FEDERAL COURT OF AUSTRALIA Resort Huntervalley Pty Limited v Commissioner of Taxation [2009] FCA 301 RESORT HUNTERVALLEY PTY LIMITED ACN 58 098 802 665 and HIGH TRADE COMPANY PTY LIMITED ACN 46 003 983 104 v COMMISSIONER OF TAXATION NSD 206 of 2009 FOSTER J 30 MARCH 2009 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 206 of 2009 BETWEEN: RESORT HUNTERVALLEY PTY LIMITED ACN 58 098 802 665 First Applicant HIGH TRADE COMPANY PTY LIMITED ACN 46 003 983 104 Second Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: FOSTER J DATE OF ORDER: 30 MARCH 2009 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent be immediately released from the undertaking given by him to the Court on 13 March 2009 that, up to and including 4.00 pm on 24 March 2009, he would refrain from serving any statutory demand and would also refrain from giving any further notice under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) in respect of either applicant, which undertaking was subsequently renewed and extended from 4.00 pm on 24 March 2009 to 4.00 pm on 31 March 2009. 2. Leave be granted to Ms Joanne McCarthy to file in Court a Notice of Motion and affidavit sworn by her on 30 March 2009. 3. The said Notice of Motion be made returnable instanter. 4. Leave be granted to Ms McCarthy to inspect the affidavit of Keith Thomas Swan sworn on 13 March 2009 (with the exception of Exhibits KS‑1, KS‑2 and KS‑3 thereto) and the affidavit of Martin Paul Caplice sworn on 13 March 2009 and to obtain one photocopy of each such affidavit upon Ms McCarthy giving an undertaking to the Court that she will pay the appropriate photocopying costs. 5. The proceedings be adjourned to 10.15 am on 31 March 2009 before Foster J. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 206 of 2009 BETWEEN: RESORT HUNTERVALLEY PTY LIMITED ACN 58 098 802 665 First Applicant HIGH TRADE COMPANY PTY LIMITED ACN 46 003 983 104 Second Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: FOSTER J DATE: 30 MARCH 2009 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Shortly after 10.15 am on 13 March 2009, the applicants made an ex parte application before me as Duty Judge for the urgent return of their Application and for an abridgment of the time for the service of that Application and the two affidavits sought to be filed in support of that application. I acceded to the applicants' application on that occasion and made the proceedings returnable before me at 12 noon on the same day. 2 When the matter was called on at 12 noon, the respondent was represented by Counsel who had only very recently been instructed. I was asked to stand the matter down so that the parties could have discussions. I did so on an application made to me by consent. The matter was then adjourned to 4.00 pm on 13 March 2009. 3 When the matter was called on before me at 4.00 pm on that day, the parties informed me that an arrangement of a temporary nature had been agreed between them which involved the giving of certain undertakings to the Court, the detail of which is recorded in the orders made on that day. The applicants gave the usual undertaking as to damages and also gave certain other undertakings concerning the disposition of their assets but with particular reference to the two principal assets held by them in Australia, namely, the Crowne Plaza Hotel Resort in the Hunter Valley and certain villas at Lovedale. 4 Upon the undertakings to which I have referred being given by the applicants to the Court, the respondent gave an undertaking in the following terms, namely, that he would refrain from serving any statutory demand or giving any further notice under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) in respect of either applicant until 4.00 pm on 24 March 2009. My recollection is that the undertakings and other orders made late on 13 March 2009 were put in place shortly before 4.15 pm on that day. 5 On 13 March 2009, I also fixed the applicants' claims for interlocutory relief for hearing on 24 March 2009 before me. On the same day, I fixed 18 March 2009 as a date for further directions. 6 When the matter came before me again on 18 March 2009, further directions and orders were made with a view to ensuring that the applicants' interlocutory application would be ready to be heard on 24 March 2009, as previously ordered. Included within the orders made on 18 March 2009 was an order that the parties have liberty to apply on 24 hours' notice. That liberty was exercised shortly after the directions hearing on 18 March 2009 and further orders were made on 19 March 2009. It is not necessary to set out those orders in detail although it is important to note that the following undertaking was given by the respondent as part of those orders, namely: The Court notes that, in reliance upon the applicants extending the said undertakings and also in reliance upon the undertaking as to damages given by the applicants on 13 March 2009, the respondent extends the undertaking given by him to the Court set out in paragraph 4 of the said document from 4.00 pm on 24 March 2009 to 4.00 pm on 31 March 2009. 7 The reference in that Note to "… the said undertakings …" is a reference to the specific undertakings concerning the disposition or encumbering of assets given by the applicants to the Court on 13 March 2009. The undertaking as to damages subsisted in any event. 8 Thus, as of 19 March 2009 the respondent's undertaking was continued up to and including 31 March 2009 upon the basis that the undertakings concerning their assets previously given by the applicants were also extended until 5.00 pm on the same day. 9 As well as dealing with other matters, on 19 March 2009 I vacated the hearing date which I had previously fixed for 24 March 2009 and refixed the interlocutory hearing—on this occasion, for 31 March 2009. 10 I have been told on more than one occasion since 13 March 2009 that the parties were having discussions with a view to resolving the matter. Indeed, this morning's fixture was appointed against the background of my having been told that this was the case. 11 When the matter was called on before me this morning, Senior Counsel for the applicants informed me from the Bar table that a number of transactions had occurred involving the assets of the applicants which, had they occurred subsequent to the point in time on 13 March 2009 when the applicants gave the undertakings to the Court concerning their assets which they gave on that occasion, would appear on their face to constitute breaches of those undertakings. As conveyed to me, the transactions were said to have occurred during the course of the day on 13 March 2009 and before the undertakings were given to the Court. 12 As matters presently stand, there is no evidence before me of precisely what has occurred although it is fair to say that, from the admissions made on behalf of the applicants from the Bar table, it is quite clear that several transactions have been entered into with a view to making it difficult for the respondent to recover the amount of tax, penalties and interest claimed by it which, as I recall, stands at a figure of something approaching $50 million. The controllers of the applicants appear to think that they may enter into these transactions in a way which will pre-empt the recovery of that money should it be due and in a way which seems to be designed to circumvent the substance of the undertakings which they have given to the Court. 13 In the face of these events, the respondent has applied to be released from the undertaking which was initially given by him to the Court on 13 March 2009 and which has been subsequently renewed. That application is not opposed by the applicants. In my view, in light of what I have been told today, it is appropriate to release the respondent from that undertaking immediately in order to allow the respondent to consider his position and to take whatever action he deems appropriate in the circumstances with which he is now confronted. 14 The undertaking which the respondent gave to the Court on 13 March 2009 and which was subsequently renewed was given by him upon the basis that the applicants would not dispose of or further encumber their assets. No doubt, when the respondent originally gave that undertaking on 13 March 2009, he was not aware of the transactions which the applicants had in train on the very same day and did not contemplate that, immediately before the applicants' undertakings were proffered to the Court, the applicants' assets would be encumbered by the grant of the securities of which I have now been informed. 15 Accordingly, I order that the respondent be immediately released from the undertaking given on 13 March 2009 to which I have referred and which he has subsequently renewed. 16 The release of the respondent from that undertaking has no impact whatsoever on the undertaking as to damages or the undertakings concerning their assets given to the Court by the applicants on 13 March 2009 and which have been subsequently renewed. All of those undertakings remain in place. 17 I now turn to deal with the second matter raised before me this morning. The applicants apply for leave to discontinue the proceedings upon the basis that they submit to an order that they pay the respondent's costs of the proceedings. At the moment, in light of what I have been told today, I am not prepared to grant that leave. I will consider the question of discontinuance, if necessary, tomorrow. 18 The third matter with which I now wish to deal is the following. Ms Joanne McCarthy has made application for access to all affidavits filed in these proceedings. Ms McCarthy is a journalist employed at the Newcastle Herald which appears to be a newspaper published by Fairfax Media. 19 I grant leave to Ms McCarthy to file her Notice of Motion and her affidavit in support in Court. I make that Notice of Motion returnable instanter. 20 The applicants' Application is supported at the moment by the affidavit of Keith Thomas Swan sworn on 13 March 2009 and by the affidavit of Martin Paul Caplice sworn on the same day. Those affidavits, although not read in open court at any stage to my recollection, were read in a sense that is commonly understood in courts in support of the applicants' application for an abridgement of the time for service of its Application and for an order that their interlocutory application be heard urgently. If it matters, in my view, for presently relevant purposes, those affidavits have both been read. 21 There is also other material in the file of a formal nature and there is also material in the file which relates to the business of the Court. 22 In addition, the respondent has filed an affidavit by Krisstine Nash. The affidavit of Ms Nash was sworn on 25 March 2009 and that affidavit has been filed in support of an Application for Summary Dismissal of the entire proceeding made by the respondent. This last affidavit has not been read at all nor has the respondent's motion yet been heard. 23 Ms McCarthy has attended at Court this morning and has put some brief submissions in support of her Application. Those submissions essentially come down to the proposition that there is significant interest on the part of the public, particularly in the Hunter Valley and Newcastle areas, in the activities of the applicant companies and in the operation of their businesses in those areas. 24 It seems to me that I should allow Ms McCarthy to look at and obtain a copy of each of the affidavit of Keith Thomas Swan sworn on 13 March 2009 and also the affidavit of Martin Paul Caplice sworn on the same day. I do not think there is any justification in Ms McCarthy looking at the affidavit of Ms Nash and I do not think that it is appropriate that Ms McCarthy look at any other part of the file. I am also of the view that Ms McCarthy should not be given access to Exhibits KS-1, KS-2 and KS-3 to the affidavit of Mr Swan as those exhibits were not tendered on 13 March 2009 and have not, in any event, been filed or handed up to me. 25 Accordingly, I will grant leave to Ms McCarthy to inspect the two affidavits to which I have referred and which were sworn on 13 March 2009 (with the exception of Exhibits KS‑1, KS‑2 and KS‑3 to the affidavit of Keith Thomas Swan sworn on 13 March 2009). I also grant leave for those affidavits to be photocopied upon an undertaking from Ms McCarthy to pay the appropriate photocopying costs. I make no order as to the costs of Ms McCarthy's Motion. 26 I will adjourn the proceedings until tomorrow morning when I will consider any further applications in the matter which the parties may see fit to make. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 1 April 2009 Counsel for the Applicants: Mr K Connor SC, Miss M Avenell Solicitor for the Applicants: Ernst & Young Law Counsel for the Respondent: Mr ML Brabazon SC Solicitor for the Respondent: ATO Legal Services Branch Date of Hearing: 30 March 2009 Date of Judgment: 30 March 2009