FEDERAL COURT OF AUSTRALIA

Skalkos v Nicols [2009] FCA 346

BANKRUPTCY – meaning of “income” and “fringe benefit”.

BANKRUPTCY – application for amendment by the Court of assessment notices issued by a trustee in bankruptcy – whether the Court has a discretionary power to make the order sought.

EVIDENCE – burden of proof – inferences that may be drawn from failing to call witnesses.

Bankruptcy Act 1966 (Cth) ss 30, 80, 139J, 139K, 139L, 139ZA, 139ZF, 178  

Fringe Benefits Tax Assessment Act 1986 (Cth)

Bankruptcy Regulations 1996 regs 6.12, 6.12C; Sch 4 cl 30.3  

Bond v The Trustee of the Property of Alan Bond, A Bankruptcy (1994) 52 FCR 304

Ellis, Re; Ex parte Jefferson [1995] FCA 81

Fabre v Arenales (1992) 27 NSWLR 437

Jones v Dunkel (1959) 101 CLR 298

Lal v Worrell [1999] FCA 1122

Payne v Parker [1976] 1 NSWLR 191

Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348

Zantiotis v Andrew [1987] FCA 722

THEODORE SKALKOS v STEVEN NICOLS

NSD 1201 of 2008

BUCHANAN J

15 APRIL 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  The application is dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

BUCHANAN J:

1                     Mr Skalkos was made bankrupt on 25 June 2004 and discharged from bankruptcy on 3 March 2008.  Mr Nicols was his trustee in bankruptcy.  The present litigation arises from a re-assessment made by Mr Nicols during Mr Skalkos’ bankruptcy of contributions required to be paid by him to his estate and three further reassessments subsequently made shortly after Mr Skalkos was discharged from bankruptcy.  Each of the re-assessments increased substantially the contributions Mr Skalkos was required to make.

2                     Shortly before a sequestration order was made against Mr Skalkos a company of which he was a director, Bridgemoon Pty Limited, transferred to a company called Cunick Pty Limited title to the property in which Mr Skalkos was living at 31A New South Head Road, Vaucluse for $3.125m.  Bridgemoon took a mortgage over the property

3                     Mr Nicols was appointed trustee of Mr Skalkos’ bankrupt estate on 25 January 2005.  On 31 January 2005 he wrote to Mr Skalkos notifying his appointment and providing certain other information.  The letter was sent to Mr Skalkos by certified mail to 31A New South Head Road, Vaucluse.  Amongst other matters the letter informed Mr Skalkos that s 80 of the Bankruptcy Act 1966 (Cth) (“the Act”) required him to inform his trustee of any change of address.  Mr Skalkos was advised that he should lodge a statement of affairs within 14 days.

4                     On 17 February 2005 Mr Skalkos informed Mr Nicols by facsimile that although he was late in lodging a statement of affairs he would do so shortly.  A statement of affairs signed by Mr Skalkos on 28 February 2005 which was provided to Mr Nicols gave Mr Skalkos’ residential address as 31A New South Head Road, Vaucluse and identified two earlier addresses at which he had lived.

5                     The statement of affairs also contained a proposal by Mr Skalkos that he should pay $200 per week to his trustee in bankruptcy “until rent is required for accommodation”.  It is clear, therefore, that Mr Skalkos represented to Mr Nicols in his statement of affairs that he was living rent free at 31A New South Head Road, Vaucluse.

6                     On 24 May 2005 Mr Nicols wrote to Mr Skalkos at 31A New South Head Road, Vaucluse advising him of compulsory contributions he was required to make to his estate.  Mr Skalkos accepted that he received mail which was addressed to him in this way.  This first assessment related to the period 25 January 2005 to 25 January 2006, evidently a period commencing upon Mr Nicols’ appointment.  No amount was included in this assessment for a rent free benefit. 

7                     On 19 January 2006 Mr Nicols wrote again to Mr Skalkos at the same address advising him that he had reassessed the contribution due.  This reassessment related to the period 25 June 2004 to 25 June 2005, a period beginning on the commencement of Mr Skalkos’ bankruptcy.  In this reassessment Mr Nicols advised Mr Skalkos that he had included a rent free benefit calculated at $1,000 per week ($52,000 per annum) arising from his occupancy of the premises at 31A New South Head Road, Vaucluse.  This re-assessment was also sent on the same day to Mr Skalkos at his personal email address.  Mr Skalkos in his oral evidence accepted that he had received it in that fashion also. 

8                     No payment of the amounts sought was made although Mr Skalkos had earlier arranged for $200 per week to be paid on a regular basis in accordance with the proposal contained in his statement of affairs.  That payment of $200 per week continued throughout his bankruptcy and he was given credit for it in the various assessments made by Mr Nicols.

9                     Mr Nicols explained in his evidence that the press of other business contributed to the fact that the matter did not progress further during the period of Mr Skalkos’ bankruptcy although he had during that time prevented Mr Skalkos from leaving the country by refusing to release his passport to him while amounts remained outstanding.

10                  After Mr Skalkos was discharged from his bankruptcy three further re-assessments were issued covering the twelve month periods to 25 June 2006 and 25 June 2007 and the period to 2 March 2008.  Those assessments were each dated 9 April 2008 and were handed to Mr Skalkos on 10 April 2008.  Mr Skalkos acknowledged receipt of each of them by his signature.  Each assessment assessed a rent free benefit at the rate of $1,000 per week.  Each of the various five assessments informed Mr Skalkos that information was attached advising him of his rights of appeal.  Mr Nicols’ evidence identified a one page document drawing attention to a right to seek a review of a trustee’s decision by the Inspector General in Bankruptcy under s 139ZA of the Act and a further possible application to the Administrative Appeals Tribunal for review under s 139ZF of the Act of any decision of the Inspector General.  Under s 139ZA of the Act an application to the Inspector General for review of a trustee’s decision must be made within 60 days.  Mr Skalkos did not take that step with respect to any of the assessments which were issued to him.

11                  Instead, on 31 July 2008, he commenced the present proceedings.  Initially he sought the following forms of relief:

1.                  An extension of time in which to request the Inspector General to review Mr Nicols’ decisions assessing a rent-free contribution at $1,000 per week.

2.                  An extension of time in which to appeal to the Court against Mr Nicols’ decisions.  (Such an application was required by s 178 to be made within 60 days of any decision in question.)

3.                  If an extension of time to appeal under s 178 was granted, orders quashing each of the assessments which incorporated a rent-free benefit of $1,000 per week.

4.                  Review under s 178 of the Act of Mr Nicols’ conduct and permanent restraint of Mr Nicols from pursuing any unpaid contributions which had been assessed.

5.                  Amendment by the Court of the assessment notices to remove any reference to a rent-free benefit calculated at $1,000 per week, with consequential calculations.

12                  At the hearing of the application, counsel for Mr Skalkos confined the application for the relief sought to orders of the kind last mentioned.  The source of power to grant such orders was said to be s 30 of the Act which gives the Court a general power to decide all questions of law or fact in any case of bankruptcy.  One consequence of the election thereby made was to avoid the need to persuade the Court that there were grounds for granting an extension of time in which either to request the Inspector General to conduct a review or to permit an appeal to the Court under s 178.  That was probably a prudent course to take.  The only evidence which had been advanced by Mr Skalkos to explain why he had not taken the steps available to him under either s 139ZA or s 178 was the following four line statement in the affidavit he filed in support of his application:

“I did not make this application at an earlier point in time because I was unable to raise the funds necessary to make the application.  On 3 July 2008 I had raised the necessary money to pay my solicitor and for her and Counsel to draft the documents and make this application.”

13                  Such an explanation would be quite insufficient to explain why a request was not made to the Inspector General shortly after 19 January 2006 or shortly after the further assessments issued on 9 April 2008.  Furthermore, as counsel for Mr Nicols pointed out, the procedures under s 139ZA necessary to initiate a request to the Inspector-General to review a decision of a trustee to make an assessment are straightforward.  Moreover, so far at least as the later assessments issued on 9 April 2008 were concerned, Mr Skalkos had retained his current solicitors before that date.  Those solicitors wrote to Mr Nicols on Mr Skalkos’ behalf on 1 April 2008, 10 April 2008 and 17 April 2008.

14                  On 22 April 2008 Mr Nicols provided copies to the solicitors of all the contribution assessments (and reassessments) which had been made by him.  Time in which to apply to the Inspector-General under s 139ZA, or to the Court under s 178, had not expired at least with respect to the last three assessments issued on 9 April 2008.  It did not do so for another five weeks.  During that time, at least, Mr Skalkos had access to expert advice from solicitors who were already acting on his behalf in relation to the very matters at issue in the present case.  In those circumstances also, his explanation for his inaction before the institution of the proceedings would have been rejected as inadequate.

15                  Counsel for Mr Skalkos identified three issues which arise for determination in relation to the relief finally sought.  The first was whether Mr Skalkos’ sworn evidence, that he moved from 31A New South Head Road, Vaucluse in August 2004 and was therefore not liable to be assessed by reference to a rent-free benefit of $1,000 per week referrable to living at that address, should be accepted.  The second was a legal argument which, if correct, rendered Mr Skalkos immune from paying any rent-free benefit of the kind assessed by Mr Nicols even if his evidence was not accepted.  The third issue concerned the need to persuade the Court that any discretion reposed in the Court by s 30 of the Act should be exercised in Mr Skalkos’ favour.

16                  I have reached the conclusion that Mr Skalkos fails on each of those issues.

17                  Mr Skalkos bore the onus of showing, at the very least, that the factual foundation for Mr Nicols’ reassessments was absent.  To discharge that onus it was necessary to show that the information that he provided in his statement of affairs was inaccurate.

18                  The statement of affairs was not the only information available to Mr Nicols.  It was common ground that Mr Skalkos and Mr Nicols first met on 25 February 2005.  Mr Nicols made a file note of his discussions with Mr Skalkos at that meeting.  Mr Nicols gave sworn evidence that at the meeting Mr Skalkos told him he was living at Vaucluse.  The file note says in part: “He’s living back in Vaucluse”.  The file note predated by a substantial margin the events which are at the heart of the present proceedings.  I see no reason to doubt that it was an accurate record of the substance of Mr Skalkos’ comments. 

19                  Mr Skalkos denied that he was living in Vaucluse in February 2005.  He said that after the transfer of the property at 31A New South Head Road, Vaucluse to Cunick Pty Limited in April 2004 he remained living there, with the permission of the proprietors of Cunick Pty Limited, Mr and Mrs Thomas, only until August 2004 when renovations to the property were commenced.  So far as the evidence discloses, Mr Skalkos first made any suggestion of that kind in an affidavit sworn on 30 July 2008, which accompanied the application commencing the present proceedings.  Some parts of the affidavit are clearly unreliable.  Mr Skalkos there said, for example, that at his first meeting with Mr Nicols, which he accepted in his oral evidence was 25 February 2005, Mr Nicols made reference to the statement of affairs provided by Mr Skalkos and Mr Nicols then suggested that Mr Skalkos pay a contribution of $200 per week.  Mr Skalkos did not sign his statement of affairs until 28 February 2005.  There was no suggestion made that it was provided to Mr Nichols before that date.  It was not possible for Mr Nicols, therefore, to have made any reference to the content of the statement of affairs on 25 February 2005 as Mr Skalkos asserted.  I do not accept, either, that Mr Nicols suggested he pay $200 per week.  That was a suggestion made by Mr Skalkos in his statement of affairs and unilaterally implemented by him.

20                  Evidence tendered during cross-examination of Mr Skalkos revealed him to have had, despite his claim to have left, some ongoing connection with the property.  A development application dated 25 February 2005, stamped as received in the Woollahra Municipal Council Customer Service Department on 15 November 2005, sought approval by Cunick Pty Limited to carry out development works which were described as “cover hard stand car parking area”.  Mr Skalkos was named as the contact person for the company.  Mr Skalkos signed the application both as the owner of the land and on behalf of Cunick Pty Limited. 

21                  In the proceedings before me there was also other material that suggested Mr Skalkos gave 31A New South Head Road, Vaucluse as his residential address during the relevant period and more recently.  In income tax returns lodged by Mr Skalkos for each of the years ending 30 June 2004 to 30 June 2008 inclusive Mr Skalkos’ home address was given as 31A New South Head Road, Vaucluse.  The return for the year ended 30 June 2004 was stamped as lodged on 11 February 2005.  For the years ended 30 June 2006, 30 June 2007 and 30 June 2008 the tax returns were stamped as lodged on 31 July 2008.  Those three returns, and the return dated 30 June 2005, also bear endorsements suggesting that they were lodged electronically in the afternoon of 31 July 2008.

22                  The material to which I have referred is consistent with what Mr Nichols was told in the statement of affairs.  However, there was some material tendered in the proceedings which arguably pointed the other way.

23                  Records of the Roads and Traffic Authority were admitted into evidence without objection which showed Mr Skalkos’ address variously as 1-9 Glebe Point Road, Glebe (25 May 1984 to 23 October 1996), 7 Garners Avenue, Marrickville (24 October 1996 to 7 January 2004), 1-9 Glebe Point Road, Glebe (8 January 2004 to 25 August 2008) and 40 Ricketty Street, Mascot (25 August 2008 and continuing).  Those addresses, and the periods during which they applied, do not correspond to Mr Skalkos’ assertions in the proceedings that he was living at 31A New South Head Road, Vaucluse in April 2004 and remained there at least until August 2004.  The addresses in the Roads and Traffic Authority records do correspond closely, however, with the business address of F.L.Press Pty Ltd, of which company Mr Skalkos was a director before his bankruptcy, by whom Mr Skalkos was employed during his bankruptcy and of which he is again a director.  Company searches carried out in relation to F.L.Press Pty Ltd showed that its principal places of business since 1992 were as follows: 1 Glebe Point Road, Glebe (3 March 1992 to 31 October 1996), 7 Garners Avenue, Marrickville (1 November 1996 to 1 September 2002), 118-124 Bourke Road, Alexandria (2 September 2002 to 7 May 2003), 1 Glebe Point Road, Glebe (from 8 May 2003 to 10 October 2008) and 40 Ricketty Street, Mascot (from 11 October 2008 and continuing).  The evidence is equally consistent with Mr Skalkos having given a business address to the Roads and Traffic Authority as it is with a place of residence. 

24                  Bank statements from the ANZ Bank and the Commonwealth Bank were also admitted into evidence without objection.  The ANZ Bank statements show Mr Skalkos’ address as 1 Glebe Point Road, Glebe from 3 October 2003 to 4 December 2008.  This is broadly consistent with the Roads and Traffic Authority record and with the principal place of business of F.L.Press Pty Ltd.  There is no reference during this period to 31A New South Head Road, Vaucluse, even though Mr Skalkos asserted he was living there in 2004.  The Commonwealth Bank statements show the following addresses for Mr Skalkos: 1 1-9 Glebe Point Road, Glebe (from 10 October 2006 to 30 June 2008) and 40 Ricketty Street, Mascot (from 1 July 2008 to 3 December 2008).

25                  None of the documentary evidence from the Roads and Traffic authority, or from the banks, in the circumstances, establishes that the representation in the statement of affairs was inaccurate or mistaken.

26                  No witness was called to corroborate Mr Skalkos’ assertion that he left the property at 31A New South Head Road, Vaucluse in August 2004.  Mr George Minas assisted Mr Skalkos to complete his statement of affairs.  Mr Skalkos suggested that Mr Minas knew he was not living at 31A New South Head Road, Vaucluse in February 2005, despite what appeared in the statement of affairs.  In particular, Mr Skalkos asserted that Mr Minas, who was also a solicitor and business associate, knew that he had taken up residence in an apartment above the business premises of F.L.Press Pty Ltd at 1-9 Glebe Point Road, Glebe and lived there from August 2004.  Counsel for Mr Nicols relied on Jones v Dunkel (1959) 101 CLR 298 to submit that an inference should be drawn, against Mr Skalkos, that evidence from Mr Minas would not have assisted his case.  The same submission was made about the failure to call Mr Thomas who, Mr Skalkos asserted, gave him permission to remain at the Vaucluse address, but only until August 2004 when renovations began.

27                  I am satisfied that the onus lay upon Mr Skalkos to displace the suggested inference by explaining why those two witnesses, or others who could give direct evidence about his domestic circumstances, were not called (see e.g. Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348 at 366-7; Payne v Parker [1976] 1 NSWLR 191 at 200-202; Fabre v Arenales (1992) 27 NSWLR 437 at 444-446).  No attempt was made to provide such an explanation.

28                  In the circumstances, an inference is readily available that Mr Skalkos’ case would not be assisted either by the evidence of Mr Minas or Mr Thomas, or by the evidence of any person who knew the truth about his domestic arrangements during the period of his bankruptcy.  He has not discharged the onus of showing that the information in his statement of affairs was incorrect or that he ceased to reside at 31A New South Head Road, Vaucluse at any time during his bankruptcy.

29                  Although I do not accept Mr Skalkos’ evidence on the fundamental factual question on which the success of his application depends it would make no difference to the success of the application if I had accepted his evidence, for reasons I will in due course explain.

30                  Mr Nicols’ reassessments of contributions were made pursuant to the provisions of s 139L of the Act.  In aid of the proposition that no rent-free benefit should have been assessed by Mr Nicols for any accommodation which might have been provided to Mr Skalkos, whether until August 2004 or thereafter, Mr Walsh drew my attention to amendments which were made to s 139L of the Act in 1996 following a judgment of a Full Court of this Court in Bond v The Trustee of the Property of Alan Bond, A Bankruptcy (1994) 52 FCR 304 (“Bond”).  In Bond a majority of the Court (Cooper and Carr JJ, French J dissenting) held that provisions defining “income” to include “the value of a benefit that is, or if it were provided by an employer would be, a fringe benefit” should be read strictly so as to extend only to benefits in respect of employment (at 325-6 per Cooper J and at 332 per Carr J).  Particular reliance was placed by Mr Walsh on the following remarks by Cooper J:

“It is not an object within s 139J of the Act to prevent bona fide acts of benefaction from the family or friends of a bankrupt using their own money or property. Nor is it an object of the section to prevent a bankrupt accepting such benefaction unless the bankrupt has sufficient income to pay any contribution assessed if the benefit is treated as income for bankruptcy purposes. Likewise, it is not an object of the section to require payment by the benefactor of any assessed contribution towards the bankrupt’s estate as the price for providing the benefit.

The construction contended for by the respondent can lead to results which are absurd and which it is highly unlikely were intended by the legislature. For example, it is not an object of Div 4B of the Act to exclude a bankrupt spouse, partner or child, from the family home where that home and lifestyle, while owned and provided by other family members, are so valued that continued residence at home would render the bankrupt liable to assessment to contribute to the estate even though the bankrupt was without funds or income to satisfy the assessment. Yet, on the construction contended for by the respondent, such is the consequence where the valuation of the benefit exceeds the statutory income limit if an assessment is to be avoided.

In the circumstances of the bankrupt in the instant case, the value of the legal services paid for by others for his benefit itself exceeds the income limit. If the respondent is correct in the construction contended for, that circumstance alone renders the bankrupt liable to assessment for contribution to his estate whether or not he has any capacity to pay the contribution and exposes him to the serious consequences of non-payment of the contribution. In principle this would seem to occur whether the funds for the legal services were provided by family and friends or by a Legal Aid Commission briefing out and paying for the provision of legal services to the bankrupt, notwithstanding that a bankrupt was at the relevant time not employed and not in receipt of income and satisfied the means test applicable to the grant of legal aid. That, of course, is not the present case. However, no basis has been shown which would justify the applicant being treated differently from a Legal Aid Commission beneficiary placed in similar circumstances to the applicant requiring substantial legal services where those services have been paid for by a third party provider.”

31                  Section 139J, to which Cooper J referred, provides:

“139J    The objects of this Division are:

(a)          to require a bankrupt who derives income during the bankruptcy to pay contributions towards the bankrupt’s estate; and

(b)          to enable the recovery of certain money and property for the benefit of the bankrupt’s estate.”

32                  With great respect to the observations of Cooper J, the analysis seems to me to be somewhat circular.  Section 139K of the Act defines income, where used in Division 4B (which includes s 139J), to have the meaning given by s 139L.  Section 139J cannot, in those circumstances, be used to read down or qualify what s 139L provides. 

33                  More importantly, however, s 139L was amended to overcome the effect of the judgment in Bond.  The relevant provision is now s 139L(1)(a)(v) which provides that the income of a bankrupt which may be used to assess a contribution towards a bankrupt estate, includes:

“(v)      the value of a benefit that:

(A)        is provided in any circumstances by any person (the provider) to the bankrupt; and

(B)        is a benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986 as in force at the beginning of 1 July 1992 (other than a benefit that would be an exempt benefit for the purposes of that Act if the provider were the employer of the bankrupt as an employee and the provider had provided the benefit in respect of the employment of the bankrupt);

being that value as worked out in accordance with the provisions of that Act but subject to any modifications of any provisions of that Act made by the regulations under this Act...”

(Original emphasis.)

34                  It is now quite clear that what is included is a benefit that is provided in any circumstances by any person to a bankrupt.  In accordance with the statutory permission to effect modifications to the Fringe Benefits Tax Assessment Act 1986 (Cth), reg 6.12 of the Bankruptcy Regulations 1996 also makes clear that any reference in that Act to an employer is taken to be a reference to any person (other than the bankrupt) and any reference to an employee is taken to be a reference to the bankrupt.  Similarly clause 30.3 of Schedule 4 to the Bankruptcy Regulations 1996 now defines fringe benefit in a way which makes it clear that, subject to exceptions which are not here relevant, it means “a benefit provided at any time during the period by any person to the bankrupt”.

35                  Counsel for Mr Nicols also drew my attention to a number of places in the legislative scheme where the Act or Bankruptcy Regulations now deal directly with the issues raised by Cooper J in Bond and other issues.  They include s 139L(b), reg 6.12C and Sch 4 cl 30.3(g) of the Bankruptcy Regulations 1996.  The last provision makes plain that support by way of lodging provided by a close relation up to a value of $250 per week is not to be regarded as a “fringe benefit”.

36                  There is no ambiguity in the present statutory scheme.  There is no need to resort to extraneous material.  Had such a need arisen the matter would be put beyond doubt by reference to the Explanatory Memorandum which accompanied the amendments and which was provided to the Court during submissions by counsel for Mr Nicols.  Amongst the explanations which were given for the passage of the amendments is the following:

“Paragraph 139L(e) of the Act as it presently stands was thought to make the value of benefits provided to a bankrupt by a third party income, regardless of whether it is provided in an employment or work context.  That was the original intention of the provision.  However, the Federal Court, in the decision Bond v Ramsay (1994) 125 ALR 399, given on 20 October 1994, held that any benefit had to be provided in an employment context, before it could be regarded as forming part of a bankrupt’s income.  Accordingly, it is necessary to amend the provision to ensure that the original intention is carried into effect, and that the value of any benefit, whether or not provided in an employment context, whether or not in connection with the provision of work or services, and regardless of who supplies the benefit or the circumstances in which the benefit is supplied will be counted as part of a bankrupt’s income. Benefits or money provided in the nature of gifts to the bankrupt, or in the form of payments which discharge obligations of the bankrupt to third parties will be required to be included as part of the bankrupt’s income for contribution purposes.”

37                  From whatever standpoint the matter is viewed the argument advanced by counsel for Mr Skalkos, to the effect that the rent-free benefit was not assessable by Mr Nicols, must be rejected. 

38                  That leaves, finally, the question of how any discretion should be exercised if Mr Skalkos had persuaded me that Mr Nicols had proceeded on an incorrect view of the facts.

39                  Although counsel for Mr Nicols was reluctant to accept that the Court may have an unfettered power under s 30 of the Act to grant the relief which was sought, my attention was drawn to a judgment of Drummond J which appeared to accept that such power does exist (Re Ellis; Ex parte Jefferson [1995] FCA 81 at [6]).  Drummond J accordingly dealt with an application under s 30 of the Act on a discretionary basis rather than as a matter of power.  That would be an appropriate course for me to take in the circumstances of this case.  Although there does not appear to be any real doubt that the power in s 30 would be available if necessary (see also Zantiotis v Andrew [1987] FCA 722 and Lal v Worrell [1999] FCA 1122), it is not necessary for me to act on any conclusion that there is power under s 30 to grant the relief which was sought or decide whether, as a matter of statutory construction, the power should be regarded as limited by the facilities provided elsewhere in the Act, such as s 178 and s 139ZA, for review of a trustee’s decision.

40                  No criticism can be made of Mr Nicols for acting upon the material which Mr Skalkos provided to him.  That material clearly represented that Mr Skalkos was living rent-free at 31A New South Head Road, Vaucluse.  When an assessment was made of a rent-free benefit upon that premise Mr Skalkos took no step to challenge the assessment or, apparently, to remonstrate with Mr Nicols about it.  Mr Nicols deposed to conversations later in 2006 concerning Mr Skalkos’ desire to travel overseas.  On Mr Nicols’ evidence he withheld Mr Skalkos’ passport because not all monies assessed had been paid.  Mr Skalkos did not, in his evidence, indicate that at that time, or at any other time, he had suggested to Mr Nicols that the assessment proceeded upon a factually erroneous basis.  That remained the position until the present proceedings were commenced.  I would only have been prepared to interfere with Mr Nicols’ administration of Mr Skalkos’ estate had I been satisfied that there was a very clear case requiring the correction of unjustified error.  I am not so satisfied.

41                  Furthermore, as counsel for Mr Nicols correctly observed, even if Mr Skalkos’ evidence had been accepted he failed to provide any material upon which an adjustment of the kind claimed by him could reasonably be made.  Account would need to be taken, if he was accepted, of the value of accommodation provided to him at 1-9 Glebe Point Road, Glebe.  In this, as in other respects, he bore the onus.

42                  I also agree with submissions made by counsel for Mr Nicols that the Court should be slow to use any facility provided by s 30 of the Act in a way which would avoid the need for compliance with the times fixed by s 178 of the Act or s 139ZA of the Act or, alternatively, the need to provide a clear and persuasive explanation why those time limits had not been complied with.  As counsel for Mr Skalkos correctly accepted the relief which he sought is discretionary.  Although the discretion might be unfettered by statutory restriction and although it clearly is a discretion which is required to be exercised judicially, that does not mean that it should be exercised without regard for the surrounding circumstances and without regard for the fact that no explanation of any substance was offered by Mr Skalkos to explain why the matter was left unaddressed in any of the ways which were open to him.  His failures in that regard are consistent with an indefensible position and very difficult to reconcile with the position which he sought to advance in support of the present application.  Even if I had accepted his evidence at face value, or given him the benefit of the doubt in relation to it, I would not have granted the relief which he sought as a matter of discretion.

43                  The application will be dismissed.  There appears no reason why Mr Skalkos should not pay Mr Nicols’ costs and I will so order.

Associate:

Dated:         15 April 2009