FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Ma [1999] FCA 1093

PRACTICE & PROCEDURE – service of originating process – service outside Australia – interaction of rules relating to personal service and substituted service – whether appropriate to consider order for substituted service outside Australia if no prior leave obtained to serve outside jurisdiction – procedure for effecting service in a non-Convention country – leave to serve outside Australia without complying with procedure for effecting service in a non-Convention country – leave to give notice outside Australia of proceedings where giving of notice takes place of service

Federal Court Rules, O 7 rr 1, 2(1), 9;  O 8 rr1(a), 2(2A), 2(2C)

Amalgamated Wireless (Australia) Ltd v McDonnell Douglas Corp (1987) 16 FCR 238, considered

Takapana Investments Pty Ltd v Teko Information Systems Co Limited (1998) 82 FCR 25, followed

Laurie v Carroll (1958) 98 CLR 310, cited

Rice Growers Co-operative Ltd v ABC Containerline NV (1996) 138 ALR 480, followed

Mondial Trading Pty Ltd v Interocean Marine Transport (1985) 65 ALR 155, followed

COMMISSIONER OF TAXATION v PING MA & ORS

N690 OF 1999

EMMETT J

29 JULY 1999

SYDNEY

THE COURT ORDERS THAT:

1.         The Applicant be granted leave under Order 8 rule 2(2) of the Federal Court Rules to serve the documents set out in Schedule A (“the Documents”) outside the Commonwealth upon the First and Third Respondents on condition that the Applicant:

(i)         serve upon the firm of Messrs Holman Webb Solicitors, 13^th Floor, 167 Macquarie St, Sydney, sealed copies of  the Documents;

(ii)        inform the First and Third Respondents by facsimile transmission the above mentioned service on Messrs Holman Webb Solicitors of the Documents transmitting a letter by facsimile transmission to the Beijing International Hotel, 9 Jianguo-Mennei Dhaie, Beijing 100005, China, facsimile  0015 86 129972.

(iii)       leave sealed copies of the Documents at the residential premises known as 53 Malvern Ave, East Roseville NSW 2069;

(iv)       leave sealed copies of the Documents at Unit 13, 1012 Alfred St, Westmead, NSW 2145; and

(v)        deliver sealed copies of the Documents to Oliver Lai & Co, Chartered Accountant, Suite 204, 309 Pitt St, Sydney NSW  2000.

2.         The Applicant be granted leave, under Order 8 rule 2(2C) of the Federal Court Rules, to give notice outside the Commonwealth of the present proceedings to each of the First and Third Respondents in the manner stipulated in Order 1 on the basis that the giving of such notice takes the place of serving the originating process in relation to the proceedings.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

1                     I have before me an application by notice of motion for the grant of orders relating to service of the amended application and the further amended application.  The applicant is the Commissioner of Taxation (“the Commissioner”) and orders have already been made in the nature of Mareva orders restraining the respondents from dealing with certain assets in Australia.

2                     The proceedings relate to assessments, issued to the first respondent, which have not yet fallen due for payment.  The second respondent is the owner of real property situated at East Roseville, which the Commissioner alleges is held on trust for the first respondent.  The third respondent may be the husband of the first respondent and there is evidence that he has said that she is his wife.  The third respondent is the proprietor of a term deposit with the fourth respondent, CitiBank Limited.  The Commissioner also contends that that deposit is held on trust for the first respondent.  I mention those matters only to indicate that the proceedings have been before the court already and orders have been made ex parte on the basis of evidence read in open court.

3                     The matter before me now relates to the basis upon which the proceedings should be served on the respondents in circumstances where it appears that the first and third respondents are presently in the People's Republic of China.  There is some suggestion also that the second respondent may be out of Australia and in Singapore.  However, I am not satisfied that adequate steps have been taken in relation to the service of the proceedings on the second respondent to justify making any orders in that regard.

4                     There is evidence that the second respondent owns the property in East Roseville and when one attempt to serve was made, an occupier indicated that the second respondent resided there.  A business office of the second respondent was another location at which an attempt was made to serve the proceedings.  There, the server was informed that the second respondent may be in Singapore.  However, on the basis of that material, without any further steps being taken, I am not at the moment prepared to make any special orders about service on the second respondent.

5                     There is evidence before me that the first respondent resides at the East Roseville premises.  However, it is clear that, at present, she and the third respondent are out of Australia and there is evidence that they are in China.

6                     The provisions of the rules relating to service are contained within Orders 7 and 8.  Order 7 rule 1 provides that, subject to the provisions of Order 7, originating process must be served personally on each respondent.  Order 7 rule 2(1) then relevantly provides that that personal service of a document is effected on an individual by leaving a copy of the document with him or as the court or judge may direct.

7                     In Amalgamated Wireless (Australia) Ltd v McDonnell Douglas Corp (1987) 16 FCR 238, Wilcox J considered that Order 7 rule 2 is unambiguously worded.  His Honour referred to rule 1 and then observed that rule 2 states how personal service is to be effected.  The rule provides that personal service of a document is effected(he was dealing with a corporation) as set out in that rule.  His Honour, however, went on to say (at page 241):

“The rule ends by giving to the Court, and to a judge of the Court, a general discretion to direct a different method of personal service [from that specified in rule 2].”

If service is effected in accordance with such a direction, the process, his Honour considered, had been personally served.  His Honour considered there was no limitation imposed on the ambit of the discretion given by rule 2 and his Honour saw no reason for reading in any such limitation.

8                     In Takapana Investments Pty Limited v Teko Information Systems Co Limited (1998) 82 FCR 25, Goldberg J observed (at 30-31) that the Federal Court Rules make provision for three types of service, namely personal service under Order 7 rule 2, substituted service under Order 7 rule 9 and service overseas under Order 8.  His Honour considered that, if the construction of Order 7 rule 2 adopted by Wilcox J is correct, there would be little need for recourse to Order 7 rule 9. 

9                     Order 7 rule 9 requires a threshold to be overcome, namely that it is impractical to serve in the manner set out in the rules, before recourse can be had to it.  Rules 9 and 10 provide as follows:

“9        (1)  Where, for any reason, it is impractical to serve a document in the manner set out in the Rules, the Court may by motion in an existing proceeding make an ex parte order that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person to be served.

………….

 10       Where for any reason it is impractical to serve a document in the manner set out in the Rules, but steps have been taken to bring the document to the notice of the person to be served, the Court may order that the document be taken to have been served on that person on a date specified in the order.”

The difference between rules 9 and 10 appears to be that, in one case, an order is made prior to effecting service and another is made ex post facto. 

10                  I shall deal in more detail in a moment with Order 8.  However, I prefer the view expressed by Goldberg J concerning the scheme of the rules relating to service.  That is to say, one must read down the final words of rule 2 of Order 7 in the light of the provisions of rule 9.  It would be curious if the rules provided the qualifications for substituted service in rule 9 but provided that those requirements could be ignored at the unlimited discretion of the judge contemplated by Wilcox J.

11                  The structure of the Federal Court Rules is such that, in general terms, it can be said that the Federal Court has jurisdiction over persons physically present within the jurisdiction at the time the process was filed or issued, or persons who, by their actions or activities or the consequences thereof which fall within a particular sub-rule of Order 8 rule 1, are accepted as being amenable to the jurisdiction of the court – see Laurie v Carroll (1958) 98 CLR 310.

12                  However, there is a limitation imposed upon the ambit of the discretion given by Order 7 rule 2, being a limitation that the form of service directed must have some personal component in it.  What that personal component may be, will vary from case to case and it is not necessary to set out exhaustively what might be covered by the alternative forms of personal service that might be allowed under Order 7 rule 2. 

13                  In Rice Growers Co-operative Limited v ABC Containerline NV (1996) 138 ALR 480, Tamberlin J also referred to the operation of Order 7 rule 9.  The application before his Honour was for an order for substituted service where the respondent was outside Australia.  However, there had been no application for leave to serve outside the jurisdiction.  His Honour was of the view that no sufficient case had been made out to warrant an order for substituted service in the circumstances.  His Honour referred to the observations of Dawson J in Mondial Trading Pty Limited v Interocean Marine Transport (1985) 65 ALR 155 at 157 as follows:

“The plaintiff must, in the absence of an agreed mode of service upon the defendant, obtain leave for service outside the jurisdiction and must attempt to effect service by that mode.  No such attempt has been made and there is insufficient evidence in the material that the plaintiff would be unable, by the exercise of reasonable effort, to effect service on the defendant outside the jurisdiction.  The inquiries made by the plaintiff so far are limited to an examination of Lloyd's Register of Shipping, which does not contain the respondent's whereabouts. 

Whilst the plaintiff is at the moment unable to obtain an order for substituted service, it does not follow that, should the plaintiff obtain an order for service out of the jurisdiction and then, having made reasonable efforts to do so, be unable to effect service, an order for substituted service within the jurisdiction cannot be made.  However, that is something which must await the outcome of the plaintiff's having taken the necessary steps to pursue its claim.”

14                  I, with respect, agree with those observations and the comment made by Dawson J.  That is to say, it is not appropriate to consider an order for substituted service under Order 7 rule 9, unless some leave is at least obtained to serve the proceedings outside the jurisdiction.

15                  That brings me to Order 8 which provides for service abroad of judicial documents.  Order 8 rule 1 provides that, subject to rule 2 and Divisions 2 and 3 of Order 8, originating process may be served outside the Commonwealth in the cases there set out.  One of those cases is where the proceeding is founded on a cause of action arising in the Commonwealth.  That appears to me to apply to the present case.  The principal relief sought by the Commissioner is a declaration concerning moneys owing by the first respondent in respect of income tax assessments.  While it is accepted that that money is not yet payable, it clearly became owing upon service of the notices of assessment.  Indeed, on one view, a liability arises at 30 June upon the end of the year of tax.  On the basis of the material before me, there is, clearly enough, a liability owing by the first respondent to the applicant.

16                  In circumstances where money is owing but not yet payable, there may be a question as to whether or not the Commissioner is entitled to sustain Mareva orders such as those that have been obtained.  However, that is not the question presently before me.  The question only concerns service and I am satisfied that the proceeding is one in which the court has jurisdiction by reason of Order 8 rule 1(a).

17                  I am satisfied that the Commissioner has a prima facie case for the relief which he seeks. Accordingly, it is appropriate to give leave to serve outside Australia. 

18                  However, as I have said, rule 2 is subject to Divisions 2 and 3.  Division 2 relates to service in a “Convention country”.  The People's Republic of China is not a “Convention country” and accordingly, Division 2 has no application.  Division 3 relates to service in non-Convention countries. Division 3 lays down a procedure involving the filing of a request in accordance with a prescribed form and the forwarding of the request by the Commonwealth Attorney-General. 

19                  Nevertheless, Order 8 rule 2(2A) provides as follows:

“However, a party may serve originating process outside the Commonwealth without complying with Division 2 or 3 of this Order if

(a)       the Court has given the party prior leave to serve the process outside the Commonwealth; and

(b)       the process is served in accordance with any terms or conditions imposed by the Court in giving the leave.”

Thus, there is a mechanism for effecting service otherwise than complying with Division 3. 

20                  If, pursuant to the leave which I propose to give, the proceedings are served in accordance with the scheme of Division 3, that will be an end of the matter.  However, in the light of the circumstances concerning the Mareva orders, it is desirable that this matter be brought to a head as soon as possible.  Accordingly, I consider that it is appropriate to impose conditions in giving leave to serve outside Australia.

21                  I have before me an affidavit of 29 July 1999 sworn by Mr Michael Joseph Donohoe of the Australian Government Solicitor's Office. Mr Donohoe deposes to the steps which have been taken to effect service of the proceedings since the commencement of the proceedings.  He also refers to the fact that a conditional appearance had been filed by a firm of solicitors acting on behalf of the first and third respondents.

22                  A communication was also received by Mr Donohoe, apparently from a New South Wales barrister, who said that he expected to be retained to act for the first and third respondents.  That communication was by facsimile from a hotel in Beijing.  Mr Donohoe also spoke by telephone to somebody purporting to be the barrister, following the making of the orders which I made ex parte.  I also have evidence of addresses relating to the first and third respondents shown in taxation returns and other communications with the Taxation Office.

23                 Accordingly, I propose to impose, as a condition of the leave, a requirement that sealed copies of the documents set out in a schedule, which include the initiating process and affidavits, be served at the office of the firm of solicitors who appeared and also at the East Roseville property and the other two business addresses for which there is evidence of a connection with the first and third respondents.  I also propose to impose, as a condition, a requirement that the first and third respondents be informed by facsimile transmission, to the Beijing address to which I have referred, of the service of the documents on the solicitors.

24                  Order 8 rule 2(2C) provides as follows:

“Nothing in this rule prevents the Court from giving a party leave to give notice, outside the Commonwealth, of a proceeding in the Court on the basis that giving the notice takes the place of serving the originating process in relation to the proceeding.”

It is not totally clear to me, at the moment, how sub-rules (2A) and (2C) operate together.  It may be that the purpose of imposing conditions, including the giving of notice, is that it is then appropriate for the giving of the notice to take the place of service of the originating process.

25                  In any event, it appears to me, in the circumstances, appropriate to give leave to the Commissioner to give notice of the proceedings by complying with the conditions to which I have just referred.  In due course, of course, it may be that a conditional appearance will be filed in order to challenge the service.  However, in the circumstances, I consider that it is appropriate to make orders as I have indicated.

Associate:

Dated:              29 July 1999