Deputy Commission of Taxation v De Simone
[2012] VSC 644
•21 December 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2011 2530
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| v | |
| SERAFINO FRANCESCO DE SIMONE | Defendant |
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JUDGE: | LANSDOWNE AsJ | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 7 December 2011, 19 March 2012, with further correspondence in May 2012. | |
DATE OF JUDGMENT: | 21 December 2012 | |
CASE MAY BE CITED AS: | Deputy Commission of Taxation v De Simone | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 644 | |
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TAXATION – Debt recovery – summary judgment – summary judgment refused in respect of amounts not the subject of a conclusive notice of assessment
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Rosewarne | Australian Government Solicitor |
| For the Defendant | In person |
HER HONOUR:
Application and proceedings
The plaintiff seeks by summons filed 21 November 2011 summary judgment in respect of proceedings commenced by writ filed 20 May 2011. I commenced to hear the application on 7 December 2011 and the hearing was adjourned part heard to 19 March 2012. On that date I reserved judgment. The plaintiff has reduced the amount sought by letter dated 9 May 2012.
The writ and statement of claim seeks unpaid income tax for the three years ending 30 June 1999, 30 June 2000 and 30 June 2001, together with interest, administrative penalties and interest on those penalties. The amount claimed in the statement of claim as at 18 May 2011 was $597,164 together with interest from that date and costs. At the hearing on 19 March 2012, the plaintiff claimed (as at 16 March 2012) the sum of $603,910.95 in respect of these matters. By letter dated 9 May 2012 from the solicitors for the plaintiff, the plaintiff reduced the amount sought as of 4 May 2012 to $599,290.46.
The defendant filed a defence on 29 June 2011. That defence does not admit any aspect of the plaintiff’s case and denies the central aspects. The defence makes the following assertions:
· It denies the making and service by the plaintiff of the relevant notices of assessment (paragraph 3).
· It claims a set-off by way of refunds due (unparticularised) (paragraph 5).
· It disputes the general interest charge and penalties on the basis of claimed undertakings given by the plaintiff in certain Federal Court proceedings (paragraph 6).
· It asserts that it is beyond the legislative power of the Commonwealth to empower the Commissioner to impose a general interest charge and/or penalties (paragraph 6).
· It asserts there are mistakes of calculation and a failure to independently verify the amounts claimed (paragraphs 9 and 14).
· It asserts that any administrative penalty was not authorised and in breach of undertakings given and inconsistent with announcements made by the Commissioner (paragraph 10).
· It alleges bad faith on the part of the plaintiff in that it is asserted that the plaintiff seeks to punish the defendant for disputing an income tax liability and ”to take resources and time away from the defendant” (paragraph 16).
· It asserts that the amount claimed for the year ended 30 June 1999 is not in accordance with a decision of the Administrative Appeals Tribunal made in respect of an appeal by the defendant against determination of his objection in respect of that year (paragraph 17).
· It asserts that the plaintiff has not given effect to undertakings and remissions given to the defendant by letter dated 28 March 2007 (said to apply to the administrative penalties) (paragraph 18).
· It asserts that certain provisions of taxation legislation that prevent the defendant from challenging the debt are beyond the legislative power of the Commonwealth (paragraphs 19 and 20).
· It disputes the amount claimed on the basis that deductions claimed by the defendant were appropriate and should have been allowed (paragraph 21).
· It asserts that assessments issued by the plaintiff in respect of the “Jolson partnership” were done “in bad faith and/or were manifestly excessive and/or did not take into account all the relevant considerations” on the basis of information apparently known by the plaintiff in relation to the defalcations and fraud of the director of that partnership (paragraph 22).
· It makes the similar assertions in relation to assessments issued by the plaintiff in respect of the Seachange and Mews partnerships (i.e. bad faith, that the assessments were manifestly excessive or that they did not take into account all relevant considerations) having regard to a ruling issued on 30 June 1994 by the plaintiff.
The defendant issued and served a Notice of Constitutional Matter dated 14 November 2011 asserting that ss 175 to 177 of the Income Tax Assessment Act 1936 are not within the legislative power of the Commonwealth on various grounds. That Notice also raised issues under the Victorian Charter of Human Rights and Responsibilities Act 2006 (“the Charter”). All State and Commonwealth Attorneys‑General were served with the Notice. No Attorney‑General entered an appearance and the Commonwealth Attorney indicated by letter dated 2 December 2011 that he did not propose to intervene.
In respect of the matters raised under the Charter, the Victorian Equal Opportunity and Human Rights Commission advised by letter dated 5 December 2011 that it did not propose to intervene.
The defendant sought to cross‑examine the plaintiff’s witness on 7 December 2011. I refused that application. The application commenced to be heard on 7 December 2011. By orders made that day I permitted the defendant to file affidavit material “as to matters of fact or calculation relating only to facts in the plaintiff’s case that are not the subject of conclusive evidence already adduced.” The defendant subsequently filed an affidavit sworn 2 February 2012.
After conclusion of the hearing on 19 March 2012, by letter dated 9 May 2012, the solicitor for the plaintiff advised of two changes to the amount sought. First, the letter advises that the plaintiff allowed an objection by the defendant to the assessment for the year ended 30 June 2001. As a consequence, the penalty claimed by the Commissioner for the year ended 30 June 2001 was reduced to nil and interest in respect of same extinguished. The second change is that the plaintiff also remitted in full the penalty for the year ended 30 June 2000, formerly remitted in part only. As a consequence the general interest charge in respect of that penalty was also extinguished. As set out earlier, as a consequence of those changes the plaintiff advised that it now sought summary judgment as at 4 May 2012 in the sum of $599,290.46. Fresh certificates or notices of assessments were not supplied.
By letter to the Court dated 10 May 2012, the defendant accepts the statement that penalties and the associated interest have been reduced to nil but states that he has not been supplied with any calculations or worksheets as to the effect of that decision to enable him to verify the amount now sought. He claims that an issue of “embedded interest” attached to the remitted penalty for the 2000 tax year remains unresolved, and is still, as at the date of that letter, under investigation by the Commissioner. He also states that a further hearing is to be held, scheduled for 14 June 2012, as to an extension of time for the balance of his objection to the assessment for 2000, which has a flow on effect for 2001.
No further correspondence from either party as to these matters has been received.
Material
The plaintiff relies on the affidavits of Kerry Strautmanis sworn 21 November 2011 and 7 December 2011, and the affidavit of Ekta Dhall sworn 19 March 2012. Counsel for the plaintiff filed written submissions on 7 December 2011 and 19 March 2012 and also prepared a table guide to the amount sought.
The defendant relies on his affidavit sworn 2 February 2012, written submissions dated 7 December 2011 and a chronology filed in court on 19 March 2012.
Legislative scheme
Provision for the collection of unpaid tax by court process is made by the Income Tax Assessment Act 1936 (“ITAA”), the Taxation Administration Act 1953 (“TAA”) and Taxation Administration Regulations 1976 (“Regulations”).
Schedule 1 to the TAA is entitled “Collection and recovery of income tax and other liabilities” and makes provision for the same. Clause 255-5 provides:
1.An amount of a tax-related liability that is due and payable:
(a)is a debt due to the Commonwealth; and
(b)is payable to the Commissioner.
2.The Commissioner, a Second Commissioner or a Deputy Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable.
These proceedings are commenced by the Deputy Commissioner of Taxation seeking recovery of a tax-related liability that is said to be due and payable in this Court, being a court of competent jurisdiction.
In the usual proceeding for debt recovery between private individuals or entities, the alleged debtor is able in those proceedings to dispute the amount claimed both as to calculation and liability. Accordingly, a defendant may be able to show an arguable defence as to one or other of these matters, sufficient to render the giving of summary judgment inappropriate. The taxation legislation, however, greatly limits the possibility of an arguable defence in recovery proceedings by the legislative provisions I now set out.
The major limitation is imposed by the provisions challenged by the defendant in his defence and the Notice of Constitutional Matter being ss 175-177 of the ITAA. These sections limit the capacity of a tax payer to challenge the calculation of the amount claimed in debt recovery proceedings. They also limit the capacity of a tax payer to challenge the validity of an assessment. The sections provide as follows:
175Validity of assessment
The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.
175AObjections against assessments
(1)A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.
(2)A taxpayer cannot object under subsection (1) against an assessment ascertaining that:
(a)the taxpayer has no taxable income; or
(b)the taxpayer has an amount of taxable income and no tax is payable;
unless the taxpayer is seeking an increase in the taxpayer’s liability.
176Judicial notice of signature
All courts and all persons having by law or consent of parties authority to hear, receive and examine evidence, shall take judicial notice of the signature of every person who is or has been the Commissioner, a Second Commissioner or a Deputy Commissioner, provided such signature is attached or appended to any official document.
177Evidence
(1)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 the assessment are correct.
(2)The Production of a Gazette containing a notice purporting to be issued by the Commissioner shall be conclusive evidence that the notice was so issued.
(3)The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy Commissioner, shall be conclusive evidence that the document was so issued.
(4)The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced.
(5)To avoid doubt, subsection (4) applies to a copy or an extract of a document that was given to the Commissioner on a data processing device or by way of electronic transmission unless the taxpayer can show that the taxpayer did not authorise the document.
The effect of ss 177(1) and 175A is that the sole means of objection to the amount or particulars in a Notice of Assessment is that set out in Part IVC of the TAA. That Part enables a tax payer who disputes these matters to lodge an objection and thence to seek review of the determination of the objection by the Commissioner in the Administrative Appeals Tribunal (“AAT”) (and thence the Federal Court on appeal on a question of law) if the tax payer remains dissatisfied. The Part also permits direct appeal to the Federal Court in certain instances. The sections on their face also purport to exclude review of the due making of an assessment except in Part IVC proceedings. As will shortly be discussed, the High Court has confirmed that judicial review by the Federal or High Courts remains possible in respect of claimed jurisdictional errors, although not errors made in the course of exercising jurisdiction.
That debt recovery is intended to be distinct from challenge to the assessment is made clear by ss 14ZZM and 14ZZR in Part IVC of the TAA which provide as follows:
14ZZM Pending review not to affect implementation of taxation decisions
The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.
14ZZR Pending appeal not to affect implementation of taxation decisions
The fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no appeal were pending.
Other evidentiary provisions to assist the Commissioner in the recovery of tax said to be payable are contained within sections 255-45 and 255-50 of Schedule 1 to the TAA. Section 255-45 provides relevantly as follows:
(1)A certificate:
(a)stating one or more of the matters covered by sub‑section (2) or (3); and
(b)signed by the Commissioner, a Second Commissioner or a Deputy Commissioner;
is prima facie evidence of the matter or matters in a proceeding to recover an amount of a tax related liability.
(2) A certificate may state:
(a)that a person named in the certificate has a tax-related liability; or
(b)that an assessment relating to a tax-related liability has been made, or is taken to have been made, under a taxation law; or
(c)that notice of an assessment, or any other notice required to be served on a person in respect of an amount in a tax‑related liability, was, or is taken to have been, served on a person under a taxation law; or
(d)that the particulars of a notice covered by paragraph (c) are as stated in the certificate; or
(e)that a sum specified in the certificate is, as at the date specified in the certificate, a debt due and payable by a person to the Commonwealth.
(3)(not here relevant)
Section 255-50 of Schedule 1 to the TAA provides that statements in the plaintiff’s statement of claim are also prima facie evidence of the matters there stated. It is important to note the distinction between these provisions (which provide that certificates or averments are prima facie evidence of the matters there stated), and s 177(1) which provides that a notice of assessment is conclusive evidence of three matters: that the assessment was duly made, that the amount is correct, and that the particulars stated are correct. The distinction lies in relation to the nature of the document (certificate or notice of assessment); the matters to which it relates (certificates may be given as to broader matters, including service of a notice of assessment, and amounts owing that are not included in the notice of assessment such as additional tax and interest); and the effect (whether conclusive or only prima facie evidence).
Proof that a certificate has been signed by the correct person is facilitated by Regulation 45 of the Regulations. That regulation provides:
45 Presumption as to signatures
(1) Judicial notice must be taken of the names and signatures of the persons who are, or were at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner.
(2) A certificate, notice or other document bearing the written, printed or stamped name (including a facsimile of the signature) of a person who is, or was at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner in the place of a person’s signature is taken to have been duly signed by the person, unless it is proved that the document was issued without authority.
Judicial consideration of legislative provisions
These provisions have been the subject of judicial consideration in many cases. For current purposes I will refer to the following.
Sections 175-177 were the subject of detailed consideration by the High Court in Commissioner of Taxation v Futuris Corporation Ltd (“Futuris”)[1] and, in respect of s 177(1), in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (“Broadbeach”)[2]. The constitutional validity of the provisions was not directly challenged in either case, but in Futuris the Court, in the joint judgment of Gummow, Hayne, Heydon and Crennan JJ, made comment as to whether or not the provisions infringed Chapter 111 of the Constitution dealing with the judicial power, which is one of the arguments advanced by the defendant here. That judgment stated, in relation to the provisions as a whole:
The recourse to the Federal Court (and thereafter by special leave, to this Court) which is provided by Pt IVC of the Administration Act meets the requirement of the Constitution that a tax may not be made incontestable because to do so would place beyond examination the limits upon legislative power.[3]
[1](2008) 237 CLR 146, [2008] HCA 32.
[2](2008) 237 CLR 473, [2008] HCA 41.
[3]At [9].
This view was expressly repeated later in that judgment in relation to s177 (1), which provides that, except in Pt IVC proceedings, a notice of assessment is conclusive evidence of the due making of the assessment and that the amount and particulars of the assessment are correct, in these words:
In recovery proceedings s 177(1) operates to change what otherwise would be the operation of the relevant laws of evidence. But, given the presence of Pt IVC, s 177(1) does not operate to impose an incontestable tax or otherwise fall foul of the principles which were considered in Nicholas v The Queen and which respect usurpation of the federal judicial power by deeming to exist an ultimate fact.[4] (citations omitted)
[4]At [65].
It was alleged in Futuris, as here, that a decision of the Commissioner had been made in conscious maladministration of the taxation Acts. The Court held that s 175 and s 177 do not prevent judicial scrutiny as to whether an assessment has been made in conscious maladministration, and such scrutiny is available by way of judicial review for jurisdictional error on application to the Federal Court pursuant to s 39B(1) of the Judiciary Act 1903 (Cwlth).[5] They cautioned, however, that:
Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made or upheld.[6]
[5]Ibid, at [55]-[56].
[6]Ibid, at [60].
The Court in the joint judgment held in Futuris that bad faith was not proved in that case.
The relationship between debt recovery by the Commissioner and ss 175-177 was directly considered by the High Court in Broadbeach. In that case, the Commissioner had issued statutory demands against the taxpayer companies in respect of tax claimed unpaid. Each company both challenged the calculation of the claimed tax in Part IVC proceedings in the AAT after its objection was disallowed by the Commissioner, and applied to the Queensland Supreme Court for orders setting aside the statutory demand on the basis that there was a genuine dispute as to the amount owing. The companies were successful at trial and on appeal in having the statutory demands set aside. Thus the case directly concerns debt recovery of claimed unpaid tax, the amount of which is in dispute, and so is analogous to the current proceedings.
The High Court expressly considered the conclusive evidence provision contained in s177(1) of the ITAA. In the joint judgment of Gummow A-CJ, Heydon, Crennan and Kiefel JJ, the Court noted the adverse comment that “the apparent asperity with which s 1777(1) operates and its impact upon what would otherwise may be avenues open to taxpayers when defending recovery proceedings” has attracted in a number of decisions, and quoted from a number of such decisions.[7] They concluded that:
But harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue.
[7]At [41]-[43].
The Court then cited comment in other decisions to the same effect.[8] Kirby J noted in his separate judgment that the taxpayers did not in either Futuris or Broadbeach challenge the constitutional validity of s 177(1), and joined in the orders proposed by the majority only on the basis of the arguments advanced.
[8]{44]-[45].
Constitutional challenges to the taxation legislation have been made unsuccessfully in Federal Commissioner of Taxation v Trautwein[9] (“Trautwein”) and Deputy Federal Commissioner of Taxation v Clyne[10](“Clyne”). In Trautwein, the taxpayer argued that legislation providing for the imposition of additional tax by way of penalty for non payment of tax constituted a breach of the separation of powers enshrined in the Constitution, in that it conferred on the Commissioner, a non judicial officer, the power to impose a penalty, which as part of the judicial power can only be exercised by the courts. He also argued that such penalty infringed s 55 of the Constitution on the basis that it imposed a tax, not upon income but upon a subject of taxation different from income. Both arguments were unsuccessful. Evatt J held that it was the statute that imposed the penalty, not the Commissioner, who only had the power to remit it, being properly a part of the executive power. Further, he held there was no infringement of s 55 of the Constitution, because that section was not intended to prevent the inclusion of incidental penal provisions in the Acts levying tax, which are “an essential part of any income tax system”.[11]
[9](1936) 56 CLR 211, single judge decision of the High Court, by Evatt J.
[10]82 ATC 4070, single judge decision of the Supreme Court of NSW, by Hunt J.
[11]Op cit, at 216-217.
In Clyne, the Commissioner sought to recover tax, the amount of which was under dispute in pending taxation appeals. At that time the Commissioner was not required to pay interest on monies paid by way of tax for which the taxpayer was subsequently found to be not liable. The taxpayer argued that repayment without interest constituted the acquisition of property not on just terms, contrary to s.51(xxxi) of the Constitution. The argument was rejected by Hunt J. on the basis that the imposition of tax creates a debt, it does not compulsorily acquire property.
The question of the relationship between taxation and acquisition of property was also adverted to in the recent decision of the High Court in Roy Morgan Research Pty Ltd v Commissioner of Taxation and anor[12]. That case concerned the superannuation guarantee. The Court held that the guarantee was a tax, and constitutionally valid on that basis. In reaching that conclusion the joint judgment noted that “taxation stands outside the guarantee (of acquisition on just terms) provided by s 51 (xxxi).”[13] The argument that the imposition of a civil liability for a pecuniary penalty amounts to acquisition of property was rejected by the High Court in The Queen v Smithers; ex parte McMillan[14], which concerned the imposition of a pecuniary penalty for importation of prohibited goods, and Re DPP; ex parte Lawler[15], which concerned the civil forfeiture of property following a conviction under fisheries legislation.
[12](2011) 281 ALR 205, [2011] HCA 35.
[13]At [15].
[14](1982) 152 CLR 477 at 487.
[15](1994) 179 CLR 270 per Brennan J at 278, Gaudron and Deane JJ at 285, Dawson J at 291 and McHugh J at 293.
The usual application of s 177(1) in conclusively establishing the liability by evidence of a notice of assessment is illustrated in a number of cases to which counsel for the plaintiff took me. By way of example, I refer to Deputy Commissioner of Taxation (Vic) v Yates[16] (“Yates”) and Deputy Commissioner of Taxation v Epov[17](“Epov”). In Yates, the taxpayer sought to make a distinction between the applicability of s 177(1) to an original assessment and an amended assessment. Nathan J. ruled that no such distinction applied, and that the Commissioner was not required in proceedings for final judgment to establish the basis of an assessment, whether original or amended, by way of affidavit. The notice of assessment proved by s 177(1) was sufficient. To find otherwise, he held, “would divest s 177 of any meaning”.[18]
[16](1987) 19 ATR 219, a single judge decision of the Supreme Court of Victoria, by Nathan J.
[17] [2008] NSWSC 1085, a judgment by Harrison As J of the Supreme Court of NSW.
[18]Op cit, at p223.
In Epov, the taxpayer had objected to tax and additional tax assessed for the year ending 1999, payable by virtue of the notice of assessment issued on 11 September 2001 on 16 October 2001. The taxable income there assessed was $500,000. The taxpayer challenged the notice of assessment in the Federal Court. The Deputy Commissioner issued an amended assessment for 1999 dated 22 June 2004, prior to orders in the Federal Court, which amended the taxable income to $80,291. The amended assessment expressed the due date for payment as “as previously advised” i.e. as 16 October 2001. Interest was recalculated, based on the reduced amount, but still from 16 October 2001, when, according to the Deputy Commissioner, the liability arose. The Federal Court subsequently, on 14 December 2004, made orders that the objection decision be set aside and the taxable income and tax payable thereon be “in accordance with the amended assessment issued to the applicant on 22 June 2004”. There was no finding or order made as to when the tax became payable, and so from what date interest accrued.
The defendant sought to resist summary judgment in respect of interest claimed from 16 October 2001 (on the reduced tax) on the basis that interest should only run from 21 days after the amended assessment of 22 June 2004.
Harrison AsJ held that:
upon production of the notices of assessment in recovery proceedings, s177(1) operates to preclude the tax payer from impugning their veracity in those proceedings…The veracity of the assessments can only be impugned in proceedings by way of appeal under Part IVC Divisions 4 and 5 of the TAA53.[19] (citations omitted)
[19]Op cit, at [24].
In that case, as in this in relation to some years, the taxpayer had exercised his right to challenge under that Part. Harrison AsJ. held that the taxpayer could have challenged the date on which the tax became payable in those proceedings, but that in the recovery proceedings it could not be challenged, and the proposed defence was accordingly hopeless.
The different operation of the evidentiary provisions in relation to notices of assessment (conclusive by virtue of s 177(1)) and certificates as to additional tax and interest (prima facie only) is illustrated by Deputy Commissioner of Taxation v Hooper[20] (“Hooper”). That judgment concerned an appeal from the giving of summary judgment to the Deputy Commissioner. The appeal was allowed in part, and leave to defend given, but only as amounts claimed by way of additional tax, interest and charges, which were the subject of prima facie certificates. The taxpayer conceded that by virtue of s 177(1) the notices of assessment were conclusive evidence of the due making of the assessments and that the amount and all particulars are correct. Hansen J. affirmed that the taxpayer is precluded in recovery proceedings from questioning the amount of assessments to income tax and the particulars thereof. He contrasted this with the certificates that constitute only prima facie evidence of the matters stated therein, and said that “in relation to these, it is open to the defendant to challenge liability for the amount claimed.” [21]
[20][2005] VSC 69, a judgment of Hansen J.
[21]Ibid, at [6]-[7].
The taxpayer there argued that by virtue of inconsistencies in the plaintiff’s evidence as to additional tax, interest and general charges, leave to defend should be given in respect of those matters. In other words, the defendant asserted that summary judgment should be refused due to deficiencies in the plaintiff’s evidence, as well as having regard to his evidence in opposition. Hansen J. refused leave to defend in respect of a challenge to interest that he held, on analysis, amounted to a challenge to the correctness of the underlying assessment, on which interest was levied.[22] He granted leave to defend in respect, however, of other challenges the subject of prima facie certificates, going to the allocation of payments and the correctness of the amounts due for additional tax, interest and the general charge.[23]
[22]Ibid, at [36].
[23]Ibid, at [49].
The signature provisions were considered in Deputy Commissioner of Taxation v Warwick (No 2)[24] (“Warwick”). In that case, the taxpayer had lodged objections which had not been determined by the time summary judgment was sought in recovery proceedings. The taxpayer sought leave to defend on the basis of a number of arguments, including that evidentiary certificates were not “signed” by the Commissioner, a Second Commissioner or a Deputy Commissioner because it appeared from the face of the certificates that the facsimile signature of the Deputy Commissioner had been affixed by someone other than herself. French J (as he then was) held that:
In my opinion, a Deputy Commissioner can affix a facsimile signature personally or through an appropriate officer acting under her authority…In any event, where a certificate, notice or other document bears a facsimile of the signature of a Deputy Commissioner reg 172 has the effect that the onus lies upon the person challenging its authenticity to show that the document was issued without authority.[25]
[24](2004) 56 ATR 371, [2004] FCA 918
[25]Ibid, at [91].
The reference is to regulation 172 of the Income Tax Regulations 1936, which was essentially in identical terms to the current provision, reg 45 of the Regulations.
In Horner v Deputy Commissioner of Taxation[26] (“Horner”) the Court rejected an argument of the taxpayer that summary judgment ought not be given because the Deputy Commissioner had failed to prove that the facsimile signature of a Deputy Commissioner on an evidentiary certificate had been applied by an officer authorised by the Deputy Commissioner so to do.
[26]A judgment of Fenbury DCJ of the District Court of Western Australia delivered 24 February 2003, in proceedings CIV 733 of 2002.
Test for summary judgment
The summons on which the plaintiff relies does not specify whether the application for summary judgment is made pursuant to Order 22 of the Supreme Court (General Civil Procedure ) Rules 2005 (“the Rules”) or pursuant to the Civil Procedure Act 2010 (“CPA”). Under s63 of that Act summary judgment may be given if the defence has no real prospect of success. In a number of decisions trial judges of this Court have expressed the view that the test for summary judgment under the CPA is different to, and requires a lower threshold than, that required under the Rules.[27]
[27]Wheelahan and Anor v City of Casey and Ors (No.3) [2011] VSC 15 at [8] (Osborn J as he then was); Matthews v SPI Electricity Pty Ltd and SPI Electricity Pty Ltd v Utility Services Corporation Limited and Ors(Ruling No.2) [2011] VSC 168 at [18] to [22] (J.Forrest J); Ottedin Investments Pty Ltd v Portbury Developments Co. Pty Ltd and anor [2011] VSC 222 at [8] to [18] (“Ottedin”) (Dixon J); JBS Southern Australia Pty Ltd and anor v Westcity Group Holdings Pty Ltd and ors {2011] VSC 476 at [39] to [50] (Croft J); Dattner v Wharton [2011] VSC 610 at [43] (Habersberger J); Samfa Pty Ltd v Hilane Pty Ltd and ors [2011] VSC 644 at [9]-[10] (Davies J).
Recently the Court of Appeal in Karam v Palmone Shoes Pty Ltd[28] held that the change in terms was not intended to establish a new or different test, and that the power to exercise summary judgment is still to be exercised sparingly and it should only be granted if it is clear that there is no real question to be tried.[29] In that case it was clear there was no real question to be tried, and so it was not necessary to distinguish between the two tests. For the avoidance of doubt, however, I will determine this application under the old standard, being that summary judgment will only be given if it is clear that there is no real question to be tried.
[28][2012] VSCA 97
[29]Ibid, at [28].
I will also separately consider the discretion vested in the Court to refuse summary judgment, even if there is no defence, by r 22.06 (b) and s 64 of the CPA.
Consideration of the plaintiff’s case
The plaintiff must prove its case to obtain summary judgment irrespective of any defence. The amounts sought, and proof thereof, are as follows.
1999 tax year
In this year the defendant provided funding to “Jolson, the Musical”. The plaintiff relies on an amended assessment dated 22 March 2004. A copy of the assessment is KS-2 to Ms Strautmanis’ first affidavit. It bears a facsimile signature of Paul Duffus, who is elsewhere described as a Deputy Commissioner of Taxation. The itemised amounts are for tax on taxable income, Medicare levy, additional tax for late return, understatement penalty and interest, credit for group certificates, tax offsets and other credits and a credit for the balance of the previous assessment, resulting in a claimed amount of $234,591.07 said to be due on 27 April 2004.
The defendant lodged an objection to this amended assessment, which was not allowed by the Commissioner. He appealed to the AAT, which found partially in his favour by judgment dated 13August 2008 and thence to the Federal Court.
The Commissioner is required to implement a decision of the AAT and issued an amended assessment dated 24 September 2008. This amended assessment is in evidence by way of exhibit to Ms Strautmanis’s second affidavit, but it is not pleaded in the statement of claim and so not relied upon by the plaintiff in its case. The plaintiff initially sought leave to amend the statement of claim to rely on the later certificate, but then withdrew that application.
The plaintiff’s case is that the statement of claim accurately claims the amount due after implementation of the AAT decision by the particulars to paragraph 9. These set out in tabular form, in relation to 1999, the increased liability pursuant to the amended assessment of 22 March 2004, plus general interest up to 17 May 2011 (the starting date for interest is not stated, only the end date) less a credit of $99,001.46. This credit is entirely unparticularised in the statement of claim. The basis for it is not stated (i.e. whether the decision of the AAT or otherwise); nor is it stated whether it is made up of credits of principal only, interest only or both; nor are dates given as to when it applied.
The plaintiff did not adduce evidence in relation to any of these matters in the first affidavit of Ms Strautmanis, filed with the summons for summary judgment. Rather, Ms Strautmanis relied solely, as counsel for the plaintiff submits the plaintiff is entitled to do, on KS-2, being a conclusive copy notice of assessment pursuant to s 177(1), and KS-4, being a certificate which states it is pursuant to s 255-45 of the TAA, bearing the facsimile signature of Paul Duffus, there described as a Deputy Commissioner of Taxation. The certificate states that the notice issued 22 March 2004 (and the other notices of assessment relied upon) are “taken to have been served” on the defendant and states the total amount due for all years as at 21 November 2011. An updated certificate, also bearing Mr Duffus’ facsimile signature, and dated 6 December 2011 was filed in court on the first day of hearing, 7 December 2011, restating that the notices of assessment are taken to have been served, and updating the amount said to be owed as at 6 December 2011.
In her second affidavit, sworn on the day of first hearing, 7 December 2011, Ms Strautmanis did give particulars as to the credit, swearing that it gave effect to the decision of the AAT and exhibiting the amended assessment of 24 September 2008. This second affidavit exhibits the defendant’s detailed statement of account and swears that a copy of this account was given to the defendant on 4 November 2011. Notwithstanding this further information, the defendant asserts that the decision of the AAT has not been applied correctly.
The amounts owing by the defendant for all three years together were updated by way of affidavit sworn by Ms Dhall just prior to the second day of hearing. That affidavit swears to a further credit of $3,796.32 since the commencement of proceedings (the details are not there given, but this would appear to be the credit to which Ms Strautmanis swears in relation to 2000- see below) and further interest of $55,917.15 as at 19 March 2012, bringing the total tax claimed to $591,785.77. The affidavit exhibits a certificate stated to be pursuant to s 255-45 of Schedule 1 of the TAA and bearing the facsimile signature of Robert Ravanello, described as a Deputy Commissioner of Taxation, which states that that sum is due and payable by the defendant as at 19 March 2012.
Having regard to the conclusive nature of the copy notice of assessment I find that the plaintiff has proved the debt there claimed of $234,591.07, but only as at the date of that notice of assessment i.e. pre implementation of the AAT decision. I am satisfied that the plaintiff has prima facie proved service of the notice of assessment (by virtue the certificates bearing Mr Duffus’ signature), the amount of general interest and the credit (by virtue of the averments in the statement of claim, and the certificates bearing the facsimile signatures of Mr Duffus and Mr Ravanello). I will consider in relation to the defendant’s case whether the defendant has adduced evidence sufficient to prove to the contrary, or establish sufficient doubt so as to warrant refusal or part refusal of summary judgment.
2000 tax year
In the 2000 tax year the defendant advanced funds towards the construction of two retirement villages, being Seachange Village in Ocean Grove and Mews Village in outer Perth, Western Australia. The statement of claim relies on a notice of assessment dated 4 April 2005, a copy of which bearing the facsimile signature of Paul Duffus is KS-3 to Ms Strautmanis’ first affidavit. That notice of assessment claims $15,734.72 for that year. The plaintiff relies on the certificate bearing Mr Duffus’ facsimile signature which is KS-4 for proof of service of the notice. The statement of claim pleads a general interest charge thereon up to and including 17 May 2011. The amount of interest is updated in the updated figures given by the certificates bearing the facsimile signatures of Mr Duffus and Mr Ravenello as at 21 November 2011 and 16 March 2012 respectively. Ms Strautmanis swears that subsequent to the filing of the statement of claim, the defendant received a credit adjustment of $3,796.30 for this tax year which also included an adjustment of interest.[30]
[30]Affidavit of 21 November 2011, at [24].
I find having regard to the conclusive evidence of KS-3 and the prima facie evidence of the averments in the statement of claim, KS-4 (as to service) and the subsequent certificates as to the amount owing, that the plaintiff has proved the amount sought for 2000, subject to the defendant establishing evidence to the contrary in relation to service or interest.
2001 tax year
The plaintiff pleads an amended notice of assessment issued 5 October 2004, which is proved by KS-1 to Ms Strautmanis’ first affidavit. As in relation to other years, that is a copy of the notice of amended assessment bearing the facsimile signature of Mr Duffus. It claims $101,661.82 by way of tax due.
In respect of the 2001 tax year, the plaintiff asserts in the statement of claim a credit of $66, 830.80, which accordingly must have occurred after the date of the assessment relied upon, 5 October 2004, and before the institution of proceedings. This credit is entirely unexplained. It is not particularised in the statement of claim, and no evidence is given in relation to it by Ms Strautmanis in either of her affidavits.
As in relation to the earlier years, interest is pleaded in the statement of claim to 17 May 2011 and the plaintiff relies on the certificates bearing the facsimile signatures of Mr Duffus and Mr Ravenello as to prima proof of service and the total amount owing as at the date of the certificates. I find, as in respect of earlier years, that the plaintiff has proved these amounts, subject to evidence to the contrary in relation to service, the credit and interest.
Administrative penalty
2001
The statement of claim includes an allegation that the defendant owes a sum by way of administrative penalty for the 2001 tax year and interest thereon. Ms Strautmanis swears the plaintiff made an assessment of an administrative penalty incurred by the defendant in respect of the 2001 tax year in the sum of $25,415.45 and served notice of same by notice dated 14 October 2004, which is KS-5 to Ms Strautmanis’ first affidavit. As this amount was not paid by the due date, the plaintiff also claimed interest on that sum. The penalty was remitted by the plaintiff down to 5% in July 2011, resulting, the plaintiff asserts, in a credit adjustment of $45,998.54. Ms Strautmanis swears[31] that this adjustment included an adjustment of interest.
[31]Affidavit of 21 November 2011, at [23].
As stated earlier, the plaintiff subsequently allowed an objection out of time by the defendant to the imposition of penalty and has reduced the penalty to nil for 2001, and claims to have extinguished the interest claimed thereon.
2000
The statement of claim does not include any allegation that a sum was owed by way of administrative penalty in respect of the 2000 tax year, or interest thereon. Nor is there any such evidence in the affidavits relied upon by the plaintiff. It is somewhat surprising then that the letter of 9 May 2012 from the solicitors for the plaintiff to the Court says penalty for the year ending 30 June 2000 has now been remitted in full, also extinguishing the interest charged in respect of same.
Consideration of the defence
As set out earlier, the defence raises a number of challenges to the statement of claim. It denies the making and service of the relevant notices of assessment (paragraph 3); it challenges the calculation of the sums sought on various grounds, including that the Commissioner has not properly implemented the AAT decision (paragraphs 9, 14, 17, 18, 21, 22 and 23); it claims a set off (paragraph 5); it challenges the constitutional validity of ss175-177 of the ITAA, on which the plaintiff relies to prove its case and the provisions that enable the imposition of a general interest charge and penalties (paragraphs 6,19 and 20); it alleges bad faith, including inconsistency with undertakings given by and announcements made by the plaintiff and an intent to punish the defendant (paragraphs 6, 10, 16, 22 and 23) and asserts the plaintiff did not take into account all relevant considerations (paragraphs 22 and 23).
It is not enough for the defendant simply to allege these matters in his defence. In respect of matters which are conclusively established by a s 177(1) copy notice of assessment, the authorities to which I have referred earlier establish that the defendant cannot contest those matters in these proceedings even on evidence. In respect of contestable matters, for example the allegations of invalidity of the legislation and those facts the subject of only a prima facie certificate (such as post assessment changes, service, and, to the extent it relates to interest and post assessment changes only, the amount owing) the onus is on the defendant to show an arguable defence. In the case of the factual matters, to do so the defendant must adduce evidence to support the allegation.
The defendant gives detailed evidence of claimed errors of calculation and claimed bad faith in his affidavit sworn 2 February 2012. In addition, he raises additional matters of dispute as follows. He asserts that the averments in the statement of claim, upon which the plaintiff relies pursuant to s 255-50 of Schedule 1 of the TAA, were made in bad faith as they are “clearly in error to the actual knowledge or presumed knowledge of the plaintiff.” (paragraph 3). He disputes that the plaintiff may rely on certificates to which the signature of Paul Duffus, even if a Deputy Commissioner of Taxation, is affixed on the basis that the stamp was not affixed with his (actual) knowledge or consent (paragraphs 4, 25). He asserts that the amended assessment dated 22 March 2004, upon which the plaintiff relies in respect of the tax year ended 30 June 1999 is no longer valid as it was found excessive by the AAT, and that the subsequent amended assessment of 24 September 2008 is also invalid due to “transcription and arithmetic errors” (paragraph 5). He challenges the notices of assessment relied upon for the 2000 and 2001 tax years on the basis of the existence of, or inconsistency with, earlier notices for each year, as well as claiming errors in each assessment (paragraphs 6 and 7).
The defendant elaborated on these matters by way of submission in his written and oral submissions.
I determine the matters raised by way of defence as follows.
Challenges contained within the Notice of a Constitutional Matter
The defendant submits that the constitutional matters he raises mean that the case is not suitable for summary determination. In my view, constitutional defences are to be evaluated in the same way as other defences put- if arguable, then summary judgment should be refused; if not reasonably arguable, it may be granted. Although the constitutional validity of ss 175-177 was not directly challenged in Futuris or Broadbeach the dicta therein, which I have cited above, together with the other cases to which I have referred, establish in my opinion that the defendant has no arguable defence on the basis of the matters asserted in paragraphs 2.1-2.2.10, and 2.12-2.13 of his Notice.
In particular, because these sections allow challenge to an assessment by way of Part IVC the tax is not incontestable; additional tax and penalties (in fact no longer relevant in this case in any event) do not infringe the preservation of the imposition of penalty to the judiciary, and the provisions do not otherwise infringe or usurp judicial power ; judicial review by the Federal Court is permitted on certain grounds; and the imposition of tax is not the acquisition of property.
The defendant also raises the question whether the sections infringe a right of due process created by the Constitution. It is by no means clear that any such right is created by the Constitution. [32] Even if this be the case, given the statements of the majority of the Court in Futuris that the provisions do not make tax incontestable, I do not consider it reasonably arguable that the provisions infringe a right of due process.
[32]International Finance Trust Company Ltd v NSW Crime Commission (2009) 240 CLR 319, per French CJ at [50]-[52].
The matters asserted in paragraphs 2.11- 2.2.12 rely on the Charter. I accept the submission of the plaintiff, based on analogy with Priestley v Godwin and ors[33], that the Victorian Charter applies only to the interpretation of Victorian laws, not a law of the Commonwealth. The issue in that case was whether the ACT Human Rights Act 2004 applied to a challenge to the Federal Court Act of Australia 1976 (Cwlth) by virtue of s 79 of the Judiciary Act 1903 (Cwlth), there being no Commonwealth law that covered the field of the relevant section of the ACT Act. The Court held the ACT Act did not apply to the interpretation of a Commonwealth law, and applied only to the interpretation of ACT laws. Further, the plaintiff is correct in his assertion that the Charter only applies to a Court as a public authority in its administrative capacity.
[33](2008) 171 FCR 493, [2008] FCA 1453
Service
In relation to service of the notices of assessment, although this is not admitted, there is no evidence to displace the prima facie evidence contained in the certificates and other evidence supports service, in particular the subsequent challenges by the defendant.
Signature
The asserted defences, or challenges to the plaintiff’s case, on the basis that the plaintiff has not proved that the facsimile signatures were applied by a person with the actual knowledge of the Deputy Commissioner are not arguable having regard to the authorities discussed earlier. Actual knowledge is not required; it is sufficient that the facsimile was applied by a person with the authority to do so, and this is presumed to be the case unless there is evidence to the contrary. There is no such evidence here, only speculation.
The defendant puts the argument slightly differently in his submissions. He submits that the requirement that a s 177(1) copy notice of assessment be “under the hand of” one of the nominated officers:
implies something more than an affixing of a facsimile signature by way of stamp used by a delegate. Indeed, it strongly indicates that delegation is not available for such a certificate.[34]
[34]Written submissions at [10].
Again, I do not consider this reasonably arguable in the face of the decisions previously discussed.
Other challenges to the validity of the notices of assessments
As established in Futuris, challenge to the validity of a notice of assessment is prohibited by s 175 and 177 other than in Part IVC proceedings or in proceedings by way of judicial review, on the grounds of jurisdictional error. Accordingly, the matters relied upon here by the defendant to challenge the validity of the various notices of assessment in evidence cannot constitute a defence in these proceedings.
Bad faith
The defendant claims that the plaintiff has acted in bad faith in a number of respects. The remedy for bad faith where it amounts to jurisdictional error is by way of judicial review in the Federal Court, not by way of defence to recovery proceedings. As held in Futuris s 175 does not prevent a challenge on the basis of jurisdictional error, only a challenge, except in Part IVC proceedings, to the exercise of power within jurisdiction. The bar is of course very high in a challenge on the basis of jurisdictional error. Where the claim is really one of an error of calculation, i.e. to the exercise of power or discretion within jurisdiction, the remedy is objection and challenge by way of Part IVC. It is not a basis to resist summary judgment in these proceedings that discovery may support suspicion of jurisdictional error. The need for discovery must relate to a defence that is arguable in these proceedings.
Errors of calculation
Claimed errors of calculation, including set off, can only constitute a defence to the extent they are outside the (conclusive) notices of assessment relied upon, and evidence is required to show such arguable defence. Otherwise the remedy for an error of calculation is by way of objection and Part IVC proceedings. Similarly, it is not sufficient for the defendant to merely assert that the amounts sought in the certificates have not been particularised or verified. The plaintiff does not have to explain or justify how the amounts are calculated. He is entitled to claim the amount as a lump sum, without detail, and evidenced by certificate only. The only basis for resisting summary judgment in respect of that sum is if an error claimed by the defendant falls only within a prima facie certificate, and, the defendant’s evidence, not just assertion, establishes sufficient doubt to provide a basis for refusing summary judgment in that respect. In this regard, sufficient doubt will exist unless the defence raised is bound to fail.
I consider that the defendant is able to challenge some aspects of the claim on the ground of arguable error of calculation. This is possible because the plaintiff has chosen to plead its case in relation to the 1999 tax year, and seek to prove it, on the basis of the pre-AAT decision notice of assessment even though this notice of assessment was overtaken by subsequent events even before the proceedings commenced, being the AAT decision and its implementation. The subsequent notice of assessment, dated 24 September 2008 is in evidence, as KS-8 to Ms Strautmanis’ second affidavit, but counsel for the plaintiff after consideration withdrew an application to amend the statement of claim to rely upon it.
The developments after the date of this assessment are proved only in a prima facie way, by the averments in the statement of claim and by the evidentiary certificates. In addition, Ms Strautmanis exhibits to her second affidavit the defendant’s statement of account said to support the evidence she gives that the AAT decision had been properly recorded and its consequential effects taken into account in the credit which appears in the statement of claim for that year.
The defendant disputes that the AAT decision has been properly implemented. He says that the AAT decision required his taxable income to be reduced by $67,700. The difference in taxable income between the 2004 assessment and the 2008 assessment is, however, only $67,000. It may be that, on examination at trial, the plaintiff will be able to show its calculations correct (either because the AAT decision properly only required a reduction of $67,000 or because the calculations used to create the eventual total in fact allowed $67,700, or for other reason). At first blush, however, the defendant’s claim appears to at least be arguable, by comparison between the decision and the difference in taxable income between the two assessments. On this application that is all that is required. I will give the defendant leave to defend in respect of all amounts claimed for the 1999 tax year, because interest presumably depends on the underlying tax, and so on the taxable income. Other aspects of the amount claimed may also be affected by error in implementation of the AAT decision.
In respect of the 2000 tax year, the plaintiff relies on a conclusive certificate and a prima facie certificate as to interest only. Accordingly, the only challenge permitted in these proceedings is to interest. I will consider this below.
For the 2001 tax year, by contrast to 2000 and similarly to 1999, the plaintiff relies on a conclusive assessment less a credit (the subject of a prima facie certificate only) and interest (also the subject of a prima facie certificate). I will consider interest below. I have not identified any challenge in the defendant’s material to the credit pleaded after the notice of assessment. The defendant says in his affidavit that he was not refunded the amount of $63,480.45 stated to be a credit, but this amount is included on the notice of assessment. The defendant relies on Cassaniti v Commissioner of Taxation[35] (“Cassaniti”) to argue that certain matters he contests are not “particulars” of the notice of assessment, and so may be challenged. That case concerned credits for amounts withheld from salary. Edmonds J held that the quantification of that credit on a notice of assessment was not a particular of the assessment. I consider that it is distinguishable on the facts from this case. I consider that the challenge to the credit on the notice of assessment relied upon for 2001 to be a challenge to a conclusive assessment which can only be made in Part IVC proceedings. Accordingly, subject to the question of interest, I do not consider there is any arguable defence to the amounts claimed for 2001.
[35][2010] FCA 641
General interest
In respect of all three years, the plaintiff claims interest on the unpaid tax. The defendant disputes the entitlement to interest in respect of each year on a number of bases. The plaintiff generally, but not exclusively, relies on certificates to prove interest which are prima facie evidence only. Accordingly, if the defendant is able to show that he has an arguable defence to interest the subject of a prima facie certificate then summary judgment should be refused as to that component.
I will first deal with the interest of different types which is specifically claimed on the notices of assessment relied upon by the plaintiff for the 1999 and 2000 tax years. The defendant asserts, following Cassaniti, that “the calculation of interest on a debt or a penalty is not a particular but a statement of account and therefore not protected by section 177(1).”[36] His argument appears to turn on interest being “the automatic application of calculations under the Act or the flow through of factual matters” rather than “the actual assessment of taxable income”.[37]
[36]Written submissions at [35].
[37]Ibid, [30] –[31].
As stated above, Cassaniti relates to credits, not interest, which is a debit. For the defendant to be correct, but s 177(1) still to have force, there would need to be demonstrated a difference between interest and other debits appearing on the notice of assessment, including the principal tax. Despite his argument summarised above, I do not consider this is shown. I consider that this interest claimed is conclusively proved in these proceedings by the notices.
I consider a different conclusion is required, however, in respect of the interest claimed for 1999 on the prima facie evidence of the averments in the statement of claim and prima facie certificates. As discussed earlier, the plaintiff has chosen to rely on the pre- AAT decision assessment (dated 22 March 2004) and apply interest to that, reduced by a credit as a consequence of implementation of the AAT decision. A later assessment was issued, dated 24 September 2008, which is in evidence but is not relied upon. Accordingly, the interest on, and credits to, the 1999 tax year are the subject of prima facie certificates only.
As set out above, I will allow leave to defend in respect of the whole of the sums sought for 1999, including interest, because of an arguable defence that the AAT decision was not properly applied.
The defendant also challenges the interest applied to the amounts claimed for the 2000 and 2001 tax years on the basis that the Commissioner “applied the interest and penalties not from the self assessed amounts but from his own changed figures.”[38] In my view, this is a challenge to the underlying figure on the basis of which interest is levied, which figure is the subject of conclusive notices of assessment. Accordingly, this defence is not available in these proceedings.
[38]Ibid, [53].
Finally, the defendant challenges the interest for each year on the basis that it has been charged on overpayments made by way of refund paid to him as a consequence of the original assessments for those years, but no notice pursuant to s8AAZN of the TAA was issued.
That section provides:
8AAZN Overpayments made by the Commissioner under taxation laws
(1) An administrative overpayment (the overpaid amount):
(a) is a debt due to the Commonwealth by the person to whom the overpayment was made (the recipient); and
(c) may be recovered in a court of competent jurisdiction by the Commissioner, or by a Deputy Commissioner, suing in his or her official name.
(2) If:
(a) the Commissioner has given a notice to the recipient in respect of the overpaid amount, specifying a due date for payment that is at least 30 days after the notice is given; and
(b) any of the overpaid amount remains unpaid at the end of that due date;
then the recipient is liable to pay the general interest charge on the unpaid amount for each day in the period that:
(c) started at the beginning of that due date; and
(d) finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:
(i) the overpaid amount;
(ii) general interest charge on any of the overpaid amount.
(3) In this section:
administrative overpayment means an amount that the Commissioner has paid to a person by mistake, being an amount to which the person is not entitled.
The defendant relies on Deputy Commissioner of Taxation v De Angelis[39], a single judge decision of a judge of the District Court of South Australia, to support his contention that in the absence of a notice pursuant to this section, which he says was not given, summary judgment should not be given in respect of interest charged on an overpayment by way of refund. In that case the plaintiff sought summary judgment for an administrative overpayment and interest thereon. The plaintiff relied on a conclusive notice of assessment reversing a GST refund to prove the overpayment and a prima facie certificate as to the interest. No notice under s 8AAZN had been given. Summary judgment was given by a Master in respect of the overpayment, but not the interest. On appeal, the judge refused summary judgment, but, contrary to the defendant’s submission, this was not on the basis of the failure to comply with the notice requirement. Rather, the judge held there was a genuine dispute as to whether or not the payment in question was an overpayment at all. In response to the argument of the plaintiff that the notice of assessment was conclusive in this regard, the Court relied on Neutral Bay Pty Ltd v Commissioner of Taxation[40], a decision of the Full Court of the Supreme Court of Queensland in which a statutory demand was set aside on the basis that there was a genuine dispute as to the existence of the debt notwithstanding that it was the subject of a conclusive certificate.
[39][2008] SADC 103
[40](2007) 25 ACLC 1,341
At the time of the judgment in De Angelis an appeal from that decision by special leave had been argued in the High Court and judgment reserved. The judgment was subsequently delivered in the Broadbeach decision discussed earlier, which also concerned this appeal. Thus the basis for determination in De Angelis has been overturned by the High Court.
Accordingly, even if it is correct that interest has been charged on overpayments without a notice being given, s 175 and s 177(1) prevent challenge to that defect because the overpayment has been included in the notices of assessment relied upon and the validity of those notices, or the correctness of the amount there claimed, cannot be challenged in these proceedings.
Conclusion as to possible defences
I consider the defendant has an arguable defence in respect of the 1999 tax year, but not otherwise. I will give leave to defend in respect of that tax year.
Discretion
The Court may refuse summary judgment and give leave to defend even where there is no arguable defence on the basis that there ought to be a trial notwithstanding the absence of arguable defence (r 22.06(1)(b)) or because it is not in the interests of justice to give summary judgment or the dispute is of such a nature that only a full hearing on the merits is appropriate (s 64 of the CPA). I have considered the following matters in relation to the exercise of the discretion to refuse summary judgment.
The first matter is the manner in which the plaintiff has pleaded his case. It is pleaded in a very confusing manner. First, the statement of claim is not chronological, either as to tax year or notice of assessment relied upon. The first affidavit of Ms Strautmanis provides evidence in accordance with this framework, and so perpetuates the obscurity. The table prepared by counsel for the plaintiff providing a breakdown of liability would not have been necessary had the statement of claim been more clearly pleaded, and the evidence given accordingly.
Next, as set out earlier, the plaintiff has chosen to rely on notices of assessment already overtaken by events prior to the commencement of proceedings in respect of the 1999 and 2001 tax years. This has been significant in the grant of leave to defend in respect of 1999, but in respect of the subsequent change for 2001, being the credit, no defence is put.
Finally, the amount sought by the plaintiff in the statement of claim has changed a number of times (for reasons other than additional interest due to the effluxion of time or payment), both after the commencement of the proceedings and before hearing of the application (as shown by paragraphs 23 and 24 of Ms Strautmanis’ first affidavit), and after hearing of the application (as shown by the May correspondence). Despite these changes, the plaintiff has not sought to amend the statement of claim to reflect the new amount sought.
The confusing nature of the pleading and presentation of the evidence has lengthened the consideration of the application considerably, but I do not consider that it justifies further refusal of summary judgment. The changes to the amount sought, at least to the extent they relate to later consideration of objections by the defendant in Part IVC proceedings, is an inevitable consequence of the strict separation of recovery of tax and challenge to the calculation of tax that the legislation requires. Accordingly, neither do these changes justify refusal of summary judgment.
The defendant gives evidence in his affidavit of certain additional matters which he contends show a “propensity to make mistakes” on the part of the plaintiff. He says that the plaintiff has failed to give a proper accounting and explanation of the tax sought, contrary to the Taxpayer’s Charter and contends in his affidavit that summary judgment is sought by the plaintiff to relieve him of the obligation to explain his decisions and provide the material in support of those decisions and to have the calculations and decisions tested under cross-examination. The defendant seeks a hearing on the merits after discovery to allow disclosure and testing of the calculations and also to establish the matters of bad faith on which he relies. These relate to the Commissioner’s claimed actual or constructive knowledge of the activities of a Mr Brereton, a solicitor, in relation to loans claimed as deductions by the defendant and disallowed.
Given the legislative scheme I do not consider that the defendant’s claimed desire to test the plaintiff’s lump sum figures by discovery and cross examination is sufficient to justify refusal of summary judgment in the absence of an arguable defence. The plaintiff is entitled to put his case by way of lump sum figures proved by conclusive and prima facie certificates. Further, discovery must be for the purpose of proving a defence in these proceedings, not to ground a challenge which can only be brought elsewhere.
Accordingly, I do not consider there is any discretionary reason to refuse summary judgment otherwise shown to be available.
Orders
I will give leave to defend in respect of the 1999 tax year.
In respect of the other years, I will give summary judgment subject to the following. First, the statement of claim should be amended to reflect the amount now sought. That amount had further changed by May of this year, and may now have changed further, either by an increase in interest due to the effluxion of time, or by decision in pending objection proceedings.
Next, updated evidence is required as to the amount now sought, consistent with these reasons and the amended statement of claim.
Finally, depending on how that updated evidence is given, some aspects of the amendments and certificates may be contestable, in which case I will give the defendant an opportunity to adduce further evidence in answer.
The plaintiff is required to prepare and circulate draft orders in accordance with these reasons. Those orders should also make provision for any amended defence in respect of 1999 following amendment to the statement of claim.
I will hear the parties as to costs if required.
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