Deputy Commissioner of Taxation v Citi Pty Ltd
[2018] FCA 352
•8 March 2018
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Citi Pty Ltd [2018] FCA 352
File number(s): NSD 160 of 2018 Judge(s): DAVIES J Date of judgment: 8 March 2018 Catchwords: PRACTICE AND PROCEDURE – Summary judgment sought in respect of unpaid tax liabilities pursuant to s 35A of the Federal Court Act and r 26.01 of the Federal Court Rules; dispensation with the time requirement under rule 26.01(3)
TAXATION – Debts comprising tax related liabilities due and payable to the Commonwealth by ss 255-1 and s 250‑10 of Sch 1 to the Taxation Administration Act (TAA); effect of production of notices of assessment pursuant to s 350-10 of Sch 1 to the TAA, and of evidentiary certificates pursuant to s 255-45 of Sch 1 to the TAA
Legislation: Federal Court of Australia Act 1976 (Cth)
Taxation Administration Act 1953 (Cth)
Federal Court Rules 2011 (Cth)
Date of hearing: 8 March 2018 Registry: New South Wales Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 10 Counsel for the Applicant: Mr A McInerney SC with Mr D Habashy Solicitor for the Applicant: Craddock Murray Neumann Lawyers ORDERS
NSD 160 of 2018 BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Applicant
AND: CITI PTY LTD ACN 001 735 780
First Respondent
CITI QUEENSLAND PTY LTD ACN 069 116 481
Second Respondent
CITIWESTCO PTY LTD ACN 003 368 956 (and others named in the Schedule)
Third Respondent
AND BETWEEN: CITI PTY LTD ACN 001 735 780 (and others named in the Schedule)
First Cross-Claimant
AND: COMMISSIONER OF TAXATION
Cross-Respondent
JUDGE:
DAVIES J
DATE OF ORDER:
8 MARCH 2018
THE COURT MAKES THE FOLLOWING ORDERS AND DIRECTIONS:
1.DISPENSES with the requirement in rule 26.01(3) of the Federal Court Rules 2011 (“the Rules”) to serve the Interlocutory Application and supporting affidavits filed in these proceedings on 2 March 2018 at least 14 days before the hearing of the application, pursuant to rule 1.34 of the Rules.
2.JUDGMENT for the Applicant against the First Respondent in the amount of $16,461,074.92 (inclusive of General Interest Charges to 2 March 2018).
3.JUDGMENT for the Applicant against the Second Respondent in the amount of $12,922,648.67 (inclusive of General Interest Charges to 2 March 2018).
4.JUDGMENT for the Applicant against the Third Respondent in the amount of $15,039,260.28 (inclusive of General Interest Charges to 2 March 2018).
5.JUDGMENT for the Applicant against the Fourth Respondent in the amount of $7,704,225.94 (inclusive of General Interest Charges to 2 March 2018).
6.JUDGMENT for the Applicant against the Fifth Respondent in the amount of $2,637,850.22 (inclusive of General Interest Charges to 2 March 2018).
7.ORDERS that the Applicant’s costs of this application be paid by the Respondents as agreed or taxed.
8.ORDERS that the second respondent comply with the Asset Disclosure Order in the form annexed and marked A to these Orders on or before 5 pm on 19 March 2018.
9.ORDERS that the fifth respondent comply with the Asset Disclosure Order in the form annexed and marked B to these Orders on or before 5 pm on 19 March 2018.
10.ORDERS that the ninth respondent comply with the Asset Disclosure Order in the form annexed and marked C to these Orders on or before 5 pm on 19 March 2018.
11.The matter be set down at 2.15PM on 28 March 2018 for a case management hearing and the return of any application made by the Applicant or any Respondent on three days written notice and to the Associate of Davies J.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ANNEXURES TO ORDERS
ANNEXURE A
CITI QUEENSLAND PTY LTD
ACN 069 116 481
PENAL NOTICE
IF CITI QUEENSLAND PTY LTD (“YOU”) (BEING THE PERSON BOUND BY THIS ORDER):
(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 NOT TO DO,
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.
1.Subject to paragraph 2, you must, on or before 19 March 2018, swear and serve on the applicant an affidavit:
(i)setting out to the best of your ability, details of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets, and details concerning:
(a) the location(s) at which your books and records are stored;
(b) the systems by which your books and records are maintained (including for example, any accounting software package used in maintaining your books and records); and
(c) the person(s) within your organisation who have responsibility for maintaining your books and records;
(ii) identifying the recipient and destination of the funds transferred out of the Westpac account 13-0530 (held in the names of Citi Pty Ltd, Citiwestco Pty Ltd and Citi Queensland Pty Ltd), in the sum of $500,000 on 20 January 2017 and $14,000,000 on 10 February 2017; and
(iii) annex a copy of your bank statements for the period commencing 1 July 2016 to the date of this Order
2.
(a) This paragraph (2) applies if you are not a corporation and you wish to object to complying with paragraph 1 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(b)This paragraph (2) also applies if you are a corporation and all of the persons who are able to comply with paragraph 1 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 1 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(c)You must:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
ANNEXURE B
LINC PTY LTD
ACN 007 239 661
PENAL NOTICE
IF LINC PTY LTD (“YOU”) (BEING THE PERSON BOUND BY THIS ORDER):
(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 NOT TO DO,
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.
1.Subject to paragraph 2, you must, on or before 19 March 2018, swear and serve on the applicant an affidavit:
(i)setting out to the best of your ability, details of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets, and details concerning:
(a) the location(s) at which your books and records are stored;
(b) the systems by which your books and records are maintained (including for example, any accounting software package used in maintaining your books and records); and
(c) the person(s) within your organisation who have responsibility for maintaining your books and records;
(ii)annex a copy of your bank statements for the period commencing 1 July 2016 to the date of this Order.
2.
(a) This paragraph (2) applies if you are not a corporation and you wish to object to complying with paragraph 1 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(b)This paragraph (2) also applies if you are a corporation and all of the persons who are able to comply with paragraph 1 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 1 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(c)You must:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
ANNEXURE C
BAYFIN PTY. LIMITED
ACN 003 941 740
PENAL NOTICE
IF BAYFIN PTY. LIMITED (“YOU”) (BEING THE PERSON BOUND BY THIS ORDER):
(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 NOT TO DO,
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.
1.Subject to paragraph 2, you must, on or before 19 March 2018, swear and serve on the applicant an affidavit:
(i)setting out to the best of your ability, details of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets, and details concerning:
(a) the location(s) at which your books and records are stored;
(b) the systems by which your books and records are maintained (including for example, any accounting software package used in maintaining your books and records); and
(c) the person(s) within your organisation who have responsibility for maintaining your books and records;
(ii)annex a copy of your bank statements for the period commencing 1 July 2016 to the date of this Order
2.
(a) This paragraph (2) applies if you are not a corporation and you wish to object to complying with paragraph 1 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(b)This paragraph (2) also applies if you are a corporation and all of the persons who are able to comply with paragraph 1 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 1 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(c)You must:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
REASONS FOR JUDGMENT
(Revised from transcript)DAVIES J:
The Deputy Commissioner of Taxation (“DCT”) has applied for summary judgment against the respondents under s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 (Cth). Section 31A enables the Court to give summary judgment for a party against another if satisfied that the other party “has no reasonable prospect of successfully defending the proceeding”. Rule 26.01 is in like terms.
The DCT’s claim on which he seeks judgment against each of the respondents is for recovery of unpaid tax related liabilities. Pursuant to s 255-5 of sch 1 of the Taxation Administration Act 1953 (Cth) an amount of a “tax related liability” that is due and payable is a debt due to the Commonwealth and payable to the Commissioner. Section 255-1 identifies a tax related liability as a pecuniary liability to the Commonwealth arising directly under a taxation law. Section 250-10 contains a table of tax related liabilities which, relevantly, includes liabilities for income tax (item 37), general interest charge (“GIC”) (item 70) and administrative penalties (item 140).
The unpaid tax liabilities in respect of which the DCT seeks judgment are:
(a)as against the first respondent, the amount of $16,461,074.92 comprised of:
(i)$8,116,990.50 in income tax liabilities for the financial years ended 30 June 2014, 2015, 2016 and 2017;
(ii)$7,305,291.40 in penalties;
(iii)as at 2 March 2018, GIC totalling $1,038,793.02;
(b)as against the second respondent, the amount of $12,922,648.67 comprised of:
(i)$6,397,040.40 in income tax liabilities for the financial years ended 30 June 2014, 2015, 2016 and 2017;
(ii)$5,757,341.65 in penalties;
(iii)as at 2 March 2018, GIC totalling $768,260.62;
(c)as against the third respondent, the amount of $15,039,262.28 comprised of:
(i)$7,439,280 in income tax liabilities for the financial years ended 30 June 2014, 2015, 2016 and 2017;
(ii)$6,695,360.10 in penalties;
(iii)as at 2 March 2018, GIC totalling $904,632.18;
(d)as against the fourth respondent, the amount of $7,704,225.94 comprised of:
(i)$3,489,000 in income tax liabilities for the financial year ended 30 June 2014;
(ii)$3,140,100 in penalties;
(iii)as at 2 March 2018, GIC totalling $1,075,125.94;
(e)as against the fifth respondent, the amount of $2,637,850.22 comprised of:
(i)$1,315,467.00 in income tax liabilities for the financial year ended 30 June 2016;
(ii)$1,185,670.30 in penalties;
(iii)as at 2 March 2018, GIC totalling $136,712.92;
The DCT has produced copies of the notices of assessment of income tax and assessment of penalties. By virtue of s 350-10 of sch 1 to the Tax Administration Act the production of the copies of the assessments is conclusive evidence in the proceedings that the assessments were properly made and that the amounts and particulars of the assessments are correct. The effect of s 350-10 is that the respondents cannot, in these recovery proceedings, contest their liability to pay the tax as assessed.
The DCT has also produced evidentiary certificates pursuant to s 255-45 of sch 1 to the Tax Administration Act in respect of the tax-related liabilities. Those certificates are prima facie evidence that each of the tax related liabilities on which the DCT has sued for recovery is a debt due and payable by the relevant respondent to the Commonwealth of Australia.
I am accordingly satisfied that none of the respondents have any reasonable prospect of successfully defending the proceedings and the DCT is entitled to judgment in the amounts sought.
I will grant dispensation with the requirement under rule 26.01(3) of the Federal Court Rules that an application for summary judgment be made at least 14 days before the hearing of the application. In this case, the application was made in a timeframe that was less than 14 days, but the date was allocated pursuant to orders of the court that were made on 26 February 2018 by consent of the parties.
The Court was also provided with a copy of a letter from the respondents’ solicitors to the DCT’s solicitors indicating that none of the respondents proposed to appear and to be heard in respect of the DCT’s application for summary judgment.
Having regard to the consent orders and being satisfied that the respondents knew about the interlocutory hearing today, the dispensation should be granted.
I am also satisfied that there has been non-compliance with order 8 of the freezing orders made against the second, fifth and ninth defendants. Martyn Allen Richardson purported to swear affidavits in compliance with order 8, as agent on behalf of each of those respondents but his affidavit contained no material which identified either the authority to swear the affidavit as agent on behalf of those respondents, nor did it identify the basis of Mr Richardson’s knowledge to make those affidavits on their behalf. In the circumstances, I do not accept his affidavit as compliance by the second, fifth and ninth defendants with order 8 of the freezing orders and I will make an order directing that each of those respondents file and serve an affidavit in compliance with paragraph 8(b) of each of the freezing orders made in orders 3 to 12 of the orders made on 13 February 2018 as varied, and such affidavits to be filed and served on or before 15 March 2018.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.
Associate:
Dated: 8 March 2018
SCHEDULE OF PARTIES
NSD 160 of 2018 Respondents
Fourth Respondent:
CITI PURCHASING PTY LTD ACN 055 420 249
Fifth Respondent:
LINC PTY LTD ACN 007 239 661
Sixth Respondent:
EAGLEPOINT INVESTMENTS PTY LTD
ACN 603 602 615Seventh Respondent:
PATHOLD NO. 84 PTY. LIMITED ACN 064 860 340
Eighth Respondent:
PALROZ PTY LTD ACN 002 333 173
Ninth Respondent:
BAYFIN PTY. LIMITED ACN 003 941 740
Tenth Respondent:
MARTJOHN INVESTMENTS PTY LTD
ACN 112 244 087Cross-Claimants
Second Cross-Claimant:
CITI QUEENSLAND PTY LTD ACN 069 116 481
Third Cross-Claimant:
CITIWESTCO PTY LTD ACN 003 368 956
Fourth Cross-Claimant:
CITI PURCHASING PTY LTD ACN 055 420 249
Fifth Cross-Claimant:
LINC PTY LTD ACN 007 239 661
Sixth Cross-Claimant:
EAGLEPOINT INVESTMENTS PTY LTD
ACN 603 602 615Seventh Cross-Claimant:
PATHOLD NO. 84 PTY. LIMITED ACN 064 860 340
Eighth Cross-Claimant:
PALROZ PTY LTD ACN 002 333 173
Ninth Cross-Claimant:
BAYFIN PTY. LIMITED ACN 003 941 740
Tenth Cross-Claimant:
MARTJOHN INVESTMENTS PTY LTD
ACN 112 244 087
0
0
3