D.C.T. v John E. Barnes & D.C.T. v Judith A. Barnes (No.4) [2009] FMCA 39 (27 January 2009)

Last Updated: 5 February 2009

FEDERAL MAGISTRATES COURT OF AUSTRALIA

D.C.T v JOHN E. BARNES & D.C.T v JUDITH A. BARNES (No.4)

[2009] FMCA 39

PRACTICE & PROCEDURE – Application for leave to rely on disclosure affidavits in Federal Court proceedings – whether disclosure in the interests of the administration of justice – Court’s implied power to grant leave – disclosure will assist resolving a fact in issue in Federal Court proceedings – no prejudice asserted – leave granted.

Taxation Administration Act 1953 (Cth), Schedule 1, s.260-5

DCT v JE Barnes and DCT v JA Barnes (No.3) [2008] FMCA 1235 Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2008] FCA 391 Skipworth v State of Western Australia & Ors (No.2) [2008] FMCA 544; (2008) 218 FLR 16; (2008) 6 ABC(NS) 252; [2008] FMCA 544

Applicant:

DEPUTY COMMISSIONER OF TAXATION

Respondent:

JOHN ERIC BARNES

File number:

PEG 253 of 2007

Judgment of:

Lucev FM

Hearing date:

27 January 2009

Date of last submission:

27 January 2009

Delivered at:

Perth

Delivered on:

27 January 2009

Applicant:

DEPUTY COMMISSIONER OF TAXATION

Respondent:

JUDITH ANGELA BARNES

File number:

PEG 254 of 2007

Judgment of:

Lucev FM

Hearing date:

27 January 2009

Date of last submission:

27 January 2009

Delivered at:

Perth

Delivered on:

27 January 2009

REPRESENTATION

Counsel for the Applicant:

Mr J.C. Vaughan

Solicitors for the Applicant:

Australian Government Solicitor

Solicitors for the Applicant:

Mr P.R. Butcher

Solicitors for the Respondent:

Butcher, Paull & Calder

ORDERS PEG 253 of 2007

(1) The applicant be granted leave to rely on the disclosure affidavit sworn by the respondent in this matter on 27 March 2008 in Federal Court Action No. WAD 215 of 2008, being the Commissioner of Taxation
v Barnes Developments Pty Ltd.
(2) There be no order as to costs.
(3) The freezing orders made on 14 January 2008, as extended from time to time, be discharged.
(4) The applicant’s undertaking as to damages proffered in support of the freezing orders made on 14 January 2008, as extended from time to time, be discharged.

ORDERS PEG 254 of 2007

(5) The applicant be granted leave to rely on the disclosure affidavit sworn by the respondent in this matter on 27 March 2008 in Federal Court Action No. WAD 215 of 2008, being the Commissioner of Taxation
v Barnes Developments Pty Ltd.
(6) There be no order as to costs.
(7) The freezing orders made on 14 January 2008, as extended from time to time, be discharged.
(8) The applicant’s undertaking as to damages proffered in support of the freezing orders made on 14 January 2008, as extended from time to time, be discharged.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH

PEG 253 of 2007

DEPUTY COMMISSIONER OF TAXATION

Applicant

And

JOHN ERIC BARNES

Respondent

PEG 254 of 2007

DEPUTY COMMISSIONER OF TAXATION

Applicant

And

JUDITH ANGELA BARNES

Respondent

REASONS FOR JUDGMENT

(Ex tempore reasons edited from transcript)

Introduction

1. This is an application for disclosure affidavits filed in this Court on 27 March 2008 by each of the respondents in these proceedings to be used in Federal Court proceedings number WAD 215 of 2008 between the Commissioner of Taxation and Barnes Developments Pty Ltd.

Background

2. The Federal Court proceedings brought by the Commissioner of Taxation relate to an application concerning the alleged failure of Barnes Developments to comply with garnishee orders under s.260-5 to Schedule 1 of the Taxation Administration Act 1953 (Cth). The Federal Court proceedings involve claims for money allegedly due by Barnes Developments to each of the respondents, namely, Mr Barnes in the sum of $73,842 and Mrs Barnes in the sum of $383,451.13.
3. Barnes Development’s defence in the Federal Court proceedings puts in issue the existence of the alleged debts. The disclosure affidavits refer to loan accounts for the Barnes Family Trust in Australia and sets out estimated values in relation to those accounts at paragraphs 2(d) and 2(e) of the disclosure affidavits of Mr and Mrs Barnes respectively and in respect of Mr Barnes in a debit amount of $235,767 and in respect of Mrs Barnes in an amount of $383,451.
4. In the Federal Court proceedings, it is admitted that Barnes Developments is a trustee of the Barnes Family Trust and that each of the respondents in these proceedings is a beneficiary of that trust.[1] It is also relevant to note that the respondents, until their recent bankruptcy, were apparently the sole shareholders and two of the four directors of Barnes Developments.[2]

Legal principles

5. The Court accepts that the law in respect of the question of disclosure of these affidavits is as summarised in the applicant’s outline of submissions at paragraph 6; namely, that:
   1. the applicant must show special but not exceptional circumstances, that is, something that takes the matter out of the ordinary course;
   2. it is relevant to consider actual prejudice that the respondents may sustain; and
   100. the most important consideration is the interests of justice, specifically the likely contribution that the material sought to be disclosed will make to the achievement of justice in the other proceedings, in this case the Federal Court proceedings.[3]

Consideration

6. In this case it is the Court’s view that special circumstances can be established which support the disclosure of the affidavits. In that regard, the Court notes that:
   1. the relevant documents came into existence in circumstances related to bankruptcy proceedings in which it was found that the respondents remained outside of Australia with intent to defeat or delay creditors;[4]
   2. the applicant in the proceedings in this Court and the applicant in the proceedings in the Federal Court is a creditor of the respondents in these proceedings;
   100. the monies sought to be recovered in the Federal Court proceedings are essentially taxation or public revenue;
   4. the affidavits which are sought to be disclosed may assist in the resolution of the matters put in issue by the respondent in the Federal Court proceedings. That is because on their face the affidavits filed in this Court appear to be at odds with the sworn testimony of office holders of the respondent in the Federal Court proceedings. Therefore the disclosure affidavits are likely to contribute to the achievement of justice in the Federal Court proceedings because they are directly relevant to and probative of the issues in those proceedings;
   5. the fact that the affidavits, or at least Mr Barnes’ affidavit on the evidence before this Court, are based on draft accounts, is immaterial in the Court’s view. What is material is that the material in the affidavits may be directly relevant to and probative of what has been put in issue in the Federal Court proceedings or, as Counsel for the applicant has put it today, will lead to a “legitimate forensic inquiry” on a matter which will be for the Federal Court to resolve;
   6. the Court’s view is the administration of justice would not be furthered by the exclusion of relevant material evidence in the Federal Court proceedings, especially material sworn by the respondents in these proceedings, who are office holders of the respondent in the Federal Court proceedings; and
   7. the interests of the bankrupts’ creditors may be contributed to by a successful prosecution of the Federal Court proceedings.
7. No prejudice is asserted by Counsel for the respondents appearing today nor is any prejudice asserted by the trustee in bankruptcy who has written to the applicant’s solicitors indicating that he has no objection to the applicant in these proceedings seeking leave to rely upon the disclosure affidavits in the Federal Court proceedings.
8. Finally, in relation to the interest of justice, I simply repeat what has been said in relation to subparagraphs (d), (e) and (f) in para.6 above in relation to whether special circumstances exist.

Conclusion and orders

9. For those reasons, there will be orders as sought by the applicant in their interim application filed on 9 December 2008 and in that regard the Court notes that the power to make those orders is made pursuant to the Court’s implied power to make any orders necessary in the circumstances of this case.[5]

I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Lucev FM

Deputy Associate: Michele Lord

Date: 30 January 2009

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[1]Affidavit of Carla Kovacevic sworn 9 December 2008, annexures CK2 and CK3.
[2] Affidavit of Annelies van den Brun sworn 14 November 2007, annexure AVB4.
[3] The Court accepts that this summary is essentially taken from what Tamberlin J said at paras.10-14 of Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2008] FCA 391 and the cases cited in those paragraphs.
[4] D.C.T v J.E Barnes and D.C.T v J.A Barnes (No.3) [2008] FMCA 1235.
[5] Skipworth v State of Western Australia & Ors (No. 2) [2008] FMCA 544; (2008) 218 FLR 16; (2008) 6 ABC(NS) 252; [2008] FMCA 544.