Deputy Commissioner of Taxation v Barron - [2018] WADC 108

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   DEPUTY COMMISSIONER OF TAXATION -v- BARRON [2018] WADC 108
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   16 AUGUST 2018
DELIVERED          :   30 AUGUST 2018
FILE NO/S:   CIV 4255 of 2016
BETWEEN:   DEPUTY COMMISSIONER OF TAXATION
Plaintiff

AND

PAUL DOUGLAS BARRON
Defendant

Catchwords:

Practice and procedure - Summary judgment application - Consideration of estoppel as a defence - Turns on its own facts

Legislation:

Nil

Result:

Judgment entered for the plaintiff

Representation:

Counsel:

Plaintiff	:	Mr Chu
Defendant	:	Mr R G S Harrison

Solicitors:

Plaintiff	:	Minter Ellison
Defendant	:	Tottle Partners

Case(s) referred to in decision(s):

AGC (Investments) Limited v Federal Commissioner of Taxation (1991) 91 ATC 4180
Commissioner of Taxation v Tropitone Furniture Company Pty Ltd (1991) 22 ATR 361
Ellison v Deputy Federal Commissioner of Taxation (1999) 99 ATC 4576
Federal Commissioner of Taxation v Wade (1951) 84 CLR 105
Federal Commissioner of Taxation v Winters (1997) 97 ATC 4967

DEPUTY REGISTRAR HEWITT:

This action was commenced by a writ issued on 17 November 2016. The application with which I am required to deal is a chamber summons for a summary judgment filed on 18 April 2018. Although filed considerably out of time, no issue is taken by the defendant in that regard.
In litigation of this kind the deputy commissioner has the benefit of a number of provisions which operate in his favour, namely a provision which provides that the amount of an income tax assessment is conclusive proof of a debt due and recoverable by the Commonwealth from the taxpayer and a further provision which provides that an evidentiary certificate is prima facie evidence according to its tenor. Considering that evidence in isolation, it is clear that the plaintiff has established a case for the judgment he seeks in the summary judgment application and it is therefore necessary to look to the defence to see if there is anything raised by the defendant which could amount to a defence giving rise to a triable issue.
The principal issue raised by the defendant is one of estoppel and that estoppel is said to arise in the following way. The defendant had failed to file income tax returns for a number of years as a consequence of which he encountered some difficulties with the Australian Taxation Office. Of principal concern was a lump sum of money which he received from a company in Canada with the contention being whether or not that lump sum comprised income in which case it would be taxable or, alternatively, capital in which case it would not. There were a series of discussions and interactions between the representatives of the plaintiff and the defendant and on 12 December 2010 the plaintiff wrote to the defendant setting out certain proposals to pay what he then considered to be an appropriate amount for outstanding income tax. There were a number of conditions attached to the proposal including the waiver of general interest charge. Nonetheless, those negotiations led to a decision which was taken by the plaintiff, presumably on the basis of the information provided by the defendant to the plaintiff in his letter setting out his straitened financial circumstances, that it was not economical to pursue the income tax and general interest charge debts and that decision was notified to the defendant. The defendant alleges that there were consequences relating to that decision, those consequences being, firstly, he did not consider it necessary to retain certain records relating to the, what I might call, Canadian transactions; secondly, the defendant through his association with a company, Sandpiper Entertainment Pty Ltd of which he held an approximately 17% share and of which he had control, undertook certain borrowings in order to obtain film rights and intellectual property rights and the total of those borrowings was in the order $215,000. It is not at all clear to what extent the defendant committed himself to the raising of those monies since they are said to have been procured through a combination of a bank overdraft and loans, both personal and commercial. There is no evidence whatsoever upon which I can draw any conclusion as to whether or not the defendant exposed himself to a significant liability nor whether the loans remain outstanding. The information is so scanty that I find it extremely difficult to characterise that transaction as imposing any detriment on the defendant. Additionally, the defendant alleges that in 2011 and 2012 he borrowed the sum of $95,000 from some undisclosed source to assist conducting the business in which he was engaged. He alleges that money remains outstanding and, in respect of both these transactions, he alleges that they would not have been undertaken had he not received an assurance from the plaintiff that he would not be pursued for his outstanding income tax. As is well known, an estoppel can be created when a party relies upon a representation and acts to his detriment through that reliance. Two issues arise. The first is whether or not the detriment described by the defendant is in truth a detriment. The loan to the company does not appear to me to have been a detriment. There is no evidence at all that the defendant suffered any kind of detriment by virtue of the borrowings by the company to which he was, to some unascertained degree, a party. In the absence of more useful information it is not possible to understand how it can be said that the defendant personally suffered a detriment by entering into this transaction nor whether as a consequence of this transaction he was in any way out of pocket financially or remains liable financially.
As to the loan of $95,000, again, there is a lack of detail which is disturbing. It is not indicated from whom the money was borrowed, the terms upon which it was borrowed or precisely how the money was applied.
Furthermore, I find that by borrowing money 'from 2015 and onwards ...' for the purposes described as to 'progress the creative and commercial development and exploitation ...' of certain rights and intellectual properties could not be fairly characterised as a detriment. Nor can I see borrowing a sum of money to provide working capital for his business as constituting a detriment, particularly in light of the fact that the defendant during that time defaulted in the payment of further tax assessments of substantial amounts.
In the letter dated 10 December 2010 it is clear that the defendant intended to maintain his business as a basis to produce ongoing amounts which could be remitted to the plaintiff in reduction of his tax liability. It is therefore clear from the tenor of that letter that the defendant intended to take the steps necessary to keep the business afloat. That does not sit very happily with the assertion that it was necessary to borrow $95,000 and that he would not have done so had he been aware that the Australian Taxation Office might pursue him for the outstanding tax liability in respect of which a non‑pursuit decision had been made.
The next aspect to consider is even if there was a representation such as is alleged by the defendant and even if there were reliance upon it as argued by the defendant, whether or not as a matter of law an estoppel can operate to prevent the Commissioner of Taxation from reversing his non-pursuit decision and pursuing a taxpayer for outstanding income tax and interest on those amounts.
In the course of argument I have been referred to a very helpful article by one John Bevacqua appearing at page 95 of the Journal of Australasian Tax Teachers Association 2009, volume 4, No 1. The learned author in the article has referred to a number of cases, the first being Federal Commissioner of Taxation v Wade (1951) 84 CLR 105, in which Kitto J stated, 'No conduct on the part of the commissioner could operate as an estoppel against the operation of the act'.
Similarly, in AGC (Investments) Limited v Federal Commissioner of Taxation (1991) 91 ATC 4180, Hill J stated:
There is no room for the doctrine of estoppel operating to preclude the commissioner from pursuing his statutory duty to assess tax in accordance with the law. The Income Tax Assessment Act imposes obligations on the commissioner and creates public rights and duties, which the application of the doctrine of estoppel would thwart.
Similarly, in Ellison v Deputy Federal Commissioner of Taxation (1999) 99 ATC 4576, Wallwork J stated:
In this case there had been no reason for the commissioner not to change his mind and take action to protect the revenue which it was his public duty to protect.
Similarly, but somewhat less emphatically, in Commissioner of Taxation v Tropitone Furniture Company Pty Ltd (1991) 22 ATR 361, Gobbo J noted:
It seems to me that it is highly doubtful, having regard to well‑established principles, that save for well known exceptions, estoppel cannot lie against a statutory body charged with carrying out the performance of its duties.
There are, however, some cases such as Federal Commissioner of Taxation v Winters (1997) 97 ATC 4967 in which Moynihan J contended that in an appropriate case an estoppel might be available and there are a number of cases which suggest that in his dealings with a taxpayer the commissioner is required to act with fairness to the taxpayers.
Additionally, the proposition advanced by the defendant is, in my view, weakened by the fact that, subsequent to the notification, which he alleges led him to act to his detriment, further income tax assessments were made, those being of $33,714.30 for the year ended 30 June 2011, $5,414.20 for the end year 30 June 2012, $2,622.30 for the year ended 30 June 2014, together with a general interest charge in relation to those assessments, none of which were paid and additional administrative penalties for failing to lodge income tax returns as required for the years 2005, 2006 and 2008 and interest on the amounts due by way of administrative penalties for those failures were also not paid. The income tax assessment for the year ended 30 June 2011 of approximately $33,000 also indicates that at the time the defendant was making submissions concerning his inability to pay income tax in his letter dated 10 December 2010, he was in fact in receipt of substantial income for that financial year, as is revealed by the amount of income tax which was assessed against him.
The final matter which arose in the course of the argument before me concerned the notion of fairness. I queried whether it was appropriate for the commissioner to be claiming a general interest charge for the period following his indication that he would not pursue the defendant for the outstanding income tax and the date upon which that decision was reversed. Whilst there may be some overall requirement by the commissioner to act fairly towards a taxpayer, likewise, in my view, there should be some requirement for the taxpayer to act fairly to the commissioner. I am aware, because of the letter dated 10 December 2012, that the taxpayer had made a number of promises to pay some monies towards the outstanding income tax debt and none of those promises were kept. I also know that the description of the financial circumstances of the defendant in his letter dated 10 December 2012 was not as dire as he had indicated and he must have had a substantial net income, even allowing for the income tax assessed upon it. With those facts in mind, whether or not the commissioner is required to, and has acted, fairly to this taxpayer, seems to me to be an irrelevant issue and it is one that I shall not consider further.
For all the matters that I have discussed above, I am of the view that the defence advanced by this defendant to the claim by the commissioner in this action is not capable of overturning the statutory presumptions upon which the commissioner relies and I therefore consider that the commissioner should obtain the judgment which he seeks in the summary judgment application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JC
COURT OFFICER
7 SEPTEMBER 2018