Deputy Commissioner of Taxation v Kocic

Consideration 4 Part 16 of the Federal Court Rules addresses pleadings. Rule 16.02 sets out the general rules concerning the content of pleadings. The failure to comply with any of the requirements in r 16.02(2) may found an application to strike out a pleading under r 16.21. I have regard to these and other rules in that Part. 5 It is well-established that the main purposes of a pleading is to give notice to the other party of the case it has to meet, to avoid surprise to that party, to define the issues at trial, to thereby allow only relevant evidence to be admitted at trial and for the trial to be conducted efficiently within permissible bounds: Thomson v STX Pan Ocean Co Pty Ltd [2012] FCAFC 15 (Thomson) at [13]. It is also well-established that pleadings are not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation: Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 293. 6 The Federal Court Rules in relation to pleadings requirements must be interpreted and applied considering s 37M of the Federal Court of Australia Act 1976 (Cth), which provides that the overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes according to law as quickly, inexpensively, and efficiently as possible: Chandrasekaran v Commonwealth of Australia (No 3) [2020] FCA 1629 (Chandrasekaran) at [101]; Australian Competition and Consumer Commission v NQCranes Pty Ltd [2021] FCA 1270 (NQCranes) at [14]. In that context, as I observed in NQCranes at [15], at least in contemporary times with the development of case management procedures, it has been recognised that courts do not take an "unduly technical or restrictive approach to pleadings", provided they fulfil their function: Thomson at [13], citing Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 at [4]-[8], and see Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 [2021] FCAFC 121; (2021) 287 FCR 388 at [152]. 7 In that context, and given the respondents' submissions, it is timely to recall some relevant principles. A fact is a material fact if it is essential to the cause of action: Australian Automotive Repairers' Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568 at [13]; cited in Sabapathy v Jetstar Airways [2021] FCAFC 25; (2021) 283 FCR 348 at [21]. There is not always a bright line between a material fact and particulars of a material fact: Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees Association of Western Australia [1987] FCA 135; (1987) 13 FCR 413 (Charlie Carter) at 417. There is a well-established distinction between particulars and evidence; a pleading contains the former, not the evidence to be relied on to prove the case: Palram Australia Pty Ltd v Rees [2013] FCA 649 at [31]. 8 Given the respondents' challenge to the amended pleadings, I make the following observations. 9 First, in challenging this amending pleading, the respondents repeated some of the submissions previously advanced in relation to the original pleading (the subject of the previous decision) and added others. The respondents submitted they were entitled to do so as this is an interlocutory application, and the earlier reasons given do not address all their arguments. 10 On the last occasion, the respondents alleged some specific deficiencies in the pleadings and in so doing, referred to the pleading provisions in the Federal Court Rules. However, underlying that submission and at its core, was the proposition that because of those deficiencies, they did not understand from the pleading the case they had to meet. I rejected that underlying submission. Given that the pleadings, with the observations I made as to repleading, were sufficient to fulfil their purpose, the purported deficiencies were not a basis sufficient to refuse leave to file. So much is evident from the judgment. Contrary to the respondents' submission, it was therefore not necessary to give detailed reasons for each individual complaint made. The observations made about repleading have been addressed by the Commissioner, and a repleaded amended statement of claim and originating application has since been provided. 11 Second, in any event, I have considered the respondents' submissions. Again, they contended that they did not know the case they had to meet. I do not accept that proposition. I remain of the view that the pleading, as drafted, sufficiently identifies the case. Rather, the approach taken by the respondents in challenging these pleadings was, at times, unduly technical and raised matters as being fundamental issues to the sufficiency of the pleading when that point, if correct, was available to have been made on the last occasion (in relation to the original pleadings). This reflects on whether the deficiency now claimed, was as obvious as contended, or rather, reflects an approach by the respondents as one searching for a deficiency or error. To take a simple example, the respondents submitted that the originating application does not expressly plead that the claim for relief under s 37A of the Conveyancing Act 1919 (NSW) is in the alternative to the preceding beneficial ownership claim. It was submitted that as a result, there is impermissible inconsistency in the pleading. As the respondents conceded in oral submissions, the statement of claim makes it clear that the s 37A claim is in the alternative, and the respondents are plainly aware of that fact. Further, this is also in the context where the applicant's submissions in relation to the original application, made its case clear. There is no matter of substance raised. 12 Further, the respondents criticised the structure of the statement of claim, focussing on the amendments in [135] and [136] as examples. Paragraphs [135] and [136] of the amended statement of claim are extracted as follows: Beneficial ownership - assets of Koch71 135. Further or in the alternative, Nedzad Kocic is and was at all relevant times, the beneficial owner of the properties pleaded at paragraphs [81], [87] and [93] above. Particulars a) See paragraphs [6], [10], [60], [82] to [84], [88] to [90], [94] to [96] above. b) Affidavit of Nedzad Kocic dated 8 December 2021 at paragraph [8]. c) Further particulars will be provided in due course. Beneficial ownership - assets of Koch Commercial 136. Further or in the alternative, Nedzad Kocic is and was at all relevant times, the beneficial owner of the properties pleaded at paragraphs [99], [105], [111] and [117] above. Particulars a) See paragraphs [13] to [18], [27] to [31], [33] to [35], [60], [100] to [102], [106] to [108], [112] to [114] and [118] to [123] above. b) Further particulars will be provided in due course. 13 The structure adopted by the Commissioner in drafting these paragraphs is consistent with that adopted in other paragraphs in the original statement of claim (the subject of my first decision), of which no complaint was then made. Those other paragraphs which use that same structure are also now challenged. The respondents also challenged the drafting technique used by the applicant, whereby certain paragraphs included cross-references to other pleaded paragraphs, submitting that was not an acceptable form of pleading as the respondents (and the Court) were, as a result, required "to go through the labyrinthine pathways of a statement of claim". Again, this technique appears in the original statement of claim, to which no challenge was raised. That complaints are now made which the respondents advance as basic and fatal to the pleading, in circumstances where they were not raised previously, tells against them impacting on the respondents' understanding of the case it has to meet. To put it another way, if those matters were ambiguous, caused confusion or were otherwise insufficient in the manner now contended, the complaints would have been expected to have been made to the previous statement of claim on the last occasion. 14 The respondents also made submissions in relation to certain words used in the statement of claim as being rolled-up conclusions or claims without a factual basis, such that the respondents do not understand the meaning of the terms or the case they have to meet. The terms "caused", "controlled", "beneficial ownership" and "funded" were identified. Again, many of those same terms appeared in the original statement of claim, without the current criticism. In any event, I do not accept the respondents' submission. It suffices to illustrate this, with reference to paragraph [10] of the statement of claim (a paragraph relied on by the respondents in this context), which states: "In the period 17 January 2012 to about 1 October 2022, Nedzad Kocic controlled Koch71". The respondents submitted that in relation to [10], they "did not know what that [pleading] means" or the factual basis for it. However, the preceding paragraphs detail, inter alia, that during that period, Mr Kocic was the sole director, secretary, and sole shareholder of Koch71: see [6] of the amended statement of claim. The pleading clearly identifies the applicant's case, and a sufficient basis to infer control. 15 Third, significantly, the respondents' submissions proceeded to analyse paragraphs of the statement of claim in a vacuum and criticise them in that context. The document must be considered holistically, not in a piecemeal fashion, an approach the respondents later conceded to during their submissions. 16 To illustrate, the respondents, adopting that approach and again using [135] and [136] as examples, criticised the matters there pleaded as conclusory and impermissible. Those paragraphs, using the same drafting technique as previously used, provided particulars which, inter alia cross-referenced other paragraphs in the statement of claim. The respondents submitted that by using that approach, material facts were not pleaded. 17 Pleading a conclusion may be sufficient in some circumstances to constitute a material fact: Charlie Carter at 417-418. Determining whether that is so, is case specific, to be adjudged by assessing whether the pleading satisfies its purpose. Taking [135] and [136] as the examples, properly read, and in context, the respondents have not established their fundamental proposition, that the statements are conclusory such as to be impermissible. Rather, those paragraphs plead material facts, of which particulars are then provided. Those particulars, by cross-referencing other pleaded paragraphs which plead facts, are sufficiently clear as to inform the respondents of the case they have to meet. They are not by reason of their cross-referencing, as the respondents contend, either burdensome or confusing. The respondents' reliance on Wheelahan v City of Casey (No 12) [2013] VSC 316 (Wheelahan) at [25(m)] does not advance their case. Although the Court there observed that "extensive cross-referencing of facts in a pleading may render parts of the pleading unintelligible", whether that is so depends on the pleading. It does not do so here. Rather, the cross-referencing used here enables the claim to be succinctly articulated while avoiding unnecessary repetition: Wheelahan at [49]. In this matter, the pleadings at [135] and [136], including their cross-references, with a considered reading, are readily understandable. 18 The respondents also relied on Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 (David Jones) at 110-115 to submit that the use of particulars to plead the facts was not sufficient, rather material facts must be pleaded. Contrary to the respondents' submission, although the pleading in David Jones contained particulars, its content was different to the one in contention here. The respondents referred to the discussion in David Jones about paragraph [15] in that pleading. That paragraph simply recited the terms of the relevant statutory provision alleging an arrangement or understanding, with the particulars factually describing the arrangement or understanding in question: David Jones at 110. The facts on which that arrangement or understanding was based were not in the statement of claim: David Jones at 114. On that basis, the Court concluded that "standing alone", paragraph [15] did not disclose a reasonable cause of action. That is not this case. In any event, simply because there is a reference to particulars in a statement of claim, a common technique used to provide further understanding of the case, does not necessarily render the statement of claim liable to be struck out. In Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466, von Doussa J observed that: A strict distinction between material facts and particulars has tended to become more obscured as the years have gone by. The tendency now is towards narrative pleading as there is a growing concern that pleadings according to traditional rules do not adequately make known to the Court and to the parties the nature of the opposing cases in complex matters. …Technical objections raised to pleadings on the ground of alleged want of form will be received with less enthusiasm today than in times past. Nevertheless the pleadings, including particulars stated therein, must be adequate to disclose the case which the opposing party must meet at trial, and to disclose a reasonable cause of action. 19 That said, if all that has occurred is that there is in substance material facts pleaded as particulars, it would "be a triumph of form over substance": see Plaintiff M83A/2019 v Morrison (No 2) [2020] FCA 1198 (Plaintiff M83A/2019) at [91]. Indeed, in this instance, where the pleading discloses the case the respondents have to meet, it would be contrary to the objectives of s 37M of the Federal Court Act if leave to rely on this pleading were to be refused (thus requiring the applicant to replead, a second time). However, as explained above, [135] and [136] of the statement of claim are themselves material facts, which inter alia refer in its particulars, other pleaded material facts in the statement of claim. I do not accept the submission that underlying facts are not pleaded. Further, contrary to the respondents' submission, it is unnecessary to repeat those facts in detail in [135] and [136] of the applicant's statement of claim, given the cross-referencing is clear and sufficient. The same reasoning applies to the other paragraphs of the pleadings the respondents criticise on this basis. 20 It was also submitted in the alternative, that whenever a claim is based on a case of beneficial ownership (as in [135]-[136]), it is necessary to identify in the pleading whether it is based on an express, resulting, or constructive trust, which this pleading fails to do. I do not agree that such specific identification is required. The factual basis of the claim is sufficiently pleaded such that the respondents are aware of the case they have to meet. 21 Fourth, although not articulated in their written submissions, the respondents submitted orally that in relation to the s 37A and beneficial ownership claims, there is no reasonable cause of action pleaded. A pleading must disclose a reasonable cause of action, meaning one which has a chance of success having regard to the pleaded allegations: Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] FCAFC 97; (2012) 203 FCR 325 at [42]-[43]; Chandrasekaran at [108]-[111]; Wride v Schulze [2004] FCAFC 216 at [25]. A cause of action cannot be struck out merely on the basis that it appears to be weak: Chandrasekaran at [108]. For a plaintiff to be denied the opportunity to place his or her case before the court upon the basis that no reasonable cause of action is demonstrated, a high degree of certainty is required about the ultimate outcome of the proceeding, if it were allowed to go to trial in the ordinary way: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [57]. I do not accept the respondents' submission. Properly read, the statement of claim pleads reasonable causes of action. The merit of those claims is a matter for the substantive hearing. 22 The respondents further contended that the movement of properties by Mr Kocic referred to in the s 37A claim is alleged to have occurred before any assessment of tax liability occurred, and therefore, it could not be established that the first respondent did so with the intention of defeating a creditor, being the Commissioner of Taxation. It was submitted, therefore, there is no reasonable cause of action. I do not agree. As the respondents conceded, an intention can be inferred: see Kocic (No 2) at [9]. On the matters pleaded, it could be inferred that the movement of properties in the circumstances in which they occurred, was done to defeat creditors. Given the amount of tax liability outstanding, it could be inferred that included his liability to the Commissioner to pay taxes. That is the applicant's case, and the facts on which it relies is evident in the statement of claim. I note that unlike his other submissions, the first respondent does not suggest he does not understand that to be the case advanced. 23 Fifth, the respondents' challenge to [79]-[80] of the statement of claim relating to an alleged breach of the freezing order, is again a submission made for the first time in this application, when those paragraphs were pleaded in the same form in the original version. The respondents submitted that those paragraphs have no relevance and are, or will become, a distraction. I disagree. On the face of the pleadings, the apparent relevance, as described by the Commissioner, relates to proof of the respondents' intention. 24 Finally, the respondents submitted that the Commissioner was required to plead various additional matters. It is important to recall that the issue on whether leave is granted, is not whether the pleading could have been drafted differently (or could have used a different technique). It is not necessary to refer to each submission or paragraph of the pleadings complained of. I have considered each. They do not provide a basis to deny the applicant leave to rely on these pleadings. 25 As explained above, in contemporary times it has been recognised that courts do not take an "unduly technical or restrictive approach to pleadings", provided they fulfil their function: Thomson at [13]. Pleadings must fulfil the basic function of identifying the issues between the parties, disclosing an arguable cause of action or defence, and ensuring that parties are apprised of the case to be met: Plaintiff M83A/2019 at [50]; Thomson at [13]. This pleading is to be assessed against the purpose it is to serve. That assessment is necessarily case specific. That is the issue for determination. I am satisfied this pleading fulfils that purpose.

Conclusion 26 I grant leave to the Commissioner to amend the originating application in the manner contended, and to rely on the statement of claim. 27 The interlocutory application also sought orders pursuant to r 9.05 of the Federal Court Rules, to join various parties to the proceedings. This has not been addressed pending resolution of this application. Leave having been granted in relation to the amended originating application and statement of claim, I assume there is likely to be no issue as to joinder. As I stated in Kocic (No 2) at [30], the real issue in dispute is whether the pleading could be filed, because if that occurred, then the parties the Commissioner sought to be joined should in fact be joined. At that time, I observed that neither party took issue with that proposition. The relevant principles are there set out: see Kocic (No 2) at [15]-[16]. Although there is now one further party the Commissioner seeks to join in addition to those sought at the time of that statement, the reason for that is explained in the affidavit of Ms Chan. I assume that the parties' position as to joinder remains. Regardless, the parties are to communicate their position to chambers within seven days of this judgment being delivered. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.

SCHEDULE OF PARTIES NSD 1201 of 2021 Respondents Ninth Respondent: ARABIAN OWL PTY LTD ACN 151 186 560