Deputy Commissioner of Taxation (Cth) v Hooper (No 2)
[2006] VSC 183
•15 May 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 5544 of 2002
| DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA | Plaintiff |
| v | |
| ANTHONY EDWARD HOOPER | Defendant |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 May 2006 | |
DATE OF JUDGMENT: | 15 May 2006 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation (Commonwealth) v Hooper (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 183 | |
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Practice – Income Tax – Limited leave to defend – Order requiring defendant to file amended defence and affidavits – Non-compliance of defendant due to alleged ill-health – Adjournments with same orders made – Continued non-compliance – Defendant engaged in transactions with his real estate – Ordered to pay sum claimed into court.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P G Sest | ATO Legal Services Branch |
| For the Defendant | Mr R E Cook | S V Winter & Co. |
HIS HONOUR:
On 27 February last I had the parties before me and made some orders which included an order that the matter come on today for any necessary directions and orders in relation to an order that I made in paragraph 6 of the orders made on that day.
To make sense of that there is some history that has to be given, but before I mention any of that I should say that by the orders made on 27 February 2006 I also fixed the trial of the proceeding for 5 June next.
The submissions of the parties today (to which I will refer in a moment) were directed to the following orders being made. On the part of the plaintiff, that it now have judgment for the full amount of the claim, alternatively that the defendant be ordered to pay into court, pending the hearing and determination of the proceeding, the sum of $399,674.24 as security, so to speak; that sum representing, as I understand it, the amount which the plaintiff would recover if fully successful in the proceeding. On the other hand, the defendant opposed the making of any such orders, and sought an adjournment for a period of seven days in order to be able to file material to explain his dealings with properties that are deposed to in the affidavits filed in support of the plaintiff's application today. It was added to this that the defendant is solvent and would be able to pay any judgment; there are at present no affidavit materials from the defendant that would enable that contention to be established.
I should say that in the course of the argument this morning I raised the question whether, in the circumstances of this case (to which I will refer more fully in a moment) it was not appropriate to grant a Mareva injunction, the case being one in which it might be said that a sufficient degree of apprehension is raised as to whether the plaintiff will see the fruits of a judgment, assuming one is obtained at trial.
Counsel for the defendant opposed the making of any such injunction. He did, however, go further in some final submissions and contend, as he has before on previous occasions, that I could make a self-executing order in the event that the defendant did not comply with orders of the type that I have made previously. To make sense of all of this I need to say something about the history of the case.
The defendant is a member of the inner Bar in this State. He has been a member of the inner Bar for many years. As long ago as 2002 the plaintiff, the Deputy Commissioner of Taxation, commenced the present proceeding against him for the recovery of taxation liabilities alleged to be owing. After a long period of time, in which little progress was achieved in the case, Master Kings gave summary judgment for the plaintiff on 17 December 2004. From that decision the defendant appealed and his appeal came on for hearing before me on 9 March 2005. The complexity of the issues raised required me to reserve my decision. On 21 March 2005 I gave judgment[1]. I concluded that, as to certain matters, it was appropriate that the defendant have liberty to defend, and orders were made that were considered appropriate to bring the issue on for trial in an ordered and reasonably expeditious way. So on 5 April I ordered that on or before 29 April 2005 the defendant file and serve an amended defence which pleaded and particularised the matters in respect of which he had leave to defend; also, by the same date, he was ordered to file and serve an affidavit or affidavits on which he intended to rely, and which included all relevant details and amounts concerning the matters in respect of which he was granted leave to defend, and which specified the precise amount which he contended represented the amount of tax-related liability outstanding by him to the plaintiff.
[1][2005] VSC 69.
He did not comply with those orders, nor did he comply with orders made in the same terms in June, August, November and December of 2005. The consequence was to push back the time for the trial of the proceeding. In December I also fixed the trial for 27 February 2006. It was in those circumstances that the case came on before me for trial on 27 February 2006. At that time the defendant had still not filed any materials in accordance with the successive orders of the court.
What had occurred at the hearings in August, November and December 2005, and then again in February 2006, was that the defendant's solicitor, Stuart Victor Winter, had sworn affidavits which sought to inform the court that the defendant was not, by reason of ill-health, in a state able to do that which the court had provided for, and otherwise to be able to have his case ready to proceed. The affidavits were based on instructions from the defendant. He also produced letters from doctors. However, no medical practitioner ever deposed to the health of the defendant, and so the matter went through until February this year.
In February, there was an again affidavit from Mr Winter. In fact he swore two affidavits on 23 February, both being filed on the 27th, that is, the very day when the matter was before me in court for trial. The first affidavit deposed to the defendant's current medical condition and treatment. This was based on instructions from the defendant. The second affidavit exhibited a report from the defendant's doctor, Dr Elizabeth Carew-Reid. No affidavit by the defendant was filed in substantiation of the matters deposed to concerning his health and ability to attend to the case.
In the course of his affidavit Mr Winter set out what "I am told". It is apparent that he meant told by the defendant. "Each morning Mr Hooper wakes feeling nauseated", has "headaches and little energy to do more than sit up." "Following medication" which he described, "he starts to feel better about one hour later and he is able to move around the house, bath and so forth. On some days he is able to function to a certain extent, but on other days, which are becoming more often, after about two hours or so he commences to suffer quite severe pain in his lower back, shortness of breath if he moves around and a complete loss of energy. As a result he has to lie down for a few hours before he has energy to do anything else. This occurs during the evening as well."
Mr Winter then said that:
"At present Mr Hooper cannot concentrate for very long and finds he is making simple errors constantly - easy spelling mistakes and so forth. He has found it extremely difficult to make any arrangements for business or other serious appointments or time to telephone or meet with people, because he is concerned that he will not be well enough to meet with them and concentrate on matters needing discussion."
Mr Winter continued:
"He has become extremely stressed on any occasions when he has met with people. If he does attempt to go out to attend to matters he finds that he needs help to get home and he is so exhausted that he has go to bed for the rest of the day and still feel energy-less and stressful on the following day."
"On one occasion", Mr Winter said, "on Friday 10 February 2006, having returned home he suffered chest pains on Sunday night and went to bed. He was unable to get up on the Monday and by the end of the day was suffering considerable shortness of breath and difficulty breathing."
He went on to say that "Since seeing Dr Gelman in late December he has not been able to say lead any sort of real life at all. He feels constantly unwell and seems to have no energy. He has not been to any social events and rarely leaves the house. After his accountant and solicitor returned from their holidays in mid-January he has not felt well enough to concentrate to do the necessary preliminary work to see them to discuss the financial and legal problems he is facing. He is extremely stressed by his long absence from work since June last year, being a person whom notwithstanding flu and other minor ailments has never missed a day at work in 40 years."
Mr Winter concluded by saying that "He is presently feeling worse every day. He trusts that Dr Gelman may have some surgical or other answer for him. He is very depressed and has had some difficulty relating to people. Although medication helps him from time to time and he is trying to do his best he feels almost defeated by the lack of energy which he has and the stress that he is suffering. He does not consider that he can presently carry out any work responsibilities or cope well at all." That concluded Mr Winter's affidavit of 23 February 2006.
I do not overlook the earlier references in the affidavit to doctors that Mr Hooper was said to have seen; nor do I overlook the report of Dr Carew-Reid exhibited to the second affidavit Mr Winter swore on 23 February 2006. It identified visits to or attendances upon various doctors by the defendant and stated that "Until his health improves he will be unable to work for more than two to three hours per day and sometimes not at all".
It was by reason of the matters concerning the defendant's health and ability to attend to that which was required to prepare for the trial of this case that I had been prepared, last year, to stand the matter over to further dates, and extend the time for performance of the things which I was requiring the defendant to do.
It was not entirely irrelevant to that that Mr Hooper was a member of the Bar and, as I have said before, a long-standing member of the inner Bar, who would be expected to conduct himself, in relation to the court with frankness and best endeavours to comply with orders.
On 27 February, having heard submissions from the parties, and in an attempt to crack the nut which, regrettably, seemed to be just rolling along without resolution, I made the following orders.
First, as mentioned, I again fixed the trial, this time for 5 June 2006.
Secondly, by paragraphs 2 and 3 I extended until 21 April 2006 the time by which the defendant was to file an amended defence and an affidavit or affidavits as to the matters mentioned earlier.
Thirdly, I ordered that on or before 12 May 2006 the plaintiff file and serve any further affidavit or affidavits on which she intended to rely.
If those orders had been complied with the matter would have been in an orderly state for trial on 5 June. If they had not been, because the defendant had not done that required of him by the above dates, there was no reason why the trial would not proceed anyway, with the defendant giving evidence or not, or calling other evidence as he determined. That, of course, is still the case.
The trial can be had on the 5th of June, whether the defendant complies or not; but I suppose someone (perhaps himself) will have to go into the witness box and, by oral evidence in the old-fashioned way, with the production of that which is relevant in terms of documents, seek to make out the position that is desired to be made out.
Fourthly, I fixed the matter for today, as I mentioned earlier, for any further directions, including orders and directions as may be necessary in relation to matters set out in paragraph 6 of the orders to which I now refer. In that paragraph I ordered that:
"If the defendant fails for any reason whatsoever to comply with all the requirements of each of paragraphs 2 and 3 hereof:
(a)on or before 5 May 2006 the defendant file and serve an affidavit or affidavits which include an explanation and full reasons for the failure; and
(b)if and insofar as the explanation for the failure includes the defendant's medical condition, any evidence to be given in respect of the defendant's medical condition shall be given by affidavit made by a medical practitioner or practitioners and that medical practitioner or those medical practitioners shall attend the further hearing of this proceeding listed for 15 May 2006 for cross-examination".
Fifthly, I granted liberty to apply.
Now, the order in paragraph 6 was to operate if and to the extent that the defendant did not comply with the order to file and served an amended defence and an affidavit or affidavits as to the specific matters mentioned in the order, which I mentioned earlier in this judgment.
Somewhat unhappily, the defendant did not, by on or about 21 April 2006, file and serve an amended defence or an affidavit or affidavits of that type. That was one thing. But the further thing that the defendant did not do was to comply with paragraph 6 of the order. No affidavit at all was filed, as required by that order. Furthermore, no medical practitioner has attended today, at the instance of the defendant, to inform the court as to an explanation for any of these matters, even without the defendant having sworn an affidavit or any medical practitioner having done so.
In these circumstances the conclusion is open and in the circumstances is to be drawn, in my opinion, that the failure to comply with the order requiring filing of the defence and an affidavit or affidavits as to the merits is not due to the medical condition of the defendant. That is an extraordinary position, in light of the history of this case.
The next step in the proceeding occurred last Friday, 12 May, when the plaintiff filed a summons, returnable this morning, in which it sought the order for payment into court. There were two alternatives on that application. There was also an application that the plaintiff be entitled to enter judgment in the event the defendant did not comply with the order for payment into court. The summons was supported by two affidavits. These affidavits depose to various dealings by the defendant with real estate owned by him. Title searches disclose fresh mortgages having been granted and caveats being lodged. The summons, and affidavits in support, were served on the defendant's solicitor on Friday.
The final step that has occurred is that the defendant's solicitor has sworn an affidavit this morning, which was provided to me in sworn form during the course of the morning's hearing. Mr Winter deposes in this affidavit that he spoke to the defendant yesterday. He states that the defendant wishes to defend the application made by the summons. He further states that the defendant has informed him that he is currently preparing a statement of his assets and liabilities, but has been unable to do that in the time available over the weekend.
Mr Winter states further that the defendant has informed him that his health remains in a similar position to his health as described by Mr Winter in previous affidavit material. He states that the defendant has informed him that he is loath to approach Dr Carew-Reid to ask her to either prepare an affidavit or to appear in court on the basis that he believes that, if she does so, she would, in all probability, be unwilling to continue to treat him. The defendant has said that he has great confidence in that doctor and her abilities to look after him, and would be loath to put that relationship at risk.
Mr Winter further deposed that there was nothing sinister in Mr Hooper's property dealings which were referred to in the affidavit sworn in support of the plaintiff's summons. He said that the defendant had been forced to re-finance his properties to provide finance to service loans he has over the properties and pay his day-to-day living expenses. He said that the defendant is solvent and will be able to pay any debt due to the plaintiff if judgment is entered against him. In all the circumstances Mr Winter asked that the hearing of the application be adjourned for a period of not less than seven days.
Mr Winter then went on to say that, insofar as the defendant had failed to comply with orders previously made and, in particular, those made on 27 February 2006, that the defendant had informed him that his health remained in a similar position to that as it was on 27 February 2006, and that he is unable to provide medical evidence other than a further medical report, if required, but not affidavit material or oral evidence from his medical advisors.
I took that affidavit into account in saying what I did a moment or two earlier about the inference to be drawn from the failure of the defendant to comply with the orders made on 27 February 2006, in particular that contained in paragraph 6. As to that, in my opinion Mr Winter's affidavit is a mere argumentative assertion against the order with which the defendant, being aware of its requirements, did not comply.
If the defendant had a difficulty, truly, in complying with the orders in any respect, but in particular that in paragraph 6, the remedy, as it has always been in relation to orders, was to apply to the judge prior to the expiration of the time limited; but to do so, of course, on proper materials.
It seems to me that the conclusion is unavoidable that the defendant is simply going around in circles avoiding the ultimate day of trial, and that the point has been reached at which the contention that he is unable to comply with the orders due to ill-health is to be recognised as untenable, at least in the absence of cogent admissible evidence to the contrary.
That is to be understood in light of the affidavit material put before the court in support of the plaintiff's summons today. That material is extensive. It discloses that the defendant is the registered proprietor of a number of properties and, without going into all the detail, discloses that in the period since I first made orders in April last year the defendant has been able to attend to commercial transactions concerning those properties, such as the granting of mortgages and variations of mortgage; there are caveats that have been lodged, even as recently as this year, indeed, as recently as April; it is apparent from title searches that recently mortgages and caveats have been lodged for registration, which all reflects that in the time since April 2005 when it has been said that the defendant was unable, for medical reasons, for reasons of health, to attend to that which was necessary to enable this proceeding to move to trial and determination, he has been able to attend to commercial matters. The two seem to me to have some inconsistency and leave the court with some concern about bona fides.
It is in those circumstances that the plaintiff has become concerned, to the point of seeking the order that the amount for which judgment would be obtained if, looking at it today, the plaintiff was to succeed in full, ought be paid into court pending the hearing and determination of the proceeding. As I said earlier, the circumstances are also such as to reasonably give rise to concern as to the financial position of the defendant and to the question whether the defendant will be able to pay a judgment obtained in due course.
As I mentioned earlier, in his affidavit sworn today Mr Winter asserted that the defendant had told him that he is solvent and would be able to pay any debt due to the plaintiff, and his counsel has said the same thing today.
The difficulty with that submission is that it proceeds off the face of the mortgages, so to speak, in that it relies upon the gross amount of the advances which in gross terms run to several millions. But without being informed by the defendant as to what his overall net position is, and bearing in mind the plaintiff is an unsecured creditor, it is not possible for me to have an informed view as to the overall financial position of the plaintiff and whether if, for instance, judgment were to go today, there would be satisfaction.
I should say, as to this, that on the 24th of April last the plaintiff wrote to the defendant's solicitor requesting the payment of money into court, and that the defendant provide an affidavit as to his assets and liabilities, expressing a concern as to whether or not the defendant would be able to meet a judgment. No reply was provided to that letter until in an affidavit sworn in a like case between the parties in the County Court (current at the moment) Mr Winter stated that the defendant would not respond to that letter of the plaintiff's.
A somewhat different attitude seemed to be taken today, in that counsel said that he wanted an adjournment for seven days in order to be able to file material to explain the dealings of the defendant in his properties, and, as I understand it, to also indicate solvency, and that also seemed to be indicated by Mr Winter's affidavit which said that the defendant had been unable to prepare a statement of his assets and liabilities over the weekend.
On the matter of solvency, a rather curious position arose this morning in counsel's submissions. Counsel for the plaintiff submitted, in supporting an order for payment into court, that the defendant being solvent (as Mr Winter and his counsel said) there could be no hardship to him if the order was made; whereupon counsel for the defendant said that the defendant is having financial problems, has not worked since June and has undertaken a refinancing, that he would have trouble in making payment, and that he needed time to file material. So what counsel for the defendant said at the conclusion of argument seemed to run counter to the proposition as to capacity to meet a judgment. After all, any judgment obtained at trial on 5 June will be immediately payable subject only to a stay.
It is not irrelevant to note that that was said in the context of the amount the plaintiff wishes to have paid into court being very slightly under $400,000, and mortgage liabilities measured in several millions.
It was submitted by counsel for the defendant that the court did not have power to order moneys to be paid into court at this stage of the proceeding. That was because the order could have been made as a condition of granting limited leave to defend last year but, not having then been made, the court was therefore denied power to now make such an order.
Counsel for the plaintiff submitted either that the power in rule 22.06 remained, or that the court had an inherent jurisdiction to do that which was just in the circumstances as they had come to be since the order was first made last year.
I would have thought that the court, having ample and inherent power to control proceedings before it, and in view of the somewhat extraordinary circumstances that obtain in this case, has power to order the payment of a sum into court. Perhaps it would be possible to revoke the limited grant of leave to defend. But I neither propose to take that course nor, indeed, to consider whether it would be open.
I think that the circumstances as they now stand, considering the conduct of the defendant in relation to compliance and otherwise with the orders of the court, and the attitude thus reflected, and what is said as to his financial position and the need to refinance his commitments and the extent to which his properties are encumbered, suggest a case for a Mareva injunction. But such an order is not asked for. What is asked for is that the amount which represents that which would go if the plaintiff had judgment today be paid into court.
In saying that I do not overlook that the plaintiff sought judgment in the proceeding. I consider however that it is not appropriate, or open, to make that order.
In my view, the circumstances that have come to pass, as I have described them, bespeak a case in which, if the court were not to require payment into court, the court would be indulging the defendant to an extent that was out of all proportion as between the parties.
It seems to me that, if this limited leave to defend is to subsist, it is to be on terms that are just as between the parties. That which has obtained is thoroughly unacceptable, from the point of view of the plaintiff and from the point of view of the court, which seems to me, if I may say so with respect, to have been led something of a merry dance this year, if not earlier.
Accordingly, I propose to order that the sum of money specified in paragraph 1 of the orders be paid into court, pending the hearing and determination of the proceeding, and I will require that to be paid into court as stipulated in paragraph 1 of the orders, that is, by 4 p.m. on the 18th of May this year.
I will hear counsel on costs, but my present disposition is to order that the plaintiff have her costs of the day on an indemnity basis.
(Discussion ensued).
I make the order in paragraph 1 of the summons. I order indemnity costs for the day, and I grant liberty to apply.
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