FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Yeo (Trustee) [2018] FCA 635

ORDERS

THE COURT ORDERS THAT:

1.    The applicant be granted leave pursuant to rr 10.43 and 10.44 of the Federal Court Rules 2011 to serve on the third respondent in Romania, in accordance with the requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965, the following documents:

(a)    Form 26 “summary of documents to be served”;

(b)    the originating application filed on 5 December 2017;

(c)    the affidavit of Aris Zafiriou sworn on 1 December 2017;

(d)    a copy of the orders made on 20 December 2017 and the reasons for those orders; and

(e)    a copy of these orders and the reasons for these orders.

2.    The matter be listed for a case management hearing at 9.30 am on 17 August 2018.

3.    There be liberty to apply.

4.    Costs be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    This proceeding was commenced on 5 December 2017 by the Commissioner of Taxation (the Commissioner) against Andrew Yeo and Gess Rambaldi (the Trustees), in their capacity as trustees of the bankrupt estate of Florin Burhala (Mr Burhala), and Mr Burhala. Mr Burhala was made bankrupt by orders of the Federal Circuit Court of Australia made on 10 August 2016.

2    The relief sought by the Commissioner in the application had two aspects. First, the Commissioner sought leave pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) to commence and take steps in three proceedings (one of which is the present proceeding). Secondly, the Commissioner sought an order for judgment for the amount of $4,737,623.81 against Mr Burhala for tax-related liabilities.

3    The first part of the relief sought, namely the application for leave pursuant to s 58(3)(b) of the Bankruptcy Act, was dealt with by the Court on 20 December 2017. In summary, orders were made giving the Commissioner leave to commence and take steps in three proceedings (including the present proceeding). These orders were made with the support of the Trustees. As noted in the Court’s orders dated 20 December 2017, the Commissioner, by his counsel, undertook to pay any funds or property received by him to the Trustees in order for any such funds or property to be distributed rateably among the creditors of Mr Burhala. At the time those orders were made, Mr Burhala had not been served with the application. As noted in the ex tempore reasons for making the 20 December 2017 orders, it has been held that the bankrupt is not a necessary party to proceedings under s 58(3): Kattirtzis v Zaravinos [2001] FCA 1158 at [5].

4    The Commissioner has now filed an interlocutory application seeking leave to serve the application and certain related documents on Mr Burhala in Romania pursuant to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (the Hague Convention).

5    For the reasons that follow, I consider it appropriate to grant that leave.

The application to serve out of the jurisdiction

6    The Commissioner seeks leave, pursuant to r 10.43 of the Federal Court Rules 2011, to serve the application on Mr Burhala at an address in Romania, in accordance with the requirements of the Hague Convention.

7    The Commissioner also seeks leave pursuant to r 10.44 to serve certain additional documents on Mr Burhala in Romania in accordance with the Hague Convention.

8    In support of the application, the Commissioner relies upon: an affidavit of Aris Zafiriou sworn on 1 December 2017 (the first Zafiriou affidavit); and an affidavit of Mr Zafiriou sworn on 16 March 2018 (the second Zafiriou affidavit).

Applicable principles

9    Rule 10.43 of the Federal Court Rules 2011 relevantly provides:

(2)    A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

(3)    The application under subrule (2) must be accompanied by an affidavit stating:

(a)    the name of the foreign country where the person to be served is or is likely to be; and

(b)    the proposed method of service; and

(c)    that the proposed method of service is permitted by:

(i)    if a convention applies — the convention; or

(ii)    if the Hague Convention applies — the Hague Convention; or

(iii)    in any other case — the law of the foreign country.

(4)    For subrule (2), the party must satisfy the Court that:

(a)    the Court has jurisdiction in the proceeding; and

(b)    the proceeding is of a kind mentioned in rule 10.42; and

(c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

10    Rule 10.42 relevantly provides:

Subject to rule 10.43, an originating application, or an application under Part 7 of these Rules, may be served on a person in a foreign country in a proceeding that consists of, or includes, any one or more of the kinds of proceeding mentioned in the following table.

…

1    Proceeding based on a cause of action arising in Australia

…

15    Proceeding seeking any relief or remedy under an Act, including the Judiciary Act 1903

11    Rule 10.44 relevantly provides:

(1)    A party may apply to the Court for leave to serve a document filed in or issued by the Court, other than an originating application, on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

…

(2)    An application under subrule (1) must be accompanied by an affidavit that includes the information mentioned in paragraphs 10.43(3)(a) to (c).

12    I referred to the relevant principles in Australian Competition and Consumer Commission v Apple Pty Ltd [2017] FCA 416. For ease of reference, I set out again, below, that summary of the principles.

13    Rule 10.43(4)(c) refers to the party having a prima facie case for all or any of the relief claimed in the proceeding. This requirement has been described as “not particularly onerous”: Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218 (Yellow Page Marketing) at [25] per Gordon J. In Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 6) (2010) 270 ALR 504, Bennett J said in relation to the predecessor provision (at [8]):

Establishing a prima facie case for the relief claimed for the purposes of O 8 r 3(2) of the FCR should not call for a substantial inquiry. A prima facie case is made out where, upon a broad examination rather than an intense scrutiny of the material before the court, inferences are shown to be open which, if translated into findings of fact, would support the relief claimed: Western Australia v Vetter Trittler Pty Ltd (in liq) (rec and mgr apptd) (1991) 30 FCR 102 at 110; 4 ACSR 795 at 802–3 per French J; Sydbank Soenderjylland (A/S) v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549; 149 ALR 134 at 142–3; the Full Court in F Hoffman-La Roche at [17] and [96]–[97] per Carr J. The relevant question was put in the following terms by Lee J in Century Insurance (in prov liq) v New Zealand Guardian Trust Ltd [1996] FCA 376, a formulation approved by the Full Court (in Ho v Akai Pty Ltd (in liq) [2006] FCAFC 159 at [10] (Ho)):

What the court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the court’s processes to resolve it and whether causing a proposed respondent to be involved in the litigation in the court in Australia is justified.

14    The applicant need only show a prima facie case in respect of part of, rather than the entirety of, its claim: Yellow Page Marketing at [25].

15    The Court has residual discretion to refuse leave to serve out even if the requirements of the above rules have been met: Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd (2015) 331 ALR 108 at [66] per Edelman J and the cases there cited.

Application of principles to the present case

16    Paragraphs 9 to 11 of the second Zafiriou affidavit establish that Mr Burhala is or is likely to be in Romania. In particular, Mr Zafiriou deposes in that affidavit that he met with Mr Burhala in Romania during the course of his travel there in February 2018. Additionally, Mr Burhala gave an address in Romania as his address when he provided his statement of affairs to his bankruptcy trustees.

17    The proposed method of service is to serve the relevant documents in accordance with the requirements of the Hague Convention.

18    As set out in paragraph 13 of the second Zafiriou affidavit and exhibit AZ-2, Romania is a contracting party to the Hague Convention.

19    It is proposed that the documents to be served will be sent by mail to the designated Central Authority in Romania, the Ministry of Justice, for service by procedural agents or by any other judicial officers from the territorial competent court: paragraphs 14 and 15 of the second Zafiriou affidavit and exhibit AZ-3.

20    As is apparent from the information set out in the second row of the table on page two of exhibit AZ-3, there are no translation requirements in respect of the documents to be served.

21    The proposed method of service is permitted by Articles 2 to 5 of the Hague Convention: paragraph 17 of the second Zafiriou affidavit.

22    The Commissioner’s claim against Mr Burhala is for income tax and tax-related liabilities. The Court has jurisdiction under s 39B(1A)(c) of the Judiciary Act 1903 (Cth) to give judgment for such a debt owed to the Commissioner: see Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412 at [3].

23    The proceeding is of the kind mentioned in items 1 and 15 in the table appearing at r 10.42 because it is a proceeding based upon a cause of action arising in Australia (Table, item 1) and also because it is a proceeding seeking relief or remedy under an Act including under the Judiciary Act 1903 (Table, item 15).

24    The following principles are relevant in the context of the current proceeding:

(a)    A tax-related liability that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner, who may recover any unpaid tax-related liability in a court: s 255-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (Schedule 1).

(b)    The production of a notice of assessment, or of a document purporting to be a copy of the notice of assessment, is conclusive evidence that the assessment was properly made and that the amount and all the particulars of the assessment are correct: s 350-10 of Schedule 1.

(c)    An evidentiary certificate (stating, for example, that the person named in the certificate has a tax-related liability, that an assessment relating to a tax-related liability has been made or that a notice of an assessment was, or is taken to have been, served on the person) is prima facie evidence of the matters stated: s 255-45 of Schedule 1.

(d)    The amounts claimed by the Commissioner in the current proceeding are tax-related liabilities: s 250-1 of Schedule 1.

25    The Commissioner’s claim is made up of the following amounts:

(a)    income tax of $2,988,258.18;

(b)    shortfall interest charges of $582,558.81; and

(c)    tax shortfall penalties of $1,166,806.82.

26    I am satisfied, on the basis of the first Zafiriou affidavit, that the Commissioner has a prima facie case in relation to those amounts.

27    It follows that the preconditions for making an order for service outside Australia are established. In my view, it is appropriate in the circumstances to make such an order. A matter exists that warrants the use of the Court’s processes and justifies the involvement of a foreign respondent.

28    Accordingly, it is appropriate to grant leave to the Commissioner to serve the application and the additional documents on Mr Burhala in Romania in accordance with the Hague Convention. I will make orders to this effect.

Associate:

Dated:    10 May 2018