Weston v McAuley
[2020] FCCA 1135
•13 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WESTON v MCAULEY | [2020] FCCA 1135 |
| Catchwords: BANKRUPTCY – Application by trustee in bankruptcy for judgment for income contributions assessed under s.139W of the Bankruptcy Act 1966 (Cth) (Act) as recorded in a certificate issued under s.139ZG(4) of the Act – whether the bankrupt has adduced any evidence to raise doubt about his liability to pay the amount of the income contribution recorded in the certificate – bankrupt has not discharged evidentiary burden raised by the certificate that he is not liable to pay the amount recorded in the certificate. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.139K, 139L(1), 139P, 139Q, 139R, 139S, 139T, 139U(1), 139W, 139ZA, 139ZF, 139ZG(3), 139ZG(4) Bankruptcy Regulations 1996 (Cth), reg.6.17 |
| Cases cited: Schiffer v Pattison [2005] FCA 494 |
| Applicant: | PAUL GERARD WESTON |
| Respondent: | JOHN MCDONALD MCAULEY |
| File Number: | SYG 3100 of 2019 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 23 April 2020 |
| Date of Last Submission: | 24 April 2020 |
| Delivered at: | Sydney |
| Delivered on: | 13 May 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Marshall SC and Mr E Walker |
| Solicitors for the Applicant: | Keypoint Law |
| Respondent in person, by telephone |
ORDERS
Subject to order 5, and the matters noted in paragraphs 6 and 7, judgment is entered for the applicant in the sum of $308,229.16, inclusive of interest, up to the date of judgment.
The respondent pay the applicant’s costs.
Subject to order 5, and the matters noted in paragraphs 6 and 7, the applicant’s costs are fixed in the amount of $15,000.
Enforcement of orders 1, 2, and 3 are stayed until 5 pm on 18 June 2020.
The respondent have liberty to apply by 18 June 2020 if he disputes either or both of:
(a)the calculation of the interest component of the amount referred to in order 1; or
(b)the amount for which the applicant’s costs have been fixed under order 3.
THE COURT NOTES THAT
The amount of the judgment referred to in order 1 includes the $302,228.16 income contribution the applicant has assessed the respondent for contribution assessment periods 3, 4, 5, 6, 7, and 8 (CAP3-CAP8) under s.139W of the Bankruptcy Act 1966 (Cth) (Act), being the amount recorded in a certificate the applicant has signed under s.139ZG(4) of the Act (139ZG Certificate).
Subject to paragraph 8, as an indulgence granted to the respondent, the applicant intends to undertake the matters specified in paragraphs (c) and (d), but only if the respondent undertakes the matters specified in paragraph (a):
(a)By 5 pm on 21 May 2020 the respondent provides to the applicant’s lawyer satisfactory evidence of his income and expenses for CAP3-CAP8 and, if he intends to make an application under s.139T of the Act (hardship application), information in relation to such application.
(b)If by 5 pm on 21 May 2020 the respondent does not provide to the applicant’s lawyer satisfactory evidence of his income and expenses for CAP3-CAP8, or if by that time and date the respondent does not accept the applicant’s assessment of the respondent’s income contribution in relation to CAP3-CAP8, as recorded in the 139ZG Certificate, the applicant will not consider any hardship application the respondent may have made under (a) or otherwise, and orders 1, 2, 3, 4, and 5 shall stand.
(c)If by 5 pm on 21 May 2020 the respondent provides to the applicant’s lawyer satisfactory evidence of his income and expenses for CAP3-CAP8, or if by that time and date the respondent accepts the income contribution in relation to CAP3-CAP8 as recorded in the 139ZG Certificate, the applicant will by 5 pm on 11 June 2020 determine whether he should make a fresh income contribution assessment under s.139W of the Act in relation to CAP3-CAP8, and determine any hardship application the respondent may make under (a).
(d)If, after considering the information the respondent may provide to the applicant’s lawyer under (a):
(i)the applicant makes a fresh income contribution assessment for CAP3-CAP8; and
(ii)whether or not he makes a fresh income contribution assessment for CAP3-CAP8, the applicant determines under s.139T of the Act that the respondent will suffer hardship if required to pay the income contribution assessment for CAP3-CAP8 as recorded in the 139ZG Certificate, or any different amount as the applicant may assess under (i),
the applicant will be at liberty to apply to the Court:
(iii)for leave to reopen his case for the purpose of tendering any fresh certificate the applicant may sign under s.139ZG(4) of the Act to reflect the determination or determinations he may make under (i) or (ii) or both; and
(iv)apply to substitute for orders 1 and 3 amounts (including interest) that reflect the amount that may be recorded in any fresh certificate the applicant may sign under s.139ZG(4) and any additional costs the applicant may have incurred.
THE COURT ORDERS THAT
The applicant have liberty to apply on such notice as the circumstances warrant if the matters noted in paragraph 7 do not reflect the substance of the notation contained in the draft short minutes of order the applicant by his lawyer provided to the associate of Judge Manousaridis by email sent on 24 April 2020.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3100 of 2019
| PAUL GERARD WESTON |
Applicant
And
| JOHN MCDONALD MCAULEY |
Respondent
REASONS FOR JUDGMENT
Introduction
On 3 March 2010 the applicant (Trustee) was appointed trustee in bankruptcy of the estate of the respondent, Mr McAuley, following the making on that day of a sequestration order against his estate. Mr McAuley was discharged from bankruptcy on 11 May 2018.
By letter dated 15 June 2017 the Trustee notified Mr McAuley that he was liable under s.139Q of the Bankruptcy Act 1966 (Cth) (Act) to make contributions totalling $302,228.16 for what the letter identified as “CAPs 3-8 (inclusive of the CAP2 arrears)” (assessed amount). The Trustee also stated that the letter constitutes notice under s.139W of the Act.
Mr McAuley did not pay any of the assessed amount. That led to the Trustee signing a certificate as provided for by s.139ZG(4) of the Act in the manner prescribed by reg.6.17 of the Bankruptcy Regulations 1996 (Cth) (Regulations); and, acting under s.139ZG(3) of the Act, and relying on the certificate, commencing this proceeding against Mr McAuley, who is not legally represented, to recover the assessed amount as a debt.
In these reasons for judgment, therefore, I consider whether the Trustee is entitled to judgment for the assessed amount based on the certificate, having regard to the matters raised by Mr McAuley. Before I do so, it will be useful to describe the effect of the statutory provisions on which the Trustee relied to determine the assessed amount, and on which he relies to recover that amount in this proceeding.
Scheme for assessing and recovering contributions
The relevant provisions are contained in Division 4B of Part VI of the Act (Scheme). The Scheme may be divided into six elements. The first is the imposition of an obligation on the bankrupt to provide to the trustee in bankruptcy information relating to his or her income. The obligation is imposed by s.139U(1) of the Act, which requires a bankrupt to provide to the trustee information identified in that subsection by no later than 21 days after the end of a “contribution assessment period”. That expression, when used in relation to a bankrupt, is defined in s.139K of the Act to mean a period:
a)beginning on the day the bankrupt becomes bankrupt, or an anniversary of that day during the bankruptcy; and
b)ending one year after that day or anniversary, as the case requires, or if the bankrupt is discharged or the bankruptcy is annulled within that year, ending on the discharge or annulment.
Subsection 139U(1) requires the bankrupt to provide two classes of information. The first is the information identified in s.139U(1)(a) of the Act, namely, a statement setting out particulars of all the income the bankrupt and each of his or her dependents derived in the contribution period that had passed, and the income the bankrupt expects he and each of his or her dependents will derive in the next contribution period. The second class of information is that identified in s.139U(1)(b) of the Act, and that is “such books evidencing the derivation of the income referred to” in the statement the bankrupt provides to the trustee in bankruptcy under s.139U(1)(a).
A second element of the Scheme is the obligation s.139W(1) of the Act imposes on a trustee in bankruptcy to assess, as soon as practicable after the start of “each contribution assessment period in relation to a bankrupt”, the following
a)The “income” that is likely to be derived, or was derived, by the bankrupt during the contribution assessment period that has passed. “Income” is defined in s.139L(1) to have its “ordinary meaning”, subject to the matters set out in that subsection.
b)The “actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made”. The expression “actual income threshold amount” is defined in s.139K of the Act by reference to the “base income threshold amount” and the number of dependents the bankrupt has. “Base income threshold” is defined in s.139K by reference to “the amount that, at that time, is specified in column 3, item 2, Table B, point 1064-B1, Pension Rate Calculator A, in the Social Security Act 1991”.
c)The “contribution (if any) that the bankrupt is liable to pay in respect of that period”, namely, the assessment contribution period that has passed, “under section 139S”. The “contribution” the bankrupt is liable to pay under s.139S of the Act is the amount worked out according to the formula:
Assessed income – Actual income threshold amount
2A third element of the Scheme is the provision of avenues for the review of an assessment a trustee in bankruptcy makes under s.139W of the Act. Under s.139ZA of the Act, the Inspector-General in Bankruptcy may review a decision of a trustee in bankruptcy to make an assessment under s.139W. The Inspector-General may review such decision either on his or her own initiative or on the request of the bankrupt; and the Inspector-General must review the trustee’s determination if requested to do so by the Commonwealth Ombudsman, and if the bankrupt makes a request in the manner provided by s.139ZA(3). Under s.139ZF an application may be made to the Administrative Appeals Tribunal for the review of a decision by the Inspector-General on the review of a decision by a trustee to make an assessment, or, where the Inspector-General refuses a request to review a decision of the trustee, for a review of that decision.
A fourth element of the Scheme is the conferral on the bankrupt of a right to apply to the trustee under s.139T(1) of the Act after the trustee has assessed a contribution under s.139W. The bankrupt may make an application if he or she considers that, if required to pay the contribution the trustee has assessed, the bankrupt will suffer hardship for any one or more of the reasons set out in s.139T(2) of the Act. Under s.139T(6), the trustee, if satisfied that the bankrupt will suffer hardship if required to pay the contribution the trustee has assessed, may determine that, for the purposes of s.139S “in relation to the bankrupt in respect of the contribution assessment period, the actual income threshold amount that was applicable in relation to the bankrupt when the assessment was made is taken to have been increased to such amount as the trustee determines”. The trustee’s decision in response to an application the bankrupt makes under s.139T(1) is reviewable in the same way as the trustee’s decision under s.139W is reviewable.
A fifth element of the Scheme is the imposition on the bankrupt of a liability to pay the amounts the Trustee has assessed; and here there are two provisions. The first is s.139P(1) of the Act which provides:
Subject to section 139Q, if the income that a bankrupt is likely to derive during a contribution assessment period as assessed by the trustee under an original assessment exceeds the actual income threshold amount applicable in relation to the bankrupt when that assessment is made, the bankrupt is liable to pay to the trustee a contribution in respect of that period.
The second is s.139Q, which provides:
(1) If the income that a bankrupt is likely to derive, or derived, during a contribution assessment period as assessed by the trustee under a subsequent assessment exceeds the actual income threshold amount applicable in relation to the bankrupt when the subsequent assessment is made, the bankrupt is liable to pay to the trustee a contribution in respect of that period.
(2) The liability of the bankrupt under subsection (1) in respect of a contribution assessment period is in substitution for any liability of the bankrupt in respect of that period under subsection 139P(1) or under any previous application of subsection (1) of this section and has effect despite subsection 139P(2).
(3) If the income that a bankrupt is likely to derive, or derived, during a contribution assessment period as assessed by the trustee under a subsequent assessment does not exceed the actual income threshold amount applicable in relation to the bankrupt when the subsequent assessment is made:
(a) the bankrupt is not liable to, but may if he or she so wishes, pay to the trustee a contribution in respect of that income; and
(b)any liability that the bankrupt had under subsection 139P(1) or under subsection (1) of this section to pay a contribution in respect of that period is extinguished.
I should also refer to s.139R of the Act, which provides that any liability under s.139P(1) or s.139Q(1) is not affected by the bankrupt’s discharge from bankruptcy after the making of the assessment that gave rise to the liability.
The sixth and final element of the Scheme relates to the recovery of the amounts for which a bankrupt becomes liable to pay under s.139P or s.139Q. Subsection 139ZG(1) of the Act provides that, subject to s.139ZG(3), a contribution that a person is liable to pay under s.139P(1) or s.139Q(1) is payable at such time as the trustee determines or, if the trustee permits the contribution to be paid by instalments, at such times and in such amounts as the trustee determines. Subsection 139ZG(3) provides that the “total of any contributions or instalments that are not paid by the bankrupt is recoverable by the trustee as a debt due to the estate of the bankrupt”. Next, there is s.139ZG(4) of the Act, which provides:
The trustee may, in connection with proceedings to recover the debt:
(a)sign a certificate setting out the nature and the amount of the debt; and
(b)file the certificate in the court in which the proceedings have been instituted.
As I have already noted, reg.6.17 of the Regulations deals with the contents and effect of a certificate a trustee may sign under s.139ZG(4):
(1) A trustee may give a certificate, signed and dated by the trustee, stating:
(a)that the trustee has made an assessment under subsection 139W(1) or (2) of the Act in relation to a bankrupt; and
(b) the amount of the contribution to which the assessment relates that the bankrupt is liable to pay; and
(c) that the trustee has given notice setting out particulars of the assessment to the bankrupt under subsection 139W(4) of the Act; and
(d) the respective dates of the assessment and the notice.
(2)In proceedings against the bankrupt for recovery of the amount, or part of the amount, of a contribution, the certificate:
(a) is evidence that the bankrupt is liable to pay the amount of contribution stated in the certificate; and
(b)may be tendered in evidence without further proof.
Subsection 139ZG(5) of the Act provides that in the proceeding in which a certificate issued under s.139ZG(4) is filed, “the certificate is prima facie evidence of the existence of the debt and the amount of the debt”.
The effect of a valid notice issued under s.139ZG(4) of the Act was considered by Weinberg J in Schiffer v Pattison:[1]
It seems clear that the effect of a certificate under s 139ZG(4) is to shift the onus of proof from the trustee to the bankrupt in relation to the existence and amount of the debt claimed. It is not clear whether what is intended is a shift of the legal onus, or the evidential onus. On any view, however, it must be open to a bankrupt to challenge the assessment made, notwithstanding that it is supported by such a certificate. In my view, the challenge can take any one of a number of forms. The bankrupt can deny the debt, and adduce evidence to demonstrate why the assessment made should not be accepted. Alternatively, he or she can challenge the validity of the certificate of outstanding contribution by challenging the validity of any notices upon which that certificate is based.
[1] Schiffer v Pattison [2005] FCA 494, at [77]
Trustee’s assessment of contributions
There is in evidence before me correspondence between the Trustee and Mr McAuley relating to the Trustee’s assessing contributions under the Scheme,[2] although it does not appear that all of the correspondence is in evidence. It is only necessary that I refer to the letter dated 15 June 2017 the Trustee sent to Mr McAuley.
[2] Exhibit A. This is an email from the Trustee’s lawyer sent on 22 April 2020 to my associate attaching documents that are described as annexure JM-4 to the affidavit of Mr McCauley which were not attached to that affidavit.
In that letter the Trustee set out the gross income the Trustee assessed in relation to Mr McAuley for the third to eighth contribution periods (CAP3-CAP8), and, based on that assessment, the contribution Mr McAuley was required to make in relation to each of these contribution assessment periods. The sum of the contributions is $302,228.16. The Trustee also stated that the contributions may be paid by monthly instalments commencing on 14 July 2017. The letter is supported by schedules that identify Mr McAuley’s expenses and income.
The Trustee’s letter also informed Mr McAuley of his right to apply under s.139T of the Act to increase the actual income threshold amount if Mr McAuley believes he will suffer hardship in meeting the assessed income contribution. Mr McAuley has made no application under s.139T of the Act. Nor has Mr McAuley applied under s.139ZA for a review of the Trustee’s assessment.
Trustee’s claim and matters on which Mr McAuley relies
In support of his application for judgment for the assessed amount the Trustee relies on an affidavit he made on 18 October 2019. The Trustee there deposes he was appointed trustee in bankruptcy of the estate of Mr McAuley on 3 March 2010; that on 19 February 2013 he lodged with the Official Receiver an objection to Mr McAuley’s being discharged from bankruptcy; on 15 June 2017 the Trustee assessed Mr McAuley for income contribution in the amount of $302,228.16; and on 11 May 2018 Mr McAuley was discharged from his bankruptcy. The Trustee also deposes as follows:
I have today prepared and signed a certificate pursuant to section 139ZG(4) of the Bankruptcy Act 1966(Cth) and in the form provided for by regulation 6.17 of the Bankruptcy Regulations 1996(Cth) in respect of the Respondent’s liability for the income contributions referred to in the paragraph 3, and I annex a copy of that certificate. . . . .
The certificate to which the Trustee refers (139ZG Certificate) is annexed to his affidavit and is as follows:
I, [Trustee], trustee of the bankrupt estate of John McAuley, hereby issue a certificate of outstanding contribution evidencing that:
1.I made an assessment under subsection 139W(2) of the Bankruptcy Act in relation to the Bankrupt dated 15 June 2017 (“the Assessment”).
2.The amount of contribution to which the Assessment relates and which the Bankrupt is liable to pay is $302,228.16.
3.Pursuant to section 139W(4) of the Bankruptcy Act, notice of the Assessment dated 15 June 2017 was given to the Bankrupt by post and email sent on 15 June 2017.
Mr McAuley has filed two affidavits, which I read at the hearing. In his first affidavit, which was made on 29 January 2020, Mr McAuley attaches the following correspondence between him and the Trustee’s solicitor after the Trustee commenced the proceeding.
a)A letter dated 14 December 2019 from Mr McAuley to the Trustee’s lawyer requesting that he be provided with all relevant documents “including letters, demands, working papers, calculations and summaries” supporting the Trustee’s claim for the payment of $302,228.16.
b)An email the Trustee’s lawyer sent to Mr McAuley on 20 December 2019 stating that the Trustee had previously provided to Mr McAuley details of the assessment. The letter encloses “further copies of the emails between you and our client together with a further copy of our client’s letter of 15 June 2017 with enclosed calculations”.
c)An email from Mr McAuley to the Trustee’s lawyer sent on 6 January 2020 repeating his request for documents the Trustee’s lawyer did not send with his email on 20 December 2019.
d)An email from the Trustee’s lawyer to Mr McAuley sent on 21 January 2020 attaching the Trustee’s assessment dated 15 June 2017, and a notice and emails which the Trustee’s lawyer states evidence requests the Trustee made for the payment of the outstanding contributions. In this email the Trustee’s lawyer quotes from an email Mr McAuley had sent to the Trustee on 23 October 2017 in which Mr McAuley stated he was aware that “such calculation has been necessitated by my reluctance to provide actual information”, and that he had “never come to grips” with his bankruptcy.
In his affidavit to which this correspondence is annexed Mr McAuley deposed that he has not had a reasonable time to consider the documents, or to consult a lawyer. Mr McAuley deposed that four days before his discharge from bankruptcy the Trustee received a copy of Mr McAuley’s bank accounts, fee statements, and other financial records “as a result of a search of my residence by the Official Receiver, presumably at the request of the” Trustee. Mr McAuley finally deposed that a review of the documents the Trustee received “will show that the assumptions made by the [Trustee] in preparing the Income Calculation Assessment Calculations are incorrect; but because I was discharged from bankruptcy on 11 May 2018, I assume that no such review was made”.
Mr McAuley made this affidavit before the directions hearing on 7 February 2020. On that day I made an order requiring Mr McAuley to file additional evidence by 20 March 2020, and set the matter down for hearing on 23 April 2020. Pursuant to that order Mr McAuley filed an affidavit made on 20 March 2020 in which he asserts the following:
a)The Trustee’s income contribution assessment calculations for the six years ending on 2 March 2018 are incorrect.
b)Mr McAuley’s gross income for 2011 and 2012 was $212,822 and $79,268 respectively.
c)Mr McCauley was the full time carer for his wife who passed away on 23 August 2019.
d)Mr McCauley will contest the Trustee’s “continual” assessment of his gross income of $250,000 for each of CAP3-CAP8, and will tender evidence to support that contention.
e)The Trustee has relied on a statement from Mr McAuley’s wife in a court proceeding that Mr McAuley paid the house rental for Double Bay. Mr McAuley believes his wife meant he was operating her bank account, because Mr McAuley has evidence of rental money coming out of her bank account, with the source of that money being the proceeds of sale of a property in Castle Hill in which his wife held a 95% interest. Mr McAuley paid the rental when his wife did not do so.
f)Ms McAuley also challenges the Trustee’s assessment of Mr McAuley’s business expenses “on the basis that they are under the amount paid or incurred”.
Mr McAuley concludes his affidavit by submitting that “the amount paid by the Applicant is incorrect and should be reduced to such amount as is finally determined”.
Submissions
The Trustee, in his counsels’ outline of submissions, submitted that the 139ZG Certificate constitutes prima facie evidence of Mr McAuley’s liability to pay the income contribution as assessed by the Trustee; and that the matters on which Mr McAuley relies on his affidavit amount “to nothing more than an unsupported assertion the [Trustee’s] gross income calculation is incorrect, and fails to even identify a sum the Respondent says he is liable to contribute”. At the hearing before me counsel for the Trustee repeated the substance of this submission.
Mr McAuley relied on his written submissions. He there referred to the illness and passing of his wife; and to his querying the amount claimed by the Trustee, and in particular, the Trustee’s assessment of Mr McAuley’s income, and the absence of any reduction for hardship. Mr McAuley also stated that, given his discharge from bankruptcy, he is not sure whether “the provisions of the Bankruptcy are still applicable as regards sections 139WA [sic] and 139T”. Mr McAuley also referred to a particular class of expense attributable to his wife’s illness.
At the hearing before me Mr McAuley did not present any further evidence. He said that he had shunned away from accepting the fact he had been made bankrupt, and that he had been remiss in his dealings with the Trustee. Mr McAuley said that his wife had been extremely ill for probably the last ten years, having passed away last August, and that he had been her carer. Mr McAuley reiterated the belief stated in his affidavits that the $302,228.16 for which he has been assessed is much higher than he had ever earned. He also said that due to his wife’s illness he had a tremendous amount of expenses. Mr McAuley asked that he be given further time to address by evidence the question of his income and hardship.
It appears from what Mr McAuley said that the Trustee calculated his income from payments that had been made into his bank account as revealed by bank statements to which the Trustee had access. Mr McAuley acknowledged, however, that he had not put before me any evidence that discloses what his actual income was. He also acknowledged that he had not undertaken any calculations on the basis of the documents that had been provided to the Trustee.
Towards the end of the hearing I asked counsel whether if I were to enter judgment against Mr McAuley for the assessed amount it would be open to Mr McAuley to make a hardship application under s.139T of the Act. Counsel submitted it was doubtful that that could be done. I then explored with counsel for the Trustee the possibility of giving some form of conditional judgment to allow Mr McAuley time to put together a hardship application to the Trustee. After my discussion with Mr Marshall SC, counsel for the Trustee, the following exchange occurred:
HIS HONOUR: Yes. Thank you. All right. So, Mr McAuley, you probably understood what I said, but what I’m going to decide are the matters that have been argued. I’m going to treat what you’ve said as a request for an adjournment, and an adjournment for two purposes. One is for you to check the calculations of the income and, secondly, to ‑ ‑ ‑
MR McAULEY: Yes, your Honour.
HIS HONOUR: ‑ ‑ ‑ gather material in relation to a hardship application.
MR McAULEY: Okay.
HIS HONOUR: And what I have in – and what I have in mind about a hardship is – and I haven’t decided this, by the way – but if I’m minded to think that you should be given more time, the way it will be done is, in effect, to give you an opportunity, starting from now, to gather all the material that you want to put forward for hardship, and to put that material to Mr Weston by – within four weeks from today.
MR McAULEY: Obliged, your Honour.
HIS HONOUR: So – and in the meantime what I’m going to do is make a direction permitting Mr Marshall to put on any note about the form of relief, that’s how I’m going to describe it, and for you, if you wish to say anything about the form of relief, to put something in reply.
MR McAULEY: Yes, your Honour.
HIS HONOUR: So – because I think – and it sounds like to me Mr Marshall says if it bears a judgment, then whatever opportunity there is under the Act for hardship is – evaporates. But, as I said, given the history of the matter, I’m inclined to keep it reasonably tight, and that’s eight weeks from today, not from the time I’m going to give my judgment which, of course, implies that I will give my judgment – well, I suppose ‑ ‑ ‑
MR McAULEY: Sorry, Your Honour. Could you ‑ ‑ ‑
HIS HONOUR: No. I suppose what I’m going to do is I’m going to direct both of to put whatever you want to put on on relief within one week, so the expectation is I will give my judgment within two weeks.
MR MARSHALL: Thank you, your Honour.
HIS HONOUR: All right. Well ‑ ‑ ‑
MR McAULEY: I’m a little – I’m a little confused, your Honour.
HIS HONOUR: That’s all right.
MR McAULEY: You said – you said that four weeks starting today to put on a hardship application.
HIS HONOUR: Yes. That’s what I have in ‑ ‑ ‑
MR McAULEY: Then you mentioned it – then you mentioned a figure of eight weeks from today.
HIS HONOUR: Well – yes, and that’s to ‑ ‑ ‑
MR McAULEY: What does that ‑ ‑ ‑
HIS HONOUR: That’s to give – that’s to give Mr Weston an opportunity to consider it.
MR McAULEY: Okay. Righto. Okay. So I’ve got four weeks to put the hardship.
HIS HONOUR: That’s what I have in mind.
MR McAULEY: And also ‑ ‑ ‑
HIS HONOUR: I haven’t made up my decision yet, but that’s what I have in mind.
MR McAULEY: No, no. Okay. So I’m just ‑ ‑ ‑
MR MARSHALL: And can I just say with – Mr McAuley, if you want to challenge the amount in the certificate which is a little bit over $300,000, you need to put up some material that supports what you say and not just make an assertion. In other words, you need to have ‑ ‑ ‑
MR McAULEY: No, I understand.
MR MARSHALL: ‑ ‑ ‑ some basis and – otherwise Mr – Mr Weston just can’t – he won’t be able to change the figure. So that’s the first step. The second step is if you want to have Mr Weston make a decision in his discretion to reduce the settlement figure of the income
‑ ‑ ‑MR McAULEY: Yes.
HIS HONOUR: ‑ ‑ ‑ for reasons of hardship, that’s a separate matter. So keep them – keep the two distinct. I’m – it’s not my job to advise you, but it would seem to me ‑ ‑ ‑
MR McAULEY: I understand, but I appreciate that.
MR MARSHALL: ‑ ‑ ‑ it would help Mr Weston if it’s set out like that.
MR McAULEY: Yes. I appreciate – I appreciate what you’re saying, and I do appreciate your consideration actually, so thank you. So I did – so that I can start working on it now, income calculations and hardship are to be all done within four weeks, essentially.
HIS HONOUR: Yes. There’s got to be an end date.
MR McAULEY: Well, subject to what ..... says.
HIS HONOUR: Yes. There’s got to be an end line.
MR McAULEY: Yes.
HIS HONOUR: All right. So ‑ ‑ ‑
MR McAULEY: So do I submit that – pardon me.
HIS HONOUR: Say that again.
MR McAULEY: Do I submit that – your Honour, do I submit that to the solicitor for Mr Weston or ‑ ‑ ‑
MR MARSHALL: Yes. Send it to Mark Tierney.
MR McAULEY: Okay. Thank you.
HIS HONOUR: All right.
MR McAULEY: Well, thank you both. Thank you both very, very much. I appreciate the time.
HIS HONOUR: All right. So the only – the only orders I make today are:
(1) By 30 April 2020 the parties may send by email to the associate to Judge Manousaridis a short note on the issue of relief.
(2) Judgment is reserved.
So just to be clear, all these issues – if I’m going to make some form of order, the only purpose of it will be – and the trustee succeeds, the only purpose of the order will be not to give effect to a judgment until about – until eight weeks. And what the parties do between now and then is something that doesn’t concern the court.
MR MARSHALL: Thank you, your Honour.
HIS HONOUR: Well ‑ ‑ ‑
MR McAULEY: Thank you, your Honour.
On 24 April 2020 the lawyer for the Trustee sent to my associate (copied to Mr McAuley) an email attaching the following proposed orders and notations (errors in original):
THE COURT ORDERS:
1.Judgment for the applicant against the respondent in the sum of $308,229.16, inclusive of interest up to judgment.
2.The respondent is to pay the applicant’s costs of these proceedings fixed in the sum of $15,000.00.
3.Enforcement of the judgment in orders one and two is stayed until 5pm on 18 June 2020.
4.The Court notes that:
a)the applicant will consider evidence relating to contribution assessment periods (CAPS) three to eight (as noted in the letter from Pitcher Partners to the respondent dated 15 June 2017 which forms part of the tender marked exhibit “A”) provided to him (via his lawyer) by the respondent before 5pm on 21 May 2020 for the purpose of any fresh income contribution assessment that may exercisable under section 139W of the Bankruptcy Act 1966 (Cth) (Act);
b)if the respondent does not provide before 5pm on 21 May 2020 satisfactory evidence of his income and expenses to the applicant for CAPS three to eight, or alternatively instead of providing such satisfactory evidence the respondent otherwise does not accept the assessment made by the applicant for CAPS three to eight, then by reason of section 139T(3) of the Act the applicant will not be at liberty to make a determination of hardship under section 139T of the Act;
c)if the respondent does provide satisfactory evidence of his income and expenses to the applicant for CAPS three to eight before 5pm on 21 May 2020, the applicant will consider any hardship application made by the respondent under section 139T of the Act by 5pm on 11 June 2020;
d)if any fresh income contribution assessment is made by the applicant for CAPS three to eight pursuant to section 139W of the Act, or if the applicant determines pursuant to section 139T of the Act that the respondent will suffer hardship if required to pay the income contribution assessment for CAPS three to eight, the applicant shall seek to re-open his case to tender an updated certificate pursuant to section 139ZG(4) of the Act; and
e)the judgment in orders one and two of these orders may be set-aside, and a fresh judgment entered in favour of the applicant, if the applicant is given leave to re-open his case for the reasons set out above.
The draft orders and the notation to those orders, at least as I understand them, contemplate that judgment will be entered against Mr McCauley for $308,229.16 together with an order that Mr McAuley pay the Trustee’s costs fixed in the amount of $15,000; but that those orders will be subject to the following.
a)By 5 pm on 21 May 2020 Mr McAuley will provide to the Trustee’s lawyer satisfactory evidence of his income and expenses for CAP3-CAP8 and, if he intends to make an application under s.139T of the Act (hardship application), information in relation to such application.
b)If by 5 pm on 21 May 2020 Mr McAuley does not provide to the Trustee’s lawyer satisfactory evidence of his income and expenses for CAP3-CAP8, or if by that time and date Mr McAuley does not accept the Trustee’s assessment of his income contribution in relation to CAP3-CAP8, as recorded in the 139ZG Certificate, the Trustee will not consider any hardship application Mr McAuley may have made under (a) or otherwise, and orders for judgment and costs will stand.
c)If by 5 pm on 21 May 2020 Mr McAuley provides to the Trustee’s lawyer satisfactory evidence of his income and expenses for CAP3-CAP8, or if by that time and date Mr McAuley accepts the income contribution in relation to CAP3-CAP8 as recorded in the 139ZG Certificate, the Trustee will by 11 June 2020 determine whether he should make a fresh income contribution assessment under s.139W of the Act in relation to CAP3-CAP8, and determine any hardship application Mr McAuley may make under (a).
d)If, after considering the information Mr McAuley may provide to the Trustee’s lawyer:
i)the Trustee makes a fresh income contribution assessment for CAP3-CAP8; and
ii)whether or not he makes a fresh income contribution assessment for CAP3-CAP8, the Trustee determines under s.139T of the Act that Mr McAuley will suffer hardship if required to pay the income contribution assessment for CAP3-CAP8 as recorded in the 139ZG Certificate or any different amount the Trustee may assess under (i).
the Trustee will be at liberty to apply to the Court:
iii)for leave to reopen his case for the purpose of tendering any fresh certificate the Trustee may sign under s.139ZG(4) of the Act to reflect the determination or determinations he may make under (i) or (ii) or both; and
iv)apply to set aside the orders for judgment and the order fixing costs and substitute amounts (including interest) that will reflect the amount recorded in any fresh certificate the Trustee may sign under s.139ZG of the Act and any additional costs the Trustee may have incurred.
These proposed draft orders, and the notations, reflect the substance of the terms on which at the hearing I indicated I might make orders, if I were to find that the Trustee is entitled to judgment, and if I were not to grant Mr McAuley any further time to adduce evidence in the proceeding.
Mr McAuley did not provide any submissions after the hearing.
Determination
I am satisfied that the assessed amount is an amount that, under s.139ZG(3) of the Act, the Trustee is entitled to recover as a debt due to Mr McAuley’s estate; that the 139ZG Certificate complies with the requirements of s.139ZG(4) and reg.6.17 of the Regulations; and that, having been filed, it constitutes “prima facie evidence of the existence of” the assessed amount as a debt due to the estate of Mr McAuley. Thus, subject to there being any evidence that raises doubt about the Trustee’s determination of the assessed amount, the Trustee is entitled to judgment against Mr McAuley for the assessed amount.
I am satisfied that the matters to which Mr McAuley deposes in his affidavits do not raise any doubt about the correctness of the Trustee’s determination of the assessed amount. Those matters are assertions the truth of which depends on the availability of evidence which is reasonably capable of supporting them; but Mr McAuley has provided no such evidence. I am also satisfied that Mr McAuley’s having been discharged from bankruptcy does not affect his liability to pay the assessed amount. The Trustee made his assessment while Mr McAuley was a bankrupt; and, as I have already noted, s.139R of the Act provides that any liability under s.139P(1) or s.139Q(1) is not affected by a bankrupt’s discharge from bankruptcy after the making of the assessment that gave rise to the liability.
That, then, leaves the question whether I should grant to Mr McAuley the further time he requests to provide evidence in relation to his income and expenses for CAP3-CAP8. I am not satisfied I should grant Mr McAuley any time. As Mr McAuley himself acknowledges, he has failed throughout the course of his bankruptcy to engage with the Trustee’s efforts to assess income contributions in relation to the income Mr McAuley has undoubtedly earned after he became bankrupt; and Mr McAuley has been given sufficient opportunity in this proceeding to put on evidence in relation to the assessment of his income and expenses which supports the assertions he has made in his affidavits. Further, given the history of Mr McAuley’s lack of engagement with the Trustee, both before and after the commencement of this proceeding, there is nothing before me that would indicate there is a substantial prospect that Mr McAuley would meaningfully engage with the Trustee by providing satisfactory evidence of his income and expenses for CAP3-CAP8.
For these reasons I propose to enter judgment against Mr McAuley for the assessed amount together with interest. I also propose to order that Mr McAuley pay the Trustee’s costs.
Disposition
The Trustee applies for judgment in the amount of $308,229.16. That includes interest. I propose to order judgment for $308,229.16, but, because I have not calculated interest, I will reserve liberty to Mr McAuley to apply by 18 June 2020 if there is any dispute about the calculation of interest. I also propose to order that the Trustee’s costs be fixed in the sum of $15,000; but because I have not assessed those costs I will reserve liberty to Mr McAuley to apply by 18 June 2020 to vary the amount for which those costs are to be assessed.
I have noted the Trustee is prepared to agree that any judgment that may be entered against Mr McAuley be stayed until 18 June 2020, but subject to the terms I have set out in paragraph 32 of these reasons. Given I am not satisfied that Mr McAuley should have any further time to file evidence in this proceeding, the Trustee’s agreement that the judgment be stayed benefits Mr McAuley and, for that reason, I will also order that the enforcement of the judgment and order for costs be stayed until 18 June 2020. The stay, and the terms on which the Trustee has agreed to such stay, provide Mr McAuley not only an opportunity but also an incentive to do that which he has failed to do, namely, provide to the Trustee satisfactory evidence of income and expenses for CAP3-CAP8 or otherwise accept the Trustee’s determination of the assessed amount.
When I pronounce my orders I will note what I understand are the terms on which the Trustee has agreed to consider information Mr McAuley may provide in relation to his income and expenses for CAP3-CAP8 and hardship. I propose, however, to grant the Trustee liberty to apply to the extent I have misunderstood the effect of those terms.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 13 May 2020
0