THE NATURE OF THE CURRENT APPLICATION
53 The issue as to the nature of the hearing arose because, as the Deputy Commissioner pointed out, once the money was paid into Court by the respondents and the freezing and ancillary orders ceased to have any effect and were discharged, none of the substantive orders made pursuant to the interlocutory application filed on 21 June 2022 remained in force. The Deputy Commissioner obviously did not seek to extend, continue or renew the freezing orders, or seek any other interlocutory relief, be it the interlocutory relief sought in the interlocutory application or otherwise. The Deputy Commissioner submitted that in those circumstances the only issue for interlocutory determination was the Widdup respondents' apparent contention that the money paid into Court by the respondents should be paid out.
54 The significance of the point raised by the Deputy Commissioner was alleviated somewhat by the fact that on 29 August 2022, the Widdup respondents filed an interlocutory application in which they sought, among other things, an order pursuant to r 2.43 of the Rules that the money paid into Court by the respondents be repaid. The Widdup respondents nevertheless maintained that the Court not only had jurisdiction to determine the Deputy Commissioner's interlocutory application "on its merits", but that the Court had a "constitutional duty" to exercise that jurisdiction. They went so far as to serve on the Attorneys-General of the Commonwealth and States a notice pursuant to s 78B of the Judiciary Act which advised that two constitutional questions had arisen in the proceeding.
55 The questions articulated in the Widdup respondents' s 78B notice were as follows: first, "whether the Court has a statutory duty to determine" the Deputy Commissioner's interlocutory application "in accordance with the Federal Court of Australia Act 1976 (Cth) as interpreted in the context of sections 71 and 77(i) of The Constitution"; and second, "whether the challenge to the Court's jurisdiction to determine" the Deputy Commissioner's interlocutory application "involves a reading of the taxation head of legislative power of the Commonwealth in sec. 51(ii) of The Constitution as prevailing over, or as construed without any regard to the statutory context of, the acquisition head of legislative power of the Commonwealth in sec. 51(xxxi) of the Constitution". The Widdup respondents filed and served lengthy and detailed written submissions in respect of those constitutional questions.
56 It is both unnecessary and undesirable to address either of those two constitutional questions. The questions, and the submissions advanced by the Widdup respondents in relation to them, do not properly arise in the proceeding. They are based on a misconception and mischaracterisation of the exchanges that had occurred at the prior case management hearings concerning the nature of the interlocutory issue that was before the Court. They also create false issues that are unnecessary to decide and are otherwise misconceived. They are, in short, a complete distraction. Needless to say, none of the Attorneys-General communicated any intention to intervene in the proceeding so as to address the supposed constitutional questions.
57 There is no doubt, and never was any doubt, that the Court is seized of jurisdiction to determine the controversy that has arisen as a result of the making of the freezing orders and the subsequent payment of money into Court by the respondents. Nor is there any doubt that the Court must resolve that controversy. The Court has before it a "matter", within the meaning of s 39B of the Judiciary Act, s 23 of the Federal Court of Australia Act 1976 (Cth) and Ch III of the Constitution. That matter, broadly speaking, concerns the recovery of tax liabilities said to arise under the ITAA36 and, as a result of the cross-claim, a challenge to the exercise, or purported exercise, of certain powers by the Deputy Commissioner under the ITAA36 and the TA Act. The current controversy concerning the freezing orders and the payment into Court arises within or as part of that "matter". It was never suggested that the Court lacked jurisdiction to determine that interlocutory controversy, or that the Court could or would refuse to resolve it. The only suggestion that was made was that it may be a more efficient and economical use of the resources of the Court and the parties to list the matter for early final hearing, particularly given the vast quantity of material that had been filed on behalf of the Widdup respondents. That suggestion was rebuffed by the Widdup respondents. The interlocutory controversy must therefore be determined.
58 The issue that does arise is essentially how best to characterise the current interlocutory dispute. Is it properly characterised as a further hearing of the Deputy Commissioner's interlocutory application which was filed on 21 June 2022? Or is it more appropriately characterised as an application by the Widdup respondents for the payment out, or repayment, of the money they paid into Court, no doubt so as to ensure that the freezing orders ceased to have effect?
59 It is difficult to see how the interlocutory dispute could properly be characterised as the hearing, or further hearing, of the Deputy Commissioner's interlocutory application. It may be accepted that, after that interlocutory application was heard ex parte on 21 June 2022, it was listed for further hearing in accordance with the Court's practice note. Had the further hearing proceeded, the issue would have been whether the freezing orders should be continued, renewed or extended. The Deputy Commissioner would no doubt have borne the onus of demonstrating that it was appropriate to continue, renew or extend the orders. That further hearing, however, did not occur, initially because the parties, including the Widdup respondents, consented to the extension of the freezing orders until further order, and subsequently because the respondents paid money into Court with the result that the orders ceased to have effect. The Deputy Commissioner obviously does not now seek to extend or renew the freezing orders or press for any of the relief that was included in the interlocutory application. It would, in those circumstances, be entirely artificial to characterise the current interlocutory dispute as involving or arising from a further hearing of the interlocutory application.
60 The current interlocutory dispute concerns the question whether the money paid into Court by the respondents should be paid out or repaid to them. That is the relief sought by the Widdup respondents in the interlocutory application filed by them on 29 August 2022. That is also the correct way to characterise the current dispute.
61 It does not, of course, follow that, in determining whether the money paid into Court should be repaid, the Court can or should ignore the circumstances in which the money came to be paid into Court in the first place. The Court's power, pursuant to r 2.42 of the Rules, to order that monies paid into Court be paid out in a particular manner involves a wide discretion. The Court is "entitled to take into account any circumstances relevant to the exercise of its discretion in a proper and judicial manner": Bou-Simon v Attorney-General of the Commonwealth (2003) 133 FCR 230; [2003] FCA 1303 at [22], cited with approval in Re Farrow [2004] FCA 1569 at [7] and Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liq) [2015] FCA 1042 at [21]. While no specific factors are required to be taken into account, or not taken into account, depending on the circumstances it might be expected that the relevant considerations are likely to include "the purpose for which the moneys have been paid in" and "any relevant event in the litigation in relation to which the moneys have been paid": Duncan (as trustee for the bankrupt Estate of Garrett) v National Australia Bank Ltd (2006) 95 SASR 208; [2006] SASC 239 at [30], cited with approval in Xu at [20].
62 Plainly, therefore, the events in the litigation in this matter to date, including all the circumstances in which the freezing orders were made, the circumstances in which the monies were paid into Court, and the arguments raised by the Widdup respondents in relation to those matters, are relevant considerations in determining whether the Court should exercise its discretion under r 2.42 of the Rules. All of the evidence and arguments that the Widdup respondents could have advanced in opposition to the continuation of the freezing orders, had the further hearing of the Deputy Commissioner's interlocutory application proceeded, can be advanced in support of the contention that the money paid into Court by the respondents should be repaid.
63 There is no legal, practical or forensic disadvantage to the Widdup respondents in characterising the current controversy as an application by them to have the Court exercise its discretion under r 2.42 of the Rules to repay the monies that they have paid into Court, as opposed to its characterisation as a further hearing of the Deputy Commissioner's interlocutory application. The only material question that may arise if the interlocutory dispute is characterised in that way is which party bears the onus of proof. Even that issue is more theoretical than real.
64 Generally speaking, a party which seeks to have the Court exercise a discretion in their favour will bear the onus or burden of establishing why the discretion should be exercised in that way. That would tend to suggest that the Widdup respondents would bear the onus of demonstrating that it would be appropriate in all the circumstances for the Court to order that the money paid into Court by the respondents should be paid out. In the particular and somewhat unusual circumstances of this case, however, it would not be appropriate to approach the application in that way.
65 There could be no doubt that the money was only paid into Court as a consequence of the making of the freezing orders at the ex parte hearing on 21 June 2022. There could also be no doubt that the respondents only paid the money into Court so as to free themselves from the restraints imposed on them by the freezing orders. It was readily apparent at the time the money was paid into Court that the Widdup respondents contended that the freezing orders should never have been made and that, had the Deputy Commissioner's interlocutory application proceeded to a further hearing, they would have opposed the renewal, continuance or extension of the freezing orders.
66 In those circumstances, while the freezing orders have been discharged and the Deputy Commissioner is not in fact seeking to have those orders renewed or extended, it would nevertheless be appropriate, as a practical matter, to approach the Widdup respondents' application as if it was, in effect, an application by the Deputy Commissioner to renew or extend the freezing orders. Approached in that way, the Deputy Commissioner would in effect bear the onus of establishing that there was a proper basis for the making of the freezing orders on 21 June 2022 and that, had the monies not been paid into Court, with the result that the freezing orders ceased to have effect, there would have been a sound and proper basis to renew, continue or extend those orders.
67 If the Deputy Commissioner is unable to demonstrate that there was a proper basis for the making of the freezing orders, or that it would not have been appropriate, if it came to it, to renew, continue or extend the orders, that would no doubt provide a compelling reason to order that the money paid into Court be repaid. In relation to the Widdup respondents' allegations of material non-disclosure, if it is established, as a matter of fact, that certain information was not disclosed to Nicholas J during the ex parte hearing, the Deputy Commissioner would effectively bear the onus of demonstrating that the information was immaterial and that there was no bad faith on the part of the Deputy Commissioner.
68 There is, however, one matter in respect of which the Widdup respondents should be taken to bear the onus of proof in the present context. As has already been noted, the Widdup respondents submitted that the Deputy Commissioner does not have a good cause of action against Mr Widdup and Mrs Widdup in respect of family trust distribution tax liabilities. They contend, in that context, that the Deputy Commissioner cannot rely on the conclusive evidence provision in respect of the FTDT notices because the notices are invalid on account of jurisdictional error and conscious maladministration. They allege as much in their cross-claim. As discussed in more detail later, there is little doubt that the Widdup respondents will bear the onus of proving jurisdictional error or conscious maladministration at the final hearing of their cross-claim. In those circumstances, they should also bear the onus of proving those allegations in the context of the present interlocutory dispute. Or, as discussed later, at the very least, they should bear the onus of proving that they have a good arguable case in that regard.