Deputy Commissioner of Taxation v Hanselmann

By notice of motion dated 6 March 2017, the Deputy Commissioner of Taxation seeks the following orders:

On 17 April 2014, Mr Hanselmann signed consent orders in the District Court of New South Wales in the amount of $229,575.98 in respect of certain alleged taxation liabilities.

On 27 April 2016, Mr Hanselmann filed a motion in the District Court seeking to set aside those consent orders.

On 8 June 2016 Judge Maiden in the District Court ordered that the application by Mr Hanselmann to set aside the consent orders be dismissed with costs.

On 30 June 2016, pursuant to a creditor’s petition presented by the Deputy Commissioner of Taxation in the Federal Circuit Court of Australia, a sequestration order against the estate of Mr Hanselmann was made by Ms Hannigan, a registrar of the court. The official trustee in bankruptcy is now administering Mr Hanselmann’s bankrupt estate.

On 20 July 2016 Mr Hanselmann filed an application to review the decision of Ms Hannigan in the Federal Circuit Court of Australia. The application for review is part heard before Judge Dowdy and is listed for further hearing on 1 June 2017.

A summons filed in this Court on 25 July 2016 by Mr Hanselmann seeks leave to appeal against the decision of Judge Maiden made in relation to the orders described in paragraph [2] above.

The Deputy Commissioner of Taxation contends that, as an undischarged bankrupt, Mr Hanselmann does not have standing to bring or prosecute the application for leave to appeal in this Court in respect of a judgment which is a provable debt in his bankruptcy.

The affidavit of Ms Gayathri Singh sworn 6 March 2017 read without objection on this application proves that on 30 June 2016 an order was made by the Federal Circuit Court of Australia that the estate of Mr Hanselmann be sequestrated under the Bankruptcy Act 1966 (Cth).

The application for review in the Federal Circuit Court of Australia does not alter Mr Hanselmann’s status as a bankrupt. There is no order for a stay of a sequestration order which has been made against the applicant. See r 20.02(4) of the Federal Circuit Court Rules 2001 (Cth). It was common ground on the hearing before me today that no application for a stay of those orders was sought or granted.

The consequence of the making of a sequestration order against the estate of Mr Hanselmann was that the judgment debt created by the consent orders he seeks leave to appeal against in this Court was an obligation incurred prior to the appellant’s bankruptcy which became provable in his estate: see s 82 Bankruptcy Act.

As the debt created by the judgment is provable in the bankruptcy of Mr Hanselmann, the right of appeal against the consent orders or the right to seek leave to appeal against a judgment or a decision of the District Court refusing to set those orders aside, is a chose in action that vests in Mr Hanselmann’s trustee in bankruptcy. I am bound so to conclude by what Brennan CJ, Gaudron and McHugh JJ said in Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 137-8:

In Samootin v Shea [2010] NSWCA 371 at [90] Campbell JA (Beazley JA and Hodgson JA agreeing) made the following observations pertinent to this case:

See also Gabor Horvath & Anor v Paul A. Pattison [1998] FCA 28.

As to the application by the Deputy Commissioner of Taxation for an extension of time to file a notice of motion I have decided to grant that extension because it is clear in the circumstances that the application for leave to appeal by Mr Hanselmann is incompetent by reason of his bankrupt status. It is, however, equally clear that if Mr Hanselmann is successful in his review of the decision of the Registrar he may again apply for leave to appeal, out of time, in this Court. In those circumstances (namely that the bankruptcy upon which I have relied upon in this decision is annulled or the order of the Registrar is otherwise set aside) Mr Hanselmann would have very strong grounds for an extension of time in this Court. He is, to that extent, protected by the order I will make, and I note that in the argument, Mr Metlej, representing the Commissioner, agreed with the observations I had made in argument to that effect.

As Mr Hanselmann is a bankrupt he does not have standing to prosecute the appeal and accordingly his leave application should be dismissed for want of competency.

Accordingly the order of the Court is:

As to costs, taking into account the indulgence I have granted the Deputy Commissioner of Taxation to extend time for filing this notice of motion, this is a case where there should be no order as to costs.