Slade v Deputy Commissioner of Taxation

[1999] FCA 960

FEDERAL COURT OF AUSTRALIA

Slade v Deputy Commissioner of Taxation [1999] FCA 960

BANKRUPTCY – application for an order that a debt admitted by the bankrupt’s trustee be expunged or reduced – Bankruptcy Act 1966 (Cth), s 99

Bankruptcy Act 1966 (Cth), ss 58(1), 99, 116
Income Tax Assessment Act 1936 (Cth), s 218

DAVID NELSON SLADE v DEPUTY COMMISSIONER OF TAXATION

N 7397 OF 1999

JUDGE:  SACKVILLE J
PLACE:  SYDNEY

DATE:  6 JULY 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7397 OF 1999

BETWEEN:	DAVID NELSON SLADE Applicant
AND:	DEPUTY COMMISSIONER OF TAXATION Respondent
JUDGE:	SACKVILLE J
DATE OF ORDER:	6 JULY 1999
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. In so far as the application filed on 15 April 1999 seeks an order under s 99 of the Bankruptcy Act 1966 (Cth), that claim be dismissed.

2.   In so far as the application purports to institute a claim against the respondent for the sum of $98,576,151, or some other sum, the applicant be given leave to discontinue the proceedings.

3.   The applicant pay the respondent’s costs of and incidental to the application.

THE COURT DIRECTS:

4.   The applicant to file a notice of discontinuance in the Registry, discontinuing the purported cross-claim contained in the application filed on 15 April 1999, such notice to be filed within seven days of today's date.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7397 OF 1999

BETWEEN:	DAVID NELSON SLADE Applicant
AND:	DEPUTY COMMISSIONER OF TAXATION Respondent

JUDGE:	SACKVILLE J
DATE:	6 JULY 1999
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

1. The present proceedings were instituted by an application filed on 15 April 1999.  The applicant is Mr Slade.  Mr Slade was made bankrupt by an order made on 17 November 1997.  In the application, Mr Slade joined the Deputy Commissioner of Taxation (“Deputy Commissioner”) as the respondent.  The Deputy Commissioner has filed a proof of claim with Mr Slade's trustee.  The proof is in the amount of $406,275.20, which has been accepted by the trustee in the administration of Mr Slade's bankrupt estate.

2. The application seeks an order under s 99 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) that the debt admitted by the trustee be expunged, or that the amount of the debt be reduced.  It has become clear that Mr Slade does not dispute portion of the proof of debt admitted by the trustee.  That portion relates to a judgment debt in the sum of $243,416.83, obtained by the Deputy Commissioner against Mr Slade on 23 August 1996.  That judgment was obtained in the District Court of New South Wales and appears to have been based on assessments issued in respect of the financial years ended 30 June 1982, 1983, 1984, 1985 and 1986.

3. Mr Slade complains, however, that the proof of debt admitted by the trustee is for an amount of some additional $163,000.  The evidence shows that the apparent discrepancy is explicable by interest on the judgment debt, some small amounts in respect of additional tax and an amount of approximately $127,000 in respect of the tax year ended 30 June 1981.  The last amount has been claimed by the Deputy Commissioner in consequence of an amended assessment in respect of the taxation year ended 30 June 1981, which was issued on 22 September 1993.  That amended assessment was in the sum of $76,472.48.  In addition, there appears to have been an additional tax penalty of $50,819.63; at least that appears to be the amount of additional tax due as at the date of the sequestration order, 17 November 1997. 

4. Although the Deputy Commissioner has not adduced evidence as to the nature or the reasons for the amended assessment apparently issued in 1993, or the basis for the additional tax, there is nothing in the evidence to suggest that the proof of debt filed by the Deputy Commissioner is incorrect.  All the evidence shows is that an amended assessment was issued and that additional tax was apparently due in the amount claimed by the Deputy Commissioner in the proof of debt.  Similarly, the evidence, albeit incomplete, indicates that the amounts of additional tax and interest claimed by the Deputy Commissioner in the proof of debt were in fact due by Mr Slade to the Australian Taxation Office.

5. Mr Slade has made the point that the District Court judgment does not appear to include the amounts due in respect of the assessment for the year ended 30 June 1981.  This is true.  However, that fact does not produce a consequence that the amounts due under the amended assessment and in respect of additional tax were not debts due by him to the Australian Taxation Office.  Debts may be due and owing for the purposes of a proof of debt, notwithstanding that they have not been converted into a judgment debt.

6. The consequence is that Mr Slade's application under s 99 of the Bankruptcy Act cannot succeed. It is appropriate therefore that that application, to the extent that it claims relief under s 99 of the Bankruptcy Act, be dismissed.

7. The application purports also to raise what is described as a "cross-claim" against the Australian Taxation Office. By the cross-claim, Mr Slade seeks damages of some $98,000,000, in consequence of what he says is the "negligent administration of an order [pursuant] to s 218” of the Income Tax Assessment Act 1936 (Cth) (“Assessment Act”).

8. It would seem that what Mr Slade is attempting to do is to mount a case for damages in his own right against the Deputy Commissioner. That case for damages appears to rest on the proposition that the Australian Taxation Office improperly issued a notice under s 218 of the Assessment Act to the Commonwealth Bank of Australia in February 1994. As I explained to Mr Slade, there is no evidence that the Australian Taxation Office acted improperly or unlawfully in issuing the s 218 notice, nor is there any evidence that, even if it did, Mr Slade suffered any damage. The only evidence that has been adduced is that, in consequence of the s 218 notice, an amount of approximately $135 was paid to the Australian Taxation Office by the Commonwealth Bank. It appears that this amount may have been paid from an account maintained by Mr Slade and his wife in trust for their son.

9. Mr Slade apparently wishes to claim that the issue of the s 218 notice produced serious adverse consequences for his commercial affairs, and it was by reason of those adverse consequences that he suffered losses of many millions of dollars. I pointed out to Mr Slade that any claim by him against the Australian Taxation Office might face insuperable difficulties under the Bankruptcy Act. Section 58(1) of the Bankruptcy Act provides that the property of the bankrupt vests forthwith in the Official Trustee, as does after acquired property.

10. Under s 116(1) of the Bankruptcy Act, all property that belonged to, or was vested in, the bankrupt at the commencement of the bankruptcy is property divisible among the creditors of the bankrupt. This is, however, subject to the limitations in s 116(2). One of those limitations is contained in par (g), which preserves the right of a bankrupt to recover damages or compensation for "personal injury or wrong done to the bankrupt". In order to maintain any proceedings against the Deputy Commissioner or the Australian Taxation Office, leaving aside evidentiary questions, Mr Slade would need to demonstrate that his claim comes within s 116(2)(g) of the Bankruptcy Act.

11. When these difficulties were pointed out to Mr Slade, he indicated that he wished, in effect, to discontinue the so-called cross-claim.  Mr Quinn, on behalf of the Deputy Commissioner, did not express any serious opposition to this course.  If this course is pursued, it will then be a matter for Mr Slade whether he wishes to attempt to institute proceedings against the Deputy Commissioner or the Australian Taxation Office.  As I have explained, any such claim would need to address the difficulties under the Bankruptcy Act.  It would also need, of course, to be supported by adequate evidence to substantiate a claim of the kind Mr Slade has foreshadowed.

12. Subject to the question of costs, the appropriate orders are:

    1.In so far as the application filed on 15 April 1999 seeks an order under s 99 of the Bankruptcy Act, that claim be dismissed.

    2.In so far as the application purports to institute a claim against the Deputy Commissioner for the sum of $98,576,151, or some other sum, the applicant be given leave to discontinue the proceedings.

    3.I direct the applicant to file a notice of discontinuance in the Registry, discontinuing the purported cross-claim contained in the application filed on 15 April 1999, such notice to be filed within seven days of today's date.

13. The Deputy Commissioner has made an application for costs. Mr Quinn has pointed out that the application for an order under s 99 of the Bankruptcy Act has failed.  The remainder of the application has been discontinued.  In these circumstances, he submits that costs should follow the event.

14. I think that submission should be accepted.  I order that the applicant pay the Deputy Commissioner's costs of and incidental to the application.  I note that no application for costs is made by the trustee, who has appeared today in order to assist the Court.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.

Associate:

Dated:             6 July 1999

Counsel for the Applicant:	Litigant in person
Counsel for the Respondent:	Mr R Quinn
Solicitor for the Respondent:	Australian Government Solicitor
Solicitor for the Official Trustee:	Mr D P Courtenay
Date of Hearing:	6 July 1999
Date of Judgment:	6 July 1999