Deputy Commissioner of Taxation v Cheung Kong Infrastructure Holdings Limited

Federal Court of Australia|2013-07-19|Before: Gordon J

INTRODUCTION 1 The Deputy Commissioner of Taxation (DCOT) seeks recovery of debts in respect of income tax and administrative penalties from Cheung Kong Infrastructure Holdings Ltd (Cheung Kong). By an ex parte interlocutory application filed on 18 July 2013, the DCOT seeks leave pursuant to r 10.43 of the Federal Court Rules 2011 (Cth) (the Rules) to serve on Cheung Kong at its principal place of business in Hong Kong by international registered post: 1. the Originating Application and Statement of Claim filed on 19 June 2013; 2. any amended Statement of Claim; 3. the DCOT's genuine steps statement filed on 19 June 2013; 4. the DCOT's Interlocutory Application filed on 18 July 2013; 5. the Affidavit of Maria Victoria Llorca sworn on 17 July 2013; and 6. any orders made by the Court on hearing this application and any reasons for judgment.

BACKGROUND 2 On 14 January 2011, the DCOT issued to Cheung Kong notices of assessment of penalty for failing to provide a document in respect of income years ended 30 June 2001 to 2009 pursuant to s 298-30 of Sch 1 to the Taxation Administration Act 1953 (Cth) (the TAA). On 22 June 2011, the DCOT issued to Cheung Kong a notice of tax shortfall penalty for false or misleading statement pursuant to the Income Tax Assessment Act 1936 (Cth) (the 1936 Act) (collectively the penalty notices). 3 On 14 January 2011, the DCOT issued to Cheung Kong notices of special assessment in respect of income years ended 30 June 2000 to 2009 pursuant to s 167 of the 1936 Act (the notices of default assessment). The penalty notices and notices of default assessment were sent by pre-paid post to Cheung Kong at 12/F Cheung Kong Center, 2 Queen's Road, Central, Hong Kong. 4 As at 17 July 2013, the DCOT claims that Cheung Kong is indebted to the Commonwealth of Australia in respect of income tax, penalties and general interest charge in the total amount of $375,887,929.45.

RELEVANT LEGAL PRINCIPLES 5 The procedures governing service of originating applications outside of the jurisdiction are well established. Rule 10.43 of the Rules provides: (1) Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if: (a) the Court has given leave under subrule (2) before the application is served; or (b) the Court confirms the service under subrule (6); or (c) the person served waives any objection to the service by filing a notice of address for service without also making an application under rule 13.01. (2) A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country. (3) The application under subrule (2) must be accompanied by an affidavit stating: (a) the name of the foreign country where the person to be served is or is likely to be; and (b) the proposed method of service; and (c) that the proposed method of service is permitted by: (i) if a convention applies - the convention; or (ii) if the Hague Convention applies - the Hague Convention; or (iii) in any other case - the law of the foreign country. (4) For subrule (2), the party must satisfy the Court that: (a) the Court has jurisdiction in the proceeding; and (b) the proceeding is of a kind mentioned in rule 10.42; and (c) the party has a prima facie case for all or any of the relief claimed in the proceeding. … (Emphasis added.) 6 Rule 10.42 provides that "an originating application, or an application under Pt 7 of these Rules, may be served on a person in a foreign country in a proceeding that consists of, or includes, any one or more of the kinds of proceeding mentioned in the following table …". Item 1 of that table is a "[p]roceeding based on a cause of action arising in Australia".

APPLICATION OF LEGAL PRINCIPLES 7 Pursuant to r 10.43(4), three requirements must be satisfied. First, that the Court has jurisdiction in the proceeding. Second, that the DCOT has established a prima facie case for service of the originating process outside of the jurisdiction. Third, that the DCOT's claim for unpaid tax and administrative penalties falls within one of the items in the table in r 10.42.

Jurisdiction 8 Pursuant to s 255-5(2) of Sch 1 to the TAA, the DCOT may sue "in a court of competent jurisdiction to recover an amount of a *tax-related liability that remains unpaid after it has become due and payable." Subsection (1) provides that an amount of a "*tax-related liability that is due and payable" is (a) "a debt due to the Commonwealth" and (b) "payable to the Commissioner". 9 Here, the amounts of income tax and administrative penalties sought by the DCOT are "tax-related liabilities" within s 255-1 of Sch 1 to the TAA: items 37, 70 and 140 of the table in s 250-10(2) of Sch 1 to the TAA; see also Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [28] and [38]. The amounts became due and payable by reason of the notices of assessments made by the DCOT: s 5-5 of the Income Tax Assessment Act 1997 (Cth) (the 1997 Act). The question is whether the Federal Court is a court of "competent jurisdiction". 10 Section 39B(1A)(c) of the Judiciary Act 1903 (Cth) (the Judiciary Act) provides: The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter: … (c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter. 11 The DCOT's claim in these proceedings is for the recovery of a "tax-related liability" pursuant to s 255-5 of Sch 1 to the TAA. Such a claim is within the jurisdiction of this Court by reason of s 39B(1A)(c) of the Judiciary Act as a matter arising under a law of the Commonwealth, namely the TAA: see Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 8) [2013] FCA 494 at [12]-[14]; LNC Industries Limited v B.M.W. (Australia) Limited (1983) 151 CLR 575 at 581.

The proceeding is of a kind mentioned in r 10.42 12 The DCOT's application for recovery of a "tax-related liability" is made pursuant to s 255-5 of Sch 1 to the TAA. The proceeding is, therefore, a proceeding based on a cause of action arising in Australia within the ambit of item 1 of the table in r 10.42: see Commissioner of Taxation v Ma (1999) 92 FCR 569 at [15]; Commissioner of Taxation v Regent Pacific Group Limited [2013] FCA 36 at [23].

Establishment of a prima facie case? 13 The requirement to demonstrate a prima facie case in this context is not particularly onerous. The question is whether, on the material before the Court, inferences were open which, if translated into final findings of fact, would support the relief claimed: see Ho v Akai (in liq) (2006) 24 ACLC 1526 at [10]. 14 The DCOT filed an affidavit sworn on 17 July 2013 by Maria Victoria Llorca, a Case Officer employed in the Debt Section of the Australian Taxation Office (the Llorca Affidavit) which annexed, inter alia, a copy of the notices of default assessment and penalty notices. Also annexed to that affidavit is an evidentiary certificate pursuant to s 255-45 of Sch 1 to the TAA. The Llorca Affidavit establishes a prima facie case for service of the originating process outside of the jurisdiction.

Location of Cheung Kong and method of service 15 Where the Hague Convention on the Service Abroad of Judicial Extrajudicial Documents in Civil or Commercial Proceedings (15 November 1965) [2010] ATS 23 (the Convention) applies, the proposed method of service must be permitted by the Convention: r 10.43(3)(c)(ii) of the Rules. 16 Australia acceded to the Convention on 15 March 2010. The Convention entered into force for Australia on 1 November 2010. The People's Republic of China is a party to the Convention and the Convention applies to the Special Administrative Region of Hong Kong. Bermuda is not a party to the Convention. 17 Article 10 of the Convention states: Provided the State of destination does not object, the present Convention shall not interfere with - (a) the freedom to send judicial documents, by postal channels, directly to persons abroad, … Article 10(a) is described as the "postal channel": see also Outline, Hague Service Convention, November 2009 at pgs 1, 2 and Chart 2. 18 Annexed to the Llorca Affidavit was an extract from the website of the Hague Conference on Private International Law (www.hcch.net) "China (Hong Kong) Other Authority (Art. 18) & practical information". That extract indicates that the Special Administrative Region of Hong Kong has no opposition to Art 10(a) of the Convention, which deals with service by post. 19 The DCOT proposes to serve Cheung Kong in Hong Kong by international registered post with return receipt: see [1] above. The Llorca Affidavit refers to a search of the information kept by the Registrar of Companies of the Hong Kong Special Administrative Region. That search was conducted via the online Integrated Companies Registry Information System (ICRIS). It disclosed that Cheung Kong was incorporated in Bermuda on 24 June 1996, with its principal place of business being located at 12/F Cheung Kong Center, 2 Queen's Road Central in Hong Kong. 20 The DCOT does not seek leave to serve the proceedings in Bermuda. Bermuda is not a party to the Convention. Instead, the DCOT seeks leave to serve the documents on Cheung Kong in Hong Kong on the basis that: 1. the ICRIS disclosed that it was a listed company; 2. its website (as at 17 July 2013) disclosed that it was listed on the Hong Kong Stock Exchange in July 1996; 3. the ICRIS disclosed that its principal place of business is 12/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong; 4. on its website (as at 17 July 2013), it describes itself as the "largest publicly listed infrastructure company in Hong Kong with diversified investments in Energy Infrastructure, Transportation Infrastructure, Water Infrastructure, Waste Management and Infrastructure Related Business" operating in Hong Kong, Mainland China, the United Kingdom, Australia, New Zealand and Canada" and as the "leading player in the global infrastructure arena"; and 5. on its website (as at 17 July 2013), it stated that its market capitalisation as of 30 June 2013 was "over HK$125 billion". 21 For the purposes of this ex parte application, I accept that the Special Administrative Region of Hong Kong has not opposed Art 10(a) of the Convention. I also accept that service by post is "permitted by" and "in accordance with" the Convention. Although service of legal or "judicial" documents would ordinarily be sent to the registered office of the company (cf, by way of example, s 109X(1)(a) of the Corporations Act 2001 (Cth) and s 356 of the Hong Kong Companies Ordinance (Cap.32)), in the circumstances, the DCOT will be granted leave to serve the documents by post on Cheung Kong by sending the documents by international registered post with return receipt to: 1. Cheung Kong's principal place of business at 12/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong; 2. the two named "Authorised Representatives" of Cheung Kong listed on ICRIS, namely Tak Chuen Edmond Ip and Hing Lam Kam, at the address listed against their name on ICRIS - 7/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong; and 3. the named secretary of Cheung Kong listed on ICRIS, namely Eirene Yeung at the address listed on ICRIS against the secretary's name - 16C, Block 27 Baguio Villa, Victoria Road, Hong Kong. 22 The Llorca Affidavit disclosed that Cheung Kong had retained an Australian solicitor in relation to these matters but that the solicitor did not have instructions to accept service of these proceedings. In the circumstances, it is appropriate that a copy of the documents also be sent to that solicitor.

CONCLUSION 23 For those reasons, the following orders will be made: 1. Pursuant to r 17.04 of the Federal Court Rules 2011 (Cth) (the Rules), the DCOT be granted leave to dispense with service on Cheung Kong of the interlocutory application filed on 18 July 2013 and for the hearing of that interlocutory application to proceed ex parte in the absence of Cheung Kong. 2. Pursuant to r 10.43 of the Rules, the DCOT be granted leave to serve on Cheung Kong in Hong Kong by international registered post with return receipt to Cheung Kong's principal place of business at 12/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong: (a) the Originating Application and Statement of Claim filed on 19 June 2013; (b) any amended Statement of Claim; (c) the DCOT's genuine steps statement filed on 19 June 2013; (d) the DCOT's Interlocutory Application filed on 18 July 2013; (e) the Affidavit of Maria Victoria Llorca sworn on 17 July 2013; (f) these reasons for decision; and (g) a copy of these Orders. 3. Pursuant to r 10.43 of the Rules, the DCOT be granted leave to serve the documents listed in paragraph 2 of this Order on Cheung Kong in Hong Kong by international registered post with return receipt to: (a) Tak Chuen Edmond Ip, Authorised Representative of Cheung Kong Infrastructure Holdings Limited, at 7/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong; (b) Hing Lam Kam, Authorised Representative of Cheung Kong Infrastructure Holdings Limited, at 7/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong; and (c) Eirene Yeung, Secretary of Cheung Kong Infrastructure Holdings Limited, at 16C, Block 27 Baguio Villa, Victoria Road, Hong Kong. 4. The DCOT forward a copy of the documents listed in paragraph 2 of this Order to Mr Michael Clough of King & Wood Mallesons, Level 50, Bourke Place, 600 Bourke Street, Melbourne, Victoria, 3000. 5. Cheung Kong file a Notice of Address for Service in accordance with r 5.02 of the Rules within 28 days after service of the Originating Application upon it in accordance with paragraph 2 of this Order. 24 Assuming service on Cheung Kong can be effected reasonably promptly, the matter will be listed for further directions on 30 August 2013. The costs of the interlocutory application are reserved. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

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