Federal Court of Australia

Burhala v Commissioner of Taxation [2020] FCA 1854

ORDERS

THE COURT ORDERS THAT:

1.    The following claims be summarily dismissed:

(a)    the applicant’s claim that the interlocutory orders dated 1 August 2019 in proceeding VID 1336 of 2017 should be set aside on account of the respondent’s fraud (paragraph 1 of the amended application and paragraphs 17-33 of the statement of claim); and

(b)    the applicant’s claim that the said interlocutory orders should be set aside on account of exceptional circumstances (paragraph 2 of the amended application and paragraphs 34-36 of the statement of claim).

2.    The respondent’s interlocutory application dated 5 June 2020 otherwise be dismissed.

3.    Subject to paragraph 4, the costs of the respondent’s interlocutory application be reserved.

4.    If either party seeks a different costs order, the party may file and serve a written submission on costs (of no more than 2 pages) by 4.00 pm on 29 January 2021, in which case the other party may file a responding written submission (of no more than 2 pages) by 4.00 pm on 5 February 2021.

5.    The matter be listed for case management on a date to be fixed.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    The applicant, Mr Florin Burhala, is a bankrupt. He resided in Melbourne between 1988 and 2015. Since 2015, he has resided in Romania. The respondent, the Commissioner of Taxation (the Commissioner), is a creditor of Mr Burhala.

2    In December 2017, in another proceeding in this Court, proceeding VID 1336 of 2017 (the 2017 Proceeding), the Commissioner sought and obtained leave, pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth), to commence three proceedings against Mr Burhala. One of those proceedings was the 2017 Proceeding itself; the other two proceedings were in Romania. The application for leave was supported by the trustees in bankruptcy of the bankrupt estate of Mr Burhala, Andrew Yeo and Gess Rambaldi (the Trustees).

3    Section 58(3) of the Bankruptcy Act provides:

(3)    Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

(a)    to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b)    except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

4    The Commissioner subsequently obtained leave to serve the originating application and other documents filed in the 2017 Proceeding on Mr Burhala in Romania.

5    In May 2019, Mr Burhala filed an interim application in the 2017 Proceeding. Among other things, he sought to have the earlier orders granting leave pursuant to s 58(3)(b) set aside. The Commissioner objected that Mr Burhala did not have standing to seek the relief that he sought in the interim application. In a judgment dated 1 August 2019, Anderson J accepted the Commissioner’s contention that Mr Burhala lacked standing, and therefore ordered that Mr Burhala’s interim application be dismissed with costs (the August 2019 Orders). Justice Anderson published reasons for judgment: Commissioner of Taxation v Yeo (Trustee) (No 2) [2019] FCA 1188 (the August 2019 Reasons).

6    Subsequently, on 14 October 2019, in the 2017 Proceeding, the Commissioner obtained summary judgment against Mr Burhala in the sum of $4,737,623.81.

7    In December 2019, Mr Burhala commenced the present proceeding against the Commissioner. Mr Burhala seeks the relief set out in his amended application dated 7 May 2020 (the amended application). His claims are pleaded in his statement of claim dated 7 May 2020 (the statement of claim). In this proceeding, Mr Burhala contends, in summary:

(a)    that the August 2019 Orders were procured by fraud by the Commissioner, and should therefore be set aside pursuant to r 39.05(b) of the Federal Court Rules 2011 (Cth); alternatively, the August 2019 Orders, which are interlocutory, should be set aside pursuant to r 39.05(c) of the Federal Court Rules on the basis that there are exceptional circumstances; and

(b)    that recovery action that is being taken in Romania at the request of the Commissioner constitutes the enforcement of a remedy against the person or property of the bankrupt in respect of a provable debt, contrary to s 58(3)(a) of the Bankruptcy Act 1966 (Cth). In respect of this contention, Mr Burhala seeks declaratory and injunctive relief.

8    Rule 39.05 of the Federal Court Rules relevantly provides:

39.05    Varying or setting aside judgment or order after it has been entered

The Court may vary or set aside a judgment or order after it has been entered if:

…

(b)    it was obtained by fraud; or

(c)    it is interlocutory; or …

9    The Commissioner has filed an interlocutory application dated 5 June 2020 seeking to have the proceeding summarily dismissed or the whole of the statement of claim struck out. It is this application that is the subject of these reasons.

10    My conclusions are, in summary, as follows:

(a)    If it be Mr Burhala’s assumption that he needs to set aside the August 2019 Orders to pursue his claims relating to s 58(3)(a), I do not consider that assumption to be correct. The August 2019 Orders and the August 2019 Reasons do not constitute a res judicata or an issue estoppel in relation to Mr Burhala’s claims relating to s 58(3)(a) (or his standing to bring such claims). Further, I do not accept the Commissioner’s submission that it is an abuse of process for Mr Burhala to pursue his s 58(3)(a) claims.

(b)    Having said this, it is nevertheless necessary to deal with the Commissioner’s contention that Mr Burhala’s claims relating to the August 2019 Orders should be summarily dismissed on the basis that they have no reasonable prospect of success, or should otherwise be struck out. I conclude that Mr Burhala’s claims relating to the August 2019 Orders have no reasonable prospect of success and should be summarily dismissed.

(c)    In relation to Mr Burhala’s claims relating to s 58(3)(a) of the Bankruptcy Act and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (as amended by the 2010 Protocol) (the Convention) (paragraphs 3-7 of the amended application and [37]-[47] of the statement of claim), the Commissioner contends that these claims should be summarily dismissed or struck out on two bases: that Mr Burhala lacks standing to bring these claims; and/or that the making of the claims constitutes an abuse of process. I am not persuaded that I should summarily dismiss or strike out the relevant claims on the basis of a lack of standing. Further, I do not accept the Commissioner’s submission that it is an abuse of process for Mr Burhala to bring these claims.

The Commissioner’s interlocutory application

11    By his interlocutory application dated 5 June 2020, the Commissioner seeks the following orders (apart from costs):

1.    An order pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) and/or r 26.01 of the Federal Court Rules 2011 that the proceeding be summarily dismissed on the grounds that:

(a)    the Applicant has no standing to bring or prosecute the proceeding;

(b)    the proceeding is an abuse of process; and/or

(c)    the Applicant otherwise has no reasonable prospect of successfully prosecuting the proceeding.

2.    In the alternative to order 1, an order pursuant to r 16.21(1) the Federal Court Rules 2011 that the whole of the Statement of Claim filed by the Applicant on 7 May 2020 be struck out.

12    The Commissioner relies on the following material:

(a)    an affidavit of Catarina Borges Cabrera, a lawyer employed by the Australian Government Solicitor, the solicitors for the Commissioner, dated 29 May 2020;

(b)    an affidavit of Fiona Biltris, a Senior Technical Leader in the Australian Taxation Office, dated 31 July 2020; and

(c)    an email chain ending with an email from the Associate to Anderson J dated 23 July 2019 to the parties to the 2017 Proceeding.

13    Mr Burhala relies on the following material:

(a)    affidavits of Mr Burhala dated 4 December 2019, 5 February 2020, 25 June 2020 and 30 July 2020; and

(b)    a letter dated 3 July 2020 from the Australian Taxation Office to Mr Viorel Nitu, Head of Department, Department for International Exchange of Information within the Ministry of Public Finance of Romania (the 3 July 2020 Letter).

14    The hearing of the Commissioner’s interlocutory application took place using video-conferencing software (Microsoft Teams) due to the restrictions in place during the COVID-19 pandemic. In light of the restrictions in place, and consistently with the Court’s practice guidelines, Mr Burhala’s affidavit dated 25 June 2020 was filed in a form that was signed but not sworn or affirmed. During the hearing, Mr Burhala took an oath and adopted that affidavit.

15    There was no cross-examination of any of the deponents of the affidavits.

16    The affidavit of Ms Biltris dated 31 July 2020 and the affidavit of Mr Burhala dated 30 July 2020 were filed (with leave) following the hearing. These affidavits were signed but not sworn or affirmed. In response to an email from my chambers, by email dated 11 August 2020 counsel for Mr Burhala stated that Mr Burhala was content with the Court accepting these affidavits as if they had been sworn or affirmed, subject to an objection to annexure “FB-4” to Ms Biltris’s affidavit on the basis that it contains inadmissible hearsay. By email dated 12 August 2020, the Commissioner’s solicitors stated that the Commissioner was content with the Court accepting these affidavits as if they had been sworn or affirmed. In these circumstances, I will receive these affidavits (apart from annexure “FB-4” to Ms Biltris’s affidavit) into evidence for the purposes of the present interlocutory application as if they had been sworn or affirmed. In relation to annexure “FB-4”, while information and belief evidence is admissible on an interlocutory application, the contents of that annexure have not been put into evidence in this way.

Background

17    In this section of these reasons, I outline the background to the present proceeding. This largely concerns the 2017 Proceeding.

18    On 10 August 2016, Mr Burhala was made bankrupt by an order of the Federal Circuit Court of Australia. The Trustees were appointed as the joint and several trustees of Mr Burhala’s bankrupt estate.

19    On 15 October 2016, the Deputy Commissioner of Taxation lodged a proof of debt with the Trustees for outstanding taxation liabilities owed by Mr Burhala to the Commonwealth of Australia.

20    On or about 5 December 2017, the Commissioner commenced the 2017 Proceeding. The Trustees were the first and second respondents to the proceeding. Mr Burhala was the third respondent to the proceeding. By the application in that proceeding, the Commissioner sought (among other things) leave pursuant to s 58(3)(b) of the Bankruptcy Act to commence certain proceedings in respect of a provable debt.

21    On 20 December 2017, I gave judgment on the Commissioner’s application for leave pursuant to s 58(3)(b), and delivered ex tempore reasons. In those reasons, I explained that the application for leave related to three proceedings:

(a)    the 2017 Proceeding itself, by which the Commissioner sought judgment for $4,737,623.81 in respect of outstanding taxation liabilities;

(b)    a claim that had been jointly filed in the name of the Trustees and the Commissioner, which asked the Bucharest Tribunal in Romania to recognise that certain transfers of real property located in Romania by Mr Burhala to his children should be declared void, as they were done with the intention of defrauding his creditors (the Avoidance Proceeding); and

(c)    a proposed action in Romania, to be brought in the names of both the Commissioner and the Trustees, being an application to freeze assets still in the name of Mr Burhala in Romania under Article 1075 of the Romanian Civil Procedure Code (the Proposed Freezing Application).

22    In the 20 December 2017 reasons, I noted that the application for leave was supported by the Trustees. I noted that the grounds for the application for leave were set out in an affidavit of Aris Zafiriou dated 1 December 2017. Briefly stated, they were:

(a)    the Commissioner had been advised by his Romanian lawyers that, in order to proceed with the Proposed Freezing Application, the Commissioner required a judgment against Mr Burhala in respect of his outstanding taxation liabilities; and

(b)    Mr Burhala had alleged in his defence filed in the Avoidance Proceeding that: the Commissioner did not have standing to participate because he did not have a judgment against Mr Burhala in respect of his outstanding taxation liabilities; the Commissioner was precluded from bringing the Avoidance Proceeding because he had not obtained leave under s 58(3)(b); and because the Trustees’ bankruptcy recognition application had not been determined, the Trustees did not have standing to bring the Avoidance Proceeding.

23    As noted in the 20 December 2017 reasons, the Commissioner had indicated that he was willing to undertake, as a condition of any grant of leave, 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. The Commissioner also submitted that the participation in the actions by the Commissioner in Romania was intended to have the effect of augmenting the assets available to all creditors and would therefore assist in the orderly conduct of the bankruptcy administration.

24    In the 20 December 2017 reasons, I stated that I considered it appropriate in the particular circumstances of the case to grant the Commissioner leave, pursuant to s 58(3)(b), to commence the three legal proceedings (with leave being granted nunc pro tunc for those already commenced). I noted that, although Mr Burhala had not yet been served, this did not appear to be necessary for the purposes of the application for leave, citing Kattirtzis v Zaravinos [2001] FCA 1158 at [5]. I adjourned the balance of the 2017 Proceeding to a date to be fixed.

25    The Commissioner subsequently filed an interlocutory application in the 2017 Proceeding for leave to serve the application and certain related documents on Mr Burhala in Romania in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965. On 7 May 2018, I granted that application: Commissioner of Taxation v Yeo (Trustee) [2018] FCA 635.

26    On 14 December 2018, Mr Burhala, having now been served, filed a notice of address for service in the 2017 Proceeding.

27    On 29 March 2019, the Commissioner filed an application for summary judgment against Mr Burhala in the 2017 Proceeding. Summary judgment was sought for the claimed outstanding taxation liabilities.

28    On 17 May 2019, Mr Burhala filed an interim application in the 2017 Proceeding. Mr Burhala’s interim application sought the following orders (apart from costs):

1.    That the Orders made by this Honourable Court on 20th of December 2017 be set aside in accordance with Rule 39.05(1) or alternatively Rule 39.05(b) of the Federal Court Rules 2011.

2.    That the Third Respondent be granted leave to file and serve a Defence to the application filed on 5th of December 2017 by the Applicant.

3.    That pursuant to section 60(1) of the Bankruptcy Act 1966 (Cth) the Court stay any legal process commenced by the Applicant with regard to enforcement to their alleged provable debt including but not limited to the request issued by the Applicant on 4th of April 2017 to the Romanian Fiscal Authorities namely Agenția Națională de Administrare Fiscală pursuant to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 Protocol.

4.    A declaration that pursuant to section 58(3)(a) of the Bankruptcy Act 1966 (Cth) the Applicant’s alleged provable debt is no longer enforceable under the laws of Australia as described by the Applicant the Certificate issued by the Applicant on 4th of April 2017 under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 Protocol given the Sequestration Order made by the Federal Circuit Court at Melbourne in File Number MLG160/2016.

5.    That the Applicant be required to withdraw the request made on 4th of April 2017 under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 Protocol to the Romanian Fiscal Authorities namely Agenția Națională de Administrare Fiscală and serve them with a copy of the declaration and the stay Orders.

6.    Should the Applicant fail to comply with Orders made under paragraph 5 therein within 30 days from the date of such Order, a Registrar of this Honourable Court cause for these Orders to be served on the Romanian Fiscal Authorities namely Agenția Națională de Administrare Fiscală.

7.    That pursuant to section 47B(1) of the Federal Court Act 1976 (Cth) the Third Respondent be allowed to appear and provide submissions before this Honourable Court by way of audio link.

29    In advance of the hearing of Mr Burhala’s interim application, the Commissioner indicated that he objected to Mr Burhala’s standing to make the interim application. The parties agreed that, before the Court addressed the merits of his application, the Court should first determine the standing issue.

30    On 22 July 2019, a hearing took place before Anderson J. This hearing was devoted to the issue of standing. The Commissioner was represented by counsel (not the same counsel as appearing for the Commissioner on the present interlocutory application). Mr Burhala appeared for himself via telephone link from Romania.

31    In the course of the hearing, the following exchange took place between his Honour and counsel for the Commissioner (at p 23 of the transcript):

[COUNSEL]: … So, as I said, no allegations of personal misconduct are made against the bankrupt, it’s as simple – he didn’t pay his tax claim. The judgment that’s sought is for a judgment quantifying his taxation and associated liabilities and no more. It’s not sought, for instance, that the judgment be executed upon. Indeed, there’s a complete barrier to doing that under section 58(3)(a).

HIS HONOUR: So, to the extent that Mr Burhala, in his submissions, makes that point, you would accept that?

[COUNSEL]: I can’t drive around that. That’s what the High Court says. You can’t enforce a judgment but there’s a barrier to that being done.

HIS HONOUR: And you say that here – that that’s a barrier which means that all the proceedings that are sought to do – that are before me are simply quantification by the ATO of a liability?

[COUNSEL]: That’s correct.

HIS HONOUR: And that section 58(3) would mean that there could be no enforcement action taken beyond the quantification?

[COUNSEL]: Well, that’s the – that’s the extent of it. That’s – and the High Court has gone into print on the meaning of section 58(3)(a), the Full Court as well in Fraser.

HIS HONOUR: Yes. I understand that.

[COUNSEL]: So I can’t – I can’t get around that. And – yes. There is a bar. But it’s my submission, though, that, as – well, if you – if you – just going back to the part of the factual matrix in the decision of Perry J in Koumanios was that there was come steps apparently to enforce the debt overseas but she found that there’s still – there’s no standing on the part of the bankrupt to apply to – apply for a stay of proceedings apparently in breach of the prohibition in 58(3)(a).

HIS HONOUR: And the person that would have standing would be the trustee.

[COUNSEL]: Trustees. Indeed.

HIS HONOUR: I understand that, [counsel]. Thank you for that.

(Emphasis added; errors in original.)

32    On 1 August 2019, Anderson J published the August 2019 Reasons and made the August 2019 Orders. As set out in the August 2019 Reasons at [3], Anderson J concluded that Mr Burhala did not have standing to seek the orders sought in his interim application.

33    The August 2019 Reasons considered the issue of standing in the context of the two substantive aspects of Mr Burhala’s interim application.

34    First, at [36]-[44], Anderson J considered Mr Burhala’s standing to set aside the orders made on 20 December 2017. Justice Anderson held, at [43], that a grant of leave under s 58(3)(b) is not a matter in respect of which the bankrupt is sufficiently interested in the relevant sense. It followed, his Honour held, that Mr Burhala did not have standing to set aside the grant of leave under s 58(3)(b).

35    Secondly, at [45]-[51], Anderson J considered Mr Burhala’s standing to preserve the property of the bankrupt estate. After noting that the third to sixth orders sought by Mr Burhala in his interim application attempted to frustrate the proceedings in Romania in respect of which leave had been granted on 20 December 2017, Anderson J held that a bankrupt has no standing to seek such orders, the effect of which is the protection of the property of the bankrupt estate: at [46]. After referring to relevant case law, Anderson J held that Mr Burhala did not have standing to seek orders 3 to 6 set out in his interim application: at [51].

36    In addition to these matters, Anderson J also addressed, at [52]-[55], the scope of the leave that had been granted under s 58(3)(b) (by the orders made on 20 December 2017). Justice Anderson noted a submission made by Mr Burhala that the participation by the Commissioner in the legal proceedings in respect of which leave was granted constituted enforcement of a remedy against the property of Mr Burhala in contravention of s 58(3)(a) of the Bankruptcy Act. In that context, Anderson J made the following observations at [54]:

Leave under s 58(3)(b) of the Act permits the commencement and maintenance of such a legal proceeding, but it does not permit the enforcement of any remedy against the bankrupt or his or her property in respect of a provable debt: Fraser v Commissioner of Taxation [1996] FCA 1701; 69 FCR 99 (Fraser) at 111 per Beaumont J, with Black CJ and Tamberlin J agreeing. For this purpose, the obtaining of an order is to be distinguished from the enforcement of such an order: see, for instance, Kostov v Nationwide News Pty Ltd (No. 1) [2018] NSWSC 1822 at [33]-[37] per Davies J. The purpose of prohibiting the enforcement by creditors of any remedy against the bankrupt or the property of the bankrupt in respect of a provable debt is to ensure the bankrupt’s assets are made available for equitable distribution among the bankrupt’s creditors: [Storey] v Lane [1981] HCA 47; 147 CLR 549 at 556-7 per Gibbs CJ, with Mason, Wilson and Brennan JJ agreeing.

37    Construed in the light of these principles, Anderson J held that the orders made on 20 December 2017 merely permitted the institution of legal proceedings and their maintenance up to the point of recovery of judgment; they did not permit the enforcement of any remedy against Mr Burhala or his property in respect of a provable debt. Thus, Anderson J made clear, consistently with the submission that had been made on behalf of the Commissioner, that the Commissioner could not take steps to enforce any judgment obtained against Mr Burhala pursuant to the earlier grant of leave under s 58(3)(b).

38    The August 2019 Orders were as follows:

1.    The interim application by [Mr Burhala] dated 15 May 2019 and filed on 17 May 2019 (Interim Application) is dismissed.

2.    [Mr Burhala] pay the [Commissioner’s] costs of and incidental to the Interim Application.

39    Mr Burhala did not seek leave to appeal from the August 2019 Orders (leave being necessary as the orders were interlocutory).

40    On 14 October 2019, a Judicial Registrar of the Court (Judicial Registrar Ryan) heard and determined the Commissioner’s application for summary judgment in the 2017 Proceeding. The Registrar ordered that there be judgment for the Commissioner against Mr Burhala in the amount of $4,737,623.81. This brought the 2017 Proceeding to an end.

41    In December 2019, Mr Burhala commenced the present proceeding by filing an application and a supporting affidavit. Subsequently, pursuant to orders made at a case management hearing, Mr Burhala filed the amended application and the statement of claim. On 5 June 2020, the Commissioner filed a defence.

The amended application and the statement of claim

42    In his amended application, Mr Burhala seeks the following orders (apart from costs):

1.    An order setting aside interlocutory orders of his Honour Mr Justice Anderson dated 1 August 2019 in action VID 1336 of 2017 on account of the respondent’s fraud;

2.    An order setting aside interlocutory orders of his Honour Mr Justice Anderson dated 1 August 2019 in action VID 1336 of 2017 on account of exceptional circumstances;

3.    A declaration that recovery enforcement warrant no. 963557/A/06.04.2017 and recovery enforcement order no. 167082542511 of 2017 issued by the Direcţia Generală Regională a Finanţelor Publice Bucureşti represented by Autoritatea Naţională a Admininstratiei Fiscale of the Republic of Romania (the Authority) at the request of the respondent pursuant to the Convention (the Request) are the enforcement of a remedy or remedies against the person or the property of the Applicant in respect of a provable debt;

4.    A declaration that the Respondent does not have and is not entitled to an instrument permitting the enforcement of tax claims against the Applicant referred to in Article 11(2) of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

5.    An injunction requiring the Respondent to communicate the withdrawal of the request to the Authority within 14 days;

6.    An order pursuant to paragraph 60(1)(b) of the Act staying any legal process whereby the Respondent and/or its agents enforces, prepares to enforce or assists in the enforcement of a remedy against the person or property of the Applicant in respect of a provable debt;

7.    An order that should the Respondent fail to comply with the injunction referred to in order 3 within 30 days from the date of these orders, a Registrar of the Honourable Court cause these orders to be served on the Authority together with a statement by the Registrar that the request is not and was never valid under the laws of the Commonwealth of Australia;

43    In [1] to [16] of the statement of claim, Mr Burhala sets out background matters. The balance of the statement of claim is divided into three sections:

(a)    Setting aside the August 2019 Orders as obtained by fraud ([17]-[33]);

(b)    Setting aside the August 2019 Orders as interlocutory orders ([34]-[36]); and

(c)    Contravention of s 58(3)(a) of the Bankruptcy Act and the Convention ([37]-[47]).

44    I will now summarise each of these three sections of the statement of claim.

45    In the first section, it is stated at [17] that Mr Burhala seeks an order that the August 2019 Orders be set aside pursuant to r 39.05(b) of the Federal Court Rules because they were obtained by fraud. (Although the statement of claim uses the word “Judgement”, I will refer to the orders as the August 2019 Orders for consistency in these reasons.) It is alleged that, at the hearing before Anderson J, counsel for the Commissioner submitted that the Commissioner would take no enforcement action in Romania in respect of the amount of $4,737,623.81 sought to be recovered by the Commissioner from Mr Burhala (referred to as the “Debt” in the statement of claim). By way of particulars for that allegation, the above extract from p 23 of the transcript of the hearing before Anderson J is set out (referred to as the “Submission”). It is then alleged at [19] that counsel for the Commissioner falsely or fraudulently made the following direct or indirect assertions (referred to as the “Assertions”):

(a)    that the Commissioner accepted Mr Burhala’s submission that the Commissioner could not execute on the Debt judgment;

(b)    that the Commissioner could not and would not enforce the Debt against Mr Burhala; and

(c)    that the Commissioner cannot “enforce the debt overseas”.

46    It is alleged at [20] that, contrary to the Submission and the Assertions, the Commissioner had previously requested the Autoritatea Nationala a Administratiei Fiscale or Romanian Fiscal Authority (ANAF) pursuant to the Convention to recover the Debt on the Commissioner’s behalf. The particulars refer to a request dated 4 April 2017.

47    It is alleged in [21] that on 6 April 2017 the Romanian Ministry of Public Finance authorised the ANAF to immediately recover the Debt in Romanian currency on behalf of the Commissioner. At [22], it is alleged that on the same date, namely 6 April 2017, the ANAF issued a recovery enforcement warrant for the seizure and sale of Mr Burhala’s assets in Romania (the Warrant). Further, it is alleged at [23] that on 6 April 2017, Mr Burhala’s bank accounts in Romania were garnished by the ANAF and he was unable to withdraw any money from the accounts.

48    It is alleged at [24] that the Submission and the Assertions were false and/or fraudulent to the knowledge of the Commissioner. It is alleged that Mr Burhala was self-represented at the hearing before Anderson J and did not hear or understand the Submission or the Assertions. It is alleged at [29] that the Submission and the Assertions were material to the August 2019 Reasons. It is alleged at [31] that the fraud “consisted in counsel for the Commissioner at the Hearing suppressing facts and allaying concerns expressed by Anderson J concerning the possible application of Bankruptcy Act s58(3)(a) prohibitions”.

49    Additionally, at [32], the statement of claim includes a complaint that the August 2019 Reasons did not consider, or adequately consider, Mr Burhala’s entitlement to relief under s 58(3)(a).

50    In the second section of the statement of claim, it is stated at [34] that, alternatively, the August 2019 Orders were interlocutory and should be set aside pursuant to r 39.05(c) of the Federal Court Rules. Mr Burhala refers to and repeats his earlier allegations and then alleges at [36]:

Circumstances attending the [August 2019 Orders] are exceptional for the following reasons:

(a)    There was an evident miscarriage of justice. The Bankrupt made it clear to the Commissioner and the Court in his application and in his oral and written submissions that the relief he sought was specific to s58(3)(a) and not s58(3)(b) of the Bankruptcy Act. The s58(3)(a) claim was not examined and scarcely referred to in the Judgement.

(b)    An abuse of electronic communication facilities occurred. The Bankrupt believes that the Commissioner’s counsel misdirected the court without any or any sufficient recourse to the Bankrupt and/or obtained an unfair advantage over him in the three-way exchange between counsel and a Judge in Melbourne and the Bankrupt in a remote Romanian location. Counsel for the Commissioner confused the Court. It is not fair to expect the Bankrupt as an unrepresented litigant to have intervened and corrected the presiding judge in these circumstances.

(c)    New evidence of the Commissioner’s fraudulent conduct came into existence when the Bankrupt’s counsel discovered what was contained in the Hearing transcript. Oral submissions made by counsel for the Commissioner to Anderson J in Melbourne during the course of the Hearing did not disclose or adequately disclose the Commissioner's fraud to the Bankrupt in his remote location.

51    The third section of the statement of claim contains Mr Burhala’s allegations concerning contravention of s 58(3)(a) of the Bankruptcy Act and the Convention. It is in the following terms:

37.    The Bankrupt asserts that s58(3)(a) of the Bankruptcy Act prohibits the Commissioner from enforcing any remedy against his person in respect of a provable debt.

38.    The Bankrupt refers to and repeats allegations made above in paragraphs 6 to 9 and 20 to 23 and the particulars sub-joined thereto.

39.    Pursuant to Article 11 of the Convention, steps taken by the ANAF to recover tax claims pursuant to the Request will be undertaken as though they were the ANAF’s own tax claims.

40.    The ANAF acted as the Commissioner’s agent for the purpose of enforcing remedies against the Bankrupt.

41.    The Request was the Commissioner’s enforcement of a remedy against the Bankrupt within the meaning of s58(3)(a) because the ANAF’s steps to recover the Debt on the Commissioner’s behalf had a remedial character.

PARTICULARS

(a)    Concerning the Convention, the Bankrupt refers to and repeats the above particulars sub-joined to paragraph 20;

(b)    Seven days after the Request was made on 4 April 2017 and in the absence of an order from a Romanian court, the Bankrupt’s bank accounts in Romania were garnished pursuant to the Warrant in partial discharge of the Debt;

(c)    The ANAF has refused to give the Bankrupt a fiscal certificate which prevents the Bankrupt from finding Romanian employment commensurate with his training and ability.

42.    No actual income threshold level amount within the meaning of s139K of the Bankruptcy Act is exempted from the Bankrupt’s income or resources liable to bank account garnishment remedy employed by the ANAF.

PARTICULARS

The Bankrupt refers to and repeats the particular (b) subjoined to the preceding paragraph.

43.    As a consequence of the bank account garnishment referred to in the previous paragraph, the Bankrupt finds it difficult to provide sustenance for himself and his family.

44.    The bankrupt is precluded from accessing early release of his Australian superannuation funds in the Covid-19 epidemic because the Warrant does not exempt the Bankrupt’s interests in a regulated superannuation fund comparably to s116(2)(d) of the Bankruptcy Act.

45.    Article 11(2) of the Convention provides that requests for the recovery of tax claims shall only apply to tax claims which form the subject of an instrument permitting their enforcement in the state of a requesting party.

PARTICULARS

The Bankrupt refers to and repeats the above Convention particulars subjoined to paragraph 20.

46.    The Request purported to be an instrument permitting the Commissioner’s enforcement of the Debt against the Bankrupt under the laws of Australia signed by Aris Zafiriou as duly appointed Competent Authority of Australia for the purposes of the Convention.

PARTICULARS

The Bankrupt refers to the above particulars subjoined to paragraph 20.

47.    In fact the Commissioner was not permitted to enforce the debt as stated in the instrument referred to in previous paragraph and enforcement of the Debt against the person of the Bankrupt is specifically prohibited by s58(3)(a) of the Bankruptcy Act.

PARTICULARS

The Bankrupt refers to the above paragraphs 6-8, 11-12 and 37-41.

Factual material before the Court

52    The parties have placed a limited amount of factual material before the Court for the purposes of the present interlocutory application. The factual findings set out below are made only for the purposes of the present interlocutory application. It is possible that different findings may be made if the matter proceeds further.

53    On 4 April 2017, the Australian Taxation Office made a request for assistance to the National Agency for Fiscal Administration, Ministry of Public Finance, Bucharest, Romania pursuant to the Convention: see Ms Biltris’s affidavit at [4]. A copy of “Attachment A” to the request is annexure “FB-3” to Mr Burhala’s affidavit of 4 December 2019.

54    A subsequent document, on the letterhead of the ANAF, was issued in Romania requesting that the amount be recovered. It was addressed to the Regional General Division of Public Finance of Bucharest. The document and a translation are set out in annexure “FB-4” to Mr Burhala’s 4 December 2019 affidavit. The third last paragraph (as translated) stated:

Regarding the foregoing, you are ordered to initiate, within maximum 10 days after the registration of this petition, all the measures that are necessary to recover the debts owed in Australia, and you are to inform us to the e-mail address colaborare.interstatal@anaf.ro within maximum 2 days after each measure of enforcement recovery that is carried out.

(Emphasis in original.)

55    It seems that a summons, on the letterhead of the ANAF, was served on Mr Burhala. A copy of the summons and a translation are set out at annexure “FB-5” to Mr Burhala’s 4 December 2019 affidavit. The first paragraph of the summons (as translated) stated:

On the grounds of art. 230 of the Law no. 207/2015 of the Tax Procedure Code, we are hereby advising you that you are registered in the tax records with the following payable amounts, for which foreclosure has been initiated, under the enforcement order issued by the Regional General Division of Public Finance of BUCHAREST, District 1 Administration of Public Finance, attached.

56    Under the heading “Nature of the tax obligation”, the summons referred to “recovery request of the Australian Government ‘Australian Taxation Office’”.

57    Mr Burhala states in his 4 December 2019 affidavit at [8] that he commenced a proceeding in Romania to appeal an enforcement recovery order and warrant issued by the ANAF. He states at [9] that the Commissioner joined those proceedings on the basis that the ANAF were acting on his behalf and that he was the beneficiary of the money to be recovered.

58    In his 4 December 2019 affidavit at [10]-[24], Mr Burhala describes proceedings that took place in Romania during the period October 2017 to August 2019. It is not necessary for present purposes to detail those proceedings.

59    On 23 December 2019, the Australian Taxation Office sent a letter to Mr Viorel Nitu of the Romanian Ministry of Public Finance to inform him that the Commissioner would be limiting the request for assistance made on 4 April 2017 to Mr Burhala’s tax liabilities for the tax periods ending 30 June 2014 to 30 June 2016. A copy of the letter is annexure “FB-1” to Ms Biltris’s affidavit dated 31 July 2020.

60    On 3 July 2020, the Australian Taxation Office sent a further letter to Mr Nitu requesting that no further recovery or conservancy action be taken for the purposes of the request for assistance made on 4 April 2017, and that any conservancy measures taken to date be discontinued. (The letter is referred to as the “3 July 2020 Letter” in these reasons.) The letter (omitting formal parts) is in the following terms:

Reference is made to our request for assistance in recovery (claim) dated 4 April 2017 and 19 December 2019 (“Request”), made under Article 11 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (amended by the 2010 Protocol) (“Convention”).

You will be aware that Mr Burhala is bankrupt in Australia and his joint Australian Trustees in Bankruptcy (“Trustees”), Andrew Yeo and Gess Rambaldi, were recently granted recognition under the laws of Romania by enforceable order of the Bucharest Tribunal, further confirmed in the appeal phased by the Bucharest Court of Appeal in case file no. 9882/3/2017. Consequently, we expect that the Trustees will shortly commence the necessary actions to realise Mr Burhala’s assets situated in Romania for the benefit of creditors of Mr Burhala’s bankrupt estate. The Australian Commissioner of Taxation (“Commissioner”) is a major creditor of that estate.

Noting that the status of the Trustees is now recognised in Romania, the Commissioner has determined that he no longer requires the assistance of the Romanian Tax Office pursuant to the Request.

As such, we respectfully request that you take no further recovery or conservancy action for the purposes of the Request. Furthermore, any conservancy measures you may have taken to date may be discontinued. We expect that the Trustees may well be in further contact with the Romanian Tax Office to coordinate on the matter.

We understand that no amounts have been recovered by you under the Request but would ask that you confirm if our understanding is correct. We would also like to take this opportunity to thank you for your assistance in this matter.

This information is provided in accordance with Article 5 of the Convention and I ask that its use and disclosure will be governed accordingly.

(Emphasis added.)

61    Although the 3 July 2020 Letter refers in the first paragraph to a request dated 19 December 2019, Ms Biltris gives evidence that she believes that that date was stated in error and it was intended to refer to the letter of 23 December 2019.

62    At [8] of her affidavit, Ms Biltris states that:

I can confirm that, unless the applicant’s bankruptcy is annulled, the [Commissioner] does not intend to issue any further request for assistance in recovery under Article 11 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (amended by the 2010 Protocol) in respect of the tax liabilities of Mr Burhala that underpin the Orders [i.e. the orders of Judicial Registrar Ryan dated 14 October 2019], and is prepared to provide an undertaking to the court to that effect.

63    Ms Biltris provides details of proceedings in Romania at [9]-[10] of her affidavit.

64    Further, Mr Burhala provides details of proceedings in Romania at [4] and [5]-[8] of his affidavit dated 30 July 2020. In particular, Mr Burhala refers to a directions hearing in appeal proceedings number 24576/3/2019 that took place on 29 July 2020. Mr Burhala states that his representative tendered the 3 July 2020 Letter and applied for the matter to be adjourned so that the ANAF could seek clarification about its proposed course of action. Mr Burhala states that the Commissioner’s representative advised the Court that he had instructions that the 3 July 2020 Letter was not a withdrawal of the Convention request, but a direction that ANAF not commence proceedings additional to the current enforcement proceedings. Mr Burhala also states that the Commissioner’s representative tendered Judicial Registrar Ryan’s order in the 2017 Proceeding that judgment be entered for the Commissioner in the sum of $4,737,623.81.

Applicable principles relating to summary dismissal and strike out

65    I recently discussed the principles relating to summary dismissal in Tresize v National Australia Bank Ltd [2020] FCA 902 at [75]-[79]. For ease of reference, I set out in the following paragraphs the substance of those paragraphs.

66    Section 31A of the Federal Court of Australia Act 1976 (Cth) provides in part:

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

(4)    This section does not limit any powers that the Court has apart from this section.

67    Rule 26.01 of the Federal Court Rules provides in part:

26.01    Summary judgment

(1)    A party may apply to the Court for an order that judgment be given against another party because:

(a)    the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or

(b)    the proceeding is frivolous or vexatious; or

(c)    no reasonable cause of action is disclosed; or

(d)    the proceeding is an abuse of the process of the Court; or

…

(4)    If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order.

68    Section 31A was discussed by the High Court in Spencer v The Commonwealth of Australia (2010) 241 CLR 118 (Spencer). In that case, Hayne, Crennan, Kiefel and Bell JJ stated at [53]:

… s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners and General Steel Industries Inc v Commissioner for Railways (NSW).

(Footnotes omitted.)

69    Their Honours continued at [56] and [58]-[60]:

56    Because s 31A(3) provides that certainty of failure (“hopeless” or “bound to fail”) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression “no reasonable prospect of successfully prosecuting the proceeding” by reference to what is said in those earlier cases.

…

58    How then should the expression “no reasonable prospect” be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is “no reasonable prospect”. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like “no reasonable prospect” is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt.

59    In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like “clearly”, “manifestly” or “obviously”) as “frivolous”, “untenable”, “groundless” or “faulty”. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word “reasonable”, in the phrase “no reasonable prospect”, be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a “frivolous”, “untenable”, “groundless” or “faulty” claim.

60    Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.

(Footnotes omitted.)

70    See also Spencer at [24] per French CJ and Gummow J and Trkulja v Google LLC (2018) 263 CLR 149 at [22] per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ.

71    Also relevant are the principles relating to strike out. Rule 16.21(1) of the Federal Court Rules provides:

16.21    Application to strike out pleadings

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

(a)    contains scandalous material; or

(b)    contains frivolous or vexatious material; or

(c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

(f)    is otherwise an abuse of the process of the Court.

72    I discussed some of the principles relating to r 16.21 in Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (2017) 123 ACSR 223 at [15]-[21], with reference to cases including McGuirk v The University of New South Wales [2009] NSWSC 1424 at [21]-[39], Shelton v National Roads and Motorists’ Association Ltd (2004) 51 ACSR 278 at [18] and McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at [23]-[26], [29].

Consideration

73    It will be convenient to consider, first, the Commissioner’s contentions relating to Mr Burhala’s claims relating to the August 2019 orders, and then the Commissioner’s contentions in relation to Mr Burhala’s claims relating to alleged contravention of s 58(3)(a) of the Bankruptcy Act and the Convention.

Mr Burhala’s claims relating to the August 2019 Orders

74    As discussed earlier in these reasons, Mr Burhala seeks to have the August 2019 Orders set aside on two alternative bases: that they were procured by fraud on the part of the Commissioner; alternatively there are exceptional circumstances justifying the setting aside of the orders. The Commissioner contends that these claims should be summarily dismissed; alternatively that the relevant allegations in the statement of claim should be struck out.

75    At the outset, I note that the purpose of seeking to have the August 2019 Orders set aside would seem to be to clear the path to make the claims set out in the last part of the statement of claim, that is, the claims relating to alleged contravention of s 58(3)(a). It seems that Mr Burhala or those advising him have assumed it to be necessary to set aside the August 2019 Orders before he can pursue those claims, perhaps anticipating an argument by the Commissioner that his s 58(3)(a) claims are precluded on the basis of res judicata, issue estoppel or abuse of process. In fact, in his defence, the Commissioner pleads at [48] that the proceeding is an abuse of process. And in his outline of submissions on the present interlocutory application, the Commissioner submits at [27] that Mr Burhala is attempting to re-litigate issues already resolved and this constitutes an abuse of process.

76    However, if it be Mr Burhala’s assumption that he needs to set aside the August 2019 Orders to pursue his claims relating to s 58(3)(a), I do not consider that assumption to be correct. Further, I do not accept the Commissioner’s submission that it is an abuse of process for Mr Burhala to pursue his s 58(3)(a) claims (because they involve the re-litigation of matters already resolved). The August 2019 Orders are merely interlocutory orders. As such, they do not constitute a res judicata, an element of which is that the decision was final: see KR Handley, Spencer Bower and Handley: Res Judicata (5th ed, LexisNexis, 2019) at [1.02], [5.32]. Further, the August 2019 Orders and the August 2019 Reasons do not constitute an issue estoppel in relation to Mr Burhala’s claims relating to s 58(3)(a) (or his standing to bring such claims). It is true that Mr Burhala’s interim application (see [28] above) referred to s 58(3)(a), and that Anderson J decided that Mr Burhala lacked standing to bring his interim application. However, as discussed above, Anderson J focussed on the question of standing in the context of the two substantive elements of the interim application. Thus, his Honour considered, first, Mr Burhala’s standing to set aside the orders made on 20 December 2017 and, secondly, Mr Burhala’s standing to preserve the property of the bankrupt estate. Justice Anderson did not address whether Mr Burhala had standing to claim a contravention of s 58(3)(a), let alone reach a conclusion on this question. Indeed, in the last section of his reasons, Anderson J emphasised that, because of s 58(3)(a), the Commissioner could not enforce any remedy against the person or property of Mr Burhala, and the previous orders granting leave pursuant to s 58(3)(b) should not be understood as permitting this. Thus the orders and judgment do not constitute an issue estoppel on this matter.

77    For the same reasons, at least for present purposes and on the basis of the material presently before the Court, I do not accept the Commissioner’s submission that it is an abuse of process for Mr Burhala to claim that the Commissioner has contravened or is contravening s 58(3)(a). While it is true that the interim application included claims relating to s 58(3)(a), it is clear that Anderson J did not consider whether Mr Burhala had standing to bring those claims, let alone decide that question. In these circumstances, I do not accept the submission that it is an abuse of process for Mr Burhala to claim in this proceeding that the Commissioner has contravened or is contravening s 58(3)(a).

78    It follows that, if and to the extent that Mr Burhala’s claims that the August 2019 Orders should be set aside are premised on a perceived need to have those orders set aside in order to pursue his claims relating to s 58(3)(a), the premise appears to be flawed. In other words, it does not appear to be necessary for Mr Burhala to include these claims in the proceeding. If there is some other reason to seek to set aside the August 2019 Orders, it is not apparent what it is.

79    Having said this, it is nevertheless necessary to deal with the Commissioner’s contention that Mr Burhala’s claims relating to the August 2019 Orders should be summarily dismissed on the basis that they have no reasonable prospect of success, or should otherwise be struck out.

80    For the following reasons, in my view, Mr Burhala’s claims relating to the August 2019 Orders have no reasonable prospect of success. Insofar as Mr Burhala contends that the August 2019 Orders should be set aside on the basis of fraud, Mr Burhala’s contentions have no merit. The submissions made by counsel for the Commissioner at the hearing before Anderson J were directed to the future and the question whether, if in the future the Commissioner obtained judgment against Mr Burhala in the 2017 Proceeding, it would be open to the Commissioner to seek to enforce that judgment against Mr Burhala. In relation to that question, counsel for the Commissioner accepted that, because of the provisions of s 58(3)(a) of the Bankruptcy Act, it would not be open to the Commissioner to seek to enforce any such judgment against Mr Burhala. There is no basis to suggest that those submissions were not honestly made by counsel for the Commissioner or that those instructing counsel did not honestly believe those statements to be correct. Indeed, those submissions were correct. Mr Burhala seeks to construct an argument to the effect that the submissions misled the Court because the Commissioner had already taken, or was then taking, enforcement steps in Romania contrary to s 58(3)(a). However, the submissions by counsel for the Commissioner at the hearing before Anderson J were not directed to any past or then current steps. Further and in any event, there is no basis to suggest that the Commissioner or his counsel believed any such steps to be in breach of s 58(3)(a). Accordingly, the allegation that the Commissioner procured the August 2019 Orders by fraud has no reasonable prospect of success and should be summarily dismissed.

81    I turn now to Mr Burhala’s claim that the August 2019 Orders, being interlocutory orders, should be set aside on the basis of exceptional circumstances. As noted above, Mr Burhala did not seek leave to appeal from the August 2019 Orders. The circumstances relied on by Mr Burhala to support the setting aside of the orders are extracted in [50] above. In my view, none of these has merit. The first circumstance is that there was a miscarriage of justice because the claim under s 58(3)(a) was not examined. It is true that the issue of standing was considered in relation to other claims and not specifically in relation to the s 58(3)(a) claim. This may well reflect the way in which the argument was presented (noting that Mr Burhala represented himself at the hearing). In any event, if the argument should have been dealt with, the proper course was to apply to the judge to deal with the argument, or to seek leave to appeal from the orders. Further and in any event, as I have discussed above, I do not consider the orders to present an obstacle to Mr Burhala raising the s 58(3)(a) argument in this proceeding. The second circumstance is that an “abuse” of electronic communication facilities occurred. It may be accepted that there were communication difficulties during the hearing. However, the Court was mindful of this and took steps to ensure that Mr Burhala had a fair opportunity to present his arguments. In any event, the proper course to pursue any contention that Mr Burhala was denied a fair hearing was to seek leave to appeal. Further, insofar as Mr Burhala contends that counsel for the Commissioner “confused the Court”, there is no basis for this contention. The third circumstance is that “[n]ew evidence of the Commissioner’s fraudulent conduct came into existence” later. For the reasons set out in the preceding paragraph of these reasons, there is no merit in the fraud allegations. Accordingly, the claim that the August 2019 Orders should be set aside on the basis of exceptional circumstances has no reasonable prospect of success and should be summarily dismissed.

82    In light of the above, it is unnecessary to consider the Commissioner’s strike-out application in relation to Mr Burhala’s claims relating to the August 2019 Orders.

Mr Burhala’s claims relating to s 58(3)(a) of the Bankruptcy Act and the Convention

83    I will now consider the Commissioner’s application for summary dismissal or strike out insofar as it concerns Mr Burhala’s claims relating to s 58(3)(a) of the Bankruptcy Act and the Convention (paragraphs 3-7 of the amended application and [37]-[47] of the statement of claim). In his outline of submissions, the Commissioner advances two bases for his application. The first is that Mr Burhala lacks standing to bring these claims. The second is that the making of the claims constitutes an abuse of process.

84    Before directly addressing the Commissioner’s contentions, it is worth noting the central role that s 58(3)(a) plays in the scheme of the Bankruptcy Act. In Talacko v Bennett (2017) 260 CLR 124 (Talacko), Kiefel CJ, Bell, Keane, Gordon and Edelman JJ (with whom Gageler J agreed) stated at [35]:

“An essential feature of any modern system of bankruptcy law is that provision is made for the appropriation of the assets of the debtor and their equitable distribution amongst his creditors”. The Bankruptcy Act implements such a system. The Bankruptcy Act includes provisions “to stop individual action by creditors for the purpose of obtaining payment of the debts due to them when the aim of the law is to secure administration of the debtor’s assets in the interest of the creditors generally”. Such provisions are necessary “to prevent one creditor obtaining an undue advantage over the others, and to prevent the scheme of the [Bankruptcy Act] from being defeated”. Section 58(3) is one of those provisions.

(Footnotes omitted.)

85    After setting out s 58(1) and (3) of the Bankruptcy Act, their Honours continued at [37]:

Section 58(3) operates in aid of s 58(1) to ensure that the property of the bankrupt which has vested in the Official Trustee, so as to be available for distribution to creditors in accordance with the other provisions of the Bankruptcy Act, is not depleted to the advantage of individual creditors and the disadvantage of creditors generally.

(Footnotes omitted.)

86    As their Honours explained at [63], “[s]ection 58(3)(a) is concerned with the execution of a judgment, as distinct from steps in a proceeding toward obtaining the judgment in question”, referring to Fraser v Federal Commissioner of Taxation (1996) 69 FCR 99 (Fraser) at 111-112 per Beaumont J (Black CJ and Tamberlin J agreeing) and Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 at 594-595.

87    On the face of things, the Commissioner’s request for assistance dated 4 April 2017 (see [53] above) and the steps taken by the Romanian authorities to recover moneys from Mr Burhala on behalf of the Commissioner following that request (see [54]-[57] above) raise serious questions as to whether this constitutes the enforcement of a remedy against the person or property of the bankrupt (Mr Burhala) in respect of a provable debt (the outstanding tax liabilities). I note that these steps were not steps taken in a proceeding in respect of which leave was granted pursuant to s 58(3)(b) of the Bankruptcy Act on 20 December 2017. In respect of those proceedings, the Commissioner gave an undertaking, as a condition of the grant of leave, to pay any funds or property received by him to the Trustees in order for such funds or property to be distributed rateably among the creditors of Mr Burhala. However, the material presently before the Court does not indicate whether any equivalent undertaking or arrangement applied to the request for assistance dated 4 April 2017.

88    I turn now to consider the Commissioner’s submissions. The first submission is that Mr Burhala, as a bankrupt, lacks standing to bring the claims. The Commissioner submits that, following the making of a sequestration order, the bankrupt no longer has an interest in his or her property, which is vested in the trustee in bankruptcy; accordingly, it is submitted, the bankrupt lacks standing to contend that a creditor is seeking to enforce a remedy against the property of the bankrupt in respect of a provable debt, in contravention of s 58(3)(a). The Commissioner relies on Cummings v Claremont Petroleum NL (1996) 185 CLR 124 (Cummings) at 135-136, where Brennan CJ, Gaudron and McHugh JJ referred to cases which established the negative proposition, which their Honours implicitly accepted, that “a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy”. The Commissioner also relies on Coumanios v Giunti [2017] FCA 678, particularly at [49]. The Commissioner submits that the relief sought by Mr Burhala in paragraphs 3 to 7 of his amended application is properly characterised as relief aimed at protecting property of which the bankrupt has been divested upon bankruptcy, however the claims are formulated.

89    I am not persuaded, at least at this stage, that Mr Burhala lacks standing to bring the claims in paragraphs 3-7 of the amended application and [37]-[47] of the statement of claim. The allegations in the statement of claim are framed as allegations that the Commissioner contravened s 58(3)(a) by the enforcement of a remedy against the person (as distinct from the property) of the bankrupt (see, eg, [37], [47] of the statement of claim). It is therefore at least arguable that the negative proposition expressed in Cummings at 135-136, which relates to property, is inapplicable to such claims. I note that in the amended application reference is made both to the person and to the property of the bankrupt. It may be that, in some respects, the claims relate to the property of the bankrupt that was vested in the Trustees and in respect of which Mr Burhala therefore has no interest. However, given the way the claims are framed in the statement of claim, I am not persuaded that they should be summarily dismissed or struck out due to a lack of standing.

90    I note for completeness that, in Mr Burhala’s outline of submissions, his counsel quite properly drew the Court’s attention to a number of cases that contain statements to the effect that the enforcement of a remedy against the person of the bankrupt must involve physical restraint: see, in particular, Fraser at 110. It is submitted on behalf of Mr Burhala that such cases can be distinguished; alternatively, it is submitted that such statements were obiter dicta or wrong (particularly in light of Talacko). In circumstances where the Commissioner did not put his case on this basis, I am not inclined to summarily dismiss or strike out Mr Burhala’s claims based on the statements in those cases. I consider it at least arguable that those cases are distinguishable or that the statements in those cases were obiter dicta. Further, the evidence presently before the Court as to the nature or character of the steps taken in Romania is somewhat limited. I consider it preferable that any issue as to whether the relevant steps constitute the enforcement of a remedy against the person of the bankrupt be determined in a fuller factual context at a final hearing. The evidence at the final hearing may include, for example, expert evidence about the nature of the relevant steps.

91    In the circumstances, I am not persuaded that I should summarily dismiss or strike out the relevant claims on the basis of a lack of standing.

92    The Commissioner’s second submission is that the making of the claims in paragraphs 3-7 of the amended application and [37]-[47] of the statement of claim constitutes an abuse of process, as the issues have already been resolved by the judgment of Anderson J. As discussed at [77] above, I do not accept this submission.

93    For these reasons, I do not propose to summarily dismiss or strike out the claims in paragraphs 3-7 of the amended application and [37]-[47] of the statement of claim.

94    I do wish, however, to make the following observations about the pleading and Mr Burhala’s case more generally. First, I consider that the relevant section of the statement of claim (at [37]-[47]) needs to be reviewed and potentially substantially re-cast in light of the evidence that emerged in the course of the hearing of the present interlocutory application and shortly after that hearing. In particular, the pleading needs to be reviewed in light of the 3 July 2020 Letter. Secondly, I consider that the amended application and the statement of claim should be re-pleaded so as to remove the claims that have been summarily dismissed (paragraphs 1 and 2 of the amended application and [17]-[36] of the statement of claim) and to plead the remaining claims on a stand-alone basis. At present there are several cross-references within [37]-[47] of the statement of claim to earlier paragraphs that have now been summarily dismissed. I will not make any orders at this stage in relation to these matters. The appropriate course is for Mr Burhala to formulate a revised proposed pleading and seek leave to amend. Any such application can be dealt with at the next case management hearing in the proceeding.

Conclusion

95    For the reasons set out above, I will make orders to the effect that:

(a)    The following claims be summarily dismissed:

(i)    Mr Burhala’s claim that the August 2019 Orders should be set aside on account of the Commissioner’s fraud (paragraph 1 of the amended application and [17]-[33] of the statement of claim); and

(ii)    Mr Burhala’s claim that the August 2019 Orders should be set aside on account of exceptional circumstances (paragraph 2 of the amended application and [34]-[36] of the statement of claim).

(b)    The Commissioner’s interlocutory application dated 5 June 2020 otherwise be dismissed.

(c)    Subject to paragraph (d), the costs of the Commissioner’s interlocutory application be reserved.

(d)    If either party seeks a different costs order, the party may file and serve a written submission on costs (of no more than 2 pages) by 4.00 pm on 29 January 2021, in which case the other party may file a responding written submission (of no more than 2 pages) by 4.00 pm on 5 February 2021.

96    I will also make an order that the matter be listed for case management on a date to be fixed.

Associate:

Dated:    23 December 2020