Deputy Commissioner of Taxation v Ciccarello - [2010] SADC 40

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
DEPUTY COMMISSIONER OF TAXATION v CICCARELLO & ORS
[2010] SADC 40
Judgment of His Honour Judge Chivell
18 March 2010
PROCEDURE
District Court Procedure - South Australia - Practice Under Rules of Court - Parties
Plaintiff instituted a claim pursuant to Income Tax Assessment Act against defendant personally alleging liability for defaults of companies of which he was a director - defendant applies for leave to issue third party proceedings out of time alleging, inter alia, negligence, breach of contract - not opposed by plaintiff - whether orderly conduct of proceedings would be affected - whether overall efficiency favours the grant of leave - leave granted
District Court Rules 1987 (SA) r 36.11.1, r 37.01, r 37.05, r 37.07, r 67, r 97.01, r 97.03 , referred to.
Imagecolour (SA) Pty Ltd (in Liq) & Sheahan v Curtis & Ors [2000] SASC 316; Alice Springs Abattoirs Pty Ltd v Northern Territory (1996) 111 NTR 9, 134 FLR 440; Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd (2000) 22 WAR 372; Mulvaney v The Commissioner of Taxation (Cth) [2004] SASC 166; Pioneer Concrete (NT) Pty Ltd v Watkins Ltd (1983) 48 ALR 365; H Stanke & Sons Pty Ltd & Anor v Frederick John Von Stanke & Ors [2007] SASC 282; JN Taylor Holdings (In liq) and Ors v Bond and Ors (No 13) Unreported, Debelle J, 15 September 1995; Kenny v Gumpl Unreported, Debelle J, 14 January 1997; O’Brien Lovrinov Crafter Pty Ltd v Corradini & Anor [1999] SASC 159, considered.

DEPUTY COMMISSIONER OF TAXATION v CICCARELLO & ORS
[2010] SADC 40

This is an appeal from orders made by Master Bampton of this Court on 20 May 2009, whereby the defendant was given leave to join Mr Hodgson, Philhodge Business Services Pty Ltd and Mr McNamara trading as McNamara Business and Property Law as third parties to the action.
Mr Brohier, counsel for the defendant, objected that the appeal by Mr McNamara could not affect the orders relating to Mr Hodgson and his company, and that the appeal was not lodged within 14 days as required by Rule 97.03.
As an alternative approach, Mr McNamara and Mr Hodgson made oral applications pursuant to Rule 67 to have the orders set aside. I proceeded to deal with the matter in that way, without further objection, although the applications were heard as if they were an appeal.
This litigation is governed by the 1987 Rules of Court, since the proceedings were instituted on 30 November 2004. The application to join the third parties was made pursuant to Rule 37.01 which states:
(1) A defendant within the earlier of 14 days of filing the defence or 14 days of the last day according to the Rules for the filing of a defence may without leave issue a third party notice in Form 13 against any person who is not then a party to the action claiming:
(a) An entitlement to contribution or indemnity;
(b) Relief related to or connected with the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff; or
(c) The determination of any question or issue relating to or connected with the original subject matter which is substantially the same as some question or issue arising between the plaintiff and the defendant and which should also be properly determined as between the defendant and the third party.
(2) By leave of the Court a defendant who has filed a notice of address for service may issue a third party notice under subrule (1) above at a time other than that laid down in subrule (1), but subject to such terms and conditions as the Court may impose either at the time of granting such leave or subsequently.
Background
The Master has set out in detail the history of these proceedings, and I adopt her Honour’s outline set out in paras [4] to [9] of her reasons. Put very briefly:
·in 2004 the plaintiff sued the defendant for tax penalties allegedly personally incurred as a result of failure to comply with various statutory obligations by companies of which he was a director;
·the defendant joined the first third parties, Mr Chan, Chan Trimmer and Associates Pty Limited and CTA Accounts Pty Limited to the action;
·at the time these events took place, the defendant was represented by Mr McNamara, and he continued to represent the defendant until 2008 – a trial was listed to commence on 8 September 2008. In August 2008 the defendant terminated his instructions to Mr McNamara and applied for an adjournment of the trial. This was granted;
·the defendant applied to join Mr Hodgson, his company, and Mr McNamara as further third parties in September 2008;
·the defendant settled his claim against the first third parties in November 2008;
·the present application was filed on 26 September 2008, and was argued before the Master on 19 February 2009
The Application
As the time limit provided by Rule 37.01(1) had long since expired, the defendant applied for leave pursuant to Rule 37.01(2).
The Master had regard to the remarks of Doyle CJ in Imagecolor (SA) Pty Ltd (in Liq) & Sheahan v Curtis & Ors[1], and extracted the following factors from the judgment as being relevant to such an application.
(a) the explanation for the delay in issuing the third-party proceedings;
(b)the impact on the orderly conduct of the proceedings between the plaintiff and the defendant;
(c)the risk of inconsistent findings if the two sets of proceedings are tried separately;
(d)overall efficiencies, including the question of whether there are common witnesses.
[1] [2000] SASC 316
The Master held that the requirements of Rule 37.01(1) were satisfied, as were each of the factors identified by the Chief Justice in Imagecolor. Her Honour granted leave to issue the third party notices. The proposed third parties appealed to this Court from that decision.
The Appeal
At the hearing of the appeal, Dr Bleby appeared for the plaintiff, but took no position in relation to the appeal. Mr Brohier appeared for the defendant. Mr Hodgson sought to represent himself and his company, and Mr McNamara represented himself. Mr Brohier objected to Mr Hodgson having leave to represent the company, since Rule 36.11, requires that the person seeking to represent the company be authorised by a resolution of the company to do so. Mr Hodgson told me that this is a company in which he is the only director and shareholder, it is no longer trading, and neither he nor the company has the funds to be legally represented.
In his commentary on the 1987 Rules[2], Judge Lunn states that a court has “an inherent jurisdiction to allow itself to be addressed by a lay person on behalf of a company”, citing Alice Springs Abattoirs Pty Ltd v Northern Territory[3] and Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd[4].
[2] at [R36.11.1] on p 8237
[3] (1996) 111 NTR 9, 134 FLR 440
[4] (2000) 22 WAR 372
In the present circumstances, I allowed Mr Hodgson to address the Court de bene esse, and I now rule that I was entitled to allow him to address the Court on behalf of the company for the purposes of the appeal, and will take into account what he said. If I am wrong about that, I would still have been entitled to hear Mr Hodgson on his own behalf, and since his interests coincide with those of the company, it probably makes little difference.
The Appellants’ Arguments
Mr McNamara argued that the evidence before the Master was inadequate to justify the orders she made. He argued that the factual assertions in the affidavit of the defendant[5] were disputed, and in many cases refuted by his own affidavit, and that the Master should not have had regard to FND 47 because it had not been served on the appellants.
[5] FDN 47
Mr McNamara did not pursue the non-service of FDN 47 at the hearing[6], but he did pursue the other arguments. In my opinion, the complaints are without foundation.
[6] T 14
It was not incumbent on the Master to make findings of fact, to reconcile conflicting assertions in affidavits, nor is it my function to do so on appeal. Indeed, I agree with Mr Brohier’s assertion that there was no necessity that the Master even heard the appellants at the hearing of the application. At that stage they were not parties to the action. In Mulvaney v The Commissioner of Taxation (Cth)[7], for example, Besanko J observed that the proposed third parties were not heard on the application.
[7] [2004] SASC 166 at [2]
Without going into details, there was ample factual material in the affidavits of Ms Baker and the defendant upon which the Master could base her decision in relation to the application.
The Operation of Rule 37.01
Mr McNamara submitted that this was not a claim by the defendant for indemnity or contribution as required by Rule 37.01(1)(a). This was conceded by Mr Brohier.
Mr McNamara also submitted that the amounts claimed by the defendant are for damages for negligence, breach of contract etc, and hence are not “related to or connected with the original subject matter of the action” as required by Rule 37.01(1)(b). They are penalties imposed by operation of a statute.
I consider that it is beyond argument that the relief claimed in the proposed third party notices is “related to” the original subject matter of the action, within the meaning of Rule 37.01(1)(b). The circumstances in which the tax penalties were allegedly incurred are the same circumstances which are alleged to give rise to the causes of action in the third party notices. The defendant alleges that the tax penalties were incurred as a result of the actions, or inactions of the proposed third parties. Similarly, the subject matter of the proposed third party proceedings is “connected to” the subject matter of the original proceedings within the meaning of the rule. The relief need not be of the same type in each case[8].
[8] Pioneer Concrete (NT) Pty Ltd v Watkins Ltd (1983) 48 ALR 365
That is enough to dispose of the appeal. However, in case it is necessary to do so, I conclude that the requirements of Rule 37.01(1)(c) had also been met.
In that regard, in considering whether such questions should be “properly determined” in these proceedings, the circumstances of the case should be examined against the list of factors identified in Imagecolor (supra) as follows:
·there had been no substantial delay in the application for leave, once the defendant obtained independent legal advice, that is legal advice from someone other than Mr McNamara;
·there had been no complaint put forward by the plaintiff that the proposed third-party proceedings would interfere with the orderly conduct of the proceedings between the plaintiff and the defendant;
·the possibility of inconsistent judgments had not been suggested by any of the parties;
·witnesses as to the circumstances in which the tax penalties were incurred would also be relevant to the issues between the defendant and the third parties.
H Stanke & Sons Pty Ltd & Anor v Frederick John Von Stanke & Ors[9] was a case involving the interpretation of Rule 37.07. That Rule, although it deals with contribution notices, is in the same terms as Rule 37.01.
[9] [2007] SASC 282
Sulan J referred to the decision of Debelle J in JN Taylor Holdings (In liq) and Ors v Bond and Ors (No 13)[10] in which his Honour said:
The purpose and intent of rule 37 is to avoid multiplicity of proceedings and to prevent the same question being determined in two actions with possibly two different results. Plainly, if this application is refused, it will be necessary for [the applicant] to institute a separate action if he seeks to pursue an indemnity. It is unlikely, however, that there is a real risk of two different results. If the plaintiffs succeed in this action and [the applicant] is held to be liable, it is unlikely that those issues will be litigated again in any later action which [the applicant] might institute. The likelihood is that the issues in that action will be confined to issues arising out of the policy of insurance. Those issues will be of much narrower scope than the issues in this action. Any prejudice to either [the applicant] or [the respondent to the application] must be weighed against the fact that the hearing of that action will, in all likelihood, be considerably shorter than the hearing of this action.
[10] Unreported, Debelle J, 15 September 1995
In Kenny v Gumpl[11]Debelle J, when discussing Rule 37.01 said:
The object of Rule 37 is well settled. It is first to prevent a multiplicity of actions and to enable the Court to settle disputes between all of the parties in one action and, secondly, to prevent the same issue from being determined in different actions possibly with different results.
[11] Unreported, Debelle J, 14 January 1997
Sulan J also examined a number of other cases where similar rules were applied, including Imagecolor (SA) Pty Ltd (In Liq) & Sheahan v Curtis & Ors[12], and Mulvaney v Commissioner of Taxation (Cth)[13].
[12] [2000] SASC 316
[13] [2004] SASC 166
In the latter case, Besanko J pointed out[14] that the Court always has the discretion to direct a separate trial of third party proceedings (Rule 37.05), and conversely, that even if leave to issue is refused and separate proceedings are instituted, an order may be made later that the two trials be heard together. All such decisions are driven by the interests of justice and the circumstances of the case.
[14] at 19 - 20
In my view it would minimise the risk of a multiplicity of litigation if the issues between all the parties are determined in the one hearing. To require the defendant to issue separate proceedings against the proposed third parties, and then apply to have the two actions heard together would be inefficient, and waste costs and court resources.
As Mr Brohier pointed out, the proposed third party proceedings are not substantially different from the third party proceedings Mr McNamara issued against the first third parties when he was acting for the defendant.
District Court Rule 97.01 provides that this appeal is by way of rehearing and, in matters involving the exercise of discretion, the Judge hearing the appeal may exercise his or her own discretion “without regard to the manner in which it was exercised in the decision, order to direction appealed against”.
In O’Brien Lovrinov Crafter Pty Ltd v Corradini & Anor[15] Martin J pointed out that this rule does not require the Judge to ignore the manner in which the Master exercised the discretion.
[15] [1999] SASC 159
Rule 37.01(1)(b) does not involve the exercise of a discretion[16]. I am satisfied that no error in the way in which the Master applied that Rule to the issues before her has been demonstrated. In my view, her Honour’s decision was clearly correct.
[16] Von Stanke (supra) at [49]
In case it is also necessary to consider Rule 37.01(1)(c), which does involve the exercise of a discretion, again I find that the Master’s decision was clearly correct, and that I would exercise my discretion in the same way.
For those reasons the applications to set aside Master Bampton’s orders made on 20 May 2009 are dismissed.
I will hear the parties as to any consequential orders.