Deputy Commissioner of Taxation v Bazzo
[2017] WASC 329
•17 NOVEMBER 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: DEPUTY COMMISSIONER OF TAXATION -v- BAZZO [2017] WASC 329
CORAM: ACTING MASTER STRK
HEARD: 27 JUNE 2017
DELIVERED : 27 JUNE 2017
PUBLISHED : 17 NOVEMBER 2017
FILE NO/S: CIV 3057 of 2016
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND
TINA MICHELLE BAZZO
Defendant
Catchwords:
Summary judgment - Income tax recovery proceedings - Defence of 'conscious maladministration' - Effect of s 175 of the Income Tax Assessment Act 1936 (Cth) and s 350-10(1) of sch 1 of the Tax Administration Act 1953 (Cth) - Turns on own facts
Legislation:
Income Tax (Transitional Provisions) Act 1997 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Income Tax Regulations 1936 (Cth)
Taxation Administration Act 1953 (Cth)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiff: Ms C H Thompson
Defendant: Mr M P Sunits
Solicitors:
Plaintiff: Australian Government Solicitor
Defendant: Zafra Legal
Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] HCASL 131
Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 17
Commissioner of Taxation v Bosanac [2016] FCA 448
Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146
Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Minister for Immigration & Multicultural & Indigenous Affairs v SBAN [2002] FCAFC 431
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
ACTING MASTER STRK: By chamber summons dated 4 April 2017 the plaintiff sought summary judgment against the defendant. The plaintiff sought that judgment be entered against the defendant in the sum of $980,331.95 together with general interest charges accrued to the date judgment pursuant to s 5.15 Income Tax Assessment Act 1997 (Cth) (ITA 1997), div 5 of the Income Tax (Transitional Provisions) Act 1997 (Cth), and pt IIA of the Taxation Administration Act 1953 (Cth), together with costs. At the hearing of the summary judgment application I entered judgment in favour of the plaintiff and indicated that I would publish my reasons, which now follow.
Background
These proceedings were commenced by writ of summons with a statement of claim on 29 November 2016 and concerned alleged unpaid income tax.
In summary, the plaintiff claimed that the defendant was assessed to pay income tax for the year of income ending 30 June 2016 (the relevant period). A notice of assessment in respect of the relevant period was served on the defendant on or about the issue date of the notice in accordance with the Income Tax Assessment Act 1936 (Cth) (ITA 1936) and the Income Tax Regulations 1936 (Cth). Income tax for the relevant period became due and payable pursuant to s 5.5 of the ITA 1997 on 21 November 2016. The plaintiff said that the defendant failed to pay income tax for the relevant period on or before the due date and by reason of that failure became liable to pay the general interest charge pursuant to s 5.15 of the ITA 1997 and pt IIA of the Taxation Administration Act. The plaintiff claimed that as at 29 November 2016 the defendant was indebted to the Commonwealth of Australia in the sum of $932,129.84 in respect of income tax and additional charges for late payment.
By these proceedings, the plaintiff sought to recover the amount which it said was due and unpaid together with further general interest charges and costs.
After service was effected pursuant to substituted service orders, an appearance was filed on behalf of the defendant on 20 January 2017. As the chamber summons for summary judgment was filed on 4 April 2017, leave was required. By consent, the plaintiff was granted leave to file and serve an application for summary judgment supported by affidavits at a later date, which date was further extended by consent. The application for summary judgment was heard and determined on the basis that leave was not in issue.
In support of its application for summary judgment, the plaintiff relied on the affidavit of Cong Thanh Nguyen (an Australian public service officer in the Australian Taxation Office), affirmed on 4 April 2017. The plaintiff also relied upon a certificate dated 27 June 2017 and made under s 350‑10 of sch 1 of the Taxation Administration Act, by which it was certified that as at 26 June 2017 the sum of $980,331.95 was a debt due and payable by the defendant to the Commonwealth of Australia; and that the debt comprised income tax liabilities and general interest charge which had accrued on those liabilities up to 26 June 2017. The plaintiff also relied on its written outline of submissions dated 15 June 2017.
In opposition to the application for summary judgment, the defendant relied upon her affidavit sworn on 9 May 2017 and filed 10 May 2017 (the first Bazzo affidavit); together with her supplementary affidavit sworn 20 June 2017 and filed on the same date (the second Bazzo affidavit). The defendant also relied upon a written outline of submissions dated 23 June 2017 and filed 26 June 2017.
The plaintiff's claim
As to liability for tax, the plaintiff's claim may be summarised as follows:[1]
(a)The plaintiff is a Deputy Commissioner of Taxation. In his official name, he is entitled to sue to recover an amount of a tax related liability that remains unpaid after it has become a debt due to the Commonwealth of Australia and payable to the Commissioner of Taxation.[2]
(b)An assessment creates a statutory debt when the liabilities assessed become 'due and payable'.[3]
(c)Income tax and general interest charges that are due and payable are 'tax related liabilities' within the meaning of s 255‑1 of sch 1 of the Taxation Administration Act.[4]
[1] From the plaintiff's outline of submissions dated 15 June 2017 [5] ‑ [7].
[2] Taxation Administration Act sch 1 s 255‑5(2).
[3] ITA 1997, s 5.5(5).
[4] Taxation Administration Act, sch 1 s 250‑10(2), items 37 and 70.
As to the evidentiary effect of an assessment and certificate, the plaintiff's position was as follows:[5]
(a)A notice of assessment under a taxation law is conclusive evidence that:
(a)the assessment was properly made; and
(b)except in proceedings under pt IVC of the Taxation Administration Act on a review or appeal relating to the assessment - the amounts and particulars of the assessment are correct.[6]
(b)The effect of s 350‑10 of sch 1 of the Taxation Administration Act is to confine the tax payer to pt IVC in challenging the amount or particulars of the assessment.[7]
(c)The recovery of disputed tax liabilities is not suspended pending the outcome of the pt IVC proceedings.[8]
(d)The production of a certificate signed by the commissioner or deputy commissioner certifying that, from the time specified in the certificate, an amount was payable under a taxation law is prima facie evidence that the amount is payable from time to time and the particulars stated in the certificate are correct.[9]
[5] From the plaintiff's outline of submissions dated 15 June 2017 [8] ‑ [11].
[6] Taxation Administration Act, sch 1 s 350‑10(1), item 2(a) and (b).
[7] As to this proposition, the plaintiff relied upon the decision of Gummow, Hayne, Heydon and Crennan JJ in Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146 [64] ‑ [67].
[8] Taxation Administration Act, sch 1 s 14ZZM and s 14ZZR; see also Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473 [44] ‑ [45].
[9] Taxation Administration Act, sch 1 s 350‑10(1), item 2(a) and (b).
Prima facie case established
By his affidavit affirmed on 4 April 2017 Cong Thanh Nguyen deposes to the following:
(a)the plaintiff is a Deputy Commissioner of Taxation: Nguyen Affidavit [4];
(b)on 30 June 2016 the Commissioner made an assessment of the income tax payable by the defendant for the year ended 30 June 2016, in the amount of $930,347: Nguyen Affidavit [5], [8] and CTN1;
(c)the due date for payment of the assessment was 21 November 2016: Nguyen Affidavit [6] and CTN1;
(d)the income tax debt was not paid: Nguyen Affidavit [9];
(e)the defendant became liable to pay general interest charge: Nguyen Affidavit [10];
(f)as at the date of the issue of the statement of claim the unpaid debt totalled $932,129.84, comprised of unpaid income tax of $930,347.00 and general interest charge of $1,782.84: Nguyen Affidavit [11];
(g)as at 4 April 2107, the unpaid debt totalled $960,725.10, comprised of unpaid income tax of $930,347.00 and general interest charge which continues to accrue: Nguyen Affidavit [12] ‑ [14] and CTN2.[10]
[10] Reproduced from the plaintiff's outline of submissions dated 15 June 2017 [12].
Having regard to the matters deposed to in the affidavit filed on behalf of the plaintiff, and in light of the legislative framework, I am satisfied that the plaintiff's claim is a good one and the affidavit does verify the essential elements of the cause of action upon which the application for summary judgment is based.
Once the plaintiff has established a prima facie case the evidentiary onus shifts to the defendant to demonstrate that there is an arguable defence or other reason for trial.
The defendant's position
By the first Bazzo affidavit, the defendant describes how the notice of assessment in respect of the relevant period came to be issued and served on her, and her response to the same. In summary, the defendant says that:
(a)the assessment was received by the defendant on or around 30 June 2016, and 'attributed the tax liabilities associated with the sale of Lot 3 (676) Anketell Road, Anketell ("the Property")';[11]
[11] The first Bazzo affidavit [3].
(b)an objection to the assessment was lodged on her behalf on 3 February 2017, the grounds of which were amended on or about 2 May 2017 (after the summary judgment application in these proceedings was filed);[12]
[12] The first Bazzo affidavit [4] and [5].
(c)the defendant objected to the assessment on the following basis:
(a)the Assessment was issued in bad faith and for an improper purpose;
(b)any gain arising from the disposal of Lot 3 (676) Anketell Road, Antetell is not part of my assessable income as it was not derived by me;
(c)I was the registered proprietor of the Property in my capacity as bare trustee for the Gucce Holdings Trust ('the Trust');
(d)I was not the beneficial owner of the Property. The Trust was the beneficial owner of the Property;
(e)I was not required to report any gain derived from the disposal of the Property in my income tax return for the relevant year;
(f)the Plaintiff was not entitled to assess me on any gain on the disposal of the Property;[13]
(d)in the alternative, the defendant objected to the assessment on the following basis:
(a)I am not in the business of developing land,
(b)I was the registered proprietor of land which has been developed into individual lots, but I was not the beneficial owner of such land as I held it for the benefit of others;
(c)Any gain arising from the disposal of the Property ought to be reduced by 50%, by reason of section 115-25 of the Income Tax Assessment Act 1997.[14]
[13] The first Bazzo affidavit [6](a) ‑ [6](f).
[14] The first Bazzo affidavit [7](a) ‑ [7](c).
At [8] and [10] of the first Bazzo affidavit, the defendant deposes as follows:
8.I believe that the Plaintiff has acted in bad faith and for an improper purpose when he decided to issue the Assessment to me by reason of the following:
(a)according to a document entitled 'Approval not to issue an interim report' maintained by the Plaintiff, the Plaintiff was desirous of raising an income tax liability as soon as possible [to] allow strategic debt management to execute a collection strategy;
(b)according to a document entitled 'Recommendation to make a s 168 assessment' maintained by the Plaintiff, the Plaintiff noted [with] some settlements expected shortly. … any new debt will need to be pursued by Strategic Debt Management ('SDM'). This new debt should be collectible if SDM can execute garnishee's (sic) on the proceeds of these expected settlements to come;
(c)by an email exchange dated 22 March 2016 and 23 June 2016, Mike Crawshaw, the audit officer, sought and obtained advice from Ross Burns, Director Debt Case Leadership of Strategic Debt Management, on whether the Assessment ought to be issued (Email Exchange); and
(d)by the Email Exchange, Ross Burns gave evidence to Mike Crawshaw to issue the Assessment for the purpose of ensuring that any tax recovered by the Plaintiff could be applied in reduction of my other alleged debts which were subject to Security Agreements with the Commissioner.
…
10.If granted leave, I will defend the proceeding on the basis that the Plaintiff issued the Assessment in bad faith and for an improper purpose.[15]
[15] The first Bazzo affidavit [8], [10]. The objection and amended objection were attached to the first Bazzo affidavit at 'TMB‑1' and 'TMB‑2' and the documents referred to at [8] of the first Bazzo affidavit were attached at 'TMB‑3'.
By the second Bazzo affidavit, the defendant put before the Court additional documents in support of her defence.[16]
[16] 'TMB-4' being a true copy of the Certificate of Title relating to 676 Anketell Road, Anketell issued on 16 January 2006.
By the defendant's written outline of submissions dated 23 June 2007, the defendant's position in response to the application for summary judgment was further refined and the defendant sought to draw the court's attention to the following:
10.1the Assessment was issued to assess the Defendant for the proceeds of the sale of the Property;
10.2a registered mortgage existed over the Property (see Certificate of Title at TMB‑4);
10.3the mortgage was discharged on the day of settlement (see record of transactions at TMB‑5 at page 8);
10.4the assessing officer issued a notice pursuant to section 353‑10 of Schedule 1 of the Taxation Administration Act 1953 to the purchaser of the Property (see TMB‑6 at page 20);
10.5the settlement statement provided by the purchaser's agent clearly expressed that a mortgage existed over the Property (see TMB‑6 at page 102‑3); and
10.6in issuing the assessment, the assessing officer disregarded any mortgage expenses associated with the property, as 'there were not any encumbrances on the property' (see report attached at TMB‑3 at page 23).[17]
[17] Defendant's written outline of submissions dated 23 June 2007 at [10.1] ‑ [10.6].
The defendant contended that the summary judgment application ought to be dismissed as there was an arguable case that the assessment was not a valid exercise of the assessment power within the ITA 1936. That is because, conscious maladministration of the assessment process may be said also not to produce an 'assessment' to which s 175 of the ITA 1936 applies.[18]
[18] The defendant sought to rely on Futuris [25] in support of this proposition.
In the written submissions filed on behalf of the defendant, it was conceded that the concept of conscious maladministration is not to be demonstrated simply by showing error.[19] However, the defendant pressed that demonstrating the equivalent of a corrupt exercise of statutory power or the exercise of that power with deliberate disregard to the scope of power is clearly within the ground of jurisdictional error.[20]
[19] Minister for Immigration & Multicultural & Indigenous Affairs v SBAN [2002] FCAFC 431 per Heerey and Keifel JJ [8]; [17] of the defendant's written outline of submissions dated 23 June 2017.
[20] The defendant relied on Futuris [55], [57] and [60]; and Commissioner of Taxation vBosanac [2016] FCA 448 [25].
As to the application of the relevant principles to these proceedings, the defendant said that the evidence demonstrated as follows:
22.1the assessing officer disregarded any mortgage expenses as is his view 'there were not any encumbrances on the property';
22.2numerous sources of evidence available to the assessing officer at the time of the issuance of the assessment clearly demonstrated that a mortgage existed over the property; and
22.3the information available demonstrates that the assessing officer acted in wilful disregard of the facts to which the Tax Laws were to be applied.[21]
[21] Defendant's written outline of submissions dated 23 June 2007 [22.1] ‑ [22.3].
The defendant said that, if allowed to defend the matter, she would defend the writ on the basis that the assessment was affected by jurisdiction error identified at [22.1] ‑ [22.3] of the defendant's written outline of submissions (reproduced above).
It was not suggested that (by these proceedings), the defendant would seek any order directed to the Commissioner of Taxation quashing the assessment or restraining the Commissioner from acting on it. Rather, the defendant sought to defend these recovery proceedings on the basis that the assessment was affected by jurisdiction error identified at [22.1] ‑ [22.3] (reproduced above), and separately press her objection under pt IVC of the Taxation Administration Act.
Determination
The power to order summary judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.[22] It is only the clearest cases where there is a high degree of certainty about the ultimate outcome of the proceeding if it went to trial that summary judgment ought properly be granted.[23]
[22] Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99 (Mason, Murphy, Wilson, Deane & Dawson JJ); SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [2].
[23] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; SMEC Australia v Valentine Falls Estate [20].
Even if the facts established are inconclusive, if it is not possible to say without doubt on the whole of the material that there is no question to be tried, there should be leave to defend.[24]
[24] Fancourt v Mercantile Credits [99].
In all of the circumstances, I am not satisfied that there is a real question to be tried and therefore do not grant the defendant leave to defend.
The defendant said that if leave was granted, she would defend the writ on the basis that the assessment was affected by jurisdiction error identified at [22.1] ‑ [22.3] of the defendant's written outline of submissions (reproduced above). I do not accept that the defence would have a prospect of succeeding in recovery proceedings in this Court.
As stated by McColl, Meagher and Payne JJ in Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation,[25] it was clearly laid down in Futuris that unless 'judicial review' proceedings are successfully conducted, a court in 'recovery proceedings' must give full effect to the conclusive evidence provision in s 350‑10(1). I find that these are recovery proceedings and in a recovery proceeding, this Court is also bound by Futuris to conclude that the conclusive evidence provision in s 350‑10(1) should be given full effect and that the assessment was 'properly made' and 'the amounts and particulars of the assessment … are correct.'[26]
[25] Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 17.
[26] Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 17, [54]. An application for special leave to appeal the decision was dismissed on 14 June 2017: Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] HCASL 131.
As the recovery of disputed tax liabilities is not suspended pending the outcome of pt IVC proceedings,[27] and having found these to be recovery proceedings, it was appropriate to enter judgment in the plaintiff's favour, with costs.
[27] Taxation Administration Act, sch 1 s 14ZZM and s 14ZZR; see also Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473 [44] ‑ [45].