The Federal Court has granted the Commissioner’s application for substituted service of a statement of claim on a taxpayer in relation to a tax liability of $186m for which the Commissioner had obtained judgment. The liability arose from an audit of the taxpayer and her husband and the taxpayer’s ammonia plant business that the taxpayer operated with her husband through companies they owned. The taxpayer and her husband subsequently departed Australia and mortgaged their previously unencumbered Australian residential properties to a company that the Court said appeared to be incorporated in the United Arab Emirates (Mercury Services Limited) which the Commissioner contended was related to the taxpayers, in circumstances where the unencumbered value of the properties would have been sufficient to pay all their debts.
The Commissioner’s application was for declarations to the effect that certain mortgages in favour of Mercury over 2 properties of which the taxpayer was the registered proprietor were void pursuant to s 89 of the Property Law Act 1969 (WA).
In granting the Commissioner’s application for substituted service of the originating application either through the diplomatic channels in the United Arab Emirates (where the taxpayer and her husband were now thought to reside) or to their Australia solicitors who were left in charge of the matter, the Court was satisfied that it had jurisdiction over the matter and that the proceedings were of a kind mentioned in rule 10.42 of the Federal Court Rules (ie where an originating application may be served on a person outside of Australia to the extent that it concerns property in Australia).
Finally, the Court was satisfied that the Commissioner had a prima face case for substituted service in view of the sufficiency of the Commissioner’s supporting evidence, the effect of s 89 of the Property Law Act 1969 (WA) and what it said was the dubious nature of the mortgage in the circumstances (eg that it was not in writing and there was no evidence of advances made to the taxpayer under the mortgage). In these circumstances, the Court concluded it was appropriate to grant an order for substituted service of the statement of claim.
(FCT v Oswal [2012] FCA 1507, Federal Court, Gilmour J, 21 December 2012.)
[FJM Note: See the WA Supreme Court case of DCT v Dunn, where the Court said that leave to give notice of the proceedings outside WA (and in fact in Thailand under Thai law) was valid.]
[LTN 4, 8/1/13]