Deputy Commissioner of Taxation v Singh [2010] FMCA 849 (2 November 2010)

Last Updated: 4 November 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DEPUTY COMMISSIONER OF TAXATION v SINGH

[2010] FMCA 849

BANKRUPTCY – Opposed creditor’s petition – whether the existence of other legal proceedings is a reason to refrain from or defer making a sequestration order considered.

Bankruptcy Act 1966 (Cth), s.52

Applicant:

DEPUTY COMMISSIONER OF TAXATION

Respondent:

PREM JEET KAUR SINGH

File Number:

SYG3044 of 2009

Judgment of:

Driver FM

Hearing date:

2 November 2010

Delivered at:

Sydney

Delivered on:

2 November 2010

REPRESENTATION

Solicitors for the Applicant:

Ms K Prestidge Australian Taxation Office Legal Services Branch

Mr B Singh appeared on behalf of the respondent

ORDERS

(1) A sequestration order is made against the estate of Prem Jeet Kaur Singh.
(2) The respondent debtor is to pay applicant creditor’s disbursements in respect of the petition, fixed in the sum of $889.
(3) Pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth), all proceedings under the sequestration order are to be stayed for a period of 21 days.
(4) The Court notes that the date of the act of bankruptcy is 15 June 2009.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY

SYG3044 of 2009

DEPUTY COMMISSIONER OF TAXATION

Applicant

And

PREM JEET KAUR SINGH

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. I have before me a creditor’s petition presented on 15 December 2009. The petitioning creditor is the Deputy Commissioner of Taxation and the debt identified in the petition is the sum of $1,488,715.29, being funds due on a final judgment in the District Court, plus costs and interest to judgment. I understand that the judgment debt flows from unpaid goods and services tax and pay as you go tax contributions due from the debtor, who previously ran a business.
2. The petition is supported by the affidavits within it verifying its contents, as well as the affidavit of Greg Hughes made on 21 January 2010, verifying service of the petition, the bankruptcy notice preceding it and an affidavit of search. I also received by leave today, final affidavits of debt and search. The final affidavit of search discloses another creditor’s petition presented by the Workers Compensation Nominal Insurer which has been listed for hearing on 29 November 2010.
3. I understand that, in addition to the debt identified in the petition and the final affidavit of debt, interest has continued to accrue since the date of the act of bankruptcy and the total amount said to be due to the Deputy Commissioner of Taxation as at today is $235,596.08. I also understand that the debtor has not filed an income tax return for the past 11 years and her personal income tax liability is not currently known.
4. I am satisfied that there has been sufficient compliance with the bankruptcy rules and that, prima facie, the Deputy Commissioner of Taxation is entitled to a sequestration order.
5. No notice of grounds of opposition has been filed by the debtor. However, her husband appeared before me today and told me that he is representing his wife’s interests. The debtor is seriously ill and has undergone cancer surgery. Mr Singh explained to me the history of his wife’s business dealings, which have apparently involved a series of borrowings, both for the purchase of real estate and for the running of the former business. The history of those borrowings has been a singularly unhappy one. The circumstances are further detailed in the two affidavits of Jasvinder Ranbir Kaur Singh, the eldest child of the respondent debtor, made on 4 August 2010 and 30 August 2010. In addition, I have before me the affidavit of Balbir Singh made on
   2 November 2010. He is the debtor’s husband who appeared today.
6. On the basis of what I have been told, the family of the respondent debtor, as well as she herself, have faced increasingly desperate financial circumstances and she has entered into dubious loan arrangements in an attempt to resolve a series of financial crises. These culminated in a borrowing from a company called Ginelle Pty Limited. That loan was secured by a mortgage over the Singhs’ land at 20 Spencer Road, Londonderry in New South Wales. Within a short time after the Singhs entered into that loan agreement, there was a default and recovery action followed.
7. The Londonderry property was sold and funds were disbursed to cover the mortgage costs and interest and for other purposes. The Singhs were dissatisfied with the way in which the proceeds of the sale of the property were disbursed and instituted legal proceedings in the Supreme Court of New South Wales. The fact of those proceedings, which were said to raise the possibility of the awarding of damages sufficient to pay the debt to the Deputy Commissioner of Taxation, has led to eight adjournments of the creditor’s petition. Judgment in the Supreme Court was given by Garling J on 22 October 2010. That judgment establishes that the Singhs were successful in persuading the Supreme Court that they should recover $25,000 from Ginelle improperly retained by that company, but were otherwise unsuccessful, and had to pay their own legal costs.
8. There is an appeal to the Court of Appeal of New South Wales, which has been heard, and on which judgment is reserved. Mr Singh sought a further adjournment of the petition on the basis that he has an expectation that the appeal will be resolved favourably and will result in the awarding of damages sufficient to pay the debt to the Deputy Commissioner. In my view, such an outcome is so unlikely as to be fanciful. In addition, there is no guarantee that whatever funds might be recovered as a result of the outcome of the appeal in the Court of Appeal would be applied to reduce or eliminate the Deputy Commissioner’s debt.
9. I also have regard to the forthcoming creditor’s petition presented by the Workers Compensation Nominal Insurer. In my view, while the circumstances of the respondent debtor are distressing, and one must have sympathy for the circumstances of her and her family, she is hopelessly insolvent and a sequestration order ought to be made. I do not rule out the possibility, however slim, that judgment might promptly be given by the Court of Appeal, which might provide some further relief to the Singhs, especially in relation to interest charges on the loan entered into with Ginelle. In those circumstances, I consider that I should stay proceedings under the sequestration order for a period of 21 days.
10. I am satisfied that the debtor committed the act of bankruptcy alleged in the petition and I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) requires proof.
11. I make a sequestration order against the estate of Prem Jeet Kaur Singh. I note that the date in the act of bankruptcy is 15 June 2009.
12. I will further order, pursuant to s.52(3) of the Bankruptcy Act, that all proceedings under the sequestration order be stayed for a period of 21 days.
13. In consequence of the making of the sequestration order, the Deputy Commissioner of Taxation seeks an order in respect of disbursements only. No professional costs are claimed. The claimed disbursements are detailed in a statement of disbursements incurred as at 23 June 2010, filed in court by leave today. Those disbursements total $889. I accept that those disbursements have been reasonably and properly incurred. I will order that the respondent debtor pay the applicant’s disbursements in respect of the petition, fixed in the sum of $889.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 4 November 2010