Collie, Ian David Stafford v Deputy Commissioner of Taxation of the Commonwealth of Australia
[1996] FCA 77
•23 Feb 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) VG 762 of 1995
)
GENERAL DIVISION )
BETWEEN: IAN DAVID STAFFORD COLLIE
(Applicant)
AND: DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
(Respondent)
CORAM: Ryan J
DATE: 23 February 1996
PLACE: Melbourne
MINUTES OF ORDERS
THE COURT ORDERS:
That the application be dismissed.
That the applicant pay the respondent's costs of the application, such costs to be taxed.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) VG 762 of 1995
)
GENERAL DIVISION )
BETWEEN: IAN DAVID STAFFORD COLLIE
(Applicant)
AND: DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
(Respondent)
CORAM: Ryan J
DATE: 23 February 1996
PLACE: Melbourne
REASONS FOR JUDGMENT
RYAN J: There is before the Court an application by Ian David Stafford Collie ("the taxpayer") pursuant to s.39B of the Judiciary Act seeking, amongst other things, an order that the respondent, Deputy Commissioner of Taxation ("the Commissioner") be restrained from initiating or prosecuting any proceedings or taking any further action to collect from the taxpayer amounts claimed in five notices of assessment. The first of those assessments issued under cover of a notice of 20 June 1985 and the others on 15 April 1986. The amended assessments embodied in those notices imputed to the taxpayer a taxable income for each of the years ended 30 June 1978, 1979, 1980, 1981 and 1982 amounting to something in the order of $12,576,000. As a result, the taxpayer was assessed to tax, including additional tax, in respect of the same years of about $17,000,000.
On 22 April 1987, the Commissioner issued proceedings (No. 1405 of 1987) in the Supreme Court of Victoria seeking to recover from the taxpayer the amount due under the amended assessment for the tax year ended 30 June 1978. On 10 June 1988, a deed was executed between the taxpayer and certain entities with which he was associated on the one hand and the Commissioner on the other. That deed included, amongst others, these recitals:
Whereas:
2.1Various assessments as to Income Tax (details of which are included in the Second Schedule) have for some or all of the years in the relevant period issued to the Taxpayers or some of them.
2.2The Taxpayers have directly or indirectly been involved in transactions with entities listed in the Second Schedule which have or might give rise to assessments as to Recoupment Tax being made.
2.3At the date of this deed the said assessments remain unpaid.
2.4The Taxpayers or some of them have lodged or caused to be lodged objections to some or all of the said assessments.
2.5Some or all of the said objections remain undetermined and other objections have been disallowed and referred to the Administrative Appeals Tribunal (or its predecessor the Taxation Boards of Review) the Supreme court or the Federal Court and have not come on for hearing.
2.6Assets said by the Deputy Commissioner to be beneficially owned by Collie, are held in the name of one or more of the Collie entities.
2.7The Taxpayers and the Deputy Commissioner desire to settle and finalise all liabilities, assessments, objections, appeals, and references as yet undetermined in respect of Income Tax and Recoupment Tax.
2.8The Deputy Commissioner, his officers and the Taxpayers wish to settle all actual and potential Administrative proceedings and Civil Litigation relating to the taxation affairs of the Taxpayers during the relevant period."
The operative parts of the deed included, so far as is relevant, these covenants:
"6.The Taxpayers shall pay or cause to be paid to the Deputy Commissioner the sum of two hundred and fifty thousand dollars ($250,000.00) on or before the 1st day of March 1990.
7.In consideration of these presents the Deputy Commissioner:-
7.1Covenants that provided the Taxpayers comply with their obligations stipulated in clause 6 he shall subject to clause 10 not sue or take further steps to enforce his rights to recover the Income Tax from the Taxpayers in respect of the assessments specified in the Second Schedule or otherwise under the Recoupment Act.
and7.2 Covenants and agrees, in the absence of an order from a Court of competent jurisdiction, not to initiate or support legal proceedings against the Taxpayers (which term for the purpose of this sub-clause shall include Caroline Helen Collie, William David Stafford Collie, Kate Louise Collie, Annabel Mary Collie and Alexandra Helen Collie) in respect of the liabilities present and contingent of the Taxpayers as to the payment of Recoupment Tax which relate to assessments or actual or potential liabilities to pay Recoupment Tax identified and listed in the Second Schedule.
...
8.The Taxpayers shall within thirty (30) days from the date of execution of this deed:-
(a)In respect of any undetermined objection relating to an income tax or recoupment tax assessment or company tax assessment referred to in the Second Schedule provide to the Deputy Commissioner a letter of withdrawal of the objection.
(b)In respect of any request for reference of a disallowed objection in respect of an income tax or recoupment tax assessment or company tax assessment referred to in the Second Schedule which has not been referred to the Tribunal, provide to the Deputy Commissioner a letter of withdrawal thereof.
(c)In respect of any application at present before the Tribunal in respect of an income tax or recoupment tax assessment or company tax assessment referred to in the Second Schedule, consent to the application being dismissed.
(d)In respect of any appeal at present before the Supreme Court or the Federal Court in respect of an income tax or recoupment tax assessment or company tax assessment referred to in the Second Schedule, file a Notice of Discontinuance thereof.
9.The Taxpayers Covenants with the Deputy Commissioners not to:
(a)lodge any objection to any of the assessments listed in the Second Schedule.
(b)institute continue or support Administrative proceedings or Civil Litigation against the Deputy Commissioner or his officers, servants or agents arising out of investigations enquiries or demands of the Taxpayers as to transactions during the relevant period SAVE AND EXCEPT that should one or any of Taxpayers be charged with any criminal offence relating to transactions during the relevant period this clause shall not prevent the obtaining of information by the Taxpayers in support of any defence to the said criminal offences.
SECURITY ENFORCEMENT AND DEFAULT
10.If the Taxpayers fail to pay or cause to be paid the payment agreed to be paid pursuant to clause 6 hereof within 60 days of its due date the Deputy Commissioner shall be at liberty to issue legal proceedings against the Taxpayers seeking judgment for the total sum outstanding under the assessments listed in the Second Schedule or if there be any subsequent amendments thereto the lesser figure."
It is common ground that the taxpayer failed to pay the Commissioner by 1 March 1990 or at all any part of the $250,000 stipulated by cl. 6 of the deed.
On 30 July 1990, the Commissioner entered judgment in his action No. 1405 of 1987 in the Supreme Court of Victoria for the sum of $2,458,999.18. That judgment was subsequently set aside in September 1990 and, on 30 November 1990, the Commissioner issued a fresh action, No. 1258 of 1990, against the taxpayer and others claiming $16,781,383.06 being the total amount outstanding under the five assessments referred to in the deed of 10 June 1990. After various interlocutory steps had been taken, action No. 1258 of 1990 was, on 21 November 1994, set down for trial. On 12 September 1995 the taxpayer instituted the present proceedings in this Court and on 5 October 1995 applied to the Supreme Court to have the proceedings before it transferred to this Court pursuant to the Jurisdiction of Courts (Cross-vesting) Act. That application was refused and action No. 1258 of 1990 proceeded to trial in the Supreme Court before McDonald J in October 1995. His Honour, on 9 November 1995 pronounced reasons for judgment in favour of the Commissioner in the sum of
$16,714,371.52. An appeal from that judgment is pending in the Court of Appeal.
By his statement of claim in this Court, the taxpayer contends that each of the amended assessments is vitiated by the failure of the Commissioner to make a genuine attempt to ascertain the taxable income of the taxpayer. It is also said that each amended assessment was merely provisional or tentative, was made in bad faith and that its making constituted an abuse of power or was for an improper purpose.
The Commissioner, by notice of motion dated 27 October 1995, has moved pursuant to O. 20 r.2 of the Rules of this Court for an order that the taxpayer's application be struck out as disclosing no reasonable cause of action, or alternatively as an abuse of the process of the Court.
As might be expected, the Commissioner points first to the deed of 10 June 1988 as precluding the taxpayer from bringing a proceeding like that instituted in this Court. Quite apart from questions of estoppel, laches and acquiescence which have been canvassed by Counsel for the Commissioner, the taxpayer has contractually bound himself not to institute, continue or support administrative proceedings or civil litigation against the Commissioner arising out of investigations, enquiries or demands of the taxpayer during the relevant period, ie, up to an including the year ending 30 June 1986. The impugned amended assessments were each issued during the relevant
period. Thus, the present application for an injunction against the Commissioner, effectively restraining him from enforcing those assessments is, in my view, clearly litigation arising out of demands in the relevant sense and is within the contractual exclusion contained in cl. 9(b) of the deed. As well, the bringing of the application for an injunction in this Court contradicts the liberty expressly granted to the Commissioner by cl. 10 of the deed to issue, in default of payment of the sum of $250,000 within sixty days of 1 March 1990, legal proceedings against the taxpayer under the assessments listed in the Second Schedule to the deed. Those assessments comprise the same five amended assessments which the taxpayer seeks to impugn in this Court.
However, the liberty reserved to the Commissioner by cl. 10 of the deed did not preclude the taxpayer from contending in any legal proceedings brought by the Commissioner pursuant to it for whatever relief the taxpayer might consider available to him under or by virtue of the deed. Moreover, it appears that the taxpayer did advance some such contentions before McDonald J in the Supreme Court. Among the pleas raised by the taxpayer in his amended defence in action No. 1258 of 1990 was the following:
"Delivery of the deed was conditional insofar as it was subject to the plaintiff duly satisfying both a condition precedent namely the release of the first defendant's father from alleged recoupment tax liability and a condition subsequent namely the issue by the plaintiff of further amended assessments which the plaintiff failed to do resulting in the defendant being properly entitled to declare himself not bound by the deed which he did by notice in writing to the plaintiff dated 2 March 1990."
In respect of that plea, McDonald J noted in his reasons for judgment that Counsel for the taxpayer had said in the course of the trial "the condition subsequent alleged was that the plaintiff was to issue further amended assessments against the defendant for the years 1978 to 1282 inclusive". His Honour continued:
"Further, the defendant alleged that he was forced to enter into the agreement reflected by the deed by economic duress being that the plaintiff threatened to use his statutory powers to attempt to recover the full amount of the purported assessments unless the defendant signed the deed. Additionally, the defendant denied that the purported assessments were assessments for the purpose of the Income Tax Assessment Act. This plea was particularised by the defendant in Further and Better particulars of his amended defence. Those particulars included the allegations that the assessments had been admitted by the plaintiff to be incorrect, that they had been not issued to correct an error in calculation, that the same showed that the plaintiff had proceeded on no intelligible basis but had plucked a figure out of the air, that they were wrong in amount, that they were not bona fide assessments and that they were tentative and provisional."
Several of those contentions by the taxpayer were not considered by McDonald J in his final reasons for judgment because his Honour had earlier ruled that they had been "foreclosed" to the taxpayer in the Supreme Court by the production and tendering in evidence of the relevant notices of assessment. That earlier ruling was explained in these terms by his Honour in his later reasons for judgment:
"After hearing submissions I ruled that on production and the tendering in evidence of the relevant notices of assessment in these proceedings the issue, in these proceedings, as to the making of the assessments and the validity and correctness of the amounts was foreclosed. I further ruled that the issue as to whether the assessments were made for inadmissible purposes was foreclosed. In addition, I ruled that on the production of the assessments, which on their face were not tentative or provisional there was foreclosed, in these proceedings, the issue as to whether in fact the assessments were tentative or provisional. The contention of the defendant, that he was forced to enter the deed by economic duress, was based on the allegation that the assessments were not valid and were not correct in amount which facts were known to the plaintiff. Consequently that matter raised the question as to whether the assessments were valid and correct in amount and whether the amounts were recoverable in these proceedings. I ruled that as those were issues not able to be determined in these proceedings, the allegation was also foreclosed and unable to be pursued by the defendant."
His Honour then proceeded to hold, against the taxpayer, that the deed has not been delivered in escrow and had not been subject to a condition subsequent that the Commissioner would issue amended assessments in place of those listed in the Second Schedule (Part One) of the deed. His Honour further held, as a matter of construction, that there was no ambiguity in the reference in cl. 10 of the deed to "the assessments listed in the Second Schedule" requiring it to be read as a reference to amended assessments not then issued which were "to be listed".
In my view, the terms of the deed provide the Commissioner with a complete defence to proceedings under s. 39B of the Judiciary Act to restrain him from initiating or prosecuting any proceedings or taking any further action to collect from the taxpayer any amount claimed in any of the five notices embodying the subject amended assessments. To overcome that defence, it should be necessary for the taxpayer to have the deed set aside, as he sought to do by the plea of economic duress raised by his defence to the Supreme Court action. Alternatively, he would have to establish that, on its proper construction, the deed, in the events which have happened, does not preclude him from impugning the subject assessments. In each of those respects he has failed in the Supreme Court, subject to what the Court of Appeal may say, and he is, I consider, prevented by the doctrine of issue estoppel from relitigating those matters in this Court.
It may be that the taxpayer in the Supreme Court did not mount all the attacks on the deed which were available to him. For example, as I suggested in the course of discussion with Counsel, the taxpayer could have argued as an alternative to his contention that the issue of further amended assessments was a condition subsequent to the operation of the deed, that it was a term of the deed that the Commissioner would issue amended assessments before seeking to recover any amount in the event of the taxpayer's default in payment of the sum of $250,000. On the basis of that alternative argument, the taxpayer might have erected a claim for specific performance of the deed, rectified, if necessary, to reflect what he argues was the common intention of himself and the Commissioner that the latter was to be bound to issue new assessments. It is true that these alternative claims were not pleaded by the taxpayer by way of defence or counter-claim in the Commissioner's action. However, the Commissioner has specifically raised the deed in his statement of claim. Accordingly, and having regard to the matters which were pleaded by way of defence to the action in the Supreme Court, I consider that the taxpayer is totally precluded by the doctrine of issue estoppel from inviting this Court to disregard the effect of the deed. Insofar as he seeks to raise matters which were not agitated in the Supreme Court, he is met by this statement of principle by Gibbs CJ, Mason and Aickin JJ in Port of Melbourne Authority v Anshun Pty Ltd [No. 2] (1981) 147 CLR 589 at 602:
"In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v County of Sac (1876) 94 U.S. [24 Law. Ed., at p. 199].
It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment."
The conclusion which I have reached that the taxpayer is prevented from seeking to overcome, except by means of the proceedings in the Supreme Court, the preclusive effect of the deed makes it unnecessary to consider the difficult legal and factual questions involved in his contentions that the relevant amended assessments were tentative or provisional or made in bad faith. Accordingly, I shall order on the Commissioner's motion that the application herein be dismissed with costs. It follows that the taxpayer's application for interlocutory relief also fails.
I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment of his Honour Justice Ryan.
Associate:
Date:
Counsel for the Applicant : Mr P.K. Searle
Solicitors for the Applicant : Jeffrey Willetts & Associates Pty
Counsel for the Applicant : Mr G. Nettle, QC
and Mr J. Lenczner
Solicitors for the Respondent : Australian Government Solicitor
Dates of Hearing : 19 and 20 February 1996
Date of Judgment : 23 February 1996
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