Deputy Commissioner of Taxation v Conley, John Patrick & Ors [1998] FCA 1476

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 408 of 1998

BETWEEN: DEPUTY COMMISSIONER OF TAXATION

Applicant

AND: JOHN PATRICK CONLEY

FIRST Respondent

AUSTRALIAN AIRCRAFT SALES (NSW) PTY LTD

SECOND RESPONDENT

NATIONAL AUSTRALIA BANK LIMITED

THIRD RESPONDENT

JUDGE: SACKVILLE J`

DATE: 12 NOVEMBER 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT HIS HONOUR: I gave a judgment extempore yesterday at about 5 pm. That judgment was given on a motion filed in Court yesterday on behalf of the Deputy Commissioner of Taxation. I do not repeat what I have said in that judgment. Today, the proceedings were re-listed on the application of the National Australia Bank, the third respondent to the notice of motion filed yesterday. Mr Reeves, who appears on behalf of the Bank, tendered evidence in connection with an application I shall mention shortly. The evidence demonstrates that early today a demand was made upon the Bank to transfer $US200,000 from the US dollar accounts at the direction of the second respondent, Australian Aircraft Sales Pty Limited. Mr Reeves pointed out that this placed the Bank in a dilemma. Under the terms of the arrangement between the Bank and its customer, it is obliged to comply with lawful directions given by the customer. However, the Bank has also received a letter, couched I might say in rather enigmatic terms, from the Australian Government Solicitor. That letter warns the Bank that, if a foreshadowed application for special leave to the High Court is allowed, then the Bank may well be "at risk" if money is paid out to the account holders or at their direction. The dilemma then, as far as the Bank is concerned, is that if it does not comply with its customer's instructions it may be in breach of its duty to its customer. If it does comply, it may find itself liable to the Deputy Commissioner of Taxation or, perhaps, to a criminal prosecution. Faced with this dilemma, Mr Reeves filed a notice of motion returnable instanter. In that notice of motion he sought orders in the nature of interpleader. As emerged in the discussion between myself and counsel, although I have considerable sympathy with the position of the Bank, I do not think it appropriate to make an interpleader order at this stage. The principal, although not the only, difficulty is this. I have been told that the amount of US dollars in the relevant accounts is very large, although I have not been told the precise amount. The likelihood is that any money paid into Court would have to be paid in the form of Australian dollars. In any event, nobody has suggested that some other course is open. If the moneys were to be converted into Australian dollars, the fluctuations in exchange rates could be such as to create the possibility of a very substantial loss within a short time. That of itself seems to me to be a reason for not acceding to the application. There are, however, other reasons. These include the lack of evidence on material matters going to the nature of the obligations to which the Bank is subject. Another difficulty of a procedural character has been pointed out by Mr Hammerschlag, who appears for the first and second respondents. Although present in court yesterday, he did not make submissions. He has, however, now pointed out that the Deputy Commissioner seeks relief in the form of orders restraining the first and second respondents from disposing of the moneys in the accounts. Yet the Deputy Commissioner has not initiated any proceedings. The proceedings determined by Davies J were brought by the first and second respondents. They succeeded in obtaining declaratory relief, and have maintained that declaratory relief on appeal. Even if there were power to stay the orders of the Full Court (a proposition that is doubtful) the effect would simply be to stay the declaratory orders in favour of the respondent. That would not, of itself, provide a basis for relief of the kind sought in the notice of motion. When all these difficulties had been canvassed, Mr Hammerschlag, on behalf of his clients, proffered a conditional undertaking to the Court. The offer was that save for the US$200,000, the subject of the existing demand, the first and second respondents would not make any further demand on the Bank in relation to the balance of the account until 5 pm tomorrow. The Bank has, however, declined to provide an undertaking as to damages for reasons that can readily be understood. In these circumstances, again for reasons that can readily be understood, Mr Hammerschlag withdrew the proffered undertaking. The end result of all of this is that matters remain where they were when I gave the judgment yesterday. I made directions at that stage for the matter to be listed before the Duty Judge tomorrow. It is clear from what has transpired today that the Deputy Commissioner will need to give further careful thought to the nature of any relief that he seeks in these proceedings. What I propose to do is to leave intact the orders that were made yesterday. That is, the matter in the first instance will be listed before the Duty Judge tomorrow at 10.15 am. However, I will make inquiries as to whether it is possible to convene the members of the Full Court who gave judgment on 21 October 1998. It may well be that, unless the Deputy Commissioner is able to formulate a way of presenting his claim for interim relief, there will be no point in convening the Full Court. If there is something of a plausible character that can be put to the Full Court, it may be convenient for their Honours to consider any application made by the Deputy Commissioner. They, after all, are familiar with the issues in the case. Accordingly, what I propose to do is this: I shall make no change to the orders in respect of the Deputy Commissioner's notice of motion. The motion stands adjourned to the Duty Judge at 10.15 am tomorrow. I shall stand over to the same time Mr Reeves' motion relating to an interpleader order. In the meantime, I shall make inquiries as to the availability of the members of the Full Court. The parties can then consider their respective positions and tell the Duty Judge what course they wish to adopt. If the members of the Full Court are available, it may be that the Duty Judge will take the course of referring the matter to the Full Court later in the day. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville