FEDERAL CIRCUIT COURT OF AUSTRALIA

Transcription

1 FEDERAL CIRCUIT COURT OF AUSTRALIA DEPUTY COMMISSIONER OF TAXATION v NUGAWELA (No.2) [2017] FCCA 1999 Catchwords: BANKRUPTCY Sequestration order made by a Registrar application to review decision of Registrar application to adjourn hearing of application to review decision of Registrar further application for stay of sequestration order status of proceedings under Part IVC of the Taxation Administration Act 1953 (Cth). PRACTICE AND PROCEDURE Application for adjournment medical evidence of respondent s condition necessity for proper evidence of medical condition whether medical evidence current case management considerations where already not insignificant delay on application for review of Registrar s decision late instruction of lawyers prejudice to the parties public and community interest. PRACTICE AND PROCEDURE Notice to produce application to set aside or for relief from compliance principles in relation to setting aside or relief from compliance with a notice to produce burden and proportionality lateness of the notice to produce. PRACTICE AND PROCEDURE Application for a stay principles in relation to grant of a stay where earlier application for stay dismissed. Legislation: Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41, 43, 44, 52, 60 Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), r.4.06 Federal Circuit Court of Australia Act 1999 (Cth), ss.42, 43, 102, 104 Federal Circuit Court Rules 2001 (Cth), rr.15a.17(2), 20.02(2) Freedom of Information Act 1982 (Cth) Judiciary Act 1903 (Cth), s.39b Taxation Administration Act 1953 (Cth), pt.ivc, s.14zzm, sch.1, s (1) Cases cited: Apotex Pty Ltd v Les Laboratoires Servier [2012] FCA 359 AWX16 v Minister for Immigration & Anor [2016] FCCA 928 Bryant v Commonwealth Bank of Australia & Anor (1996) 90 LGERA 126 Cain v Whyte (1933) 48 CLR 639; (1933) 6 ABC 117; (1933) 6 ALJ 457 Cassimatis & Anor v Australian Securities and Investments Commission [2016] Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Cover sheet and Orders: Page 1

2 FCA 131; (2016) 334 ALR 350 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194; (2000) 74 ALJR 1348; (2000) 99 IR 309; (2000) 174 ALR 585 Commonwealth Bank of Australia v Jeans (No 3) [2006] FCA 693; (2006) 4 ABC(NS) 288 Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 3) [2012] FCA 61 Cumins v Deputy Commissioner [2008] FCAFC 185; (2008) 172 FCR 425; (2008) 73 ATR 888; (2008) 7 ABC(NS) 513 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473; (2008) 82 ALJR 1411; (2008) 69 ATR 357; (2008) 248 ALR 693; (2008) 67 ACSR 593; (2008) ATC ; (2008) 26 ACLC 880 Deputy Commissioner of Taxation v Caporale Group Pty Ltd [2011] FCA 1189 Deputy Commissioner of Taxation v Futuris [2008] HCA 32; (2008) 237 CLR 146; (2008) 82 ALJR 1177; (2008) 69 ATR 41; (2008) 247 ALR 605; (2008) ATC Deputy Commissioner of Taxation v Nugawela [2015] WASC 468 Deputy Commissioner of Taxation v Nugawela [2017] FCCA 1289 Deputy Commissioner of Taxation v Webb [2017] FCCA 1137 Kellow v Dudzinski [2003] FCA 143 Kerr in his Capacity as Trustee of the Bankrupt Estate of Cross & Anor v Akcan [2017] FCCA 1128 Larne-Jones v Human Synergistics Australia Ltd [2013] FCCA 1498 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 McGrath v HNSW Pty Limited (No 2) [2015] FCA 442 Nugawela v Deputy Commissioner of Taxation [2017] WASCA 9 Nugawela v Federal Commissioner of Taxation [2016] FCA 578 Nugawela v Federal Commissioner of Taxation [2016] FCAFC 164 Nugawela v Deputy Commissioner of Taxation [2017] HCASL 114 Pattison v Hadjimouratis [2006] FCAFC 153; (2006) 155 FCR 226; (2006) 236 ALR 1; (2006) 4 ABC(NS) 367 Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629 Re Player (1962) 19 ABC 277 Rigg v Baker [2006] FCAFC 179; (2006) 155 FCR 531; (2006) 236 ALR 629; (2006) 4 ABC(NS) 419 Sanders v Snell (No 2) (2000) 174 ALR 53 Suh & Ors v Minister for Immigration & Citizenship & Anor [2009] FCAFC 42; (2009) 175 FCR 515; (2009) 108 ALD 470 Totev v Sfar [2006] FCA 470; (2006) 230 ALR 236; (2006) 4 ABC(NS) 325 Totev v Sfar & Anor [2008] FCAFC 35; (2008) 167 FCR 193; (2008) 247 ALR 180; (2008) 5 ABC(NS) 691 Tu v Chang (No 2) [2016] FCA 1568 University of Southern Queensland v Luck [2017] FCCA 639; (2017) 318 FLR Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Cover sheet and Orders: Page 2

3 147 Vogwell v Vogwell (1939) 11 ABC 83 Zdrilic & Anor v Hickie & Anor [2016] FCAFC 101; (2016) 246 FCR 532; (2016) 14 ABC(NS) 232 Applicant: Respondent: DEPUTY COMMISSIONER OF TAXATION PATRICK ALLAN NUGAWELA File Number: PEG 121 of 2016 Judgment of: Judge Antoni Lucev Hearing date: 9 August 2017 Date of Last Submission: 9 August 2017 Delivered at: Perth Delivered on: 31 August 2017 REPRESENTATION Counsel for the Applicant: Solicitors for the Applicant: Counsel for the Respondent: Solicitors for the Respondent: For the Trustee in Bankruptcy: Mr C Slater Jackson McDonald Mr JW Fickling (for the adjournment application only) Hayes Poli Legal (for the adjournment application only) Mr G Dudley Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Cover sheet and Orders: Page 3

4 ORDERS (made on 9 August 2017) (1) The Respondent s oral application for an adjournment of these proceedings be dismissed. (2) The Applicant s costs of the Respondent s adjournment application be fixed in the sum of $2,882 to be paid by the Respondent, or from the Respondent s estate in bankruptcy in accordance with the provisions of the Bankruptcy Act 1966 (Cth) ( Bankruptcy Act ), whichever is appropriate at the time payment is required. (3) The Notice to Produce a Document in a Pleading or Affidavit dated 27 March 2017 and served on 17 July 2017 be set aside. (4) The Applicant s costs of the Applicant s interim application filed 8 August 2017 be fixed in the sum of $2,095 to be paid by the Respondent, or from the Respondent s estate in bankruptcy in accordance with the provisions of the Bankruptcy Act, whichever is appropriate at the time payment is required. (5) The Respondent s application for a stay of the proceedings filed 6 July 2017 be dismissed. (6) The Applicant s costs of the Respondent s application for a stay filed 6 July 2017 be fixed in the sum of $2,095 to be paid by the Respondent, or from the Respondent s estate in bankruptcy in accordance with the provisions of the Bankruptcy Act, whichever is appropriate at the time payment is required. (7) The Respondent s application for review of the Registrar s order of 21 February 2017 to sequestrate the estate of the Respondent be dismissed, and the Registrar s orders of that date be confirmed. (8) The Applicant s costs of the Respondent s application for review of the Registrar s order of 21 February 2017 filed on 10 March 2017 be fixed in the sum of $2,426 to be paid from the Respondent s estate in bankruptcy in accordance with the provisions of the Bankruptcy Act. Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Cover sheet and Orders: Page 4

5 Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Cover sheet and Orders: Page 5

6 FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH PEG 121 of 2016 DEPUTY COMMISSIONER OF TAXATION Applicant And PATRICK ALLAN NUGAWELA Respondent Introduction REASONS FOR JUDGMENT 1. These proceedings concern an application for review made by the respondent, Dr Patrick Allan Nugawela ( Dr Nugawela ), in which he seeks a review of a Registrar s decision made on 21 February 2017 to sequester the estate of Dr Nugawela plus ancillary orders for costs and a limited stay ( Review Application ). 2. When the matter came before the Court for final hearing on 9 August 2017 the Court had to deal with: a) an application by Dr Nugawela for an adjournment, which was dismissed with costs payable by Dr Nugawela or Dr Nugawela s bankrupt estate; b) an application by the Deputy Commissioner of Taxation ( Deputy Commissioner ), that a Notice to Produce a Document in a Pleading or Affidavit served on 17 July 2017 ( Notice to Produce ) be set aside or alternatively that compliance with the Notice to Produce be dispensed with, which order was made with costs payable by Dr Nugawela or Dr Nugawela s bankrupt estate; Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 1

7 c) an application for a stay of the proceedings made by Dr Nugawela, which application was dismissed, with costs payable by Dr Nugawela or Dr Nugawela s bankrupt estate; and d) the Review Application itself, in relation to which the Court made an order dismissing the Review Application and confirming the Registrar s orders with costs payable from Dr Nugawela s bankrupt estate. 3. At the final hearing the Court indicated that it would publish formal Reasons for Judgment from Chambers at a later date in relation to each of the above applications, although it did deliver extempore oral Reasons for Judgment in relation to the adjournment application, noting that more formal and considered written Reasons for Judgment in relation to the adjournment application would be published later in the written Reasons for Judgment. 4. The Courts Reasons for Judgment in relation to each of the applications above are set out below. Adjournment application 5. Dr Nugawela s application for an adjournment of these proceedings is pressed, essentially, it seems, on two broad bases: one, in relation to Dr Nugawela s medical condition, the other in relation to the status of Part IVC proceedings ( Part IVC Proceedings ) under the Taxation Administration Act 1953 (Cth) ( TA Act ) in the Administrative Appeals Tribunal ( AAT ). 6. In relation to the medical evidence from Professor Skerritt tendered in support of the adjournment application that evidence is not current in that it was dated 27 June 2017 and indicated a reassessment in a month s time of Dr Nugawela s condition. There is no evidence of that reassessment before the Court. In any event, the letter from Professor Skerritt is simply a reflection, it would appear, of how he saw Dr Nugawela on a particular day and what he was told by Dr Nugawela. It is not in the form of an expert s report and does not set out in the necessary detail precisely why it is that Dr Nugawela is not able to attend Court in relation to any clinical condition that Dr Nugawela has. It is not current and the onus is on the person Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 2

8 seeking an indulgence from the Court by way of an adjournment on medical grounds to put before the Court proper evidence of the medical condition, that is evidence in a current and proper form: Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 at [48] per Collier, Griffiths and Mortimer JJ ( Luck ); AWX16 v Minister for Immigration & Anor [2016] FCCA 928 at [43] per Judge Lucev ( AWX16 ). As to the evidence as to Dr Nugawela s medical condition, the Court is not satisfied that an adjournment ought to be granted on that basis. 7. The Court is also not satisfied that an adjournment ought to be granted on the basis of there being further evidence to be put before the Court from Ms Slattery, apparently a tax agent for Dr Nugawela, in relation to the Part IVC Proceedings. The Court notes that there is presently and was seemingly before the Registrar an affidavit setting out the status of the Part IVC Proceedings quite fully. And, in any event, the Part IVC Proceedings relate only to a part of any debt that might be owed by Dr Nugawela, and there are other outstanding debts which the Part IVC Proceedings simply do not address. In the circumstances, the Court is not satisfied that it would necessarily be assisted by any evidence from Ms Slattery as to the current status of the Part IVC Proceedings. Otherwise, as the Court has indicated, there are debts which do not appear to be contested in relation to Dr Nugawela s capacity to repay them which stand separate and apart from the Part IVC Proceedings and which have been the subject of numerous judgments of both State and Federal Courts, and as a consequence of which Dr Nugawela has a level of indebtedness which runs to several hundreds of thousands of dollars, and would ordinarily be sufficient to see him bankrupted: Deputy Commissioner of Taxation v Nugawela [2017] FCCA 1289 at [58] per Judge Lucev ( Nugawela No 1 ) 8. The Court takes into account also the interests of the administration of justice and the interests of justice. And it does so having regard to the fact that s.42 of the Federal Circuit Court of Australia Act 1999 (Cth) ( FCCA Act ) requires matters in this Court to be dealt with with a degree of expedition, and perhaps less technically procedurally, than they might be dealt with in the superior State and Federal Courts. The Court also takes account of the fact that the Court, as presently constituted, has approximately 550 matters in the judge s docket and there is very limited assistance available from elsewhere. Were this Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 3

9 matter to be adjourned, notwithstanding the best efforts of the Court, it might not be possible to bring it back on with any expedition. So case management considerations in this Registry of this Court weigh significantly against an adjournment of a matter of this type, particularly in circumstances where the matter has already been the subject of a dismissed stay application, and programming orders listing it for hearing today. Those matters have already resulted in a not insignificant delay on an application for review which the relevant legislation indicates ought to be dealt with relatively expeditiously: FCCA Act, s.42; Federal Circuit Court Rules 2001 (Cth) ( FCC Rules ), r.20.02(2) (application for review to be listed for a hearing as soon as possible and unless impractical to do so, within 14 days after filing). 9. The Court notes that, insofar as an adjournment is sought to allow Counsel and solicitors, now very lately instructed by Dr Nugawela, to prepare further, their state of preparation, or lack thereof, is a consequence of the lateness of the instructions that they have received. There is nothing apparent on the evidence which would indicate that there was any impediment to Dr Nugawela instructing lawyers earlier in this process. And so any disadvantage suffered by Dr Nugawela is a consequence of his late instruction, and any incapacity of Counsel and solicitors to be prepared for today s hearing does fall squarely at the feet of Dr Nugawela. Those comments entail no criticism of Counsel and solicitors presently instructed. They no doubt have done their best in what might be perceived to be fairly difficult circumstances. 10. The Court also notes that in terms of the prejudice to the parties, Dr Nugawela is, in the Court s view, not as prejudiced as the Deputy Commissioner in relation to these proceedings. It would appear that, by and large, notwithstanding what has been said by Counsel for Dr Nugawela as to some further material that might be put before the Court, that the vast bulk of the material which might be put before the Court is already before the Court, and has been before the Court or the Registrar for some time or has been known by Dr Nugawela for some time. By contrast, the Deputy Commissioner is entitled to pursue these proceedings, and has been pursuing them in an appropriate manner. And there is in bankruptcy proceedings an element of as the federal courts have observed in a number of decisions public interest in Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 4

10 ensuring that a person who is insolvent, and who cannot pay their debts, does not continue to either trade or accrue further debts whilst insolvent: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473; (2008) 82 ALJR 1411; (2008) 69 ATR 357; (2008) 248 ALR 693; (2008) 67 ACSR 593; (2008) ATC ; (2008) 26 ACLC 880 at [44] per Gummow ACJ, Heydon, Crennan and Kiefel JJ ( Broadbeach ); Totev v Sfar & Anor [2008] FCAFC 35; (2008) 167 FCR 193; (2008) 247 ALR 180; (2008) 5 ABC(NS) 691 at [17] per Emmett J ( Sfar-Full Court ); Bryant v Commonwealth Bank of Australia & Anor (1996) 90 LGERA 126 at 131 per Kirby J; Nugawela (No 1) at [62] per Judge Lucev. In the circumstances, there is in this case a public interest which weighs, perhaps albeit not quite so heavily as other considerations, but which nevertheless weighs against an adjournment and which does constitute some prejudice also to the Deputy Commissioner. 11. For the above reasons, the Court is not prepared to grant the application for an adjournment that has been made by Dr Nugawela. Notice to Produce The Notice to Produce and grounds for relief 12. By a notice to produce served on 17 July 2017 Dr Nugawela seeks a range of documents to be produced by the Deputy Commissioner. 13. The Deputy Commissioner now seeks orders for the Notice to Produce to be set aside, or for relief from compliance, pursuant to r.15a.17(2) of the FCC Rules on the following grounds: a) the documents sought are irrelevant to this proceeding, in that they seek to challenge the judgment debt determined in other proceedings; and b) the Notice to Produce is unduly burdensome in requiring a broad range of documents to be produced, which span a 17 year period, without adequate specificity, where many of the documents have already been provided to Dr Nugawela in response to his Freedom of Information request; and Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 5

11 c) the Notice to Produce is issued unreasonably late in the proceedings. Background and procedural history relevant to the Notice to Produce 14. A summary of the background and procedural history of this matter relevant to the Notice to Produce is as follows: a) on 16 March 2016 the Deputy Commissioner filed the creditor's petition; b) on 1 June 2016 Dr Nugawela filed objections to the creditor s petition and an affidavit; c) on 11 January 2017, the grounds of objection were amended; d) on 21 February 2017 the creditor's petition was heard and orders were made by a Registrar of this Court to sequestrate Dr Nugawela s estate; e) on 10 March 2017 Dr Nugawela: i) applied for a review of the exercise of power by the Registrar on 21 February 2017; and ii) filed an interim application for a continuance of the stay originally granted by the Registrar; f) on 13 March 2017 Dr Nugawela filed an application purporting to seek relief pursuant to s.39b of the Judiciary Act 1903 (Cth) ( Judiciary Act ) in the Federal Court ( Judicial Review Application ); g) on 29 March 2017 Dr Nugawela served a notice to produce in the Judicial Review Application action. The Judicial Review Application was later adjourned pending a resolution of the bankruptcy action; h) on 22 May 2017 Dr Nugawela made a request of the Deputy Commissioner under the Freedom of Information Act 1982 (Cth) for various documents in relation to his taxation affairs ( FOI Request ); Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 6

12 i) on 19 June 2017 Dr Nugawela s interim application for a stay of orders made by the Registrar was dismissed in Nugawela (No 1) at [72] per Judge Lucev, and the Court made directions to prepare the matter for hearing, and listed the matter for hearing on 8 August 2017; j) on 6 July 2017 Dr Nugawela again applied to stay the creditor's petition application; k) on 17 July 2017 Dr Nugawela served the Notice to Produce on the Deputy Commissioner in substantially the same terms as the notice to produce served in the Judicial Review Application; and l) on 26 July 2017 the Deputy Commissioner processed and responded to Dr Nugawela s FOI Request. Legislative framework 15. Rule 15A.17(1) of the FCC Rules provides as follows: (a) A party may, by notice in writing, require another party to produce, at the hearing of the preceding, a specified document that is in the possession, custody or control of that other party. (b) Unless the Court otherwise orders, the party given notice to produce must produce the document at the hearing. 16. The TA Act by s (1) in Schedule 1 provides: The production of... a notice of assessment under a taxation law... is conclusive evidence that... (a) the assessment... was properly made... and (b) except in proceedings under Part IVC of this Act on a review or appeal relating to the assessment... the amounts and particulars of the assessment... are correct. 17. The Court is directed to proceed without undue formality and to endeavour to ensure that the proceedings are not protracted: FCCA Act, s.43(2)(a)-(b); see also FCC Rules, r.20.02(2) as summarised at [8] above. Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 7

13 Challenging the notice to produce 18. In Larne-Jones v Human Synergistics Australia Ltd [2013] FCCA 1498 at [17] per Judge Barnes the Court noted that the principles governing the exercise of the power to set aside a notice to produce (or to excuse production of documents in answer to a notice) were the same as those which govern the setting aside of a subpoena for production. The Court relied upon Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 3) [2012] FCA 61 at [5] and [6] per Collier J ( CFMEU (No 3) ) (followed in Apotex Pty Ltd v Les Laboratoires Servier [2012] FCA 359 at [27] per Bennett J and McGrath v HNSW Pty Limited (No 2) [2015] FCA 442 at [27] per Gleeson J), where the following principles were set out (references omitted): (1) The issuing party bears the onus of establishing that the documents the subject of the notice are sufficiently relevant to justify production. (2) The timing of the notice is a relevant factor. (3) A notice is not a substitute for an application for discovery. (4) The material sought must have apparent relevance to the issues in the proceedings the test being whether the documents are reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case. (5) A notice cannot be used for the purpose of fishing to ascertain whether a party has a supportable case. (6) A notice may be set aside where it is unduly burdensome if the width of the categories requested is too broad or the categories are not described with adequate specificity. Challenging the judgment amount 19. The operation of s in Schedule 1 of the TA Act confines Dr Nugawela s opposition to matters other than the assessments now the subject of the judgment debt. In Nugawela v Deputy Commissioner of Taxation [2017] WASCA 9 at [22] per Newnes and Murphy JJ ( Nugawela State Appeal ) the Western Australian Supreme Court, Court of Appeal ( WA Court of Appeal ) held: Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 8

14 [22] The effect of s ((1) in Schedule 1 TAA53) is that in all proceedings, other than proceedings under pt IVC (TAA53) on a review or appeal relating to the assessment, the production of a notice of assessment will be conclusive evidence that the amounts and particulars of the assessment are correct. The production of a notice of assessment is not conclusive in proceedings on a review or appeal under pt IVC because the very purpose of those proceedings is to challenge the assessment. But the fact that proceedings have been commenced under pt IVC to challenge an assessment does not detract from the conclusive nature of the notice of assessment in any other proceedings. In any other proceedings, the production of a notice of assessment remains conclusive. 20. Dr Nugawela s dispute as to the debt cannot challenge the judgment as s in Schedule 1 to the TA Act requires accepting the assessments (the subject of the judgment) as conclusive evidence in these proceedings. Dr Nugawela is confined to establishing the state of all debits and credits with the Deputy Commissioner. 21. The Deputy Commissioner has filed affidavits setting out the running account for Dr Nugawela. Basis for opposition to the sequestration order 22. Dr Nugawela confined his opposition to the sequestration order to the following: a) a genuine dispute as to the liability to pay the claimed debt arising from the Part IVC Proceedings for the years ending 2007 and 2008 and for other, now dismissed, years; and, an appeal (now dismissed); b) other sufficient cause being a dispute as to the quantum of the debt and the effect on his psychiatric health; and c) conscious maladministration and vindictive action alleged relating to the 2011 audit, garnishee notices, and the policy of the Deputy Commissioner. 23. Dr Nugawela s affidavit material does not address his ability to pay debts generally. It refers only to the Part IVC Proceedings and credits for the receipts from the garnishee notices. Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 9

15 Relevance of documents sought 24. In the Notice to Produce Dr Nugawela seeks very broad categories of documents, summarised as follows: a) all documents referring to him; b) all documents referring to the audit of compliance with his income tax obligations and his assessments in the year of 2011; c) all documents relied on in calculating "allowable deductions" in the 5 year period ending 30 June 2010; d) all documents sent to him pertaining to failing to lodge tax returns in the 11 ½ years ending 30 December 2011; e) all documents referring to Medicare garnishee notices in the period from 20 August 2015 to 31December 2016; and f) all documents referring to payments to the applicant in the 17 year period ending 31 December In relation to the relevance of the documents sought by Dr Nugawela under the Notice to Produce the Court observes as follows: a) Dr Nugawela s claim that the assessments were tentative or provisional was raised and dismissed in the Federal Court, the Full Court of the Federal Court and the WA Court of Appeal: Nugawela v Federal Commissioner of Taxation [2016] FCA 578 at [58] per McKerracher J ( Nugawela-Federal Court ); Nugawela v Federal Commissioner of Taxation [2016] FCAFC 164 at [31] per North, Dowsett and Edelman JJ ( Nugawela- Federal Appeal ); Nugawela-State Appeal at [30] per Newnes and Murphy JJ; b) Dr Nugawela s appeals in respect of the debt are now exhausted: Nugawela-State Appeal; Nugawela v Deputy Commissioner of Taxation [2017] HCASL 114 at [1] per Bell and Gageler JJ ( Nugawela-High Court ). Dr Nugawela s other challenges are all dismissed: affidavits of Alyx Sudall sworn 16 January 2017 and Chelsea Lee Quirk affirmed 20 January 2017; Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 10

16 c) notwithstanding Dr Nugawela s challenge to his assessments for the years 2007 and 2008, there remains a very large residual obligation under the judgment: see Nugawela (No 1) at [58] per Judge Lucev where this Court observed that: 58. For reasons set out above: see [52]-[54] above, any suggestion that the judgment debt arose from assessments which were not genuine or which were invalid cannot be sustained. Having regard to Nugawela Federal Appeal and Nugawela Federal Court it is apparent that there remains a substantial outstanding liability to pay tax on the part of Dr Nugawela. The evidence presently before the Court from the Commissioner sustains the view that that liability may be as much as $900,000, and on Dr Nugawela s evidence the liability may be between $313, (according to Dr Nugawela s accountant) or $1,072, (according to Dr Nugawela): see Dr Nugawela s affidavit sworn 21 February 2017 at Annexure HG-2 at [10], and at [19] (of the affidavit proper), respectively. Whatever credits Dr Nugawela might be entitled to (in addition to the credits for the assessments in the years ended 30 June 2007 and 30 June 2008) it is not apparent on the evidence that those credits (whatever they might be) have extinguished Dr Nugawela s taxation liability. In any event, the suggestion made in Dr Nugawela s submission that there were misstatements in the bankruptcy notice was rejected in Nugawela Federal Appeal at [28] per North, Dowsett and Edelman JJ. Nor do the Part IVC proceedings under the TA Act warrant a stay: if those proceedings are justified, they can be continued by the Trustee: Kellow at [3]-[5] per Spender J. This Court exercising bankruptcy jurisdiction, whilst able to go behind a judgment will not do so if the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount that there would be reduced and would not support a finding that there was no debt at all: Cumins v Deputy Commissioner [2008] FCAFC 185; (2008) 172 FCR 425; (2008) 73 ATR 888; (2008) 7 ABC(NS) 513 at [7]-[10] per North, Emmett and Rares JJ; Tu v Chang (No 2) [2016] FCA 1568 at [36] per Bromwich J. That is the case here, and nothing has changed since the Court s observations in Nugawela (No 1) set out immediately above; Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 11

17 d) Dr Nugawela s allegations of conscious maladministration are only properly litigated in the Federal Court, and are the subject of the Judicial Review Application which was commenced after the sequestration order issued. In any event, the Full Court of the Federal Court in Nugawela-Federal Appeal at [40] per North, Dowsett and Edelman JJ has observed that there was no evidence to support any conclusion of conscious maladministration or abuse of power in Nugawela-Federal Court, and that there was a strong legislative policy manifested in the recovery of tax debts to protect the revenue pursuant to s.14zzm of the TA Act: Broadbeach at [44] per Gummow ACJ, Heydon, Crennan and Kiefel JJ; and e) the credits due for the Medicare garnishee notices are explained by the affidavit of Venus Lakshman affirmed on 3 July 2017 ( Lakshman Affidavit ) which shows that all credits for payments made by Medicare pursuant to the Garnishee notices are fully accounted for, and were fully accounted for at the time of the judgment debt. 26. Dr Nugawela s psychiatric health will not be addressed by the documents sought to be produced. 27. The requested documents are therefore either not relevant at all, or not sufficiently relevant, such that the Deputy Commissioner ought not be required to comply with the Notice to Produce. Burden and proportionality 28. The affidavit of Alyx Sudall sworn 8 August 2017 ( Sudall Records Affidavit ) establishes the considerable burden on the Deputy Commissioner to respond to the wide swath of requested documents. In the Sudall Records Affidavit Ms Sudall gives evidence that: 6. The applicant maintains a computer database of its business records which includes: 6.1. the Automated Document Dispatch System, in which electronic copies of documents sent to taxpayers are stored; Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 12

18 6.2. the Storage and Access System, in which data contained in income tax returns lodged with the ATO (tax returns) is entered and stored; 6.3. the ATO Integrated System (AIS), which contains a record of credit and debit accounting postings for taxpayers including payments on Income Tax accounts that were posted to the account up to and including 14 January 2010; 6.4. the Integrated Core Processing System (ICP), in which all liabilities, payments and creditors for taxpayers' Income Tax accounts have been recorded from and including 15 January The information recorded on ICP is input into the system either manually by employees of the ATO based on information furnished to the ATO by the taxpayer through their tax returns, or automatically if the taxpayer lodged their returns electronically. The ICP records liabilities, payments and credits in chronological order and does not show how individual payments and credits have been allocated between the different liabilities on the same account; 6.5. the Receivables Management System (RMS), which is a case management system which assists the ATO in the collection of outstanding debts. The RMS has a note function which enables ATO officers to enter and keep notes on the conduct of cases; 6.6. the ATO's Siebel Client Relationship Management System (Siebel). Siebel stores correspondence and records interactions with taxpayers and has a note function which enables ATO officers to enter and keep notes on the conduct of cases. 7. In addition to the computer database maintained by the applicant, an ATO officer may: 7.1. maintain electronic documents relating to a taxpayer in their electronic records; and/or 7.2. retain paper records relating to a taxpayer and keep those records with them at their office location. 8. ATO offices may also retain paper records relating to a taxpayer on-site. For the purpose of swearing this affidavit, I have perused the records, concerning the respondent, as stated in paragraphs 6, 7 and 8 (Records). Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 13

19 9. The Automated Document Dispatch System is used by ATO employees to locate and obtain copies of relevant assessments and penalty notices including those assessments and notices used in this creditor's petition and the related matters for the respondent in other courts. From my review of the Records, all relevant assessments and penalty notices were provided to the respondent in direct communications and as part of the preparation of this creditor's petition and the related court proceedings. 10. The Storage and Access System is used by ATO employees to obtain copies of the income tax returns lodged with the ATO and to check whether such returns have been filed by a taxpayer from time to time. From my review of the Records, this system was checked when preparing this creditor's petition and related matters for the respondent in other courts. In particular I refer to my affidavit in this creditor's petition sworn 20 February 2017 at paragraph 14. From my review of the Records, all relevant payments and receipts have been accounted to the respondent in direct communications and as part of the preparation of this creditor's petition and the related court proceedings. 11. The AIS and ICP are used by ATO employees to check for payments and receipts from a taxpayer. In particular, I refer to the affidavits in this creditor's petition of continuing debt sworn by me where reference is made to receipts and the state of the debt owed to the applicant. To make those statements, I referred to the AIS and ICP. I note that there is a print out of an ICP statement attached to the affidavit of Venus Lakshman affirmed 3 July 2017 as annexure VL-2 at page 11. From my review of the Records, the relevant information from these systems was provided to the respondent in direct communications and as part of the preparation of this creditor's petition and the related matters for the respondent in other courts. 12. The RMS, Siebel and paper records relating to a taxpayer are used by ATO employees when preparing affidavits including in relation to this creditor's petition. I refer to the Legal Collections file mentioned in the affidavits of continuing debt and my affidavits sworn 16 January 2017 at paragraph 3 and sworn 20 February 2017 at paragraph 3. From my review of the Records, all relevant information from the RMS and Siebel systems and relevant documents from the Legal Collections file were provided to the respondent in direct communications and as part of the preparation of this creditor's petition and the related matters for the respondent in other courts. Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 14

20 14. The notice seeks production of a number of documents relating to a number of years. 15. The notice seeks categories of documents separated into 6 paragraphs. In respect of the documentation and information sought in paragraphs 1, 4, 5 and 6 I state as follows: I would be required to search applicant's books and records as contained in the electronic records systems outlined in paragraphs 6.3 to 6.6 above I would be required to consult with at least 7 ATO officers who have been directly involved with matters involving the respondent. Each of those persons may: possess further copies of other electronic records; possess hard copies of other documents; and/or be in a position to give first hand evidence of discussions that person had with the respondent, relevant to responding to the notice to produce It is difficult to provide with any certainty an estimation of how long each of those tasks would take At this stage, I estimate that the process of completing the tasks in paragraphs 15.1 and 15.2 will take many days to conclude I am unable to comment on the Applicant's ability to respond to paragraphs 2 and 3 of the notice as this information would be sourced by an officer working in the Client Engagement Group of the Australian Taxation Office. The Client Engagement Group is responsible for the conduct of compliance activities of taxpayers. 20. On 26 July 2017, the FOI Request was finalised. 21. I am informed and verily believe that the following was provided to the respondent in response to the FOI Request: a copy of the Siebel case notes and case comments in respect of the respondent's audit. Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 15

21 21.2. the respondent's statement from ICP for the financial years 2000 to present the respondent's running balance account for the financial years 2000 to present the respondent's income tax returns for the financial years 1998 to the respondent's statement of account and calculations of penalties notices received from Medicare Australia advising of the amounts of money garnished from the respondent and provided to the Applicant the audit policy and procedure document relevant to how the respondent's audit was undertaken. 29. Requiring a response to the Notice to Produce would be entirely disproportionate to the entitlement of Dr Nugawela to put matters in issue in these proceedings, particularly given: a) the nature of the issues in this action; b) the litigation history of this matter and other matters litigated in the Courts both State and federal; c) the documents already otherwise provided to Dr Nugawela in relation to the abovementioned litigation; and d) the documents provided to Dr Nugawela under the FOI Request. 30. Compliance with the Notice to Produce would simply involve the replication of a vast numbers of documents which have already been produced either for present purposes, or for the purposes of other litigation concerning Dr Nugawela s taxation affairs, and which, given the conclusions above: see [25]-[27] above, are irrelevant, or largely so to the present Review Application. Furthermore, insofar as it might be said that the documents are relevant to the allegation of conscious maladministration by the Deputy Commissioner, the Court notes that that is a matter in respect of which the Full Court of the Federal Court in Nugawela-Federal Appeal at [40] per North, Dowsett and Edelman JJ found no evidence of in the primary judgment in Nugawela-Federal Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 16

22 Court. Further, the Court notes that relief in relation to that issue may be available under the Part IVC Proceedings, which as the Court observed in Nugawela (No 1) are proceedings which can be continued, if necessary, by the Trustee: Nugawela (No 1) at [58] per Judge Lucev, citing Kellow v Dudzinski [2003] FCA 143 at [3]-[5] per Spender J. 31. The Court notes that the broad sweep of documents sought by the Notice to Produce can only possibly ultimately be relevant to the claim of conscious maladministration, and to an assertion that that constitutes an other sufficient cause not to issue a sequestration order. In that regard the Court notes that the question of conscious maladministration was raised with: a) the Federal Court and abandoned or rejected; Nugawela-Federal Court at [51]-[58] per McKerracher J; and b) the Full Court of the Federal Court and rejected: Nugawela- Federal Appeal at [40] per North, Dowsett and Edelman JJ; and; c) the WA Court of Appeal and dismissed in Nugawela-State Appeal at [30]-[31] per Newnes and Murphy JJA. 32. In all of the above circumstances, to pursue the issue of conscious maladministration by requiring compliance with the Notice to Produce would also be unduly burdensome and disproportionate by reason of binding findings of the Federal Court and Full Federal Court: Suh & Ors v Minister for Immigration & Citizenship & Anor [2009] FCAFC 42; (2009) 175 FCR 515; (2009) 108 ALD 470 at [29] per Spender, Buchanan and Perram JJ, and persuasive findings of the WA Court of Appeal in the above cited cases. Late service of a notice to produce 33. The late service of a notice to produce in a proceeding may itself make the notice to produce unreasonable and vexatious. In CFMEU (No 3) at [7] per Collier J the Federal Court held that: the potential disruption of a trial by unduly proximate service of a Notice to Produce may be a determinative factor in considering an application to set aside the Notice. Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 17

23 34. On 19 June 2017 the Court listed the Review Application for hearing on 9 August Dr Nugawela s outline of submissions was required to be filed by 17 July The Notice to Produce, imposing a considerable putative obligation on the Deputy Commissioner, was served on 17 July Dr Nugawela did not file the outline of submissions required to be filed by 17 July The lateness of the service of the Notice to Produce was such that, in the Court s view, it was likely to disrupt, and if it was to be complied with in its terms, to delay any hearing of the Review Application. For reasons set out above in relation to the adjournment application, case management considerations in this Registry of this Court weigh heavily against any delay in the hearing of the Review Application. Likewise, the failure to file an outline of submissions does not assist in determining whether or not the Notice to Produce ought to be complied with, and taken together with the lateness of the service of the Notice to Produce, is indicative of a desire by Dr Nugawela to delay the hearing of the Review Application. 36. In all of the above circumstances, the late service of the Notice to Produce makes compliance by the Deputy Commissioner with the Notice to Produce unreasonable. Conclusion Notice to Produce 37. There is an enormous number of documents sought by the Notice to Produce, defined by very broad date ranges and subject matters, but without definition by format, content or location. The documents are mostly not relevant, and the burden on the Deputy Commissioner to produce these documents at this late stage of these proceedings outweighs any merit in having the documents produced. The Notice to Produce is both in its terms and given the timing of its filing, unduly burdensome upon the Deputy Commissioner. 38. There will be an order that the Notice to Produce be set aside. Stay of proceedings 39. On 6 July 2017 Dr Nugawela again applied to stay or set-aside the creditor's petition application. This application: Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 18

24 a) by orders 1 and 2 sought a stay of judgment and execution pending an appeal from Nugawela (No 1), although no appeal papers were filed or served; and b) sought the same relief as had been sought and refused in the interim application the subject of Nugawela (No 1). 40. The relevant legislative provisions and case law (both generally and particular to Dr Nugawela s circumstances) are set out in Nugawela (No 1) at [41]-[71] per Judge Lucev and can be taken to be incorporated in these Reasons for Judgment. Consideration application for a stay 41. The present stay application relies on: a) an appeal from the judgment in Nugawela (No 1) which had the effect of lifting the stay. This aspect of the present stay application has no basis as an appeal had not been commenced at the time of the hearing; b) the Judicial Review Application or the Part IVC Proceedings aspect of the present stay application has no basis as those matters were considered and refused in other courts: see the cases referred to and analysed in Nugawela (No 1) at [10]-[35] and [50]-[71] per Judge Lucev; and c) the need to address the inquiries of the Trustee appointed to Dr Nugawela s sequestered estate and other creditors: this was not raised in the earlier stay application. 42. The Deputy Commissioner opposes a stay and says that: a) Dr Nugawela was asked if he consented to the directions made on 19 June 2017 and he indicated consent; b) Dr Nugawela had earlier sought three weeks to prepare, and the orders made on 19 June 2017 granted exactly that period; c) Dr Nugawela reports difficulties dealing with the trustee and other creditors, but it is not clear what the difficulties were, Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 19

25 but even if those difficulties were greater than appreciated on 19 June 2017 there has been time to address those inquiries; d) the Review Application raises no new issues of evidence or law to those raised since Dr Nugawela filed his grounds of opposition and affidavits in relation to the creditor s petition, and he has had a considerable period to prepare on those matters which have been raised and dismissed in other courts: Dr Nugawela (No 1) at [10]-[35] per Judge Lucev; and e) a further delay in the resolution of the creditor's petition would prejudice the public interest in recovering taxation obligations and avoiding the continuance of insolvent trading. 43. A stay application by Dr Nugawela was dismissed in Nugawela (No 1). There has been no, or no sufficient or relevant, change in circumstances since that judgment was delivered on 19 June 2017 to warrant a stay now being ordered. Insofar as Dr Nugawela s inquiries of the Trustee might be a new matter for consideration, it is not evident that there is any matter of sufficient importance, relevance or weight to warrant a stay of the Review Application. Also, the litigation history otherwise set out herein, and the case management considerations: see [8] above, weigh heavily against a stay being ordered. 44. For all of the above reasons the application for a stay is refused. Review Application 45. The Review Application seeks to review the exercise of the power by the Registrar in sequestrating Dr Nugawela s estate on 21 February 2017, the review being sought pursuant to ss.102(2) and 104(2) and (3) of the FCCA Act. 46. Dr Nugawela does not challenge the satisfaction of the formal requirements for s.52(1) of the Bankruptcy Act or provide evidence that he could pay his debt. Rather, Dr Nugawela submits there are other sufficient causes to dismiss the petition, namely: a) a dispute as to the debt; b) the presence of an appeal; Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 20

26 c) Dr Nugawela s health; and d) conscious maladministration or vindictive action by the Deputy Commissioner. Facts 47. A summary of the background and procedural history relevant to the Review Application is as follows: a) on 9 December 2014, the applicant filed a writ in the WA Supreme Court seeking a judgment for the payment of income tax and penalties arising from assessments of income issued after an audit; b) on 19 August 2015, judgment for the applicant was entered after a summary judgment application: Deputy Commissioner of Taxation v Nugawela [2015] WASC 468 ( Nugawela-Supreme Court ); c) on 9 December 2015, after a review under Part IVC of the TA Act relating to income tax assessments for periods ending 30 June 2007 and 2008 the Deputy Commissioner allowed the review in part and rejected it in part; d) on 8 February 2016 Dr Nugawela commenced the Part IVC Proceedings which are not complete, but are adjourned pending completion of the Review Application; e) on 18 January 2016, the Deputy Commissioner caused a bankruptcy notice to issue; f) on 23 January 2016 the bankruptcy notice was served; g) on 15 February 2016 Dr Nugawela applied to set aside the bankruptcy notice; h) the application to set aside the bankruptcy notice was dismissed on 1 March 2016; i) on 27 April 2016 Dr Nugawela sought a review of the dismissal of his application to set aside the bankruptcy notice, which was Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 21

27 refused: Nugawela-Federal Court, and an appeal from Nugawela- Federal Court wad dismissed: Nugawela-Federal Appeal; j) on 16 March 2016 the Deputy Commissioner filed the creditor's petition; k) on 29 March 2016, the creditor's petition was served on Dr Nugawela; l) on 1 June 2016 Dr Nugawela filed objections to the creditor's petition and an affidavit; m) on 11 January 2017, Dr Nugawela filed amended grounds of objection to the creditors petition; n) on 13 February 2017 the Deputy Commissioner served a consent by Mr Dudley to be the Trustee: Affidavit of Quirk affirmed 20 February 2017; o) on 18 April 2016 Dr Nugawela commenced an application for leave to appeal Nugawela-Supreme Court; p) on 7 February 2017, the appeal in relation to Nugawela-Supreme Court was dismissed for want of reasonable prospects: Nugawela- State Appeal; q) on 4 November 2016 Dr Nugawela filed amendment requests to his income tax returns for the years ending 30 June 2009 and 2010 which were rejected as being out of time; r) on 13 February 2017 the Deputy Commissioner disallowed objections lodged by Dr Nugawela to the assessments for the years ending 30 June 2005 and 2006; s) on 21 February 2017, the creditor's petition was heard and orders made to sequestrate Dr Nugawela s estate. A stay was granted for 21 days; t) on 3 March 2017 the Dr Nugawela filed an application for special leave to appeal in relation to Nugawela-State Appeal to the High Court; Deputy Commissioner of Taxation v Nugawela (No.2) [2017] FCCA 1999 Reasons for Judgment: Page 22