Canberra Cleaners Pty Ltd v Commissioner for Act Revenue
[2018] ACTSC 208
•3 August 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Canberra Cleaners Pty Ltd v Commissioner for ACT Revenue |
Citation: | [2018] ACTSC 208 |
Hearing Dates: | 11, 14 December 2017 |
Last Submissions Received: | 7 March 2018 |
DecisionDate: | 3 August 2018 |
Before: | McWilliam AsJ |
Decision: | See [120] |
Catchwords: | ADMINISTRATIVE LAW – TAXATION AND REVENUE – judicial review – whether garnishee notices issued to debtors of plaintiffs ought be set aside – whether director’s compliance notices invalid – where notices issued required total income of the businesses to be paid to the Commissioner for ACT Revenue – whether hardship a relevant consideration – whether decisions unreasonable – whether amount of unpaid tax liability stated to be payable on some notices was ambiguous, confusing, incorrect or uncertain – effect of previous declaration of invalidity – those notices ought be set aside |
Legislation Cited: | Corporations Act (Cth) ss 181, 182 Income Tax Assessment Act 1936 (Cth) s 218 Taxation Administration Act 1999 (ACT) ss 16, 50, 52, 54, 56B, 105, 134, pts 7, 10 |
Cases Cited: | Attorney-General v Carlton Bank [1899] 2 QB 158 Australian Pesticides and Veterinary Medicines Authority v Administrative Appeals Tribunal [2008] FCA 1393; 216 FCR 405 Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191 |
Texts Cited: | Mark Aronson, Matthew Groves and Greg Weeks, Judicial Review of Administrative Action and Government Liability (Thomson Reuters, 6th ed, 2017) |
Parties: | Canberra Cleaners Pty Ltd (ACN 142 575 095) (First Plaintiff in SC 424 of 2017) Phillip Arcidiacono trading as Rose Cleaning Service (ABN 28 057 543 242) (Second Plaintiff in SC 424 of 2017) Rose Cleaning Asset Services Pty Ltd (ACN 607 365 506) (Third Plaintiff in SC 424 of 2017) Philip Arcidiacono (First Plaintiff in SC 466 of 2017) Sue Price (Second Plaintiff in SC 466 of 2017) Daniel Olsen (Third Plaintiff in SC 466 of 2017) Jocelyn Katavic (Fourth Plaintiff in SC 466 of 2017) Nicolas Constantin (Fifth Plaintiff in SC 466 of 2017) Peter Farmer (Sixth Plaintiff in SC 466 of 2017) Commissioner for ACT Revenue (Defendant in SC 424 of 2017 and 466 of 2017) |
Representation: | Counsel Mr D McGovern SC with Mr S Lees and Mr A Russoniello (Plaintiffs) Mr P Walker SC with Mr W Buckland (Defendant) |
| Solicitors McEvoy Legal (Plaintiffs) ACT Government Solicitor (Defendant) | |
File Number: | SC 424 of 2017; SC 466 of 2017 |
Introduction
Before the Court are two related proceedings, each seeking judicial review of various decisions made by the Commissioner for ACT Revenue (Commissioner) over the period October to November 2017. Through those decisions, the Commissioner sought to recover an outstanding payroll tax liability, said to be owing by a group of companies or businesses providing cleaning services to organisations in the Australian Capital Territory. The Commissioner used two different methods provided for by the Taxation Administration Act 1999 (ACT) (the Act): first, by garnishing income from debtors of businesses in the group that incurred the debt; and secondly, by making individual directors of that group responsible for the repayment of the debt.
Assessments giving rise to the proceedings
It is necessary to know the context to the decisions of the Commissioner in order to understand them. On 29 November 2016, the Commissioner made an assessment under the Act in respect of Phillip Arcidiacono trading as Rose Cleaning Services (ABN 28 057 543 242) (Rose Cleaning Services). The amount of the assessment was $4,612,887.59 (including penalties and interest) in respect of a period of seven years, being the financial years 2009-2010 through to and including 2015-2016.
On 9 August 2017, the Commissioner issued a notice of assessment to Canberra Cleaners Pty Ltd (ACN 142 575 095) (Canberra Cleaners), for the same amount, less $702,147.60, which had subsequently been recovered by the Commissioner through garnishee processes in respect of income to be paid to a company that the Commissioner considered was part of the same group, namely Rose Cleaning Asset Services Pty Ltd (ACN 607 365 506) (RCAS). The total amount of the assessment was thus reduced to $3,910,739.99.
However, the garnishee process by which the Commissioner had recovered the sum of $702,147.60 became the subject of proceedings in this Court. RCAS had been excluded from the group of companies previously assessed as having incurred the payroll tax liability, and thus had not been issued with any notice of assessment prior to notices being sent to its debtors seizing its income. On 17 October 2017, declarations were made setting aside the notices that had been issued by the Commissioner on the basis of a denial of procedural fairness to RCAS: see Canberra Cleaners Pty Ltd v Commissioner for ACT Revenue (No. 2) [2017] ACTSC 303; 325 FLR 419 (Canberra Cleaners (No. 2)).
On 4 September 2017, during those proceedings (and presumably because of them), the Commissioner issued a notice of assessment to RCAS for the same figures, namely $4,612,887.59, with an outstanding liability of $3,910,739.99.
The Commissioner’s assessments were the product of an investigation which concluded that Rose Cleaning Services, Canberra Cleaners, and later, RCAS were all part of a larger group of companies and individuals, which had failed to register and pay payroll tax. Every member of the group became jointly and severally liable to pay the payroll tax debt, as prescribed in s 50 of the Act.
Those three assessments referred to above are disputed by the numerous members of the ‘group’, including a dispute as to the composition of the group itself. Separate litigation is being pursued through review channels under pt 10 of the Act, with Rose Cleaning Services, Canberra Cleaners and RCAS among the applicants in proceedings commenced in the ACT Civil and Administrative Tribunal (Tribunal). As at the date of hearing, those proceedings had not yet been heard or determined.
Proceedings SC 424 of 2017
On 18, 19 and 31 October 2017, the Commissioner issued a number of notices pursuant to s 54 of the Act (the terms of which are set out below), to various businesses the Commissioner believed to have contracted with Canberra Cleaners, Rose Cleaning Services or RCAS for cleaning services to be provided. The purpose of the notices was to garnish the amounts payable by the debtors of the group, so that any monies that each debtor would ordinarily have paid to a company or individual in the group (for cleaning services provided) were instead required to be paid directly to the Commissioner.
On 26 October 2017, Canberra Cleaners, Rose Cleaning Services and RCAS (the plaintiffs) commenced judicial review proceedings, seeking to set aside the notices that had been issued on 18 and 19 October 2017. Ultimately, the plaintiffs sought to set aside ten notices, identified in Schedule 1 to the further amended originating application dated 4 December 2017 (garnishee notices).
An interim stay was granted in respect of the operation of six of the garnishee notices: see Canberra Cleaners Pty Ltd v Commissioner for ACT Revenue (No. 3) [2017] ACTSC 340 (Canberra Cleaners (No. 3)). No monies were payable under the remaining four notices that had been issued.
Proceedings SC 466 of 2017
On 16 November 2017, the Commissioner issued compliance notices pursuant to s 56B of the Act to six individuals, who were said to be directors or former directors of companies within the group in question, namely Mr Phillip Arcidiacono, Ms Sue Price, Mr Daniel Olsen, Ms Jocelyn Katavic, Mr Nicolas Constantin, and Mr Peter Farmer (Directors).
The compliance notices were in similar terms, and stated that if the Directors did not cause the assessed tax liability to be paid or effectively take steps to put the companies into administration for the purposes of being wound up within 21 days of the notice being given (the minimum period required by s 56B of the Act), the Directors would become personally liable for the debt.
On 4 December 2017, the Directors commenced judicial review proceedings challenging the decisions leading to the issuing of the compliance notices and seeking a stay of their operation pending resolution of the proceedings.
Interim injunctive relief
On 14 December 2017, I granted an interim stay of the operation of the compliance notices, pending the determination of the proceedings. I indicated at the time that I would include reasons in the substantive judgment.
My reasons for granting the stay of the operation of the compliance notices in proceedings SC 466 of 2017 are similar to those given in Canberra Cleaners (No. 3) in respect of the garnishee notices.
There was no delay, in that the parties had brought the proceedings urgently and put themselves in a position to have the matter heard on what at the time was an expedited basis. Some of the grounds overlapped with the proceedings involving the garnishee notices (so that the question of arguable merit was the same as in proceedings SC 424 of 2017) and the relief sought by the Directors would have been rendered futile had the stay not been granted. The clear objective in the Directors commencing the proceedings was to avoid becoming personally liable for taxation debts incurred by the plaintiffs.
Had the compliance notices continued to operate and not been withdrawn, such personal liability would have arisen upon conclusion of the hearing on 14 December 2017 at 4.30pm (in accordance with a previous variation made by the Commissioner to the time stipulated in the notices).
As will be seen from the legislative scheme set out below (s 56B(5) of the Act), in order for a compliance notice to be ‘withdrawn’, the Directors would have had to cause their respective corporations to enter into payment arrangements with the Commissioner, appoint administrators, presumably to every member of the group, or commence winding up the companies, including the plaintiffs in proceedings SC 424 of 2017.
I therefore considered that the balance of convenience lay strongly in favour of granting the stay, particularly as the proceedings were by then part heard, with judgment to then be reserved upon the receipt of further written submissions.
Issues in the proceedings
The two proceedings were heard together, owing to there being some overlap in the issues for determination.
Issues in proceedings SC 424 of 2017
The plaintiffs raised a number of grounds of challenge to the garnishee notices in the further amended originating application and sought a stay of the operation of the garnishee notices in the meantime.
However, the grounds in the application were refined at the hearing to deal with seven issues. They are summarised as follows:
(a)Failure to take into account a relevant consideration, namely that issuing the garnishee notices which seize the entirety of the first and third plaintiffs’ gross income does not allow the payment of operating expenses (Issue 1);
(b) Taking into account irrelevant considerations, namely that the plaintiffs might be able to access funds from third parties (Issue 2);
(c) The terms of the garnishee notices were ambiguous, misleading or uncertain, with the consequence that the notices were not authorised by s 54 of the Act (Issue 3);
(d)A number of the garnishee notices contained an error in the “tax payable [that] remains unpaid” (s 54 of the Act) and were therefore not authorised (Issue 4);
(e)The exercise of the power to issue the garnishee notices was so unreasonable that no reasonable person could have so exercised the power, in circumstances where, to the knowledge of the Commissioner, the notices garnished 100% of the plaintiffs’ gross income, garnished an amount far exceeding their historical income and the manner of the garnishing of the plaintiffs’ debtors would force the plaintiffs into insolvent trading (Issue 5); and
(f)The garnishee notices were issued based on assessments under the Payroll Tax Act 2011 (ACT) applying for the 2009-2010 and 2010-2011 years, when the applicable legislation was the Payroll Tax Act 1987 (ACT), which was no longer in force (Issue 6).
An issue also arose during the hearing as to whether the Commissioner had breached an implied undertaking to the Court (Issue 7). The undertaking is commonly referred to as the Harman undertaking, after the English decision in which such an obligation was articulated Harman v Secretary of State for the Home Department [1983] 1 AC 280 and applied in Australia in cases such as Hearne v Street [2008] HCA 36; 235 CLR 125 at [96] per Hayne, Heydon and Crennan JJ. Under the implied undertaking, parties are obliged not to use documents or information obtained under compulsory processes for any purpose outside the scope of the proceedings in which they were produced.
Issues in proceedings SC 466 of 2017
The grounds of review are set out in the amended originating application dated 13 December 2017. The first complaint raised is that the compliance notices were not authorised by s 56B of the Act or involved an error of law. The reason is said to be that the compliance notices were based on assessments that were invalid or unlawful. This is the same legal question as that described in Issue 6 above and can be dealt with as part of considering that issue.
The second complaint made is that the issuing of the compliance notices was inconsistent with a Commonwealth law, namely ss 181 or 182 of the Corporations Act (Cth) (the Corporations Act) (Issue 8). The essence of this complaint is that the director compliance notices put each director into a conflict with the interests of the companies of which they were directors, in that it was in the companies’ interests to remain a going concern in order to pursue the separate litigation disputing the underlying assessments, but once the director compliance notices were issued, it was in the Directors’ interests to wind up the companies so as to avoid becoming personally responsible for any debt owed by the group. The Directors characterise the decision to issue the compliance notices as either (a) exceeding the power of s 56B of the Act; (b) involving an error of law; or (c) an improper exercise of the power, through taking an irrelevant consideration into account, or failing to take a relevant consideration into account.
The third ground of complaint is that the director compliance notices were issued immediately after the Court had made orders suspending the operation of the garnishee notices in proceedings SC 424 of 2017. The stay on the operation of the garnishee notices was expressly to preserve the ability of the plaintiffs in proceedings SC 424 of 2017 to pursue judicial review. Absent any stay, the effect of issuing the compliance notices was to force the Directors to commence winding up the companies and thus subverted the stay obtained in the earlier proceeding. The Directors characterise this conduct as taking into account an irrelevant consideration, or failing to take into account a relevant consideration, or as a decision so unreasonable that no reasonable decision-maker could have made it (Issue 9).
Relevant provisions of the Act
The scheme for the recovery of taxation revenue from taxpayers is important to the construction of the provisions.
Section 52 permits the Commissioner to agree to an arrangement for the payment of tax:
Arrangements for payment of tax
(1) The commissioner may extend the time for payment of tax by a taxpayer and may accept the payment of tax by instalments.
(2) A decision of the commissioner under this section may be made subject to the conditions (for example, about the payment of interest) that the commissioner may determine.
…
(3) If the commissioner has accepted the payment of tax by instalments, each instalment is due and payable at the time determined by the commissioner in relation to the instalment.
(4) If an instalment of tax is not paid on or before the time that payment is due, the whole of the outstanding amount of the tax, duty or penalty tax becomes due and payable at that time.
Note The following decisions of the commissioner in relation to a person are each commissioner-reviewable decisions (see s 107, def commissioner-reviewable decision), and the commissioner must give an internal review notice to the person (see s 107B):
• refuse to extend time for payment;
• refuse to accept payment by instalments;
• impose a condition on an extension or acceptance.
The Commissioner may collect an outstanding tax amount from people other than the taxpayer. One of the empowering provisions applicable to this case is s 54, located in pt 7 of the Act, concerning the collection of tax. It is relevantly as follows (emphasis added):
Collection of tax from third parties
(1)The commissioner may require any of the following people instead of the taxpayer to pay tax that is payable but remains unpaid:
(a) a person from whom any money is due or accruing or may become due to the taxpayer;
…
(2)The commissioner’s requirement must be made by written notice to the person concerned (the debtor).
(3)A copy of the notice must be given to the taxpayer.
(4)If the money due to the taxpayer is payable in instalments, the commissioner may specify in the notice an amount to be paid by the debtor to the commissioner out of each instalment.
(5) If, apart from this subsection, money is not due or repayable on demand to the taxpayer unless a condition is fulfilled, for this section the money is taken to be respectively due or payable on demand even if the condition has not been fulfilled.
(6) The amount of money required to be paid to the commissioner is—
(a)if the amount of money … due … to be paid does not exceed the amount payable by the taxpayer to the commissioner—all the money; or
(b) if the amount of money exceeds the amount so payable— sufficient money to pay the amount so payable.
(7) The money must be paid to the commissioner—
(a) on receipt of the notice; or
(b) when the money is held by the debtor and becomes due to the taxpayer; or
(c) after the period (if any) that may be specified by the commissioner;
whichever is the later.
(8) A debtor subject to a requirement of the commissioner under this section must comply with the requirement.
Maximum penalty: 50 penalty units.
(9) If a debtor is convicted of an offence against subsection (8) in relation to the refusal or failure of the debtor to pay an amount to the commissioner in accordance with a notice, the court may, in addition to imposing a penalty on the debtor, order the debtor to pay to the commissioner an additional amount not exceeding the firstmentioned amount.
(10) A debtor who makes a payment in accordance with this section is taken to be acting under the authority of the taxpayer and of all other people concerned and is indemnified by this section in relation to the payment.
(11)If, after a person is given a notice under this section by the commissioner, the whole or a part of the amount is paid by another person, the commissioner must promptly notify the person to whom the notice is given of the payment and the notice is taken to be amended accordingly.
(12) In this section:
tax includes—
(a) a judgment debt or costs in relation to tax; and
(b) a fine or costs imposed by a court in relation to a tax offence; and
(c) an amount ordered by a court to be paid to the commissioner by a person convicted of a tax offence.
Several points are to be made from the emphasised words in this section. First, where the debtor who receives a garnishee notice is paying money to the taxpayer in instalments, s 54(4) of the Act permits the Commissioner to collect out of every instalment only a part of the total amount owed by the taxpayer. Otherwise, if the amount payable to the taxpayer by the receiver of the notice is less than the amount the taxpayer owes to the revenue, all the money is to be paid to the Commissioner in accordance with s 54(6) of the Act. That is, the Act expressly permits the Commissioner to divert and collect every cent that might become payable to the taxpayer by a debtor, in order to pay the tax debt.
Second, s 54(11) of the Act envisages that the Commissioner may be collecting tax payable from a number of sources. It also obliges the Commissioner to promptly notify a person issued with a garnishee notice of any amounts paid by another person and “the notice is taken to be amended accordingly”.
Also located in pt 7 is the provision empowering the Commissioner to collect tax from directors and former directors, being s 56B of the Act, which is in the following terms:
Liability of directors and former directors for amounts of tax
(1)This section applies if a corporation does not pay an assessment amount.
(2)The commissioner may give a written notice about the assessment amount (a compliance notice) to 1 or more of the following:
(a) a director of the corporation;
(b)a person who was a director of the corporation when the corporation first became liable to pay the assessment amount, or any part of the assessment amount, or at any time afterwards (a former director).
(3)The compliance notice must state—
(a)the assessment amount; and
(b)a period (of at least 21 days after the day the notice is given to the director or former director) within which the notice must be complied with; and
(c)that the director or former director will be liable to pay the assessment amount if the amount is not paid, or the assessment is not withdrawn, within the stated period.
(4)If the assessment amount is not paid, or the assessment is not withdrawn, within the period stated in the compliance notice, the director or former director is jointly and severally liable with the corporation to pay the assessment amount.
(5)For this section, an assessment is taken to be withdrawn if—
(a)the commissioner makes an arrangement with the corporation for the payment of the assessment amount; or
(b)an administrator of the corporation is appointed under the Corporations Act, part 5.3A; or
(c)the corporation begins to be wound up within the meaning of the Corporations Act.
(6)A person does not cease to be liable to pay an assessment amount because the person ceases to be a director of the corporation.
(7) A former director of a corporation is not liable for any tax for which the corporation first became liable after the director ceased to be a director of the corporation, other than interest on an assessment amount for which the former director is liable.
In the event that the plaintiffs establish error in respect of the issuing of the garnishee notices or the director’s compliance notices, s 16 of the Act may be indirectly material to the consequences of any such finding of error and the relief to be granted. It provides:
Validity of assessment
The validity of an assessment is not affected only because a provision of a tax law has not been complied with.
The point to note about the legislative scheme is that there is no similar provision in respect of the issue of a garnishee notice or director’s compliance notice in the Act.
Section 16 is supported by s 134 of the Act, which provides:
(1)Production of a notice of assessment, or of a document signed by the commissioner purporting to be a copy of a notice of assessment, is conclusive evidence –
(a)of the due making of the assessment; and
(b) that the amount and all particulars of the assessment are correct, except in an objection or appeal proceeding where it is prima facie evidence only.
(2)Production of a notice of determination of an objection, or of a document signed by the commissioner purporting to be a copy of a notice of such a determination, is conclusive evidence of the making of the determination and of its terms.
General principles
Intention of the legislative scheme
The legislative scheme established in relation to tax recovery reflects a clear policy in favour of the revenue and against the taxpayer: Deputy Commissioner of Taxationv TDE Nominees Pty Ltd (No 2) [2011] NSWSC 1528 (TDE Nominees), per Gzell J at [18] to [20], dealing with similar legislation. Priority is given to the tax recovery for the revenue over the determination of the taxpayer’s appeal against the assessment: TDE Nominees at [19].
The Commissioner is placed in a position of special advantage and is, in general, free to pursue recovery proceedings, despite outstanding appeals and reviews against disallowance of an objection: Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191 at [19]; referring to Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1983) 48 ALR 545 at 547 (with both cases cited among others in TDE Nominees at [18]).
Public interest
There is an element of public interest in 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; 237 CLR 473 at [44] per Gummow ACJ, Heydon, Crennan and Kiefel JJ (Broadbeach); Totev v Sfar & Anor [2008] FCAFC 35; 167 FCR 193 at [17] per Emmett J (Totev v Sfar); Bryant v Commonwealth Bank of Australia & Anor (1996) 134 ALR 460 at 464 per Kirby J.
In Broadbeach at [44], the majority applied Attorney-General v Carlton Bank [1899] 2 QB 158 at 164, to hold that where the meaning of the words of a statute is clear, it is not open to a court to narrow or whittle down the operation of the statute, by seeming considerations of hardship or of business convenience or the like.
There is a further principle also relevant to the public interest, namely that there is a legal duty owed by the revenue to the general body of the taxpayers to treat taxpayers fairly; to use their discretionary powers so that, subject to the requirements of good management, discrimination between one group of taxpayers and another does not arise; and to ensure that there are no favourites or sacrificial victims: Bellinz v Commissioner of Taxation (1998) 84 FCR 154 at 166, cited in Elias v Commissioner of Taxation [2002] FCA 1132; 199 ALR 246 at [57].
Garnishee notices
Consistent with the intention of the legislative scheme, s 54 of the Act is cast in wide terms, and confers exceptional powers on the Commissioner to facilitate the collection of tax, particularly where it is anticipated that the taxpayer might otherwise escape payment: Clyne v Deputy Commissioner for Taxation (1981) 150 CLR 1 at 11 per Gibbs CJ, a case concerning the Commonwealth legislative equivalent for issuing statutory garnishee notices.
However, given that s 54 of the Act creates an offence for non-compliance with a notice issued under the section, the section requires certainty of the amount that is payable but remains unpaid: Canberra Cleaners (No. 2) at [109]. The requirement for certainty may be seen from cases such a Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598 at [60], which I discussed and applied to the context of garnishee notices in Canberra Cleaners (No. 2) at [75]-[78].
Issues 1 and 5 – relevant considerations and unreasonableness
It is convenient to deal with these two issues together as that was the approach taken in the oral and written submissions and the principles considered partially overlap.
Unreasonableness
Implicit in every statutory discretion, is the presumption that the power must be exercised reasonably: Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332 (Li) at [64] per Hayne, Kiefel and Bell JJ; Kruger v The Commonwealth (1997) 190 CLR 1 at 36. The complementary principle is that every statutory discretion is confined by the subject matter, scope and purpose of the legislation under which it is conferred: Li at [23] per French CJ.
A finding of unreasonableness is a conclusion which may be applied to a decision which lacks an evident and intelligible justification: Li at [76] per Hayne, Kiefel and Bell JJ.
What constitutes a relevant consideration
In relation to the failure to take into account a relevant consideration in the making of an administrative decision, such a complaint can only be made out if a decision-maker fails to take into account a consideration which he is bound to take into account in making that decision: Peko-Wallsend (1986) 162 CLR 24 (Peko-Wallsend) at 39.
As with reasonableness, what factors a decision-maker is bound to consider in making the decision is determined by construction of the statute conferring the discretion. If those factors are not expressly stated, they must be determined by implication from the subject matter, scope and purpose of the statute. When a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except insofar as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard: Peko-Wallsend at 40.
This well-established principle has recently been applied in a taxation context, being the consideration of whether to enter into a payment arrangement with a taxpayer: Stojic v Deputy Commissioner of Taxation[2018] FCA 483 at [94] per Thawley J, citing Peko-Wallsend Ltd at 39-40 per Mason J; Elias v Commissioner for Taxation [2002] FCA 845; 123 FCR 499(Elias) at [56]-[57]; and Sanctuary Lakes Pty Ltd v Commissioner of Taxation [2013] FCAFC 50; 212 FCR 483 at [227]-[229] per Griffiths J.
The present case
The considerations that the plaintiffs argue ought to have been taken into account are the consequences of the Commissioner issuing garnishee notices to every known debtor of the first and third plaintiffs. By that approach, the Commissioner seized the entirety of the gross income for the plaintiffs and did not allow for the payment of operating expenses.
The plaintiffs argue further that the decisions collectively were unreasonable, in that garnishing an amount that was both 100% of their income and far exceeded their historical income would force the plaintiffs into insolvent trading.
There are several reasons why these complaints are not made out. First, I do not accept the premise that a company who does not receive income for a period necessarily becomes insolvent. The question of solvency is often far more complex than simply whether income is being received. The company may choose to take out a bank loan to continue trading, or sell an asset, for example. However, that is a preliminary matter.
The second and more decisive reason is that it will be seen, from the legislative extracts above, that those considerations are not mandatorily relevant considerations under the Act. They were considerations that the decision-maker could have regard to, but there was no legal error if the decision-maker did not have regard to them.
The plaintiffs relied upon Edelsten v Wilcox (1988) 83 ALR 99 (Edelsten), which suggests otherwise. Burchett J was there considering s 218 of the Income Tax Assessment Act 1936 (Cth), the equivalent provision for issuing a garnishee notice under the Commonwealth legislative scheme. His Honour referred to Peko-Wallsend at 40, immediately before stating (emphasis added, citations omitted) at 112-113:
…It is clear from the Act, the authorities, and the policy guidelines which the Commissioner himself has issued, that the collection of tax in cases where appeal procedures have been properly invoked and genuine questions are outstanding is, in general, the subject of discretions, which must take account of that situation, and of the effect upon the individual taxpayer of the contemplated recovery. The legislature cannot have intended that s.218 should confer a more despotic power, not subject to the same discretionary considerations. …
An extraordinary power has been conferred on the Commissioner, and it must carry with it a special obligation. He is not given this power so that he may bring to the collection of the Commonwealth’s revenues the rapacity of a Verres who takes what he can, but because wide discretions, fairly exercised, have been found necessary. There must be advertence to the quality of fairness, which is applicable to the analogous procedure for the attachment of debts by garnishee order. …
Section 218 was not intended to become an instrument of oppression, to be utilised for a collateral purpose of extorting money from other sources, such as friends or relatives, by making it impossible for the taxpayer to continue to earn his living by the ordinary conduct of his business or profession. Nor was such a facility for the collection of tax intended as a means for the infliction of punishment upon a taxpayer who in the past had adopted, or was presently persisting in, legal and permissible means for the limitation of his liability to tax. If the means employed exceed what is truly permissible, well known provisions of the Act may be attracted, but that does not entail the consequence that sec. 218 may be employed, not to collect tax from the source which attracts its operation, but to penalise the taxpayer’s conduct, or to abolish his business.
Nor, as I have already pointed out, can the power properly be used to obtain payment, not of the tax payable by the taxpayer in question, but of tax payable by other persons. …
His Honour went on to refer to the fact that even if the plaintiff in that case was made bankrupt, proper allowance would inevitably have been made to enable him to meet the expenses of carrying on his practice and, unless most exceptional circumstances were shown, all ordinary living expenses. His Honour stated at 113 (emphasis added):
When the legislature conferred the discretion to require part only of each payment made to be paid to the Commissioner, it is difficult to see a reason why it should have intended that discretion to be exercised on some harsher basis than would, in the circumstances I have outlined, prevail in bankruptcy.
I share some of the above sentiments expressed by Burchett J on the use to which a garnishee order is to be put. It does seem that seizing the entirety of the income of a business in circumstances where appeal processes are being legitimately pursued may have the real consequence that the business is abolished, and that the Commissioner is indirectly achieving through the garnishee process what would have been directly achieved by a creditor’s statutory demand, at least in the case of the first and third plaintiffs, or commencing proceedings for a judgment debt in the case of the second plaintiff.
However, the quality of fairness to which Burchett J referred and whether there is a requirement to have regard to the effect on the individual taxpayer of the contemplated recovery, must be considered by reference to the object, scope and purpose of the Act. The intention of the legislative scheme, and the priority it gives to the collection of the revenue, has already been discussed. Edelsten predates Broadbeach, Totev v Sfar and Elias and those more recent authorities must be taken to represent the current state of the law.
The fact that a statute permits the garnishing of only part of a person’s income does not mean that the decision-maker is obliged to take that course wherever it appears a person or business will face severe hardship. It does not even require that the decision-maker has to consider that matter. To hold otherwise would, in my view, be contrary to the principle stated in Broadbeach at [44] that where the statutory discretion is broad and clear, the Court should not whittle it down by reference to hardship or business inconvenience.
Elias is also of relevance here. It concerned a refusal by the Commissioner of Taxation to defer the time for payment of tax. Hely J stated at [60]-[61] (emphasis added):
In ARM Constructions Pty Ltd v Commissioner of Taxation (1986) 10 FCR 197, Burchett J, after referring to Ahern, Thurecht and Barina held that in the light of the purpose which the discretion under s 206 serves, a claim by a taxpayer who genuinely disputes the imposition of the tax that payment on the due date would wholly or partly abolish his business, is a claim which the Commissioner is bound to consider. In Nestle Australia Ltd v Commissioner of Taxation (1987) 16 FCR 167 at 178 Wilcox J held that in considering an application under s 206 "it is always a relevant matter that the liability for tax is disputed" and the cumulative effect of financial hardship and the existence of a genuine dispute may be such as to warrant an extension of time.
The factors on which the applicant relies in the present case are relevant considerations, in the sense that if the decision-maker chose to have regard to them it could not be said that his decision was based upon considerations which were extraneous to the power. But, with respect to those who have taken a different view, I agree with Kiefel J in Harts Fidelity [Pty Ltd v Federal Commissioner of Taxation (1999) 42 ATR 438] that the factors in question are not "relevant considerations" in the Peko-Wallsend sense of matters which the decision-maker was bound to take into account. To borrow the language of Allsop J in Paul v Minister for Immigration & Multicultural Affairs [2001] FCA 1196; (2001) 64 ALD 289 at 312 they are not considerations "made compulsorily relevant" by the Act, although the decision-maker may regard such matters as part of the relevant circumstances of the case.
It can be seen that, even where the purpose of the section under consideration was to allow a taxpayer to defer the payment of tax, Hely J found that financial hardship was not a mandatorily relevant consideration. In my view, the reasoning in cases such as Elias has stronger force to s 54 of the Act, where the purpose of the section is one step removed from collecting money directly from the taxpayer and instead serves the purpose of permitting the Commissioner to collect tax from debtors of the taxpayer, where the tax amount is payable but unpaid. Indeed, in circumstances where the taxpayer has communicated to the Commissioner that it is already suffering financial hardship in that it has no money to pay the debt itself (as was the case here, according to the reasons of the decision-maker, set out below), that is precisely where s 54 of the Act may be of most use to the Commissioner.
I therefore find that considerations that payment under the garnishee notices would cause financial hardship, would wholly abolish the plaintiffs’ businesses, or would force them into insolvent trading, are not matters the decision-maker was bound to take into account under the Act. The statute may operate harshly, but that is the outcome the legislature has seen fit to enact and it is the principle I must apply to this case.
For this reason, the failure to consider those matters was not a legal error. Nor was the garnishing of 100% of the plaintiffs’ income unreasonable, having regard to the object, scope and purpose of the Act, being to collect tax and to prioritise the revenue.
The third reason why the complaint has no substance is that the decision-maker’s reasons for making the decision to issue each garnishee notice demonstrate that consideration was in fact given to the harsh consequences of issuing garnishee notices to every known debtor and seizing 100% of monies payable and thus, in all likelihood, seizing the entirety of whatever income there was. The reasons (issued when these proceedings had already commenced and considered in that light) include the following:
Prior to issuing the Notices on 18 October 2017 I had regard to a range of factors in deciding that:
i.it was appropriate to recover the tax liability whilst an objection was pending;
ii.…
iii.it was appropriate to garnishee 100% of the monies payable by debtors of the Taxpayers.
In making my decision, I had regard to the following matters:
…
·The Notice of Assessment [issued to Rose Cleaning Services] …imposed…penalty tax of 90 per cent, the highest level of penalty tax legislatively permitted, due to a lack of cooperation, including hindering and obstructing authorised officers and intentional disregard of tax law;
…
·A suitable time payment arrangement could not be agreed between the Commissioner and the Taxpayers;
·On 10 February 2017, …a representative of the Taxpayers…stated words to the effect that there was no money to pay the liability…
…
·The Taxpayers have failed to voluntarily pay any amount of their assessed liabilities;
…
·There is a high degree of uncertainty as to the accuracy and reliability of the records of the Taxpayers and their financial position. …
…
·The Commissioner entered into a receiver arrangement with some of the Taxpayers, which ran for approximately 6 months, and resulted in no funds being paid against the tax liability.
·The potential for hardship, bankruptcy or liquidation as a consequence of the section 54 notice.
…
Having regard to the above factors, I came to the view that the Commissioner’s interest in recovering the outstanding tax liability outweighed any hardship that may be caused to the Taxpayers.
I have given the references to hardship and weighing hardship against the Commissioner’s interest in recovering an outstanding tax liability little weight. They have the distinct flavour of being inserted with an eye to the reasons for decision being tendered in these proceedings, where one of the key issues was consideration of hardship. However, even without those statements, the above extract is sufficient to reveal that the Commissioner both knew the severe consequences of garnishing the totality of the plaintiffs’ income, and that in circumstances where all attempts to recover the money from the plaintiffs (among others) had failed, the Commissioner’s plain intention was to seek to recover every cent possible without giving any priority to the likely impact on the business expenses of the plaintiffs. Those are questions of weight. They are for the decision-maker alone and the Court cannot intervene.
For these reasons, the complaints of unreasonableness and failure to take into account relevant considerations have not been made out.
Issue 2 – irrelevant consideration that the plaintiffs could access funds from third parties
This complaint concerns the decision-maker taking into account the following:
The Taxpayers directors and shareholders respective financial capacity to meet the liability and/or fund the continued operation of their respective businesses, including available assets and other financial resources.
A number of reasons are then given as to why the decision-maker believed the plaintiffs could call in other resources.
The same reasoning applies in relation to this complaint. The decision-maker was not prohibited from taking into account the broader context. Again, the words in Edelston at 113 (emphasised above at [53] of these reasons), that the garnishee process was not to be utilised to extort money from other sources such as friends or relatives, must be seen in light of the more recent authorities.
At first thought, an ability to draw upon external resources is not a relevant consideration, if those words are used to describe what factors are directly material to issuing a garnishee notice. The Commissioner’s purpose under the Act is to collect tax that is unpaid. It is the taxpayer’s problem as to how to exist while paying the tax debt. Whether the taxpayer sells an asset, takes out a bank loan, or asks family and friends for assistance, they are all matters for the taxpayer.
However, in some cases, such considerations might determine the Commissioner’s strategy on collection, as a profitable business trading for another ten years is obviously worth more to the revenue than a business that ceases to exist tomorrow. Whether a business is likely to be able to trade out of dire financial circumstances by recourse to other funds such as bank loans may be relevant to the Commissioner’s strategy in determining what percentage of income ought to be garnished.
Importantly though, following Peko-Wallsend and the authorities discussed above, the question is not whether the Commissioner should or should not have taken the plaintiff taxpayers’ external resources into account. The question is whether the Commissioner was prohibited under the Act from taking those matters into account.
Reasoning by way of a simplistic example, if a taxpayer owes the Commissioner ten dollars, and the taxpayer only has five dollars sitting in a bank account, it is unfortunate for the taxpayer if the Commissioner demands that five dollars, but no one would deny that the Commissioner was entitled to collect the five dollars under the Act. That is exaction, not extortion. All that a garnishee notice does is to allow the Commissioner to collect the money (from the debtor) on its way into the bank account.
If the Commissioner then acknowledges that such collection will leave the taxpayer’s bank account empty, but takes the extra step of turning his mind to whether the taxpayer might be able to remain afloat by selling an asset or getting a bank loan secured by the asset, I cannot see from the object, scope and purpose of the Act that the Commissioner is prohibited from that reasoning process. The discretion in the Act is sufficiently broad to enable the Commissioner the freedom to consider the individual facts and circumstances of taxpayers in the decisions it makes, which may include what the Commissioner knows about the taxpayer’s assets and resources.
There is no difference to that conclusion if one substitutes selling an asset for calling upon other financial resources, such as family or friends. If the Commissioner considers those circumstances to be relevant to whether to issue a garnishee notice, the Act permits that reasoning process.
Accordingly, Issue 2 has not been made out.
Issues 3 and 4 – the garnishee notices were not authorised
Issue 3 is the complaint that the garnishee notices were ambiguous, misleading or uncertain and Issue 4 is that a number of the garnishee notices contained an error in what constituted the tax payable but that remained unpaid.
The genesis of the complaint stems from the previous orders made in Canberra Cleaners (No. 2), whereby declarations were made that a number of notices issued to debtors of the plaintiffs under s 54 of the Act were invalid. Those notices were then aside.
The plaintiffs now argue that the monies that had been collected previously under those notices should have been immediately returned back to the recipients of the notices and that to the extent the garnishee notices the subject of these proceedings included those amounts, they were either ambiguous, misleading, or uncertain.
By the wording of some of the garnishee notices (identified below and about which the plaintiffs make separate complaint), it appears the Commissioner was similarly confused or uncertain as to the effect of the previous orders.
The applicable principle is as follows. Invalidity is required to be established by judicial, not administrative, determination, and any decision tainted by jurisdictional error is valid and effective in law until such a determination is made. Examples are to be found in Forbes v New South Wales Trotting Club Ltd (1979) 143 CLR 242 at 277 per Aikin J; Ousley v The Queen (1997) 192 CLR 69 per Gummow J at 130-131; and R v Balfour; ex parte Parkes Rural Distributions Pty Ltd (1987) 17 FCR 26 at 33.
If the position were otherwise, the operation of the vast number of administrative decisions made daily would be compromised, and the system would be unworkable. Indeed, it would be reduced to a status of anarchy, to draw from the writings of the legal philosopher Hans Kelsen, cited by Gageler J in State of New South Wales v Kable [2013] HCA 26; 252 CLR 118 at [40].
The amounts that were previously recovered by the Commissioner ($702,147.60 at the time of the notices issued on 19 October 2017, and $918,581.77 at the time of the notice issued on 31 October 2017) were validly collected, because at the time of the collection, there was no judicial declaration of invalidity.
Accordingly, to the extent that the garnishee notices refer to the unpaid tax liability as being $3,910,739.99 with accrued interest, or in the case of the notice dated 31 October 2017 issued to Tuggeranong Valley Rugby Union & Sports Club Limited, the unpaid tax liability as being $3,694,305.82, there is no mistake or uncertainty. Those notices are garnishee notices 5-10 in Schedule 1 to the further amended originating application.
However, there are four notices that differ in their content. They are the notices issued on 18 October 2017 to the ACT Education Directorate (ACN 148 723 351), the Active Leisure Centre (ACN 508 132 455), Calvary Health Care ACT Limited (ACN 105 304 989) and Commonwealth Bank of Australia (ACN 123 123 134).
Taking the notice issued to the ACT Education Directorate as an example of those terms, the notice itself includes the following (emphasis added):
Pursuant to a Notice of Assessment and Reassessment issued on 28 November 2016, and Assessment issued 9 August 2017, the entity has an outstanding tax liability of $4,612,887.59, with accrued interest which remains unpaid.
As a result of the Notices issued under s 54 of the Act on 13 February 2017 and 28 March 2017 the Commissioner of ACT Revenue collected $84,736.62 from you as a debtor of the entities. Under section 54(10) of the Act a debtor who makes a payment in accordance with this section is taken to be acting under the authority of the taxpayer and of all other people concerned and is indemnified in relation to the payment.
On 17 October 2017 the ACT Supreme Court declared the notice issued to you on 28 March 2017 invalid. The reasoning of the ACT Supreme Court suggests that the notice issued to you on 13 February 2017 might also be invalid. As a result, monies paid under those garnishee notices may not have, contrary to the effect of subsection 54(10), discharged your liability to the entities.
In accordance with section 54 of the Act…this Notice requires you to pay the Commissioner for ACT Revenue any money you are required to pay …to the entity, including any monies which you may be required to pay to the entities as a result of the invalidity of the 13 February 2017 and 28 March 2017 garnishee notice, until the entities’ outstanding tax liability is discharged.
The $84,736.62 already collected will be credited against any liability which was reinvigorated by the invalidity of the 13 February 2017 and 28 March 2017 garnishee notice.
You are otherwise required by this Notice to pay monies due to the entity to the Commissioner for ACT Revenue …until such time as the Commissioner for ACT Revenue advises you otherwise.
I accept the plaintiffs’ submissions that the content of such a notice is confusing, embarrassing, ambiguous and misleading. Particularly having regard to the passages emphasised above, the recipient of such a notice is left with no understanding of what is the correct, true or certain amount of the tax liability that is unpaid.
It may be that the amounts were so large that whatever amounts the debtors owed to the plaintiffs would have been included in the monies payable to the Commissioner. However, as referred to in Canberra Cleaners (No. 2) at [109]-[111], the consequences for non-compliance with a notice issued under s 54 of the Act are severe. Non-compliance with a notice is an offence. The section thus requires certainty of the amount that is payable. The above contents of the four notices issued on 18 October 2017 lacks that sufficient clarity so that there can be no doubt as to what is payable. In fact, if there was any certainty, they were certainly wrong as to the amount claimed to be unpaid.
Notices 1-4 of Schedule 1 to the further amended originating application are invalid and will be set aside.
Issue 6 – whether the underlying assessment was invalid
The issue here may be shortly stated as an argument that the Commissioner applied the wrong statute in relation to assessing payroll tax for the years prior to the current Payroll Tax Act 2011 (ACT) coming into force (on 1 July 2011). The complaint is that the correct statute to apply was the Payroll Tax Act 1987 (ACT) (repealed).
That issue may well have some merit, however there are two matters standing in the way of the Court determining the point. The first is s 134 of the Act, set out above. Challenges to the garnishee notices and the issue of director’s compliance notices are not appeal proceedings of the assessments themselves and thus, the assessments are conclusive evidence in these proceedings. A collateral challenge in the context of these proceedings is not available to the plaintiffs.
The second hurdle for the plaintiffs, and assuming without deciding that the reference to the wrong statute in a notice of assessment was jurisdictional, is whether the Court should conduct judicial review of the notices of assessment issued by the Commissioner.
As stated above, appeal proceedings are currently being heard by the Tribunal. In circumstances where the statute has expressly provided an alternative remedy as the ordinary and regular recourse for an aggrieved person, such as full merits review, the effect of the authorities is that the Court has a discretion to decline to grant a remedy by way of judicial review: Commissioner for Taxation v Futuris Corp Ltd [2008] HCA 32; 237 CLR 146 (Futuris) at [10] per Gummow, Hayne, Heydon and Crennan JJ and [156] per Kirby J.
Relevant principles for determining when the Court may embark upon the judicial review of an administrative decision have been discussed in AWB Ltd v Cole (No 2) [2006] FCA 913; 253 FCR 288 at [71]; Meagher v Stephenson (1993) 30 NSWLR 736 at 738-739; and Jacobs v OneSteel Manufacturing Pty Ltd [2006] SASC 32; 93 SASR 568 at [93] per Besanko J (when sitting in the Full Court of the Supreme Court of South Australia, and with whom Duggan, Vanstone and Layton JJ concurred). It is unnecessary to repeat them here.
The plaintiffs argued that they were entitled to raise the argument as part of the present proceedings because they could not raise the argument in the proceedings before the Tribunal. That submission was in turn founded on the appeal in the Tribunal proceeding on the basis that there was a valid assessment.
However, the Tribunal can take an appeal from a decision even where the assessment is invalid: Futuris at [156]. The Tribunal has jurisdiction to entertain an appeal from a decision in fact made, which purported to be made in the exercise of powers under an enactment: Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307 (Brian Lawlor) per Bowen CJ at 314-315
In cases where there may have been a jurisdictional error, the legislation presumes that the assessment was valid. What is required is that the decision (in this case, an assessment) purports to have been made under the relevant statute: Australian Pesticides and Veterinary Medicines Authority v Administrative Appeals Tribunal [2008] FCA 1393; 216 FCR 405 at [85], citing Brian Lawlor. That requirement was plainly fulfilled in this case.
The plaintiffs drew the Court’s attention to the decisions of Kennedy v Administrative Appeals Tribunal [2008] FCAFC 124; 168 FCR 566 (Kennedy), and Gashi v Commissioner of Taxation [2013] FCAFC 30; 209 FCR 301 (Gashi), and there is some dicta in Federal Commissioner of Taxation v Administrative Appeals Tribunal [2011] FCAFC 37; 191 FCR 400 at [22], suggesting that Kennedy and Gashi held to the contrary. However, properly understood, the principle to be drawn from those decisions is that where the assessment was invalid, the remedy is the substitution by the relevant tribunal of its own decision; it does not have the power to declare the assessment to have been invalid. That is the view held by the learned authors in Judicial Review of Administrative Action and Government Liability (Thomson Reuters, 6th ed, 2017) at [10.150] fn 79, and I agree with it.
Importantly, the power of the Tribunal extends to making decisions about the applicable law. If the Tribunal finds that Commissioner applied the incorrect statute in making the assessment, the Commissioner will be required to give effect to that finding.
Thus, while the plaintiffs are entitled to bring judicial review proceedings in this Court, the legislature has provided for a different path to be followed, and I consider it to be an alternative and adequate remedy. The Court should decline to exercise discretion to review the decision, following Futuris at [48] and [156].
Issue 7 – Harman undertaking
It was unfortunate that the parties diverted their attention to this issue and even sought extra time to address it in lengthy written submissions followed by supplementary authorities and even an application in proceedings after judgment was reserved, in circumstances where all efforts had been made to expedite these proceedings with a view to finalising this dispute last year. In my view, any breach (which I assume without deciding) makes no difference to any of the findings contained in this judgment.
The issue arose because the Commissioner appears to have used affidavit material that was produced, but critically, not read, in other Court proceedings, in subsequently issuing the notices to the Directors under s 56B of the Act.
Given that this issue does not affect any reasons as to the validity or otherwise of any of the compliance notices under consideration, it is unnecessary to consider any breach further, or any subsequent application, for the purpose of resolving the present dispute.
If the Commissioner seeks to use any affidavit material in subsequent decision-making processes that does not form part of the public record, the Commissioner may need to seek the consent of the parties involved and/or seek leave as appropriate.
Issue 8 – the issuing of the notices placed the Directors in conflict with their duties under ss 181 or 182 of the Corporations Act
This argument is misconceived. The obligation of the taxpayers was to pay tax as assessed. The obligation of the Directors is to ensure that their respective companies comply with the law. The fact that the Act permits the imposition of a personal obligation on a director of a company in circumstances where a company fails to meet its statutory obligations has no bearing whatsoever on provisions of the Corporations Act.
Sections 181 and 182 of the Corporations Act required the Directors to exercise their powers and discharge their duties in good faith in the best interests of the corporations and not to use their position improperly to gain an advantage for themselves or cause detriment to the corporations.
The issue of the compliance notices has no effect on those obligations. In any event, the Directors have options available to them to appoint an administrator without commencing to wind up the corporate entities, thereby enabling the present appeal proceedings in the Tribunal to be pursued either by the administrator, or by the Directors with the administrator’s permission.
Accordingly, Issue 8 has no substance.
Issue 9 – issuing the director’s compliance notices immediately after an injunction was granted in relation to the garnishee notices
The Directors contend that the issuing of the director’s compliance notices immediately after the Court had granted a stay in relation to the issue of the garnishee notices pending the determination of these proceedings was a decision so unreasonable as to invalidate the compliance notices.
The same reasoning applies to this complaint as that discussed in relation to the complaint of unreasonableness in issuing the garnishee notices in Issue 5.
Reasonableness is to be judged by reference to the object and purpose of the statutory scheme. Section 56B of the Act allows the Commissioner to exercise the power independently. That is, the section does not condition the exercise of the power or prescribe that it is an alternative to other methods which the Commissioner may use to collect tax. The Commissioner may attempt to collect tax from the taxpayer, from its debtors and from its directors simultaneously.
The words of s 54(11) of the Act emphasised above, namely “if… the whole or a part of the amount is paid by another person”, support this construction. The words expressly contemplate that the Commissioner may be seeking to recover the same debt from multiple sources in accordance with the powers set out in the Act.
As to whether the conduct was unreasonable in the circumstances of this case, the fact that there were legal proceedings in train between the same parties but involving different decisions does not of itself make it unreasonable for the Commissioner to pursue different persons for the same debt.
There is nothing in the object, scope or purpose of the Act that impliedly limits the Commissioner to pursuing one method of collection at a time when proceedings in relation to another method are on foot. On the contrary, s 105 of the Act allows the Commissioner to pursue recovery regardless of whether the underlying assessment is being challenged.
The stay was granted to remedy any prejudice either the plaintiffs or the Directors may have suffered as a result of the timing of the Commissioner’s decisions. That was the appropriate order to take account of the circumstances between these related parties. The Commissioner’s conduct does not sound in any finding that would vitiate the issuing of the compliance notices.
Costs
The plaintiffs in proceedings no. SC 424 of 2017 have been partially but not entirely successful and the parties did spend considerable time dealing with the other aspects of the judicial review proceedings. Costs being in the discretion of the Court, and having regard to the principle that a successful plaintiff is ordinarily entitled to the costs of the proceedings, I consider that the defendant ought pay 50% of the plaintiffs’ costs.
In relation to proceedings no. SC 466 of 2017, the Directors have been unsuccessful and there is no apparent reason to depart from the ordinary course that the they ought bear the costs of those proceedings.
However, as there may be matters outside the knowledge of the Court that bear upon the question of costs in each proceedings, I will stay the order for costs for seven days. Any party wishing to agitate for a variation to the costs orders is to apply to the Court through my associate within that time.
Conclusion
There remains the question of the injunctive relief that is presently in place. Given the plaintiffs may wish to take steps to deal with the effect of these reasons, including giving urgent consideration to the prospects of any appeal, and having already based the existing orders in part on the futility of the proceedings for the plaintiffs if the injunctive relief were not granted, I consider it appropriate that the stay of the operation of the garnishee notices and the director’s compliance notices continue past the delivery of these reasons for a short period. If the plaintiffs in either proceedings wish to extend the operation of the injunctive relief, they will need to make the necessary application before 4pm on Wednesday 8 August 2018.
I also consider it appropriate to grant general liberty to the parties to apply to have the matter relisted on short notice. The Directors proffered undertakings when the interim injunctive relief was granted. Mr Walker, senior counsel who appeared for the defendant in each proceedings, raised a complaint about the terms of the undertakings ultimately given and whether they met what the Directors had agreed to provide to the Court. The argument, as I understood it at the time, was that because the signed undertaking did not precisely match the words of what was discussed in Court, the stay of the operation of the director’s compliance notices did not commence, with the consequence that the Directors had already become liable to pay the debt the subject of the compliance notices.
In the event that complaint is maintained, I will hear the parties further on that limited question.
For the above reasons, the orders of the Court will be:
1. It is declared that the notices issued on 18 October 2017 to the ACT Education Directorate (ACN 148 723 351), the Active Leisure Centre (ACN 508 132 455), Calvary Health Care ACT Limited (ACN 105 304 989) and Commonwealth Bank of Australia (ACN 123 123 134) are invalid.
2. The said notices are set aside.
3. The proceedings SC 424 of 2017 and SC 466 of 2017 are otherwise dismissed.
4. In proceedings SC 424 of 2017, the defendant is to pay 50% of the plaintiffs’ costs.
5. The plaintiffs in proceedings SC 466 of 2017 are to pay the defendant’s costs.
6. The stay of the operation of each of the garnishee notices listed in items 5-10 in Schedule 1 to the further amended originating application and the director’s compliance notices issued by the defendant will be lifted at 4pm on Wednesday 8 August 2018.
7. Orders 4 and 5 are stayed for 7 days.
8. The parties have liberty to apply on 48 hours’ notice.
| I certify that the preceding one hundred and twenty [120] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: 6 August 2018 |
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