Deputy Commissioner of Taxation v Assaad
[2000] VSC 410
•28 September 2000
| SUPREME COURT OF VICTORIA |
| Not Restricted |
PRACTICE COURT
No. 6730 of 2000
No. 6731 of 2000
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| v | |
| MOHAMAD ASSAAD FADIA ASSAAD | Defendants |
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JUDGE: | Eames J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 September 2000 | |
DATE OF JUDGMENT: | 28 September 2000 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v M. & F. Assaad | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 410 | |
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Mareva Injunction - Proposed auction of matrimonial home restrained - Previously unencumbered property mortgaged by defendants - Defendants intending to purchase new home in name of a company - History of attempted international transfer of funds - Real risk that funds being put out of reach of plaintiff - Balance of convenience.
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APPEARANCES: | Counsel | Solicitors |
For the Applicant | Miss H. Riley | Victorian Government Solicitor |
| For the Defendants | Mr E.J. Power | Charlesworth Josem Partners Pty |
HIS HONOUR:
This is an application for an extension of Mareva injunctions and for some consequential orders on two proceedings which are to be heard together.
On 14 September this year, Smith, J. made ex parte orders restraining the defendant Mohamad Assaad and his wife Fadia Assaad from dealing with their property in terms set out by that order. His Honour also made an order requiring that the defendants swear and file an affidavit disclosing the full value of their assets within or without the jurisdiction. Affidavits from both defendants in each proceeding have now been filed.
The applications before me are for an extension of the orders, and in particular also for leave to cross-examine the deponents. That latter issue has not been the subject of any debate. As to the question of the extension of the orders, debate before me has been restricted to the question of the necessity for removing from the ambit of the order the proposed sale of the matrimonial property of the two defendants. That property is to be auctioned on 7 October, it having previously been placed on the market in June but having been passed in without there being any bidder at the auction.
The claim which is brought in each instance is supported by affidavits from Jeffrey Anthony Joseph, a tax auditor with the Special Investigations Unit of the Australian Taxation Office, who deposes that an audit was conducted into the affairs of the defendants commencing early 1999 and continuing thereafter, as a result of which audit the Deputy Commissioner's Office concluded that there had been a non-disclosure of taxable income over a period of some four years, the total sum being allocated by the Deputy Commissioner as between the two defendants. In the case of Mohamad Assaad, the understatement was put at $719,602 and some cents, and in the case of Fadia Assaad, it was in the sum of $246,956 and some cents.
The plaintiff issued Notices of Amended Assessment with respect to the defendants to which Notice of Objection has been filed by the defendants.
It appears that the defendant Mohamad Assaad conducted a jewellery store and jewellery business as a sole trader until 1997 and then with his wife in a partnership structure thereafter. The name of the business is referred to in the affidavits.
The defendants had been the owners of unencumbered property but subsequently, in August 2000, the residential property became mortgaged to the National Australia Bank. I have been told that the sum secured by virtue of that mortgage is in the order of some $650,000.
The affidavits of Mr Joseph discloses, and I accept, that the case against the defendants on the proceedings brought against them by the Deputy Commissioner is extremely strong and the claim arises out of a course of conduct of deliberate concealment of assets over a period of years and a course of conduct of hiding assets and dealing with assets in such a way as to make them difficult to be rendered subject to any orders which might be obtained pursuant to these proceedings.
The affidavits filed on behalf of the plaintiff disclosed that the defendants, in particular the male defendant, travel overseas on numerous occasions, it is said, no doubt, as part of the business. The affidavit material discloses a bank account, in the name of the male defendant, held in Lebanon. The material also discloses transfers or attempted transfers of very significant funds from Australia into that bank account. It is of significance to note that that bank account is not one of the bank accounts which is referred to in the affidavit of assets which has been filed pursuant to the order of Smith, J.
The matrimonial property which, as I have said, was previously unencumbered has now become encumbered by a substantial mortgage to the National Bank. The parties are in the process of selling that property and purchasing another property, but that property will be purchased in the name of a company which has been formed and of which the sole director is the female defendant, a factor which may very well be relevant to the question whether that company might later dispose of assets, in a way which would not be prevented by virtue of any orders which I might make, because it is not a party to the proceedings.
On behalf of the Deputy Commissioner it is submitted that the orders should go, firstly, because there is a strong case established on the evidence as is required for the granting of a Mareva injunction, and secondly that there is a real risk that if the order is not made and continued, the assets will be dissipated or hidden from or removed from the opportunity for them to be applied towards the judgment orders which may be made against either defendant.
It is submitted on behalf of the defendants that the auction of the property should not be interfered with, on the basis that a Mareva injunction should not be used so as to amount either to a security for a judgment or to prevent a party which is in the course of business from simply dealing with business debts. I have been referred to authorities on this question, including Iraqi Ministry of Defence and Ors v. Arcepey Shipping Company S.A. The Angel Bell (1981) All E.R. 480 and to a decision of O'Bryan, J. and of the Court of Appeal in Deputy Commissioner of Taxation v. Rosenthal 16 A.T.R. 159.
As to the questions whether there is a real risk of disposal of assets and the assertion that the parties should not be restrained so as to pay out a debt, it seems to me that the circumstances surrounding the auction which is to take place, of themselves, raise suspicion that the auction and the proposed purchase of a new property are part of a course of conduct of putting assets beyond the reach of the Deputy Commissioner in the event of a judgment succeeding. What had previously been an unencumbered property has now become encumbered by the actions themselves of the defendants, with the result being that if this auction goes ahead, funds will then be lent for the purpose of purchasing another property which is in a name which is not that of one of the parties before the proceedings.
I have no explanation by way of affidavit before me as to why that unusual arrangement should have been undertaken and it is open to me to infer, and I do infer for the purposes of this application, that there is at the least a prima facie case that that discloses a course of conduct which should be restrained. As to it being a debt and therefore a party being entitled to deal with its business debts, without restraint by a Mareva order, it is a debt created by themselves. It is not as though the National Bank is seeking to enforce some debt against the parties which they have not invited the National Bank to enforce, solely for their own purposes. In the circumstances I do not regard that as being any factor mitigating against making the orders.
So far as the balance of convenience is concerned and also the question of the disadvantage to a creditor, namely, the National Bank, it seems to me the bank's position is not affected at all if restraint extends to the auction. It has got as safe an investment as it could have, given that the party here is the Deputy Commissioner of Taxation; its undertaking as to damages provides complete protection. The only party who is at risk if the order is made are the defendants, and as I said in the course of argument, if that is so, it is because they have engaged in a course of conduct which has all the hallmarks of being one designed to put assets beyond the reach of the plaintiffs.
I am satisfied that there is a real risk of the dissipation of assets. I note, as appears from the affidavits, that there is a course of conduct not merely disclosed in the matters which give rise to the proceedings, but also in other events, such as the attempted dishonest transfer of funds overseas, in circumstances in 1998 which led to the male defendant being fined. All of that reflect a course of conduct which gives a very strong suggestion that the conduct which is now being engaged in, here, by the proposed auction merits restraint.
As to the balance of convenience, in my view it is all one way, and that supports the granting of the order.
As to the course of conduct disclosed by the proceedings themselves being a relevant consideration, I refer to the decision of the Court of Appeal in New South Wales in Patterson v. B.T.R. Engineering Aust. Limited (1989) 18 N.S.W.L.R. 319 at 325. In all the circumstances, the orders which are sought, in my view, should be granted and I will make each of those orders subject to the undertakings that are set out under the heading of "Other Matters".
MISS RILEY: Yes, I make those undertakings, Your Honour.
HIS HONOUR: Yes, very well. I note that that includes costs of the application being reserved. I will make those orders in the terms disclosed. Do you wish to say anything as to - - -
MR POWER: Yes, sir, just one thing. In relation to the order of cross-examination, is there a date to be set for all of that?
HIS HONOUR: It is listed for the moment as the return date, which it is highly unlikely it will occur on that day, I would have thought.
MR POWER: I haven't got a copy of that, sir.
HIS HONOUR: I am sorry, I presumed you had a copy of this.
MR POWER: No, I haven't.
HIS HONOUR: I will hand this - - -
MR POWER: Sir, you mentioned, I think, two affidavits. I've only got one affidavit.
HIS HONOUR: No, I mean the affidavit on the two files.
MR POWER: Thank you. But I haven't got a copy of that - - -
HIS HONOUR: My apologies, I will hand you down the orders. I thought you would have copies.
MISS RILEY: I'm sorry, I should have made them available. I did discuss the question of the return on 5 October with my friend and suggested that would be an appropriate date for the cross-examination.
HIS HONOUR: If necessary, I would (indistinct) such further date as the Court may order, because I would not expect - I mean, quite frankly, the Court has been so busy, the chances of necessarily getting a cross-examination dealt with on the day of return, I would not have put a lot of money on.
MR POWER: Sir, we did discuss a day, but I said I was unavailable, that's next Thursday, and I guess if the auction is not going ahead, it's neither here nor there, the next Thursday, but I am certainly not available next Thursday and I suggested the week after, Thursday the 12th.
HIS HONOUR: Do you want to pick another date?
MISS RILEY: I'd have no objection; whatever date is convenient to - perhaps 12 October.
MR POWER: Yes.
HIS HONOUR: I will change the proposed order to 12 October in each instance and initial that. So Order 5 will become on 12 October. That still has the further hearing being adjourned; that should be adjourned to 12 October also.
MISS RILEY: Yes.
HIS HONOUR: Order 4 will be changed to that extent. So the orders I am making are in accordance with the minutes of orders that have been handed up to me, which I do not think it is necessary for me to spell out; they are all in writing and I have just signed them. So it is effectively a Mareva injunction, together with the order adjourning the proceedings further to 12 October on which date I am ordering the cross-examination of the two defendants, liberty to apply at 48 hours' notice, consolidation of the proceedings and reserving costs and dispensing with the requirement of authentication so that the matters can be signed by myself.
Are there any other matters?
MR POWER: No.
HIS HONOUR: If there are no other matters, we will adjourn the Court sine die.
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