James v Deputy Commissioner of Taxation [2010] FCA 676

FEDERAL COURT OF AUSTRALIA

James v Deputy Commissioner of Taxation [2010] FCA 676 Citation: James v Deputy Commissioner of Taxation [2010] FCA 676

Parties: TREVOR ARNOLD JAMES v DEPUTY COMMISSIONER OF TAXATION

File number: QUD 75 of 2010

Judge: DOWSETT J

Date of judgment: 1 April 2010

Date of hearing: 1 April 2010

Place: Brisbane

Division: GENERAL DIVISION

Category: No catchwords

Number of paragraphs: 8

Counsel for the Appellant: Mr D Hassall

Solicitor for the Appellant: Mamdouh Elmaraazey

Counsel for the Respondent: Mr P Bickford

Solicitor for the Respondent: Australian Taxation Office Legal Services Branch

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION QUD 75 of 2010

BETWEEN: TREVOR ARNOLD JAMES

Appellant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

JUDGE: DOWSETT J

DATE OF ORDER: 1 APRIL 2010

WHERE MADE: BRISBANE

THE COURT ORDERS THAT:

1. The notice of motion filed by the appellant on 19 March 2010 be dismissed. 2. The appellant pay the respondent's costs of the motion.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION QUD 75 of 2010

BETWEEN: TREVOR ARNOLD JAMES

Appellant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

JUDGE: DOWSETT J

DATE: 1 APRIL 2010

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 The applicant (a bankrupt) moves for a stay of his bankruptcy pending the hearing and determination of an appeal to this Court from a decision of a Federal Magistrate affirming an earlier sequestration order made by a registrar. The sequestration order was, it seems, made on 13 June 2008, and the bankruptcy has continued since that date. For that reason alone it seems most undesirable that I should interfere in the administration of the estate at this late stage, at least in the absence of some reason for doing so. The only reason advanced by the bankrupt, as far as I can see, is that he has now unsuccessfully applied to a Federal Magistrate to set aside the earlier decision and has initiated an appeal from the Federal Magistrate's refusal of that application. 2 I cannot see that those events are in any way relevant to the bankrupt's application for a stay. If a stay were justified or necessary, one would have expected it to have been sought before the present time. A further difficulty is that the trustee in bankruptcy is not a party to these proceedings. Although I am told that he was served yesterday, I have no evidence to that effect. It would, I think, be unsatisfactory to proceed to restrain the trustee without hearing from him, particularly given the fact that there is no formal evidence as to service. I am told that the trustee is presently absent from Brisbane. 3 A third reason militating against a stay order at this stage arises out of the circumstances of the bankrupt's estate to the extent that they have been demonstrated to the Federal Magistrate and before me. It seems that there may be assets which the Federal Magistrate found to be worth about $500,000 or a little more, although the bankrupt's valuer asserts a figure in excess of $600,000. The Commissioner of Taxation, the petitioner in these proceedings, asserts a debt of about $178,000, and it is said there is also a secured debt of about $400,000. Thus any excess of assets over liabilities is likely to be quite small. Those circumstances, too, suggest that a stay in the present circumstances would not be justified. 4 A considerable amount of time has been spent in the course of the hearing in considering the grounds of appeal. The bankruptcy notice contains an error. The judgment debt is for $61,145.63. This judgment was obtained in 2005, and it seems that no attempt has been made to set it aside. Nor has there been any challenge, in a form recognised by the relevant tax legislation, to the assessment upon which it is based. 5 A further amount of $615 is claimed by way of costs, and interest totalling $7578.70 is claimed in the bankruptcy notice. This shows a total of $69,339.33, the amount specified in the schedule to the bankruptcy notice. Item 5 of the schedule states: "less…payments made and/or credits allowed since date of judgment or order - two cents". However, instead of deducting the two cents from the total, it was added on. As a result, instead of a total of $69,339.31, the total is shown as $69,339.35. The same amount is shown on the front page of the bankruptcy notice. There is also one further apparent anomaly in a further document attached to the bankruptcy notice, which showed, in connection with the calculation of interest, a reduction in the principal sum from $61,145.63 to $61,145.61. Thus the amount in dispute is no more than five cents. 6 It is said for the bankrupt that the authorities establish that even minor errors may affect the validity of the bankruptcy notice. There must, however, be a limit upon the extent to which that can be so. For my part, and without wishing to pre-empt any decision on appeal, I find it very hard to believe that in 2010 an overstatement of a debt by five cents can be seen as anything other than a formal defect of the kind contemplated in s 306 of the Bankruptcy Act 1966 (Cth) (the "Act"), in which case it would only affect the validity of the bankruptcy notice if it could be shown that it was in some way misleading. I doubt that could be shown that it was misleading, given that the error is patent on the face of the document. Even the most innocent of debtors could be expected to be able to realise the difference between adding and subtracting two cents. In any event, s 41(5) provides a remedy in the event that a bankrupt asserts that an excessive amount had been claimed in the bankruptcy notice. That provision requires that notice be given to the creditor, disputing the validity of the notice on the ground of misstatement. The bankrupt claims to have done so in a general way. He seems to have orally challenged the overall debt rather than the number of cents which might be owing. The Federal Magistrate accepted that an oral notice might be a valid notice for the purpose of s 41(5), but concluded that it did not sufficiently specify the alleged error in order to constitute such a notice. 7 There seems to me to be considerable substance in that argument. The bankrupt also submits the bankruptcy notice is not a notice of the kind contemplated by s 40(1)(g) in that it does not state the debt. However that would invite a consideration of the validity of the bankruptcy notice, having regard to the considerations set out by the High Court in its decision in Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 and other decisions concerning the Act. 8 I am far from persuaded that there is any substantial ground raised by the notice of appeal. Prima facie, one would have thought that the Federal Magistrate's reasons were measured and unexceptionable. However, as I say, I do not say that there are no grounds of appeal; only that the prospects do not seem particularly good. In the circumstances, and for all of the reasons which I have given, I decline the application for a stay. I order that the applicant pay the respondent's costs of the motion today. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.