Commissioner of Taxation v Cumins [No 2]

Case [2008] FCA 354

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Cumins [No 2] [2008] FCA 354

PRACTICE AND PROCEDURE – discovery – applicant already provided significant discovery – failure by respondent to articulate need for discovery of further documents – whether it would be oppressive to grant discovery.

Administrative Appeals Tribunal Act 1975, s 42(A)1B
Taxation Administration Act 1953 (Cth), s 8AAZA
Federal Court Rules 1976 (Cth), O 15 r 15   

Australian Securities & Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262

Cumins v Deputy Commissioner of Taxation [2007] FCAFC 207

Wren v Mahony (1972) 126 CLR 212

DEPUTY COMMISSIONER OF TAXATION v BRIAN CUMINS
WAD 216 OF 2007

GILMOUR J
17 MARCH 2008
PERTH

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 216 OF 2007

BETWEEN:

DEPUTY COMMISSIONER OF TAXATION
Applicant

AND:

BRIAN CUMINS
Respondent

JUDGE:

GILMOUR J

DATE OF ORDER:

17 MARCH 2008

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.The motion be dismissed.

2.The respondent pay the applicant’s costs of the motion.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 216 OF 2007

BETWEEN:

DEPUTY COMMISSIONER OF TAXATION
Applicant

AND:

BRIAN CUMINS
Respondent

JUDGE:

GILMOUR J

DATE:

17 MARCH 2008

PLACE:

PERTH

REASONS FOR JUDGMENT

  1. Mr Cumins, the respondent in the bankruptcy petition brought by the Deputy Commissioner of Taxation, seeks discovery of documents by motion dated 21 January 2008. 

    BACKGROUND

  2. The respondent, Mr Cumins, invested in excess of $5 million in what he described as “Infomercial Schemes” between 1996 and 1998.  An “Infomercial”, according to the respondent, is an advertising film which is generally shown on television and promotes a product in an informative and objective style.

  3. On 23 October 2000, the applicant issued Notices of Amended Assessments to the respondent for the years ended 30 June as follows:

    Year Ended  Amount

    1996  $  3,344,884.24

    1997  $  2,836,956.98

    1998  $12,954,263.05
      TOTAL  $19,136,104.27

  4. Those assessments were related to tax deductions claimed by the respondent in connection with his investments in the Infomercial Schemes.  Those tax deductions were disallowed by the applicant.

  5. On 23 November 2000 the applicant issued further Notices of Amended Assessments to the respondent for the years ended 30 June as follows:

    Year  Amount

    1995  $   243,360.31

    1996  $   123,141.55

    1998  $2,619,580.49

    TOTAL  $2,986,082.35

  6. In February 2001 the applicant filed a writ in the Supreme Court of Western Australia to recover from the respondent the amounts of both the October and November 2000 assessments as well as interest and other charges.

  7. On 3 August 2001 the respondent commenced review proceedings in the AAT in respect of each of the applicant’s decisions to disallow the respondent’s objections to the assessments issued on 23 October 2000. In February 2005 the respondent withdrew the proceedings. The respondent says that he did so because he did not have the assistance of the promoters of the Infomercial Schemes including Mr Peter Leslie Ambrosy and that without…

Details
AGLC
Commissioner of Taxation v Cumins [No 2] [2008] FCA 354
Case
[2008] FCA 354
Decision Date

CaseChat Overview and Summary

The case of Commissioner of Taxation v Cumins [No 2] involves the respondent, Mr Cumins, who had invested heavily in Infomercial Schemes and was subsequently issued tax assessments by the Commissioner of Taxation. Mr Cumins sought discovery of documents to support his position that the investments were part of a fraudulent scheme. The Commissioner opposed the motion for discovery on various grounds. The primary legal issue before the court was whether Mr Cumins was entitled to the discovery of specified documents to aid in his defense against the tax assessments.

The court examined the nature of the Infomercial Schemes and their classification as a fraud, as determined in a prior case. It considered the respondent’s attempts to challenge the assessments and the implications of withdrawing the AAT review proceedings. The court also scrutinized the respondent's claim that he lacked assistance from the promoters of the schemes, which influenced his decision to withdraw the AAT proceedings. Additionally, the court evaluated the procedural steps taken by the Commissioner and the consequences of those steps, including the entry of summary judgment against Mr Cumins.

After considering these factors, the court concluded that Mr Cumins was not entitled to the discovery of the documents he sought. The court found that the respondent had not sufficiently demonstrated a need for the documents to address the tax assessments. The court also held that the respondent's previous attempts to challenge the assessments, including the withdrawal of the AAT proceedings, did not warrant granting the discovery motion. Consequently, the court dismissed the motion and ordered the respondent to pay the applicant's costs.

Orders

Orders of the court

1. The motion be dismissed.

2. The respondent pay the applicant’s costs of the motion.

Background

Background to the litigation

Mr Cumins, the respondent in the bankruptcy petition brought by the Deputy Commissioner of Taxation, seeks discovery of documents by motion dated 21 January 2008. BACKGROUND The respondent, Mr Cumins, invested in excess of $5 million in what he described as “Infomercial Schemes” between 1996 and 1998. An “Infomercial”, according to the respondent, is an advertising film which is generally shown on television and promotes a product in an informative and objective style. On 23 October 2000, the applicant issued Notices of Amended Assessments to the respondent for the years ended 30 June as follows:Year Ended Amount 1996 $ 3,344,884.241997 $ 2,836,956.981998 $12,954,263.05 TOTAL $19,136,104.27 Those assessments were related to tax deductions claimed by the respondent in connection with his investments in the Infomercial Schemes. Those tax deductions were disallowed by the applicant. On 23 November 2000 the applicant issued further Notices of Amended Assessments to the respondent for the years ended 30 June as follows: Year Amount1995 $ 243,360.311996 $ 123,141.551998 $2,619,580.49TOTAL $2,986,082.35 In February 2001 the applicant filed a writ in the Supreme Court of Western Australia to recover from the respondent the amounts of both the October and November 2000 assessments as well as interest and other charges. On 3 August 2001 the respondent commenced review proceedings in the AAT in respect of each of the applicant’s decisions to disallow the respondent’s objections to the assessments issued on 23 October 2000. In February 2005 the respondent withdrew the proceedings. The respondent says that he did so because he did not have the assistance of the promoters of the Infomercial Schemes including Mr Peter Leslie Ambrosy and that without his assistance it was not possible for him to present his case in the AAT. Pursuant to s 42(A)1B of the Administrative Appeals Tribunal Act 1975, the affect of the withdrawal was that the AAT proceedings were considered to have been dismissed. In Australian Securities & Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262 at [58] the Supreme Court of Victoria held that certain Infomercial schemes were a fraud on the investors, if not on the Australian Taxation Office. These schemes, so claims the respondent, were the ones in which he had invested. Importantly, other than in relation to a very small sum comprised in the 1998 assessment, none of the November 2000 assessments concerned the respondent’s investments in the Infomercial Schemes. The assessment for 1998 for $2,619580.49 was subject to objections by the respondent. These objections failed as did a subsequent review before the Administrative Appeals Tribunal (AAT). In February 2005 an appeal to this Court from the decision of the AAT was dismissed by consent. The November 2000 assessments for 1995 and 1996 have never been the subject of an application for review or legal challenge. On 15 June 2005 a summary judgment was entered in the Supreme Court proceedings against the respondent for the sum of $38,084,522.24 including interest. The respondent did not consent to the judgment but did not oppose it. The amount of the judgment attributable to the assessments made on 23 November 2000 was $4,778,969.82 including interest charges. The amount of $243,360.31 contained in the amended assessment issued on 23 November 2000 in respect of the 1995 financial year was not included in the judgment sum because it had by then been paid. However interest on this sum was claimed in the writ.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GILMOUR J

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Ratio Decidendi

Legal Principle Established

Established by: GILMOUR J

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