Deputy Commissioner of Taxation v Arico
[2017] VSC 453
•7 August 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST
S CI 2017 02769
| BETWEEN: | |
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| - and - | |
| ANTONIO ARICO | First Defendant |
| ANTONIA ARICO | Second Defendant |
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JUDGE: | Kennedy J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 August 2017 |
DATE OF EX TEMPORE ORAL REASONS: | 2 August 2017 |
DATE OF WRITTEN REASONS: | 7 August 2017 |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Arico |
MEDIUM NEUTRAL CITATION: | [2017] VSC 453 |
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PRACTICE & PROCEDURE – Application for extension of freezing orders – No material adduced in opposition – Extension granted with appropriate amendments given pre-existing orders under the Confiscation Act1997 (Vic) – Supreme Court (General Civil Procedure) Rules 2015 O37A.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I Martindale QC | Minter Ellison |
| For the First and Second Defendants | Ms F Arico, with leave | |
| For the Director of Public Prosecutions for Victoria | Mr D Martin | Office of Public Prosecutions Victoria |
HER HONOUR:
This is an application to extend freezing orders that were made ex parte on 24 July 2017 by the Honourable Justice Vickery.
The application is supported by extensive material[1] and relates to a proceeding wherein the Deputy Commissioner (DCT) seeks judgment for tax debts owing by each defendant pursuant to amended assessments served on 28 January 2015.
[1]The plaintiff relies on two affidavits of Mr Aris Zafiriou sworn on 18 July 2017 and 24 July 2017, an affidavit of Mr Daniel Slater affirmed on 1 August 2017, and an affidavit of service of Mr David Robert Holland sworn on 28 July 2017.
As at 24 July 2017, the tax debts of the first defendant, Mr Arico, total $1,033,062.22 and the tax debts of the second defendant, Mrs Arico, total $1,047,554.87. The defendants have commenced review proceedings in the Administrative Appeals Tribunal (AAT) under Part IVC of the Taxation Administration Act 1953 (Cth) (TAA) which were listed for hearing commencing on 3 July 2017. However, that hearing date was vacated as a result of the defendants’ application for an adjournment. The matter is otherwise returning for directions tomorrow.
The defendants were served with the material in support of this application on 26 July 2017.
The defendants have not filed material in opposition to the extension of the freezing orders. However, in correspondence from Condello Solicitors, Mr Anthony Condello suggested some changes to the form of the freezing orders. He otherwise indicated that he did not have instructions to appear for the defendants today. Mr Condello stated that he was acting for the defendants and the son of the defendants, Mr Rocco Arico, in relation to various restraining orders made under the Confiscation Act1997 (Vic) (Confiscation Act). These orders were related to the conviction of Mr Rocco Arico on 3 March 2017 for extortion, intentionally causing injury and trafficking a drug of dependence. Mr Arico had earlier served a term of imprisonment for a conviction of attempted murder in June 2001 but was released on 4 July 2008.
In the result, the defendants appeared in person. Given alleged difficulties with language, and in the absence of objection, Ms Franki Arico, the daughter-in-law of the defendants, was given leave to appear on their behalf.
Ms Arico presented as articulate and appeared to have a very good understanding of the ambit of the freezing orders (for example she was able to address the exception relating to ordinary living expenses).
Ms Arico opposed the continuation of the orders in a limited way. Thus she objected to the making of the orders against the property at 409 Albion Street, Brunswick West (Brunswick West Property), said to be the family home. She also sought a variation as to the exception for ordinary living expenses of $500 per week. She otherwise did not appear to oppose the extension of the freezing orders in relation to the other assets.
Ms Arico conceded that the defendants did not have any material to adduce in opposition. However, she claimed that the Aricos did not believe that they owed the amount claimed to the DCT and were trying to ‘sort that out’ with the AAT.
Principles
In KQ International Trading Pty Ltd v Yang,[2] Kaye J (as His Honour then was) stated as follows:
The principles governing the grant of a freezing order are well established, and need only be referred to briefly. In order to be entitled to a freezing order, the plaintiff must, first, demonstrate that it has a realistic prospect of success, or a good arguable case, at trial. Secondly, the plaintiff must establish that the refusal of the injunction would involve a real risk that any judgment or award of damages in favour of it would remain unsatisfied. Thirdly, the plaintiff must establish that the balance of convenience lies in favour of the grant of such an injunction.
[2][2012] VSC 415, [5].
Good arguable case
I note that the freezing orders here are sought in aid of a prospective judgment for taxation liabilities based on assessments of income tax and associated penalties made by the DCT.
The relevant assessments have been produced. By s 350-10(1) of Schedule 1 to the TAA, the production of a notice of assessment, or a copy of it, is conclusive evidence of the due making of the assessment, and except in proceedings under Part IVC of the TAA, that the amount and all the particulars of the assessment are correct.
Further, although there are Part IVC proceedings pending, pursuant to s 14ZZM of the TAA, despite the AAT proceedings, the tax may be recovered as if no review were in fact pending.
In all the circumstances I am therefore satisfied that there is a good arguable case.
Real risk
In terms of the real risk that any judgment or award of damages would remain unsatisfied there were a number of matters raised. However, I am satisfied that such a risk exists on the basis of the following matters.
First, the material shows that assets have generally been diminished between 2010 and today's date. Thus, although it appears that the defendants’ asset portfolio generally increased following the release from prison of Rocco Arico in 2008, a number of properties which the defendants owned/held an interest in, were subsequently disposed of (particularly between 2012 and 2015).[3]
[3]These include properties located at Southbank, Sandringham, Glenlyon, Pascoe Vale South, Safety Beach and Mt Eliza as well as a family business known as the ‘Café Trevi’ business.
Second, the material shows that the defendants have been able to, and have, transferred funds overseas as demonstrated by a series of transfers between March 2011 and September 2015.
Third, the evidence suggests that the defendants have been prepared to breach an undertaking given on 22 December 2016 not to dispose of the Brunswick West Property or any interest in any other asset. The undertaking was expressed to remain in force until three days after the second conciliation in the AAT which was originally scheduled to take place on 22 February 2017, but which took place on 1 May 2017. This undertaking was breached on 24 April 2017 by the withdrawal from an ANZ Access Advantage Account in the sum of $61,800.
Finally, there appears to have been a breach of an in principle agreement between the DCT and the defendants of 18 February 2015 by reason that the defendants failed to provide the DCT with a first ranking mortgage over the Brunswick West Property.
The dissipation of assets suggests that there is a real risk that, absent an order, the remaining assets of the defendants may be further dissipated leaving any judgment unsatisfied. The breaches of arrangements with the DCT also suggest that a court order is necessary to manage this risk.
In all the circumstances then, I am satisfied, on the (unchallenged) material before me, that there is a real risk that any judgment or award of damages in favour of the plaintiff would remain unsatisfied absent an extension of the freezing orders.
Balance of convenience
In terms of balance of convenience, there are a number of factors that support the extension of the orders.
Firstly, as I have indicated already, there has been no evidence adduced of any prejudice.
Secondly, the plaintiff will provide the usual undertaking which provides significant protection against any prejudice in any event.
Thirdly, leaving aside the Brunswick West Property, the defendants' rights have already been curtailed in relation to a number of assets by reason of the making of various restraining orders under the Confiscation Act (in particular, by reason of an unexplained wealth restraining order made by the Honourable Justice Macaulay of 31 March 2017). It is nevertheless appropriate to continue the freezing orders in relation to these properties given the defendants are currently seeking to make application to exclude assets and given the general lack of opposition. However, to ensure consistency, the orders will provide that the current exceptions in paragraph 8 do not operate in relation to assets otherwise the subject of restraining orders under the Confiscation Act.
Insofar as the Brunswick West Property is concerned, this property was otherwise not subject to a court order. I have therefore given consideration to whether it ought be included in the light of the request of Ms Arico.
However, the fact that it is not already subject to a court order tends to strengthen the risk already identified that, absent an order, it might be dissipated or otherwise dealt with. The orders will also not interfere with the possessory rights of the defendants in relation to the property.
The balance of convenience therefore also supports the extension of the freezing orders.
Other matters
As indicated above, the defendants submitted that the living expenses that are provided for in the exceptions to the current freezing orders are insufficient. Thus, order 8(a) does not prohibit the defendant from paying up to $500 a week on the defendant’s ‘ordinary living expenses’.
I am not satisfied that the amount should be increased in circumstances where the defendants have failed to adduce any material in support of such a request. The defendants may instead choose to make application for a formal variation in due course if proper material is adduced.
I also raised an issue of utility in relation to the Safety Beach Property given that, by orders made by the Honourable Justice J Forrest of 31 May 2017 (as varied by the Honourable Justice T Forrest of 14 July 2017) permission has been given for the property to be subdivided and for certain lots to be sold.
However, given the defendants continue to claim an equitable interest in the Safety Beach Property (which was not abandoned by Ms Arico), I am satisfied that it is appropriate to continue the orders in relation to the Safety Beach Property on the basis of the Reasons above. I will again ensure that the orders are consistent with the orders in place under the Confiscation Act.
Conclusion
In all the circumstances, the freezing orders will be extended.
Subject to the matters mentioned in paragraphs 25 and 32, above, the freezing orders will be extended.
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