The Federal Court (Flick J) has refused to set aside a bankruptcy notice issued to the taxpayer on the grounds that it constituted an abuse of process. Further, the Court held that it had no power to extend the time for compliance with the notice.
The bankruptcy notice was based on a default judgment obtained by the Commissioner against the taxpayer in the Supreme Court of New South Wales in an amount of $6,790,121.53. The taxpayer had sought a review of the decisions disallowing the taxpayer's objections to the assessments upon which the judgment was based, and those review proceedings had not been determined at the time of the hearing of the taxpayer's application to set aside the bankruptcy notice.
His Honour said, at para 33:
"...no finding should be made in the present proceeding that the Deputy Commissioner issued the Bankruptcy Notice for the purpose of pressuring Mr Seller into paying the amount claimed rather than issuing it for the purpose of genuinely invoking this Court’s jurisdiction in respect to bankruptcy. No finding as to an abuse of process – or an abuse of power – is open on the facts presented."
His Honour continued at para 34:
"Different considerations may well apply should the point be reached where a sequestration order is sought. It is at that stage when more detailed consideration may have to be given (for example) to the consequences of Mr Seller being deprived of an entitlement to pursue his objections to the assessments and the prospect of a trustee not pursuing those proceedings...Although that consideration more immediately arises when a sequestration order may be sought, it nevertheless remains of some relevance to an assessment as to there being an existing abuse of process. Its relevance in the present proceeding, it is concluded, is marginal. "
Seller v FCT  FCA 865 (Federal Court, Flick J, 3 August 2011).