FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Robert Nitijudo Wachjo [2005] FCA 561 BANKRUPTCY – departure of company director from Australia – substantial taxation indebtedness – non-return to Australia of debtor and members of family – reward of funds from Australia – sequestration order made Bankruptcy Act 1966 (Cth) ss 40(1)(c) and s 43 Puels v Exelerate Funding Pty Limited [2005] FCAFC 38 referred to Edge Technology Pty Ltd (in liq) (receiver appointed) v Jen-Tse Wang [2000] FCA 1586 applied Re Andrews; Ex parte Manning (1966) 8 FLR 56 cited Barton v Deputy Federal Commissioner of Taxation (1974) 131 CLR 370 cited DEPUTY COMMISSIONER OF TAXATION v ROBERT NITIJUDO WACHJO N 1899 OF 2004 CONTI J 19 APRIL 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1899 OF 2004 BETWEEN: DEPUTY COMMISSIONER OF TAXATION APPLICANT AND: ROBERT NITIJUDO WACHJO RESPONDENT JUDGE: CONTI J DATE OF ORDER: 19 APRIL 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. A sequestration order be made against the estate of Robert Nitijudo Wachjo. 2. The applicant's costs, and reserved costs, be taxed and paid from the estate of the respondent in accordance with the Bankruptcy Act 1966 (Cth). AND THE COURT NOTES THAT: 3. The date of the act of bankruptcy is 20 June 2004. 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 1899 OF 2004 BETWEEN: DEPUTY COMMISSIONER OF TAXATION APPLICANT AND: ROBERT NITIJUDO WACHJO RESPONDENT JUDGE: CONTI J DATE: 19 APRIL 2005 PLACE: SYDNEY REASONS FOR JUDGMENT Introduction 1 On 20 December 2004 the Deputy Commissioner of Taxation ('the Commissioner') presented a petition to the Court for a sequestration order against the respondent Robert Nitijudo Wachjo, pursuant to s 43(1) of the Bankruptcy Act 1966 (Cth) ('the Bankruptcy Act'), in reliance upon the act of bankruptcy enumerated in paragraph 4 of the Petition: 'The following act of bankruptcy was committed by the debtor within 6 months before the date of presentation of this petition, that on and from 9 December 2002, with intent to defeat or delay his creditors, he remained out of Australia, and otherwise absented himself, in terms of section 40(1)(c)(i) and (iii) of the Bankruptcy Act, and he continues to do so.' 2 On 8 March 2005, a Registrar of this Court made an order for substituted service of the Commissioner's Petition, thereby dispensing with the need for personal service. 3 The respondent, who according to ASIC records, was born in Indonesia, was a director of a company called Universal Powerpoint Pty Ltd ('Universal') now in liquidation. The debts in question are liabilities for income tax, administrative penalties and the general interest charge incurred by the respondent, at least partly, in his capacity as director of Universal. 4 In order to make a sequestration order against the estate of the respondent, I must be satisfied of the proof of the matters contained in s 52(1) of the Bankruptcy Act, being: (i) the matters stated in the petition; (ii) service of the petition; and (iii) the fact that the debt or debts on which the petitioning creditor relies is or are still owing. In addition, s 43 of the Bankruptcy Act sets out a further requirement which establishes the Court's jurisdiction to make an order of this kind. Since the date the petition was presented to the Court, the Commissioner has filed a number of affidavits which establish the necessary requirements that I have set out above. Service of Creditor's Petition 5 I am satisfied that service of the petition was effected in accordance with the Registrar's order of 8 March 2005, and in this regard I refer to the affidavit of Mr Michael Murray sworn on 18 April 2005. Mr Murray is a solicitor in the employ of the Australian Government Solicitor who represents the Commissioner. An envelope containing the signed and sealed petition, affidavits sworn by Mr Bradley Pearson Liddle on 7 and 15 December 2004 verifying that petition, the consent of Mr Max Donnelly, a registered trustee in bankruptcy dated 26 August 2004, a copy of the sealed orders of the 8 March 2004 and a letter addressed to the respondent was mailed to each of the 13 addresses of the respondent identified in the orders of the 8 March 2005 on 17 March 2005. Two of those envelopes were returned by 22 March 2005. 6 Mr Murray attested that shortly after substituted service was carried out, he was advised by a Mr Nick Fryer of the office of the liquidator of Universal Powerpoint Pty Ltd (in liq) of an address of the respondent in Indonesia. The same documents were posted to that address in Indonesia on 21 March 2005. As of the date of swearing that affidavit, Mr Murray had not received back the envelope that he had posted to Indonesia. Annexed to the affidavit is a letter dated 14 April 2005 from Ms Elizabeth Moran addressed to Mr Murray, which refers to the documents that have been filed in the matter of Robert Nitijudo Wachjo and takes exception to the doubt manifested in some of them as to whether Elizabeth Moran is a 'real solicitor'. Mr Murray replied to this letter on 18 April 2005. Proof of debt 7 The petition states that the respondent is indebted to the Commissioner in the total sum of $2,122,997.20. 8 The proof of debt is contained in the two affidavits sworn by Mr Bradley Pearson Liddle, being a tax officer of the Australian Tax Office, on the 7 and 15 December 2004. I was informed by counsel for the Commissioner during the hearing of the application that the subsequent affidavit was necessitated by the Commissioner becoming aware of further amounts owed by the respondent. Three notices of assessment were issued to the respondent pursuant to s 222AOE of the Income Tax Assessment Act 1936 (Cth) ('the Tax Act') in 2002. Those notices imposed penalties incurred by the respondent in his capacity as director of Universal for failure to comply with either ss 222AOC or 222AOD of the Tax Act. Those sections relate to the requirement of directors of a company to cause the company to comply with its obligations in relation to income tax deductions pursuant to s 222AOB of the Tax Act. The total amount of those penalties was $167,084.97. The respondent also owes the Commissioner the sum of $1,199,089.89 in respect of unpaid income tax in the years ended 30 June 2001, 30 June 2002 and 30 June 2003. This amount includes additional charges for late payment. The respondent is also charged with penalties payable in respect of his failure to lodge income tax returns in the years ended 30 June 2001 and 30 June 2002. Those amount to $1,121.12, which includes the general interest charge accrued there on up to an including 9 December 2004. Finally the respondent is liable to the Commissioner for $755,691.22 being administrative penalties, and the general interest charge thereon for tax shortfall amounts in respect of the financial years ended 30 June 2001, 30 June 2002 and 30 June 2003. Mr Liddle's affidavit sworn on 15 December 2004, which, together with his earlier affidavit sworn on 7 December 2004, was filed after the presentation of the petition on 20 December 2004, contains the calculations of each of these amounts. That affidavit further attests that as at 9 December 2004, the respondent still owed the Commissioner the sum of $2,122,997.20. 9 The amount now owed by the respondent to the Commissioner is $2,210,980.58, owing to additional interest and charges that have accrued, due since 9 December 2004. This is detailed in the affidavit of debt sworn by Ms Julieanne Waters of the Australian Tax Office on 18 April 2005. Ms Waters attested to the fact that no payments had been made in respect of that liability since the swearing of Mr Liddle's 15 December 2004 affidavit. Ms Waters' affidavit repeated the calculations contained in the earlier affidavit that I have essayed; updating those amounts for which the respondent is now liable. I am satisfied that the debts upon which the Commissioner relies are still owed by the respondent. Jurisdiction 10 The requirement of s 43(1) of the Bankruptcy Act, being the provision which empowers the Court to make orders sequestrating a debtor's property upon petition presented by a creditor, is that in addition to requiring an act of bankruptcy to be shown, the Court must satisfy itself that at the time the bankruptcy was committed, the debtor: '… (ii) had a dwelling-house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager …' Annexed to the affidavit of Mr Liddle sworn 7 December 2004 are the results of title searches carried out in late May 2004, which reveal that the respondent was at that time, the registered proprietor, either solely, or in common with another or other person or persons of a number of residential properties in Australia. Evidence was also provided by the same affidavit of Mr Liddle that Australia Post had sent a report to the Commissioner dated 25 September 2004 showing that the respondent was receiving mail at the address 12 Burlington Avenue, Jilliby NSW, as well as at a post office box in Wyong. I am satisfied that this evidence demonstrated that the respondent had a dwelling house in Australia during the relevant period. 11 Also annexed to that affidavit is the result of an ASIC company search of Universal dated 19 November 2004, in which the respondent is listed as the current director of Universal. Also placed in evidence is an affidavit sworn on 7 March 2005 by Mr Murray to which is annexed ASIC company searches of additional companies of which the respondent is named as a director. Those companies are Robert Wachjo and Associates Pty Ltd (ACN 102581439), Teentime Pty Ltd (ACN 060005343) and 21st Century Powerpoint Pty Ltd (ACN 096017739). The Commissioner contended that the act of bankruptcy occurred on 20 June 2004. I am satisfied that the requirement contained in s 43(1)(b) of the Bankruptcy Act is therefore met, on either of the grounds postulated above. Act of bankruptcy 12 The final issue which I resolve relates to the existence of the act of bankruptcy alleged in paragraph 4 of the petition. That paragraph expressly evokes the terms of s 40(1)(c)(i) and (iii) of the Bankruptcy Act, which are as follows: 's 40(1) A debtor commits an act of bankruptcy in each of the following cases: … (c) if, with intent to defeat or delay his or her creditors: (i) he or she departs or remains out of Australia; (ii) … … (iii) he or she otherwise absents himself or herself … 13 The respondent left Australia on 9 December 2002. In evidence is the respondent's departure card which indicates that he travelled on an Australian passport to Singapore en route to the United Kingdom. Records obtained by the Commissioner from the Department of Immigration and Multicultural and Indigenous Affairs show that the respondent has not returned to Australia, in spite of recording on his departure card that the estimated time that he would be overseas was to be 10 days. 14 Universal entered voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth) on 16 December 2002, being precisely one week after the respondent left Australia. The liquidator of that company, who was appointed on 19 December 2002, is Mr John Sheahan. The ASIC company extract annexed to Mr Liddle's affidavit sworn on 7 December 2004 reveals that the respondent's brother Mr Cliff Dipo Wachjo was the secretary of Universal as at the time of liquidation. Mr Liddle attests that Mr Sheahan was unable to locate either the respondent or his brother. In the same affidavit it is affirmed that a son of the respondent, Rafael Wachjo, left Australia on 28 June 2004 and has not returned, in spite of informing the Department of Immigration and Multicultural and Indigenous Affairs that his absence from the country would be no more than 20 days. Finally, a daughter of the respondent, Reinne Butcher, left Australia on 18 March 2004 and has not returned. 15 The affidavit of Mr Murray sworn on 7 March 2005 refers to telephone records of all international calls made from the respondent's residence at 12 Burlington Road, Jilliby NSW, commencing from 1 March 2004. These records were obtained under the Telecommunications Act 1997 (Cth). The Telstra report records that the majority of calls were made to telephone numbers operated in Indonesia. I observe that the respondent was born in Indonesia according to the ASIC records annexed to the first affidavit of Mr Liddle. Further investigation, details of which are contained in Mr Murray's affidavit, reveal that the respondent's daughter was the authorised representative of the company who leased one of the telephone line connections, the international calls from which formed the basis of the Telstra report. As counsel for the Commissioner observed during the hearing, inferences may be drawn from these facts, which point to the likelihood of the respondent having, at the very least, links with Indonesia. 16 Mr Michael Murray's affidavit sworn on 7 March 2005 also details attempts that had been made to contact the respondent through two of his former solicitors, being Ms Elizabeth Moran and Messrs Aubrey Brown Partners. Both solicitors indicated however that they would not be in a position to deliver documents to the respondent. I would observe that in spite of this, Mr Murray's correspondence with solicitors for the Commissioner would indicate that she received the petition even though it was never posted to her. 17 A further affidavit was filed by the Commissioner on 19 April 2005, being the affidavit sworn by Mr Murray on the same day. That affidavit brought into evidence further correspondence between various Australian banks and the Commissioner. That material related to inquiries made about various bank accounts conducted in the name of the respondent. Those inquiries were made subsequently to the date of departure of the respondent from Australia. In response to a notice served upon Westpac Banking Corporation under the Taxation Administration Act 1953 (Cth), the Commissioner was informed by letter dated 2 July 2003 that accounts of the respondent had been closed respectively on 6 June 2003, 18 June 2003 and 30 June 2003. In response to the notice sent to the National Australia Bank, the Commissioner was informed that the respondent did not hold an account with that bank. The response from St George Bank was that there were no funds in the relevant account with which to meet the notice. 18 I further observe that there was no appearance by the respondent when the matter was called before the Registrar on 19 April 2005 and this petition initially came on for hearing earlier in the day on 19 April 2005. Similarly, the respondent made no appearance when the hearing eventually took place before me later that same day. 19 It is in all of those circumstances that I am asked to find that the respondent committed an act of bankruptcy on 20 June 2004 by remaining out of Australia, or otherwise absenting himself, with the intent of defeating or delaying his creditors, being in this case of course the Commissioner. Section 40(1)(c) was recently discussed in Puels v Exelerate Funding Pty Limited [2005] FCAFC 38 (Weinberg, Jacobson and Lander JJ), where the debtor was held to have absented himself with intent to defraud his creditors, within the terms of s 40(1)(c)(iii) of the Bankruptcy Act, by excusing himself from a creditors meeting and refusing to be contacted subsequently. Lander J limited his reasons to s 40(1)(c)(iii) owing to the inapplicability of the other bases contained within that sub-section. Jacobson J agreed with Lander J, as did Weinberg J who added further observations of his own in relation to s 40(1)(c)(iii). Counsel for the Commissioner also relied upon my decision in Edge Technology Pty Ltd (in liq) (receiver appointed) v Jen-Tse Wang [2000] FCA 1586, which was a case where the debtor had departed from Australia. 20 In Puels, Lander J rejected the appellant's submission based upon the following passage from my reasons for judgment in Edge Technology appearing at [7]: 'A party is likely to have absented himself or herself where, with intent to defeat or delay his or her creditors, he or she has so acted as to render it impossible for his or her creditors to ascertain his or her whereabouts: In re Alice Alderson; Ex parte Jackson [1895] 1 QB 183.' Lander J did not accept that this passage enunciated the relevant test as to whether a person had absented himself, within the meaning of the Bankruptcy Act, such as to make it 'practically impossible' for his creditors to ascertain his whereabouts. Lander J expressed the view (with which Weinberg and Jacobson JJ agreed) that what I had in mind, by that statement in Edge Technology, was not to lay down a universal test for determining whether a person had absented him or herself, but rather to demonstrate an instance where such would be found to have been the case. 21 Section 40(1)(c) of the Bankruptcy Act requires a physical act that is accompanied by the necessary intent in order to satisfy the notion of defeating or delaying the debtor's creditors. A useful general statement on the subject is contained in the judgment of Clyne J sitting as judge in the Federal Court of Bankruptcy in Re Andrews; Ex parte Manning (1966) 8 FLR 56 at 58: 'Intent to defeat or delay is a question of fact and must be alleged by a petitioning creditor and proved. It is seldom that the intent of a debtor can be proved by a debtor's own statements, and it is usually shown by inference from the circumstances in which the debtor departed from his dwelling house or place of business. The evidence necessary to prove intent must differ according to the circumstances of each particular case. The conduct of a debtor in various forms may give rise to a presumption of intent obliging the debtor to rebut the presumption, but in the end this intent must be established.' Furthermore, as I pointed out in Edge Technology at [5]: 'In considering the conduct of the debtor against a background of all the facts and circumstances, it is clear that the Court must infer that a person intends the necessary consequences of his or her acts: Ex parte Goater, Re Finney (1874) 30 LT 620 at 621 per Mellish LJ.' In Barton v Deputy Federal Commissioner of Taxation (1974) 131 CLR 370 at 375 Stephen J referred to various authorities in holding that the 'requisite intent to which s 40(1)(c) refers need not be a debtor's sole intent in leaving or remaining out of the country'. 22 As counsel for the Commissioner observed in his comprehensive written submissions, there is no direct evidence of the intention relevantly of the respondent as at his time of departure from Australia. Counsel pointed to the respondent's absence from return to Australia, the departure and absence of return of two of his children, one of whom was making numerous international telephone calls to the respondent in the lead up to her departure, and the inability of the Commissioner to contact him directly or through his former legal representatives, together with the apparent withdrawal or transfer of the contents of his Australian bank accounts, as evidence of the respondent's intent to defeat or delay his creditors by remaining out of Australia. Counsel also contended that the proximity of his departure to the winding up of Universal, in a context of his personal liability that had arisen in respect of the unremitted tax, was indicative of a departure from Australia with the requisite intent. 23 I would further adopt the Commissioner's submission that notwithstanding the fact that the departure occurred more than six months prior to the presentation of the petition, the terms of s 40(1)(c)(i) of the Bankruptcy Act are still satisfied, because of the words thereof 'or remains out of Australia'. 24 In the circumstances I do not consider it necessary to address the Commissioner's submissions directed to fulfilment of s 40(1)(c)(iii) of the Bankruptcy Act. 25 Finally, I should refer to the affidavit of Silvana Rokov, sworn 18 April 2005, she being an employee of the Australian Government Solicitor, to which is annexed the results of a search undertaken by her of the records of the Insolvency and Trustee Service, which search revealed that there was no record of the respondent having been already made bankrupt, nor of any other bankruptcy petition pending against the respondent debtor Mr Wachjo. Conclusion 26 I am satisfied as to matters required to be proved in relation to the petition to the court for a sequestration order under section 43 of the Bankruptcy Act against the estate of the respondent, Robert Nitijudo Wachjo, on the basis of the verified creditors petition presented on 20 December 2004, and the affidavits which have been read and recorded in these reasons for judgment. 27 I am therefore of the view that sufficient ground has been established for the making of the sequestration order on account of the committal of an act of bankruptcy, in that on and from 9 December 2002, with intent to defeat or delay his creditors, the respondent Mr Wachjo has remained out of Australia in terms of section 40(1)(c)(i) of the Bankruptcy Act, and continues so to do. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 10 May 2005 Counsel for the Applicant: JT Johnson Solicitor for the Applicant: Australian Government Solicitor The respondent did not appear Date of Hearing: 19 April 2005 Date of Judgment: 19 April 2005