Caporale v Deputy Commissioner of Taxation

[2013] HCATrans 152

[2013] HCATrans 152

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S113 of 2013

B e t w e e n -

ROSA CAPORALE

Applicant

and

DEPUTY COMMISSIONER OF TAXATION

Respondent

Summons

BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 21 JUNE 2013, AT 9.58 AM

Copyright in the High Court of Australia

MS R. CAPORALE appeared in person.

MR A.J. O’BRIEN:   Your Honour, I appear for the respondent.  (instructed by Australian Taxation Office Legal Services Branch)

HER HONOUR:   Yes, Ms Caporale.

MS CAPORALE:   Your Honour, this morning’s matter is in relation to a summons filed and served on 19 June 2013 with respect to seeking an urgent order to stay the sequestration order made by Magistrate Driver on 4 February 2013.  This is in relation to an application which I then filed and served on 17 June seeking - an application seeking special leave in relation to appealing Justice Robertson’s decision on 23 May at the Federal Court.

I am also seeking a stay with respect to concurrent proceedings which are in relation to matters that are going before the Attorney‑General where there are facts that may mean that the Attorney‑General is simply able to compel the ATO to withdraw some of the matters which would mean the judgment actually might fall away as a result of that.  In my affidavit I have just summarised the conversation that essentially - on page 2, paragraph 11 of my affidavit of 19 June 2013 ‑ ‑ ‑

HER HONOUR:   Yes, if you would just bear with me a moment.  Yes, perhaps to clarify for my benefit, Ms Caporale, the second order that you seek by your summons is framed as a:

stay of the sequestration order . . . to allow the Attorney General time to compel the ATO to withdraw from any legal and other actions that has resulted from facts that the ATO knew and knows to be fact and to be true.  And to allow the Attorney General time to take the necessary steps to compel the ATO to act in accordance with its legal services direction and withdraw the matters –

Now, a moment ago you spoke of the second order being a stay respecting the outcome of certain proceedings.  By that are you referring to some administrative representations that you have made to the Department of the Attorney‑General?

MS CAPORALE:   The second one is in relation to that, yes, your Honour.

HER HONOUR:   All right.  I think I understand, yes.

MS CAPORALE:   The third one is an order – effectively my understanding is that Justice Jagot did not extend the sequestration order that was in effect till 18 June 2013.  Simply what I guess I am asking is that no other proceedings be enacted by the trustee in normal accordance to his rights until we are able to proceed with the application that I did file before that order was made to make the sequestration order on the 18th.  Simply, number 4 is really just an extension of time because what that may mean is that the Attorney‑General will obviously come back and it may mean that I just supplement the details that I already have filed with respect to my application for special leave.

HER HONOUR:   Yes, very well.  Now, you read your affidavit sworn on 19 June 2013 in support of the relief that you claim in the summons.  Is that so?

MS CAPORALE:   I do, your Honour.

HER HONOUR:   Yes.  Mr O’Brien, what is your attitude to the affidavit?

MR O’BRIEN:   No objection, your Honour.

HER HONOUR:   Yes, very well.  The affidavit is read.  That is the whole of the evidence in support of the application.

MS CAPORALE:   Look, I mean there is expansion in terms of I could start referring to the application for special leave and points that I have made in my summary of arguments and also an affidavit which I did bring this morning just in case we do need to go through with respect to specific evidence that was before both Magistrate Driver at the Magistrates Court and Justice Robertson at the Federal Court in relation to these facts that I am referring to that I am now dealing with the Attorney‑General.  I am just not sure whether this morning’s purpose is simply really to just ask for the stay, whether I need to go into a lot more further details, your Honour, in respect to that ‑ ‑ ‑

HER HONOUR:   Ms Caporale, have you been supplied by Mr O’Brien with a copy of his submissions and the annexures to that document?

MS CAPORALE:   I received them this morning, your Honour.  I think my response to that, I think simply is that I understand that the ATO believes I do not have an arguable case and that, secondly, I am actually not entitled to proceed, even with these proceedings this morning.

HER HONOUR:   Yes.

MS CAPORALE:   My understanding is I guess I could not stop the trustee at the moment from continuing to act under his duties, but I can seek the Court to allow me to proceed with the proceedings that I had lodged before the sequestration order was made on the 18th.  So I am going to rely on the fact that I believe I can continue these proceedings that – not

necessarily do not have the consent or have the authority to stop the trustee from continuing on only other than I am seeking that order under order 3 to be able to probably stop any more damage being caused if the trustee continues on while this hearing is being ‑ ‑ ‑

HER HONOUR:   What I am dealing with today, Ms Caporale, is the relief that you claim in your summons, the primary relief being a stay of the sequestration order made on 4 February 2013 by Magistrate Driver and an order requiring the trustee not take action respecting any rights that the trustee has under that order. 

Now, the reason I asked if you had received a copy of the submissions signed by Mr O’Brien was to direct your attention to the essence of the opposition that the respondent makes to the application that you seek and that in light of the matters that you raised when I asked if your evidence comprised your affidavit sworn yesterday, and you said to me yes, but that you had also had in mind to direct my attention to matters in your application for special leave.

As to the latter, one can see the significance of that in light of the attitude that I understand the respondent takes to the application.  I will come to that in a moment, but I will give you an opportunity in due course to direct my attention to the prospects of the grant of special leave on a view that in the inherent jurisdiction I have the power to make the order that you seek.  You understand that is controversial in light of the provisions of the Bankruptcy Act on which, as I understand it, the respondent intends to rely.  But I will come to that in a moment.  As I understand it, your evidence is complete and I will turn to Mr O’Brien to see if there is any evidence that the respondent seeks to tender on the application.  Mr O’Brien?

MR O’BRIEN:   No, your Honour.

HER HONOUR:   Yes, thank you, Mr O’Brien.  Mr O’Brien, do I understand that the respondent’s position is as indicated in the short outline of submissions filed this morning, namely that you seek to have the summons dismissed?

MR O’BRIEN:   Yes, your Honour.  There is an issue as to whether Ms Caporale has capacity even to bring this application today, but even assuming she did, we do not say there is any merit in the special leave application and you will also see that the trustee has written in saying – indicated he will discontinue the special leave application.

HER HONOUR: Yes. I wonder, Mr O’Brien, if you can help me with this. My understanding is that following the making of the sequestration order on 4 February, the federal magistrate stayed proceedings on the order under section 52(3) of the Bankruptcy Act for seven days.

MR O’BRIEN:   Seven days.  He did, your Honour.

HER HONOUR:   Following that, proceedings were commenced in the Federal Court appealing the making of the sequestration order, and stays were granted.

MR O’BRIEN:   They were.  We contested it, but there was stop/start and in the end Justice Robertson said let us just go to a final hearing.  In the end we agreed to that.

HER HONOUR:   I see.  Now, after Justice Robertson delivered his reasons for judgment on 23 May, his Honour acceded to an application to stay the orders for 21 days subject to an undertaking that the applicant promptly file and serve any application for special leave.

MR O’BRIEN:   That is right.

HER HONOUR:   Those orders had the effect that the sequestration order was stayed until 13 June.  Is that so?

MR O’BRIEN:   That is so.  That was the expiry date.

HER HONOUR:   Now, what happened thereafter was on 13 June Ms Caporale approached the duty judge, Justice Jagot in the Federal Court, and obtained a further stay which, at the time the order was made, stayed the execution of the sequestration order till yesterday, 20 June.

MR O’BRIEN:   At that time.

HER HONOUR:   Yes.  Then the respondent moved to have that order set aside.  Justice Jagot made orders requiring the filing of the special leave application by 17 June.

MR O’BRIEN:   That is right.

HER HONOUR:   That occurred.

MR O’BRIEN:   Yes.

HER HONOUR:   Then the following day Justice Jagot considered the stay application, having the benefit of the application for special leave before her.

MR O’BRIEN:   That is right.

HER HONOUR:   Her Honour set aside the orders that she had previously made with the effect that as from 18 June there was no stay on the sequestration order.

MR O’BRIEN:   That is exactly right.

HER HONOUR:   Her Honour’s order was entered on 19 June ‑ ‑ ‑

MR O’BRIEN:   Yes.

HER HONOUR:   ‑ ‑ ‑ and the trustee notified of that and of the proceedings, being the application for special leave that had been filed on 17 June.

MR O’BRIEN:   That is right, yes.

HER HONOUR: So the situation that we are in, on the face of matters, is that the special leave application is subject to the provisions of section 60 of the Bankruptcy Act?

MR O’BRIEN:   I think that is right because it was commenced prior to – even though the sequestration order, in effect, starts back in February now, I think the better view would be it was filed before, in effect, the order was effective, if you know what I mean.

HER HONOUR:   Yes, I see.  It would appear that the trustee does not propose to exercise the election to continue the proceedings?

MR O’BRIEN: Correct, your Honour, under section 60(3) it has elected to discontinue.

HER HONOUR:   Now, Mr O’Brien, I am mindful that the view has been taken in this Court that the jurisdiction to grant a stay to preserve the subject matter of an application for special leave to appeal is an ample jurisdiction.  Have there been instances where this particular issue has arisen?

MR O’BRIEN:   There have not, your Honour.  It is surprising when you – some very fundamental things in this area when you look for authority it is very hard to find.  Even people who have been made bankrupt and appealing it is a little bit uncertain whether they need a stay at the same time to have status to appeal.  The better view seems to be they do.

HER HONOUR:   Yes.  It seemed to me, Mr O’Brien, that perhaps, bearing in mind the ample jurisdiction that has been the subject of reference

in decisions, albeit not in this area, but I have in mind some statements that were made by Justice Hayne determining the stay application in Patrick Stevedores Operations [No 2] v Maritime Union of Australia (1998) 72 ALJR 869 that there might be some benefit at least initially in considering the application on the basis of what I might characterise as your alternative basis of opposition which is that there are not the exceptional circumstances that would justify the grant of the stay even if section 60 did not present a difficulty.

MR O’BRIEN:   I hear what you say, your Honour.  Actually the applicant – I just would indicate the applicant sought a very short stay from Justice Jagot so it would continue so she could seek a further stay up here and her Honour thought it was so futile that her Honour refused to extend it any further, but I hear what you say, your Honour.  I am happy for that – concede that.

HER HONOUR:   Thank you, Mr O’Brien.  Ms Caporale, I trust you understood that exchange.  You are conscious, I think, that there is a lively issue about your capacity to maintain the present application before me on your summons and that is particularly so in light of the indication of the trustee’s attitude to the proceedings.  Now, I take it you have seen the trustee’s letter that is attached to Mr O’Brien’s submissions.

MS CAPORALE:   Yes, I saw it this morning, your Honour.

HER HONOUR:   It may be that it will be necessary for me to come to a view about that question of capacity, but for the present, in light of my discussion with Mr O’Brien, I think it might be more helpful for us to address your application upon the assumption that I have the power to grant the relief that you seek, but that the grant of that relief involves the exercise of an extraordinary jurisdiction and requires you to discharge a burden of showing that exceptional circumstances justify it. 

So perhaps I could just invite you to address your attention to that.  In particular, Ms Caporale, I invite you to focus on the nature of the application and that is for special leave to appeal from the orders made by Justice Robertson, those being orders dismissing an appeal from the making of the sequestration order in the Federal Magistrates Court.  The making of the sequestration order, as I understand it, was based on an act of bankruptcy being the failure to comply with a bankruptcy notice, that notice being based upon the judgment obtained in the District Court by the respondent arising, as I understand it, out of assessments of personal income tax.

Now, there seems to have been, to some degree in the proceedings below, an endeavour by you to go behind the judgment debt with a view to challenging the assessments on which it was based.  That, given the nature of the proceedings, was attended by difficulties.  I think you are aware of that.

MS CAPORALE:   Yes.

HER HONOUR:   So can I ask you to focus your attention on the reasons in law that you say attend error in Justice Robertson’s judgment.

MS CAPORALE:   Yes, your Honour.  I think in terms of probably what I am seeking in relation to the High Court is probably that the interest of the administration of justice particular to this case and that be considered to allow the proceedings and also the appeal to proceed, that is what I think constitutes the exceptional circumstances in this particular case in that there are two things at the moment.  That it may mean that the Attorney‑General simply in his ability – legal ability to direct or compel the ATO to take certain steps – it would mean simply that this might actually fall away in that the original judgment that was based on the statement of claim which was served in about I think originally June 2010 means that that does fall away because the actual debt is no longer owing. 

That is simply because there have been two payments made and that has been outlined in the statement of claim, but not apparent, I think, to anyone, including the judges along the way, I think it only probably became obvious – and this is why I think that the original notice and then the bankruptcy notice or the judgment and then the bankruptcy notice that followed is defective because the income tax liability figures, which is the assessment that the ATO relied under section 177 of the Tax Administration Act 1936 is null and void.  That was very specifically, I think, outlined in a decision which was made at the Tribunal on 25 October 2012.

This decision confirmed that the tax years from 1995 to 2002, there were figures that were made under Part IVC of the Tax Administration Act and in relation to that that meant that those figures – and I do have those in the draft notice of appeal, your Honour, if I could just – only two figures because that is just factually - in page 8 of my draft notice of appeal ‑ ‑ ‑

HER HONOUR:   Yes.

MS CAPORALE:   Paragraph 40 – I will just go down to the figures.

HER HONOUR:   Draft notice of appeal page 8 – my page 8 of your draft notice of appeal commences with subparagraph (e) of paragraph 51.

MS CAPORALE:   I have, for some reason, paragraph 55 on page 8.

HER HONOUR:   Yes, I have paragraph 55 on page 8 at the bottom.

MS CAPORALE: Yes. So basically that summary there is income tax liabilities calculated by the ATO in accordance with their statement of claim. That statement of claim relies on their own assessments in accordance with section 177 of the Act. Page 9, which is the next following paragraph which is, I think, 56, they are the figures, the income tax liability figures that the Tribunal issued out in accordance with their decision on 25 October 2012. Now, that makes a great difference because in factual evidence the first one – which is under section 177 – I have a tax liability of 190,000 approximately which is on paragraph 55, but under Part IVC of the Income Tax Act, which is paragraph 56, the total liability of that I would be owing $88,000.

HER HONOUR:   Ms Caporale, one difficulty I am having is the date of the District Court judgment upon which the bankruptcy notice was founded was some time, I thought ‑ ‑ ‑

MS CAPORALE:   11 August 2011, I think it was, your Honour.

HER HONOUR:   It is that judgment that forms the basis of the creditor’s petition in the sense that the act of bankruptcy relied upon depends upon the failure to comply with the bankruptcy notice issued on that final judgment in the District Court of New South Wales.

MS CAPORALE:   That is right.

HER HONOUR:   So it is just not clear to me that the matters that you are presently agitating are relevant to the correctness or otherwise of Justice Robertson’s assessment that Magistrate Driver’s order was not attended by error.

MS CAPORALE:   Well, because on 7 November 2012, which is barely two weeks after the decision came out from the Tribunal, that is why I sought an adjournment of that matter realising that the decision of the Tribunal which was made two weeks before the hearing of the Magistrates Court verified once and for all that the ATO cannot rely – under legislation if the Tribunal makes a finding with the decision of certain figures, then it overrides.  Now, in Justice Robertson, his own finding in paragraph 16, your Honour, of his decision ‑ ‑ ‑

HER HONOUR:   Yes.

MS CAPORALE:   Now, he specifically says that in accordance with the law and he states - Deputy Commissioner of Taxation v Broadbeach Properties he says in essence nobody can really go behind the assessments which were made by the Deputy Commissioner under section 177, so we acknowledge all of that. What he does say then, the next sentence is:

That is, except in proceedings under Part IVC –

Now, what has been filed in all of this is that there was the matter at the Tribunal under Part IVC.  That decision was actually delivered on 25 October 2012, two weeks before the hearing before Magistrate Driver.

HER HONOUR:   There were a number of assessments, were there – the matter that is just entirely unclear to me at the moment is I am looking at an act of bankruptcy based on a District Court judgment from August 2011 and you keep directing my attention to proceedings before the Administrative Appeals Tribunal in the exercise of the jurisdiction under Part IV of the Taxation Administration Act.

MS CAPORALE:   I think two things that have happened is that in 2006, your Honour, which was three, four years before the statement of claim was issued and five years before the judgment made, in 2006 we went before the Tribunal and they also found that from the 1995 year to the 2000 year there were certain figures that needed to be adopted.  Now, I have tried to sort of direct this ‑ ‑ ‑

HER HONOUR:   Is that when you consented to orders being made by the Tribunal?

MS CAPORALE:   That is right and that was in 2006.  So at the very least ‑ ‑ ‑

HER HONOUR:   That related essentially to assessments in the years of income 1995 to 2000.

MS CAPORALE:   That is right.

HER HONOUR:   I think Justice Robertson refers to the predominant part of the judgment debt relating - arises out of assessments for the income years 2001 and 2002.  I have in mind his Honour’s reasons at paragraph 35 and he notes those were assessments raised in accordance with returns that you had lodged and in addition there was the general interest charge.

MS CAPORALE:   That is right.  I think the second bit that comes into that is that prior to the judgment made in the District Court on 11 August 2011, what has not been taken into account is that two payments had been made and this is clear in the statement of claim – I do have a copy, your Honour.  I would like to refer that.

HER HONOUR:   I think before you do that, Ms Caporale, it just might assist me if you see no difficulty with this course – if I just ask some questions of Mr O’Brien.  I am having some difficulty with the chronology.  You understand.

MS CAPORALE:   Yes, thank you.

HER HONOUR:   Mr O’Brien, can you just assist me with the chronology?  My attention has been directed to a determination of the Tribunal in October of last year.  I am having difficulty understanding its ‑ ‑ ‑

MR O’BRIEN:   There were actually two determinations, your Honour, you see.  There was one in 2006 and I think there is a chronology in Justice Robertson’s – pages 14 and 15.

HER HONOUR:   Yes, page 14.

MR O’BRIEN:   So if you go to page 14 you see “28 April 2006”.  That was where there was a settlement entered into with the ATO.

HER HONOUR:   Those are the consent orders.

MR O’BRIEN:   They are the consent orders, but they only ‑ ‑ ‑

HER HONOUR:   They relate to the assessments in the years of income up to 2000.

MR O’BRIEN:   Exactly as your Honour said – 1995 to 2000.

HER HONOUR:   Do they form part of the judgment debt?

MR O’BRIEN:   They do.

HER HONOUR:   Yes.

MR O’BRIEN:   It is quite a small component, I should say.

HER HONOUR:   I see.

MR O’BRIEN:   The tax in regard to those years was a modest amount, only about $14,000.

HER HONOUR:   I see.

MR O’BRIEN:   But the tax in regard to 2000/2001 year was about 70,000 or 80,000.

HER HONOUR: It was that figure together with the interest accruing under the Act that formed the judgment sum.

MR O’BRIEN:   That is right.

HER HONOUR:   In relation to that part of the judgment debt, that was the subject of assessments that were issued based on the returns filed by Ms Caporale ‑ ‑ ‑

MR O’BRIEN:   For 2001/2002 it was based on assessments issued to Ms Caporale and, of course, there is a second Tribunal hearing too where Ms Caporale tried to reopen all the ‑ ‑ ‑

HER HONOUR:   It might just assist me if you can explain that to me.

MR O’BRIEN:   Yes.  Basically, Ms Caporale went back in when the Commissioner was seeking to recover – went back to the Tribunal and sought to reagitate all the years but of course she was out of time to do that and went to the Tribunal and they refused – the Commissioner refused to extend time.  Ms Caporale, as was her right, appealed that refusal and the Tribunal said all too late and made a decision – I will pick it up here, the date, your Honour.

HER HONOUR:   I think it is 25 October 2012.

MR O’BRIEN:   That is it.

HER HONOUR:   I am looking at page 15 of Justice Robertson’s judgment.

MR O’BRIEN:   That is the one, your Honour.

HER HONOUR:   I see.  So that there was not a Part IVC merits style review of the 2001/2002 ‑ ‑ ‑

MR O’BRIEN:   Well, the whole lot.

HER HONOUR:   Indeed, the whole lot because the earlier were the subject ‑ ‑ ‑

MR O’BRIEN:   The whole lot.  Even though it was settled, Ms Caporale came back with the whole lot.

HER HONOUR:   Yes, I understand.

MR O’BRIEN:   The Tribunal – as to whether to allow an extension of course the Tribunal looks at the merits.

HER HONOUR:   Yes, I understand.

MR O’BRIEN:   Yes.

HER HONOUR:   Thank you.  Ms Caporale, is there anything arising out of that exchange that you want to draw to my attention?

MS CAPORALE:   No, only – and I think it is accepted that the figures from the 95 to 2000 stood in accordance with the original Part IVC so they are still incorrect in accordance with the judgment because they are not the same figures.

HER HONOUR:   Ms Caporale, I do not know that that is accepted, but in any event ‑ ‑ ‑

MS CAPORALE:   I guess, just in summary, your Honour, what makes it so relevant I suppose after October was that if you then substitute the figures under the Part IVC from the 2006 settlement and then accept that the Tribunal has said that my own income tax that I lodged for the 2001/2002 – those totalling up are now 88,663 in accordance with paragraph 56 of the notice of appeal.  That is relevant because there was a payment made – first one, the tax liability for the 1995 year has been paid for which I showed a group certificate and the rest of it – there was a $200,000 payment or credit which I, as a director of a company called Caporale Designs, directed in 2002 and that is in my affidavit ‑ ‑ ‑

HER HONOUR:   Ms Caporale, I will just interrupt you for a moment.  I am trying to understand the relevance of this material to the exercise that I have before me. 

MS CAPORALE:   Yes.

HER HONOUR: To the extent that you sought to make a case before Magistrate Driver arising out of some suggested disconformity between the judgment debt and the amount of tax that you asserted that you owed, you were inviting Magistrate Driver to affirmatively conclude that in the exercise of the discretion under section 52 of the Bankruptcy Act he ought not to make the sequestration order.  Is that ‑ ‑ ‑

MS CAPORALE:   Under some other sufficient cause, I think there was a ‑ ‑ ‑

HER HONOUR:   Yes.

MS CAPORALE:   So I was relying on that part and I was simply saying that if we accept that even on October 2012 what the Tribunal said was that they did not go through the hearing again.  They just said this is what you should be relying on.

HER HONOUR:   All right.  Now, Ms Caporale, I will just interrupt you again just to keep the focus on the issues that are critical for my decision.  That was a matter that you agitated before Federal Magistrate Driver and it was resolved against you.  You then appealed to the Federal Court and Justice Robertson also determined that aspect against you in the sense that he found no error in the way the matter had been dealt with by the federal magistrate.  What he said was – if I can just direct your attention to his Honour’s judgment – he summarised in paragraph 6 the matters of challenge in your notice of appeal.

MS CAPORALE:   Yes, your Honour.

HER HONOUR:   He concluded that there was no substance to any of them except for the consideration of the ground by which you claimed you had not been given adequate time to produce further evidence and so forth.  Then his Honour rejected that ground for two reasons, the first being that the evidence that you wished to place before the court was in light of the legal issues raised by your proceedings irrelevant and the second ground was his satisfaction you had had time adequately to present your case in any event. 

Now, you appreciate that this Court is not generally concerned to undertake an extensive fact‑finding task.  This Court is concerned with settling matters of principle raised in the determination of appeals by intermediate courts.  The respondent says there is no such matter of principle in this application and that, in essence, as I understand the respondent’s position, you do not, in your 116 proposed grounds of challenge to Justice Robertson’s orders, identify any arguable ground on which this Court might grant leave.  Now, taking me to a close consideration of factual matters is perhaps not the best way to deal with that argument.  Do you understand?

MS CAPORALE: Yes, your Honour. I will try and summarise. I think the two things – and I understand – are that his Honour has continued to err in judgment because he is not applying the correct legislation under – he is applying section 177 and Part IVC actually overrides it even in accordance with Deputy Commissioner of Taxation v Broadbeach.  Second of all, the ability to allow me what is sought to be sufficient time, while I probably had about eight months to do it, I also had some 260 other matters with the ATO concurrently.  Thirdly, is that it would be obviously completely in breach of the interest of the administration of justice when, in fact, when all is said and done, there is a payment of something like $207,000 that would be offset against what is now in accordance with the Part IVC figures applied by the administrator, $88,000. 

So I am actually owed some $120,000‑odd plus interest back so that is simply just something that cannot be conceivable in the interest of justice when, at the end of the day, it was only realised on 25 October.  So despite the fact that we probably spent much of the time – the crucial point was 25 October 2012 when the Tribunal came back and said once and for all, look you, as a tax office, cannot rely on your own tax assessments which, in fact, that is what the statement of claim relies on.  They are actually void.  What you should be relying on is my assessments which essentially were made as a result of that judgment. 

If you then correctly apply that back to the statement of claim which the judgment now relies on, we would have found that the credits that are specifically stated in the statement of claim that were made and paid on my behalf as offsets are more than what the figures, the actual real debt – and this is the issue of the legislation – what everyone calls the real debt, everyone is referring to the real debt under the assessment made by the ATO in accordance with section 177.

The real debt – that is why – what I am trying to do when I go behind the judgment is not actually understand that piece of legislation, what I am saying is the real debt when we go back to that principle, legal principle, is that the real debt is the figures under Part IVC.  So therefore once we then recalculate and offset the credits which are specifically stated in the statement of claim it means that I am actually owed some $120,000 plus interest accruing this whole time for the last 18 years.  So essentially that is the misunderstanding ‑ ‑ ‑

HER HONOUR:   Ms Caporale, can I just inquire, in the first round, if I can put it that way, of proceedings before the Administrative Appeals Tribunal you consented to certain orders being made.

MS CAPORALE:   That is right.

HER HONOUR:   So there was, as between you and the Deputy Commissioner, agreement on figures?

MS CAPORALE:   That is right.

HER HONOUR:   Thereafter, you sought to have that agreement reopened in proceedings before the Tribunal, together with the review of the 2001/2002 income year assessments.  Is that right?

MS CAPORALE:   That was after the judgment.  Yes, your Honour, I did do that.

HER HONOUR:   Yes, and in relation to all of those applications, ultimately on 25 October 2012, the Tribunal determined not to extend – the Tribunal upheld a decision of the ‑ ‑ ‑

MS CAPORALE:   The original decisions of 2006.

HER HONOUR:   Yes.

MS CAPORALE:   Plus my income tax.

HER HONOUR:   Yes.

MS CAPORALE:   Exactly.  What I am saying is that even ‑ ‑ ‑

HER HONOUR:   Ms Caporale, I am sorry, but just so you understand the difficulty I am having taking on board some of the submissions that you have been making, the effect of the Tribunal’s orders was conformable firstly with the figures to which you agreed in the first determination and, secondly, with the Commissioner’s assessment based on your returns for the subsequent years of income.  Is that so?

MS CAPORALE:   But they were not used in the statement of claim.  What I am saying is following 2000 – if we just break it down from 95 to 2000, your Honour, there was an agreement by both the ATO and ourselves of those figures.  Now, the statements of claim do not reflect those, so that is the very first error.  That has not been picked up at all.  For some reason ‑ ‑ ‑

HER HONOUR:   Ms Caporale, you are saying that the statement of claim in the District Court proceedings was based on figures other than the figures to which you and the Commissioner agreed.  Is that so?

MS CAPORALE:   Yes, that was the first point.

HER HONOUR:   Just one moment, I will just - Mr O’Brien, is that common ground.

MR O’BRIEN:   No, your Honour, no.  What happened – Ms Caporale has brought this up a number of times with Justice Robertson also and he

accepted our submissions on this point.  The point is that there was initial number – for the 95 to 2000 years there was initial number put up there based on the original assessment.  Based on the settlement that number was adjusted down – significantly adjusted down by reference to credits – I think it had credits and it adjusted the number down to reflect the settlement reached for the 95 to 2000 years.

HER HONOUR:   …..the proceedings in the District Court were based on?

MR O’BRIEN:   Assessments issued.

HER HONOUR:   Yes.

MR O’BRIEN:   But they were adjusted down for the 95 to 2000 years so there was a notice of assessment and it had X dollars and then it said credit to reflect the settlement and the net amount was the amount that was agreed at ‑ ‑ ‑

HER HONOUR:   The judgment obtained in the District Court represented the adjusted down figures for those years of income together with a substantial sum arising out of the income year 2001 and 2002 and ‑ ‑ ‑

MR O’BRIEN:   The original assessment is unadjusted for 2001 and 2002.

HER HONOUR:   Yes, I understand.

MR O’BRIEN:   That is it.

HER HONOUR:   Now, Ms Caporale, I understand there seems to be some issue between you and the respondent factually about these matters.  You have put to me one account of matters and you understand that the respondent puts a different account.  I am not here to determine the rights and wrongs of it, but the matter that I raise for your consideration is these are factual issues that have been explored below and a determination made adversely to you.  What you need to persuade me of is not that you differ in your view about how that determination should have been made – in other words, you maintain that the facts are other than as found – what you have to persuade me of is some important question of law which would not only justify the grant of special leave but that would suggest there were prospects that this Court, if you were granted special leave, might find in your favour on the hearing of the appeal.  Now, nothing so far has been directed to that.

MS CAPORALE: Your Honour, I can simply say that – like I said I do not want to go too much in the facts, but it is very clear from the statement of claim that they are not – the ATO is still relying on section 177. According to all of the case law you can only rely on that until Part IVC kicks in. The judges have all relied on that real debt being the section 177 assessments which the statement of claim is based on and therefore the judgment is.

Pending all of that, the next very important thing about all of that is that when the ATO in the statements of claim accepts that there were payments made, when you deduct all of those offsets in payments which it was in the lieu of the $200,000 plus the 5,300 offset for the group certificate, I am actually owed. 

So, in the interest – and what I am saying is if nothing else there are two things – I think it was to resolve that the judgments are at odds with the application of the legislation that has been used where the High Court matters say of Broadbeach specifically are contrary to what the judgments have been based on in that they say I cannot go back and the real debt – the real debt is obviously based on a different legal principle than normally is applied by the High Court case of Broadbeach for instance or Futuris. 

The other one is obviously in the interest of the administration of justice, simply that if $207,000 has been paid in accordance with that then for some reason it has not been addressed.  It was evidence before Justice Driver and it was evidence before Justice Robertson in factual evidence, which none of those seem to have taken into consideration.  The major thing – when everything is all said and done, if there was a credit more than the debt then simply someone could not be bankrupt if that money particularly was made in 2002, which is some eight years before the statement of claim was issued and some 11 years before the judgment was entered.

So I am well within my rights in the bankruptcy notice to say look well, you know, you may apply your law but if I have, at the end of the day, paid it, it is probably – it should not mean that the bankruptcy notice should have been affected if nothing else.  So either prove that it is defective or if that is not the issue, then in the interest of justice there is a credit more than what the ATO is asking for today and even today that stands because that money has been used by the ATO, your Honour.

HER HONOUR:   Yes.

MS CAPORALE:   As I said, paragraph 25 - your Honour does point out that procedurally I had enough time but again there was evidence before both matters that I did have to deal with other matters.  I do not have the resources that the ATO has.  Obviously I do not have the funds to be able to employ other people to proceed quickly.  He says that the evidence was irrelevant because the first time I produced this evidence was on 16 May.  That is incorrect and that is paragraph 56 of his judgment. 

Justice Robertson in that case says that – I bring this up, the $200,000 credit, I bring this up again to say well, when all is said and done I have actually paid for it anyway.  Justice Driver says:

In my opinion, the appellant should not be permitted to raise that matter for the first time –

Well, that is not the first time.  This was in evidence before Magistrate Driver at the hearing and well before the hearing.  It was in evidence as late, even if Justice Robertson had not picked it up, in an affidavit which was filed and served on 1 March 2013, which was two and a half months before this particular hearing on 16 May.  So the assumption is that there was irrelevant – or it is not the first time, your Honour.  He has actually had that information ‑ ‑ ‑

HER HONOUR:   His Honour records that you accepted that the claim had not been made before the federal magistrate.  This is in paragraph 56.

MS CAPORALE:   No.  I understand what he said but what I am saying is that that evidence was in evidence before Magistrate Driver and then in the affidavit again ‑ ‑ ‑

HER HONOUR:   Was it a claim that you made, that is that you advanced before Federal Magistrate Driver?  I think you had ‑ ‑ ‑

MS CAPORALE:   They were before both, yes.

HER HONOUR:   Ms Caporale, I think annexed or exhibited to an affidavit before Federal Magistrate Driver were 28 lever‑arch folders.  Are you telling me that within those 28 lever‑arch folders there was the material on which you rely to claim that you are ‑ ‑ ‑

MS CAPORALE:   The $200,000 had been transferred, yes, and in fact I also then ‑ ‑ ‑

HER HONOUR: Ms Caporale, that is a rather different proposition to a proposition saying that you advanced before Federal Magistrate Driver that assertion and that it was dealt with, as it were, as a basis for your opposition to the making of the sequestration order. Do you understand what I am taking up with you? There might have been a lot of things in 28 lever‑arch folders of material. What I am raising is whether this claim was advanced as a claim as the basis of reasons that might justify Federal Magistrate Driver in not making an order sequestering your estate under section 52 in circumstances in which, notwithstanding his finding, that all the requirements for the making of the order had been established by the respondent but that nonetheless there was a circumstance that justified him in not making the order. You understand what I am putting to you.

MS CAPORALE:   Yes, and in fact that is the reason why I asked for the adjournment because on 25 October – like I said, it was only two weeks before so I did not have months.  I asked for that adjournment realising that these – I did have them in evidence in the 28 folders and I appreciated that your Honour was not going to go through 28 folders.  What I did then is a bit of extra time which essentially would have summarised what I have summarised for the Federal Court before Justice Robertson in summarising those tabs in the folders so we know that they were already present and what it had to be was then pointed directly say to the $200,000, the group certificate, the Part IVC figures and that would have summarised exactly that whatever happened, either way the payments were made.  So I guess at the end of the day, however the legislation would have come out or determined, there was a credit that would have sufficiently paid.

HER HONOUR:   I understand.  Are there any further matters?

MS CAPORALE:   No, your Honour.

HER HONOUR:   Yes, Mr O’Brien.

MR O’BRIEN:   Your Honour, we rely on our submissions but just on this credit business I want to clarify that it is an extraordinary proposition to say that you paid the debt years ago and the first time you raise it is with Justice Robertson on appeal from the federal magistrate.  I mean that is an extraordinary proposition.  If you paid the debt it would be the first thing you would say.

Now, your Honour, the $200,000 has nothing to do with any adjustment to the statement of claim and Ms Caporale raised it for the first time with Justice Robertson and said there was a credit owing to one of the companies and that credit was applied in discharge of a debt by the Tax Office. 

Now, firstly, the Tax Office simply does not have the power to transfer over any credit if it did exist from one of the family companies to her personal account.  They do not have that power.  Secondly, Ms Caporale swore an affidavit, which I took his Honour to – he was slightly concerned about this point – where she says this tax officer indicated he would do it, et cetera, et cetera, and then finally in the end she comes clean and says, but he did not do so.  At that point his Honour lost interest in the $200,000 point.  That is all I have to say.

HER HONOUR:   Yes.

MS CAPORALE:   Sorry, your Honour, just a quick response to that.

HER HONOUR:   Yes.

MS CAPORALE: The $200,000 becomes significant on 25 October because it means that if you apply the Part IVC debt I would have been in credit. If it had not been the Part IVC and I had to rely on the section 177 I still would have been in debt and therefore would have been bankrupt. Second of all, I pointed out specifically in a document given to me by the ATO, yes I actually had to authorise it otherwise it would be illegal to transfer the $200,000. So there are very specific reasons why that happened.

HER HONOUR:   Yes.

The applicant, who appears unrepresented, applies for orders claimed in her summons filed on 19 June 2013 staying the sequestration order made in the Federal Magistrates Court on 4 February 2013 until 28 days after the determination of her application for special leave to appeal from the judgment of the Federal Court of 23 May 2013.  Other orders sought in the summons are an order staying the sequestration order to allow the Attorney‑General to take what are described as necessary steps to compel the Australian Taxation Office to act in accordance with its legal services direction and to “withdraw the matters”.  A consequential order is sought precluding the trustee from taking any action arising out of the sequestration order.  The respondent opposes the grant of the relief claimed in the summons and applies for the summons to be dismissed with costs.

The background may be shortly summarised.  The respondent filed a creditor’s petition in the Federal Magistrates Court on 10 May 2012.  The petition asserted that the applicant owes the respondent $261,692.30 and had committed an act of bankruptcy by not complying with a bankruptcy notice.  The bankruptcy notice was founded on a judgment of the District Court of New South Wales and was personally served on the applicant on 19 October 2011.  Following litigation before a registrar in the Federal Magistrates Court concerning the bankruptcy notice, the act of bankruptcy relied upon was committed on 13 December 2011.

Federal Magistrate Driver concluded that prima facie the respondent was entitled to the relief claimed in that the procedural requirements for the making of a sequestration order were satisfied.  The controversy before the federal magistrate arose out of the applicant’s Notice of Opposition, which his Honour characterised as discursive but from which he distilled three grounds of challenge:  first, that the court should look behind the judgment debt because in reality there was no debt as the applicant had no taxation liability; secondly, the Australian Taxation Office had acted improperly in obtaining the judgment; and, thirdly, the applicant was solvent.  The federal magistrate rejected those claims and made orders that the applicant’s estate is sequestered on 4 February 2013.

Pursuant to s 52(3) of the Bankruptcy Act 1966 (Cth) (“the Act”), his Honour directed that all proceedings under the sequestration order be stayed for a period of seven days. The applicant appealed from the making of those orders to the Federal Court of Australia. The proceedings came before Robertson J. The sequestration order was stayed pending the determination of the proceedings.

The applicant relied on some 175 grounds of appeal.  These were distilled by his Honour into five grounds, four of which his Honour concluded had no substance.  The fifth was a contention that the magistrate erred by failing to adjourn proceedings to allow the applicant further time to provide additional evidence and to amend her grounds of opposition to the grant of the creditor’s petition.  His Honour rejected that ground for two reasons:  first, the evidence which the applicant sought to rely on was largely irrelevant; and, secondly, the history of the proceedings showed that the applicant had had an adequate opportunity to present her case.

The appeal was dismissed.  On the applicant undertaking to promptly file and serve any application for special leave to appeal with all due diligence, his Honour directed that proceedings under the sequestration order be stayed for 21 days.  That period expired on 13 June 2013.

On 27 May 2013, the respondent forwarded an email to the applicant requesting that she give notice of at least one working day in the event she intended to make any further application for a stay.  On 13 June 2013, the applicant approached Jagot J, the duty judge in the Federal Court, ex parte and obtained an order staying the sequestration order for a further period of seven days. 

The respondent, on learning of that order, had the matter relisted before Jagot J on 14 June 2013.  Her Honour gave directions requiring the applicant to file and serve her special leave application on or before 4.00 pm on Monday, 17 June 2013 and she stood the proceedings over till 4.15 pm on Tuesday, 18 June 2013 to determine the stay application.  On that date the application for special leave to appeal had been filed in the Registry.  Justice Jagot, having reviewed the documents filed in support of the application, set aside the order made on 13 June and ordered the applicant to pay the respondent’s costs.  The effect of that order was that no stay on the sequestration order applied from the time the order was entered, on 19 June 2013. 

The trustee, M.C. Donnelly, by letter dated 20 June 2013 addressed to the respondent, advises pursuant to s 60(2) of the Act of his election to discontinue the special leave application.

The respondent submits that, in circumstances in which the applicant is an undischarged bankrupt, does not have the legal capacity to bring the application, and has not sought the consent of the trustee to bring it, the provisions of s 60(2) are engaged and the order should not be made.

On the hearing of the application, in light of the ample inherent jurisdiction of the court, referred to by Hayne J in Patrick Stevedores Operations Pty Ltd [No 2] v Maritime Union of Australia (1998) 72 ALJR 869 at 870 [2], the respondent was content for the application to be considered on the basis of its primary contention, which is that the relief claimed in the summons should not be granted, the applicant having failed to satisfy the demanding test of demonstrating the existence of exceptional circumstances.

I approach the matter on that footing.  The principles respecting the circumstances in which this Court would stay the execution of orders pending the determination of an application for special leave to appeal are as stated by his Honour in the Patrick Stevedores’ Case and in Jennings Construction Ltd v Burgundy Royale Investments (No 1) (1986) 161 CLR 681 at 684, 685 by Brennan J.

The respondent accepts in the event the stay is not granted the applicant is unlikely to be able to prosecute her appeal. The respondent’s opposition to the grant of the relief claimed (putting to one side questions of capacity under the Act) is the absence of identification of any important question of law of general application, and that the 116 proposed grounds of challenge do not disclose prospects of success in the event that the application were granted.

In the respondent’s submission, the application is futile and no useful purpose is achieved by the grant of a stay.  The respondent submits it would merely put it to unnecessary expense and delay and while it would not suffer loss, the balance of convenience now lies in no further stay being granted.  The respondent points to the interests of creditors and the community more generally in estates being subject to due administration and to the inherent difficulties that arise for a trustee in bankruptcy in recovering moneys when there is delay in the administration of the estate.

In circumstances in which the application is yet to be determined, it is not appropriate for me to embark upon a detailed review of the proposed grounds of challenge.  It is sufficient to observe that in Jennings Construction v Burgundy Royale Brennan J identified as the first consideration the question of whether there is a “substantial prospect” that special leave to appeal will be granted, and to record that the applicant has failed to satisfy me of the existence of that prospect. 

Bearing in mind the exceptional nature of the jurisdiction, it is not appropriate that I grant the relief that is claimed in the summons.  The orders that I make are that the summons be dismissed and that the applicant pay the respondent’s costs.

Are there any further matters that I need attend to, Mr O’Brien?

MR O’BRIEN:   No, your Honour.  I note that the application for special leave is still on foot but I think that is a matter for the trustee to file a notice of discontinuance if he is not going to pursue it.

HER HONOUR:   That may well be so, Mr O’Brien.  It is certainly not before me.

MR O’BRIEN:   No.

HER HONOUR:   Yes, I will adjourn.

AT 11.19 AM THE MATTER WAS CONCLUDED