Deputy Commissioner of Taxation v Vasiliades

REASONS FOR JUDGMENT 1 Mrs Vasiliades has applied to set aside judgment given on 5 May 2015 and orders made on 10 July 2015. She also seeks to have stayed orders made on 7 August, or alternatively that the time by which the registrar be permitted to act pursuant to paragraphs 2 and 3 of those orders, be extended to the hearing and determination of the application to set aside the May judgment and the July orders. The Commissioner opposes the applications. The application for interim relief to delay giving effect to the 7 August orders was dismissed on 25 August 2015 and the parties were informed that these reasons would be published on 28 August 2015. The principal application to set aside the May judgment and the July orders was set down for trial on 1 December 2015 on an estimate of 1 day. 2 The background to the applications by Mrs Vasiliades can be seen in the reasons for judgment given on 5 May 2015 (Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412) and the reasons for the orders made on 7 August 2015 for substituted performance (Deputy Commissioner of Taxation v Vasiliades [2015] FCA 854). Judgment was given on 5 May 2015 following a hearing at which Mrs Vasiliades was not present or represented. On 10 July 2015 orders were made at another hearing at which Mrs Vasiliades was neither present nor represented, in which she was ordered to direct Macquarie Bank to pay a sum of money to the Commissioner. The July orders were not complied with by Mrs Vasiliades and on 7 August 2015 orders were made permitting a registrar to give the direction to the bank which she had been required to give. 3 The applications by Mrs Vasiliades to set aside the May judgment and July orders, and for interim relief to delay the effect of the 7 August orders, came before the Court on 25 August 2015 for directions. Those acting for Mrs Vasiliades expressly submitted that they did not intend or comprehend the hearing on 25 August 2015 to be of the principal application that the May judgment and the July orders be set aside. However, it was necessary to consider on that day her application for interim relief to delay giving effect to the orders made on 7 August 2015 which authorised a registrar of this Court to give the instructions to Macquarie Bank which Mrs Vasiliades had been ordered on 10 July 2015 to give to Macquarie Bank to give effect to the judgment given on 5 May 2015. 4 It is not clear on what basis the application by Mrs Vasiliades was made for the interim relief to delay the effect of the 7 August orders by stay or variation. Section 29(1)(a) of the Federal Court of Australia Act 1976 (Cth) permits the Court to stay orders where an appeal has been instituted but in this case no appeal has been instituted. The Court has power to vary an order that is interlocutory under r 39.05(c) of the Federal Court Rules 2011 (Cth) and has power under r 41.03 to stay an order. I have some doubt, however, about whether the orders made on 7 August 2015 were interlocutory in the sense contemplated by r 39.05(c), but the Commissioner did not maintain a submission that the orders of 7 August 2015 could not be varied under r 39.05(c). Rule 41.03 permits a stay of orders and provides: A party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed. The Commissioner did not contend that the 7 August orders could not be stayed under r 41.03. The Commissioner did contend, however, that the effect of the 7 August orders should not be deferred either by variation or by stay. He submitted that Mrs Vasiliades had the burden of demonstrating that the interim relief she sought should be granted and that she had not done so. The Commissioner contended that the application to set aside the May judgment and the July orders have no reasonable prospects of success, that Mrs Vasiliades has not provided a sufficient explanation for not having participated at the hearing resulting in judgment, that she had not explained the delay in seeking to set aside the May judgment and the July orders, and that there was no real risk that Mrs Vasiliades would suffer prejudice or damage if the 7 August orders are not delayed which cannot be redressed by a successful application to set aside the judgment and orders. 5 In Flight Centre Limited v Australian Competition and Consumer Commissioner [2014] FCA 658 Rangiah J set out some principles which may be relevant in this context although his Honour was considering them in a different context. At [9] his Honour identified the following general principles which may usefully be considered although it is important to bear in mind his Honour was not concerned with a stay or variation of inter parte orders but with an application to stay an order imposing a pecuniary penalty where different considerations may be relevant. At [9] his Honour identified the following general principles: (a) There is an onus on the applicant to demonstrate a proper basis for a stay that will be fair to all parties. (b) There is a prima facie assumption that the judgment appealed from is correct. (c) There is a prima facie assumption that the Court should not deprive a litigant of the benefit of a judgment in its favour. (d) The Court has a broad discretion as to whether to grant a stay, and it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances. It is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the exercise of discretion in its favour. (e) The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case. (f) A stay will usually be granted if there is a real risk that the applicant will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal. (g) In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. It is for Mrs Vasiliades to demonstrate a proper basis for a stay that will be fair to all the parties in circumstances where judgment has been given against her. A party should not be deprived of the benefit of a judgment unless the Court is satisfied by the unsuccessful party that justice requires that the successful party be delayed in enforcing the benefit of the judgment. The prospects of success on the principal application, her conduct in the proceedings thus far, the explanations she offers for that conduct and the prospect of real prejudice that cannot be compensated, are all matters which bear upon the exercise of any discretion to grant the indulgence she seeks. 6 Mrs Vasiliades appeared on 7 August 2015 by counsel and a solicitor to seek an adjournment of the hearing which had been set down for that day. The adjournment application had been made without notice or material to justify the grant of an adjournment and the solicitor instructing counsel was not yet on record as acting on her behalf. The application for an adjournment was refused and the Commissioner's application for substituted performance was heard and granted upon his counsel informing the Court that a successful application for substituted performance would not be relied upon as an additional ground to resist any application to set aside the May judgment and July orders if such an application was subsequently made and if it would otherwise have been successful. An indication was given to those appearing for Mrs Vasiliades, however, that any application to set aside the May judgment and the July orders was to be made by 21 August 2015 and to be made returnable for directions at 9:30am on 25 August 2015. On 20 August 2015 an application was made to set aside the May judgment and July orders and was made returnable for directions on 25 August 2015. The application, however, also sought the interim relief to delay by stay or variation the effect of the 7 August orders for substituted performance. The material relied upon was an affidavit by Mr Salinger (Mrs Vasiliades' solicitor) and a draft affidavit of Mrs Vasiliades prepared by Mr Salinger on her instructions which Mr Salinger deposed to believe to be true and correct. The Commissioner did not oppose reliance upon the draft affidavit for the interlocutory relief application. 7 It is desirable to consider first the explanation given by Mrs Vasiliades for her not appearing or participating at the hearings in which the May judgment and July orders were made. The explanation to which her present lawyers point for Mrs Vasiliades not having participated in these proceedings, and for the delay in bringing the application to set aside the judgment, is said to be "that she was, by implication, persuaded by her husband's decision not to defend the proceeding and moreover [that] she did not fully understand the implications of withdrawing her representation from solicitors who were instructed to act". Mrs Vasiliades had been represented by McNab & McNab in these proceedings for about 4 months until they ceased to act for her in February 2015. She was represented by a solicitor and counsel in contesting freezing orders when the proceedings first commenced but consciously elected not to participate in the Commissioner's claim for declarations in respect of the proceeds of the sale of the property. The draft affidavit contains a statement that Mrs Vasiliades did not turn her mind properly "to the consequences of being unrepresented" but otherwise indicates that she had also obtained "separate advice from Ron Jorgenson a partner at Rigby Cooke (another law firm) and John Paolacci [her] accountant at Moore Stephens and a partner of Shine Wing". The draft goes on to say: 11 I did not properly turn my mind to the consequences of being unrepresented. I did not believe I had any active involvement in the matter as I did not owe any money to the Deputy Commissioner of Taxation. It wasn't really clear to me. Notwithstanding I told my accountant that he should continue to accept service on my behalf as I still wanted to know what was going on. John Paolacci has been our accountant for over 20 years and was fully aware of the financial position with the Towers Road property. 12 John Paolacci has been the family accountant for 15 years. He has always advised on all financial matters. He has assisted our family at all times and provided critical information to the ATO and any lawyers so retained by us. John Paolacci continued to accept service of any proceedings when McNab ceased to act on 15 February or thereabouts. We were then living permanently overseas. 13 John Paolacci is still accepting service and acts for me as a post office box. I have now formally instructed Jeffrey P Salinger & Associates to act on my behalf and have informed Paolacci that all documents should be formally forwarded to Jeffrey Salinger for him to peruse and provide immediate advice. None of this, in my view, provides an adequate explanation sufficient to deprive the Commissioner of the benefits of judgment until the hearing of her application to have set aside the May judgment and July orders. It is clear from the account given by Mrs Vasiliades that she had made a decision not to participate in the hearing which resulted in the May judgment and July orders. The statement that she did not turn her mind to the consequences of being unrepresented at the hearing may be an accurate statement but does not explain why she failed to make a properly informed decision in the context of court proceedings having been instituted in which she had been actively represented by solicitors and on which she subsequently sought further advice from others. It was incumbent upon her to turn her mind to the consequences of the decision she was making and her statement that she did not turn her mind properly to the consequences does not explain why she did not do so. Mrs Vasiliades did not file any affidavit from any of those who had been advising her or who had been acting on her behalf at the time when she decided not to participate in the hearings that resulted in the May judgment and the July orders. 8 An additional reason to reject the application for interim relief is that there was no evidence of any kind with the application upon which the Court could form a view about the length of time a delay would be required before the principal application could be heard. There was evidence that Mrs Vasiliades was in New York and that it would take time for the draft affidavit to be finalised. There was also material indicating that she would rely, in her application to set aside the May judgment and July orders, upon an affidavit sworn by Mr Vasiliades as well as her draft affidavit when finalised. There was no material filed with the application for interim relief, however, suggesting that the principal application could be heard quickly or whether Mr and Mrs Vasiliades, as the deponents of the affidavits, would be available for cross-examination. Indeed, counsel for Mrs Vasiliades foreshadowed during the course of the hearing of the application for interim relief that an application would be made for the evidence of Mr and Mrs Vasiliades to be given by video evidence. In that context, counsel conceded candidly, and correctly, that he did not have instructions about whether either would be unwilling to be present in Australia to give evidence if their application to give evidence by video were unsuccessful and, if so, whether or when they could do so. The omission of such information is significant in this case because one of the bases upon which Mrs Vasiliades will seek to set aside the judgment and orders is the evidence of her husband and herself about their actual intentions which is likely to be the subject of cross-examination (if not inevitable) and is likely to involve issues about credit. 9 It was asserted for Mrs Vasiliades that interim orders would preserve the status quo and would not prejudice the Commissioner. However, the "status quo" in the context of an application to set aside judgment is not the same as the status quo of parties before judgment. In the former, unlike the latter, there has been an adjudication of rights and the successful party is entitled to the benefits of the adjudication. Furthermore, in this case, the Commissioner pointed to the prejudice he would suffer from not having the benefit of the 7 August orders until the hearing and determination of the application to set aside the May judgment and July orders because the money in the Macquarie Bank account was not bearing interest. 10 The foregoing reasons were sufficient to reject the application for interim orders to delay giving effect to the orders made on 7 August 2015 and, therefore, it is not necessary to consider the merits of the case which Mrs Vasiliades seeks to advance to set aside the May judgment and July orders. For present purposes it is sufficient to note that the case Mrs Vasiliades proposes to put to set aside the May judgment and July orders does not have such force to outweigh factors weighing against making the interim orders she seeks. Mrs Vasiliades proposes to rely upon two matters in seeking to set aside the judgment. The first is her contention that the evidence establishes an advancement inconsistent with the basis upon which judgment was granted in favour of the Commissioner. The second is that she is entitled to have paid from the proceeds of the sale of the property, to the extent that they are in the Macquarie Bank account, a debt due to the State Revenue Office for a liability in respect of assessments made for the 2009-2011 years. Each proposition may for present purposes be considered to be arguable, although the former will depend substantially upon cross-examination of Mr and Mrs Vasiliades and, in that context, upon questions of credit. Neither proposition, however, must at this stage be regarded as having such apparent strength that the Commissioner should be delayed in obtaining the benefits of the May judgment and July orders. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.