Deputy Commissioner of Taxation v Miraki

THE COURT ORDERS THAT:

1. Pursuant to rule 2.43 of the Federal Court Rules 2011 (Cth), the District Registrar pay the amount of $727,023.00 to the trust account of the intervener's solicitor.
2. Within seven days of the date of this order, the intervener's instructing solicitor notify the District Registrar of the trust account details into which the funds should be paid.
3. Paragraph 2 of the interlocutory application dated 20 February 2022 be dismissed.
4. The first respondent pay the intervener's costs of paragraph 1 of the interlocutory application.
5. The intervener pay the first respondent's costs of paragraph 2 of the interlocutory application.
6. There be no order as to costs incurred by the applicant in respect of the interlocutory application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 On 20 February 2023, the intervener filed an interlocutory application in these proceedings seeking orders that certain moneys presently held in the court be paid out to him. The court has power to make such an order at its discretion under rule 2.43 of the Federal Court Rules 2011 (Cth). 2 The background facts so far as relevant to this interlocutory application are as follows. 3 On 18 May 2021, a contract for sale was entered into by Ms Miraki with respect to property at Castle Hill. The sale price was stated to be $2,250,000. Ms Miraki was entitled to the net proceeds of sale of the property of $1,154,047.41, after mortgages were discharged and after disbursements were paid. 4 On 15 June 2021, an amount of $265,306 was paid into Court by Ms Miraki, upon settlement of the sale of 303/5 Belmont Avenue, Wollstonecraft NSW 2065. 5 On 11 August 2021, an amount of $1,154,047.41 was paid into Court by Ms Miraki, upon settlement of the sale of the Castle Hill property. 6 On 8 November 2021, the NSW Court of Appeal made orders in El-Cheikh v Miraki [2021] NSWCA 271, which included: 2. Give judgment for Mr El-Cheikh as against Ms Miraki in the sum of $450,000. 3. Declare that Mr El-Cheikh is entitled to 50% of the amount payable to Ms Miraki on sale of the Castle Hill property. 4. Declare that in calculating that amount, Ms Miraki should bear all liability for capital gains tax arising from any profit on the sale of the property. 7 Fifty per cent of the amount of $1,154,047.41 payable to Ms Miraki on sale of the Castle Hill property is $577,023.71. 8 On 19 April 2022, by consent of Ms Miraki and Mr El-Cheikh, the Court ordered that $300,000 be paid out of court to Mr El-Cheikh. 9 If the $300,000 paid out of court is taken to relate to the proceeds of sale which were paid into court from the sale of the Castle Hill property (not the Wollstonecraft property), Mr El-Cheikh is yet to receive $277,023.71 of the net proceeds realised from the sale of the Castle Hill property, which he is entitled to receive in accordance with Order 3 of the Court of Appeal's Judgment. At least $854,047.41 of what remains in court relates to the sale of the Castle Hill property. 10 Pursuant to Order 2 of the Court of Appeal's Judgment, Ms Miraki is also required to pay $450,000 to Mr El-Cheikh. 11 There is currently $1,119,353.41 held in court in relation to these proceedings. 12 Mr El-Cheikh seeks payment out of court of an amount of $727,023. This amount has been calculated as: $577,023 (the 50% share of the net sale proceeds) plus $450,000 (the judgment debt), less the $300,000 which has already been paid out of court. 13 The Commissioner, upon whose application the relevant freezing orders were made, neither consent to nor opposes that amount of $727,023 being paid out of court. 14 By her written submissions, Ms Miraki conceded that she could no longer maintain her objection to payment out, but referred the court to issues concerning the payment of capital gains tax on the Castle Hill property. 15 In oral submissions, senior counsel for Ms Miraki accepted that Ms Miraki ultimately had the obligation to meet the entirety of the capital gains tax liability for sale of the Castle Hill property by reason of the orders of the Court of Appeal and the loan agreement between the parties, in particular, clause 1A of the special conditions. 16 I am satisfied that appropriate notice has been given to parties who might be thought to have an interest in the moneys held in court, and that no response has been received asserting such an interest. I conclude that Mr El-Cheikh is entitled to the moneys which are held in court. 17 As to the issues concerning CGT, in circumstances where the Commissioner does not object to the moneys being paid out, it seems to me that the issue is essentially one of timing. If I were to adopt Ms Miraki's submission that the payment should not be made out of court until Ms Miraki has paid the CGT liability in some way, then the moneys could be held in court for a substantial period of time and potentially delayed by Ms Miraki's inaction. 18 Paragraph 2 of the intervener's interlocutory application is in the following form. 2. The first respondent is to provide the intervener with written notice (such notice to be given to the Intervener's solicitors) no later than 14 days before: a) Entering into any contract or arrangement involving the transfer, disposition, alienation or any other form of dealing in respect of any real property in respect of which the first respondent is the registered proprietor (whether alone or jointly with any other person or entity) or of which the first respondent has or claims an unregistered interest; b) Mortgaging, charging or encumbering in any way any real property described in paragraph 2(a); and c) Increasing the indebtedness secured over any of real property described in paragraph 2(a). 19 The intervener pointed out that it had costs orders in the Supreme Court proceedings, in the Court of Appeal proceedings, and in relation to an application for special leave which had been made by Ms Miraki to the High Court from the orders of the Court of Appeal. The intervener also indicated that he had costs orders in his favour arising out of this proceeding. None of the costs orders have crystallised in the form of a judgment in favour of the intervener. 20 It seems to me that paragraph 2 of the interlocutory application could have been brought as separate proceedings because they are in many ways unconnected with the freezing order granted in this proceeding in favour of the Commissioner of Taxation, and in many ways unconnected with the moneys now held in court. In circumstances where: (a) there is in fact no actual monetary sum owing; (b) the intervener can bring separate proceedings for what are in substance freezing orders; and (c) the existing freezing order, albeit in favour of the Commissioner, provides some protection to the intervener against Ms Miraki disposing or encumbering assets; it is not appropriate to grant the relief which is sought. 21 I should note that the intervener relied upon various matters in support of its application for the order in paragraph 2, including that Ms Miraki failed to comply until February 2023 with an order made by this court in May 2022 for repayment of certain funds paid out of court, that she had failed to tell the Commissioner about the sale of a property at 305 Wollstonecraft Road, and that she had failed to acknowledge Mr El-Cheikh's entitlement to funds held in this court. I have taken those matters into account, but nevertheless consider that the relief should not be granted for the reasons given. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley .