Caason Investments Pty Limited v Cao

1. The Scheme Administrator is authorised to deduct: (a) the amount of $34,189 referable to the GST Issue, pursuant to Order 11(a) of the orders dated 6 December 2017; and (b) the amount of $17,969.62 referable to the costs of the Scheme Administrator, pursuant to Order 1 of the orders dated 27 August 2020; from any amounts payable to the First Applicant under the Settlement Distribution Scheme. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MURPHY J: 1 These reasons assume familiarity with a long-running dispute between the first applicant, Caason Investments Pty Ltd (Caason) and the Scheme Administrator of the Settlement Distribution Scheme following settlement of this class action. I previously set out the history of the dispute in relation to what I have called "the GST Refunds Issue" in Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 at [225]-[231]. In Caason Investments Pty Limited v Cao (No 3) [2020] FCA 191 (Caason No 3) at [45]-[58] I summarised the part of the GST Refunds Issue which is relevant to these reasons. It relevantly concerned: (a) whether Caason had received and retained $34,189 in input tax credits received from the Australian Taxation Office (ATO); and (b) whether Order 11(a) of the orders dated 6 December 2017 should be set aside or stayed. 2 On 17 December 2020, Banton Group, the solicitors for the Scheme Administrator, sent an email to my chambers. It referred to my reasons for judgment in Caason No 3 at [57]-[58] where I said the following: The Scheme Administrator deposed that although the ATO amended Caason's GST assessments to deny $669,768 in relevant GST refunds for the Audit Period of 1 April 2014 to 31 March 2018, Caason retained $34,189 it had claimed prior to the Audit Period, as the ATO was out of time to amend GST assessments made prior to 1 April 2014. On that basis the Scheme Administrator said that $34,189 remained due to the Scheme Administrator under Order 11(a). The Scheme Administrator argued that if Caason wished to receive its Representative Costs it must first pay to the Scheme Administrator $34,189 of the GST refunds paid to it, which it had wrongly retained. Caason was on notice of the Scheme Administrator's claim. The ATO letter of 19 June 2018 expressly stated that $34,189 in GST refunds claimed by Caason for periods prior to March 2014 had not been amended through the ATO review, because they had timed out due to the four year time limit. Caason denied that it had retained $34,189 in relevant GST refunds but, although it should have been straightforward for it to adduce evidence that it did not retain the benefit of any such payment or credit, it did not adduce any cogent evidence in that regard. It did not adduce evidence to rebut the Scheme Administrator's contention or to show that the ATO's position paper was incorrect. Caason had the onus of establishing that it is appropriate to strike out or stay Order 11(a) and it did not do so. 3 The reasons record that I declined Caason's interlocutory application dated 1 March 2019 which sought orders to strike out or stay Order 11(a) of the orders made on 6 December 2017. Order 13(b)(iii) of those orders had made Caason's entitlement to payment of its Representative Costs subject to its compliance with Order 11(a). 4 In the email the Scheme Administrator said that, notwithstanding the finding that Caason had failed to adduce any evidence to establish that it had not received or retained the benefit of $34,189 in input tax credits that had been paid to it by the ATO, Caason had recently claimed that it was not required to refund that amount to the Scheme and had sought the Scheme Administrator's agreement to orders by consent to set aside or stay Order 11(a). The Scheme Administrator said she had declined to do so on the basis that the Court had already adjudicated on this issue and she "did not think it appropriate to engage in a further protracted dispute with Caason regarding the GST and further delay the final distribution to group members." 5 The Scheme Administrator sought an order that she be allowed to deduct: (a) an amount of $34,189 referable to the GST Issue; and (b) an amount of $17,969.62 referable to the costs of the Scheme Administrator in opposing Caason's interlocutory application dated 1 March 2019, pursuant to Order 1 of the orders dated 27 August 2020; from any amounts due to Caason under the Scheme. 6 Regrettably, the Scheme Administrator omitted to copy Caason or its solicitors (if any) into the email. Accordingly, early on 21 December 2020 my chambers provided the email to Caason and gave it until 12 noon on 23 December 2020 to file any short submissions it wished to make in regard to the orders sought. 7 On 23 December 2020 Caason filed short submissions. It did not dispute that in Caason No 3 at [57]-[58] it was held that Order 11(a) of the orders made on 6 December 2017 required Caason to pay $34,189 of the GST refunds paid to it by the ATO, nor dispute that Caason's interlocutory application dated 1 March 2019 seeking orders to strike out or stay Order 11(a) was refused by the Court. Rather it submitted as follows: [6] However, it is respectfully submitted that, by ATO Position Paper dated 19 June 2018 (attached), the ATO finally rejected and disallowed any and all GST claimed in a sum of $669,768 in relation to legal costs in the Arasor matter and ruled that Caason was not entitled to claim the GST as an input tax credit. [7] The aforesaid ATO Position Paper further categorically stated that, the $34,189 GST credits previously claimed by Caason in BAS periods prior to March 2014 (and included in the total GST credits claimed $669,768 was not amended, as it had timed out due to time limit restrictions. [8] The result was $669,768 being returned to the ATO by Caason in accordance with the directions of the said ATO Audit Position Paper leaving Caason with no financial benefit whatsoever. [9] In these circumstances, Caason is effectively unable to comply with Order 11(a) of the Court's Orders dated 6 December 2017. [10] As such, we do not believe that the Scheme Administrator is entitled to $34,189 from Caason in relation to GST as Caason has not received any GST refund from the ATO and does not have the benefit of this amount of GST from the ATO. … [12] All documents pertaining to the aforesaid decisions and actions have been shared with the Scheme Administrator both voluntarily and/or when requested and the Scheme Administrator has knowledge of Caason's position. [13] In these circumstances, we humbly request that Orders 11(a) and 13(b)(iii) of this Court's Orders dated 10 February 2020 [sic] be removed. (Emphasis in original.) 8 In my view it is appropriate to make the orders the Scheme Administrator seeks. In Caason No 3 at [50]-[51] I noted the following: [50] On 19 June 2018 the ATO provided Caason with an audit position paper setting out a proposed decision to reject Caason's entitlement to claim and retain the GST refunds it had received. After considering further submissions made by Caason on 16 July 2018, the ATO issued a final decision on 15 January 2019. The ATO rejected Caason's claim for GST credits for the period 1 April 2014 to 31 March 2018 (the Audit Period) and reduced Caason's GST credits by $669,768. The amendments to Caason's GST entitlements included $221,883 under Caason's June 2017 BAS and $79,527 under Caason's BAS for 1 July 2017 to 31 March 2018 which amounts had not been refunded to Caason by the ATO. [51] In the 19 June 2018 proposed decision the ATO said: It should be noted that $34,189 GST credits previously claimed by you in BAS periods prior to March 2014 (and included in total GST credits claimed as per your detailed spreadsheet emailed to the Tax Office on 07/06/2018), have not been amended, as they have timed out due to the four year time limit. A footnote to the letter said that the reduction in Caason's GST credits for the period 1 April 2014 to 30 June 2017 were, as a result, less by $34,189. 9 I further noted at [52]-[53] that Caason's solicitor at the time, and its Managing Director, Mr Astill, had not addressed the ATO's statement that the GST credits paid to Caason had not been reduced by $34,189 for amounts of GST claimed for the periods prior to March 2014. Nor, as I noted at [57]-[58], had Caason adduced any evidence to rebut the Scheme Administrator's contention, based on the ATO Position Paper, that Caason had received and retained the benefit of that amount. It was for those reasons that I refused to strike out or stay Order 11(a) of the orders made on 6 December 2017. 10 It is not open to Caason to now attempt to re-litigate that issue by seeking orders for the "removal" of Orders 11(a) and 13(b)(iii). Caason has not filed any appeal against the orders made on 10 February 2020 in relation to its interlocutory application dated 1 March 2019 and it is now out of time to do so. Nor has Caason filed a fresh application to set aside Order 11(a) of the orders made 6 December 2017, and if it did so it would likely be met with a claim of abuse of process. 11 In Johnson v Gore Wood & Co [2002] 2 AC 1 at 31, approved in UBS AG v Tyne [2018] HCA 45; (2018) 265 CLR 77 at [7] (Kiefel CJ, Bell and Keane JJ), Lord Bingham of Cornhill explained, that a finding of abuse of process in such circumstances requires the court to make: …a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. 12 It is unnecessary to decide, but on the evidence as it is I would have no difficulty in concluding that to allow Caason to again litigate the issue of whether it has retained the benefit of $34,189 paid to it by the ATO would be an abuse of process. If Caason wished to establish that it had not retained that benefit it had that opportunity to do so in the interlocutory application dated 1 March 2019. It failed to do so and it cannot now re-litigate the question. 13 I also note that Caason did not make submissions in opposition to the Scheme Administrator's request for an order that the amount of $17,969.62 referable to the costs of the Scheme Administrator pursuant to Order 1 of the orders dated 27 August 2020, be deducted from Caason's entitlements under the Scheme. That order required Caason pay the Scheme Administrator's costs of and associated with Caason's interlocutory application dated 1 March 2109. 14 That interlocutory application was in Caason's personal interests; it was not in the interests of group members. It is appropriate to order the deduction sought by the Scheme Administrator as it should be Caason, not the group members, that bears the costs incurred by the Scheme Administrator in successfully opposing the application. Absent such an order, given the history of this dispute I have little faith that Caason will pay those costs without requiring the Scheme Administrator to engage in further protracted correspondence or litigation. The Scheme Administrator should not be required to do so, which would be at the expense of the group members. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.