Court Decisions
Freezing orders continued
15.09.2010
The Federal Court has continued freezing orders against five foreign corporations which had never filed tax returns in Australia and which had been assessed to tax for an aggregate exceeding $30 million (DFCT v Hua Wang Bank Berhad ([2010] FCA 1014).
Kenny J was satisfied that it was in the interests of justice to continue the freezing orders. A good arguable case and a real risk of dissipation had been established. On the evidence as it stood, if the relevant assets were removed or dissipated, the Commissioner would be unable to satisfy any prospective judgment. Such a judgment, if obtained, would represent a significant amount of unpaid taxes and administrative penalties. The risk of frustration of judgment was sufficient to justify a freezing order in light of this substantial unpaid tax liability, which, on the Commissioner’s view, has accumulated over several years in a regular pattern of non-payment and non-filing by the respondents. The evidence of hardship to the respondents as a result of a freezing order was generalised and vague; and there was nothing to show that the Commissioner’s undertaking as to damages would not offer them adequate protection.
Kenny J said that potentially lengthy duration of any freezing orders that the court might make had given her significant concern. Her Honour said:
“One possibility is that these freezing orders will be brought to a relatively speedy end upon the Commissioner’s expeditious application for judgment. Another possibility is that the litigation may become attenuated as the taxpayers challenge their assessments under and in accordance with Part IVC of the TAA. It seems to me that the Court should take steps to ensure as far as possible that the freezing orders operate only so long as they can be reasonably required. Amongst other things, this means that the Commissioner must act with reasonably alacrity when called upon to do so. At the hearing, I took up this aspect of the matter with senior counsel for the Commissioner and senior counsel for the respondents. Senior counsel for the respondents agreed that the respondents should be able to lodge their taxation objections in accordance with Part IVC within about a fortnight of the hearing. Senior counsel for the Commissioner indicated that the Commissioner would need about seven days from receipt of the objections in order to estimate the time needed to make decisions on them. In these circumstances, I would not continue the freezing orders indefinitely. Rather, I would extend them for a period of about three weeks until 11 October 2010, upon the basis that the respondents will lodge their objections in accordance with Part IVC by 30 September 2010. On 11 October 2010, I will be asking the parties for some statement of the likely progress of the matter.”
