KADE & KADE AND ORS

[2012] FamCA 163

FAMILY COURT OF AUSTRALIA

KADE & KADE AND ORS [2012] FamCA 163

FAMILY LAW - INJUNCTIONS – Rights of third party – where the Commissioner for Taxation seeks the discharge of injunctions restraining S Bank and P Pty Ltd from dealing with funds held on behalf of the husband or the company - where Commissioner for Taxation has a garnishee interest as a secured creditor over the funds held in the husband’s bank accounts – where wife has withdrawn her undertaking as to damages and has made no appearance – orders dismissing the injunctions

Brown and Brown (2007) FCA 207-3

APPLICANT: Ms Kade

FIRST RESPONDENT: Mr Kade

SECOND RESPONDENT: S Bank

THIRD RESPONDENT: P Pty Ltd

FOURTH RESPONDENT: Commissioner for Taxation

FILE NUMBER: SYC 7627 of 2011

DATE DELIVERED: 7 March 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 7 March 2012

REPRESENTATION

SOLICITOR FOR THE APPLICANT: No appearance

SOLICITOR FOR THE FIRST 

RESPONDENT:

Barkus Doolan Kelly

SOLICITOR FOR THE SECOND

 RESPONDENT:

No appearance

SOLICITOR FOR THE THIRD

 RESPONDENT:

No appearance

COUNSEL FOR THE FOURTH

RESPONDENT:

Ms Foda

SOLICITOR FOR THE FOURTH

RESPONDENT:

Australian Government Solicitors

Orders

1. That orders 8, 9, 10 and 11 made by Watts J on 19 December 2011 be discharged.

2. That the costs of the Fourth Respondent Commissioner for Taxation in respect of the applications for injunction be reserved.

3. That the Fourth Respondent be excused from further appearance in the proceedings.

4. That the Registrar and the parties notify the Fourth Respondent in the event that any application is made which affects the interests of the Fourth Respondent.

5. That costs of all parties otherwise be reserved.

IT IS NOTED that publication of this judgment under the pseudonym Kade & Kade and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 7627 of 2011

Ms Kade

Applicant

And

Mr Kade

First Respondent

And

S Bank

Second Respondent

And

P Pty Ltd

Third Respondent

And

Commissioner of Taxation

Fourth Respondent

REASONS FOR JUDGMENT

1. The proceedings before the Court arise out of the making of orders by Watts J on 19 December 2011 on the application of the wife.  The orders, which are relevantly orders 8, 9, 10, and 11, made by His Honour on that day, restrain the S Bank, P Pty Ltd (trading as R Business Suburb D), and the husband, from dealing with funds held in the bank, on behalf of the company and or husband.

2. The matter came before me on 13 February 2012 and on that day the wife, through her senior counsel, indicated that she was no longer in a position to continue to give the undertaking as to damages which had been given before Watts J, but I nevertheless continued the injunction and stood the matter over before me on 21 February 2012. 

3. On that day, the wife was represented by her solicitor, Mr Connolly, and was present in court when orders were made by consent requiring her, on or before 4 pm on 4 February 2012, to file and serve a verified Statement of Claim including all of the facts and circumstances upon which she relied to seek orders against the fourth respondent, the Commissioner for Taxation. 

4. In addition, orders were made on that day requiring the husband to file and serve any response to the wife’s application, together with a financial statement and any affidavit material upon which he sought to rely, by 6 March 2012. 

5. Before me today, the counsel for the Commissioner for Taxation appears seeking an order, as has been sought on each occasion the matter has been before me, that the injunctions be discharged.

6. The interest of the Commissioner for Taxation arises by virtue of notices issued by the Commissioner pursuant to section 260-5 of schedule 1 of the Taxation Administration Act 1953 (Cth) to S Bank and to P Pty Ltd (trading as R Business Suburb D), those notices being issued on 7 December 2011. As a result of the service of those notices, the Commissioner has a garnishee interest as a secured creditor over the funds held in those accounts. As at 19 January 2012 the debt in relation to the Commissioner’s claim against the husband, for income tax, penalties, and shortfalls was $25,402,920.

7. Gordon J, in the Federal Court of Australia in Brown & Brown (2007) FCA 2073, confirmed that a garnishee notice, issued in these circumstances, has the effect of creating a statutory charge in favour of the Commissioner, and thus makes the Commissioner a secured creditor for the purpose of the Corporations Act 2001 (Cth) and entitled to priority of payment over unsecured creditors.

8. At this time, no application has been filed and served by the husband which seeks to set aside the garnishee notices and therefore, before me, the validity of the notices is not in issue.

9. When the matter commenced before me this morning, Mr Connolly, solicitor, appeared, as a matter of courtesy to the Court, to advise that his instructions had been withdrawn and that he had filed a Notice of Ceasing to Act.  However, I am satisfied that the wife is on notice that the matter is proceeding today, and of the attitude of the Commissioner. 

10. Before me is a statutory declaration sworn by Mr M to the effect that he personally served the wife with a copy of a letter from the Commissioner dated 29 February 2012, that personal service having occurred on 1 March 2012.

11. In the letter, the Commissioner sets out clearly the fact that the Commissioner will apply before me today for the injunctions to be discharged.  The letter contains, inter alia, these words: 

    If you wish to have the injunctions continued (that is, orders 8, 9, 10 and 11 made by the honourable Watts J on 19 December 2011), you should be prepared to argue accordingly on Wednesday 7 March 2012.

12. And at paragraph 6: 

    You will recall that the injunctions (among other matters) restrained by injunction the [S Bank] from making any payments from accounts held in the name of your husband, [Mr Kade]. If the injunctions are not continued, then the [S Bank] will be under an obligation to pay to our client moneys held in accounts in the name of your husband. That obligation arises under the notice served by the Commissioner on the [S Bank] pursuant to section 260-5 of schedule 1 to the Taxation Administration Act 1953.

13. The Commissioner could not have put the wife on clearer notice than that which is contained in the letter, but the wife has not appeared before me today to seek the continuance of the injunction.

14. The wife has not complied with the orders which were made on 21 February 2012 for the filing and service of a verified statement of claim.

15. The husband has not complied with the orders that were made for the filing and service by him of an amended response, a financial statement, and any affidavit material. 

16. In the circumstances, where the Commissioner is a secured creditor and where the wife has withdrawn her undertaking as to damages and has not appeared today to argue that the injunction should be continued, I will discharge orders 8, 9, 10, and 11, made by Watts J on 19 December 2011.

17. I note that the matter is listed for hearing for directions before a registrar on 21 March 2012, and I otherwise adjourn the matter to that day and I will reserve costs of all parties.

18. The counsel for the Commissioner makes an application that the wife pay the costs of the proceedings in relation to the injunctions.  There is no evidence before me of the wife’s financial position, although counsel for the Commissioner rightly points out that the situation arises by virtue of the wife’s failure to comply with directions. 

19. In circumstances where the Commissioner is a publicly-funded authority, and I have no evidence that the wife can afford to pay any order for costs that I might make, I have declined to make an order for costs.  However, I will reserve the costs of the Commissioner in relation to the applications by way of injunction before Watts J and before me.

20. I note that it may be the case that no further orders will be sought against the Commissioner, and I will direct that the Commissioner be excused from attendance on any further occasion, and that the registrar notify the Commissioner in the event that any order is sought which affects the Commissioner’s interest. 

I certify that the preceding TWENTY (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 7 March 2012.

Associate: 

Date:  20 March 2012