Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service
[2017] ACTSC 379
•13 December 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service |
Citation: | [2017] ACTSC 379 |
Hearing Date: | 6 December 2017 |
DecisionDate: | 13 December 2017 |
Before: | Murrell CJ |
Decision: | Application for summary judgment dismissed. Liberty to approach Court re strike out application. Orders re costs see [103]–[105]. |
Catchwords: | PRACTICE AND PROCEDURE – Court Procedures Rules 2006 (ACT) r 1146 – application by plaintiff for summary judgment –notices of assessment issued claiming outstanding payroll tax liability – taxation scheme under the Taxation Administration Act 1999 (ACT) – defendants asserted jurisdictional error and other defences – arguable defence challenging liability identified |
Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 425, 1146 Legislation Act 2001 (ACT) pt 19.5, ss 84, 88, 125 Income Tax Assessment Act 1936 (Cth) ss 175, 175A, 177 Sales Tax Assessment Act (No 1) 1930 (Cth) s 67 (repealed) |
Cases Cited: | Canberra Cleaners Pty Ltd v Commissioner for ACT Revenue (No 2) [2017] ACTSC 303 Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; 237 CLR 146 Kevern v Marshall [2012] ACTSC 9 |
Parties: | Commissioner for ACT Revenue (Plaintiff) Phillip Arcidiacono trading as Rose Cleaning Service (ABN 28 057 543 242) (First Defendant) Canberra Cleaners Pty Ltd (ACN 142 575 095) (Second Defendant) Rose Cleaning Service Aust Pty Ltd atf Rose Cleaning Service Aust Trust (ACN 602 897 850) (Third Defendant) RCS Australia Pty Ltd atf Rose Cleaning Services Trust (ACN 611 682 850) (Fourth Defendant) Rose Cleaning Services ACT Pty Ltd (ACN 154 348 508) (Fifth Defendant) Rose Cleaning Group (A.C.T) Pty Ltd (ACN 613 111 112) (Sixth Defendant) P & S Price Holdings Pty Ltd atf P & S Price Discretionary Trust (ACN 155 887 264) (Seventh Defendant) 6 Lyell Street Pty Ltd (ACN 605 727 133) (Tenth Defendant) 4 Lyell Street Pty Ltd (ACN 605 727 124) (Eleventh Defendant) Spa Asset Holding ty Ltd (ACN 149 361 286) (Twelfth Defendant) Spa Holdings A.C.T Pty Ltd (ACN 613 504 279 (Thirteenth Defendant) 11 Cessnock Street (ACT) Pty Ltd (ACN 138 335 029) (Fourteenth Defendant) Spirant Building Pty Ltd atf Rose Cleaning Trust No 1 (ACN 155 304 493) (Eighteenth Defendant) Lloyds Cleaning Service Pty Ltd atf Rose Cleaning Trust (ACN 155 393 427) (Nineteenth Defendant) United Financial Pty Ltd atf United Financial Trust (ACN 168 547 859) (Twentieth Defendant) R Cleaning Group Pty Ltd atf R Cleaning Group Trust (ACN 610 692 781) (Twenty-first Defendant) Rose Cleaning Asset Services Pty Ltd (ACN 607 365 506) (Twenty-second Defendant) |
Representation: | Counsel Mr P Walker SC and Mr B Buckland (Plaintiff) Mr D McGovern SC and Mr A Russoniello (Defendants) |
| Solicitors ACT Government Solicitor (Plaintiff) McEvoy Legal (Defendants) | |
File Number: | SC 167 of 2017 |
MURRELL CJ:
The Commissioner for Australian Capital Territory Revenue (the Commissioner) sought summary judgment against the 1st to 7th defendants, the 9th to 14th defendants and the 18th to 22nd defendants in the sum of $3,910,739.99 plus interest.
Alternatively, the Commissioner sought an order pursuant to r 425 of the Court Procedures Rules 2006 (ACT) (CPR) that paragraphs 14, 15(b) and 17 of the defendants’ defence be struck out.
The claim
The Commissioner filed an originating claim on 22 May 2017. The claim was amended on 20 September 2017.
In the amended claim, the Commissioner sought judgment for $3,910,739.99 or, alternatively, for $4,612,887.59 plus interest and costs against 22 defendants, and the Commissioner indicated that he would seek summary judgment.
The Commissioner discontinued proceedings against the 9th defendant (Pala Management Services Pty Ltd).
On 29 November 2016, a delegate of the Commissioner sent a document titled “Notice of Reassessment and Assessment” (the November Notice) relating to payroll tax, penalties and interest to the first defendant, Phillip Arcidiacono t/as Rose Cleaning Service, as the designated group employer of a payroll tax group made up of the defendants. The November Notice claimed an outstanding ACT payroll tax liability of $4,612,887.59 for the period 1 July 2009 to 30 June 2016 and stated that the assessed amount was payable within 28 days of 29 November 2016.
The defendants lodged an objection to the assessment pursuant to s 100 of the Taxation Administration Act 1999 (ACT) (TA Act). The objection has not yet been decided.
In February 2017, the Commissioner issued garnishee notices under s 54 of the TA Act to some of the defendants’ debtors (the first set of garnishee notices). As a result, $702,147.60 was paid to the Commissioner.
On 9 August 2017, the Commissioner sent correspondence described as “Notice[s] of Assessment” to the 2nd to 7th defendants, the 9th to 14th defendants and the 18th to 21st defendants, claiming from each the sum of $3,910,739.99 plus interest pursuant to s 25 of the TA Act (the August Notices).
On 4 September 2017, the Commissioner sent correspondence described as a “notice of assessment” to the 22nd defendant, claiming the sum of $3,910,709.99 plus interest pursuant to s 25 of the TA Act (the September Notice).
The 1st, 2nd and 22nd defendant successfully challenged the validity of the first set of garnishee notices. In October 2017, the notices were set aside: Canberra Cleaners Pty Ltd v Commissioner for ACT Revenue (No 2) [2017] ACTSC 303.
The Commissioner then issued a second set of garnishee notices, which are also the subject of challenge. The matter was before McWilliam As J on 11 December 2017.
Apart from the monies collected through the issue of the garnishee notices (which has not been refunded to the defendants), the defendants have paid nothing to the Commissioner.
The Commissioner relied on s 81(1) of the Payroll Tax Act 2011 (ACT) (PT Act) to establish that each of the defendants was liable for the whole of the amount claimed.
Court Procedures Rules
The requirements in relation to summary judgment and the strike out of pleadings are found in the CPR.
Rule 1146 of the CPR provides:
1146 Summary judgment — for plaintiff
(1) The plaintiff may, at any time after a defendant files a notice of intention to respond or defence, apply to the court for summary judgment against the defendant.
Note Pt 6.2 (Applications in proceedings) applies to an application under this rule.
(2) The court may give judgment for the plaintiff against the defendant for all part of the plaintiff’s claim for relief, unless satisfied that —
(a) the defendant has a good defence to the claim for relief on the merits; or
(b) sufficient facts are disclosed to entitle the defendant to defend the claim for relief generally.
(3) Without limiting subrule (2), the court may give judgment for the plaintiff for damages to be assessed.
Rule 425 provides that a court may, at any stage of proceedings, order that a pleading or part of a pleading be struck out if it discloses no reasonable cause of action or other bases for a strike out are established.
The principles relating to an application for summary judgment were summarised by Jagot J in Galovac Pty Limited v Australian Capital Territory [2010] ACTSC 132 at [5] and recently repeated by Mossop As J in Denham Constructions Pty Ltd v Islamic Republic of Pakistan [2016] ACTSC 67 at [3]. Before summary judgment is given, there must be a high degree of certainty about the outcome at a full hearing; the jurisdiction to terminate an action summarily is to be sparingly employed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. Further, a plaintiff who is seeking summary judgment bears the overall onus of establishing that it is proper to enter summary judgment.
In order to determine the application, it is necessary to refer to the evidence presented on the application.
Evidence on the application
On the summary judgment application, the Commissioner read three affidavits: an affidavit of Mr Salisbury affirmed on 19 May 2017 and affidavits of Mr Callaghan affirmed and sworn respectively on 30 August 2017 and 5 December 2017. The Commissioner also tendered the correspondence by which notices were given to the 21st and 22nd defendants.
The Commissioner did not tender evidence under s 136 of the TA Act. Section 136 provides for “certificate evidence”; a certificate signed by the Commissioner that states specified matters is proof of the matters stated.
The defendants called no evidence.
Status of the Commissioner
In the amended defence, the defendants admitted that the Commissioner was appointed by the Minister under s 73 of the TA Act.
Assessment made under s 7 of the TA Act
It his affidavit of 19 May 2017, Mr Salisbury asserted that, in the November Notice:
4. …the defendants were assessed to be liable for payroll tax, penalty tax and interest of $4,612,887.59 payable under the Payroll Tax Act 2011, section 7 and Taxation Administration Act 1999, section 7 (in relation to the primary payroll tax liability) and sections 34 and 25 (in relation to penalty tax and interest respectively).
The November Notice particularised the payroll tax that was said to be payable in relation to seven financial years (those ending 30 June 2010 to 30 June 2016), added penalty tax and interest in relation to each financial year, and then stated: “[t]he amount of $4,612,887.59 is payable within 28 days of the date of this notice.”
The correspondence from the Commissioner to the defendants other than the first defendant annexed the November Notice and noted that the first defendant had been given 28 days “to pay the total assessed amount ($4,612,887.59)”, but had failed to do so, although $702,147.60 had been recovered. After referring to s 81 of the PT Act, the correspondence stated that “the following assessment [had] been issued to [the addressee] pursuant to section 14 of the Tax Admin Act.” Thereafter, there was a “summary of assessment” which referred to five items: primary tax, penalty tax, interest, amounts recovered and outstanding amount ($3,910,739.99). The addressee was required to pay the outstanding amount immediately.
Assessment issued under s 14 of the TA Act
In his affidavit of 19 May 2017, Mr Salisbury asserted that, on 29 November 2016, a “notice of assessment and reassessment” was issued to the defendants under s 14 of the TA Act.
In the affidavit of 30 August 2017, Mr Callaghan deposed to the fact that “as delegate of the [Commissioner]” he “issued assessments under section 14 of the Tax Administration Act 1999 (TA Act) to the Second Defendant through to the Seventh Defendant, the Ninth Defendant through to the Fourteenth Defendant and the Eighteenth Defendant through to the Twentieth Defendant”.
Service
Mr Salisbury deposed to the fact that the November Notice was “sent” to the office of the “defendants representative” (the first defendant’s “representative”), Mr Sam Cassaniti of Accolade Advisory at a particular post office box and that, on or about 21 December 2016, he received objections to the notice of assessment “on behalf of the defendants”.
Mr Callaghan deposed to the fact that, on 9 August 2017, he “caused the assessments to be sent by post and email” to the defendants’ legal representative. It would appear that the reference to the defendants’ legal representative was a reference to McEvoy Legal, the solicitors on the record for the defendants in these proceedings since 28 September 2017. In all relevant respects, the correspondence to the various defendants (other than the 1st defendant) was identical.
Non-payment
In his affidavit of 5 December 2017, Mr Callaghan stated that recently he had caused a staff member to calculate the total outstanding debt, including interest, and, taking into account the monies received under garnishee notices, the total amount outstanding as at that date was $3,886,145.63.
CPR requirements
The defendants filed a defence.
Defence
The plaintiff must satisfy the Court that the defendants do not have a “good defence” on the merits (in the sense that there is a real issue to be tried).
The defendants argued that they had good defences in the following respects:
(a)The November Notice was not a valid notice of assessment because it was not executed as required by ss 131 and 134 of the TA Act (the execution point).
(b)The November Notice assessment was made under the TA Act. However, the assessment included payroll tax liability for the financial years 2009/2010 and 2010/2011. Liability for those years arose under the Payroll Tax Act 1987 (ACT) (the Old Act), which was not a “tax law” to which the TA Act applied. Consequently, the entire assessment was infected by “jurisdictional error” (the jurisdictional error point).
(c)There was no proof of service of the August, September or November Notices (the service point).
(d)The amended claim did not plead a case against any defendant other than the first defendant (the pleading point).
In order to consider whether these arguments raise a good defence or defences, it is necessary to refer to the relevant legislation: the PT Act (including the transitional provisions in relation to the Old Act), the TA Act and the Legislation Act2001 (ACT) (Legislation Act).
Payroll Tax Act 2011
Part 2 of the PT Act (imposition of payroll tax)
Part 2 of the PT Act contains ss 6 to 11C.
Section 6 provides that payroll tax is imposed on “all taxable wages”.
Section 7 provides that the “employer” by whom taxable wages are paid or payable is liable to pay payroll tax on the wages.
Section 8 provides that the amount of payroll tax payable must be worked out in accordance with schs 1 and 2.
Section 9 provides that a person who is liable to pay payroll tax on taxable wages must pay it within seven days after the end of the month in which the wages were paid or payable, except in relation to the month of June, in relation to which a 21 day period is allowed.
Part 5 of the PT Act (grouping of employers)
Part 5 of the PT Act contains ss 67 to 81. The pt provides for the grouping of entities for tax purposes. The grouping provisions are designed to avoid tax minimisation by employers electing to split their operations and thereby utilise multiple tax free thresholds.
As the provisions are widely drawn, they may have undesirable consequences. However, under s 79, the Commissioner may determine that a person who would, but for the determination, be a member of a group, is not a member of the group.
Section 80(1) provides that the members of a group may designate a qualified member of the group to be the “designated group employer” for the group. If the group does not designate a group employer, the Commissioner may do so: s 80(4). The designated group employer may cease to have that status in particular circumstances: s 80(5).
Section 81 creates joint and several liability between group members. It provides:
81 Joint and several liability
(1) If a member of a group fails to pay an amount that the member is required to pay under this Act in relation to any period, every member of the group is liable jointly and severally to pay the amount to the commissioner.
(2) If 2 or more people are jointly or severally liable to pay an amount under this section, the commissioner may recover all of the amount from them, or any of them, or any 1 of them.
(3) If, under this section, 2 or more people are jointly and severally liable to pay an amount that is payable by any 1 of them, each person is also jointly and severally liable to pay—
(a) any amount payable to the commissioner under this Act or another law in relation to the amount, including any interest and penalty tax; and
(b) any costs and expenses incurred in relation to the recovery of the amount that the commissioner is entitled to recover from the person
Provisions concerning repeal of the Payroll Tax Act 1987
Prior to the commencement of the PT Act, the payment of payroll tax was governed by the Old Act.
On 1 July 2011, the Old Act was repealed and replaced by the PT Act. At that time, the definition of “tax law” in s 4 of the TA Act was amended to delete reference to the Old Act and to substitute reference to the PT Act.
The transitional provisions were contained in pt 10 of the PT Act.
Transitional provisions in pt 10 of the PT Act
Section 201 provided that, despite its repeal, the Old Act continued to apply to payroll tax on taxable wages paid or payable before 1 July 2011.
Section 202 was a general saving provision. It provided:
Any act, matter or thing that had effect under a provision of the old Act immediately before 1 July 2011 continues to have effect under the corresponding provision of this Act, subject to this part or any regulation under this part.
Section 206 provided for continuity in relation to designated group employers.
Part 10 expired five years after the date it commenced: s 212.
Provisions in the Legislation Act
Sections 84 and 88 of the Legislation Act may also be relevant. They provide:
84 Saving of operation of repealed and amended laws
(1) The repeal or amendment of a law does not—
…
(c) affect an existing right, … or liability acquired, accrued or incurred under the law.
(2) An investigation, proceeding or remedy in relation to an existing right, … or liability under the law may be started, exercised, continued or completed, and the right, privilege or liability may be enforced and any penalty imposed, as if the repeal or amendment had not happened.
…
(6) In this section:
liability includes liability to penalty for an offence against the law.
…
88 Repeal does not end effect of transitional laws etc
(1) The continuing operation of a transitional law or validating law is not affected only because the law is repealed.
Taxation Administration Act
The purpose of the TA Act is to make general provision in relation to the administration and enforcement of other tax laws, including in relation to the assessment and reassessment of tax liability and the payment of tax: ss 6(1), (3)(a)–(b).
Section 4 of the TA Act defines the PT Act as a “tax law”. Prior to 1 July 2011, the Old Act was defined as a tax law, but since that date it has not been defined as a tax law: see above [46].
Part 3 of the TA Act (assessment of tax liability)
Part 3 contains ss 7 to 18.
Section 7 of the TA Act provides:
7 General power to make assessment
(1) The commissioner may make an assessment of the tax liability of a taxpayer.
…
Section 7 of the TA Act merely provides that the Commissioner “may make an assessment of the tax liability of a taxpayer” (emphasis added), without detailing any requirements for a proper “assessment”.
The Dictionary defines “assessment” to mean “an assessment, reassessment or compromise assessment of the tax liability of a person under a tax law, made by the Commissioner under part 3” (emphasis added).
The Dictionary defines “tax” to mean “a tax, duty or levy under a tax law” and to include interest and penalty tax.
Section 14 of the TA Act provides:
14 Notice of assessment, reassessment or withdrawal of assessment
(1)The commissioner may issue a notice of assessment, showing the amount of the assessment.
…
(3)If the commissioner makes a reassessment, the commissioner must issue a notice of assessment, showing the amount of the reassessment and the amount by which the assessment has been increased or decreased.
(emphasis added)
Section 15 of the TA Act provides:
15 Inclusion of interest and penalty tax in notice of assessment
A notice of assessment of the taxpayer’s tax liability issued following a tax default by the taxpayer must specify any interest and penalty tax that are payable, or will become payable by the taxpayer under part 5 in relation to the default.
Section 16 provides:
16 Validity of assessment
The validity of an assessment is not affected only because a provision of a tax law has not been complied with.
Parts 5, 7, 9 and 10 of the TA Act
Part 5 of the TA Act (interest and penalty tax) includes ss 25 to 37. It deals with the calculation of interest and penalty tax.
Part 7 (collection of tax) includes s 48(1), which provides:
48 Tax payable to the commissioner
(1)Tax that is payable is payable to the commissioner, who may recover any amount unpaid in a court of competent jurisdiction as a debt to the commissioner.
Part 9 (tax officers, investigation and secrecy provisions) includes s 78, which provides:
78 Delegation by commissioner
The commissioner may delegate to any person the commissioner’s functions under this or any other Act.
Under s 79, the Commissioner is an authorised officer and may appoint others to be authorised officers.
Part 10 of the TA Act (objections and reviews)
Section 105 is contained in pt 10 of the TA Act. It provides:
105 Recovery of tax pending objection or review
The fact that an objection or review is pending does not affect the assessment or decision to which the objection or review relates, and tax may be recovered as if no objection or review were pending.
In Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; 237 CLR 146 (Futuris) at [24]–[25] and Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; 237 CLR 473 (Broadbeach), especially at [40]–[50], the High Court confirmed that, except in limited circumstances, it is not possible to go behind a notice of assessment in curial proceedings and the proper method to challenge an assessment is via the objection and merits review process. As to those limited circumstances, see [85] below.
In Deputy Federal Commissioner of Taxation v Roma Industries Pty Ltd (1976) ATR 54 at 57 (cited with approval in Broadbeach at [45]), Sir Nigel Bowen explained that taxation legislation such as that which his Honour was considering (and that in the present case) was designed to be, in effect, “pay first, fight later”, thereby ensuring that the revenue was protected against the class of taxpayer who would prefer to dispute assessments and, in the process, deprive themselves of the means to meet the assessments.
Part 11 of the TA Act (miscellaneous provisions)
Section 129 is located within div 11.4 (notices and service of documents). It provides that “a document authorised or required to be served on or given to a person by the commissioner for tax law may be served on or given to the person” by any of the stated means, including personally and by post addressed to the last known address (emphasis added). Section 129(2) states:
(2)If a person (the agent) has actual or apparent authority to accept service of a document on behalf of another, the Commissioner may, for a tax law, serve the document on the agent as if the agent were that other person.
Division 11.5 (proceedings and evidence) contains ss 131 to 137.
Section 131 states:
131 Presumption of regularity about issue of documents
A document or a copy of a document bearing the written, printed or stamped signature or name of the commissioner or a person described in the document as a delegate of the commissioner must be presumed to have been lawfully issued by the commissioner.
Section 132 creates a presumption of authority to take legal proceedings in the name of the Commissioner.
Section 134 concerns evidence of assessment and determinations. Section 134(1) 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.
…
(emphasis added)
In summary, the scheme of the TA Act is that the Commissioner may choose to “make an assessment of the tax liability of a taxpayer” (s 7), i.e. the tax liability under a “tax law” within the meaning of s 4 of the TA Act. The Commissioner may (but need not) “issue a notice of assessment, showing the amount of the assessment”: s 14. In the case of reassessment, the Commissioner must issue a notice of reassessment. Payroll tax is payable regardless of whether a notice of assessment has been issued. The Commissioner may recover any amount of tax that is unpaid in a court of competent jurisdiction. If two or more people are jointly or severally liable to pay an amount “under a tax law”, the Commissioner may recover the whole amount from any of them.
There is no express provision stating that the Commissioner’s entitlement to recover depends upon the prior service of a notice of assessment (as opposed to a reassessment), although the certificate evidence provision suggests that that may have been the intention. However, if no certificate evidence is tendered (as in this case), in order to prove “the due making of the assessment” and “that the amount and all particulars of the assessment are correct”, the Commissioner will need to produce a notice of assessment or another document described in s 134 of the TA Act.
The execution point
The defendants submitted that there was no proof that the notices of assessment had been signed by the Commissioner. Consequently, the Commissioner could not, via s 134 of the TA Act, use the November, August or September Notices to prove the due making of an assessment.
This does not seem to be a strong point. Section 134 enables reliance on two types of document: a notice of assessment or a document signed by the Commissioner purporting to be a copy of a notice of assessment. As to the former, it would seem that the only requirement for a notice of assessment to be relied on is that it be “issued” by the Commissioner. Pursuant to s 131, a copy of a document bearing the written signature or name of a person described in the document as a delegate of the Commissioner “must be presumed to have been lawfully issued by the commissioner”. The November, August and September Notices appear to satisfy this requirement.
The jurisdictional error point
The defendants submitted that, at the time of the November, August and September 2017 assessments (as evidenced by the November, August and September Notices), the Commissioner had no power to assess payroll tax for the 2010 or 2011 financial years as they were not “tax liabilities” within the meaning of s 7 of the TA Act; in order to be a “tax liability”, the liability must relate to the payment of tax under a s 4 “tax law”. Liability for payment of payroll tax under the Old Act was not a “tax liability” because, at the time of the assessments, the Old Act was not a “tax law” under the TA Act.
Similarly, when the proceedings were commenced, the liabilities were not liabilities under a “tax law”. Pursuant to s 50 of the TA Act (which applies if two or more people are jointly or severally liable to pay an amount of tax), the Commissioner was only entitled to recover amounts due under a “tax law”.
The defendants argued that, insofar as the transitional provisions may have assisted the Commissioner, those provisions expired five years after the Old Act was repealed (i.e. on 1 July 2016). The assessments were made, and the proceedings were commenced, after that date.
This submission raises several matters: whether liability under the Old Act survived past 1 July 2016; whether, when assessments were made, the Commissioner was empowered to make an assessment that related to payroll tax liability under the Old Act; and whether, when proceedings were commenced, the Commissioner was empowered to recover payroll tax under the Old Act.
The defendants submitted that s 14 of the TA Act envisaged that an assessment was a single amount; s 14 refers to “the amount of the assessment” (emphasis added). Consistent with the terms of s 14, the Commissioner had identified one amount as being the “assessment”. The defendants submitted that, because an “assessment” is a single amount and, in this case, the Commissioner had acted beyond power in reaching that amount (the Commissioner included tax, penalties and interest from the 2010 and 2011 financial years), the whole assessment was infected by “jurisdictional error”.
The defendants acknowledged that the Commissioner would rely on s 16 of the TA Act (which provides that the validity of an assessment is not affected only because a provision of a tax law has not been complied with) to defeat their arguments. However, the defendants submitted that s 16 did not protect an assessment that, like the assessment in this case, was infected with “jurisdictional error”.
In relation to “jurisdictional error”, the defendants relied on Futuris. In that case, the High Court considered the effect of s 175 (no invalidity for non-compliance) and s 177 (production of a notice of assessment is conclusive evidence) of the Income Tax Assessment Act 1936 (Cth). At [24], the plurality observed that when s 175 was read with ss 175A (objections against assessments) and 177, the validity of an assessment was not affected by failure to comply with any provision of the Act and errors in the process of assessment did not go to jurisdiction. However, at [25], the plurality continued:
But what are the limits beyond which s 175 does not reach? The section operates only where there has been what answers the statutory description of an “assessment”. Reference is made later in these reasons to so-called tentative or provisional assessments which for that reason do not answer the statutory description in s 175 and which may attract a remedy for jurisdictional error. Further, conscious maladministration of the assessment process may be said also not to produce an “assessment” to which s 175 applies.
(emphasis added)
The defendants submitted that, in this case, the Commissioner had engaged in “conscious maladministration of the assessment process”, crystallising in a final “assessment” that was infected with “jurisdictional error”.
The defendants also relied on Darrell Lea Chocolate Shops Pty Ltd v Commissioner of Taxation (1996) 72 FLR 175; 141 ALR 713, 723 where, in relation to s 67 of the Sales Tax Assessment Act (No 1) 1930 (Cth) (which is analogous to s 134 of the TA Act), the Full Court said:
Section 67 will therefore operate to preclude a court from examining the validity of an assessment once a notice of assessment is tendered, provided always:
(1) that there has been a bona fide attempt to exercise the power of assessment;
(2) that that attempt to exercise the power of assessment relates to the subject matter of the legislation, in the present case the sales tax legislation; and
(3) that the exercise of the power of assessment is reasonably capable of reference to the power given to the Commissioner.
In this case, it is reasonably arguable that the liability of the defendants to pay payroll tax under the Old Act did not survive beyond 30 June 2016. It is reasonably arguable that the Commissioner made one assessment and, in doing so, he purported to exercise a power that he did not have (in relation to the 2010 and 2011 financial years). Further, it is reasonably arguable that the Commissioner lacked statutory power to commence the proceedings. It is reasonably arguable that these flaws meant that the whole of the assessment was infected with “jurisdictional error”. The Commissioner has not persuaded me otherwise.
The service point
This issue was raised in oral argument; it is not mentioned in the written submissions.
The defendants argued that the evidence before the Court regarding service of the November, August and September Notices did not satisfy the service requirements of s 129 of the TA Act. While there was evidence that the notices were “sent”, there was no evidence that the “sending” was to an address that satisfied the address requirements of s 129.
The argument appears to be weak.
First, there does not seem to be any legislative requirement for service of a notice of assessment or reassessment; notices of assessment are “issued” rather than “served”.
Second, s 129 of the TA Act sets out the means by which documents “may be served” (emphasis added); it does not require that documents be served in one of those ways.
Third, pt 19.5 of the Legislation Act deals with the service of documents and it equates service with “sending”. It applies to a document “that is authorised or required under a law to be served (whether the word “serve”, “give”, “notify”, “send” or “tell” or any other word is used)”: s 245. There is evidence that the notices were “sent’.
The pleading point
The defendants submitted that the amended originating claim does not plead a claim against the defendants other than the 1st defendant.
In paragraph 6 of the amended statement of claim, the claim pleads that an assessment was issued to the defendants, but this paragraph seems to refer to the November Notice, which was not issued to the defendants.
The claim should be amended to clearly plead the case against the defendants.
While the claim is deficient, it is obvious that the defendants are well aware of the manner in which the Commissioner puts his claim against them. In answer to the claim, they have filed an amended defence.
Conclusion
The application for summary judgment is dismissed.
Strike out application
Insofar as the amended defence seeks to challenge the fact that the assessment reflects the Commissioner’s decision about grouping, it would appear that the defendants seek to challenge the “validity” of the assessment within the meaning of s 16 of the TA Act, raising a proper basis for strike out.
However, possibly because of time pressure, at the hearing the parties did not address the strike out application.
If either party wishes to do so, it may approach my associate to obtain a date to hear the strike out application.
Costs
Unless by 21 December 2017, a party files and serves short written submissions (of no more than two pages) as to why a different order should be made, the Commissioner is to pay the defendants’ costs of the application.
If a party files and serves written submissions about costs, the other party is to file and serve any short written submissions in reply (of no more than two pages) by 18 January 2018.
If written submissions are filed, costs will be determined on the basis of the written submissions.
| I certify that the preceding one hundred and five [105] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice Murrell. Associate: Date: 13 December 2017 |
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