Deputy Commissioner of Taxation v Galaxy S.à r.l. SICAR

The Deputy Commissioner's claim 5 The Deputy Commissioner's claim against Galaxy can be summarised as follows. It is alleged that: (a) Galaxy was assessed to pay income tax in the amount of $48,624,615 for the year ended 30 June 2012. A notice of assessment was issued. The amount has not been paid. (b) By reason of its failure to pay the income tax, Galaxy became liable to pay the general interest charge pursuant to s 5-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and Pt IIA of the Taxation Administration Act 1953 (Cth) (TAA 1953). The general interest charge calculated up to and including 13 February 2017 was $22,034,732. (c) Further, Galaxy failed to give the Commissioner of Taxation (the Commissioner) an income tax return for the year ended 30 June 2012 on or before the day on which the return was required to be given to the Commissioner, being 28 February 2013, pursuant to s 161(1) of the Income Tax Assessment Act 1936 (Cth). By reason of this failure, Galaxy became liable to pay certain penalties, being an amount of $4,250 (the subject of a notice dated 27 May 2016) and an amount of $36,468,461 (the subject of a notice dated 30 May 2016), plus general interest charges for late payment of these penalty amounts.

Applicable principles 6 Rule 10.43 of the Federal Court Rules 2011 relevantly provides: (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. 7 Rule 10.42 relevantly provides: Subject to rule 10.43, an originating application, or an application under Part 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. … 1 Proceeding based on a cause of action arising in Australia … 15 Proceeding seeking any relief or remedy under an Act, including the Judiciary Act 1903 8 Rule 10.44 relevantly provides: (1) A party may apply to the Court for leave to serve a document filed in or issued by the Court, other than 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. … (2) An application under subrule (1) must be accompanied by an affidavit that includes the information mentioned in paragraphs 10.43(3)(a) to (c). 9 I referred to the relevant principles recently, in Australian Competition and Consumer Commission v Apple Pty Ltd [2017] FCA 416. For ease of reference, I set out again, below, that summary of the principles. 10 Rule 10.43(4)(c) refers to the party having a prima facie case for all or any of the relief claimed in the proceeding. This requirement has been described as "not particularly onerous": Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218 (Yellow Page Marketing) at [25] per Gordon J. In Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 6) (2010) 270 ALR 504, Bennett J said in relation to the predecessor provision (at [8]): Establishing a prima facie case for the relief claimed for the purposes of O 8 r 3(2) of the FCR should not call for a substantial inquiry. A prima facie case is made out where, upon a broad examination rather than an intense scrutiny of the material before the court, inferences are shown to be open which, if translated into findings of fact, would support the relief claimed: Western Australia v Vetter Trittler Pty Ltd (in liq) (rec and mgr apptd) (1991) 30 FCR 102 at 110; 4 ACSR 795 at 802-3 per French J; Sydbank Soenderjylland (A/S) v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549; 149 ALR 134 at 142-3; the Full Court in F Hoffman-La Roche at [17] and [96]-[97] per Carr J. The relevant question was put in the following terms by Lee J in Century Insurance (in prov liq) v New Zealand Guardian Trust Ltd [1996] FCA 376, a formulation approved by the Full Court (in Ho v Akai Pty Ltd (in liq) [2006] FCAFC 159 at [10] (Ho)): What the court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the court's processes to resolve it and whether causing a proposed respondent to be involved in the litigation in the court in Australia is justified. 11 The applicant need only show a prima facie case in respect of part of, rather than the entirety of, its claim: Yellow Page Marketing at [25]. 12 The Court has residual discretion to refuse leave to serve out even if the requirements of the above rules have been met: Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd (2015) 331 ALR 108 at [66] per Edelman J and the cases there cited.

Application of principles to the present case 13 Rule 10.43(3) requires the application for leave to serve out to be accompanied by an affidavit setting out certain matters. In the present case, the application is supported by an affidavit of Fiona Biltris, a public servant employed by the Australian Taxation Office, dated 16 February 2017, and three affidavits of Daniel James Slater, a solicitor employed by the firm acting for the Deputy Commissioner. These affidavits set out the required matters. It is proposed to serve the following documents on Galaxy in Luxembourg: (a) form 26: 'summary of documents to be served'; (b) the originating application; (c) the amended statement of claim; (d) the affidavit of Fiona Biltris affirmed on 16 February 2017; and (e) translations of the documents listed above at (a) to (d) into French, being one of the official languages of Luxembourg. 14 The proposed method of service is to transmit the documents to the designated competent authority for Luxembourg (being the Public Prosecutor at the Superior Court of Justice) for service by a bailiff. The third affidavit of Mr Slater states that the proposed method of service is permitted by articles 2 to 5 of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (the Hague Convention), to which Australia and Luxembourg are parties. 15 Turning then to the requirements of r 10.43(4), I am satisfied that each of these requirements is established. First, the Court has jurisdiction in the proceeding. This is conferred by s 39B(1A)(c) of the Judiciary Act 1903 (Cth), which confers original jurisdiction on the Court in any matter arising under any laws made by the Commonwealth Parliament (other than in respect of certain criminal proceedings). This proceeding concerns matters arising under the tax legislation referred to above. Secondly, the proceeding is of a kind mentioned in r 10.42. In particular, it is of a kind mentioned in items 1 and 15 of r 10.42: see Deputy Commissioner of Taxation v McManus (2015) 101 ATR 567; [2015] FCA 959 at [4] per Pagone J. 16 Thirdly, the affidavit material establishes that the Deputy Commissioner has a prima facie case for the relief claimed against Galaxy in the proceeding. In particular, the affidavit of Ms Biltris states as follows at [5]-[18]: 5. On 30 May 2016 the Commissioner of Taxation (Commissioner) issued a notice of assessment for income tax in respect of the year ended 30 June 2012 (Notice of Assessment). Annexed to this affidavit and marked "FB1" is a copy of the Notice of Assessment. 6. The Notice of Assessment was served on the Respondent on or about 30 May 2016 pursuant to section 174 of the Income Tax Assessment Act 1936 (Cth) and the Income Tax Regulations 1936. 7. The Respondent failed to pay the Notice of Assessment on or before the due date specified in the Notice of Assessment. 8. By reason of the failure to pay income tax by the relevant due date the Respondent became liable to pay the general interest charge pursuant to section 5-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and Part IIA of the TAA 1953. Failure to Lodge an Income Tax Return 9. The Respondent failed to give the Commissioner an income tax return for the year ended 30 June 2012 (Return) on or before the day on which the return was required to be given to the Commissioner. 10. By reason of the failure to give the Commissioner the Return under subsection 161(1) of the ITAA 1936, the Respondent became liable to pay a penalty pursuant to section 286-75 in Schedule 1 to the TAA 1953 (Failure to Lodge Penalty). 11. On 27 May 2016 a notice of the administrative penalty was served on the Respondent pursuant to section 298-10 in Schedule 1 to the TAA 1953 (Notice). Annexed to this affidavit and marked "FB2" is a copy of the notice. 12. The Respondent failed to pay the Failure to Lodge Penalty on or before the due date specified in the Notice. 13. By reason of the Respondent's failure to pay the administrative penalty on or before the due date specified in the notice, the Respondent became liable to pay the general interest charge pursuant to section 298-25 in Schedule 1 and Part IIA of the TAA 1953. Administrative Penalty 14. By reason of the Respondent's failure to give the Commissioner the Return on or before the day on which it was required to be given, [the Respondent] became liable to pay a penalty pursuant to section 284-75 of Schedule 1 to the TAA 1953 (administrative penalty). 15. On 30 May 2016 the Commissioner issued a notice of administrative penalty (Administrative Penalty Notice) to the Respondent in accordance with section 298-10 of Schedule 1 to the TAA 1953. Annexed to this affidavit and marked "FB3" is a copy of the Administrative Penalty Notice. 16. The Respondent failed to pay the administrative penalty on or before the relevant due date. 17. By reason of the Respondent's failure to pay the Statement Penalty by the relevant due date, the Respondent became liable to pay the general interest charge pursuant to section 298-25 of Schedule 1 to the TAA 1953 and Part IIA of the TAA 1953. 18. Now produced and shown to me and marked with "FB4" is a certificate in writing pursuant to section 255-45 of Schedule 1 to the TAA 1953 under the hand of a Deputy Commissioner which states that, as at 16 February 2017: (a) Galaxy S.À R.L. SICAR has a tax-related liability; (b) the notice of assessment for the year ended 30 June 2012 is taken to have been served on Galaxy S.À R.L. SICAR under a taxation law; (c) the notice of penalty for failure to lodge documents on time for the year ended 30 June 2012 is taken to have been served on Galaxy S.À R.L. SICAR under a taxation law; (d) the notice of assessment of penalty for failing to provide a document for the year ended 30 June 2012 is taken to have been served on Galaxy S.À R.L. SICAR under a taxation law; (e) the sum of $109,202,784.91 is, as at 16 February 2017, a debt due and payable by Galaxy S.À R.L. SICAR to the Commonwealth of Australia. 17 It follows that the preconditions for making an order for service outside Australia are established. In my view, it is appropriate in the circumstances to make such an order. A matter exists that warrants the use of the Court's processes and justifies the involvement of a foreign respondent. 18 Accordingly, it is appropriate to grant leave to the Deputy Commissioner to serve the court documents referred to above on Galaxy in Luxembourg in accordance with the Hague Convention. I will make orders to this effect. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.