Vats v Deputy Commissioner of Taxation

[2014] FCCA 1049

FEDERAL CIRCUIT COURT OF AUSTRALIA

VATS v DEPUTY COMMISSIONER OF TAXATION [2014] FCCA 1049

Catchwords:  
BANKRUPTCY – Ruling on application for a stay.

Legislation:  

Federal Circuit Court Rules 2001, r.20.02(2)
Bankruptcy Act 1966, ss.37, 52(3)
Evidence Act 1995

Applicant: PRAVEEN VATS

Respondent: DEPUTY COMMISSIONER OF TAXATION

File Number: MLG 480 of 2014

Judgment of: Judge Burchardt

Hearing date: 12 May 2014

Date of Last Submission: 12 May 2014

Delivered at: Melbourne

Delivered on: 12 May 2014

REPRESENTATION

The Applicant: In Person

Counsel for the Respondent: Ms Tai

Solicitors for the Respondent: Australian Taxation Office

ORDERS

1. The application in a case filed 30 April 2014 be dismissed.

2. Mr Praveen is to file and serve any affidavits on or before 19 May 2014.

3. The Deputy Commissioner of Taxation is to file and serve any affidavits on or before 26 May 2014.

4. The mention date of 20 May 2014 be vacated. 

5. The matter be listed for trial on 16 June 2014 at 10.00 am. 

6. Costs are reserved.

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT MELBOURNE

MLG 480 of 2014

PRAVEEN VATS

Applicant

And

DEPUTY COMMISSIONER OF TAXATION

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. There are two matters before the Court.  The first is an Application in a Case filed by Mr Praveen on 30 April 2014.  I should note that although his family name appears to be Vats, Mr Praveen prefers to be known by his given or personal name.  Mr Praveen seeks a stay of a Sequestration Order made against him and an ancillary costs order.  The second matter before the Court, although it was filed earlier, is Mr Praveen’s Application for Review filed on 24 April 2014, which seeks a review of a decision made by Registrar Caporale on 24 April 2014.  Registrar Caporale made a Sequestration Order against Mr Praveen and ordered costs fixed at $4,723.60. 

2. I have already, earlier this morning, directed the parties to file affidavits and I am going to set the matter down for early hearing on 16 June 2014 at 10:00 am.  So what remains to be disposed of is the Application for a stay.  I propose, however, to put this matter in its proper context, to traverse all the materials that have been filed.  The Creditor’s Petition was filed on 19 March 2014 and the debt therein asserted is over $401,000.  It springs in the ultimate, it would appear, from a County Court judgment given on 22 April 2013.  The Affidavit of Service of the Petition, filed on 19 March 2014, annexes the Bankruptcy Notice, which itself annexes a Certificate of Judgment from the County Court, sealed by the Registrar on 8 August 2013.  

3. On 16 April 2014, Mr Praveen filed his Form 5 Notice of grounds of opposition to a Creditor’s Petition.  I will read out the grounds therein set out:

   “1.    the respondent has not been provided with a valid Court Order which complies with the Australian Constitution and the Victorian Constitution Act 1975-Sect 76.

   2.    by relying on a ‘Certificate of Judgment’ and not a valid Court Order, the applicant and/or its representative (AGS) is attempting to pervert the course of justice and gain financial advantage by deception.

   3.    the respondent has the financial capacity to settle the alleged debt, in full, and agrees to do so, on the proviso, a Court Order which complies with the Australian Constitution and the Victorian Constitution Act 1975-Section 76 is provided.”

4. The Notice went on to point out that an Affidavit supporting the grounds of opposition was filed at the same time.  The Affidavit to which the Notice referred was, it seems to me, clearly sworn by Mr Praveen, albeit that some of the language in it is somewhat convoluted, referring to him as:

   “The Person’s Personal Representative of a Person PRAVEEN VATS, in being, acting as the sole beneficiary of Person PRAVEEN VATS and NOT as a trustee of Person PRAVEEN VATS.”

5. That sort of language seems to me somewhat convoluted as a matter of first impression.  In any event, the Affidavit asserts, and I paraphrase, that he repeats the matter of the court order being a copy.  He goes on to say that in identifying himself as Praveen Vats to the process server he made a mistake.  He goes on to say that he has the financial capacity to settle the alleged debt in full and should not be declared bankrupt and he repeats his preparedness to pay the bill provided he is given a proper copy of the court order.  That there has been a court order is plain from the face of this Affidavit because Mr Praveen sets out an exchange between, allegedly, the solicitor representing the plaintiff in the County Court proceedings and Judge Kennedy in which there was some discussion as to whether the Australian Tax Office was a legal entity which, of course, it was then asserted it was not.  However, the Affidavit goes on to assert that the Deputy Commissioner is not a human being and rather an artificial person and incapable of bringing any legal proceedings against a natural person. 

6. On 30 April 2014, Mr Praveen filed another Affidavit in support of his Application in a Case for a stay and I will read paragraphs 4 to 7 of that. Sorry, I should go back a moment. Mr Praveen, first of all, makes complaint about the way the Court listed his matter and asserts, as he has done in correspondence to the Court, that there has been a breach of this Court’s r.20.02(2). It is sufficient for these purposes to say that I think Mr Praveen’s construction of the Rule is inaccurate. Any further consideration of that matter can be left to trial. It should be noted that this is, of course, an interlocutory hearing and none of my findings are final and conclusive. They are made at the level of satisfaction that obtains in an interlocutory hearing.

7. The next matter that Mr Praveen raises, having drawn attention to the Court’s Rules, is and I quote:

   “4.    … due to this delay, I may be put in psychological and financial distress, since AFSA (Australian Financial Security Authority) has a 14 day time limit from the date of the order, before a trustee is appointed, who can take action.

   5.    and that, this delay equates to ‘restriction of trade’ and exposes me to ‘financial hardship’

   6.    and that, I have the financial capacity to settle the alleged debt in full and if given an opportunity am able to provide evidence to support my claim (income statements etc.).

   7.    and that, I agree to pay the alleged debt in full, when the original court order, upon which the Plaintiff has relied upon to bring forward the Bankruptcy Notice, is provided to me.”

8. When the matter was before the Court, Mr Praveen repeated the assertion that he is solvent.  He said he had no chance to put his points before Registrar Caporale.  He handed up to the Court, although I did return them, documentation showing income receipts in his practice as an anaesthetist showing an income on an ongoing basis of well in excess of half a million dollars per year.  He also referred to the possibility of prejudice in his profession in the event that the stay was not granted. 

9. Against that introduction which I think, at least for present purposes, fairly traverses and paraphrases the materials and submissions before the Court, I come to the question of the stay application itself. 

10. There is, as I indicated to Mr Praveen, some question as to whether the Court has power properly to order a stay in these circumstances.  If one looks at McQuade and Gronow, Australian Bankruptcy Law and Practice, at paragraph 37.2.05, the learned authors say:

    “Notwithstanding that the court has no power to rescind or suspend the operation of a sequestration order under s 37(2)(a) pending an appeal, it has been held on several occasions that the Federal Court of Australia does have such powers under provisions of the Federal Court Act 1976. I omit authority.  The authors go on to say: It has also been held that the Federal Circuit Court (formerly Federal Magistrates Court) has such a power, though the basis of it is not entirely clear: see commentary at [52.3.05].  There is some doubt, however, whether the Federal Court has power to order a stay where “there is no appeal pending”.”  And once again, authority to that effect is quoted and there is reference to the 21 day period available as a stay under s.52(3).

11. Here, of course, there is no appeal as such. What I am hearing is an Application for Review of a decision of the Registrar. I have some considerable doubt in the face of these authorities to which I have just referred whether the Court actually has power to stay the operation of a Sequestration Order in circumstances where s.37 of the Bankruptcy Act 1966 (“the Act”) expressly provides that a Court does not have power to suspend the operation of a Sequestration Order.  However, for these purposes, I will assume that such power is available and I will examine Mr Praveen’s Application in its merits. 

12. Firstly and most importantly, he asserts that he is solvent and I am prepared to accept on an interim basis that he has very significant earnings. However, he has not been in a position to disclose his practice costs. Nor does he otherwise detail any of the aspects of his finances that might go to support the proposition that the entirety or a substantial proportion of his income is available to assist in meeting his debts as and when they fall due, including the prima facie debt of over $400,000 to the Petitioning Creditor. In these circumstances, and bearing in mind that it is for Mr Praveen to put on his own material to persuade the Court, I am not satisfied on the materials that have been filed thus far that he is solvent within the meaning of the Act and the authorities which have considered its operation.

13. So I am not satisfied that the assertion of solvency is made out on the materials as they stand although, obviously, that is a matter that is likely to be revisited in greater detail at the final hearing. 

14. The next matter Mr Praveen raises, and indeed, it is the one he himself places first, is the so-called constitutional point.  Once again, I am not expressing a concluded view but on an interlocutory basis this seems to me to be misconceived.  The extract annexed to the Bankruptcy Notice is a sealed extract copy from the court’s records and would seem to me prima facie to be admissible under the Evidence Act 1995, in any event. 

15. Third, Mr Praveen says that the ongoing currency, so to speak, of the Sequestration Order may cause him damage both in the terms of personal stress and in some not particularly clearly indicated fashion, in the conduct of his profession.  I accept, of course, that this must be a stressful time for Mr Praveen but the fact is that there is no evidence before me that his health is at risk.  Nor, indeed, did he present as a person in that situation, although I emphasise I am not a medical practitioner.  Furthermore, there is nothing to indicate that his professional status is likely to be in any way damaged before trial. 

16. The fact is the matter will be heard in just over a month which is, in the scheme of things, a small delay.  True it is there may be prejudice to

    
    

    Mr Praveen in as much as the Trustee takes up their appointment but that is, in my view, less likely than otherwise on the materials as they stand.  There is no likelihood of any suspension of Mr Praveen’s right to practice medicine.  The Trustee will, of course, be aware of the hearing date and is more likely than otherwise to approach the matter in a sensibly cautious way.  It is not likely that substantial costs will be run up by the Trustee pending trial or that the Trustee will take significant steps such as to, in some irredeemable way, harm

    
    

    Mr Praveen’s interests. 

17. Given that as things presently stand today I cannot be satisfied that

    
    

    Mr Praveen is solvent, especially bearing in mind a judgment debt to the taxation authorities in excess of $400,000, it is clear, taking all the materials as a whole, that I should exercise my discretion and not grant the stay sought. 

ORDERS DELIVERED

1. I do that on the footing that although the Application in a Case has been dismissed, there would have had to have been a directions hearing, in any event, and it remains to be seen whether there were any additional costs in truth really generated by the extra aspect of the hearing. 

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate: 

Date:  22 May 2014