Re Toni Hadidi Ex Parte: Deputy Commissioner of Taxation [1993] FCA 519 (28 October 1993)

FEDERAL COURT OF AUSTRALIA

Re: TONI HADIDI
Ex parte: DEPUTY COMMISSIONER OF TAXATION
No. P3317 of 1992
FED No. 771
Number of pages - 3
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
SWEENEY J

CATCHWORDS

Bankruptcy - creditors petition presented based upon a judgment obtained for tax owed; after judgment an agreement by petitioner to accept taxpayer's offer of settlement - petition dismissed.

In Re a Debtor (1909) 16 Manson 205.

HEARING

MELBOURNE, 8 October 1993
28:10:1993

Counsel for the Debtor: Mr P. Brereton

Solicitors for the Debtor: Mr Michael Chahoud

Counsel for the Petitioning Creditor: Mr M. Aldridge

Solicitors for the Petitioning Creditor: Australian Government

Solicitor

ORDER

THE COURT ORDERS:

That the petition be dismissed, with costs including any reserved costs.

Note: Settlement and entry of orders is dealt with in O.36 of the Federal Court Rules.

DECISION

SWEENEY J A creditor's petition was presented by the Deputy Commissioner of Taxation ("the petitioning creditor") on 2 October 1992 following a judgment obtained by him in the District Court at Parramatta on 7 February 1989 against Toni Hadidi ("the debtor") in the sum of $50,760.44, together with costs of $85, for unpaid income tax for the years ending 30 June 1979, 1980, 1981, 1982 and 1985 together with additional tax for late payment, totalling $141,051. On the same day a creditor's petition was presented by the petitioning creditor against the wife of the debtor, Mrs Marcelle Hadidi, alleging a debt to him of $80,874.50. On 12 April 1992 a bankruptcy notice was issued against the debtor, the relevant parts of which read as follows:

"WHEREAS the Deputy Commissioner of Taxation one of whose address
is 2-12 Macquarie Street Parramatta (hereinafter referred to as
the 'judgment creditor') has claimed that the sum of $50,845.44 is
due by you to him under a final judgment obtained by him against
you in the District Court of New South Wales Parramatta on the
Seventh day of February 1989 being the amount of $50,845.44 and
due under the said judgment sinced (sic) reduced by $45,000.00
interest amounting to $10,091.53 calculated on the daily balance
of the judgment debt at the rates prescribed in the District Court
Act from the Seventh day of February 1989 to First day of April
1992, making a total of $15,936.97 the said judgment being a
judgment the execution of which has not been stayed:
THEREFORE TAKE NOTICE that within fourteen days after service of
this notice on you, excluding the day on which this notice is
served on you, you are required-
(a) to pay the sum of $15,936.97 so claimed by the
judgment creditor to the Registrar District Court
N.S.W. Cnr George and Mardsen Street Parramatta.
or
(b) to secure payment of the sum referred to in the last
preceding paragraph to the satisfaction of the Federal
Court of Australia or the judgment creditor or
compound the sum so specified to the satisfaction of
the judgment creditor."

2. In the debtor's Notice of Intention to Appear, as amended at the hearing, he set out the following grounds of opposition:

"1. The debtor denies that he is justly and truly indebted to
the petitioner in the sum of $141,051.00 as alleged.
Particulars
In or about early November 1989 the petitioner agreed to
accept $75,000.00 in full satisfaction of all outstanding
income tax and additional tax for late payment accrued on
the accounts of the debtor and Marcel Hadidi to the year
ended 30 June 1987. That sum has been paid to the
petitioner.
2. The debtor denies that he has committed the act of
bankruptcy alleged, in that the bankruptcy notice served on
or about 22 April 1992 was not valid and could not found an
act of bankruptcy.
Particulars
(a) On 7 February 1989 the petitioner obtained a judgment
against the debtor in respect of the debt referred to in the
bankruptcy notice ('the judgment').
(b) On 8 June 1989 the creditor issued bankruptcy notice No.
2350 of 1989 against the debtor which notice was
subsequently served on the debtor, in respect of the
judgment debt.
(c) After issuing the said bankruptcy notice, the creditor in or
about early November 1989 agreed with the debtor to accept
payments totalling $75,000.00 in full satisfaction of all
liabilities of the debtor and Marcel Hadidi for all
outstanding income tax and additional tax for late payment
accrued on their accounts to the year ended 30 June 1987,
including the judgment debt.
(d) In the premises, the original judgment debt has been
compounded or extinguished and cannot be made the subject
of bankruptcy proceedings.
(e) Further, the bankruptcy notice is false or misleading, in
that it mis-states the amount due under the judgment."

3. To an affidavit by an officer of the petitioning creditor there was annexed a file note made by another officer in early November 1989 which recorded agreement to accept the following "settlement offer" made by the tax agent for the debtor and his wife "on behalf of the taxpayers":

"$15,000 on 9 Nov or 10 Nov 89 (Bk Chq)
$15,000 on 9 Dec or 10 Dec 89
$15,000 on 9 Jan or 10 Jan 89 (sic)
Bal. ($30,000) on 28 Feb 90".

4. The reference to "Jan 89" was obviously meant to be to January 1990.

5. The file note also included the following paragraph:

"4. If default occurs on any one payment of the arrangement,
legal proceedings will be continued - T/A was notified to
impress this upon taxpayers. Letter of confirmation to
follow".

6. No letter was forwarded to the tax agent until that dated 14 February 1990, which read as follows:

"Reference is made to your representations on behalf of the
abovenamed taxpayers, with Mr R South of this office, wherein an
Offer to Settle income tax due by the taxpayers was agreed to as
follows:
Payments of: $15,000.00 on either 9/10 November 1989
$15,000.00 on either 9/10 December 1989
$15,000.00 on either 9/10 January 1990
Balance $30,000.00 by 28 February 1990.
Receipt is acknowledged of the three payments each of $15,000.00.
You are notified that the balance sum of $30,000.00, to be paid by
Bank Cheque on or before 28 February 1990, will be accepted as
full and final payment of all outstanding income tax and
additional tax for late payment, accrued on the taxpayers'
accounts, to the year ended 30 June 1987.
If you wish to discuss this matter please contact Mr Ray South on
the above telephone number."

7. The petitioning creditor had waited until the first three payments each of $15,000 had been made on behalf of the debtor and his wife before sending his letter, in which he purported to insert a requirement that the payment of $30,000 due by 28 February 1990 should be by bank cheque. As has been seen, the file note referred to the November 1989 payment as being by bank cheque, but did not do so in relation to any other payment.

8. There was undoubtedly an agreement between the petitioning creditor and the agent of the debtors made in early November 1989, the best available evidence of which is to be found in the petitioning creditor's letter to the agent of the taxpayers dated 14 February 1990, in which he said that "an offer to settle income tax due by the taxpayers was agreed to" and proceeded to set out the schedule of agreed payments. The debtors were notified that a payment by bank cheque of the "balance sum of $30,000" made on or before 28 February 1990 "will be accepted as full and final payment of all outstanding income tax and additional tax for late payment, accrued on the taxpayers' accounts, to the year ended 30 June 1987". There was no statement in that letter that, if there were any default in respect of that "full and final payment", the whole of the agreement of early November 1989 would be struck down and the petitioning creditor would be free to proceed upon its judgments against the debtor and his wife, after giving each of them a credit of some unascertained amount in respect of the payments received, whether proportionate to their respective debts, or equally apportioned between them. The letter was also silent on the question whether interest upon the judgments was to be revived by any failure to make the final payment and if so, for any and what period.

9. I am satisfied that before the issue of the bankruptcy notice the Commissioner had agreed with the agent for the debtor and his wife that he would be content to accept their promises under the agreement in place of their liabilities under the judgments obtained against them. If that agreement has been broken, it is to him to seek a judgment to enforce it and, if successful, to issue a bankruptcy notice. The judgment against the debtor obtained on 7 February 1989 could not found the bankruptcy notice relied upon by the petitioner creditor (see In re a Debtor (1909) 16 Manson 205).

10. Accordingly, the petition the life of which was extended until 3 October 1994, is dismissed, with costs including any reserved costs. I have not found it necessary to consider the debtor's alternative submissions that, in any event, the bankruptcy notice was misleading.