 1975 (AAT Act) so that the time limits specified in s 29(3) came into play. We decided that she is deemed to have made a decision under s 149P(6) of the Bankruptcy Act, rather than s 25(5) of the AAT Act so that s 29(3) is not relevant. As it was a deemed decision, the time limits prescribed in s 29(2) are not relevant either for no notice of the decision was given to Mr Phillips. Sections 29(4), (5) and (6) of the AAT Act are relevant, though, and we decided that we could “entertain” the application under them.

That conclusion led us to consider whether we had power to change our minds. We have decided that we could change our minds. The practical outcome is the same as it was when we ordered an extension of time under s 29(7) at the hearing.

A further issue arises in relation to whether the second application has yet been made because Mr Phillips has not paid an application fee and no order has been made by a Registrar, District Registrar or Deputy Registrar under r 19(5) of the Administrative Appeals Tribunal Regulations 1976 (AAT Regulations) that only one fee is payable because the second application involves the same parties as, and may be heard with, the first. Mr Phillips has asked for a fee reduction setting out all of his financial circumstances and provided a copy of his pensioner concession card.

Very properly, his request for a fee reduction had not been considered before we made a decision that we could “entertain” his second application. Until his request was considered, a decision made on it and any fee that was payable was paid, the application could not be regarded as having been “made”. The Tribunal’s power to review a decision arises when “… an application is made to it under … [an] enactment.”[10] If he pays the fee by 12 December 2012 or within such further time, if any, as we allow, we will make a decision on the substantive issues raised by his second application. They were fully argued at the hearing on the assumption that his application had been made.
[10] AAT Act, s 25(4)

On the substantive issues raised by Mr Phillips’ second application, we have decided that we will cancel the trustee’s objection under s 149D(1)(f) and remit the contribution assessments to the trustee to reassess them having regard to our revised assessments of Mr Phillips’ total income, child support payments he has paid or is liable to pay in all or any of the Contribution Assessment Periods (CAPs) and the outcome of further enquiries he makes regarding whether Mr Phillips had one or two dependent children at the relevant times.

Our reasons for the decisions we have reached on both the first and second applications are set out in the Attachments that follow:

Attachment	Subject	Paragraphs
A	Beijing Garden Resort Pty Ltd, Stavros Phillipou Family Trust and Phoenix International Group Pty Ltd (Office holders, projects, activities, employees and finances)	[13] – [50]
B	Beijing Garden	[51] – [82]
C	Phoenix International	[83] – [153]
D	Provisions of the Bankruptcy Act relating to the review of the trustee’s and Inspector-General’s decisions	[154] – [187]
E	First application and ground of objection: s 149D(1)(b) “after the date of the bankruptcy, the bankrupt contravened section 206A of the Corporations Act 2001 (disqualification from managing corporations)”	[188] – [325]
F	First application and ground of objection: s 149D(1)(da) “after the date of the bankruptcy, the bankrupt intentionally provided false or misleading information to the trustee”.	[326] – [342]
G	First application (Do the reasons for objecting justify the making of the objection under s 149D(1)(b)?)	[343] – [350]
H	Second application (Identifying the decision under review, working out the time prescribed for lodgement of application for review, deciding whether an application must be “made” before the Tribunal may “entertain” it and related matters)	[351] – [448]
I	Tribunal’s power to change basis on which second application entertained (The basis on which we may decide to entertain Mr Phillips’ second application under s 29(4)(c) instead of making an order under s 29(7) to extend the time for lodgement)	[449] – [465]
J	Second application and ground of objection: s 149D(1)(f) “the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139Z”.	[466] – [471]
K	Second application and contribution assessments	[472] – [496]
L	Procedural and other issues arising during the hearing	[497] – [512]

BEIJING GARDEN RESORT PTY LTD, STAVROS PHILLIPOU FAMILY TRUST AND PHOENIX INTERNATIONAL GROUP PTY LTD

(Office holders, projects, activities, employees and finances)

In this section of our reasons, we will set the corporate structure and office holders of the companies in which Mr Phillips has been involved in some way. We will then summarise various projects and activities in which those companies have been involved. In addition, we will set out the findings we have made regarding the experience and qualifications of the office holders, past and present, of the corporations and any involvement in other corporations at an earlier time.

OFFICE HOLDERS OF BEIJING GARDEN AND PHOENIX INTERNATIONAL

On the basis of the searches referred to in the footnotes, we find that the persons shown in the tables have been office holders and shares are now held by the persons listed under the heading “Current Members”:

Beijing Garden Resort Pty Ltd (Beijing Garden)
(Registered 13 April 1994)[11]
(Current principal place of business: Brunswick Street, Fitzroy)[12]
(Trustee of Stavros Phillipou Family Trust)[13]

[11] T documents, T 167 at 944

[12] Organisational Search dated 9 March 2010: T documents, T167 at 945

[13] Mr Phillips’ Statement of Affairs, T documents, T5 at 35

Name	Position	Appointment Date	Cessation Date	Current members
Mr Steve Phillips	Director[14]	13 April 1994	27 June 2006	(Transferred shares to brother, Phillip Phillipou)[15]
Mr Steve Phillips	Secretary[16]	13 April 1994	5 August 2006[17]
Travis Bingham	Director[18]	1 March 2006	15 June 2007[19]
Tanya Belaj	Director[20]	9 February 2007	100 ordinary fully paid shares[21]
Tanya Belaj	Secretary[22]	6 February 2010

[14] Historical extract dated 29 August 2006 from data base of Australian Securities and Investments Commission (ASIC): Exhibit 15 at AY-8

[15] Controlling Trustee’s report under s 189A of Bankruptcy Act: T documents, T169 at 956-957 and see also Historical extract dated 29 August 2006 from data base of Australian Securities and Investments Commission (ASIC): Exhibit 15 at AY-8 at 1247 showing ASIC received notification of the change of shareholders on 9 May 2006 and registered it on the following day.

[16] Same reference

[17] Historical personal name extract dated 1 March 2010: T documents, T162 at 933

[18] Historical extract dated 29 August 2006 from data base of ASIC: Exhibit 15 at AY-8

[19] Historical personal name extract dated 1 March 2010: T documents, T165 at 941 and see also T167 at 945-946

[20] Historical personal name extract dated 9 March 2010: T documents, T166 at 942

[21] Same reference at T 166 at 942-943. Shares acquired 11 February 2010: Organisational Search dated 9 March 2010: T documents, T167 at 949

[22] Organisational Search dated 9 March 2010: T documents, T167 at 945

Phoenix International Group Pty Ltd (Phoenix International)
(Registered 18 June 2004)[23]
(Current principal place of business: Brunswick Street, Fitzroy)[24]

[23] Historical company extract dated 23 November 2009 from ASIC data base: T documents T149 at 895

[24] Historical extract dated 29 August 2006 from ASIC data base: T documents, T110 at 622

Name	Position	Appointment Date	Cessation Date	Current members
Mr Steve Phillips	Director[25]	11 April 2005	5 August 2006	100 ordinary fully paid shares owned by Beijing Garden[26]
Mr Steve Phillips	Secretary[27]	11 April 2005	5 August 2006
Travis Bingham	Director[28]	11 April 2005
Tanya Belaj	Director[29]	9 February 2007
Phillip Phillipou	Secretary[30]	5 August 2006

[25] Historical personal name extract dated 1 March 2010: T documents, T162 at 934-935

[26] Historical Extract from ASIC database dated 16 January 2009: T documents, T111 at 623

[27] Historical personal name extract dated 1 March 2010: T documents, T162 at 935

[28] Historical personal name extract dated 1 March 2010: T documents, T165 at 941 and see also Historical Extract from ASIC database dated 16 January 2009: T documents, T111 at 621

[29] Historical personal name extract dated 9 March 2010: T documents, T166 at 942 941 and see also Historical Extract from ASIC database dated 16 January 2009: T documents, T111 at 621

[30] Historical Extract from ASIC database dated 16 January 2009: T documents, T111 at 623

Cessation of Mr Phillips’ appointment as a director in 2006

Mr Phillips said that he had been advised by his accountant, Mr Graham Clark, to disassociate himself from the companies when he could not pay a couple of sub-contractors and was proposing to put to his creditors that he enter an arrangement with them under Part X of the Bankruptcy Act. He did not want to put the companies at risk because of his actions. In particular, he did not want to compromise the position of Phoenix International.[31] At the time, Beijing Garden had no income at all, he said. By removing himself as a director, he removed the stress levels to his heart.
[31] Transcript, 22 November 2010 at 9. We have referred to transcript when that transcript has been available to us as a result of a decision by the District Registrar to obtain it for Mr Phillips. The circumstances in which a transcript will be ordered by the Tribunal are limited by guidelines. We do not know either the days for which transcript was requested or the reasons for making the decision to provide it and nor do we need to know. What we do know is that we do not have transcript for those days of the hearing held on 23 November 2010 and 20 and 27 October 2011. For those days, we have relied on our notes. Extracts reproduced from transcripts are reproduced as they appear and we have not marked errors in spelling by inserting “[sic]”.

In his memorandum of 23 September 2011, Mr Phillips has stated that he “… resigned as an officer of the companies on the 1^st July 2005, due to health issues and was removed from the ASIC register on/or about August 2006. …”.[32] This is consistent with a letter that he wrote to Beijing Garden and Phoenix International bearing that date but which was not admitted in evidence. He described himself as continuing as a “caretaker director” until new directors were appointed. In the meantime, he would “apply for a Part Ten to clear any personal issues so they do not impact on my family and the companies.” He would remain as a part-time employee receiving $500.00 per week together with access to a car and payment of all insurance premiums. It is also consistent with the statement he made at the hearing that:
“… Travis became a director of Phoenix in 2006, about March, and took over the role when I applied for my part 10 as the officer of the company and Tanya was approached after that, seeing she has a business degree in Management, to take over the managerial role of Phoenix which then left Travis able to just be on the side at Hawthorn full time and when I wasn’t in hospital I worked as a part time employee for Phoenix as I resigned my position as a director on 1 July 2005. I stayed on as a caretaker director until Travis took over – or Tanya took over and Travis took over and ceased to operate as a director.”[33]
[32] Memorandum No 25 at [3]
[33] Transcript, 22 November 2010 at 13

This also accords with what Mr Phillips said on the day he gave the oral evidence we referred to in the previous paragraph[34] but it does not accord with what actually happened. Mr Phillips’ later statement and this passage of the evidence is not consistent with the statutory obligations imposed on both Beijing Garden and Phoenix International as corporate bodies registered as companies under the Corporations Act. Under s 601CV(1), each was required to lodge with ASIC a written notice of any change in its directors. It was required to do so within one month of the change. The Organisational Search on Beijing Garden made from the ASIC database on 9 March 2010 shows that a document entitled “Change to Company Details Appointment or Cessation of A Company Officeholder” was received by ASIC on 28 June 2006 and another on 30 August 2006.[35] A similar record appears for Phoenix International showing the same type of document’s having been received on 30 August 2006.[36]
[34] Transcript, 22 November 2010 at 13
[35] T documents, T167 at 949
[36] T documents, T 149 at 897

On the basis of a letter written by Mr Clark to Phoenix International dated 25 July 2006, we find that Mr Phillips had appointed Mr Clark to be his controlling trustee.[37] In that role, Mr Clark was authorised to call a meeting of Mr Phillips’ creditors and to take control of his property.[38] He called a meeting on 29 August 2006 and proposed that he pay $35,000 in full and final settlement of all provable claims against him.[39] That meeting was held outside the time permitted by s 188 of the Bankruptcy Act i.e. 25 working days after Mr Clark had consented to exercise the powers given by the authority.[40]

EXPERIENCE AND QUALIFICATIONS OF OFFICE HOLDERS

[37] Exhibit G

[38] Bankruptcy Act, s 188(1)

[39] Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (ST documents), ST8 at 1134 at 1136

[40] Bankruptcy Act, s 194 and see also s 188(2AA)

Mr Phillips

Mr Phillips’ evidence on this subject was not contradicted either expressly or implicitly by reference to other evidence. We have no reason to doubt it. Therefore, we find that Mr Phillips began as an apprentice carpenter and joiner for Collingwood Timber and Joinery, which was a subsidiary of the builder, E A Watts. After concluding his apprenticeship, he became a junior building estimator both in joinery and building. After moving to another builder, Mr Phillips won a Churchill Fellowship to study building techniques overseas. He was a project manager on the World Trade Centre. On his return, he worked for Reinforced Concrete and Monier Pipe Construction Company as its senior building estimator and then for Dominion Properties. He worked for the Pilsen Group as a Project Manager and undertook one development on his own.

In the meantime, Mr Phillips formed a company, ST Phillips & Co, with two others. All three became shareholders. ST Phillips & Co was owned by Phillipou Holdings Pty Ltd (Phillipou Holdings). Mr Phillips went to work in China where he felt that the names of his companies were incompatible with the environment in which he worked. That led him to form Beijing Garden and Phoenix International as more appropriately named corporations. He worked as Phoenix International’s Project Manager. He is a Registered Building Practitioner for Commercial and Domestic building projects of all sizes,[41] a Quantity Surveyor, Project Manager, Construction Manager, Building Consultant and Estimator as well as an Occupational Health and Safety Officer Grade 3.
[41] T documents, T164 at 940

Mr Phillips sees the role of a Project Manager as a person who supervises the works and solves the problems on site be they conflicts in the drawings or structural issues. If needed, he gets the engineer on site to resolve the problem. If a carpenter’s offsider is sick, he gives him a hand to lift a beam or gets someone else to help him. His business card for Phoenix International has the following statement after his name:
“FAIH AIQS (affil)
Building practitioner + quantity surveyor, project + construction manager, building consultant + estimator, OH&S officer grade III”[42]
[42] Exhibit 10

Ms Belaj

On the basis of her oral evidence, we find that Ms Belaj began working for Phoenix International in approximately 2007 and, perhaps on the basis of Mr Phillips’ memory, early 2006. On the basis of her business card, we accept that Ms Belaj has a BA Business (Hons) degree.[43] We also accept that she graduated with that degree from an Australian University in 2004.[44] She describes herself as “business administrator” for Phoenix International on her business card.
[43] Exhibit 10
[44] Transcript, 22 November 2010 at 13

Mr Phillips said in November 2010 that he expected that Ms Belaj would shortly obtain registration as a Domestic Builder (Manager). Registration is provided for in s 170 of the Building Act 1993 (Vic). Qualifications for registration are “… a certificate issued by the Board, after examination of the applicant, certifying that the applicant has adequate knowledge and experience (including financial management knowledge and experience) to manage or arrange the carrying out by a builder registered under the Act in another class of domestic builder of the components of domestic building work specified in the certificate.”[45] Ms Belaj had completed a three month course in July 2010.
[45] Building Regulations 2006 (Vic), r 1503 and Schedule 7, item 17

On the basis of her own evidence, we find that, before becoming its director, Ms Belaj performed office duties, worked on costings, liaised with lawyers and travelled to the building sites. She also undertook research on building products and her tasks were in the nature of administrative tasks. Her evidence is consistent with that given by Mr Phillips in this regard. He added that she had typed all letters and memoranda and would check his for grammatical mistakes.

At the public examination, Ms Belaj had said that she was engaged in these tasks “More on a casual part-time basis” than full-time.[46] Although she could not recall the basis of her employment at the hearing in 2011, we find that was the basis of her employment at the time. We do so on the basis that her memory of events was likely to be accurate at the time she gave her evidence at the public examination.
[46] T documents, T100 at 454

Ms Belaj has also assisted Mr Phillips in his ill health by accompanying him to his medical appointments. In some weeks, this would occupy five or so hours of her time and, in others, ten to fifteen. She continued to provide assistance to Mr Phillips after she became a director of Phoenix International and Beijing Garden. Between her duties as a director and her caring for Mr Phillips, her responsibilities engaged her on a full-time basis.

The regard Mr Phillips has for Ms Belaj is illustrated by the following passage from his cross-examination:
“… I trust Tanya with my life every day, that's why she’s my carer, but she’s a strong enough person to make her own decisions and the only way she’s going to learn is by making mistakes for the future benefit. The opposing solicitor would say she’s a young woman. She’s a very intelligent young woman and maybe I’ve – I’ve asked her to jump into something before her time and she has made mistakes, minor mistakes. She has learnt by them. I've made mistakes in my life and I’ve learnt by them.”[47]
[47] Transcript, 24 November 2010 at 146

Mr Bingham

Mr Bingham was not called to give evidence but we have a transcript of his public examination on 8 December 2009 and Mr Phillips’ evidence. On that basis, we accept for the purposes of this case that Mr Bingham has qualifications in occupational health and that he acted as both a shop steward and as a construction manager on site assisting Mr Phillips.[48] His business card as provided by Phoenix International describes him as the “FAIH industrial relations & safety officer member of safety institute”.[49]
[48] Transcript, 17 November 2011 at 21 and 18 November 2011 at 149
[49] Exhibit 10

We find that Mr Bingham worked as the site manager for Phoenix International at the Hawthorn, Ballarat and Beaumaris projects. That meant that he ran the job, dealt with the unions and with Worksafe regarding health and safety. He did not work on the Prahran house renovation or the Lorne property.[50]
[50] T documents, T99 at 252-253. Mr Phillips’ evidence was that Mr Bingham was the onsite supervisor “most of the time” at the Hawthorn development: Transcript, 22 November 2010 at 5

PROPERTY OWNED BY BEIJING GARDEN

On the basis of Mr Phillips’ evidence in cross-examination, we find that Beijing Garden currently owns the property at Brunswick Street in Fitzroy (Brunswick Street property), another at Lorne and a motor vehicle. It has income in the form of rent from a property purchased in Lorne.[51]
[51] Transcript, 24 November 2010 at 142-144

Brunswick Street property

Mr Phillips said that he knew that the Brunswick Street property was held by Beijing Garden as part of the Family Trust as he had seen the title deed. His brother had transferred the property to the Trust Fund after their mother died on 18 December 1994.[52] On the basis of the Register Search Statement dated 29 August 2006, we find that, as the executors of their late mother’s estate, Mr Phillips and his brother transferred the Brunswick Street property to Beijing Garden on 16 December 1996. Beijing Garden was shown on the Transfer of Land as having paid $250,000.00 for the property.[53]
[52] Exhibit 7 and see also Transcript 22 November 2010 at 14
[53] Exhibit 8

On 19 January 2004, we find, a mortgage was registered in favour of Catholic Church Insurances Limited. The mortgage secured repayment of the sum of $515,000. Mr Phillips signed the mortgage as the sole director of Beijing Garden and was the guarantor of the repayment of the loan.[54] A few months later, on 14 May 2004, another mortgage was registered. The mortgagee was Charley’s Shoe Stores Pty Ltd and the amount secured was $65,000. Again, Mr Phillips signed the mortgage as the sole director and again was named as guarantor.[55] Variations of both mortgages were registered in 2005. That in favour of Catholic Church Insurance Limited was varied on 6 October 2005 and the other on 14 October 2005.[56]
[54] ST documents, ST8 at 1219-1220
[55] ST documents, ST8 at 1225-1226
[56] ST documents, ST8 at 1217, 1221-1222 and 1227-1228

We are satisfied that the debts secured by the mortgages were paid.[57] In the case of Catholic Church Insurances Limited, the debt was refinanced leading to the discharge of the mortgage and the registration of another on 15 September 2006 to Permanent Trustee Company Limited (Permanent Trustee).[58]
[57] ST documents, ST8 at 1238 and 1240
[58] ST documents, ST8 at 1242

Lorne property

There is no dispute between the parties that Beijing Garden purchased a property from Jetoglass Pty Ltd (Jetoglass) for the sum of $840,000. A deposit of $42,000 was paid on the signing of the contract on 15 January 2006.[59] On the basis of the Title Search, we find that the Lorne property was transferred to Beijing Garden on 17 September 2007.[60] On that day, a mortgage was registered on the title in favour of Secure Funding Pty Ltd. That mortgagee, we find on the basis of Ms Belaj’s evidence at the public examination, is also known as BEAT.

[59] Exhibit 11

[60] ST documents, ST30 at 1532

Hawthorn property

On the basis of the Contract of Sale dated 26 May 2006,[61] we find that Beijing Garden agreed with Gantley Pty Ltd (Gantley) to purchase two units off the plan of a development in Hawthorn (Hawthorn property). Phoenix International had entered a contract with Gantley to build those and eighteen other units in the development. The purchase price of the two units was approximately $945,000 being $560,000.00 for one and $385,000.00 for the other. Under the contract, a 10% deposit of the purchase price was required on each. Mr Phillips’ evidence was that it was in the order of 5% of the purchase price but whether or not that was the amount actually paid rather than the full 10% is of no consequence in this case. For the purposes of this case, we accept Mr Phillip’s evidence that Beijing Garden sold the two units before the development was completed and no longer has an interest in them.[62]
[61] Part of Exhibit 11
[62] A contract for the sale of one of the units was signed on 7 July 2009: part of Exhibit 11

STAVROS PHILLIPOU FAMILY TRUST

In cross-examination, Mr Phillips said that the Stavros Phillipou Family Trust (Family Trust) had been established for the benefit of his children. Beijing Garden is the trustee of the Family Trust. The Deed of Settlement establishing the trust was dated 21 November 1996.[63]
[63] Exhibit B

In her will, his mother had left the Brunswick Street property to Mr Phillips to have its use and enjoyment for life or until his son, Kristopher attained the age of 25 years, whichever was earlier. She made a similar provision in relation to the property next door for her other son, Mr Phillip Phillipou and his son.[64]
[64] Exhibit 7

This, we find, is not what has happened to the Brunswick Street property. It was transferred to a Family Trust “… because it had to park somewhere …”.[65] Beijing Garden was shown on the Transfer of Land as having paid $250,000 for the property but Mr Phillips said that he was not sure what had happened to that money. He agreed with the proposition that the purchase price should be his son’s money but he had left the whole matter to his lawyers. They had told him to put the property in a trust so that he could carry out his mother’s wishes. During cross-examination, Mr Phillips said that he thought that the sum of $250,000 had been borrowed but that it had been repaid. He did not know the source of the borrowed funds as borrowing and repaying “becomes a revolving door”. Money is borrowed from one person, a sale activated and money repaid.[66]
[65] Transcript of public examination: T documents, T101 at 482
[66] See also Transcript of public examination: T documents, T101 at 481-485

We do not accept Mr Phillip’s evidence that anything that Beijing Garden owns is owned by his children. Property owned by Mr Phillips’ late mother had been transferred to the Family Trust. She had been quite clear, he said, that the property went to his children. That was contrary to the express terms of her will which, provided her grandsons reached the age of 25 years, had specified that one of her houses was left to Mr Phillips’ son and the other to his brother’s son. He had persuaded her that this was not fair to his daughters and, he said, she had made it clear that the property was to be shared with the girls as well.[67] In his mind, he is not a beneficiary of the Family Trust and that trust is beyond the reach of his bankruptcy. He has never received any payment from the Family Trust.
[67] Transcript, 22 November 2010 at 76

Beijing Garden declared that it would hold the Trust Fund and the income on that Trust Fund on trust and subject to the provisions of the Trust Deed. Clause 3(a) of that deed set out the way in which Beijing Garden would ascertain the income of the Trust Fund and, under Clause 3(b)(i), it is required to pay all costs, disbursements, commissions, fees, taxes and proper outgoings in each Accounting Period. It may then decide, under cl 3(b)(ii), the classes of income that apply in each of those periods. Under cl 3(c):
“The Trustees may at any time before the expiration of any Accounting Period with respect to all or any part or parts of the net income of the Trust Fund for such Accounting Period determine –
(i)To pay apply or set aside the same to or for any one or more of the General Beneficiaries living or in existence at the time of the determination;
(ii)-(iv)…
PROVIDED that nothing in this paragraph shall oblige the Trustees to set aside any sum aforesaid or affect any rights of the Trustees in the event of any assessment of tax being made against them in respect of any amount so paid applied or set aside.”[68]
[68] Exhibit 3

The “General Beneficiaries” include those who are named as a “Specified Beneficiary” and the “… children of the Specified Beneficiary or Specified Beneficiaries …”.[69] Only one person is named as a Specified Beneficiary: Mr Phillips.[70] Therefore, Mr Phillips, as well as his children, are General Beneficiaries under the Trust Deed and entitled to share in any distribution of income that might be made.
[69] Clause 1(b)(ii), Exhibit 3
[70] The Schedule, Exhibit 3

On the Vesting Day - 30 June 2075 - Beijing Garden will hold the Trust Fund on trust for Mr Phillips, if he were still to be alive. If not, it will hold the Trust Fund on trust for his brother if he is still alive. Otherwise, it will hold it on trust for Mr Phillips’ “statutory next of kin”.[71] If there is nobody meeting that description, the trust fund was held on trust for the “statutory next of kin” of the Guardian or, if none, the person who was last Guardian.[72] Mr Phillips was the Guardian but he could appoint another.[73]
[71] Clause 4(d)(i), Exhibit 3
[72] Clause 4(d)(ii), Exhibit 3
[73] Schedule, Exhibit 3

In view of the terms of the Trust Deed, we do not accept Mr Phillips’ view that Beijing Garden owns property on trust for his children. Although it may be that, in a particular Accounting Period, Beijing Garden will decide to apply any income it may have to his children rather than to him, that does not mean that it holds the trust for their benefit and not for his. Mr Phillips is both a Specified Beneficiary and a General Beneficiary under the Terms of the Trust Deed and that is not altered by the discretionary nature of the Family Trust regarding distribution of its income. Although unlikely that Mr Phillips will still be alive on 30 June 2075, the Trust Fund would be held on trust for him absolutely on that day unless Beijing Garden had decided to hold it on trust for a charitable purpose.[74]
[74] Clause 4(b), Exhibit 3

Our finding is not altered by the fact that, on 1 July 2005, Mr Phillips nominated his brother, Mr Phillip Phillipou, as the Substitute Guardian and Appointor.[75] Mr Phillips said that he had been advised to do this before he offered to enter a Personal Insolvency Agreement with his creditors under Part X of the Bankruptcy Act. He understood that he had been advised to do that so it could not be suggested that he was a beneficiary of the Family Trust. His brother and he were co-executors of their mother’s will and Mr Phillips happily handed his role under the Family Trust to him. Mr Phillips said that he controlled nothing as a result. He denied that his actions meant that he realised that he was a beneficiary of the Family Trust. He “realised nothing”, he said. He had gone to his accountant, Mr Graham Clark, telling him that a couple of “subbies” were becoming aggressive but that he could not afford to pay them. Mr Clark had tried to negotiate a settlement but only one accepted the settlement. He told Mr Phillips to disassociate himself from the companies and the Family Trust. Mr Phillips said that he had not asked Mr Clark why he advised this course of action but did what he had recommended. He thought that the advice had been given so that he could mitigate the risk to his mother’s house. That risk would come from creditors but he saw the Family Trust as out of their reach.
[75] Part of Exhibit B

The variation made by Mr Phillips related to the trust fund itself and any accumulated interest remaining at Vesting Day. It did not alter the fact that Mr Phillips is one of the persons for whose benefit Beijing Garden could apply the income of the Family Trust in a particular Accounting Period in the meantime.

PHOENIX INTERNATIONAL

Before Mr Phillips’ bankruptcy on 28 August 2006, Phoenix International had undertaken the project management of the refurbishment of a four storey block of units in North Melbourne. It was also engaged as the project manager of the fit out of a bar and restaurant in Docklands. In both cases, Phoenix International was paid a percentage of the total cost of the project. In each, that cost was in the order of $1 million. It was also paid costs in the North Melbourne project.[76]
[76] Transcript, 24 November 2010 at 148-149

We find that Phoenix International had completed all of these projects before 2004. It had none in 2005 but Mr Phillips spent that year working with Mr Zayler and Mr Zayler’s architect in order to minimise the costs of three building projects. Ultimately, Phoenix International was engaged to build them. On the basis of three proceedings commenced by Phoenix International in the County Court,[77] we find that Phoenix International agreed to build the following projects for Mr Zygmunt Zayler or for companies with which he is associated:
[77] Judgment on application for security for the defendants’ costs: Phoenix International Group Pty Ltd and Others v Resources Combined No. 2 Pty Ltd [2009] VCC 555; Judge Shelton

Date	Location	Associated company	Project	Date of Notice of Termination
October 2006[78]	Hawthorn	Gantley Pty Ltd	Construct a 20 unit development for $4.95 million.	19 February 2009
January 2006	Ballarat	Resources Combined No. 2 Pty Ltd	Construct eight two storey town houses for $1.428 million.	23 February 2009
December 2005	Beaumaris	Jetoglass Pty Ltd	Construct two double storey townhouses for $825,000.[79]	24 February 2009

[78] See also Building Permit Application dated 13 September 2006 nominating Phoenix International as the building practitioner to be engaged on the work.

[79] This was said to be $1 million by Mr Phillips at the hearing: Transcript, 24 November 2010 at 151

None of the projects ended happily with Phoenix International claiming that Notices of Termination had been wrongly given and treating them as repudiations of the contract. It sought damages on a quantum meruit basis. The defendants contended that the work had not reached practical completion as required under the various contracts and that no extension of time claims had been made under the contract.

On the basis of Mr Phillips’ evidence, we also find that Phoenix International had also renovated a section of Mr Zayler’s house for a sum of approximately $30,000.[80]
[80] Transcript, 24 November 2010 at 149

Up until, March 2009, we find that Mr Phillips, Ms Belaj and Mr Bingham were employed by Phoenix International on either a full-time or part-time basis. We accept that Mr Phillips has been in receipt of a Disability Support Pension from Centrelink (DSP) since that time and also accept that Mr Bingham resigned at the same time. Up until then, the services of a bookkeeper and of an accountant would be obtained as required.[81]

[81] See also transcript 22 November 2010 at 14

BEIJING GARDEN

In this section of our reasons, we will refer to the evidence and set out some of our findings regarding various aspects of Beijing Garden’s management and business activities. We will return to these matters later in our reasons when we review the objection decisions.

Income

Mr Phillips said that he pays $100 per week in rent for a room in the Brunswick Street property. That is not regarded as income of Beijing Garden but is used to meet household expenses for the four occupants of the property. If Phoenix International has a profit, it is paid to Beijing Garden. Beijing Garden has an asset being the Brunswick property.

We note that Beijing Garden’s Balance Sheet for the year ending 30 June 2008 shows cash assets for both that year and the previous year of $10.00. The Profit and Loss Statement shows income of $52,000.00 from rent for the Brunswick Street property and, in 2008, $11,601.00 as rent from the Lorne property.[82] No mention is made of a term deposit in the Bank of Queensland (BoQ) as either an asset or of the interest paid on that term deposit. On the basis of the documents submitted to BEAT in support of a loan application,[83] we find that Beijing Garden had a Premier Investment Account with that bank. An initial deposit of $200,000 was made on 14 June 2007 for a term of five months. We would have expected it to be shown as an asset in the Balance Sheet for the year ending 30 June 2007. It is not there.

[82] The financial statements for Beijing International for the year ended 30 June 2008 were not given an Exhibit number and that raises a question whether we may have regard to them. They were not tendered by either party but their contents were put to Mr Phillips and Ms Belaj. Mr Phillips was asked the rental shown in the Profit and Loss statement for that year during cross-examination on 20 October 2011. The Balance Sheet as at 30 June 2008 was shown to Ms Belaj on 27 October 2011 when she was asked about the negative equity shown in that year and the previous year. Income and expenditure over a number of years, including the 2008 financial year and the preceding year shown on those financial statements, were clearly in issue. Mr Phillips was on notice of that. We understand that he did not have the assistance of legal representation but took that into account in giving him every opportunity to refute, explain or expand upon financial information whether it appeared in documents that were ultimately allocated an exhibit number or was referred to in questions or in documents (such as the 2008 financial statements) put to him or Ms Belaj. Therefore, we have decided that we may have regard to them.

[83] Exhibit 18

Signatories to the bank accounts

We find that Mr Phillips was originally the signatory for all of Beijing Garden’s accounts. He remains a signatory, although not a sole signatory, on the accounts held at BoQ in the name of Beijing Garden and Phoenix International.[84] He is the sole signatory on the account held at Bankwest in the name of Beijing Garden.[85]

Purchase of the Lorne property

[84] Letter to Tribunal dated 19 August 2001 in response to summons

[85] Letter to Tribunal dated 12 July 2010 in response to summons: Exhibit 14

A.The purchase

We have already found that Beijing Garden purchased the Lorne property but we now turn to how that purchase came about. At the hearing on 23 November 2010, Mr Phillips agreed that Beijing Garden had purchased a property in Lorne (Lorne property) as an “investment for Beijing”. It was to be used as a rental property. That was his belief, he said, as he had remained away from the whole matter. Maintenance on the property was carried out by the body corporate and he had done no more than change the locks to coordinate with a master key system and hung some pictures. The Lorne property had been sold during 2010, he said, after it had been on the market for two years.

On the following day, Mr Phillips was shown what appears to be part of a Contract of Sale of Real Estate dated 15 January 2006 for the sale of a unit in Lorne in Victoria (Lorne property).[86] The vendor was Jetoglass Pty Ltd (Jetoglass), whose sole director is Mr Zygmunt Zayler. The purchaser was Beijing Garden. Mr Phillips’ agreed that he had signed the document as the director of Beijing Garden[87] but described it as a “…a presale document, which is not a binding document.”[88] Mr Phillips’ evidence was that the purchase was an:
“… off-the-plan purchase and I told you that the off-the-plan purchase was requested by Mr Zayler as - to create numbers for the bank, and if the company didn’t want to go ahead with it then he was going to release the obligation.”[89]

As things turned out, the sale proceeded. The transfer was signed by Ms Belaj as sole Director of Beijing Garden and Mr Zayler as that for Jetoglass.[90] Having regard to that fact in light of the unequivocal terms of that part of the Contract of Sale that we do have, we find that, on its face, the document signed by Mr Phillips when he was a director of Beijing Garden was a binding contract between Beijing Garden and Jetoglass. That finding, we note, also accords with the evidence of Ms Belaj who said that the Lorne property had been purchased before she became a director of Beijing Garden.

[86] Part of Exhibit 11

[87] Transcript, 24 November 2010 at 141

[88] Transcript, 24 November 2010 at 131

[89] Transcript, 24 November 2010 at 131

[90] Exhibit 3

B.Application for a loan from BEAT

On the basis of facsimile transmission information appearing on the application form used by BEAT Home Loans (BEAT), we find that Ms Belaj signed that application some time on or after 24 August 2007. By that time, Ms Belaj was the director of Beijing Garden. She did not complete the first page of BEAT’s application form which asked for details of the purposes for which the loan would be used. It specified business purposes or personal use. Other documents from BEAT lead us to conclude that Beijing Garden and Ms Belaj applied jointly and severally for a loan of $672,000 to purchase the Lorne property. Repayments would be on the basis of interest only for five years.[91]
[91] Exhibit 18

At that time, the value of that property was shown as $840,000. Beijing Garden’s other assets were detailed in the application documents. The Brunswick Street property was shown as an investment property valued at $1.3million. It was subject to a mortgage of $922,000 repayable by monthly instalments of $6,030. Given that the balance of the loan remains static, the rate of interest and the amount of the payment, we find that interest only is repaid each month. It generated rent of $1.00 per week and attracted annual deductions of $72,360.00. Beijing Garden’s other assets were shown as a 2000 Hyundai Santafe valued at $18,000, household items valued at $125,000 and a BoQ account with $200,000. An acknowledgment from BoQ shows that the $200,000 had been deposited in a five month term deposit on 14 June 2007. It was due to mature on 14 November 2007.[92]

[92] Exhibit 18

Ms Belaj signed a statement authorising the payment of commission and another nominating herself as the person to whom BEAT should give notices. She signed an income declaration statement in which she stated that her income from the business listed in the application was $207,000 per annum and that she had fully and honestly disclosed all her income and liabilities. That figure was described as her “Average Pre-Tax Business Income”. Ms Belaj also signed a declaration agreeing, among other matters, that the loan would be secured by a mortgage, she agreed to pay all fees and charges associated with obtaining the loan and, if a sale of the property did not repay the loan in full, would be personally liable for the unpaid portion of the loan.[93]
[93] Exhibit 3

In other documents, she was shown as “self-employed” and “director of Own Company” with “100% ownership of Beijing Garden and a gross salary of $0.00. The business income of Beijing Garden was shown to be an average of $207,000 each year. The nature of its business was shown to be that of a “Primary Producer”.[94]
[94] Exhibit 18

C.The circumstances in which the application for a loan was made

We find that the Transfer of Land was sent by solicitors by facsimile on 3 September 2007 with a subject line reading “Steve Phillips and Beijing Garden Resort Pty Ltd”.[95] In cross-examination, Mr Phillips said initially that he did not know why this would have been so but then said that he “… would always attend their office with Tanya.”.[96] He denied discussing the matter with Ms Belaj in anything other than general terms. They never went into the “specifics in relationship to the company matters.”[97] That was so even though Ms Belaj is a young woman who had an income of $11,000 a year in director’s fees from Phoenix International at the time. That was so even though she was entering a contract on behalf of the company that was the trustee of assets intended to secure his children’s future.
[95] Exhibit 3
[96] Transcript, 24 November 2010 at 132
[97] Transcript, 24 November 2010 at 133

Mr Phillips saw no difficulty in Ms Belaj’s being the guarantor of such a large sum because, at the relevant time in June 2006, Phoenix International was buoyant. It had contracts worth up to $6 million on its books and “everything looked

rosy”.[98] Phoenix International’s net profits were paid to Beijing Garden, which was its parent company but Ms Belaj would be able to pay the loan repayments using the money she received in rent for the Lorne property, Mr Phillips said. Even if that property had to be sold, the loan was less than its value and she would not be liable to pay any shortfall under the guarantee she had given.

[98] Transcript, 24 November 2010 at 134

Ms Belaj’s evidence was a little different. She said that she had arranged the loan but had done so through mortgage brokers to whom she had been introduced by Mr Phillips. She said that she saw the mortgage brokers four or five times and Mr Phillips accompanied her on three or four occasions. First, she said that he would greet the mortgage brokers and then leave them to have a coffee but later said that he stayed for the whole conversation on three occasions. Ms Belaj said that the subject of the finance came up in conversation with Mr Phillips once or twice. She did not tell him the details of what she was proposing to do and he was not given a copy of her application. She does not know what he knows about the loan, she said.

In cross-examination, Ms Belaj could not recall what the figure of $1.00 for rent represented. Although she had some responsibility for Beijing Garden’s accounts, and we will return to this later, Ms Belaj was unable to explain why a figure of $52,000 was shown for rent received in its Profit and Loss Statement for the financial year ended 30 June 2006. That had been prepared by the accountants on 6 August 2007.[99] She could only assume that the amount shown on the BEAT application was rent paid by Mr Phillips but could not explain the difference in the figures. Other than Mr Phillips and herself, no-one else lived at the Brunswick Street property. Mr Phillips could not explain the figure and had “no knowledge” of anything other than the $100 he paid each week.
[99] Exhibit 15 at AY-23

Ms Belaj could not explain what the figure of $72,360.00 represented and did not know what was meant by the description of Beijing Garden’s business as a “Primary Producer”. The figure of $207,000 shown as Beijing Garden’s average annual business income was the figure that was shown in its bank account. That was the amount that had been deposited in its account and that is where she believed the

figure came from. She could not clarify or recall how it was that she came to describe the figure in the bank account as the corporation’s average annual income.

C.Transfer of the Lorne property

On the basis of the Title Search, we find that the Lorne property was transferred to Beijing Garden on 17 September 2007.[100] On that day, a mortgage was registered on the title in favour of Secure Funding Pty Ltd. That mortgagee, we find on the basis of Ms Belaj’s evidence at the public examination, is also known as BEAT.
[100] ST documents, ST30 at 1532

D. How could Beijing Garden afford to purchase the Lorne property?

On the basis of the financial accounts for 30 June 2006, we find that it showed Beijing Garden’s accumulated losses to be $125,667.00, which was a $9.00 improvement on the previous year. Its assets totalled $1,302,273.00 and its total liabilities $1,427,930.00.[101] The notes to the financial statements recorded the purchase of the Lorne property. The directors were said to have purchased it for $840,000.00, valued it at $900,000.00 and proposing to obtain a loan in the order of 80% of the cost price.
[101] Exhibit 15 at AY-23

Ms Belaj said that she would have to look at the bank accounts held by Beijing Garden to work out where the money came from to pay the deposit on the Lorne property. It would have come from a bank account in the name of Beijing Garden but not one that appears in its financial records. She could not explain why that would be the case. When asked where the shortfall between the deposit and the loan of $672,000.00 and the purchase price of $840,000.00 came from, Ms Belaj said that it also came from a Beijing Garden bank account. She could not see that account in the financial records either.

Ms Belaj said that Beijing Garden obtained the money in the bank accounts by mortgaging the Brunswick Street property. That is where it obtained the sum of $200,000.00 that it referred to in its application to BEAT. It has lent various amounts to Phoenix International so that it can carry on its building business. Phoenix International repays that money and Beijing Garden repays the mortgage from those

moneys. She said that repayment is secured by a fixed charge over Phoenix International. One such loan for the amount of $201,817.00 is shown in the Balance Sheet for Phoenix International for the year ending 30 June 2007. We acknowledge that, together with the Profit and Loss Statement, the Balance Sheet was described by Mr John May as having been prepared by an external bookkeeper. Mr John May was accountant to Mr Phillips as well as Beijing Garden and Phoenix International at the time.[102]

[102] Letter dated 16 May 2008 to Mr Yeo: Exhibit 15 at AY-23

Ms Belaj rejected a proposition put to her by Ms Spencer that the sum of $200,000 had been paid by Phoenix International to Beijing Garden. She pointed to a withdrawal of that amount from a Phoenix International BoQ bank account on 15 June 2007 and payment into a Beijing Garden BoQ Investment account on the same day. In view of the amounts and the nature of the account, we accept that this is what occurred but it does not detract from Ms Belaj’s belief that Phoenix International was repaying a loan previously made to it by Beijing Garden. On the financial records that we have, it is possible that an amount had been lent by Beijing Garden of which the $200,000 was a part payment or even a payment of a debt in whole. We do not have the financial records for the year ending 30 June 2007. The Balance Sheet for 30 June 2008 shows a loan from Beijing Garden to Phoenix International of $201,817 for that previous year. It is shown as a “nil” figure for the year ending 30 June 2008 although a loan of $133,855 is now shown as a loan from the “S Phillipou Family Trust”.

In cross-examination, Mr Phillips said that he could not recall how much was borrowed by Beijing Garden but thought that the money had been put towards maintaining the Brunswick Street property, feeding the family, meeting the family’s obligations and paying “subbies” or sub-contractors. He was only just surviving at the time, he said. He then said that the money had been used to pay debts owed to Phillipou Holdings Pty Ltd (Phillipou Holdings). That company had lent money to Phoenix International when it had been unable to pay its debts because one debtor had gone into liquidation and another did not pay its debt.

Mr Phillips said that he had no knowledge of the specific details regarding the refinancing of the Brunswick Street property on 15 September 2006 and

so after his bankruptcy. Ms Belaj had told him that there might be a need for it to be further mortgaged and he had told her to “… do what’s necessary and make sure that it’s an asset that has a value.”[103] At the time, he was in and out of hospital and she had enough people to advise her. Ms Belaj could not ask him every time what had to be done. He denied that she runs to him and added:

“… I give advice on certain things I can advice on. I can’t give advice on financial issues. There she has people who are experts in that field.
… Me saying go ahead and do it, take that, do this, that would be me telling her, but to discuss and give advice is not to dictate.”[104]

Even if Ms Belaj were to make a “really dud deal”, Mr Phillips said, he would make his recommendation but could not do more as he did not have control. He did not know whether she would go ahead in spite of his recommendation.

[103] Transcript, 24 November 2010 at 137

[104] Transcript 24 November 2010 at 138

With regard to the funding of the purchase of the Lorne property, Mr Phillips said that he did not know where the money came from to purchase it. He “surmised” that the Brunswick Street property had been further mortgaged to obtain the balance of the money but he could not guarantee it. Had the Lorne property been resold before completion and before settlement was required, funds would have been available to settle Beijing Garden’s purchase of the property. That would have been between Ms Belaj and the real estate agents, he said.

On the basis of Mr Phillips’ evidence, we find that he does not distinguish particularly between Beijing Garden and Phoenix International and their finances. If a parent company owns another, he said, all of the subsidiary company’s earnings go back to the parent company. The arrangements have to be viewed as a whole.

Managing the accounts

Ms Belaj said that she managed Beijing Garden’s financial matters with the assistance of an accountant and a bookkeeper. She would prepare the “details” (cash receipts, petty cash claims and bank sheets) for the bookkeeper who did “what was needed” for the accountant. The accountant then did what he needed to do. They

“crunched the numbers”. When asked whether she was satisfied that the accountant’s work was accurate, Ms Belaj replied that she had gone to another accountant to ask for a review of the accountant’s work. She had lost confidence in the first because he had undertaken to lodge the Business Activity Statements (BAS) and had not done so for 2011. Her confidence had begun to wane in late 2009 and she had begun looking for another accountant in 2010.

Ms Belaj had been unable to say at the public examination whether Beijing Garden had prepared and submitted taxation returns since 2004.[105] She had been required to produce all such returns at the examination.[106] Mr Phillips had said that taxation returns had been lodged but later said that he could not say when they were lodged and did not have the documents.[107]
[105] T documents, T99 at 330
[106] Exhibit 15 at AY-40; Summons for Examination at 3.2.1
[107] Transcript, 24 November 2011 at 114

At the public examination, Ms Belaj had explained that Beijing Garden would lend money to Phoenix International, which would reimburse it at a later stage. When asked whether Phoenix International paid interest on that money, she replied that she was not sure. She also believed that Beijing Garden held a lien over the profits of Phoenix International. By a “lien” she meant that, after it had paid all its other creditors, Phoenix International would pay any money it had left over to Beijing Garden. She was not sure what would happen if Phoenix International did not have enough money to pay Beijing Garden or if it did not have enough to pay any of its creditors. When asked whether there was a document regarding the lien, she replied that she would have to look in the office and was not sure.[108]
[108] T documents, T100 at 428-429

Unsecured debts owed to Beijing Garden

The Balance Sheet prepared for Phoenix International as at June 2007 shows that Beijing Garden is an unsecured creditor for the sum of $267,401.70.[109] Ms Belaj could not explain how that figure was made up. Although she knew that Beijing Garden had made loans in 2007.

[109] Exhibit 15 at AY-23

Ms Belaj said that she believed that Mr Phillips was an unsecured debtor owing approximately $500,000 to Beijing Garden. She believed that Mr Phillips had given a personal guarantee in relation to a debt and the amount of the debt was still outstanding. He had given it before she became a director. She could not recall the nature of the debt and would have to check the paperwork. She had submitted a proof of debt for the amount on behalf of Beijing Garden, she said, and was satisfied that it was a genuine debt owed to it. We do not have the proof of debt but we do have a document in which Beijing Garden appoints her as its proxy at a creditors meeting held in relation to Mr Phillips. As to when Mr Phillips had incurred the debt she could not say as it had been incurred before she became a director. Ms Belaj agreed that an unsecured loan of that amount does not appear in the BEAT application form she signed in August 2007 when she was a director of Beijing Garden. She could not point to it in the financial records of Beijing Garden.

In his Statement of Affairs, Mr Phillips had stated that he owed $500,000 to Beijing Garden and that the debt had been incurred between 2000 and 2003. He ticked the box marked “No” when asked whether Beijing Garden was a related party.[110] In cross-examination, Mr Phillips said that he disclosed that debt as he has provided a personal guarantee for that amount to cover moneys he believed had been advanced. He could not provide details, he said, as he had been advised to return all documents to the company. By giving the documents back, his position could not be compromised and he could disassociate himself from the company. He just involved himself in the building side of things.
[110] T documents, T5 at 31

A memorandum was written on 25 August 2006 by Mr May, the Accounting Director of Mr Phillips’ accountants at the time, fresh numbers pty ltd. Mr May wrote:
“Upon examination of various documents I understand Mr Steve Phillips to be indebted to the company Beijing Garden Resort Pty Ltd to the extent of $535,021.67.
This debt is an internal loan to Phillipou Holdings Pty Ltd secured by a personal guarantee from Mr Phillips. The debt was crystallised upon the defaulting of the loan due to deregistration of Phillipou Holdings Pty Ltd on 21 April 2006 making Mr Phillips (as guarantor) personally liable for the debt.

…”[111]

None of the documents was attached to the memorandum.

[111] T documents, T3 at 18

The proof of debt submitted to Mr Yeo and dated 29 April 2008 was for the sum of $400,000 and he referred to it in his letter to Mr Bingham rejecting the proof. Mr Yeo rejected it on the basis that Mr Bingham had not provided any supporting material as requested in Mr Yeo’s earlier letter dated 8 April 2008.[112] Mr Phillips said that he had not seen the proof of debt and could not comment on the difference in the debt claimed.

[112] Exhibit 17

PHOENIX INTERNATIONAL

In this section of our reasons, we will refer to the evidence and set out some of our findings regarding various aspects of Phoenix International’s management and business activities. We will return to these matters later in our reasons when we review the objection decisions.

Employees, sub-contractors and sole traders

We note that in the Profit and Loss Statement for Phoenix International for the year ending 30 June 2006, amounts have been included for subcontractors but not for employees. A figure is also shown for the previous financial year. In the Trading Profit and Loss Statement for the year ending 30 June 2008, amounts are again shown for contractors for that year and the previous year. Another is shown for consultants and a further for Staff Amenities. Ms Belaj could not explain why no figure had been included for employees. This was despite her having written an open letter dated 18 August 2009 confirming that Mr Phillips was engaged as a full-time or part-time Project Manager for Phoenix International depending on the condition of his health at the time.[113] It was also despite the evidence supporting our earlier finding that Mr Bingham had been an employee up until March 2009.
[113] Exhibit 20

There is a question whether the figures reflect annual leave. If Mr Phillips were an independent contractor, he might not be entitled to four weeks’ annual leave. We do not, however, accept that he is an independent contractor for to do so would be contrary to Ms Belaj’s letter dated 18 August 2009 confirming that Mr Phillips was engaged as a full-time or part-time Project Manager for Phoenix International depending on the condition of his health at the time.[475] Therefore, we should allow for that annual leave in each CAP but it may be that it has already been allowed for in the quantum meruit claims for the work is said to extend through the Christmas period.
[475] Exhibit 20

We have had other difficulties in applying the principles to the facts as well. As we do not have access to the particular weeks in which Mr Phillips was working on the three projects and those on which he was working on only two. Given that all three projects extended over the period of the three CAPs, we think it better to average the monthly payments over the entire period beginning in October 2006 and ending on 19 February 2009 i.e. 28 months. Given that the Hawthorn project and the Ballarat project are both shown as extending over 28 months, that does not seem unfair even though the dates indicate they started a month apart. The 13 month Beaumaris project was undertaken during those same 28 months. On that basis, Mr Phillips’ average monthly income as Project Manager was $14,857.14 per month or $178,285.71 per annum.

This is an annual income that is within the range of $150,000.00 to $180,000.00 assessed by Mr Hare for a Project Manager without executive functions in a building company of the size of Phoenix International. It is within that range even though Mr Phillips did not work 50 to 60 hours each week as Mr Hare suggested was the norm. At most, he worked only 34 hours each week when all three projects were active and 26 hours when only the Hawthorn and Ballarat projects were active. Those hours represent significantly less than the 70 or 80% of the 50 or 60 hour working week what Mr Hare regarded as necessary to carry out the responsibilities of the role satisfactorily. Whether Mr Phillips carried them out satisfactorily or not is not for us to decide.

What we do need to decide is whether, in the period of each of the CAPs, Mr Phillips has received less remuneration than he might reasonably be expected to have received for his work as Project Manager for Phoenix International. On Mr Phillips’ evidence, we find that he has always occupied the position of Project Manager and was doing so before work started on each of the projects. Therefore, it is reasonable to use the average figure over the whole of CAP 1 even though the first of the projects did not start until September 2006 and CAP 1 starts on 26 August 2006. We have allowed for the fact that Mr Phillips was placed on a DSP in March 2009 by deciding that the amount of reasonable remuneration should be assessed under s 139Y as half that of the earlier periods. For these reasons, we have decided that the remuneration Mr Phillips might reasonably have been expected to receive in CAPs 1 and 2 was $178,285.71 and in CAP 3 was $89,142.86.

That is not an end of the matter because Mr Phillips showed himself as receiving director’s fees of $6,000.00 in the taxation returns for the 2007 and 2008 financial years. We have considered whether this amount should be added to our assessment of his income in CAPs 1 and 2. Although Mr Phillips was disqualified from being a director of a company, this is how he has described the sum to the Commissioner of Taxation. He was not required to identify the corporation in respect of which he received the fees and did not.

The initial question is whether this is an amount different from the $500.00 cash he drew each week and which has not been disclosed on the income tax returns. The weekly payments would have amounted to $26,000.00 per annum and is clearly incorporated within our assessment of Mr Phillips’ reasonable remuneration under s 139Y. We have come to the conclusion that the $6,000.00 disclosed in the income tax returns is intended to be part of that $26,000.00. Its essential character is reflected in Mr Phillips’ including it as a director’s fee. It seems to us, however, that the sum of $6,000.00 is simply part of the remuneration he received in weekly payments. The payments were intended to reflect the work of an executive nature that he undertook for Phoenix International in addition to the non-executive work that he undertook as its Project Manager. In Mr Phillips’ mind, his work was not divided along those boundaries and we have come to the view that his remuneration was not divided in that way either. It was all is reflected in its quantum meruit claims made in the Supreme Court.

Therefore, for the reasons we have given, we have decided that Mr Phillips total assessed income was:

CAP 1 (Aug 2006-2007)	CAP 2 (Aug 2007-2008)	CAP 3 (Aug 2008-2009)
Income assessed under s 139Y	$178,285.71	$178,285.71	$89,142.00
Director’s fees	-	-	-
TOTAL INCOME	$178,285.71	$178,285.71	$89,142.00

Mr Phillips has paid child support to the mother of his children under the Child Support (Assessment) Act 1989. It is clear from s 139N(1)(a)(iii) that any amount Mr Phillips “… pays or is likely to be liable to pay, or paid or was liable to pay …” by way of child support under the Child Support (Assessment) Act 1989 has to be deducted from the figure assessed as his total income.[476]
[476] Bankruptcy Act, s 139N(1)(a)(iii) when read with s 5 defining a “maintenance order” to include an assessment made under the Child Support (Assessment) Act 1989.

Actual income threshold amount

Mr Phillips has given evidence that his son was totally dependent on him during the CAPs and his daughter was partially dependent. Mr Phillips’ evidence was that his son earned nothing but we do not have any evidence regarding his daughter’s income. In view of this, we are satisfied that the base income threshold should be increased by 18% on the basis that Mr Phillips has one dependant. In the absence of any evidence regarding his daughter’s income, we are unable to make a decision whether she satisfies s 139K(c). Therefore, we have decided to remit that to the trustee to assess her income, decide whether she is a dependent and make reassessments accordingly.

Questions were addressed to the rent paid by Mr Phillips for a room in the Brunswick Street property. The records show that he has paid either $1.00 or $100.00 for it. We have no basis for disagreeing with the trustee’s assessment of a discounted lodgings benefit ranging from $9,425.00 for CAP 1 to $6,825.00 for each of CAPs 2 and 3. Given the location of the Brunswick Street property, we consider this represents reasonable rental for a room and use of certain other parts of the property, such as the kitchen, dining room, toilets and bathroom.

For the reasons we have given, we:
(1)have decided that, until the applicant pays the lesser application fee of $100 payable under s 29(6) of the Administrative Appeals Tribunal Regulations 1976:
(a)the second application has not been made; and
(b)under s 25(5) of the Administrative Appeals Tribunal Act 1975, the Tribunal does not have power to review any decision of which the second application seeks review;
(2)if the applicant pays the lesser application fee in respect of the second application by close of business on 12 December 2012, the Tribunal will decide to:
(a)set aside the decision of the Inspector-General deemed to have been made to confirm the trustee’s decision to issue contribution assessments for each of the three contribution assessment periods (CAPs); and
(b)remit the matter to the trustee to reassess the contribution assessments on the basis that:
(i)the applicant’s total income for each of the periods was:

CAP 1 (Aug 2006-2007)	CAP 2 (Aug 2007-2008)	CAP 3 (Aug 2008-2009)
$178,285.71	$178,285.71	$89,142.00

(ii)the applicant’s total income is adjusted having regard to the following additional matter:
(i)the applicant’s total income is to be reduced by the amount of any payments he made, or was liable to make, in each CAP under the Child Support (Assessment) Act 1989;

(iii)the applicant’s actual income threshold amount is adjusted having regard to:
(I)the applicant’s son being a dependent in each CAP; and
(II)an assessment’s being made of whether the applicant’s younger daughter is dependent or partially dependent on him in all or any of the CAPs and, if so, whether her income, if any, is below the threshold of $2,500.00 per annum; and

(iv)the Inspector-General otherwise adopts the figures in the contribution assessments as originally made.[477]
[477] If Mr Phillips does not pay the lesser application by that day or within such further time, if any as we allow, then the decisions deemed to have been made by the Inspector-General under ss 139ZE(6) to confirm the trustee’s assessments in respect of the three CAPs will stand. That will be because we have no power to review them.

PROCEDURAL AND OTHER ISSUES ARISING DURING THE HEARING

During the hearing and in his subsequent submissions and memoranda, Mr Phillips raised a number of procedural matters. We will set out each of them as we understand them.

Provenance of certain documents produced on behalf of the trustee

Mr Phillips has queried the reliance that the Inspector-General has placed on certain documents said to have been produced at the public examination and subject to an order subsequently made by a Registrar of the Federal Magistrates’ Court of Australia (FMC) and in County Court proceedings involving Phoenix International. In the former category are said to be the financial statements of Beijing Garden for the years ending 30 June 2005, 2008 and 2009 and for Phoenix International for the years ending 30 June 2005, 2006, 2008 and 2009. In the latter category are records of various accounts kept by various banks on behalf of Beijing Garden, Phoenix International and Mr Phillips.

A.Documents produced in the County Court

There are limits on the use that may be made of material whose production is required in court proceedings. These were considered by the High Court in Hearne v Street[478] by Hayne, Heydon and Crennan JJ:
“Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise …, to disclose documents or information, the party obtaining the disclosure cannot, without leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery …, answers to interrogatories …, documents produced on subpoena …, documents produced for the purposes of taxation of costs …, documents produced pursuant to a direction from an arbitrator …, documents seized pursuant to an Anton Piller order …, witness statements served pursuant to a judicial direction … and affidavits …”[479]
[478] [2008] HCA 36; (2008) 235 CLR 125; 248 ALR 609; 82 ALJR 1259; Gleeson CJ, Kirby, Hayne, Heydon and Crennan JJ
[479] [2008] HCA 36; (2008) 235 CLR 125; 248 ALR 609; 82 ALJR 1259 at [96]; 154; 632; 1276 (footnotes omitted)

We do not know the basis on which the bank records were produced in the County Court proceedings but, had their production been required in that court and had copies of those particular documents been tendered in this matter, we would not have admitted them in evidence unless the County Court had first given leave for them to be produced to the Tribunal.

We have referred to “those particular documents” for the implied undertaking arising in the County Court proceedings does not mean that copies of those documents can never be tendered in the Tribunal. If a copy has been obtained by a legitimate means other than its production in the County Court proceedings, then it may be relied on in this Tribunal. That is what has happened in this case. The documents relied upon were produced by the various banks in response to summonses issued by the Tribunal.

B.The Registrar’s order

The Registrar of the FMC had issued a Summons for Examination under s 77A of the Bankruptcy Act. It was addressed to Ms Belaj and required her to attend before the FMC to be examined on oath under s 81. She was also required to produce documents in her possession, custody or power and in the categories described in paragraph 3 of the summons. As a broad description, the documents summonsed were the financial and business records of Beijing Garden and Phoenix International.[480] Under an order dated 25 November 2009, a Registrar of the FMC made orders under s 81(6)(c) of the Bankruptcy Act. Paragraph 7 of the order read:
“Any further documents to be produced by Ms Belaj in response to her summons for examination, but not covered by any application for discharge referred to above, be produced to the Court by 10:15am on 1 December 2009, and upon such production the trustee be given leave to uplift, inspect and copy such documents and will return those documents to Ms Belaj by midday on 3 December 2009.”[481]
[480] Exhibit 15 at AY-40
[481] This was not a document tendered by the parties during the hearing but is available on the publicly accessible Commonwealth Courts portal. We have referred to it in order to make sense of the order that was tendered and became Exhibit A.

On 1 December 2009, the Registrar ordered:
“Access to the documents produced by Ms Belaj on 1 December 2009 (in accordance with order 7 of the orders made on 25 November 2009) be restricted to the trustees and the trustees’ legal advisors on the basis that their contents not be disclosed to any person other than each other.”[482]
[482] Exhibit A at [1]

From Mr Phillips, we understand that Ms Belaj asked for the order. We do not doubt that but we are perplexed by it and do not understand the basis on which it was made. A public examination is an administrative proceeding that is only one such proceeding in a continuum of administrative proceedings. They begin from the moment the sequestration order is made, continue through the trustee’s administration and, if sought, include review of some of the trustee’s decisions by the Inspector-General and this Tribunal. An order that does not permit the trustee to disclose the contents of documents summonsed and, it appears from the transcript of the public examination, examined on at least to some extent to anyone else in the continuum of administrative decision-making under the Bankruptcy Act that may follow the public examination will lead to additional costs for the trustee and so for the bankrupt estate. There must be a reason for the order that we are not privy to.

Whatever the reason for making it, it must be honoured and applied without question. It applies to the documents reproduced at ST3, ST9, ST10, ST13 and ST19 of the ST documents. We have relied on none of them and we are satisfied on the basis of Mr Yeo’s evidence and Ms Spencer’s reassurance that they have not been copied to anyone other than Mr Phillips and the Tribunal. We have made an order restricting access to them to the Tribunal.

We note that some of the documents coming within those ST documents have been summonsed and produced on summons by Bankwest and BoQ. To obtain them in that way is not to breach the Registrar’s order for they have been obtained quite separately. His order does not restrict the Tribunal from using its own powers under the AAT Act to require the production of documents whose existence was apparent from other sources. The existence of the BoQ Premier Investment account in the name of Beijing Garden and with an initial deposit of $200,000.00 was, for example, apparent from Exhibit 18. That Exhibit was not covered by Registrar Hetyey’s order.

Mr Zayler’s affidavit

Mr Phillips has described Mr Zayler as the Inspector-General’s prime witness. He has complained that Mr Zayler was allowed to produce an affidavit and then exempted from cross-examination. We note that Mr Zayler’s affidavit was not tendered in evidence by Ms Spencer on behalf of the Inspector-General once it became apparent that Mr Phillips would not consent to its being admitted in evidence. There was some debate as to whether he would consent but, as he wanted to cross-examine Mr Zayler if his affidavit were admitted in evidence, he did not do so. Ms Spencer did not want to tender the affidavit without his consent because the Inspector-General was not relying on the affidavit for anything other than to demonstrate one of the avenues Mr Yeo had explored in administering Mr Phillips’ estate. She did not seek to establish the truth of the matters Mr Zayler had deposed to and so did not seek to establish the truth of what Mr Zayler had told two employees of Pitcher Partners working to Mr Yeo on the matter.[483]
[483] Transcript, 21 October 2011 at 48-49

We have not admitted Mr Zayler’s affidavit in evidence and have had no regard to it in making our decision. Mr Phillips had indicated that he had wanted to call Mr Zayler and we had indicated that he could. He did not. We have not given any further thought to his not having done so let alone drawn inferences from either his or Ms Spencer’s not having done so.

A de novo hearing

Mr Phillips was very focused on the events that led to the FMC having made a sequestration order. He was deeply concerned about aspects of his business dealings with Mr Zayler and felt that the sequestration order should never have been made. He submitted that our role in reviewing decisions de novo meant that we could examine these matters.

We do not accept that we can. There is no question that we engage in “de novo review” of administrative decisions in the sense that we review all of the evidentiary material, make findings of fact and apply those findings of fact to the legislative criteria to come to a decision. In the absence of any legislative provision to the contrary, there is no presumption that the particular administrative decision under review is correct or that the findings of fact made by the initial decision-maker carry any weight. The decision is made afresh from the beginning but it is that particular administrative decision that is made afresh from the beginning. It is the particular administrative decision that the Tribunal is given power to review and not all decisions, administrative or judicial, that might have preceded its making.

In this case, the particular administrative decisions that the Tribunal has been given power to review are those we have described. They are decisions of Mr Yeo to decide to file notices of objection to Mr Phillips’ discharge from bankruptcy and decisions making contribution assessments. Those particular administrative decisions circumscribe our review. They are predicated upon Mr Phillips’ being a bankrupt but the Bankruptcy Act does not give the Tribunal power to review the sequestration order. Its powers are limited by s 149Q, as read with s 149N, in the case of the objections and by s 139ZF, as read with s 139ZD, in the case of the contribution assessments. Those provisions do not give the Tribunal power to review the sequestration order. An appeal from a sequestration order lies to the Federal Court.

For the same reasons, we cannot review the business dealings between Mr Phillips and Mr Zayler. These are matters for the courts and Phoenix International has taken that path. Quite apart from our lack of power, the issues between them are not relevant to the issues we must decide.

I certify that the preceding five hundred and twelve paragraphs are a true copy of the reasons for the decision herein of

Deputy President S A Forgie and Dr R McRae, Member

Signed: ....................................................................
Leah Berardi Associate

Dates of Hearing 22, 23 and 24 November 2010;
20, 21 and 27 October 2011; and
17 and 18 November 2011
Date of last written submission 28 September 2012

Date of Decision  13 November 2012
Applicant  Mr Steve Phillips
Solicitor for the Respondent   Ms Fiona Spencer with
Ms Fiona Hudgson
Ashurst
(formerly known as Blake Dawson)

“… I had said Tanya was running the administration side of Phoenix. … I’ve been running the building side of things. …And that is a completely different … area of jurisdiction.”
and 233 where he said:
“I’ve said to you more – time and time again, I deal with the building side. I write the documents that relate to the building project, and any queries and questions that are building project, because that is what I’m qualified to do. The accounts department is not qualified, at the time, to do that, at that particular time. I did it, because I am the project manager, and responsible for the running of that building site. Not the running of the company.”
and where the following exchange took place with Mr Phillips:
“Yes, and all dealings, on behalf of Phoenix, with the only client of Phoenix came through you?‑‑‑The client felt more comfortable dealing with me, at the particular time. I don’t know why, but that’s what he did. DR McRAE: So your answer is yes?‑‑‑Yes, but I qualify the point that it is purely and solely related to building. And the building projects, as the specific projects. Nothing to do with the administration of the company.”
and see earlier, Transcript, 22 November 2010 at 15:
“… there is a distinction between corporate management and project management. Corporate management deals with running of the corporations under the Corporations Act and ASIC rules. Project management is preparing instructions, dealing with subcontractors.”

On the evidence we have, we find that Mr Phillips was a registered builder under the Building Act when Phoenix International entered the contracts in 2005 and 2006 and so before his bankruptcy. We note that a “major domestic building contract means a domestic building contract in which the contract price for the carrying out of domestic building work is more than $5000 (or any higher amount fixed by the regulations)”. A “domestic building contract means a contract to carry out, or to arrange or manage the carrying out of, domestic building work other than a contract between a builder and a sub-contractor”. “[D]omestic building work means any work referred to in section 5 that is not excluded from the operation of this Act by section 6”: DBC Act, s 3(1). Section 5(1)(a) provides that the Act applies to “the erection or construction of a home …” including associated work and renovation as elaborated in the provision. A “home means any residential premises and includes any part of a commercial or industrial premises that is used as a residential premises …” but excludes certain residential premises such a rooming houses and motels. Section 6 excludes certain buildings and associated work that is not relevant.
There is a question whether s 29(c) requires that at least one of the directors continue to be a registered builder during the term of the contract or whether the requirement is limited to the time at which the major domestic building contract is entered. This is not a question to which the parties turned their attention and it is not necessary to answer it for the purposes of reviewing the decision.

            On their face, the proposed amendments suggest that an application will be taken to have been “made” and not simply “lodged” when all of the criteria, other than the payment of any prescribed fee, has been met. That conclusion follows from the fact that the Tribunal’s power to review a decision is dependent upon an application’s having been “… made to it under any enactment”: AAT Act, s 25(4). Until an application is made, the issue of its dismissal does not arise. By giving the Tribunal a power, as proposed by the inclusion of s 69C, to dismiss the application if the fee is not paid, would seem that Parliament has intended that it be “made” on lodgement alone.
            Were Parliament intending to restore the situation to that existing before Angus Fire Armour, we respectfully suggest that it had only to repeal s 29A. That it does not intend to restore that earlier situation but to provide that an application is “made” without the payment of a fee is supported by the following passage from the Second Reading Speech made by Mr O’Connor, Minister for Privacy and Freedom of Information, Minister for Home Affairs and Minister for Justice: “The bill also makes amendments relating to fees in the Administrative Appeals Tribunal. … [T]hey will allow applicants to make a valid application for review where they do not have the money to pay immediately, but where there is a time limit for making the application.” (emphasis added) (Hansard, House of Representatives, 23 November 2011 at 13533).
If an application is made without the payment of a fee, the Registrar, a District or Deputy Registrar, will have to process the application and notify the decision-maker of the application under s 29(11) of the AAT Act. Section 29(11) does not have a time limit within it but, since the 1980s at least, the Tribunal’s standard has been that notification is sent within two business days of the application’s being made. Such a time standard would seem to be consistent with the nature of the statutory obligation imposed by s 29(11). It would also seem to be consistent with an agency’s need to know at an early stage that its administrative decision is being challenged and to consider whether it needs to respond by, for example in the case of an overpayment, ceasing recovery action.
On receiving the notice, the decision-maker will immediately be under an obligation to provide a statement of reasons and documents under s 37(1). It will be possible to avoid this outcome if, before the Registrar gives notice under s 29(11), the Tribunal makes an order under s 37(1) extending the time within which the decision-maker must comply with the obligations imposed by that provision. The terms in which that order is framed and the period of the extension will depend, in part, on any new fee regime that may be prescribed in the AAT Regulations.
            In the meantime, the Tribunal itself will presumably take no action in relation to the application while it is waiting for the fee to be paid. Presumably also, if the fee is not paid within the time worked out under the regulations made under the proposed s 70(3), the Tribunal will give thought to whether it should dismiss the application under the proposed s 69C. That will raise two questions. The first will be whether the Tribunal should accord the applicant an opportunity to present a case why the application should not be made. That would be relevant under the common law and under s 39(1). Section 39(1) requires the Tribunal to give every party to a “proceeding” a reasonable opportunity to present a case. In view of its wide definition in s 3(1) of the AAT Act, a “proceeding” would include dismissal under proposed s 69C. Arguably, the Tribunal should accord procedural fairness. The second question will be whether the power to dismiss under s 69C is a discretionary power or a power that it must exercise if the fee is not paid. If interpreted as a discretionary power, it might well be seen as running counter to a scheme that requires the payment of a fee, of one size or another, in relation to all but those applications made in specified jurisdictions. That fact might favour the interpretation of s 69C as a non-discretionary power that must be exercised when the fee has not been paid.