Re Wade, Jonathan Brian Ex Parte Deputy Commissioner of Taxation of the Commonwealth of Australia

[1996] FCA 620

CATCHWORDS

BANKRUPTCY - creditor's petition - debtor sought the exercise of the Court's discretion under section 52(2) of the Bankruptcy Act 1966 to refrain from making a sequestration order for other sufficient cause.

Bankruptcy Act 1966 sub-sections 52(1) and (2).

RE JONATHAN BRIAN WADE EX PARTE DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
VP281/96

Olney J
Melbourne
10 July 1996

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE
STATE OF VICTORIA
  No VP 281/96

RE:                 JONATHAN BRIAN WADE

EX PARTE:     DEPUTY COMMISSIONER OF TAXATION

Coram:    Olney J

Place:    Melbourne

Date:     10 July 1996

REASONS FOR JUDGMENT
The petitioning creditor obtained judgment against the debtor in the County Court of Victoria on 3 October 1995 in the sum of $159,414.18 for income tax due under the Income Tax Assessment Act. On 9 November 1995 the debtor signed an authority under s 188 of the Bankruptcy Act 1966 and a meeting of creditors was held on 5 December 1995. The debtor's proposal was not accepted. The petitioning creditor was the only creditor voting in opposition, but nevertheless the amount of the debts owed to the other creditors who voted in favour was inadequate to carry the resolution in accordance with the provisions of the Bankruptcy Act.

Relying on the act of bankruptcy committed by the debtor on 9 November 1995, the creditor presented a bankruptcy petition on 16 April 1996.   The petition and the supporting documents were served on 26 May 1996.   On 27 June 1996 the debtor filed a notice of intention to appear at the hearing and set out in considerable detail the grounds of his opposition to the
petition.   Subsequently affidavit evidence has been filed on both sides.

So far as the formalities are concerned, I am satisfied that the petitioning creditor has complied with the requirements of s 52(1) of the Bankruptcy Act, and is prima facie entitled to a sequestration order. The debtor has not asserted that he is solvent, and although his notice of intention to appear does not say so in so many words, it is obvious that he seeks the exercise of the Court's discretion to refrain from making a sequestration order for "other sufficient cause", to use the words of s 52(2). The petitioner makes the point that the onus is on the debtor to establish a sufficient cause why the sequestration order ought not to be made.

It is clear that over a long period of time the petitioning creditor and the debtor have had numerous exchanges concerning the debtor's outstanding tax liability.   The debtor has made various offers to satisfy the debt, although not the whole of it.  He has offered to pay the primary tax but not the penalties and interest, and he has offered to pay these amounts by instalments.   The evidence indicates that apart from deductions made under the prescribed payments scheme in respect of work done as a subcontractor, the debtor has paid no tax to the creditor since 8 June 1989, and the present liability is of the order of $160,000.

An enormous amount of detail has been put before the Court but I think it is fair to summarise the debtor's complaints in this way.   First, he complains that the petitioning creditor has been unreasonable in insisting upon payment in full of this tax liability.   He says further, that he has not been able to make any payments due to matrimonial proceedings in which he was involved, and that those proceedings, together with his involvement with the petitioning creditor in relation to his tax affairs, have had the result of reducing his earning capacity.   He takes the view that the petitioning creditor has acted unreasonably in rejecting the proposals that he has put forward.   He further takes exception to the decision of the petitioning creditor to vote against the proposal put to the meeting under Part X.   As to that I think that there can be no question as a matter of law that the petitioning creditor was entitled to exercise his judgment in any way thought to be appropriate consistent with the law, and, despite the debtor's concern that the Full Court should so decide the law which binds this Court is that which has been recently decided in the matter of Huggins v Deputy Commissioner.   Accordingly, I am of the view that the conduct of the petitioning creditor in voting against the Part X proposal is entirely irrelevant in these proceedings.

Likewise, I am also satisfied that the petitioning creditor's conduct in refusing to accept any settlement proposal which did not involve the payment of the full amount due to the Commonwealth was entirely reasonable.   Having read the long correspondence that has been exchanged between the debtor and the officers of the petitioning creditor, and later between the debtor and the Ombudsman, I can understand that a lot of the debtor's time and attention has been diverted to his dispute with the petitioning creditor.   But, in my view, his problems are of his own making.   His responsibility, like every other Australian citizen, is to pay his income tax as and when it becomes due and there seems to be no reason why his failure to pay tax from as far back as June 1989, should enable him now to raise issues suggesting that the ATO or the petitioning creditor has been unreasonable in the approach that has been adopted.

The petitioning creditor has an obligation under statute and it would be an imposition upon the Commonwealth and to the tax paying citizens of Australia if one debtor could escape his legal liabilities by engaging in a practice of writing long complaining letters to all and sundry objecting to having to do what the law requires him to do as has been done here.   And I note, and take into account as a matter of discretion, that despite offers that have been made by the debtor no payment whatever has been made subsequent to those offers.   In these circumstances, I do not think that the justice of the case warrants the Court exercising its discretion to refrain from making a sequestration order.

I am satisfied that the formalities of the Bankruptcy Act have been complied with and that a sequestration order should issue.   I note that Leon Alfred Lumsden of 563 Bourke Street, Melbourne, a registered trustee has consented to act as trustee in the event that the debtor becomes bankrupt.   I note also that the act of bankruptcy was committed on 9 November 1995.   There will be an order that the costs of the petitioning creditor (including reserved costs) be taxed and paid in accordance with the statute.

I certify that this and the preceding 4 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate:

Dated:

Heard:    10 July 1996

Place:    Melbourne

Judgment: 10 July 1996

Appearances:

Mr J. Nolan (instructed by Australian Government Solicitor) appeared for the petitioning creditor.

The debtor appeared in person.