REASONS FOR JUDGMENT

When matters come before a court and particularly a Duty Judge at short notice, they sometimes present particular difficulties.  This is one such case. 

The applicant, the Deputy Commissioner of Taxation, by notice of motion filed in court, seeks orders against the first and second respondents restraining them from dealing with funds held in certain accounts.  It appears from what I have been told that the funds in those accounts are held in US dollars. 

The orders sought would restrain the respondents from dealing with those moneys pending the outcome of an application for special leave to appeal to the High Court from a judgment of the Full Federal Court given on 21 October, 1998.  So far as I can glean from the material and the limited opportunity I have had to examine it, proceedings were commenced by the first and second respondents before a judge of the Court, Davies J.

The substantial purpose of those proceedings was to determine the validity or effectiveness of a notice issued by the Deputy Commissioner under s 218 of the Income Tax Assessment Act 1936 (Cth).  That notice, so it would seem, had been served on the Bank holding funds in US dollars.  By an order made on 28 April 1998, Davies J made declarations in relation to the relevant accounts.  The effect of those declarations was that the moneys in those accounts did not constitute "money" for the purposes of s 218 of the Income Tax Assessment Act.  The declarations were made on the basis, that as a matter of construction, s 218 does not apply to funds held otherwise than in Australian dollars.  Davies J made certain other orders but I need not refer to those at present. 

The Deputy Commissioner then appealed to the Full Court.  The Full Court unanimously upheld the judgment of Davies J.  Accordingly, the appeal was dismissed.  Each of their Honours held that s 218, as a matter of construction, did not apply to foreign currency accounts.

It follows that thus far four Judges of the Court have rejected the Deputy Commissioner's contentions and found in favour of the first and second respondents.  Curiously enough, no application was made on 21 October 1998, or indeed in the three weeks thereafter, for orders of the kind that have been sought today.  Mr McMillan, who appears on behalf of the Deputy Commissioner, has not provided any satisfactory explanation as to the reason why no such application was made.

The position therefore appears to be that there has been no impediment since the judgment of 21 October 1998, to the first and second respondents taking steps to remove the funds from the US dollar accounts.  The present application appears to have been prompted by information coming to the attention of the Deputy Commissioner, or those acting on his behalf, that steps might now be taken to remove some or all of the funds.

I think the appropriate course is to treat the present application as one for ex parte relief.  I note that counsel for the first and second respondents has been in court, but has not sought to participate on the application. 

Mr McMillan very properly referred me to a recent statement of the applicable principles on an application for stay where a party has made an application for special leave to appeal to the High Court.  The principles are conveniently stated by Kirby J in Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460, esp at 463-465.  I am prepared to assume that these are the principles that apply to the current application.

Before turning to those principles, I should note a further significant consideration.  No application for special leave to appeal to the High Court has yet been filed.  I accept that the Deputy Commissioner has given instructions for the filing of such an application.  However, I have no document before me that sets out the grounds upon which it is proposed that special leave should be sought. 

Mr McMillan has sought to identify the issue that might attract the consideration of the High Court.  However, I do not have a detailed analysis of the grounds upon which any special leave application will be pressed.  One would ordinarily expect in an application of this kind, at least one brought some time after the handing down of the judgment of the Full Court, a detailed statement of the grounds of a proposed application for special leave to appeal. 

In Bryant v Commonwealth Bank, Kirby J emphasised the following points.  First, in an application for a stay adjunct to an application for special leave to appeal, it is necessary to consider the applicant's prospects of success in gaining special leave.  Kirby J pointed out that a decision on a stay application should not become an occasion for a detailed analysis of the issues that will arise in the special leave application, and if granted special leave, on the appeal.  As his Honour observed, the evaluation of the prospects of success will involve a judicial impression. 

Secondly, a stay is not granted simply for the asking.  It is necessary to take into account whether a stay is required to preserve the subject matter of the litigation. 

Thirdly, the position relating to a stay where there is an application for leave to appeal to the High Court is somewhat different from the position obtaining where there is an appeal as a right.  Kirby J states that the more liberal approach to the granting of stays has not been adopted by the High Court in respect of cases where special leave to appeal is being sought.

Fourthly, Kirby J says that what he describes as "the old rule of stringency" continues to apply with particular force where no grant of special leave to appeal has yet been secured.  He points out that there are obvious reasons for this approach.  Ordinarily, as in the present case, the litigation will have proceeded through at least two tiers of the judicial process.  Thus the would-be appellant’s argument will have been rejected by the Court whose orders are the subject of a special leave application.  As his Honour points out, only a relatively small proportion of applications for special leave succeed. 

Fifthly, his Honour pointed to the principles laid down by Brennan J in Jennings Constructions Limited v Burgundy Royale Investments Pty Limited (No 1) (1986) 161 CLR 681, at 685.  There his Honour said this:

“In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this court’s discretion.  In each case when the court is satisfied a stay is required to preserve the subject matter of the litigation it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant had failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies.”

Sixthly, Kirby J repeats the proposition that cases involving a stay of the operation of the criminal law of laws designed to protect the public are in a class different from cases involving no more than the suspension of the operation of orders affecting two private litigants. 

Seventhly, Kirby J draws attention to the fact that in Bryant the applications for a stay had not been brought first to the Court in which the matter was pending and which was familiar with the matter.  His Honour indicates that ordinarily this is a significant consideration, pointing out that the Court deciding the matter is ordinarily familiar with it. 

The last consideration is relevant to this case.  I was not a member of the Full Court that determined the appeal in this case.  It is the members of the Full Court who would be familiar with the issues in the case and would be in a position to make an informed judgment about the prospects of special leave being granted by the High Court.  I think it follows from the observations made by Kirby J in Bryant and by Brennan J in Burgundy Royale, that a material consideration on this application is that the Deputy Commissioner did not make a timely application to the Full Court, the members of which would have been alert to the issues the case raises.

Mr McMillan has argued notwithstanding the absence of the documents to be utilised on the application of special leave to appeal, that an issue of public importance is involved.  He identifies that as the correct construction of the term “money” in s 218.  He says that this is a question of general commercial significance.  I can see some force in that submission.  However, it is very difficult on the material before me to reach the conclusion that there are substantial prospects of a grant of special leave in this case. Notwithstanding the unanimity of approach within the Court up to date, the prospects of a successful application for special leave cannot be ruled out entirely.  However, doing the best I can, having regard to the restraints I have mentioned, I cannot say that the prospects of an application for special leave succeeding are substantial. 

It is necessary to take into account that on the material before me the failure of this application may well lead to the withdrawal of the moneys in the US dollar accounts.  In that sense, the preservation of the subject matter of the litigation may well be at stake.  There is nothing to indicate, although of course this is an ex-parte application, that the granting of an order would cause irreparable harm to the first or second respondents.  It is clear from the principles to which I have referred that the fact that the subject matter of the litigation is at stake is a significant, but not necessarily determinative, consideration.

As I have indicated, Mr McMillan has proceeded on the basis that the relief sought here is the equivalent of granting a stay and that the principles to which I have referred are applicable.  Assuming this is correct, in my view, there are two particularly significant matters that militate against the granting of the relief sought by the Deputy Commissioner.  They are, first, the failure to take timely action to preserve the subject matter of the litigation.  As I have already said, for a period of three weeks there has been no impediment to the first and second respondents removing the moneys in the US dollar accounts.  This is not merely a question of delay.  The failure to take this course has meant that those members of this Court, best in a position to assess whether there are substantial prospects of a special leave application succeeding, have not been asked to direct their attention to that question. 

The second point is that, although I have acknowledged that there may be a point of some public importance in the case, I cannot characterise the prospects of the High Court granting special leave as substantial. 

I have taken into account the other matters that I have mentioned.  I repeat that I am conscious that a refusal of the application made lead to the subject matter of the litigation in effect being removed.

Nonetheless, in light of the principles that have been laid down by the High Court, in my view, this application fails.  I therefore decline to grant the relief sought ex parte by the Deputy Commissioner.

Mr McMillan has sought in the alternative orders that would provide for short service of the notice of motion and supporting affidavit.  I shall grant leave for the Deputy Commissioner to serve the notice of motion, which has been filed in court and any supporting affidavits by 4.00pm tomorrow, 12 November, 1998.  I shall direct that the motion may be made returnable before the duty judge at 10.15am on Friday, 13 November 1998.

Associate:

Dated:                        11 November 1998