Commissioner of Taxation v Growth Investment Fund SA

Case [2014] FCA 780

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Growth Investment Fund SA [2014] FCA 780

Citation: Commissioner of Taxation v Growth Investment Fund SA [2014] FCA 780
Parties: COMMISSIONER OF TAXATION v GROWTH INVESTMENT FUND SA, ZERO NOMINEES PTY LTD and EUROZ SECURITIES LIMITED
File number: WAD 162 of 2014
Judge: GILMOUR J
Date of judgment: 28 July 2014
Catchwords: PRACTICE AND PROCEDURE – freezing orders - ex parte application - relevant principles – whether or not there is a good arguable case on an accrued or prospective cause of action justiciable in this Court – whether or not there is a risk of dissipation of assets – whether or not the balance of convenience favours the making of freezing orders - service out of the jurisdiction – substituted service - confidentiality orders.
Legislation: Income Tax Assessment Act 1936 (Cth) ss 167, 177
Taxation Administration Act 1953 (Cth) Div 1 of Pt IIA, ss 255-1, 255-5(1), 298-30(3) in Sch 1
Income Tax Assessment Act 1997 (Cth) s 5-5(5)
Federal Court Rules 2011 (Cth) Divs 7.4, 10.4, 10.6
Cases cited: Applecross Pte Ltd v Lim (No 2) [2010] FCA 589
Australian Competition & Consumer Commission v Kokos International Pty Ltd [2007] FCA 2035
Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1
Commissioner of Taxation v Ma (1999) 92 FCR 569
Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd (2009) 77 ATR 414
Deputy Commissioner of Taxation v Chemical Trustee Limited (No 4) [2012] FCA 1064
Deputy Commissioner of Taxation v Gashi (2010) 27 VR 127
Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194
Deputy Commissioner of Taxation v Sharp (1988) 91 FLR 70
Federal Commissioner of Taxation v Edgewater Estates Ltd (2009) 72 ATR 956
Federal Commissioner of Taxation v Resource Capital Fund III LP (2010) 81 ATR 13
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Porter v Freudenberg [1915] 1 KB 857
Third Chandris Shipping Corporation v Unimarine SA [1979] 1 QB 64
Date of hearing: 19 June 2014
Place: Perth
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 42
Counsel for the Applicant: Ms CH Thompson
Solicitor for the Applicant: Australian Government Solicitor

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

WAD 162 of 2014
BETWEEN:

COMMISSIONER OF TAXATION
Applicant

AND:

GROWTH INVESTMENT FUND SA
First Respondent

ZERO NOMINEES PTY LTD
Second Respondent

EUROZ SECURITIES LIMITED
Third Respondent

JUDGE:

GILMOUR J

DATE OF ORDER:

19 JUNE 2014

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.This interlocutory application be returnable immediately.

2.Pursuant to section 17(4) of the Federal Court of Australia Act1976 (Cth), the hearing be conducted in private.

3.Pursuant to rule 2.32 of the Federal Court Rules 2011 (Cth), the documents filed in the proceeding will remain confidential and no person, other than a party to the proceedings, may inspect the file, until the earlier of either:

(a)       the end of the hearing at the next return date, as specified in order…

Continue reading Commissioner of Taxation v Growth Investment Fund SA

Sign in free to access the full text

Details
AGLC
Commissioner of Taxation v Growth Investment Fund SA [2014] FCA 780
Case
[2014] FCA 780
Decision Date

CaseChat Overview and Summary

The case of Commissioner of Taxation v Growth Investment Fund SA was heard in the Federal Court of Australia. The Commissioner of Taxation sought ex parte freezing orders against the assets of Growth Investment Fund SA, a company incorporated in Panama with apparent business ties to Switzerland, due to outstanding tax liabilities in Australia. The Commissioner argued that the company had not lodged any tax returns in Australia and had a history of trading in Australian shares. The Commissioner's audit determined that Growth Investment Fund SA owed significant income tax and penalties for the years 2004 to 2013, with additional interest accruing. The Commissioner sought to freeze the company's remaining Australian assets to secure the payment of these liabilities.

The legal issues the court had to address included whether there was a good arguable case on an accrued or prospective cause of action that was justiciable in the court, whether there was a risk of dissipation of assets, and whether the balance of convenience favoured the making of freezing orders. The court also had to consider the appropriate methods for serving the documents on the respondent, given that the respondent was based overseas. The court examined the evidence presented, which indicated the likelihood of asset dissipation and the absence of any legitimate business reason for the respondent to hold such significant assets in Australia.

The court found that the Commissioner had a good arguable case and that there was a significant risk that the respondent would dissipate its assets, particularly given the offshore nature of the respondent's business. The balance of convenience was deemed to favour the making of the freezing orders to prevent potential injustice. The court granted the application for freezing orders, allowed substituted service of the documents on the respondent, and mandated confidentiality to protect sensitive commercial information. The court issued detailed orders for the service of documents and set a date for a directions hearing.

The final orders included the immediate return of the interlocutory application, a private hearing, confidentiality of documents, a freezing order against the first respondent, restrictions on the second and third respondents from disposing of assets, and specified methods for serving the documents on the respondents. The court also directed the service of orders to relevant financial institutions and set a date for a further hearing. The costs of the application were reserved for later determination.

Orders

Orders of the court

1. This interlocutory application be returnable immediately.

2. Pursuant to section 17(4) of the Federal Court of Australia Act 1976 (Cth), the hearing be conducted in private.

3. Pursuant to rule 2.32 of the Federal Court Rules 2011 (Cth), the documents filed in the proceeding will remain confidential and no person, other than a party to the proceedings, may inspect the file, until the earlier of either:

(a) the end of the hearing at the next return date, as specified in order 13; or

(b) further order.

4. A freezing order be made against the first respondent in the terms specified in Annexure "A" up to and including 5:00 pm on 26 June 2014.

5. The second respondent and third respondent be restrained from disposing of, dealing with or diminishing the value of any assets held by either of them or in the name of either for or on behalf of the first respondent until either:

(a) the freezing order made against the first respondent in these proceedings on 19 June 2014 is discharged; or

(b) further order.

6. The applicant have leave to serve the Documents* on the first respondent in Switzerland in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

7. The applicant have leave to serve the Documents* on the first respondent:

(a) by emailing them to the first respondent at gtbomotiers@bluewin.ch;

(b) by emailing them to the first respondent at fondation-bf@bluewin.ch;

(c) by pre-paid post to the first respondent at Chateau D’Ivernois, Grande Rue 7, CH-2112 Motiers, Val-de-Travers NE Switzerland; and

(d) by pre-paid post to the First Respondent at Monaval Asset Management Ltd, Talstrasse 39 PO Box 2621, CH-8022 Zurich Switzerland.

8. Service in accordance with order 7 be deemed good and sufficient service of the Documents* upon the first respondent.

9. Subject to order 10, the applicant serve the Documents* on the second and third respondents within 2 days of the making of the orders.

10. On or before 5:00 pm 20 June 2014, a sealed copy of the orders be served on the second and third respondents.

11. On or before 5:00 pm 20 June 2014, a sealed copy of the orders be served by facsimile on Bankwest, a division of Commonwealth Bank of Australia.

12. On or before 5:00 pm 20 June 2014, a sealed copy of the orders be served by facsimile on the following share registries:

(a) Computershare Investor Services Pty Ltd;

(b) Link Market Services Ltd; and

(c) Security Transfer Registrars Pty Limited.

13. The matter be listed for a directions hearing at 11:45 am on 26 June 2014.

14. Liberty to apply be granted on 24 hours’ notice.

15. The costs of the interlocutory application be reserved.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The applicant seeks urgent orders on an ex parte basis freezing the assets of the first respondent, based on the matters set out in the affidavit of Aris Zafiriou sworn 18 June 2014 ("Zafiriou Affidavit"). This evidence discloses:(a)the first respondent is a company incorporated in Panama which appears to have its place of business in Switzerland. It is not registered for a tax file number nor has it lodged any tax returns in Australia;(b)although they are not disclosed by the relevant regulatory authority in Panama as directors of the first respondent, the first respondent appears to be controlled by persons resident in Switzerland;(c)the first respondent has a history of trading in shares in Australian companies. It owns shares in a number of Australian companies, through either the second or third respondents, as nominees;(d)the applicant has carried out an audit of the share trading business carried on by the first respondent in Australia since 2000 and has determined that between the 2004 to 2013 income years the first respondent derived taxable income totalling $17,857,784;(e)on 18 June 2014 the applicant issued notices of assessment to the first respondent:(i)for income tax, pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) for each of the income years ending 30 June 2004 to 30 June 2013, which assessed the first respondent to income tax of $5,357,335.20 (Income Tax Assessments); and (ii)for administrative penalties totalling $4,744,510.35 (Penalty Assessments) in respect of the income years ending 30 June 2004 to 30 June 2013, totalling $10,101,845.55 (together, the Assessments), with General Interest Charge which accrues pursuant to Part IIA of the Taxation Administration Act 1953 (Cth) (TAA 1953) estimated as at 27 May 2014 to be $4,170,506.91, with a total taxation liability of $14,272,352.46 (Total Estimated Liability); (f)the due dates for payment for the Income Tax Assessments, which are set out in the table below; Income Tax Year ending Evidence Due Date30 June 2004 AZ-24 1 December 200430 June 2005 AZ-25 1 December 200530 June 2006 AZ-26 1 December 200630 June 2007 AZ-27 3 December 200730 June 2008 AZ-28 1 December 200830 June 2009 AZ-29 1 December 200930 June 2010 AZ-30 1 December 201030 June 2011 AZ-31 1 December 201130 June 2012 AZ-32 3 December 201230 June 2013 AZ-33 2 December 2013and (g)the due date for payment of each of the Penalty Assessments is 7 July 2014. The applicant seeks freezing orders over the first respondent's remaining Australian shares (including those held for it by the second or third respondents) to the value of the Total Estimated Liability, to provide a means by which the first respondent's taxation liabilities can be met, in the circumstances disclosed in the Zafiriou Affidavit.Jurisdiction of the Court to make freezing orders Rule 7.35(1)(b)(i) FCR relevantly invests a discretion in the Court to make a freezing order if the applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in this Court. Rule 7.35(4)(b) relevantly provides that the Court may make a freezing order in such a case if it is satisfied, in all the circumstances, that there is a danger that the assets may be removed from Australia, or from within Australia, or disposed of, dealt with or diminished in value so that a prospective judgment will be wholly or partly unsatisfied. Consideration requires also to be given to whether the balance of convenience favours the granting of the orders. Prospective cause of action justiciable in this Court

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.