Discretionary Considerations
19 The Schedule to the motion derives its terms in part from the further Re-amended Notice stating grounds of opposition to the amended creditor's petition dated 26 March 2008 and in part from the content of paras [3]-[5] of the affidavit of Ms Thiele. The Schedule was introduced during the hearing of the notice of motion on 15 April 2008. Accordingly the delay in seeking an extension of time for the Schedule to stand as notice under s 41(5) of the Act is in excess of two years.
20 The bankruptcy petition was deemed to be served on the respondent on 4 August 2006 pursuant to orders made by Registrar Gilich on 14 July 2006 in the matter of PEG 177 of 2006. A notice of appearance was filed on 20 February 2007. The delay is sought to be explained by the respondent on the basis that he was not in a position to identify the mis-statements as to the amount actually due under the Bankruptcy Notice until recently, following inspection of documents discovered by the applicant pursuant to orders made by Registrar Jan on 29 January 2008. Those documents included the Income Tax - Account History document to which I have referred. It is this document which discloses the relevant rounding credit. Furthermore, he contends that the amount of $31,007.72 only became evident to him by virtue of the content of paragraphs [3]-[4] of the affidavit of Ms Deborah Thiele affirmed on 9 April 2008.
21 It may be accepted that questions concerning the amount of $31,007.72 did not, nor could reasonably have, come to the notice of the respondent until these matters were exposed in Ms Thiele's affidavit.
22 The rounding credit however, in my view, could have been discovered by the respondent had he chosen to ask the applicant for a copy of his taxation account disclosing the application of payments and credits from the time of the judgment debt until the date of the issue of the Bankruptcy Notice. He did not do so. Ms Thiele said that had the applicant been asked for that information then it would have been provided and indeed would have been provided in the form of a copy of the respondent's Income Tax - Taxation Account document.
23 However, the issue of rounding credits including the 4 cent rounding credit was raised for the first time at the first day of the hearing of the bankruptcy petition during cross-examination of Ms Rice by counsel for the respondent on 18 March 2008. It was not until 26 March 2008 that the non-application of the rounding credit of 4 cents applicable to 19 July 2005 was formally raised. It was contained in the Amended Notice of Objection to the petition under Schedule "A".
24 I agree, respectfully, with the view expressed by Beaumont J in Re Manion; ex parte Custom Credit Corporation Ltd (in Liq) [1996] FCA 343 when he said that it must be a "rare case" where an application to extend time for giving a notice under s 41(5) would be granted after the presentation of a petition. The application to extend time for giving notice in respect to the overstatement of $31,007.72 might be thought to be such a case because the underlying facts have only recently come to the attention of the respondent. For reasons I will turn to later, it is not such a case. The observations of the Full Court in Seovic Civil Engineering v Groeneveld at [37] in relation to the underlying policy considerations are apt to this case. By the respondent's delay in relation to the rounding credit the applicant has been denied the timely opportunity of withdrawing the Bankruptcy Notice and issuing a fresh one. I would for that reason alone refuse to extend time for the giving of notice in respect to the rounding credit. The Full Court also referred to the "considerable risk that the debtor will be able to take unmeritorious advantage of minor errors … and that unnecessary and wasteful litigation will eventuate". Such an observation would be apt in relation to the rounding credit if indeed it were an error. For reasons which I explain below the omission of the rounding credit of 4 cents in the Bankruptcy Notice was not an error.
25 It is relevant also, in my view, to the exercise of discretion, to consider the merits of the grounds sought to be raised in challenging the validity of the Bankruptcy Notice.
26 In my opinion, the proposed ground that the amounts totalling $31,007.72 should have been included in Item 5 to the Schedule of the Bankruptcy Notice is without merit. These were not amounts which had been paid, nor were they credits allowed, since the date of the judgment debt. The figure of $31,007.72 represents the amount by which general interest charges applied to the respondent's account prior to the date of the judgment would have been reduced, had the payment and credits identified above, been taken into account. They are, of course, amounts liable to be taken into account should the Court in due course go behind the judgment debt to consider whether or not there is a genuine debt: Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 at 587-588. That may or may not have practical consequences so far as the petition is concerned. The respondent is undoubtedly entitled to a credit for that amount. It does not, however, have the effect of rendering the amount due under the Bankruptcy Notice incorrect. The date of the issue of Bankruptcy Notice is the time at which the question of an alleged overstatement of the amount due is to be judged: Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337. In their effect the amounts totalling $31,007.72 have the consequence that the judgment debt was for an amount exceeding the amount actually due at the time of the judgment. That however, does not result in there not being an act of bankruptcy upon which the applicant is entitled to proceed in bankruptcy: In Re Bedford; ex parte HC Sleigh (Qld) Pty Ltd (1967) 9 FLR 497; Re Manion; ex parte Custom Credit Corporation Ltd (in Liq) [1996] FCA 343. It would, in my opinion, be futile to extend time for giving a notice concerning the credits for the remission of the general interest charges as it relates to the sum of $31,007.72.
27 The proposed ground concerning the rounding credit is also, in my opinion, without merit. The respondent submits that the amount of the rounding credit of 4 cents applied to his account between the dates of the judgment debt and the Bankruptcy Notice should also have been included in Item 5 of the Schedule to the Bankruptcy Notice. Again, I do not accept this submission. The rounding credit of 4 cents was applied on 19 July 2005 which was the same date as a general interest charge of $384,756.50 was debited to the taxation account of the respondent. This general interest charge to which the rounding credit, on its face, applied was not included in the Bankruptcy Notice. Indeed, no general interest charges which had been applied to the respondent's taxation account between the dates of the judgment and the Bankruptcy Notice were included in the Bankruptcy Notice under Item 3 of the Schedule or otherwise. Therefore this rounding credit was not, in my view, a relevant credit required to be included in the Bankruptcy Notice. If the general interest charge of $384,756.50 had been included in the Schedule to the Bankruptcy Notice then the rounding credit should also have been included. In that sense it was both or neither.
28 However, the respondent submits that this rounding credit related not to the general interest charge of $384,756.50 applied to the account of the respondent on 19 July 2005 but rather was a delayed credit to the general interest charge of $932,757.54 applied to the respondent's taxation account on 23 March 2005. This is said to be the case because the effect of applying the 4 cents rounding credit would have been to reduce that figure to $932,757.00 being the nearest multiple of 5 cents, consistently with s 8AAGA of the Taxation Administration Act. It follows, the respondent submits, that because the general interest charge of $932,757.54 was included in the amount for which judgment was entered that the credit of 4 cents should have been credited, post-judgment, as applying to it, in Item 3 of the Schedule to the Bankruptcy Notice.
29 Section 8AAGA is, in my view, merely facultative and is entirely discretionary in its application. I have identified already that the approach of the Commissioner to the application of rounding credits was varied and, arguably, inconsistent in that, on occasions, no rounding credit was applied when it might have been and on other occasions was applied where the result was to produce an amount of a general interest charge which was not a multiple of 5 cents. I do not, therefore, consider that it follows that the debit of 4 cents should be applied to the general interest charge debited to the respondent's account some three months earlier. The way that the other rounding credits were applied does not support any practice of applying a credit to round down an earlier general interest charge to a multiple of 5 cents. I am reinforced in this view by the fact that on every occasion that a rounding credit was applied, it was done on the same date as a general interest charge had been debited to the taxation account. I accordingly treat the rounding credit of 4 cents as applicable to the general interest charge debited on 19 July 2005 and not the earlier date. I also note, that despite what may appear to be the inconsistent approach in the application of rounding credits, that in every case, even if the result upon the general interest charge is not that contemplated by s 8AAGA, nonetheless it does produce an account balance in the last column of the Income Tax Account History document which is a multiple of 5 cents. The 4 cents rounding credit applied on 19 July 2005 demonstrates this proposition. The account balance on 15 June 2005 was $38,084,522.24. On 19 July 2005 a general interest charge of $384,756.50 was applied and but for the rounding credit of 4 cents the account balance following the application of that general interest charge would have been $38,469,278.74. However, by applying the 4 cents rounding credit the 74 cents in that last figure was reduced to 70 cents which is, of course, a multiple of 5 cents.
30 Ms Nola Rice who is an officer in the Australian Public Service employed as a case manager in strategic recovery at the Australian Taxation Office, gave evidence, consistent with this approach, that the rounding credits had been applied to the taxation account balance from time to time. She did however concede that, despite this, the application of rounding credits may have the effect of rounding down a general interest charge to a multiple of 5 cents. However she was not responsible for posting or calculating the rounding credits in the respondent's taxation account and was unable to say whether they were applied when a figure needed rounding down or whether there might be a delay in posting them. Ms Thiele stated that the rounding credits were "system generated" meaning generated by computer. She had not calculated the amount owing for inclusion in the Bankruptcy Notice. Later, she said that she had been told by the person who had done so that the rounding credits between the dates of the judgment and the Bankruptcy Notice had been applied against the general interest charges. I do not regard her evidence as having any significant probative value in these respects.
31 Again, it would be futile to extend time for the giving of notice under s 41(5) of the Act in respect to the rounding credit of 4 cents which, in my opinion, raises an unmeritorious challenge to the validity of the Bankruptcy Notice. I have already said, had it been otherwise, that because of the inordinate period of delay I would not, in any event, have extended time in this respect.
32 Finally, the respondent then submits that the applicant had not previously taken the point that no notice for the purposes of s 41(5) of the Act had been given. That is certainly the position in relation to the first challenge by the respondent to the validity of the Bankruptcy Notice which culminated in the dismissal of the respondent's appeal to the Full Court: Cumins v Deputy Commissioner of Taxation [2007] FCAFC 207. That avails the respondent nothing in respect to this motion however. The particular mis-statements asserted by the respondent in Schedule "A" have only recently been brought to the attention of the applicant. Were it necessary, and in my opinion, it was not, the applicant put the respondent, by his solicitors, on notice by letter dated 28 March 2008 which was two days after the Amended Notice of Objection was filed by the respondent, that it "maintain(ed) that the respondent (was) not entitled to question the validity of the bankruptcy notice on the basis of an incorrect statement of debt … in view of s 41(5) of the Bankruptcy Act 1966."
33 It is for the respondent to demonstrate that grounds exist to support the grant of an extension of time. He has not discharged this burden. I would not extend the time for filing a notice. It follows by virtue of the provisions of s 41(5) of the Act that the Bankruptcy Notice is not liable to be rendered invalid by reason only that the sum specified in the Notice as the amount due to the applicant exceeds the amount in fact due. In saying this I do not, for the reasons I have given, intend to imply that there has been an overstatement. The position is to the contrary.
34 The motion should be dismissed. The respondent should pay the applicant's costs of the motion.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.