DCT v Zizza
[2002] NSWSC 558
•25 June 2002
CITATION: DCT v Zizza [2002] NSWSC 558 CURRENT JURISDICTION: Common Law FILE NUMBER(S): SC 13425/96 HEARING DATE(S): 18 June 2002 JUDGMENT DATE: 25 June 2002 PARTIES :
Anthony Zizza
Deputy Commissioner of Taxation
(Plaintiff)
(Defendant)JUDGMENT OF: Master Harrison
COUNSEL : Mr M Christie
Mr G Drake
(Plaintiff)
(Defendant)SOLICITORS: Mr A R Shirvington
Ms J Bull
Australian Government Solicitor
(Plaintiff)
Jenny Bull & Company
(Defendant)CATCHWORDS: Set aside judgment, income tax - s 95 interest calculations LEGISLATION CITED: Supreme Court Act 1970 - s 95
Supreme Court Rules - Part 40 r 9(2)
Taxation Administration Act 1953 (Cth) - Part IVC Divisons 4 & 5
Income Tax Assessment Act 1936 (Cth) - ss 166, 177CASES CITED: Cohen v Mcwilliam (1995) 38 NSWLR 476
DCT v Awad [2001] NSWSC 37
McAndrew v FCT (1956) 98 CLR 263
F J Bloemen Pty Ltd v Commissioner of Taxation (1981) 147 CLR 360
DCT v Jonrich Pty Ltd (1986) 17 ATR 880DECISION: (1) The defendant's notice of motion filed 21 December 2001 is dismissed; (2) The defendant is to pay the plaintiff's costs as agreed or assessed.
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
MASTER HARRISON
TUESDAY, 25 JUNE 2002
JUDGMENT (Set aside default judgment, income tax13425/96 - DEPUTY COMMISSIONER OF TAXATION
v ANTHONY ZIZZA
- – s 95 interest calculations)
1 MASTER: By notice of motion filed 21 December 2001 the defendant seeks an order that the default judgment entered on 11 December 1996 be set aside or varied, or alternatively, that any order for interest on the default judgement be set aside or varied and that execution of all writs issued for recovery of the judgment debt be stayed until further order of the court. In the further alternative the defendant seeks that the claim for principal outstanding on the said default judgment be set aside, that the claim for interest be set aside or varied and that the execution of all writs issued for the recovery of the principal and/or interest be stayed until further order of the court. The defendant relied on his affidavit sworn 12 February 2002. The plaintiff relied on two affidavits of Fiona Elizabeth Andrew sworn 26 September 2001 and 11 March 2002 and the affidavit of Anthony Roy Shirvington sworn 6 March 2002.
2 On 6 August 1995 the statement of claim was filed and the plaintiff claimed the sum of $783,886.96 which was comprised of income tax for the years ending 30 June 1978 to 1988, less any credits, together with additional tax for late payment pursuant to s 207 of the Income Tax Assessment Act 1936 (ITAA). No defence was filed. On 11 December 1996 default judgment was entered in the sum of $801,477.28. On 4 October 2001 a writ for levy of property was issued for the sum of $285,147.20.
3 The relevant section of Pt 40 r 9(2) of the Supreme Court Rules provides:
- "(2) The Court may set aside or vary a judgment -
- (b) where the judgment has been entered after judgment has been given in the absence of a party, whether or not the absent party had notice of trial or of any motion for the judgment."
4 For the defendant to succeed in his application to set aside default judgment it must give an adequate explanation for the delay in filing its defence and show that it has a defence on its merits, or as often expressed a bona fide defence. However, as Priestley JA said in Cohen v McWilliam (1995) 38 NSWLR 476, it is a fundamental duty of the court to do justice between the parties.
5 On 7 January 1997 the defendant’s solicitor advised the plaintiff that he intended to apply to have judgment set aside so that he could lodge a defence. The defendant did not make an application to have judgment set aside until 21 December 2001, nearly four years later. The defendant’s counsel conceded that the defendant did not have an arguable defence.
6 However according to the defendant it would be fairer and more equitable if the original judgment debt be set aside and the plaintiff issue fresh proceedings on the basis of the final demand contained in its letter dated 31 May 2001. In that way interest would not run on that alleged principal sum until entry of judgment in the fresh proceedings.
7 Alternatively the defendant submitted that the interest component under s 95 of the Supreme Court Act 1970 (SCA) should be recalculated. This is because on 31 May 2001 the plaintiff acknowledged that it had made three errors in the calculation of the original assessment, and it was on this date that the defendant became aware of the actual liquidated sum of money he was liable to pay. Alternatively, if the judgment remains on foot then the defendant submitted that interest should be calculated from either January/February 2000 or 31 May 2001 or 27 September 2001. The plaintiff submitted that these calculations devolve from the amounts referred to in the assessment notice and this court cannot go behind this notice.
8 It is true that the court cannot impugn the veracity of the assessment notice except by way of appeal under Part IVC Divisions 4 and 5 of the Taxation Administration Act 1953 (Cth). Such an appeal does not lie to this court. In DCT v Awad [2001] NSWSC 37 I briefly set out how the taxation regime works and I repeat it here.
9 Upon the basis of a person’s income tax return, the Commissioner may make an assessment of the amount of taxable income of that person and of the tax payable thereon - s 166 Income Tax Assessment Act 1936 (Cth) (ITAA). Where, however, a person defaults in furnishing a tax return or alternatively the Commissioner is not satisfied with the return furnished by any person or has reason to believe that any person who has not furnished a return has derived taxable income, the Commissioner may make an assessment of the amount upon which, in his judgment, income tax ought to be levied and the amount of tax payable thereon - see s 167(a), (b), (c). In this case the assessment was made by way of asset betterment assessments.
10 Such tax as assessed becomes due and payable on the date specified in the notice of assessment (s 204(1)), as a debt due to the Commonwealth (s 208(1)), and where unpaid may immediately be sued for and recovered by the Commissioner in any court of competent jurisdiction (ss 207(2), 209(1)).
11 Section 177(1) of the ITAA provides:
“The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of assessment are correct.”
12 By virtue of s 177(1) of the ITAA the production of a notice of assessment by the Deputy Commissioner is, except in proceedings on appeal against the assessment, conclusive evidence of the due making of the assessment and that the amount and all the particulars of the assessment are correct. Upon production of the notices of assessment in recovery proceedings, s 177(1) operates to preclude the tax payer from impugning their veracity in those proceedings - see McAndrew v FCT (1956) 98 CLR 263 at 281; FJ Bloemen Pty Ltd v Commissioner of Taxation (1981) 147 CLR 360 at 375; 11 ATR 914; DCT v Jonrich Pty Ltd (1986) 17 ATR 880 at 883, 899-900. The veracity of the assessments can only be impugned in proceedings by way of appeal under Part IVC Divisions 4 and 5 of the Taxation Administration Act. The defendant has already exercised his rights to challenge the assessments in the ATT, the Federal Court and the Full Federal Court.
13 However it is after judgment is entered that the calculation of interest is made pursuant to s 95 of Supreme Court Act 1970. As with default judgment, the Supreme Court Act empowers this court to determine interest pursuant to s 95.
14 The relevant portions of s 95 of the Supreme Court Act state:
“Interest on debt under judgment or order
(1) Where judgment is given or an order is made for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as is from time to time unpaid.
(4) If an order is made for the payment of costs, the Court may order that interest is to be paid on the amount so ordered, at the prescribed rate referred to in subsection (1), from the date or dates when the amount in respect of costs was duly paid.”…
15 The court has a discretion in relation to interest after judgment is given. It can “otherwise order” that interest be payable on some other basis other than the prescribed rate. The issue is whether the defendant has discharged his onus and made out grounds to “otherwise order” the payment of interest.
16 Originally the statement of claim sought payment of the sum of $783,886.96. On 31 May 2001, the plaintiff was advised he had been granted a further remission of $51,820.46 and his total liability as at 31 May 2001 was $343,110.85 and was comprised of:
Judgment Debt 801,962.28
Less: Remission of additional charges for lay payment
Previously granted for the period 1 September 1991
To 29 August 1995 279,319.09
Less: Remission of additional charges to take into account
Errors in asset betterment assessments 51,820.46
Less: Income tax assessment for the 1996 year 591.27
Less rounding benefit 0.01
Less: Payment received 30 December 1999 350,000.00
Balance of Judgment Debt 120,231.45
Add: Judgment Interest calculated to 30 June 2001 161,327.20
Add: Recovery costs 341.00
Total Debt 343,110.85Add: Legal costs 61,238.20
17 In about January or February 2000 the defendant offered to settle the debt by making a further payment of $350,000. This offer was rejected on the basis that it would not pay out the debt. The defendant contests that this sum would have discharged the defendant’s tax liability.
18 At paragraph 3 of Ms Andrew’s affidavit of 26 September 2001 she deposed that the following payments or credits had been made or applied on account of the judgment. On 11 December 1996, there was partial remission of additional tax for late payment $279,319.09. On 11 December 1996, there was partial remission of additional tax for late payment $51,820.46. On 12 May 1997, there was credit for 1996 assessment $591.27. On 12 May 1997, there was a rounding credit of $0.01; and on 23 December 1999, payment by defendant $350,000.00. Paragraph 5 refers to the calculation of interest as being $164,915.75. A schedule annexed to this affidavit details those interest calculations.
19 On 16 November 2001 the defendant’s accountant was advised that judgment interest has been reduced to take into account the remissions of additional tax. From the schedule of calculations, the adjustments were made back to the principal sum. Interest has been calculated from the date of judgment, namely the 12 December 1996 on the sum of $470,822.73 not the sum of $801,962.28. The defendant has corresponded with the plaintiff in relation to this tax liability over a number of years. Yet over the past five years he has not sought to set aside the judgment. It is my view that it is not the interests of justice to set the judgment aside. As I have previously stated, the defendant does not have an arguable defence nor an adequate explanation for delay in applying to set aside the default judgment.
20 The plaintiff has calculated the defendant’s interest pursuant to s 95 properly. An “otherwise order” should not be made. I dismiss the motion.
21 Costs are discretionary. Normally costs follow the event. The defendant is to pay the plaintiff’s costs as agreed or assessed.
22 The court orders that:
(1) The defendant’s notice of motion filed 21 December 2001 is dismissed.
(2) The defendant is to pay the plaintiff’s costs as agreed or assessed.
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