Commissioner of State Revenue v Famajohn Nominees Pty Ltd (No. 2)

[1999] VSC 398

SUPREME COURT OF VICTORIA

VICTORIAN TAXATION APPEALS LIST

Not Restricted

No. 5039 of 1999

COMMISSIONER OF STATE REVENUE	Applicant
V
FAMAJOHN NOMINEES PTY LTD (ACN 005 099 196) (as trustee for the John Fast Family Trust)
And
FAMAJOHN NOMINEES PTY LTD
(ACN 005 099 196)
(as trustee for Mr John C Fast)	Respondents

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JUDGE:	Balmford, J.
WHERE HELD:	Melbourne
DATE OF HEARING:	14 October 1999
DATE OF JUDGMENT:	18 October 1999
CASE MAY BE CITED AS:	Commissioner of State Revenue v Famajohn Nominees Pty Ltd (No. 2)
MEDIA NEUTRAL CITATION:	[1998] VSC 398

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COSTS – Land tax paid by the taxpayer was refunded by the Commissioner of State Revenue – The taxpayer must now repay the amount refunded – Whether interest is payable on the amount refunded.

Land Tax Act 1958 (Vic); ss 29, 58, 58A

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr PH Solomon	Solicitor for the Commissioner of State Revenue
For the Respondents	Mr RL Berglund	Arnold Bloch Leibler

DRAFT

HER HONOUR:

1. I delivered judgment in this matter on 14 October 1999, granting the application for leave to appeal and indicating that the appeal would be upheld. These reasons should, so far as is necessary, be read together with the reasons delivered on 14 October. Counsel had indicated during the hearing that because of certain payments which had been made, the matter of the orders to be made on the appeal would need to be the subject of further submissions, and brief submissions were presented on the delivery of the judgment.

2. No question arises as to the making of orders that the respondents (“the taxpayer”) bear the costs of the appellant (“the Commissioner”), that so much of the decision of the Victorian Civil and Administrative Tribunal (“the Tribunal”), made on 16 March 1999, as was subject of the appeal be set aside, and that the two assessments for land tax for 1996 and 1997 the subject of the appeal be confirmed pursuant to section 29 of the Land Tax Act 1958 (“the Act”).

3. Before the delivery of the decision of the Tribunal, the taxpayer paid the whole of the tax assessed for 1996, and part of the tax assessed for 1997, leaving an amount of $7,097.26 unpaid in respect of that year. After the decision was delivered, the taxpayer, having been successful in the Tribunal, requested a refund of tax paid by it. Under cover of a letter dated 27 August 1999, the Commissioner paid to the solicitors for the taxpayer the sum of $10,757.02 made up of two amounts which, on the basis of the decision of the Tribunal, had been overpaid by the taxpayer. Those amounts were $8,478.70 in respect of the 1996 assessment and $2,278.32 in respect of the 1997 assessment. The amounts involved are not in question.

4. The letter of 27 August 1999 in part read as follows:

   1996 assessment

   Please note that this amount of $8,478.70 is refunded on your demand subject to the following condition. Should the 1996 Assessment, the subject of the current appeal, be ultimately upheld as correct, your client would be liable to:

   (a)        immediately pay this amount of $8,478.70 to the Commissioner;

   (b) pay the Commissioner additional tax payable in respect of the sum of $8,478.70, being unpaid land tax payable under the 1996 assessment, pursuant to sections 58 and 58A of [the Act], at 20 per centum per annum from the date of receipt by you of this letter to the date on which your client repays the refunded sum of $8,478.70 to the Commissioner.

   1997 assessment

   Please note that this amount of $2,278.32 is refunded on your demand subject to the following condition. Should the 1997 assessment, the subject of the current appeal, be ultimately upheld as correct, your client would be liable to:

   (a)        immediately pay to the Commissioner;

(i)	this refunded amount of $2,278.32;
(ii)	the balance primary tax of $7097.26 due;

(b) pay the Commissioner additional tax pursuant to sections 58 and 58A of [the Act], at 20 per centum per annum payable in respect of:

(i)	the sum of $2,278.32 refunded herewith, being unpaid land tax payable under the 1997 assessment from the date of receipt by you of this letter to the date on which your client repays the refunded sum of $2,278.32 to the Commissioner;
(ii)	the sum of $7,097.26, being unpaid balance primary tax payable by your client under the 1997 Assessment from 4 April 1997 to the date on which your client pays the said balance of $7,097.26 to the Commissioner.

In the event that the application for leave and appeal is successful, the Commissioner will make application to the Court for appropriate orders to be made in relation to the above claims.

1. On the basis of that letter, the Commissioner seeks an order in this proceeding that the taxpayer pay to the Commissioner:

   A.      In respect of the 1996 assessment:

   1.          the sum of $8,478.70;

   2.          additional tax at the rate of 20% per annum on that sum from 27 August 1999 until the date of payment.

   B.          In respect of the 1997 assessment:

1.	the sum of $2,278.32;
2.	additional tax at the rate of 20% per annum on that sum from 27 August 1999 until the date of payment;
3.	the sum of $7,097.26;
4.	additional tax at the rate of 20% per annum on that sum from 4 April 1997 until the date of payment.

1. Mr Berglund submitted that the amounts described under items A1 and B1, B3 and B4 were in any case payable by virtue of the Act and needed no order of the Court. However, if I understood him correctly, he was prepared to accept an order expressed to be made “for the avoidance of doubt” and in the circumstances I would consider such an order to be appropriate.

2. The question in issue is whether the Court has power to order that the taxpayer pay to the Commissioner amounts calculated in accordance with items A2 and B2. Section 58 of the Act provides, so far as relevant:

   (1) If any tax remains unpaid at the expiration of fourteen days after the due date thereof twenty per centum per annum from the due date to the date of payment on the amount of the tax unpaid shall be and be deemed to be added thereto by way of additional tax and shall be payable accordingly.

3. Mr Solomon, for the Commissioner, submitted that once the two amounts described under items A1 and B1 had been refunded by the Commissioner, those amounts of tax “remained unpaid”. Fourteen days had expired from the due date thereof. Accordingly, additional tax in terms of items A2 and B2 was payable on those amounts in accordance with section 58. There was a valid assessment on foot, and the Commissioner had not had the use of the money. The amount had been refunded under protest. The Commissioner had received no reply to the letter of 27 August 1999. In Mr Solomon’s submission the letter would found an action for the recovery of the additional tax, in estoppel if not in contract.

4. Mr Berglund submitted that, the tax having been paid once, it could not be said that after it had been refunded to the taxpayer it “remains unpaid” so as to bear additional tax in accordance with section 58. It was not “unpaid at the expiration of fourteen days” in terms of the section. There was no provision of the Act under which the Commissioner could be said to be entitled to additional tax in respect of the period during which the tax had been refunded. Once the tax had been paid, that was the end of the matter. The letter could not found an estoppel.

5. Dealing with the question briefly, I am satisfied that the letter does not found an action in contract or estoppel. While I note that the taxpayer took the cheque and refrained from replying to the letter of 27 August 1999, the letter does not in my view initiate a contractual relationship. Although each refund is expressed to be made “subject to the following condition”, what follows is not a condition, but rather a statement of the effect of section 58 as it appeared to the Commissioner, and an indication of the Commissioner’s future intention. It would be difficult to maintain that, by failing to reply to the letter of 27 August 1999, the taxpayer created in the Commissioner an assumption, on which the Commissioner, to the knowledge of the taxpayer, relied to his detriment, that interest would be paid on the amount refunded (see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387).

6. I accept the submission of Mr Berglund which seems to me to describe accurately the effect of section 58 in the circumstances with which I am concerned. Accordingly there will be no order for the payment of additional land tax in terms of items A2 and B2.

7. The orders of the Court will be:

   that the taxpayer pay the costs of the Commissioner;

   that so much of the decision of the Tribunal made on 16 March 1999

   as was subject of the appeal be set aside;

   that the two assessments for land tax for 1996 and 1997 the subject of

the appeal be confirmed pursuant to section 29 of the Act; and

for the avoidance of doubt, orders as set out in A1, B1, B3 and B4 in
paragraph 4 above.