Cumins v Deputy Commissioner of Taxation for the Commonwealth of Australia
[2007] WASCA 30
•8 FEBRUARY 2007
CUMINS -v- DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA [2007] WASCA 30
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASCA 30 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:107/2006 | 18 DECEMBER 2006 | |
| Coram: | PULLIN JA | 7/02/07 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application for extension of time in which to appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | BRIAN CUMINS DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA |
Catchwords: | Appeal Practice and procedure Application for extension of time Substantial delay Lack of explanation Whether arguable case Equity Unjust enrichment Income Tax Effect of production of nature of assessment |
Legislation: | Administrative Appeals Tribunal Act 1975 (Cth), s 26(2), s 42A(1B) Income Tax Assessment Act 1936 (Cth), s 177, s 226L Supreme Court (Court of Appeal) Rules 2005 (WA), |
Case References: | Australian Securities and Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Esther Investments Pty Ltd v Markalinga Pty Ltd [1989] 2 WAR 196 Gallo v Dawson (1990) 64 ALJR 458 Girando v Girando (1997) 18 WAR 450 Hayes v Powers, unreported; FCt SCt of WA; Library No 990103; 5 March 1999 Hill v Van Erp (1997) 188 CLR 159 Roxborough v Rothmans of Pall Mall Australia (2001) 208 CLR 516 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : CUMINS -v- DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA [2007] WASCA 30 CORAM : PULLIN JA HEARD : 18 DECEMBER 2006 DELIVERED : 8 FEBRUARY 2007 FILE NO/S : CACV 107 of 2006 BETWEEN : BRIAN CUMINS
- Appellant
AND
DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
File No : CIV 1171 of 2001
(Page 2)
Catchwords:
Appeal - Practice and procedure - Application for extension of time - Substantial delay - Lack of explanation - Whether arguable case
Equity - Unjust enrichment
Income Tax - Effect of production of nature of assessment
Legislation:
Administrative Appeals Tribunal Act 1975 (Cth), s 26(2), s 42A(1B)
Income Tax Assessment Act 1936 (Cth), s 177, s 226L
Supreme Court (Court of Appeal) Rules 2005 (WA),
Result:
Application for extension of time in which to appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr K A Dundo
Respondent : Mr J D Allanson
Solicitors:
Appellant : Q Legal
Respondent : Australian Government Solicitor
(Page 3)
Case(s) referred to in judgment(s):
Australian Securities and Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Esther Investments Pty Ltd v Markalinga Pty Ltd [1989] 2 WAR 196
Gallo v Dawson (1990) 64 ALJR 458
Girando v Girando (1997) 18 WAR 450
Hayes v Powers, unreported; FCt SCt of WA; Library No 990103; 5 March 1999
Hill v Van Erp (1997) 188 CLR 159
Roxborough v Rothmans of Pall Mall Australia (2001) 208 CLR 516
(Page 4)
1 PULLIN JA: This is an application for an extension of time to appeal against a judgment of Master Sanderson dated 15 June 2005. Judgment was for the sum of $38,084,522.24, together with interest. The judgment related to unpaid income tax due to the respondent.
Principles governing an application for an extension of time in which to appeal
2 The discretion to extend time is given for the sole purpose of enabling the Court to do justice between the parties: Gallo v Dawson (1990) 64 ALJR 458 at 459. The matters which have to be considered when deciding whether an extension of time should be granted are that the respondent has a vested right to retain the judgment, the length of the delay, the reasons for the delay, whether there is an arguable case on the appeal and the extent of any prejudice to the respondent. The need for a cogent explanation increases as the time increases: See Girando v Girando (1997) 18 WAR 450 at 454. See generally: Esther Investments Pty Ltd v Markalinga Pty Ltd [1989] 2 WAR 196 at 198; Hayes v Powers, unreported; FCt SCt of WA; Library No 990103; 5 March 1999.
The length of the delay
3 Rule 26(2) of the Supreme Court (Court of Appeal) Rules 2005 (WA) requires any appeal to be commenced within 21 days after the date of the decision. Accordingly, this application for an extension of time was made nearly 13 months out of time. I will deal with the reasons for the delay after considering the question of whether the appellant has an arguable case, and the history of litigation between the parties.
The litigation and the appellant's submission
4 The background is as follows. The amended assessments of income tax, which are the foundation for the judgment, were issued for the years ended 1996 to 1998. There were six of them, all issued in October or November 2000. The appellant objected to these assessments in November and December 2000. On 13 February 2001 the respondent commenced proceedings in the Supreme Court of Western Australia (CIV 1171 of 2001) for the recovery of the unpaid tax under the assessment. The respondent disallowed the objections to the assessments on 13 July 2001.
5 On 2 August 2001 and 4 February 2002, the appellant filed applications to review the respondent's disallowance of the objections. The applications were made to the Commonwealth Administrative
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- Appeals Tribunal ("AAT"). On 15 August 2002 the respondent brought an application for summary judgment in the Supreme Court action. On 10 January 2003, Acting Master Dixon granted the appellant leave to defend.
6 On 3 February 2005 the appellant filed a notice of withdrawal of the AAT matters which had been listed for a three week hearing to commence on 14 February 2005. As a result of the withdrawal, the appellant's applications for a review were taken to have been dismissed by reason of s 42A(1B) of the Administrative Appeals Tribunal Act 1975 (Cth).
7 On 17 February 2005 the respondent's solicitor wrote to the appellant's then solicitor inviting the appellant to consider consenting to judgment. On 1 March 2005 the appellant's then solicitor advised the respondent's solicitor that the appellant would not consent to judgment and expected that the respondent would move for judgment. The appellant's solicitor further advised that the appellant would not be opposing judgment or taking any further steps in the Supreme Court action.
8 On 1 April 2005 the solicitors for both parties attended a Supreme Court status conference and the respondent's solicitor informed the Court that, in the light of the appellant's letter of 1 March 2005, the respondent intended to bring a second summary judgment application. The status conference was adjourned sine die. The respondent filed a second application for summary judgment on 3 June 2005. On 15 June 2005, the application was heard. No-one appeared for the appellant. Judgment was entered by Master Sanderson and he gave no reason for decision.
9 On 17 March 2006 a bankruptcy notice was issued. On 14 July 2006 the Federal Court made orders allowing substituted service, and this resulted in service on 4 August 2006.
10 On 14 August 2006 the appellant commenced proceedings in the Federal Court seeking an order setting aside the bankruptcy notice. The first return dated in the Federal Court proceedings was 22 August 2006, and orders were made for the filing of relevant affidavit evidence. The appellant filed this application for an extension of time on 23 August 2006, the day after the first return date of the Federal Court proceedings. There were then discussions between the parties about whether the matter could be settled. On 6 September 2005 the respondent rejected a proposal put forward by the appellant. In a conversation on 23 September 2005 the respondent advised the appellant that the respondent was not prepared to accept a Pt 10 proposal which had been made. During the conversation,
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- the appellant claimed that he had been defrauded by people who set up an infomercial project scheme in which the appellant had participated.
11 The appellant has filed an affidavit in these proceedings in which he relates events leading to his investment in some infomercial projects. He was introduced to these projects in April 1996. As a result of representations he said were made to him, he invested $1 million in the projects in June 1996 and further amounts in 1997 and 1998, including an investment of $3,520,000 in 1998.
12 The appellant deposes in his affidavit that he was defrauded by the promoters of these schemes. He points to the decision of the Supreme Court of Victoria in Australian Securities and Investments Commission v Infomercial Management Group Pty Ltd [2002] VSC 262 (dated 28 June 2002) ("ASIC v IMG") in the course of which the court said:
"The scheme in each case was a fraud on the investors, if not on the Australian Tax Office."
13 The appellant's affidavit reads:
"I verily believe that the Infomercial Projects as a business, capable of a tax deduction, has never been determined on its merits, as the fraud underlying the schemes had the effect that they failed commercially and the deductibility, had the fraud not been committed, has never been tested."
14 The appellant also deposes in his affidavit that he believes that:
"… had the fraud committed by the Promoters not occurred there would not have been amendments to my tax assessments for my investments in the Infomercial Projects to which the Judgment relates."
15 He asserts that the ATO was aware, suspected or was investigating the activities of the promoters prior to his investments in the projects, and "if so should have taken steps to inform me". The appellant deposes that on the ATO's website there is a web page containing details of settlement arrangements for investment schemes entered into before 30 June 2003, and the list of the investment schemes includes "Infomercial Syndicates".
16 The appellant further deposes:
"I verily believe that evidence was not produced to show that I was defrauded by the Promoters. My understanding is that the
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- Respondent had previously argued that in order to receive a tax deduction on my investments in the Infomercial Projects, the Infomercial Projects must be a business. However the Supreme Court of Victoria has confirmed in ASIC v IMG that 'the interests involved in the schemes were securities' and the promotion and marketing of the schemes resulted in the Infomercial Projects being a securities business dealing in securities".
17 The appellant deposes to the fact that these matters were "never considered" by the court or raised in the court proceedings which resulted in judgment. He deposes that after judgment was obtained:
"… a series of meetings and discussions were held with the Respondent, which failed to resolve the dispute and as a consequence the Bankruptcy Notice has been issued."
18 He concludes by asserting that, given the fact that the Supreme Court of Victoria in ASIC v IMG found that the scheme was a fraud on the investors, if not the Australian Tax Office, an extension of time should be granted to raise the matters referred to above as a defence.
19 The appellant's written submissions submit that the appellant:
"… has an arguable defence that the Tax Assessments are not valid and therefore the amount claimed is not due and payable or alternatively that the Respondent is not entitled to rely on a fraud committed against the Appellant if not the Respondent. Therefore, the Judgment should not be left to stand."
20 The appellant also submits that the penalty tax claimed in the tax assessments pursuant to s 226L of the Income Tax Assessment Act1936 (Cth) should not apply to the appellant, as the infomercial projects to which they relate were not "tax avoidance schemes" for the purposes of that section. Alternatively, it is argued that the penalty tax rate should be 25 per cent.
21 Finally, it is submitted that if the judgment were left to stand and the respondent:
"… is entitled to rely on the legal conduct of the Promoters and their fraud against the Appellant, if not the Respondent, a substantial injustice would result and the Respondent would be greatly enriched at the expense of the Appellant in relation to
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- the penalty tax and general interest claimed in the tax assessments …"
22 The appellant submitted that the respondent would be "unjustly enriched" if recovery was permitted. This was the central theme of the appellant's submissions.
Reasons for delay
23 The appellant has not given any reasons for the long delay in deciding to appeal. The decision of the Victorian court, which is said to give rise to circumstances which might found some defence, was made in 2002. The appellant objected to the assessments and commenced proceedings to review the decisions disallowing the assessments, and then withdrew them. The discussions which took place between the appellant and the respondent were not discussions about the matters to which the appellant now refers. Rather, they were attempts to compromise the proceedings.
Whether there is an arguable case
24 Judgment was entered by Master Sanderson without the appellant attempting to demonstrate that he had a defence to the claim. No grounds of appeal have been filed by the appellant and nor has the appellant provided any draft grounds of appeal.
25 The appellant's argument during submissions was that the respondent would be "unjustly enriched" if permitted to recover the tax. This is an invitation to the Court to make some subjective evaluation about the unfairness of the assessments and then to hold that the claim should be struck down as a result. The notion of unjust enrichment is a "concept and not a definitive legal principle": Roxborough v Rothmans of Pall Mall Australia (2001) 208 CLR 516 per Gummow J at [74]. Before an enrichment of a party may be described as unjust, the Court must be satisfied that there exists some qualifying or vitiating factor, such as mistake, duress or illegality: Hill v Van Erp (1997) 188 CLR 159, per Gummow J at 239 and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ at 379.
26 No attempt has been made to demonstrate the existence of any vitiating factor affecting the assessments in this case. In any event, the conclusive evidentiary effect of the production of a bona fide notice of assessment, means that in practical terms the only option a taxpayer has in
(Page 9)
- resisting payment of tax is to exercise objection and appeal rights under other parts of the taxation legislation. See s 177 of the Income Tax Assessment Act 1936; FJ Bloemen Pty Ltd v The Federal Commissioner of Taxation (1981) 147 CLR 360; Deputy Commissioner of Taxation v Richard Walter Ltd (1995) 183 CLR 168 at 199 - 200, 218 - 219, 229 and 237; McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 269 per Dixon CJ, McTiernan and Webb JJ. The notices of amended assessment were produced to the Master in this case. The appellant's attempts to establish the fraud of the promoters, if relevant, was a matter to be raised in the proceedings in the AAT and not in the recovery proceedings in the Supreme Court.
27 In my opinion, the appellant has not revealed an arguable case.
Prejudice to the respondent
28 There is no prejudice that the respondent will suffer if an extension of time is granted.
Disposition of the application
29 The length of delay is substantial. The vested right the respondent has to retain the benefit of the judgment is not to be disturbed after such a long time unless the other relevant factors strongly point towards the grant of an extension of time. They do not.
30 In view of the fact that the delay has not been explained, the delay is substantial and the appellant has not revealed any arguable case, there will be no injustice if the application for an extension of time is dismissed. That will be the order of the Court.
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