LAW SOCIETY PARA 4(b) MR ROULSTONE'S PAYMENTS "TO REPAY PERSONAL LOANS AND OTHER UNSPECIFIED CREDITORS" AND PARA 4(e) "CONTRIBUTIONS WERE MADE TO UNSPECIFIED FAMILY EXPENSES"
154Mr Roulstone says he paid $500,000 to "repay loan from bank for Scott Roulstone". The evidence is that the loan was secured over real estate, but it was not his real estate. The mortgage therefore was not his. The bank was not identified by Mr Roulstone. He did not identify the nature or purpose of the loan, and did not put the mortgage or any bank records of the mortgage, the loan or the payment into evidence. The payment of the debt benefited the owner by releasing the title from the $500,000.00 liability. In the absence of evidence to the contrary the Tribunal is comfortably satisfied that Mr Roulstone's wife is the owner of the property and she received the benefit of the payment of the debt secured against her property.
155Mr Roulstone alleges that on 22 December 2011 he paid $160,000.00 from the proceeds of sale of his shares to discharge a debt for school fees. He did not identify the school. He produced no record or other evidence of the debt or the payment.
156There was no evidence as to whether the debt was a joint debt of him and his wife or a debt of Mr Roulstone alone. His evidence of the debt and the payment was not corroborated. He made no reference to this alleged debt or the alleged payment in his Section 67 Statement to the Law Society or in subsequent submissions after the Law Society raised its concerns as to what money he received from the sale of the shares and what he did with those funds. The Law Society in its reasons referred to his explanation that part of the funds from sale of his shares were used for what the Law Society described as "to repay personal loans and other unspecified creditors".
157In his Debtor's Petition he completed on 6 August 2012, where he was required to disclose "a total amount of more than $1,000 over and above your normal repayments" paid in the last 12 months "as a result of pressure for payment" he did not disclose any payment of $500,000.00 to a bank, nor any payment of $160,000.00 for school fees or any other amount for any purpose.
158In SJR 3 Mr Roulstone states as to $507,034.00 of the funds he received from sale of his shares (after 10 January 2011) that it was used for "taxation payments, accounting fees, legal fees, rent, living expenses, credit cards, school fees etc, business expenses related to future employment prospects". He provided no other detail and no corroboration.
159Mr Roulstone alleged he used $1,616,363.19 of the sale money to make payments to reduce his debt to the Roulstone Family Trust. In SJR 3 Mr Roulstone says that the payment of the $366,363.19 to the trust on 11 January 2011 was "partial repayment of Scott Roulstone debt" to the Trust and the payment of $1,250,000.00 (referred to as "$1,155,000.00") to the trust on 1 May 2012 was "partial repayment of debt - Scott Roulstone".
160The Law Society at para 5 of its reasons stated that Mr Roulstone had informed it that as at 30 June 2011 he owed the Trust $1,721,146.00 and in May 2012 he paid the Trust $1,205,000.00 (sic), but "no further explanation has been proffered" as to why the payment was made in May 2012. In the body of his affidavit in the Tribunal Mr Roulstone did not offer any further explanation.
161There is no disclosure of the first payment in his Statement of Affairs and Bankruptcy Petition, in SJR 4, or his Trustee's Report to Creditors.
162The Trustee in Bankruptcy reported that as at 30 June 2010 the law practice owed the Trust $2,927,887. He reported that at the same date the Trust owed Mr Roulstone $1,828,201. He further reported that as part of the sale of the law practice, Mr Roulstone assumed responsibility for the amount owed by the law practice to the Trust. As at 30 June 2010 the net effect would have been to leave a net debt owing by Mr Roulstone to the Trust of $1,099,686.00. But Mr Roulstone's evidence is that in January 2011 he paid the Trust $366,363.19 to reduce the debt. The Trustee in Bankruptcy, however, states that according to the financial statements of the Trust, as at 30 June 2011 the debt of Mr Roulstone owing to the Trust was $1,221,146.00.
163Mr Roulstone provided no evidence to explain how that came about and no evidence to establish that receipt of the alleged first payment is recorded in the financial records of the Trust.
164The Trustee report of 15 March 2013 states that the payment of 1 May 2012 (in fact $1,250,000.00) is shown in the bank statement for the Trust. He says that the records show a payment shortly after by the Trust of $100,000.00 to Mr Roulstone. At the time of the report, and at the time of the hearing in the Tribunal in May, 9 months after the payment of $1,250,000.00 to the Trust, the Trust and Mr Roulstone had not paid any part of the $1,250,000.00 to the Trustee in Bankruptcy. The Trustee reported that there were "good prospects of recovering" the $1,250,000.00 from the Trust under Section 122 of the Bankruptcy Act 1966 as a preference payment.
165In cross examination Mr Roulstone testified that the three solicitors were advised that the funds from the sale "had to be parked somewhere" and were advised that if they paid their income tax assessments, the payments could be set aside as a preference. He conceded that other than "parking" funds in his wife's accounts and payments to the family trust, he made other payments with some of the proceeds of the sale of his shares. He conceded that the debt owing to the Roulstone's Family Trust "wasn't pressing". There was no penalty interest payable. The debt had been owed for "a couple of years".
166There were, of course, other alternatives available, such as collecting the available funds in an interest bearing account till the bankruptcy or a composition occurred, or paying the tax debt and avoiding the high rate of interest.
167It was put to Mr Roulstone that he "made a conscious decision not to pay tax". He said that he did it on the advice of his solicitor and he "dissuaded me from paying tax. He said it would be a preference to others. He said as to paying off mortgages etc. "in my own mind, I would have paid the tax and not paid the trust".