Deputy Commissioner of Taxation v Chemical Overseas Limited
[2021] FCA 602
•3 June 2021
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Chemical Overseas Limited [2021] FCA 602
File number: NSD 98 of 2021
NSD 1156 of 2018Judgment of: LOGAN J Date of judgment: 3 June 2021 Catchwords: TAXATION – parties promoted by consent orders giving judgment for the applicant and providing for an associated freezing order – whether Court should exercise discretion to make such orders – orders made in terms proposed Division: General Division Registry: New South Wales National Practice Area: Taxation Number of paragraphs: 4 Date of hearing: On the papers NSD 98 of 2021
NSD 1156 of 2018Solicitor for the Applicant: Australian Government Solicitor Solicitor for the Respondent: Norton Rose Fulbright Australia ORDERS
NSD 98 of 2021 BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Applicant
AND: CHEMICAL OVERSEAS LIMITED
Respondent
ORDER MADE BY:
LOGAN J
DATE OF ORDER:
3 JUNE 2021
NOTING THE UNDERTAKING OF THE APPLICANT AT SCHEDULE A TO ANNEXURE A TO THESE ORDERS, THE COURT ORDERS BY CONSENT THAT:
1.There be judgment for the Applicant in the sum of $4,196,250.36.
2.Each party pay its own costs of the proceeding.
3.There be a freezing order against the Respondent in the terms specified in Annexure A to these orders until further order.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1156 of 2018 BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Applicant
AND: CHEMICAL TRUSTEE LIMITED
Respondent
ORDER MADE BY:
LOGAN J
DATE OF ORDER:
3 JUNE 2021
THE COURT ORDERS BY CONSENT THAT:
1.The freezing orders made on 18 December 2018 by Robertson J be discharged.
2.The undertakings given to the Court on 18 December 2018 by the Applicant be discharged.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
LOGAN J:
The parties to these proceedings have consensually promoted that the Court make orders giving judgment for the applicant in the amount of $4,196,250.36, and providing for a freezing order associated with that judgment.
The reasons specified for promoting those orders are as set out in an email from the Commissioner’s solicitors to the Court, dated 10 May 2021, sent with the permission of the respondent’s solicitors, and which is now marked as Exhibit 1. It is there stated:
NSD98/2021
The parties have agreed to consent orders … that would resolve the above proceedings. …
The proposed orders provide for the Applicant to have judgment against the Respondent and for freezing orders to be made against some of the Respondent’s assets. The freezing orders are expected to remain in place pending resolution of the objection and appeal process regarding the relevant tax assessments. That process is expected to take some time as the assessments are still at objection stage. The Commissioner will not enforce the judgment in the meantime.
Please note that the freezing orders differ from the standard freezing orders in the following respects:
•They do not freeze all of the Respondent’s Australian assets, but rather only shares held by the Respondent in specific ASX-listed companies. These shares are currently valued at the “Relevant Sum” in the freezing orders.
•The “Relevant Sum” is 30% more than the judgment sum. This to ensure that the value of the frozen shares is sufficient to cover judgment interest accruing on the judgment and to allow for fluctuations in the share prices.
•The orders do not contain most of the usual exceptions eg for payments in the ordinary course of business or for legal expenses. This is because the Respondent has significant Australian and overseas assets not covered by the freezing orders from which such payments could be made.
NSD1156/2018
Freezing orders were made by consent in an earlier proceeding between the parties (NSD1156/2018) on 18 December 2018. The judgment debt the subject of that proceeding has now been extinguished, so the parties agree that those freezing orders should be discharged as soon as the freezing orders in NSD 98/2021 have been made. We enclose proposed consent orders. This proceeding was formerly in the docket of Robertson J. As his Honour Robertson J has now retired, we respectfully request that his Honour Logan J make the relevant orders in chambers.
Strictly speaking, to grant a freezing order requires the exercise of discretion and cannot be wholly dictated by consent, although consent is a relevant consideration.
In the present circumstances, I am well satisfied that the Court has the power to make such an order, and that it ought, for the reasons given, as set out on behalf of the parties, make such an order.
I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan. Associate:
Dated: 3 June 2021
ANNEXURE A
IN THE FEDERAL COURT OF AUSTRALIA
DISTRICT REGISTRY: NEW SOUTH WALESDIVISION: GENERAL NSD 98 of 2021
DEPUTY COMMISSIONER OF TAXATION
ApplicantCHEMICAL OVERSEAS LIMITED
RespondentPENAL NOTICE
TO: CHEMICAL OVERSEAS LIMITED
IF YOU:
(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.
ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.
TO:CHEMICAL OVERSEAS LIMITED
This is a ‘freezing order’ made against you on 3 June 2021 by Justice Logan after the Court was given the undertakings set out in Schedule A to this order.
THE COURT ORDERS:
INTRODUCTION
1.Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified.
2.In this order:
(a)‘applicant’, if there is more than one applicant, includes all the applicants;
(b)‘you’, where there is more than one of you, includes all of you and includes you if you are a corporation;
(c)‘third party’ means a person other than you and the applicant;
(d)‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.
3.(a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.
(b)If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.
FREEZING OF LISTED ASSETS
4.(a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia listed in order 5 (‘Listed Assets’) up to the unencumbered value of AUD 5,455,125.75 (‘the Relevant Amount’).
(b)If the unencumbered value of your Listed Assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Listed Assets still exceeds the Relevant Amount.
5. For the purposes of this order, your Listed Assets are:
(a) the security interests listed below that you own in the following entities:
Entity Security Interest Australian Agricultural Company Limited 100,000 fully paid ordinary shares Cellnet Group Limited 1,820,000 fully paid ordinary shares Eildon Capital Limited 2,579,456 ordinary shares Globe International Limited 125,000 fully paid ordinary shares Heron Resources Limited 128,756 fully paid ordinary shares Opthea Limited 1,177,502 fully paid ordinary shares Pro-Pac Packaging Limited 732,560 fully paid ordinary shares Resource Generation Limited 1,500,000 fully paid ordinary shares 360 Capital Reit 25,000 ordinary shares
(b)Proceeds of the sale of the above security interests in accordance with paragraph 8.
EXCEPTIONS TO THIS ORDER
6. This order does not prohibit you from:
(a)dealing with or disposing of any of your Listed Assets in the ordinary and proper course of your business for the purpose of making payment to the Deputy Commission of Taxation;
provided that:
(b)before doing so, you give the applicant written notice containing full particulars of any proposed dealing, disposition and/or payment; and
(c)the applicant has consented to the proposed dealing, disposition and/or payment, in writing.
7. You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly.
8. This order does not prohibit you from giving or causing to be given instructions to:
(a)a professional stockbroker, who has been engaged with the written consent of the Deputy Commissioner of Taxation, to sell any of the Listed Assets and/or to buy or sell securities out of the proceeds thereof, such securities if bought to be acquired through and held in the share trading account numbers listed above in the name of Chemical Trustee Ltd or Chemical Overseas Ltd and to be subject to Order 4 and to be deemed to be incorporated in the Listed Assets.
9.Proceeds from the sale of any securities under paragraph 8 which are not used to buy securities must remain in the share trading account(s) provided in paragraph 8 above. Such proceeds are included in your Listed Assets pursuant to order 5(b).
10. (a) This order will cease to have effect if you:
(i) pay the sum of AUD 5,455,125.75 into Court; or
(ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicant as agreed in writing between them; or
(iii) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.
(b) Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency.
(c) If this order ceases to have effect pursuant to (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact.
COSTS
11. Each party is to pay its own costs of this application.
PERSONS OTHER THAN THE APPLICANT AND RESPONDENT
12. Persons outside Australia
(a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia.
(b) The terms of this order will affect the following persons outside Australia:
(i) you and your directors, officers, employees and agents (except banks and financial institutions);
(ii) any person (including a bank or financial institution) who:
(A) is subject to the jurisdiction of this Court; and
(B) has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and
(C) is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and
(iii) any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.
13. Assets located outside Australia
Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party’s application, reasonable written notice of the making of the application is given to the applicant.
SCHEDULE A
UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT
(1)The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.
(2) As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.
(3) The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets.
(4)If this order ceases to have effect* the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.
(5) The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.
(6) The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or an order conferring a charge or other security against the respondent or the respondent’s assets.
Note: * For example, if the respondent pays money into Court or provides security, as provided for in paragraph 10 of this Order.
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