Deputy Commissioner of Taxation v Property Builders (Constructions) Pty Limited
[2011] FCA 1221
•20 October 2011
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Property Builders (Constructions) Pty Limited [2011] FCA 1221
Citation: Deputy Commissioner of Taxation v Property Builders (Constructions) Pty Limited [2011] FCA 1221 Parties: DEPUTY COMMISSIONER OF TAXATION v PROPERTY BUILDERS (CONSTRUCTIONS) PTY LIMITED ACN 089 023 423 File number(s): NSD 1011 of 2011 Judge: JAGOT J Date of judgment: 20 October 2011 Catchwords: DISCOVERY – application for general discovery – where plaintiff allegedly gave implied undertaking not to commence proceedings – where documents specifically sought to be discovered not relevant to substantive application for winding up of defendant company Legislation: Federal Court Rules 2011 Rule 20.13 Date of hearing: 20 October 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 8 Solicitor for the Plaintiff: Mr J Ferguson of the ATO Legal Services Branch Counsel for the Defendant: Mr R Freeman Solicitor for the Defendant: Phontos Legal
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1011 of 2011
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: PROPERTY BUILDERS (CONSTRUCTIONS) PTY LIMITED ACN 089 023 423
Defendant
JUDGE:
JAGOT J
DATE OF ORDER:
20 OCTOBER 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The interlocutory application filed 4 October 2011 be dismissed.
2.The costs of the plaintiff in respect of the interlocutory application be paid out of the assets of the defendant, such costs to be fixed in the amount of $300.
3.The matter be listed before a Registrar today or on such date as may be notified to the parties.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1011 of 2011
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: PROPERTY BUILDERS (CONSTRUCTIONS) PTY LIMITED ACN 089 023 423
Defendant
JUDGE:
JAGOT J
DATE:
20 OCTOBER 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
On 4 October 2011 the defendant filed an interlocutory application seeking an order, pursuant to Rule 20.13 of the Federal Court Rules 2011, that the plaintiff give standard discovery. That application has been heard today. It was supported by two affidavits of Michael Phontos, the director of the defendant company.
In short, the defendant’s position is that it understood from dealings between it (or its representatives) and the Australian Taxation Office (the ATO) that the plaintiff had agreed not to commence proceedings until the resolution of certain other proceedings instituted by the defendant against third parties in the Supreme Court of New South Wales (the Supreme Court proceedings). This understanding was described by the defendant as an “implied undertaking” which had been confirmed by way of a facsimile from Mr Phontos to the ATO on 4 May 2010. However, there is evidence of a communication in late 2009 between the ATO and another person, a Mr Hovig Evanian (whose father was a former director of the defendant), as a consequence of which Mr Evanian was forwarded a running balance account recording debts owed by the defendant to the ATO. That evidence is contained in an affidavit of Mr Evanian sworn on 11 November 2009 in connection with the Supreme Court proceedings. Objection was taken to reliance on the affidavit and, as I indicated in the course of argument, the affidavit was technically inadmissible. However, the statement of account sent by the ATO to the defendant is admissible. There is also evidence indicating that Mr Evanian may have been making continuing enquiries of the ATO in May 2010, presumably about the defendant’s tax liability. The defendant’s position appears to be that the communications between Mr Evanian and the ATO caused the ATO to change its position from one in which it had agreed to the defendant’s proposal (that any winding-up application be deferred pending resolution of the Supreme Court proceedings) to one in which the ATO determined instead that it would proceed with the winding-up application.
In these circumstances, the defendant seeks an order for discovery in relation to all communications between the ATO and third parties which, as the defendant describes it, “appear to have led [to] the ATO changing its position with respect to the resolution of its claims and its agreement to await recovery by [the defendant] of its claims [against third parties in the Supreme Court proceedings].” As the defendant sees it, the ATO disclosed information to Mr Evanian in circumstances where to do so was a breach of confidentiality and of the privacy rights of the defendant.
The difficulties with the defendant’s application are clearly disclosed in the written submissions which have been filed on behalf of the plaintiff.
First, and importantly, none of the evidence before me suggests that any of the documents sought to be discovered would go to the question of the defendant’s solvency in circumstances where (due to the defendant’s non-compliance with the statutory demand) there is a presumption of insolvency.
Second, the defendant’s reliance on the existence of an implied undertaking (as the plaintiff’s submissions put it) would require evidence of some conduct on the part of the plaintiff’s officers which could reasonably have given the defendant the impression that the plaintiff would not commence proceedings in this Court. Far from suggesting any such conduct, the affidavit evidence indicates that there was no implied undertaking whatsoever. While the defendant may have thought that its communication of 4 May 2010 was the culmination of some agreement or arrangement, that correspondence is on its face no more than a confirmation of the defendant’s proposal. Correspondence sent by the ATO on 11 June 2010 made it clear that this proposal had been refused. Moreover, on 19 July 2010 the defendant (via Mr Phontos) sent further correspondence to the ATO which is inconsistent with the existence of any understanding on its part that there had been a concluded arrangement or implied undertaking as at 4 May 2010. This is obvious from the final two paragraphs, which refer to an additional offer from the defendant to the ATO. It is also difficult to understand why, if the defendant had believed there was any implied undertaking, some reference would not have been made to it in this further correspondence. Finally, on 12 August 2010 the ATO, by written communication, made it clear that unless the full amount of the debt to it was paid legal action would be commenced for recovery.
A further obvious difficulty for the defendant’s application is that there is simply nothing in any of the evidence which suggests any possible connection between any communication of Mr Evanian to the ATO and the ATO’s position (as set out in its correspondence to which I have referred). Moreover, as noted earlier, it is difficult to understand how any of the material which the defendant seeks could possibly be relevant to the plaintiff’s winding-up application. Even if it were assumed in the defendant’s favour that there is a connection between some communication of Mr Evanian and the ATO’s decision (and, again, there is no evidence whatsoever that this is the case), how that could bear upon the substantive application is entirely unclear.
In these circumstances, to make an order against the plaintiff for discovery – either generally or by reference to the communications to which reference is made in the defendant’s submissions – would be inappropriate and contrary to the interests of justice. As such, the interlocutory application must be, and is, dismissed. The costs of the plaintiff in respect of the application should be paid out of the assets of the defendant. The plaintiff’s winding-up application should proceed to hearing.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate:
Dated: 27 October 2011
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