Caporale v Deputy Commissioner of Taxation
[2014] FCCA 69
•28 January 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CAPORALE v DEPUTY COMMISSIONER OF TAXATION | [2014] FCCA 69 |
| Catchwords: BANKRUPTCY – Application to set aside bankruptcy notice – no grounds established. |
| Legislation: Bankruptcy Act 1966, ss.40, 41. Income Tax Assessment Act 1936, s.177 Taxation Administration Act 1953, s.14ZZM |
| Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 Caporale v Commissioner of Taxation [2012] FCA 86 Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 Caporale v Deputy Commissioner of Taxation [2014] FCCA 69 Caporale v Deputy Commissioner of Taxation [2013] FCA 427 Caporale v Deputy Commissioner of Taxation(No 2) [2013] FCA 473 Sali SPC Ltd (1993) 76 ALJR 841 Seller v Deputy Commissioner of Taxation [2011] FCA 865 |
| Applicant: | GIUSEPPE CAPORALE |
| Respondent: | DEPUTY COMMISSIONER OF TAXATION |
| File Number: | SYG 176 of 2013 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 22 October 2013 |
| Date of Last Submission: | 22 October 2013 |
| Delivered at: | Sydney |
| Delivered on: | 28 January 2014 |
REPRESENTATION
| The Applicant in person |
| Counsel for the Respondent: | Mr O’Brien |
| Solicitors for the Respondent: | Australian Taxation Office |
ORDERS
Application filed 31 January 2013 is dismissed.
The applicant to pay the respondent’s costs as agreed or as assessed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 176 of 2013
| GIUSEPPE CAPORALE |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Respondent
REASONS FOR JUDGMENT
Introduction
By way of application filed 31 January 2013 Giuseppe Caporale (the Applicant) asks the court to set aside a bankruptcy notice no. BN7614 (the notice) which was served on him on 11 January 2013. The Deputy Commissioner of Taxation (the Respondent) opposes this application. The time to comply with the notice has been extended to 21 days after the date of delivery of these reasons of judgment. These reasons explain why the court has declined to set aside the notice.
Background
The notice was issued on 21 November 2012. The respondent is the creditor. The total debt is $94 979.12 pursuant to a judgment of the District Court of NSW issued 3 September 2012. The debt arises out of unpaid income tax for 2002 and 2003 together with statutory charges for interest. It is common ground that the Notice of Objection lodged on behalf of the applicant in relation to the debt in question has been refused. It is further common ground that the applicant’s review to the Administrative Appeals Tribunal (AAT) was dismissed. On behalf of the applicant it was conceded that all rights he had against the respondent in the AAT have been exhausted unless the AAT was prepared to once again countenance a further claim as regards the relevant debt, out of time. As at the date of the hearing such leave had not been granted. The respondent submitted that, given the history of this matter and the AAT’s prior refusal to extend time for the making of an application to it, the grant of leave was highly unlikely.
It is common ground that the tax debt arises out of returns filed by or on behalf of the applicant.
On behalf of the respondent it was conceded that only the AAT can go behind the assessment: s.177 Income Tax Assessment Act 1946.
Notwithstanding all of the above, the applicant contends that the notice should be set aside because the tax debt is not in fact due, because of various set-offs to which the applicant is entitled as a result of the tax paid, and because of other arguments to which reference will be made below.
The evidence
The applicant relies on the following documents:
a)Application filed 31 January 2013
b)Affidavit of Giuseppe Caporale filed 31 January 2013
c)Affidavit of Rosa Caporale filed 24 June 2013
d)Affidavit of Rosa Caporale filed 18 October 2013
The respondent relies on the following documents:
a)Affidavit of Claudio Casonato filed 3 April 2013
b)Affidavit of Jason Green filed 15 August 2013
Applicable Law
In this matter the relevant act of bankruptcy is said to have been committed by virtue of not complying with a bankruptcy notice based on a judgment debt. In this regards s.40(1)(g) Bankruptcy Act 1966 (Cth) states:
(1) A debtor commits an act of bankruptcy in each of the following cases:
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time specified in the notice; or
(ii) where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;
The court has power to set aside the notice. Both ss.40(1)(g) and 41(7) refer to counter-claim, set-off or cross-demand. The applicant’s case is, in substance, and doing the best the court can to discern the same, based on the existence of this counter-claim, set-off or cross demand.
Chronology
The chronology below is extracted from the outline of submissions for the respondent, and has been edited to refer only to the applicant in these proceedings.
| Date | Event |
| 2 June 2003 | Notice of Assessment for the year ended 30 June 2002 issued to Giuseppe Caporale |
| 11 February 2004 | Notice of Assessment for the year ended 30 June 2003 issued to Giuseppe Caporale |
| 19 April 2004 | Notice of Amended Assessment for the year ended 30 June 2002 issued to Giuseppe Caporale |
| 29 July 2011 | Deputy Commissioner of Taxation (“DCT”) filed Statement of Claim against the Applicant |
| 13 February 2012 | Applicant lodged application for extensions of time to object against the assessments |
| 24 April 2012 | DCT refused the application for an extension of time to object with respect to the Applicant |
| 1 May 2012 | The Applicant lodged application for review of the DCT’s decision with the Administrative Appeals Tribunal |
| 30 August 2012 | District Court (Letherbarrow J) gives judgment in favour of the DCT for $93,023.35 against Giuseppe |
| 31 August 2012 | Judgment entered in favour of the DCT against the Applicant |
| 26 September 2012 | Applicant file motions seeking a stay of execution of the judgments |
| 19 October 2012 | Applicant’s motions dismissed with costs |
| 25 October 2012 | The Tribunal affirmed the Commissioner’s decision with respect to Giuseppe Caporale. |
| 11 January 2013 | Bankruptcy notice served on the applicant |
| 30 January 2013 | Applicant files motions seeking to set aside the judgment |
| 31 January 2013 | Applicant files applications to set aside the bankruptcy notices |
| 26 July 2013 | Applicant’s motions to set aside the judgment dismissed by the District Court (Gibbs J) with costs |
The Applicant’s Contentions
The applicant’s contentions are contained in the affidavit of Rosa Caporale affirmed 18 October 2013. She is the applicant’s sister and is authorised by him to act on his behalf. She is clearly a highly intelligent and articulate woman with extensive experience of litigating matters on her own behalf, as well as her family, in taxation matters. Despite that it was difficult at times to understand what the legal arguments were on behalf of the applicant. The court will do the best it can to identify and deal with the matters contended.
On behalf of the applicant an adjournment was sought as he was incapacitated due to health reasons. Accepting that this was so, the adjournment was declined due to the lengthy history of the matter, but principally because Ms Caporale was speaking on the applicant’s behalf in the context of proceedings that did not involve the giving of evidence. Thus there was no prejudice to the applicant that exceeded the prejudice the respondent would experience if the case were adjourned.
An adjournment was also sought on the basis that proceedings were listed on the AAT on 21-23 July 2014, but as it turns out these proceedings do not relate to the applicant but to his brother Tommaso. The most that could be said about these proceedings is that the applicant would ask the AAT to join his fresh application to his brother’s application and have it heard at the same time – provided of course he could convince the AAT to do that which it has already declined to do, that is, grant leave to commence out of time. The adjournment was declined because of the lengthy speculative and contingent basis on which it was advanced.
The applicant then contended that there were several reasons to set aside the notice including that:
a)The tax was already paid
b)The respondent’s officers had engaged in illegal or improper conduct
c)The tax was not in fact payable
d)It was in the public interest to do so
e)There was maladministration by the respondent or its officers
f)The respondent had acted unlawfully
It is possible that there are other contended bases for the application.
The Respondent’s Contention
On behalf of the respondent a number of key submissions were made. The respondent relies on s.177 of the Income Tax Assessment Act 1936 to conclusively prove the debt in question. Thus the applicant cannot challenge the validity of the assessment of this court. The respondent asserts that the AAT has already refused to extend time to the applicant to object to the assessment for the years in question. Indeed the evidence clearly establishes this. At paragraph 9 of the AAT decision of 25 October 2012 the tribunal states:
9. The decision to refuse an extension of tie is affirmed for the following reasons:
a. the original assessments were made in accordance with the income tax returns as lodged by the applicant;
b. no satisfactory cogent explanation for the delay has been provided. Some reference was made to the delay in preparation of the financial accounts of related entity, but no further explanation is provided as to why there was such a significant delay even after the preparation and finalisation of those accounts;
c. it is not readily apparent to the Tribunal that there is any genuine merit in respect of the substantive dispute and apart from vague references to oppressive behaviour by the Commissioner there appears to be nothing concrete in terms of the merits of the applicants case; and
d. the applications for extension are in respect of years which are now more than a decade past and notices of assessment dating back to 2003 and 2004. After such a long period of time the position of the respondent would be prejudiced in having the matter reopened at this late stage.
It is hard to see how the AAT could more clearly express itself. In any event the respondent contents that even if the AAT were to grant leave again it should not prevent the respondent from proceeding. Reliance was placed on s.14ZZM of the Taxation Administration Act 1953 which states:
The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.
Further reliance was placed on the High Court’s decision of Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [55] and [57]:
The source of the debt is to be located in the statutory consequences given to an assessment (and a GST declaration) formerly by ss 208 and 209 of the Assessment Act, now by s 255-5 in Sch 1 to the Administration Act. Neither the AAT nor the Federal Court is empowered by Pt IVC to vary assessments. That is for the Commissioner who is charged by ss 14ZZL and 14ZZQ respectively to amend assessments (and determinations) to give effect to decisions of the AAT and the Federal Court.
…
Nothing turns upon the attribution to a s 459G application of the character of a proceeding in which … a tax debt may be disputed by the applicant taxpayer. Section 459G applications by taxpayers are not Pt IVC proceedings and production by the Commissioner of the notices of assessment and of the GST declarations conclusively demonstrates that the amounts and particulars in the assessments and declarations are correct.
Thus the mere fact that there is a review does not provide the court with a basis to prevent the respondent seeking recovery. In relation to the maladministration and other claims, the respondent submitted that these lacked specificity, were ill-informed both factually and at law and were in any event arguments raised and rejected in other litigation by members of the Caporale family.
In short, the respondent’s contention is that the combined effect of s.177 of the Income Tax Assessment Act 1936, and s.14ZZM of the Taxation Administration Act 1953, is that the debt remains due and payable until such time as the Administrative Appeals Tribunal directs the respondent to give effect to its determination. In the circumstances, the respondent submits, it is entitled to issue the bankruptcy notice.
Discussion
Many matters appear to have been raised on behalf of the applicant that are irrelevant to the present proceedings, or are issues raised in other litigation but resoundingly rejected in those courts.
In order to satisfy this court that the notice should be set aside the applicant needs to demonstrate that he has a counter claim, set-off or cross-demand that could not have been set up in the action or proceeding in which the judgment was ordered or made. There is no evidence at all going to the issue of why these matters could not have been raised in the District Court proceedings. In any event the court must be satisfied that the debtor “has a prima facie case”: Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346, a matter which he has failed to do. Indeed the impression formed about the applicant’s arguments are that they are spurious and intended to delay and obfuscate.
Even if there were some residual discretion to set aside the bankruptcy, no grounds for doing so are established by the evidence. The existence of the debt is rendered conclusive by virtue of the provisions of s.177. The AAT has declined to revisit the debt. The District Court has declined to reconsider its judgment. This court lacks the ability to go behind this judgment debt, even if there were evidence to cause some doubt about it, which there is not.
What is most disconcerting about the matters pursued on behalf of the applicant is that they are the same arguments raised unsuccessfully in proceedings by other family members in relation to bankruptcy over unpaid tax. The cases include: Domenica and Giacomo Caporale v Commissioner of Taxation [2012] FCA 86 (17 February 2012) Robertson J; Giacoma Caporale v Deputy Commissioners of Taxation [2012] FMCA 1178 (19 November 2012) Raphael FM (as he then was); Deputy Commissioner of Taxation vCaporale [2013] FMCA 5 (4 February 2013) Driver FM (as he then was); Rosa Caporale v Deputy Commissioner of Taxation [2013] FCA 427 (9 May 2013) Robertson J; Rosa Caporale v Deputy Commissioner of Taxation [2013] FCA 427 (No 2) [2013] FCA 473 (23 May 2013) Robertson J. This is not a matter raised on behalf of the respondent at hand. It is a matter the court raises, not as something that is central, or indeed even peripheral, to the court’s decision but rather because this court must be able to control its own processes and prevent applicants, especially those representing themselves, from abusing the process of the court. Thus, for example, Ms Caporale was involved in Caporale v Commissioner of Taxation where Robertson J referred, at [76], to Sali SPC Ltd (1993) 76 ALJR 841 at 849 cited with approval in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [93] – [95] to support the proposition that the conduct of litigation is not merely a matter for parties and their interests, but there was an equally important public interest. When the present litigation is viewed in the broader context of all of the Caporale litigation, as well as by reference to its own facts, the inference to be drawn is that it is an abuse of process by parties seemingly obsessed with their own perceived rights and interests and oblivious to the broader interests of other litigants and the public generally. Before leaving the judgment of Robertson J one cannot help but note how paragraph 78 of His Honour’s reasons resonate with this court in it description of “the generality and vagueness with which the claim … was put” and the absence of “detail” and “coherence”.
Another example is the decision of Rahpael FM (as he then was) in Caporale v Deputy Commissioner of Taxation where Ms Caporale appeared for her father in an application to set aside his bankruptcy notice, unsuccessfully. In terms of abuse of process what is significant about this decision is the history with the Deputy Commissioner so similar to this case, the argumentative and irrelevant material relied on so similar to this case, the absence of any successful attempt to set aside the relevant judgment, the failed proceedings in the Administrative Appeals Tribunal, and speculation about cross-claims for damages in respect of breach of duties allegedly owed. The parallels with this case are obvious, but somehow not to the applicant.
Yet another example demonstrating the lack of bona fides in the present application is FM Driver’s decision in Deputy Commissioner of Taxation v Caporale, a decision that Ms Caporale should be well familiar with because it resulted in her own estate being sequestrated. The arguments raised by her in that case are similar to those raised in the present case, e.g. to challenge the judgment debt as there was in reality no debt owed; to challenge the decisions and actions of the Australian Taxation Office; to seek to revisit decisions made by the AAT; and to challenge the Deputy Commissioner’s bona fides. Her arguments were unsuccessful.
Before Robertson J in Caporale v Deputy Commissioner of Taxation Ms Caporale complained about the Commissioner’s non-compliance with the model litigant provisions under Legal Services Directions, and that this gives rise to legal rights in her. Her claim was dismissed. She is clearly aware of the Commonwealth’s obligation to act as a model litigant, but is oblivious to any sense of obligation that she might have to, for example, not seek to raise issues or make submissions that have been dealt with in other courts and at other times without success.
Just a few weeks later Robertson dismissed Ms Caporale’s appeal from the sequestration order made against her. Her arguments about maladministration, public interest, bad faith, claims for damages etcetera were all rejected.
Conclusion
The application filed 31 January 2013 should be dismissed. There is no substance on the contentions made on behalf of the applicant. Indeed there is an element of abuse of process in the application and the manner in which it was presented to the court. The applicant’s alternative claim, which is for an extension of time within which to comply with the bankruptcy notice, is also dismissed. Section 41(6A) of the Bankruptcy Act1966 does not apply on the present facts: Seller v Deputy Commissioner of Taxation [2011] FCA 865 (3 August 2011). The applicant should pay the respondents costs as agreed or as assessed.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 28 January 2014
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