FEDERAL COURT OF AUSTRALIA Groves v Commissioner of Taxation (No 3) [2011] FCA 635 Citation: Groves v Commissioner of Taxation (No 3) [2011] FCA 635 Parties: LE NEVE ANN GROVES v COMMISSIONER OF TAXATION File number: QUD 582 of 2010 Judge: LOGAN J Date of judgment: 24 May 2011 Catchwords: PRACTICE AND PROCEDURE – non-party discovery – discretion to grant – where documents critically relevant to proceeding – where non-party's costs covered by respondent – orders for non-party discovery granted Date of hearing: 24 May 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 5 Solicitor for the Applicant: Cooper Grace Ward Lawyers Counsel for the Respondent: Mr PJ Flanagan SC with Mr S Lumb Solicitor for the Respondent: McInnes Wilson Lawyers Counsel for the Liquidators The Liquidators for ZYX Learning Centres Ltd (in liq) did not appear IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 582 of 2010 BETWEEN: LE NEVE ANN GROVES Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: LOGAN J DATE OF ORDER: 24 MAY 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. That, pursuant to O 15A r 8 of the Federal Court Rules, Peter Walker and Greg Moloney ("the Liquidators") as liquidators of ZYX Learning Centres Limited (formerly ABC Learning Centres Limited (In Liquidation) (Receivers and Managers Appointed) ("ABC") make discovery to the respondent of each of the following documents (within the meaning of the term "document") in the Federal Court Rules) which the Liquidators have, or have had, in their possession: (a) all documents recording or evidencing the amount of dividends (including franking credits in respect of such dividends) declared by ABC ("the dividends") during the period on and from 1 July 2000 to and including 30 June 2008 ("the Period"); (b) all documents (including ABC dividend payment statements) recording or evidencing the distribution of the dividends to Dr Groves, or the crediting of any bank account (or financial institution account) in favour of Le Neve Ann Groves for the amount of the dividends, during the Period (other than ABC dividend payment statements in favour of Dr Le Neve Ann Groves bearing a payment date of 15 September 2005). 2. Order 1 is to be complied with by the Liquidators filing and serving on the respondent, within 30 days of the date of the order, a List of Documents in accordance with O 15 r 6 of the Federal Court Rules. 3. The respondent or his Solicitors be at liberty to inspect and make copies of (or request copies to be made of) any documents discovered by the Liquidators. 4. The respondent is to pay the Liquidators' reasonable costs and expenses of complying with Orders 1, 2 and 3, to be taxed if not agreed. 5. The respondent's costs of and incidental to the motion, and of and incidental to the compliance with order 4, by the respondent's costs in the proceedings. 6. There be liberty to apply. 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 QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 582 of 2010 BETWEEN: LE NEVE ANN GROVES Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: LOGAN J DATE OF ORDER: 24 MAY 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. That, pursuant to O 15A r 8 of the Federal Court Rules, the Secretary, Harris Black Pty Ltd (ACN 065 442 560) trading as Harris Black Chartered Accountants, ("Harris Black") make discovery to the respondent of each of the following documents (within the meaning of the term "document" in the Federal Court Rules) which Harris Black have, or have had, in their possession: (a) the signed income tax return (or a signed copy of the income tax return) of Le Neve Ann Groves ("Dr Groves") for each of the income years ended 30 June 2001 to 30 June 2007 inclusive ("the income years"); (b) all correspondence between Harris Black and Dr Groves (other than a letter from Harris Black to Dr Groves dated 21 March 2007) and all electronic files of Harris Black, during the period on and from 1 July 2000 to and including 30 June 2008 ("the Period"), in relation to any matter concerning the preparation or singing of Dr Groves' tax returns for the income years; (c) all file notes or memoranda evidencing or recording telephone conversations or personal attendances between any member of Harris Black and Dr Groves during the Period in relation to any matter concerning the preparation or signing of Dr Groves' tax returns for the income years; (d) all documents evidencing or recording any instructions by Edmund Stuart Groves to Harris Black as to the content of Dr Groves' income tax return for each of the income years. 2. Order 1 is to be complied with by Harris Black filing and serving on the respondent, within 21 days of the date of the order, a List of Documents in accordance with O 15 r 6 of the Federal Court Rules. 3. The respondent or his Solicitors be at liberty to inspect and make copies of (or request copies to be made of) any documents discovered by Harris Black. 4. The respondent is to pay Harris Black's reasonable costs and expenses of complying with the Orders 1, 2 and 3, to be taxed if not agreed. 5. The respondent's costs of and incidental to the motion, and of and incidental to compliance with order 4, be the respondent's costs in the proceedings. 6. There be liberty to apply. 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 QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 582 of 2010 BETWEEN: LE NEVE ANN GROVES Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: LOGAN J DATE: 24 MAY 2011 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The Commissioner of Taxation has sought third party discovery against the liquidators of ZYX Learning Centres Limited (Formerly ABC Learning Centres Limited) in Liquidation (Receivers and Managers Appointed), hereafter ABC. The categories of documents sought are these: (a) all documents recording or evidencing the amount of dividends, including franking credits in respect of such dividends, declared by ABC (the dividends) during a period on and from 1 July 2000 to, and including, 30 June 2008 (the period); (b) all documents (including ABC dividend payment statements) recording or evidencing the distribution of the dividends to Dr Groves or the crediting of any bank account (or financial institution account) in favour of Le Neve Anne Groves, the amount for dividends during the period (other than ABC dividend payment statements) in favour of Dr Le Neve Groves bearing a payment date of 15 September 2005. 2 As made, the application sought compliance by the liquidators with an obligation to give that discovery within 21 days of the date of the order. An affidavit of Mr Dale Patrick Brown of the solicitors for the Commissioner has been filed by leave today in support of the application. From that, it emerges that, yesterday, he attended upon Mr Maloney, one of the liquidators, at Mr Maloney's office, and was there informed by Mr Maloney of the following: (a) that the liquidators were not in immediate possession of documents of ABC, but that these were in possession of the receivers and managers of ABC, McGrathNicol, as well as GoodStart Proprietary Limited, a company established by three charity organisations to purchase from the receivers and managers the Australian assets of ABC; (b) it was anticipated that the documents sought would require a substantial time and expense on the part of the liquidators in searching through many millions of documents warehoused and archived; (c) his inquiries and efforts in response to the notice of motion were at an early stage, given that the liquidators were impecunious; (d) meanwhile, the liquidators were under great pressure in their preparation for hundreds of public examinations due to commence on 2 June 2011. 3 I am quite satisfied, having regard to the categories of discovery sought, that, even applying a more rigorous, directly relevant test, the categories of documents sought are directly relevant to issues in the taxation appeals, having regard to issues evident from the notice of objection and the respective appeal statements. Indeed, it is apparent that these documents are what one might describe as a critical category of documents, having regard to the issues in the taxation appeals. 4 That being so, it is appropriate that the liquidators give third party discovery. The Commissioner, as might be expected, anticipates that an obligation in respect of costs of compliance will fall upon him, and seeks as much in the draft order provided. It's evident that the liquidators are aware of the Commissioner's application. They have not chosen to appear today, but the Commissioner has fairly, and as might be expected from an officer of the Commonwealth, put the position of the liquidators before the Court. When one takes into account that there will be a costs compensation to the liquidators, the impecuniosity voiced is addressed. 5 There then comes a question about, funding aside, the other obligations that the liquidators are under at present, and the impact which those separate obligations have on an ability to comply with the obligation to give third party discovery. The Commissioner has proposed that in lieu of the 21 days originally sought in the notice of motion, that 30 days be inserted instead. That seems to me to be a reasonable recognition, at least on the material to hand, of other obligations to which the liquidators are subject. If it transpires that, in light of other material not presently before the Court, even allowing for costs compensation, that particular 30 day obligation is not reasonably sufficient, then a reservation of liberty to apply will allow the liquidators to make application to the court, on evidence, for an extension of time. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate: Dated: 8 June 2011