Plaintiff v Defendant

Plaintiff v Defendant - [2011] VSC 60 - VSC 2011 case summary — Zoe

[26]

15.1 The Contractor [Puffin] agrees to:

(a) maintain residence, for taxation purposes in Malta, Singapore or such other jurisdiction as agreed between the Company [AED Services] and the Contractor;

(b) to comply with its obligations under the laws of Australia and Malta, including (without limitation) the payment of all Taxes within the times required, obtaining all applicable registrations for Tax purposes, providing Tax Invoices and lodging all prescribed Tax Returns to ensure compliance with the laws of Australia and Malta to the extent such action is not able to be legally undertaken by the Company in accordance with clause 15.9;

(c) at the request of the Company, negotiate with the Company in good faith and use reasonable endeavours, including without limitation the provision of all information, the prompt execution of documents and the arrangement of its financing, to ensure that allowable deductions, credits, refunds and rebates are available to the maximum extent and to minimize to the extent legally possible any Australian and Maltese Taxes associated with the Services.

...

15.4 Subject to this Article 15, the Company shall indemnify and hold the Contractor harmless from and against any and all Tax Claims including without limitations any withholding tax on any payment by the Contractor to a Related Body Corporate, whether in the form of dividend payments or otherwise, with respect to Taxes imposed under Australia, Singapore, Malta, as well as under any other jurisdiction (Tax Indemnity).

15.5 The Company shall not be liable to indemnify the Contractor under the Tax Indemnity for any Tax claim which arises as a result of, or in respect of, or by reference to:

(ii) the Contractor's failure to comply with Article 15.1(a), 15.9(ii) and 15.10 of this Contract.

...

15.8

(i) Subject to Article 15.8(ii), where the Company is liable to make any payment under the Tax Indemnity, the due date for the making of that payment (Due Date) shall be the date falling seven days after written notice has been served on the Company demanding that payment under the Tax Indemnity.

(ii) In a case that involves an actual payment of Tax by the Contractor, the Due Date shall be the later of the date falling seven days after written notice has been served on the Company demanding that payment under the Tax Indemnity and the date on which the Tax in question would have had to have been paid to the relevant Tax authority in order to prevent a liability to interest or a fine, surcharge or penalty arising in respect of the Tax liability in question.

...

(vi) Prior to the Due Date, the Company shall on a monthly basis pay to the Escrow Agent an amount equal to the Taxes deemed to have been incurred in the previous month (Deemed Taxes). The Deemed Taxes will be held by the Escrow Agent under an escrow agreement to be prepared which contains usual and reasonable provisions for an arrangement of the type contemplated but otherwise in accordance with this Article 15.8. The Deemed Taxes shall be calculated by the Contractor and the calculation shall be submitted to the Company with all necessary information to understand and evaluate the calculation. The Company shall pay the Deemed Taxes to the Escrow Agent within seven days of the receipt of the calculation.

(vii) The Company's payments under the Tax Indemnity shall be made from the accumulated amount of Deemed Taxes. If the payment under the Tax Indemnity exceeds the accumulated amount of Deemed Taxes, the balance shall be paid by the Company to the Contractor in accordance with this Article 15.8. If the accumulated amount of Deemed Taxes exceeds the payment under the Tax Indemnity, the balance shall be credited to the Company when calculating next month's Deemed Taxes.

15.9

(i) The Company will, on behalf of the Contractor, undertake, manage and control the conduct of any action required in relation to the Contractor's obligations to comply with Tax Law, including without limitation, the preparation and filing of Tax Returns and making of any applicable registrations for Tax purposes.

(ii) The Contractor must provide the Company with all assistance and information required to enable the Company to satisfy its obligations under Article 15.9(i).

15.10 If the Contractor becomes aware of any circumstance which is likely to give rise to a claim under the Tax Indemnity, the Contractor agrees to give or cause to be given written notice of the Tax Claim (as the case may be) to the Company within a reasonable time.

(i) The Company will assume the conduct of any action in respect of a Tax Claim and the Contractor shall take such action as the Company may reasonably request to avoid, dispute, defend, resist, appeal or compromise any Tax Claim.

(ii) The Contractor must not:

(a) accept, comprise or pay;

(b) agree to arbitrate, comprise or settle; or

(c) make any admission or take any action in relation to a Tax claim.

without the Company's prior written approval, which must not be unreasonably withheld or delayed.

[41]

There are future revenue opportunities available to the plaintiff but, as with any business undertaking, nothing is certain. I am not persuaded that the defendant should stand by and wait to see if the plaintiff revives its revenue-generating capacity where there is substantial debt, which unless renegotiated is capable of significantly eroding the plaintiff's cash position.
Nor am I not persuaded that the defendant should be expected to rely upon the asserted value of the Puffin oilfield at $1 billion, when the plaintiff's production from the field has ceased. I do not think that the defendant should be expected to rely upon a contractual obligation from the joint venture partner to the plaintiff as a source of funds to meet demands.
In my view, the injunction should be made subject to conditions which will ensure: first, that the plaintiff's obligation to manage the defendant's tax liability is performed, and that the defendant fully co-operates with the plaintiff in that regard; second, that the defendant has some measure of real protection against its tax liabilities which the plaintiff is bound to pay.
I do not propose that the plaintiff be required to give security in the form of cash or a bank guarantee for the whole of the amount sought by the defendant. I would, however, require a payment into court or a bank guarantee in favour of the relevant court officer, to the extent of the GST liability as presently calculated by the defendant's accountants together with the outstanding invoices. I will not add to those sums the claims for interest.
This approach to the moulding of conditions is multifaceted. It is fundamentally designed to ensure that the consequences of the injunction to protect the plaintiff will not unfairly prejudice the defendant. I have also formed a view that the defendant's claim for GST and the invoices is significantly stronger than for income tax.
I regard the defendant's claim for income tax, based on its own assessment, as weak. There is also the real dispute about the amount; whereas there is no such dispute in relation to GST. Further, requiring the plaintiff to make the payment or provide the security, will ensure that the plaintiff will expedite its tax responsibility and that the defendant will co-operate. I would also impose specific conditions regarding the preparation of income tax returns, and compliance with other obligations to the revenue to assist in crystallising tax liabilities for the defendant and the liability of the plaintiffs to indemnify the defendant.[1]

[43]

The Plaintiff undertaking:

(1) To abide by any order the Court may make as to damages, which it appears to the Court that the Defendant has sustained by reason of this order.

(2) That by 4pm on Friday 28 August 2009 it will pay an amount into Court and/or to provide to the Prothonotary unconditional bank guarantees in the aggregate sum of $21,054,272.57. Any such bank guarantees shall be in a form approved by the Prothonotary so that any such guarantee may only be called upon if necessary and the proceeds applied by order of the Court in this proceeding. Such money and/or bank guarantees are provided for the purpose of securing the GST liabilities of the defendant referred to in the Notices of Demand described in order 1 below.

(3) That by 4pm on Friday 28 August 2009 it will pay a sum into Court and/or to provide to the Prothonotary unconditional bank guarantees in the aggregate sum of $3,161,308.35. Any such bank guarantees to be in a form approved by the Prothonotary so that any such guarantee may only be called upon if necessary and the proceeds applied by order of the Court in this proceeding. Such money and/or bank guarantees are provided for the purpose of securing payment of the unpaid invoices referred to in the Notices of Demand described in order 1 below.

(4) To do all that is reasonable to procure that AED Services Pte Ltd expeditiously does all in its power and control to procure that necessary registrations in respect of the Defendant's tax obligations are effected and the Defendant's tax returns and business activity statements for the relevant periods the subject of this proceeding are completed and lodged forthwith.

Further, the Defendant undertaking:

(5) To do all that is reasonable to ensure that necessary registrations in respect of the Defendant's tax obligations can be effected by the Plaintiff, and/or AED Services Pte Ltd, and the Defendant's tax returns and business activity statements for the relevant periods the subject of this proceeding can be completed and lodged forthwith by the Plaintiff, and/or AED Services Pte Ltd.

Communication with Commissioner of Taxation:

(6) The Court has expressed the opinion that it is reasonable for the Plaintiff to procure AED Services Pte Ltd itself, or for the Plaintiff itself, to inform the Commissioner of Taxation when filing the Defendant's income tax returns for the financial years ended 30 June 2008 and 30 June 2009 that there is an issue about the appropriate period of deprecation of the Defendant's FPSO, that different views have been expressed, and to indicate in general terms what those different views are.

[57]

The private injustice and public undesirability of permitting the relitigation of matters already litigated once is recognised in a number of principles of law, notably the rules relating to res judicata and issue estoppel, the more flexible rules under the rubric of vexation and abuse of process illustrated in such cases as Stephenson v Garrett [1891] 1 QB 677 and Hunter v Chief Constable [1981] UKHL 13; [1982] AC 529, and the restrictive provisions governing the adducing of further evidence on the hearing of an appeal even by way of rehearing (see eg s75A(8) of the Supreme Court Act 1970).

Interlocutory orders, of their very nature, create no res judicata or estoppel, and the Court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice and enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will.

The over-riding principle governing the approach of the Court to interlocutory applications is that the Court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the Court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. Not all kinds of interlocutory orders attract the same considerations. For present purposes one may put to one side orders of a merely procedural nature (as to which see e.g. Wilkshire v Commonwealth (1976) 9 ALR 325) and injunctions (or undertakings) made or given by agreement and without contest "until further order" (as to which see e.g. Warringah Shire Council v Industrial Acceptance Corporation - McLelland J 22 November 1979 unreported).

In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application (see Woods v Sheriff of Queensland (1895) 6 QLJ 163 at 164-5; Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 at 447-8; Chanel v Woolworth & Co [1981] 1 WLR 485 at 492-3; Adam P Brown Male Fashions v Philip Morris [1981] HCA 39; 148 CLR 170 at 177-8; Butt v Butt [1987] 1 WLR 1351 at 1353; Gordano v Burgess [1988] 1 WLR 890 at 894).

The following passages illustrate the point: "The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party's position." (Chanel v Woolworth & Co at 492-3 per Buckley LJ.) "A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust ...... . Of course the changed circumstances must be established by evidence (Adam P Brown Male Fashions at 178 per Gibbs CJ and Aickin, Wilson and Brennan JJ.)

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Legislation Cited (24)

Cases Cited (7)