The Federal Court has allowed a taxpayer’s interlocutory application to vary freezing orders to allow the taxpayer to access funds to meet “reasonable legal expenses” in relation to a complex dispute with the Commissioner over an $11.8m tax debt.
The freezing orders were made in relation to funds held by a related trust to which the taxpayer had lent some $1.8m. The Commissioner resisted the application to vary the freezing orders on a number of grounds including that there was evidence of other personal funds and assets available for this purpose (and which had not been properly disclosed), and that the estimate of the funds needed to meet the legal expenses was vague and lacking particularity.
After taking into account the competing considerations, the Court allowed the taxpayer’s application on the basis of the principle that a litigant “is entitled to have access to reasonable funds in order to meet reasonable expenses”. The Court also noted that the purpose of freezing orders was not to provide security against any judgment debt. However, the Court made the order subject to the condition that the taxpayer’s solicitors provide “self-certification” as to the legal expenses involved and that there be a limit of $250,000 of funds made available, although later application could be made to vary this amount.
(DCT v Bollands & Ors [2012] FCA 1050, Federal Court, McKerracher J, 24 September 2012.)
[LTN 186, 25/9]