In a lengthy decision handed down on Tue 12.12.2017, the Victorian Supreme Court has refused husband and wife taxpayers an application to stay judgment against them for outstanding tax assessments totalling over $2 million.
The Deputy Commissioner of Taxation (DCT) sought judgment against the first defendant in the sum of $1.061 million and against the second defendant in the sum of $1.077 million (as at 6 December 2017). The amounts relate to income tax assessments for the years 2009 to 2011. The Court said the taxpayers neither consented to nor opposed the application for such judgment, but rather sought a stay in circumstances where there are review proceedings being conducted in the AAT in relation to the assessments, which are currently due to be heard in March 2018. The taxpayers also sought a variation to the freezing orders made on 24 July 2017 and extended on 2 August 2017 by borrowing funds to be quarantined for the purpose of the litigation. The DCT opposed the application for a stay and for a variation in circumstances where he says the taxpayers have not made full and frank disclosure of their assets.
The taxpayers had assets associated with them consisting of a number of properties. Discretionary trusts were also involved. Various properties were sold and the DCT had concerns of a failure by the taxpayers to account for those sales and of allegedly false property valuations.
The Court considered that the state of the evidence was “unsatisfactory such that I am unable to be satisfied that there has been full disclosure of the defendants’ asset position”. It also noted that a pending review against an objection decision is not a defence. After lengthy review and analysis of the background facts, the Supreme Court ordered judgment for the DCT for the amounts stated, that the freezing orders be extended until further order of the Court, that the taxpayers’ application for variation of the freezing orders is refused, and that the taxpayers’ application for a stay of the judgment against each of them is refused.
(DCT v Arico (No 2) [2017] VSC 746, Vic Supreme Court, Kennedy J, 12 December 2017.)
[LTN 238, 12/12/17; Tax Month Dec 2017]
Catchwords
PRACTICE & PROCEDURE – Summary judgment – Whether execution ought to be stayed – Discretion – Principles to be applied in granting stay – Taxpayers’ application for stay of summary judgment refused in circumstances where court unable to be satisfied of adequate disclosure by the taxpayers
PRACTICE & PROCEDURE – Freezing order – Application for variation of freezing order enabling defendants to encumber property as security for loan to pay legal fees – Application refused absent adequate disclosure
Extract from Decision
1 In this proceeding the Deputy Commissioner of Taxation (DCT) seeks judgment against the first defendant in the sum of $1,061,049.69 and against the second defendant in the sum of $1,077,652.72 (as at 6 December 2017). The amounts relate to income tax assessments for the years 2009 to 2011. The judgment is sought by way of summary judgment under s 63 of the Civil Procedure Act 2010 (CPA); alternatively as a judgment in default of defence under r 21.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
2 The defendants neither consent nor oppose the application for such judgment. Rather, they seek a stay in circumstances where there are review proceedings being conducted in the Administrative Appeals Tribunal (AAT) in relation to the assessments the subject of this proceeding, which are currently due to be heard in March 2018.
3 The defendants also seek a variation to the freezing orders made on 24 July 2017 and extended on 2 August 2017. They seek to do this by borrowing a sum of $275,000 from their daughter, who will in turn lodge a caveat over a property known as 409 Albion Street, Brunswick West (the Brunswick West Property) (currently the subject of the freezing order). The funds are to be ‘quarantined’ for the purposes of the litigation and not to be recovered by the DCT.[1] Rather, they are to be deposited with the defendants’ solicitors, Condello Lawyers, for the payment of legal expenses.
4 The defendants have otherwise accepted that the freezing order ought to be extended until further order once judgment is entered.
5 The DCT opposes the application for a stay and for a variation in circumstances where he says the defendants have not made full and frank disclosure of their assets.
6 Accordingly, the issues before the Court are: first, whether judgment ought be entered; second, whether or not a stay ought be granted; third, whether the freezing order should be varied.
7 Given a primary issue in the case turned on the extent of disclosure by the defendants, it is necessary to set out the background of this matter in some detail below, before resolving the issues.
Background
8 As set out in my Reasons for extending the freezing orders on 2 August 2017[2] (Reasons) (which ought be read together with these Reasons), a number of the defendants’ assets were already subject to restraining orders made under the Confiscation Act 1997 (Vic) as a result of the conviction of the defendants’ son, Mr Rocco Arico, for extortion, intentionally causing injury and trafficking a drug of dependence. He had also earlier served a term of imprisonment for a conviction of attempted murder in 2001 but had been released on 4 July 2008. The restraining orders include a property at 256-264 Sydney Road, Coburg (256 Sydney Road Property) and a property at 251 Sydney Road, Coburg (251 Sydney Road Property). However, they did not relate to the Brunswick West Property.
9 The defendants’ assets, including specifically the Brunswick West Property, were the subject of freezing orders made ex parte by the Honourable Justice Vickery on 24 July 2017, which were subsequently extended by the orders of 2 August 2017.
10 This was in circumstances where (as highlighted in the Reasons), the affidavit of Mr Aris Zafiriou sworn 18 July 2017 (Zafiriou Affidavit) (in support of the freezing order) had detailed that the defendants’ assets had generally been diminishing over the course of 2012 to 2015, in circumstances where the DCT was not aware of how the proceeds of such assets had been dealt with.