15 May 14 Freezing order continued - Oswal (No 2)
The Federal Court has refused to vary a freezing order granted earlier against a taxpayer in favour of a Deputy Commissioner.
The Deputy Commissioner had obtained judgment against the taxpayer for a tax debt. A freezing order had been made precluding the taxpayer from removing, or dealing with, or diminishing the value of her assets in Australia up to the unencumbered value of the judgment sum, other than to pay the judgment debt. The taxpayer’s main asset consisted of legal claims made against parties in Australia.
The taxpayer applied to the court for a variation of the freezing order to enable her to enter into a litigation funding agreement with a company in Dubai in the United Arab Emirates.
The court refused to vary the freezing order. If the proposed funding agreement were to take effect, the object of making the freezing order on the application of the Deputy Commissioner would largely be defeated. This was because the proposed funding agreement would create a charge over the whole of any recovery from the taxpayer’s legal proceedings. Because the charge would operate over the whole of the litigation proceeds, the whole of the proceeds would be converted from unencumbered assets in Australia to a wholly encumbered asset, the subject of a charge in favour of a foreign corporation registered in Dubai. There would be no assured benefit to the Deputy Commissioner from the funding agreement taking effect, because even if the agreement was instrumental in producing assets, there was no assurance that any of those assets would be available to the Deputy Commissioner for the purposes of meeting the taxpayer’s judgment debt.
DCT v Oswal (No 2)  FCA 463 (Federal Court, Siopis J, 9 May 2014).