Deputy Commissioner of Taxation v Bramwell

1. Judgment be entered in favour of the applicant pursuant to r 5.23(2)(b) of the Federal Court Rules 2011 (Cth) against the respondent in the amount of $1,463,942.07 plus interest.
2. The respondent pay the applicant's costs of this proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PAGONE J: 1 The Deputy Commissioner of Taxation ("the Commissioner") seeks default judgment pursuant to r 5.23(2)(b) of the Federal Court Rules 2011 (Cth) ("the Rules"). The rule permits an applicant to apply to the Court for an order giving judgment against a respondent for a debt or liquidated damages where the respondent is in default within the meaning of the rule. Rule 5.23(2)(b) relevantly provides: If a respondent is in default, an applicant may apply to the Court for: […] (b) if the claim against the respondent is for a debt or liquidated damages - an order giving judgment against the respondent for: (i) the debt or liquidated damages; […] […] In this case the Commissioner contended that his claim against Mr Bramwell was for a debt or liquidated damages and that Mr Bramwell was in default within the meaning of r 5.23(2). 2 The proceeding was commenced by the Commissioner by originating motion seeking judgment against Mr Bramwell in the sum of $1,428,670.61 plus further interest as set out in a statement of claim dated 7 December 2015. The Commissioner made the application for judgment on 8 March 2016 under r 5.23(2)(b) for that amount and filed an affidavit by Ms Fiona Biltris exhibiting a certificate under s 255-45 of the Schedule 1 of the Taxation Administration Act 1953 (Cth) ("the 1953 Act") certifying that the sum of $1,463,942.07 was payable as at 9 March 2016 by Mr Bramwell to the Commonwealth of Australia. Ms Biltris' affidavit exhibiting the certificate explained the difference between the amount claimed in the application and that shown in the certificate as the additional interest charge of $35,271.46 calculated from 3 December 2015 up to and including 8 March 2016. 3 The certificate exhibited to the affidavit of Ms Biltris is prima facie evidence of the matters stated in it by reason of s 255-45 of Schedule 1 to the 1953 Act. That section provides: 255-45 Evidentiary certificate (1) A certificate: (a) stating one or more of the matters covered by subsection (2) or (3); and (b) signed by the Commissioner, a *Second Commissioner or a *Deputy Commissioner; is prima facie evidence of the matter or matters in a proceeding to recover an amount of a *tax-related liability. (2) A certificate may state: (a) that a person named in the certificate has a *tax-related liability; or (b) that an *assessment relating to a tax-related liability has been made, or is taken to have been made, under a *taxation law; or (c) that notice of an assessment, or any other notice required to be served on a person in respect of an amount of a tax-related liability, was, or is taken to have been, served on the person under a *taxation law; or (d) that the particulars of a notice covered by paragraph (c) are as stated in the certificate; or (e) that a sum specified in the certificate is, as at the date specified in the certificate, a debt due and payable by a person to the Commonwealth. (3) A certificate may state: (a) that a *foreign revenue claim for an amount specified in the certificate has been made by the competent authority under the relevant international agreement; or (b) that the relevant requirements of the relevant international agreement have been complied with in relation to the foreign revenue claim; or (c) that the claim was registered under Division 263 on the date specified in the certificate; or (d) that, as at the date of the certificate, the Commissioner has or has not received advice from the competent authority under the relevant international agreement about the reduction or discharge of an amount to be recovered under the claim; or (e) that the particulars of any reduction or discharge of an amount to be recovered under the claim are as specified in the certificate. The amount of $1,428,670.61 comprises income tax liabilities, administrative penalties, shortfall interest charges and general interest charges in respect of the years of income from 2003 to 2010. Section 255-5(1)(a) of Schedule 1 to the 1953 Act provides that an amount of a "tax-related liability" that is due and payable is "a debt due to the Commonwealth. Section 255-1(1) provides that a tax-related liability is a pecuniary liability to the Commonwealth arising directly under a taxation law": see also Kalis Nominees Pty Ltd v Deputy Federal Commissioner of Taxation (1995) 31 ATR 188, 192. An index of tax-related liabilities for the purposes of s 255-1(1) is set out in s 250-10(2) which relevantly includes those claimed against Mr Bramwell in these proceedings. Mr Bramwell is liable to the Commonwealth of Australia for the following debts: (a) income tax pursuant to s 204 of the Income Tax Assessment Act 1936 (Cth), which is listed as a tax-related liability at item 37 of the index; (b) administrative penalty for failure to lodge an income tax return pursuant to s 286-75 of Schedule 1 to the 1953 Act, which is listed as a tax-related liability at item 140 of the index; (c) administrative penalty for tax shortfall pursuant to s 284-75 of Schedule 1 to the 1953 Act, which is listed as a tax-related liability at item 140 of the index; (d) shortfall interest charge pursuant to s 280-100 of Schedule 1 to the 1953 Act, which is listed as a tax-related liability at item 37AA of the index; and (e) general interest charge pursuant to s 5-15 of the Income Tax Assessment Act 1997 (Cth) and Part IIA of the 1953 Act in respect of each of the above debts (a)-(d) for failure to pay income tax, administrative penalties and shortfall interest charge by the respective due dates, which is listed as a tax-related liability at item 70 of the index. 4 An application under r 5.23(b) may be made where a respondent is in default. Rule 5.22 supplies the meaning of default for these purposes and provides: 5.22 When a party is in default A party is in default if the party fails to: (a) do an act required to be done, or to do an act in the time required, by these Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence. The Commissioner relies upon Mr Bramwell's failure to file a defence, to appear at directions hearings and to file an address for service. Service of the proceedings was effected on Mr Bramwell pursuant to orders made on 2 February 2016. Mr Bramwell had been understood by the Commissioner to be employed by a company called SpinifexIT which has premises in Australia and in the Middle East. Mr David Hope, on behalf of the Commissioner, had a telephone conversation with Mr Bramwell on 21 January 2016 in which Mr Bramwell was made aware that the Commissioner had commenced this proceeding and was told ABOUT the nature of the claim which the Commissioner had brought against him. Mr Hope requested Mr Bramwell in that telephone conversation to make arrangements for a mutually convenient location for service of the proceedings to be effected and understood Mr Bramwell to undertake to speak to his Australian advisers and to get back to Mr Hope. Mr Bramwell, however, did not make contact with Mr Hope. 5 The Commissioner subsequently applied for orders to permit substituted service. On 2 February 2016 orders were made for substituted service as follows: 1. Pursuant to Rule 10.24 of the Federal Court Rules 2011, the originating application and statement of claim dated 7 December 2015 (Court Documents) will be taken to have been served on the Respondent by: (a) emailing copies of the Court Documents and this Order to the email address ; and (b) handing copies of the Court Documents and this Order in an envelope marked "private and confidential" and addressed to the Respondent to a person at SpinifexIT's offices located at located at Suite 3C, 88 Ricketts Road, Mount Waverley, Victoria 3149. 2. A directions hearing be listed for 9.30am on 25 February 2016. On 4 February 2016 Mr William Ho, a legal representative of the Commissioner, arranged for the Court documents and orders to be placed in an envelope that was collected by a courier and hand delivered to a person at the Mount Waverley, Victoria, offices of SpinifexIT. On 5 February 2016 Mr Hope sent an email to Mr Bramwell (at the email address in the orders made on 2 February 2016) attaching the Court documents and orders. Mr Bramwell did not attend in person or through a legal representative at the subsequent directions hearing listed for 26 February 2016. The Commissioner's legal practitioners attempted to make further contact with Mr Bramwell on 27 February 2016 by redelivering the Court documents and orders, and by foreshadowing by email to Mr Bramwell that the Commissioner would be making an application for default judgment if Mr Bramwell failed to appear at the next directions hearing which was then listed for 8 March 2016. Mr Bramwell did not appear at the directions hearing listed for 8 March 2016 and on that date, the Commissioner's application for judgment under r 5.23(2)(b) was listed to be heard on 15 March 2016. 6 Mr Bramwell also failed to file a defence as required by r 16. Rules 16.31 and 16.32 of the Rules provide: 16.31 This Division applies if a proceeding is started by an originating application supported by a statement of claim or the Court has ordered that the proceeding continues on pleadings. […] 16.32 A respondent must file a defence, in accordance with Form 33, within 28 days after service of the statement of claim. Mr Bramwell was required pursuant to these rules to file a defence within 28 days of service upon him of the originating application and statement of claim. Service upon him was effected on 4 and 5 February 2016 pursuant to the orders made on 2 February 2016 and, accordingly, Mr Bramwell was required to file a defence by 4 March 2016. He has not done so and is in breach of r 16.32. 7 Mr Bramwell was also required to file a notice of address for service but he has not done so. Rules 5.02 and 11.06 required Mr Bramwell to file a notice of address for service before the return date fixed for the originating application but that has not occurred. The directions hearings on each of 26 February 2016 and 8 March 2016 were each return dates within the meanings of these provisions: see also Ferraro v DBN Holdings Aust Pty Ltd (trading as Sports Auto Group) [2015] FCA 1127; Ross v Cotter [2015] FCA 310, [8]-[18]. Mr Bramwell has been made aware of two separate directions hearings and failed to file a notice of address for service before either of them. 8 The power to order judgment in default under r 5.23(2) is discretionary. In Deputy Commissioner of Taxation v Sibai [2015] FCA 1465 Gleeson J said at [7]-[8]: 7 In Speedo Holdings BV v Evans (No 2) [2011] FCA 1227, the Court outlined a number of principles relevant to the discretion to enter default judgment, including the following (at [20]-[25]): First, the power … remains discretionary. … Just as the discretion must be exercised [cautiously] where it is the applicant that is in default … the same caution must be exercised where it is the applicant who is seeking orders as against a defaulting respondent. Second, the discretionary power to enter a default judgment is enlivened when (as in the present case) an applicant applies to the Court for an order. Rule 5.23(2) provides that where a respondent is in default "an applicant may apply to the Court". … Third, there is a difference in the terms in which the ambit of the power conferred by the former r 3(2)(c) ("the relief… that the applicant appears entitled to on the statement of claim") and the wording of the current r 5.23(2)(c) ("the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled"). Notwithstanding that difference in language, the requirement imposed is not that an applicant prove by way of evidence the claim sought to be advanced; the requirement is that the Court needs to be "satisfied" on the face of the statement of claim that the applicant is entitled to the "relief" claimed…. The facts as alleged in the statement of claim are deemed to have been admitted by a respondent: Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2007] FCAFC 146 at [42], 161 FCR 513 at 523 per Moore, Dowsett and Greenwood JJ. … Fourth, to be satisfied that an applicant "is entitled" to the relief claimed in the statement of claim, the Court needs to be satisfied that "each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim": Macquarie Bank Ltd v Seagle [2005] FCA 1239 at [24], 146 FCR 400 at 406 to 407 per Conti J …. Fifth, in addition to the facts alleged in a statement of claim, the Court may permit recourse to limited further evidence. But it may not admit evidence which would alter the case as pleaded. 8 The above approach was followed in Placitum Pty Ltd v Andreotta [2014] FCA 726 at [12] and Electrolux Home Products Pty Ltd v Delap Impex KFT [2015] FCA 62; (2015) 110 IPR 164 at [24]. It is appropriate in this case for the discretion to be exercised in favour of granting default judgment for the Commissioner. Mr Bramwell has been made aware of, and has been served with, the proceedings. He is in default within the meaning of r 5.22(a) because he failed to file a defence by 4 March 2016 and because he failed to file a notice of address for service by the 26 February 2016 and 8 March 2016 directions hearings. He is in default under r 5.22(c) because he failed to attend either in person or through a legal representative at the directions hearings on 26 February 2016 and 8 March 2016. He is also in default generally under r 5.22(d) by failing to defend the proceedings with due diligence. The evidence before the Court is sufficient to prove that Mr Bramwell is indebted to the Commonwealth in the amounts claimed. 9 Accordingly there will be judgment for the Commissioner in the amount of $1,463,942.07 together with interest and costs. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.