Deputy Commissioner of Taxation v Gould

DAVIES J: 1 The Deputy Commissioner of Taxation (DCT) has judgment against the respondent (the taxpayer) for unpaid tax liabilities in the amount of $15,213,916.14. On 15 February 2019, the Court made orders by consent that the taxpayer attend court to be examined as to whether any and, if so, what debts are owing to him and whether he has any and, if so, what other property or other means of satisfying the judgment (the examination). The examination will be conducted by a Registrar of this Court, exercising the power conferred under r 41.10 and item 227 of Pt 3.7 of Sch 2 of the Federal Court Rules 2011 (Cth) (FC Rules). The examination is to be conducted on 16 and 23 March 2020. 2 The taxpayer has indicated that he will seek a certificate under s 128 of the Evidence Act 1995 (Cth) (Evidence Act) in respect of evidence he gives at the examination. Section 128 of the Evidence Act relevantly provides: (1) This section applies if a witness objects to giving particular evidence, or evidence on a particular matter, on the ground that the evidence may tend to prove that the witness: (a) has committed an offence against or arising under an Australian law or a law of a foreign country; or (b) is liable to a civil penalty. (2) The court must determine whether or not there are reasonable grounds for the objection. (3) Subject to subsection (4), if the court determines that there are reasonable grounds for the objection, the court is not to require the witness to give the evidence, and is to inform the witness: (a) that the witness need not give the evidence unless required by the court to do so under subsection (4); and (b) that the court will give a certificate under this section if: (i) the witness willingly gives the evidence without being required to do so under subsection (4); or (ii) the witness gives the evidence after being required to do so under subsection (4); and (c) of the effect of such a certificate. (4) The court may require the witness to give the evidence if the court is satisfied that: (a) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and (b) the interests of justice require that the witness give the evidence. … 3 An issue has arisen as to whether the Registrar would have the power to grant a s 128 certificate in respect of evidence given by the taxpayer at the examination. Whether the Registrar has the power depends on whether the Evidence Act applies to an examination ordered under r 41.10(1) of the FC Rules. 4 Rule 41.10(1) of the FC Rules empowers the Court to make an order in aid of the enforcement of a judgment of the Court as if the judgment was a judgment of the Supreme Court in the relevant State or Territory in which the judgment was obtained, which, in this case, was New South Wales. Section 108 of the Civil Procedure Act 2005 (NSW) relevantly provides that the Supreme Court of New South Wales may order a person bound by a judgment to attend before the Court and be orally examined on the "material questions", namely what debts are owed to the judgment debtor and what property that person has or other means they have of satisfying the judgment. Part 38 of the Uniform Civil Procedure Rules 2005 (NSW) stipulates how an application for an examination order is to be made and the process for the examination of a judgment debtor in the Supreme Court of New South Wales. 5 By s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) (FC Act) and item 227 of Pt 3.7 of Sch 2 to the FC Rules, the Registrar may exercise the power in r 41.10(1) of the FC Rules. Pursuant to s 35A(3) of the FC Act, r 41.10(1) applies to the exercise of the power prescribed by r 41.10 as if the reference in that rule to "the Court" was a reference to the Registrar. Further, the examination which the Registrar will conduct is a "proceeding" in the Federal Court, as that term is defined for the purposes of the FC Act: s 4, FC Act. 6 A certificate under s 128 of the Evidence Act can only be given by a "court". Section 35A of the FC Act has no application in this context because issuing a certificate under s 128 of the Evidence Act is not the exercise of a power of the Court prescribed by the FC Act or the FC Rules. The term "court" is not defined in the Evidence Act but, relevantly, s 4(1)(b) of the Evidence Act prescribes that the act applies to "all proceedings in a federal court". Part 1 of the Schedule to the Evidence Act provides that "a federal court" includes, relevantly, any court created by the Parliament (other than the Supreme Court of a Territory) and "a person or body (other than a court or magistrate of a State or Territory) that, in performing a function or exercising a power under a law of the Commonwealth, is required to apply the laws of evidence". The question therefore is whether the examination to be conducted by the Registrar is, within the terms of s 4 of the Evidence Act, a "proceeding in a federal court". 7 There has been no case which has considered this particular issue, but there is authority that s 128 of the Evidence Act does not apply to an examination under s 81 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). In Griffin v Pantzer [2004] FCAFC 113; 137 FCR 209 (Griffin v Pantzer), the Full Court (per Allsop J (as his Honour then was), with whom Ryan and Heerey JJ agreed) accepted that the word "proceedings" can have a wide scope but held that a "proceeding" to which the Evidence Act applies is a proceeding in which there are witnesses and evidence is adduced under the rules of evidence. Allsop J reasoned at 258-9 [198]-[202], [204]: The word "proceedings" is capable of wide and flexible application. In the Evidence Act, however, the proceedings contemplated are those conducted by a court, or by a person or by a body who or which is required to apply the law of evidence. The whole Evidence Act is concerned with the regulation of the rules of evidence in proceedings in which there are parties, and in which there are witnesses. Chapter 2 deals with adducing evidence, chapter 3 with admissibility, chapter 4 deals with proof and chapter 5 with miscellaneous matters. Within chapter 3, Pt 3.10 deals with privileges. Division 2 deals with religious confessions and the privilege against self-incrimination. As can be seen from the terms of s 128, and its place within Pt 3.10, the privilege being dealt with is that of a witness in legal proceedings to which the Evidence Act and the rules of evidence otherwise apply. … An examination under s 81 is in the nature of an interrogation supervised by the Court, the Registrar or a magistrate… His Honour disagreed with the view expressed by Kiefel J (as her Honour then was) in Re Interchase Corporation Ltd (1996) 68 FCR 481 (Re Interchase Corp) that an examination under s 596B of the Corporations Law was a proceeding for the purposes of the Evidence Act. Allsop J observed at 260 [206] that: … The examination may be a proceeding for the Federal Court of Australia Act. It does not follow that it is a proceeding in which it is intended that evidence be adduced from witnesses… (Italics in original) Subsequent to Griffin v Pantzer, Barrett J in Re Strarch International Pty Ltd (in liq) [2005] NSWSC 583 at [27] applied Re Interchase Corp to hold that the Evidence Act applied to a liquidator's examination under s 596A of the Corporations Act 2001 (Cth) (Corporations Act). However, it appears that the Court was not taken to Griffin v Pantzer, as there is no reference to that decision. In Meteyard v Love [2005] NSWCA 444; 65 NSWLR 36, the New South Wales Court of Appeal referred at 56 [74]-[75] to the conflicting authorities but found it unnecessary in that case to resolve the question. 8 In my view, the reasoning of Allsop J is not apt to an examination conducted pursuant to an order for examination by a judgment creditor entitled to enforce a judgment. First, although an examination conducted pursuant to r 41.10 is inquisitorial in the sense that the purpose of the examination is to investigate the judgment debtor's ability to satisfy the judgment debt, the purpose of the examination is to aid enforcement by a judgment creditor of a judgment of the Court obtained in an inter partes suit or action between them. Secondly, the nature of such an examination can properly be said to constitute "the adducing of evidence" as a step in the suit or action between the parties and in which the judgment debtor is properly to be regarded as a "witness". Thirdly, a liquidator's examination under the Corporations Act or trustee's examination under s 81 of the Bankruptcy Act are not analogous to an examination by a judgment creditor of a judgment debtor. In Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd (No. 2) [2015] NSWSC 1857, Adamson J at [32]-[34] drew the following points of distinction: … [an examination by a liquidator under the Corporations Act] is an investigative tool to inform a liquidator as to a range of matters, including as to potential causes of action and where assets of the company might be located, whereas [an examination by a judgment creditor under s 108 of the Civil Procedure Act] is an adjunct to the enforcement of a judgment of the Court by a judgment creditor. … The "material questions" in s 108(5) of the Civil Procedure Act relate only to the means whereby the judgment debtor can satisfy the judgment. The answers to the material questions are designed to inform the judgment creditor as to what, if any, enforcement action, such as a garnishee order, can be taken; or whether, there being no real prospect that the judgment debtor can satisfy the judgment, the judgment creditor ought move to wind up or bankrupt the judgment debtor. The purposes of a liquidator's examination are much broader. Although the liquidator may conduct an examination to ascertain the assets of a company in liquidation, he or she may also wish to conduct an examination to ascertain a range of matters, including whether the company has engaged in insolvent trading; whether there are actions which may be brought against the directors; and so on. These points of distinction highlight that an examination by a judgment creditor of a judgment debtor is conducted in inter partes litigation where the purpose is to ascertain the judgment debtor's capacity to satisfy the judgment debt. The examination is a proceeding in which it can be said that it is intended that evidence be adduced from the judgment debtor as an aid to enforcement of the judgment debt. 9 In the circumstances, I consider that it can properly be said that the Registrar, in conducting the examination, is exercising a power under a law of the Commonwealth in which the laws of evidence are required to be applied. Accordingly, the examination is a "proceeding in a federal court" within the meaning of the Evidence Act, and the Evidence Act applies to the conduct of the examination. Thus, "the court" in s 128 of the Evidence Act does include a Registrar exercising the power to conduct such an examination and it follows that a Registrar has the power to grant a certificate under that section in respect of evidence to be given by the judgment debtor. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.

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