Deputy Commissioner of Taxation v Bovell; Deputy Commissioner of Taxation v Bovell
[2001] TASSC 138
•5 December 2001
[2001] TASSC 138
CITATION:Deputy Commissioner of Taxation v Bovell; Deputy Commissioner of Taxation v Bovell [2001] TASSC 138
PARTIES: DEPUTY COMMISSIONER OF TAXATION
v
BOVELL, Christopher Mervyn
DEPUTY COMMISSIONER OF TAXATION
v
BOVELL, Louella
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 850/2000
851/2000
DELIVERED ON: 5 December 2001
DELIVERED AT: Hobart
HEARING DATES: 23 October 2001
JUDGMENT OF: Slicer J
CATCHWORDS:
Procedure - Supreme Court procedure - Tasmania - Amendments - Application to amend defence - Counterclaim introduced by proposed amended defence.
Aust Dig Procedure [276]
Constitutional law - Operation and effect of the Commonwealth Constitution - Inconsistency of laws - Particular cases - Other matters - Recovery action - Whether the Deputy Commissioner of Taxation engaged in "trade and commerce" - Claimed inconsistency.
Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594; The Mayor, Aldermen and Citizens of the City of Launceston v The Hydro-Electric Commission (1959) 100 CLR 654; The Commonwealth of Australia v State of Tasmania (1983) 158 CLR 1, applied.
ReKu-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134, followed.
Fair Trading Act 1990 (Tas), ss14, 15.
Trade Practices Act 1974 (Cth), ss51AA, 52.
Income Tax Assessment Act 1936 (Cth), Pt VI, Div 8 - 9, ss222AFA, 222ALA.
Aust Dig Constitutional Law [248]
REPRESENTATION:
Counsel:
Plaintiffs: A J Abbott
Defendants: J L Walters
Interveners: W C R Bale QC, S Perring
Solicitors:
Plaintiffs: Deputy Commissioner for Taxation
Defendants: Piggott Wood & Baker
Interveners: Attorney-General
Judgment Number: [2001] TASSC 138
Number of Paragraphs: 28
Serial No 138/2001
File Nos 850/2000851/2000
DEPUTY COMMISSIONER FOR TAXATION v CHRISTOPHER MERVYN BOVELL and
DEPUTY COMMISSIONER FOR TAXATION v LOUELLA BOVELL
REASONS FOR JUDGMENT SLICER J
5 December 2001
The defendants, husband and wife, were shareholders and directors of a company, Huon Foam Pty Ltd (ACN 009 575 571) ("the company"), which had failed to remit to the Deputy Commissioner of Taxation ("the Commissioner") amounts of money deducted from employees as required by the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 (Cth), which will be regarded as composite legislation and referred to as "the Act".
Prior to 1993, the Act, s221P, gave the Commissioner priority as a creditor, in the case of insolvency, for unremitted group tax. In that year the legislative scheme was altered (Div 8 - 9 of Pt VI), so as to enable (s222AFA) the Commissioner to take effective action to recover unremitted group tax. The Act requires company directors to ensure compliance and makes them personally liable, subject to certain statutory defences, if they do not do so. The Act, (s222ALA) also permits the Commissioner to enter into agreements in relation to the payment of outstanding amounts.
The company had failed to remit the amount of $66,588.81, being the sum of employee deductions between April and November 1998. The relevant provisions of the Act which governed the duties and those remittances were ss220AAM and 221F(5).
On 11 January 1999, the Commissioner entered into an agreement with the company, in accordance with the Act, s222ALA ("the agreement") for the payment of the outstanding amounts by instalments due on days specified in the agreement. The agreement was attested to by the common seal of the company in accordance with its Memorandum and Articles of Association and signed by the defendants as directors.
The company defaulted in its obligations under the agreement.
On 1 December 2000, the Commissioner commenced, by separate writs, actions against each defendant claiming an amount of $61,588.81 (an amount some $5,000 less than that stated in the schedule to the agreement because of part payment):
"made up of a penalty amount payable pursuant to Section 222AQA of the [Act] in respect of a payment agreement dated 11 January 1999 in relation to Huon Foam Pty Ltd and due and payable pursuant to Section 222AAZA of the [Act]."
The statement of claim, identical in both actions, pleaded the existence of the liability, the terms of the agreement, the default by, and liquidation of, the company, and the status of the defendants and their statutory liability.
Each defendant delivered a defence to the respective actions. Each defendant pleaded that:
(1) he/she was not a party to the agreement;
(2) the terms of the agreement did not give rise to personal liability;
(3)the agreement was entered into as a result of misrepresentation and oppression and by reason thereof was void;
(4)the Commissioner was, through his agent, guilty of fraudulent or reckless misrepresentation;
(5)the inequality of position and knowledge of the respective parties entitled each defendant to have the agreement set aside;
(6)the agreement was unjust and unconscionable "in the circumstances relating to it at the time it was made".
In addition, the defendant, Louella Bovell, pleaded that by her special status as the wife of Christopher Bovell, her inexperience in commerce and the law of taxation, and the failure of the Commissioner to either properly advise her or afford her the opportunity of obtaining such advice, she was relieved of any obligations under the agreement.
Each defendant, by way of counterclaim, sought declarations that the agreement was void or that the Commissioner was estopped from reliance and an order that the agreement be set aside.
In order to meet a foreshadowed application to strike out with a subsequent motion for summary judgment, each defendant sought to amend their respective defences. The Commissioner opposed all of the amendments.
The amendments sought in each case are comprehensive, complex and raise new issues. The respective pleadings sought by way of amendment differ to some degree, but most issues remain in common. A new matter pleaded, namely, the operation of State legislation, the Fair Trading Act 1990 (Tas) ("FTA"), resulted in the intervention of the Attorney-General, seeking to protect the integrity of that legislation in any interaction with either the Act or another Commonwealth enactment, the Trade Practices Act 1974 (Cth) ("TPA").
The intention of the parties, but not of the intervenor, was to enhance their respective positions in the inevitable striking out and summary judgment proceedings. Conscious of the ultimate real contest the Court, during the course of the hearing, indicated that it was likely to apply different tests to the components of each application to amend. If the proposed amendment related to a defence already pleaded, but sought to expand or bolster its import, it was likely to be granted. If it sought to raise a matter, not already pleaded, which on examination was found to be either without merit or so different from the matters already in issue, it would be determined in accordance with the tests of prejudice and likelihood of success as a matter of discretion (see Supreme Court Rules 2000, rr227 and 259). The Commissioner quite properly abandoned his objection to many of the proposed amendments, retaining his arguments until the hearing of a striking out application. That course permits an examination of the new issues raised without the difficulties attendant on the original contest.
One new matter raised by the proposed pleadings relates to the existence or adequacy of notice required by the Act, ss222ANA(2) and 222AOE, but forms part of the issues already raised by the pleadings in respect of the operation of statute, and it is better left until the substantive argument.
The issues remaining which require resolution are those pertaining to the interrelationship of the Act, the TPA and the FTA.
Pleadings
Following a pleading of misrepresentation, Christopher Bovell claims in the amendment sought:
"19 Further or in the alternative, at all times referred to in paragraph 14 hereof the plaintiff was engaged in trade or commerce and the defendant refers to and repeats the matters set out under paragraph 14 hereof and says that the plaintiff's conduct as pleaded therein was misleading and deceptive within the meaning of S52 of the Trade Practices Act (Commonwealth) and/or S14 of the Fair Trading Act (Tas.)
20Further or in the alternative, at all times referred to in paragraph 14 hereof the Plaintiff was engaged in trade and commerce and the Defendant refers and repeats the matters set out under paragraph 14 hereof and says that the Plaintiff's conduct as pleaded therein was unconscionable conduct within the meaning of S51AA of the Trade Practices Act (Commonwealth) and/or S15 of the Fair Trading Ac [sic] (Tas.)"
Louella Bovell, in her proposed pleadings, following claims of oppression, status by reason of marriage, mistake and disadvantage, asserts:
"21Further or in the alternative, at all times referred to in paragraph [sic] 14 15, 16, 17 & 18 hereof the plaintiff was engaged in trade or commerce and the defendant refers to and repeats the matters set out under paragraph 14 hereof and says that the plaintiff's conduct as pleaded therein was misleading and deceptive within the meaning of S52 of the Trade Practices Act (Commonwealth) and/or S14 of the Fair Trading Act (Tas).
22Further or in the alternative, at all material times referred to in paragraph [sic] 14, 15, 16, 17 & 18 hereof the Plaintiff was engaged in trade and commerce and the Defendant refers to and repeats the matters set out under paragraph [sic] 14, 15, 16, 17 & 18 hereof and says that the Plaintiff's conduct as pleaded therein was unconscionable within the meaning of S51AA of the Trade Practices Act (Commonwealth) and/or S15 of the Fair Trading Act (Tas)."
The claims of misleading and deceptive conduct within the meaning of the TPA, s52, and the FTA, s14, and unconscionable conduct as provided by the respective Acts, ss51AA and 15, raise the question of whether the Commissioner is engaged in "trade and commerce".
Position of the Attorney-General
The interest of the Attorney-General is to protect the integrity of State legislation, vis a vis, Commonwealth enactments, transactions or other matters involving Federal or interstate questions. The Attorney-General seeks to avoid any problems raised by a possible application of the The Constitution, s109, or other complication raised by claimed inconsistency and is concerned to meet a possible argument on behalf of the Commissioner that the FTA does not bind the Commissioner because s109 of The Constitution invalidates the FTA to the extent that it purports to bind the Commissioner. The Attorney-General's concern is that the State legislation might not be protected by the provisions of the TPA, ss2A and 2C. In some circumstances, the Commissioner might be involved in "trade and commerce" within Tasmania in areas of commercial activity other than the collection of revenue. The purchase of land, entry into service contracts and the like might attract the application of State legislation. The Attorney-General is content to adopt the primary argument of the Commissioner, but not be constrained by it.
Statutory provisions
The TPA, ss51AA and 52 state:
"51AA Unconscionable conduct within the meaning of the unwritten law of the States and Territories
(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.
(2) This section does not apply to conduct that is prohibited by section 51AB or 51AC.
…
52 Misleading or deceptive conduct
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1)."
The FTA, ss13, 14 and 15, provides:
"Act to bind Crown
SECT 13
This Act binds the Crown not only in right of this State but also, so far as the legislative power of Parliament permits, binds the Crown in all of its other capacities.
…
Misleading or deceptive conduct
SECT 14 (1)
(1)A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
…
Unconscionable conduct
SECT 15 (1)
A person shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to another person, engage in conduct that is, in all the circumstances, unconscionable.
…"
Statutory exclusion
The TPA, ss2A and 2C, relevantly state:
"2A Application of Act to Commonwealth and Commonwealth authorities
(1) Subject to this section and section 44E, this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth.
(2) Subject to the succeeding provisions of this section, this Act applies as if:
(a) the Commonwealth, in so far as it carries on a business otherwise than by an authority of the Commonwealth; and
(b) each authority of the Commonwealth (whether or not acting as an agent of the Crown in right of the Commonwealth) in so far as it carries on a business;
were a corporation.
(3) Nothing in this Act makes the Crown in right of the Commonwealth liable to a pecuniary penalty or to be prosecuted for an offence.
…
2C Activities that are not business(1) For the purposes of sections 2A and 2B, the following do not amount to carrying on a business:
(a) imposing or collecting:
(i) taxes; or
(ii) levies; or
(iii) fees for licences; …"
The defendants contend that the entry by the Commissioner into the agreement removes him from the statutory exclusion. He has ceased to "collect taxes" and instead has entered into a commercial arrangement, enforceable in contract, for the payment of moneys due by instalments. He does not regain his statutory right of collection unless and until there has been a breach of that agreement. If the defendants can attack the validity of that agreement, they prevent the re-establishment of statutory power.
It is first necessary to consider any implications which might arise from the decision of the Commissioner to commence the actions. He was not a person who could decide whether or not he should seek enforcement of the agreement. He was required by the operation of the Financial Management and Accountability Act, ss5 and 47 and Sch 1, to pursue "recovery of (the) debt".
The Commissioner might well enter into commercial arrangements concerning the purchase of equipment, sale of property, engagement of labour services and the like. His activities might extend to matters far removed from the imposition and collection of taxes. But the existence of these activities, some of which might require a determination of fact (FAI General Insurance Co Ltd v WorkCover Corporation (SA) [1998] ATPR 41,059 at 41-639) does not entitle the defendants to contend that if the import of an agreement is a question of fact, then they are entitled to the amendment to argue the matter at trial. This agreement was one entered into as part of, and in furtherance of, a statutory scheme. The Commissioner was entitled to recover against the company and was permitted by statute to enter into arrangements for the payment of instalments (the Act, s222ALA) in lieu of a claim of priority. The terms of that arrangement remained within his discretion, but were still integral to the legal obligation of "collection". The Commissioner retains the protection of the TPA, ss2A and 2C.
Trade and commerce
This issue is central to the arguments of the Commissioner and the learned Solicitor-General. The defendants, as directors, were subject to statutory requirements (the Act, ss222AOB(i) and 222AQA) while retaining defences (s222AQD(5)), and their entry into an agreement as directors, was a consequence of legislation, not commercial judgment. The company, through its directors, could have declined to enter into the agreement, with the consequence that the directors remained liable. Any decision was that of statutory "option" rather than one of commerce. The company was not engaged in trade or commerce in its decision to elect a proposal advanced by the Commissioner, or proposed by itself. In turn, the Commissioner was not engaged in "trade". He was involved in negotiations involving assessment of the assets and income of the company, probability of recovery and fulfilment of his own statutory duty. His procedures and decisions might be susceptible to judicial or quasi judicial review in accordance with the principles of administrative law. But they were neither commercial or trading in nature.
Insofar as the question of "engagement" remains a question of fact (FAI General Insurance Co Ltd v WorkCover Corporation (SA) (supra)), on no reading of the proposed amended pleading can it be said that the plaintiff was engaged in "trade and commerce" in his enforcement of a statutory right and duty.
There remains a narrower point as to whether the Commissioner was involved "in" trade or commerce. Both statues employ the same term, namely, "in". There remains a distinction between nexus and involvement. As Toohey J said in Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594 at 614:
"… The question is not whether the conduct engaged in was in connection with trade or commerce or in relation to trade or commerce. It must have been in trade or commerce. While there are dangers in seeking for the meaning of an expression through the substitution of another, the phrase 'as part of trade or commerce' does, I think, come close to what is intended. Thus, when the appellant's foreman described the grates as being secured on either side with bolts, that statement must have been made as part of trade or commerce before an action could lie under s52(1)."
This was not a case where a statutory entity engaged in commercial interaction either directly or indirectly (Sykes & Ors v Reserve Bank of Australia (1997) 151 ALR 579) or as an incident to its statutory duty.
The agreement made by the Commissioner was an activity which might have related, in general terms, to the commercial activity of a corporation (Unilan Holdings Pty Limited & Ors v Kerin (1992) 107 ALR 709; (1993) 44 FCR 481; The Mayor, Aldermen and Citizens of the City of Launceston v The Hydro-Electric Commission (1959) 100 CLR 654; The Commonwealth of Australia v State of Tasmania (1983) 158 CLR 1), but did not constitute conduct "in trade or commerce". The test is that of the reality of the relationship of the parties and the nature of the transaction (ReKu-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134).
Fair Trading Act 1990 (Tas) ("FTA")
The FTA is intended to apply to the Commonwealth within the legislative powers of the State (s13). It does not seek to apply to the Commonwealth in its power to, or activities involving the collection of taxes which might be lawfully imposed. It does not raise any question of inconsistency raised by The Constitution, s109. The circumstances of this case do not require any consideration of the interrelationship of Federal or State powers as discussed by the High Court in Re Residential Tenancies Tribunal of New South Wales and Henderson & Anor; ex parte The Defence Housing Authority (1997) 190 CLR 410, or any constraints of power as stated in The Commonwealth of Australia & Anor v Cigamatic Pty Limited (In Liquidation) & Anor (1962) 108 CLR 372. The State legislation has not purported to reduce or interfere with any Commonwealth power or purported enactment thereof. It has no application in relation to the action commenced by the Commissioner and can provide no basis for a defence to these actions.
Conclusion
The applications to amend the defences will be granted in the terms stated in the submitted drafts, other than those relating to the TPA and FTA. The granting of those amendments ought, in no way, be seen as a statement of their validity. Those questions remain ones for the application for striking out.
Orders:
Action 850/2000That the application dated 30 May 2001, to amend the defence, be allowed in the form of the document attached to the application other than pars19 and 20 of such annexure.
Action 851/2000
That the application dated 30 May 2001, to amend the defence, be allowed in the form of the document attached to the application other than pars21 and 22 of such annexure.
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