Brewin v Deputy Commissioner of Taxation [1999] FCA 1079

FEDERAL COURT OF AUSTRALIA

Brewin v Deputy Commissioner of Taxation [1999] FCA 1079 BARRY BREWIN v DEPUTY COMMISSIONER OF TAXATION Q 7166 of 1999

DOWSETT J 5 AUGUST 1999 BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7166 OF 1999

BETWEEN: BARRY BREWIN

Applicant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

JUDGE: DOWSETT J

DATE OF ORDER: 5 AUGUST 1999

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The application to set aside the Bankruptcy Notice be dismissed. 2. The application for an extension of time in which to comply with the Bankruptcy Notice be dismissed. 3. The applicant is to pay the respondent's costs of the proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7166 OF 1999

BETWEEN: BARRY BREWIN

Applicant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

JUDGE: DOWSETT J

DATE: 5 AUGUST 1999

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 This is an application pursuant to section 41(6A) of the Bankruptcy Act 1966 (Cth) to extend time for compliance with the requirements of the Bankruptcy Notice and to set it aside. The application is based upon an assertion by the debtor that he has a defence to the action pursuant to the judgment upon which the Bankruptcy Notice has been issued. The judgment went in default of delivery of defence in 1996. 2 It is appropriate at this time that I say something about the chronology of proceedings. Between September 1995 and April 1996 a company, Precon Proprietary Limited, of which the applicant was a director, failed to remit group tax payments. Negotiations took place in relation to this failure and on 10 May 1996 an agreement was reached between Precon and the Tax Office as to payment of those instalments. The company breached this agreement in June 1996, as result of which, pursuant to section 222AQA of the Income Tax Assessment Act 1936 (Cth), the applicant became liable for the debt. 3 On 2 July 1996 Precon appointed an administrator. On 18 July a writ was issued in the Supreme Court of Victoria against the applicant. Judgment in default of defence was entered on 11 October 1996. Certain settlement negotiations then took place. A first bankruptcy notice was issued on 11 September 1997 and served on 6 October 1997. Settlement negotiations continued. On 21 May 1998 an application was made to set aside the first bankruptcy notice, but this was not proceeded with because it was out of time. 4 Thereafter, the Tax Office decided not to proceed further with the sequestration proceedings because of formal difficulties concerning that process which are not presently relevant. On 30 March 1999 a second Bankruptcy Notice was served, and on 20 April the present application was filed. The time for compliance with the notice expired on 21 April 1999. On 25 June this year, application was made to set aside the default judgment. This is to be heard in Melbourne on 19 August 1999. 5 Section 41(6A) contemplates an extension of time in either of two circumstances, one being where proceedings have been commenced to set aside the judgment, and the other where there is an application to set aside the Bankruptcy Notice. The first alternative does not apply in this case because proceedings to set aside the judgment had not been commenced at the time that the application was made. Thus the application must be treated as being made in reliance upon 41(6AB). The application to set aside the Bankruptcy Notice depends upon the applicant demonstrating that the debt was not, in fact, owing. The application to extend time in which to comply with the Bankruptcy Notice will only be entertained if it seems that there is a reasonable prospect that such an argument will be successful. 6 It seems to me that the applicant had, at the relevant time, no defence to the action and still has no such defence. His claimed defence depends upon the affidavit of Douglas James Love, sworn on 21 May 1999. I am told, although it does not appear from the material, that Mr Love was a barrister acting on behalf of the applicant and, perhaps, his company. He asserts that he entered into negotiations with Ms Balik of the Australian Tax Office in connection with a proposed agreement to be entered into with Precon concerning the payment of arrears of group tax. He said that he advised Ms Balik that future tax payments could not be guaranteed because their payment was dependent on future cashflow which was uncertain. This seems to be a fairly obvious statement. 7 He says that he did this: ... having regard to the difficult position of the directors under such an agreement.