Riggs, C. v Deputy Commissioner of Taxation

[1986] FCA 5

._ Bankruptcy - - creditors petition - form of affidavit verlfyina

petltion

Evidence - affidavit - hearsay - whether statement in affidavit in

support of credltor's petition admissible under s.?E of Evidence

Act

Bankruptcy Act 1966 s.52(1)

Income Tax Assessment Act 1936 s s . 8 , 13

Evidence Act 1905 ss.?A.	?E, ?F, ?J
RE: CEDRIC RIGGS - Debtor

M PARTE: THE DEPUTY COMMISSIONER OF TAXATION

FOR THE STATE OF WESTERN AUSTRALIA - Creditor

No. P574 of 1985

TOOHEY J.

PERTH

14 JANUARY 1986

IN THE FEDERAL	COURT	)
OF AUSTRALIA	)

GENERAL DIVISION	)	No. P574 of 1985
BANKRUPTCY DISTRICT	)
OF THE STATE OF	t
WESTERN AUSTRALIA	)

RE : CEDRIC RIGGS

Debtor

M PARTE: THE DEPUTY COMMISSIONER

OF TAXATION FOR THE STATE

OF WESTERN AUSTRAGIA

Creditor

MINUTE OF ORDER

JUDGE MAKING ORDER: TOOHEY J.

DATE OF ORDER:	14 January 1986
WHERE MADE:	Perth

THE COURT ORDERS THAT:

1. There be a sequestration order auainst the estate of the

debtor, Cedric Riqqs.

2. The debtor pay the petitioning creditor's costs, to be taxed and paid in accordance with the Act.

Note: Settlement and entry of orders is dealt

with In Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT	)
OF AUSTRALIA	)
GENERAL DIVISION	) No. P574 of 1985
BANKRUPTCY DISTRICT	)
OF THE STATE OF	)
WESTERN AUSTRALIA	1
RE : CEDRIC RIGGS

Debtor

Ex PARTE: THEDEPUTY COMMISSIONER

OF TAXATICN FOR THE STATE

OF WESTERN AUSTRALIA

Creditor

m:	TOOHEX J.
14 January 1986

REASONS FOR JUDGMENT

This is a petition for sequestration; the act of

bankruptcy alleaed is failure to comply with a bankruptcy notice.

The affidavit verifying the petition has uiven rise to a question

whlch is of some importance to those concerned in the preparation

and presentation of petitions.

The petitioning creditor is the Deputy Commissioner of

Taxation for the State of Western Australia. The practice

hitherto has been for the person holdinu that office to swear

affidavits verlfyinu bankruptcy petitions lodqed on his behalf.

However, for admmistratlve reasons, the Deputy Commissioner

seeks to alter that practice. Hence the affidavlt verifying

petitlon in the present case has been sworn by Sheila Ralan, an advising officer attached to the recovery section of the Deputy Commissioner’s office.

i	1	, I ,-",.:F.>,	.	1,	:	2 .
1 2%
. >

. ,

The question 1 s whether the followmu statement.

appearina In an affidavlt sworn by Sheila Ra!an in verlflcation of

the petltlon. meets the requirements of the Bankruptcy Act 1966:

" 3 . - THAT the Petltloner has not nor has any person on

hls behalf received the sum of $28,585.62 claimed

in the Bankruptcy Notice dated the 26th day of

March 1985 and served on the abovenamed on 25th day

of June 1985 and the said debt has not been secured

or compounded to his satisfaction".

In her affidavit verifying petltlon. Ms. Rajan deposed:

'I... I can verify that the facts deposed to herein are

true and correct from my own personal knowledge thereof

obtalned from the records and information in the

possession of the said Deputy Commissioner of

Taxation".

By s.8 of the Income Tax Assessment Act 1936, the

Commlssloner of Taxatlon is ulven "the general administration of

this Act". By s.13, any reference in the Act to the Commissioner

shall be deemed to include a reference to a deputy commissioner in

respect of matters as to which that deputy commissloner has

exercised any power or functlon conferred upon him by delegation.

The act of bankruptcy relied on is failure to comply

wlth a bankruptcy notice issued by reason of a ~udqment obtained

by the petitioning creditor auainst the debtor in the Supreme

Court of Western Australia. Sub-sectlon 52(1) of the Bankruptcv

& A provides that at the hearlnu of a credltor's petition, the

Court shall require proof of

3 .

"(a) the matters stated m the petltlon (for which

purpose the Court may accept he affidavlt

verlfylnu the petitlon as sufficient):

(b) servlce of the petition; and

(c) the fact that the debt or debts on whlch the

petitlonmg credltor relies 1 s or are still owlnu".

What proof is adequate, for the purposes of 5.52. of the fact that

the debt arlsinu from the judgnent 1 s still owinu? Put another

way. what evidence may the Court accept that the debt is still

owlnu?

Neither the Bankruptcy Act nor the Bankruptcy Rules

requires In express terms that the traditlonal rules of evidence

be observed. Nevertheless there is long standing authorlty that

those rules should be observed and in particular that hearsay

evldence be rejected. In Re Roberts; Ex parte Mara (1958) 19

A.B.C. 259 at 261 Mannina J. said:

"Evidence based on information and belief is admissible

In certaln i terlocutory matters: its never

admissible in proceedings in which a final order may be

made. I think it is essential that it should be

remembered at all times. that he makinq of a

sequestration order is a most serious matter which can

have far-reachlnu consequences as far as the debtor is

concerned. and that where allegations are sought to be

proved, they must be proved by admissible evldence,

otherwise orders will be refused".

Manning J. was echoing the news expressed In Re Cohen (A

Bankrupt); Kx-parte The Bankrupt v. Inland Revenue Commissioners

C19503 2 All E.R. 36. At p . 3 7 Evershed M.R. said:

4.

"There 1 s no speclal rule whlch entltles a petltlonlng

creditor to depart. in seeklnu CO establlsh hls case,

In any way from the ordinary rules of evldence."

Evidence bp Ms. Ra?an that the Judument debt is still

owlnu to the petitloning creditor is hearsay evidence. However

counsel for the petitioning creditor submltted that such evidence

was admlsslble pursuant to s.7E	of the Evldence Act 1905 (Cth).
Sub-sectlon 7E(1) reads:

"7E.(1) Where, in any proceeding -

(a) the happenlng of an event of any description is

in question: and

(b)	in the course of a buslness. a system has been
followed to make and keep a record of the
happeninu of all events of that description,

oral or other evidence to establish that there 1s no

record of the happening of the event in question is

admissible to prove that the event did not happen".

Sub-section 7A( 1) defines "proceeding" to mean "a

proceedmg before ... any court ... created by the Parliament".

Thls petition is a proceeding within the meaning of the Evidence

Act. The same sub-section defines "buslness" to include "any

business, profession, occupation, callinu, trade or undertaking

enuaqed in or carrled on by the Crown In right of the Commonwealth

or of a State". In my view the operations of the Commissioner of

Taxation and those of the deputy commissioners constitute an

undertaking engaged in by the Crown in riuht of the Commonwealth.

In the present case the event, the happenina of which is

in question. 1 s payment of the debt on which the petitionmu

creditor relles. The issue then 1 s whether there is evldence "to

. 5

establish that there 1 s no record of the happenina of the event m questlon". If there I S such evldence. lt 1s admissible "to prove that the event dld not happen". It 1 s not sufflclent. in my vlew,

for an advisinu offlcer attached to the recovery sectlon of the

office of the Deputy Commlssloner of Taxation slmply to state that

he can verlfy the facts deposed to ln his affldavlt "from my own

personal knowledae thereof obtalned from the records and

mformatlon In the possesslon of the said Deputy Commissioner of Taxation". It 1 s necessary that there appears to be a system

followed to make and keep a record of payment of debts. If there

is evldence to that effect, an advising officer may give evidence

of the system and what is disclosed by it. It is then a matter

for the Court to draw such inferences as are appropriate in the

circumstances - see sub-s.7F(2).

Section 7J permits evldence relevant matters o

mentioned in s.7E to be uiven "on information and belief" by a

person having "a responslble positlon in relation to the makina or

keeplna of the records concerned". In my view s.7J is by way of

extenslon of s.7E. A person who does not have a relevant

responslble position may nevertheless uive direct evidence of the

records concerned.

In a supplementary affidavlt, Ms. Rajan deposed to a

system malntained in the Australian Taxation Office to record the

lncome tax liability of taxpayers, including court costs and fines

and credlts for income tax paid by or for the credit of a

taxpayer. The record consists of data malntained on a computer

whlch is continually updated. Ms. RaSan deposed further that the

6.

statement made in para.3 of her affldavlt verlfpinu petltlon was

made as a result of perusmu the record in relation to Cedrlc

R l u u s , the debtor and also the debtor's income tax file. The

former showed no record of payment; the latter showed no record of

the debt being compounded or	secured to the	satlsfaction of the
Deputy Commissioner.

In those circumstances I am satisfied that "the event"

viz. payment of the 3udqment debt, did not happen. The

petitloning creditor has, in all other respects, complied with the

requirements of the Bankruptcy Act. I am satisfied that the

petltioninq creditor has in all the circumstances of the case

taken all reasonable steps to obtain from registered trustees a

consent under sub-s.l56A(l) in respect of the estate of the

debtor, but has been unable to obtain any such consent. There

will be a sequestration order against the estate of the debtor and

an order that he pay the petitioning creditor's costs.

I certify that this and the preceding

five pages are a true copy of the

reasons for judgment herein of his

Honour Mr. Justice Toohey

Associate