Deputy Commissioner of Taxation v Dunn
[2012] WASC 500
DEPUTY COMMISSIONER OF TAXATION -v- DUNN [2012] WASC 500
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 500 | |
| Case No: | CIV:2856/2009 | 27 NOVEMBER 2012 | |
| Coram: | MASTER SANDERSON | 20/12/12 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Service of notice permitted | ||
| A | |||
| PDF Version |
| Parties: | DEPUTY COMMISSIONER OF TAXATION GREGORY JOHN DUNN |
Catchwords: | Jurisdiction Whether O 10 permits service out of jurisdiction of notice of writ claiming payment of income tax general interest charge and administrative penalties |
Legislation: | Nil |
Case References: | Deputy Commissioner of Taxation v Bollands [2012] WASC 143 Hewitson v Fabre (1888) 21 QBD 6 Kent v Lechmere Financial Corporation [2002] WASC 75 Mallon & Co Lawyers Pty Ltd v GAM [2012] WASC 376 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- CIV 2945 of 2009
- Plaintiff
AND
GREGORY JOHN DUNN
Defendant
Catchwords:
Jurisdiction - Whether O 10 permits service out of jurisdiction of notice of writ claiming payment of income tax general interest charge and administrative penalties
Legislation:
Nil
Result:
Service of notice permitted
(Page 2)
Category: A
Representation:
Counsel:
Plaintiff : Mr S Owen-Conway QC & Ms H E Prince
Defendant : Mr J C Vaughan
Solicitors:
Plaintiff : Australian Government Solicitor
Defendant : DLA Piper Australia
Case(s) referred to in judgment(s):
Deputy Commissioner of Taxation v Bollands [2012] WASC 143
Hewitson v Fabre (1888) 21 QBD 6
Kent v Lechmere Financial Corporation [2002] WASC 75
Mallon & Co Lawyers Pty Ltd v GAM [2012] WASC 376
(Page 3)
1 MASTER SANDERSON: The defendant applies under O 12 r 7 of the Rules of the Supreme Court 1971 (WA) to discharge ex parte orders made 5 November 2009 granting the plaintiff leave to issue a writ of which notice was to be given out of the jurisdiction and to serve notice of the writ out of the jurisdiction. The defendant seeks ancillary orders setting aside the writ, the notice of writ and default judgment entered 2 June 2011 in relation to the causes of action the subject of the writ. The basis of the defendant's application is an objection to jurisdiction. The defendant contends that the conditions in O 10 r 1(1)(i), the head relied on by the plaintiff in obtaining leave, were not met.
2 The background facts are not in dispute. In opposition to this application the plaintiff relied on an affidavit of Yen-Lin Faith Harako sworn 4 September 2012. This affidavit has as attachment YLFH1 an affidavit of Mr Benjamin Rogers which was sworn 21 October 2009. The affidavit of Mr Rogers was filed in support of the application made by the plaintiff to issue the writ and service notice out of the jurisdiction.
3 The action brought by the plaintiff against the defendant is for unpaid income tax, general interest charge and administrative penalties. The amount claimed is very large - over $11 million. Service was effected on the defendant in accordance with the laws of Thailand on 10 October 2010. However the service was not personal service. It was effected by leaving the documents at the defendant's address in Thailand. The defendant says he did not in fact receive the documents and was unaware of the proceedings until 8 June 2012. The judgment obtained by the plaintiff against the defendant was in default of appearance.
4 Order 12 r 7 of the Rules of the Supreme Court is in the following terms:
7. Setting aside writ etc. before appearance
A defendant to an action, at any time before entering an appearance in it, may serve notice of motion to -
(a) set aside the writ or service of the writ on the defendant; or
(b) discharge any order that granted leave to serve the writ on the defendant outside Australia.
(Page 4)
- that the conditions of O 10 r 1(1)(i) were not met. The approach to this rule was considered by Pullin J in Kent v Lechmere Financial Corporation [2002] WASC 75. His Honour said:
These important provisions are not mere procedural provisions which govern proceedings after they have been properly instituted. These are provisions which confer jurisdiction on the court. The common law doctrine is that the writ does not run beyond the limits of the State. Laurie v Carroll (1957-58) 98 CLR 310 at 322. The foundation of the jurisdiction of the Court is physical power, and where a writ cannot legally be served upon a defendant, the court can exercise no jurisdiction over him. In an action in personam, and whenever a defendant can be legally served with a writ, the court, on service being effected, has jurisdiction to entertain an action against him. Hence, in an action in personam, the rules as to the legal service of a writ define the limits of the court's jurisdiction: Laurie v Carroll (supra) at 323. The rules made pursuant to s 167(1)(i) of the Supreme Court Act 1975, namely O 10 r 1(1), permit service on a defendant outside the jurisdiction. This is called 'long arm' jurisdiction: Australian Securities & Investments Commission v Edensor Nominess Pty Ltd [2001] HCA 1 at [2]. The court, by these rules, has decided to supervise the extension of its jurisdiction and to ensure that only in appropriate cases will a writ issue for service outside the jurisdiction. Thus, O 5 r 9 requires an application to be made to the court for leave to issue a writ which is to be served out of the jurisdiction. The court has to grant leave before the proper officer seals the writ, whereby the writ 'issues' (see O 5 r 6). Order 5 r 9 does not permit an order nunc pro tunc. Then, before service is effected, it is necessary to obtain the leave of the court to serve out of the jurisdiction, by showing that the subject-matter of the action falls within the description of one of the sub-paragraphs of O 10 r 1(1). Order 10 r 4(1) requires an affidavit to be filed which states the grounds on which the application is made and which states that it is the deponent's belief there is a good cause of action. The affidavit should depose to facts and not to unsupported conclusions: Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Ltd [1978] 2 NSWLR 372 at 375. The affidavit should not be formal or perfunctory: GAF Corporation v Amchem Products Inc [1975] 1 Lloyds Rep 601 at 608; save that it must, in a formal way, identify the sub-paragraph or sub-paragraphs of O 10 r1(1) which are relied upon [5].
(Page 5)
- Counsel submitted so long as no additional material was produced other subparagraphs of O 10 could be relied upon.
7 It is unnecessary for me to resolve this difference of view. Rule 4 has now been amended and the proper construction of the old wording is unlikely to be raised in the future. I will proceed on the basis the plaintiff must establish he falls within r 1(1)(i) of the rule and cannot rely on any other provision in O 10 r 1(1).
8 Order 10 r 1(1)(i) is in the following terms:
1. When service out of jurisdiction is permissible
(1) The Court may, subject to rule 3, grant leave to serve a person outside the Commonwealth of Australia with a writ, or notice of a writ, that begins an action if -
...
(i) the action is for the recovery of taxes or duty (with or without interest or fines for default in payment thereof) which have been imposed or become due on or in respect of property situate within the jurisdiction.
The question which arises is whether or not, the Deputy Commissioner having indicated the desire to commence proceedings in this court, the court has jurisdiction to grant leave to do so when service of the proceedings is intended to be effected outside the State and in another country, Hong Kong. The Deputy Commissioner has sought to rely on O 10 r 1(1)(i) of the Rules of the Supreme Court, which authorises the court to grant leave to serve originating process out of the jurisdiction in cases 'where the action is for the recovery of taxes or duty (with or without interest or fines for default in payment thereof) which have been imposed or become due on or in respect of property situate within the jurisdiction'. Counsel have been unable to identify any authority dealing expressly with the question of whether or not that subrule covers a claim of the type contemplated here. My researches have not been able to discover any authority on point either. Nevertheless, respected commentators, including the late Professor Nygh in his work Conflict of Laws in Australia, say that
(Page 6)
- in the Western Australian Rules of Court O 10 r 1(i), provision is made for service out of the jurisdiction in respect of taxes 'due to the Crown in right of that State'. The provision is expressly limited to taxes imposed on or in respect of property situate within the jurisdiction.
The first thing that can be said is that the tax liability asserted in this case does not arise on or in respect of property situate within the jurisdiction. It is certainly not a liability due to the Crown in right in the State of Western Australia. The question is whether the observations by the commentators suggesting that the power under O 10 r 1(i) is limited are correct. In the events which have happened, it is unnecessary for me to decide finally that important question, but it appears to me to be one upon which the commentary is very likely to be correct, because the very purpose of O 10 is to identify a certain nexus or connection between the subject matter of the intended claim and this geographical jurisdiction.
The jurisdiction of the courts of this State certainly covers claims arising from ownership of property within the State. That is one long recognised connection or nexus. So a tax arising from the ownership of, or in respect of, property situate within the State would have an associated nexus. The nexus must be with this State and not the Commonwealth of Australia. There is nothing, it would seem, to provide that nexus in the present case. All I need do at the moment is to flag this point, which may have to be decided authoritatively in the future, and to indicate the trend of the authorities on the subject [10] - [12].
10 Counsel for the defendant accepted what his Honour said was obiter and was in no way binding upon me. However counsel submitted his Honour's interpretation of the subrule was logically consistent and in keeping with the rules of construction. Further counsel submitted there was nothing in the subrule which would permit the recovery of an administrative penalty. The subrule does allow for fines but only fines 'for default in payment'. It was submitted the administrative penalty did not fall within this provision.
11 On the other hand the plaintiff sought to have the subrule read in what is a disjunctive fashion. Effectively the rule would read, 'the action is for the recovery of taxes or duty (with or without interest or fines for default in payment thereof) which have been imposed'. This anticipates a disjunctive 'or' between 'imposed' and 'become'. It was further submitted the administrative penalties and interest were a natural incidence of the income tax regime and therefore could be recovered as part of an action to recover unpaid tax.
12 Each party sought to support their position in a different way. Counsel for the plaintiff referred to the Rules of the Supreme Court 1909 (WA). At that time O 11 dealt with service out of the jurisdiction.
(Page 7)
- Order 11 r 1(h) allowed the court to permit notice of a writ to be served out of the jurisdiction when:
The action is for the recovery of taxes (with or without interest or fines for default payment thereof) which have been imposed or become due on in respect of income that has accrued or is derived from some source within the jurisdiction on or in respect of property situate within the jurisdiction. (emphasis added)
14 Counsel for the plaintiff pointed out if the defendant's interpretation was accepted the causes of action which could be initiated was extremely limited. Really it was only those taxes touching and concerning land. For instance it would not be possible to issue proceedings for recovery of payroll tax payable pursuant to the Payroll Tax Assessment Act 1971 (WA). Such a tax is a non-property based tax and proceedings against an individual outside the jurisdiction would not be permitted under O 10. Counsel also pointed out when the Payroll Tax Assessment Act was introduced the Federal Court of Australia was not in existence. It was not established until 1977. Counsel submitted it could not have been the intention of the judges of the court to limit the right of recovery in this way.
15 Determining the proper approach to the subrules of O 10 r 1(1) is not always easy. Recently in Mallon & Co Lawyers Pty Ltd v GAM [2012] WASC 376, I considered the question of whether the cause of action based on the Trade Practices Act 1974 (Cth) fell within the provisions of the subrule. Relying on a Victorian decision I concluded r 1(1)(k) could be replied upon because a claim for damages for breach of the Trade Practices Act is generally assessed on the tortious measure giving the action sufficient connection with the subrule. It is not difficult to see the flaw in that logic. But I adopted a purpositive approach to the interpretation of the rule.
16 On balance I am satisfied the plaintiff's interpretation of the rule is to be preferred. I would be prepared to approach it in the way contended for by the plaintiff and adopt the disjunctive 'or' the plaintiff proposes. I am
(Page 8)
- also satisfied the recovery of a general interest charge and administrative penalties is picked up within the general rubric of the term 'taxes'. On that basis I would dismiss the defendant's application.
17 Before leaving this question I should make one further comment. When I first read par 15 of the submissions of counsel for the plaintiff I assumed he was submitting the rule was unconstitutional. In fact during the course of submissions counsel disavowed any such claim. But in my view there is real doubt as to whether or not, if the interpretation of the rule contended for by the defendant was correct, the rule is valid. Section 83 of the Judiciary Act 1903 (Cth) provided for Commonwealth taxes to be recovered in a State court of competent jurisdiction. Without going any further and considering the provisions of the Constitution and further provisions of the Judiciary Act and the various taxing statutes it seems to me doubtful State law can restrict the right of the Commonwealth to recover income tax which is due and payable by limiting access to State courts. In any event as this point was not argued I need not take the matter any further.
18 The defendant should pay the plaintiff's costs of this application including the reserved costs.
0
4
0