Deputy Commissioner of Taxation v Cotte - [2019] WADC 129

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   DEPUTY COMMISSIONER OF TAXATION -v- COTTE [2019] WADC 129
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   28 AUGUST 2019
DELIVERED          :   18 SEPTEMBER 2019
FILE NO/S:   CIV 1121 of 2017
BETWEEN:   DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND
JEAN-PHILIPPE VINCENT COTTE
Defendant

Catchwords:

Practice and procedure - Application for summary judgment - Notice of assessment conclusive evidence - RBA figure prima facie evidence - Turns on its own facts

Legislation:

Taxation Administration Act 1953 (Cth) sch 1 s 350-10(1)

Result:

Judgment entered for the plaintiff

Representation:

Counsel:

Plaintiff	:	Mr D Vivian
Defendant	:	Mr T Ling

Solicitors:

Plaintiff	:	Craddock Murray Neumann Lawyers
Defendant	:	Chan Galic Barristers & Solicitors

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

Nil

DEPUTY REGISTRAR HEWITT:

This action commenced via a writ filed on 11 April 2017 and has proceeded slowly since that time, due in part to difficulties in serving the defendant, which were overcome by an order made by Registrar Kubacz on 3 May 2018 authorising service by way of substituted service. The process prescribed by the order was followed, prompting a memorandum of appearance by the defendant, which was filed on 28 May 2018. A defence to the action was filed on 11 June 2018. In essence, the defendant alleges certain errors in the calculations of his tax liabilities in regard to income tax and, relies upon those errors as a defence to the claim. Similarly, the defendant relies on what are alleged to be errors, both by the plaintiff and by an accountant whom he employed in regard to his BAS liabilities.
By chamber summons filed on 17 May 2017, the plaintiff applied to have the action removed from the inactive cases list for the extension of an entry for trial milestone and the granting of leave to apply for summary judgment. Those orders were granted and the remaining orders sought, namely that judgment be entered for the plaintiff against the defendant and the defendant pay interest and costs, were adjourned for later argument.
The matter came on before me on 28 August 2019 and those aspects of the application were argued. Approximately half of the total amount claimed by the plaintiff in the writ relates to income tax assessments and general interest charges on those assessments. Given the time which has elapsed since the filing of the statement of claim and the hearing of the application, those amounts have swelled considerably and now approach $300,000. Insofar as the plaintiff's claim is based upon income tax assessments, s 350‑10(1) of sch 1 of the Taxation Administration Act 1953 (Cth) provides that the notice of assessment and amended notices of assessment are conclusive evidence that:
a. The assessments were properly made; and
b. They are correct.
In my opinion, if I am bound to regard these matters as conclusive, it also follows that general interest charges levied in respect of unpaid assessments is likewise beyond challenge.
Different considerations relate to the running balance account relied upon by the plaintiff to support the balance of its claim, namely the failure of the defendant to remit GST monies to the Australian Taxation Office. That evidence establishes the debt to a prime facie standard namely, that absent sufficient evidence to the contrary, the amount shown in the account is sufficient to support a judgment in that sum. I therefore turn to analyse the defences which have been advanced by the defendant. That defence is contained in pars 12 - 14 of the defendant's affidavit in opposition, which is in the following terms:
Triable Issue
12. I refer to paragraph 20 of the Affidavit and say the lodgement of Tax Returns under the family partnership was a mistake done by my tax agent. During the relevant period, the cleaning business and the Jani-King Commercial Cleaning Franchise (with effect from 11 January 2007) was operated by me solely without my wife's involvement. The relevant pages of the Franchise Agreement dated 11 January 2007 is attached hereto and marked as Annexure 'JV-5' and a letter dated 23 September 2013 (stating that the franchise being Vincent Jean Philippe Cotte) is attached hereto and marked as Annexure 'JV-6'.
13.I was assessed 50% of the income of the partnership of J.M COTTE & J.V COTTE and thus was assessed for 50% of the tax under the BAS provisions and accumulated in my RBA account. My tax agent had incorrectly used the turnover as profit resulting in such a high outstanding tax to be paid by me to the plaintiff. My assessment should have been 100% of the income from my sole proprietorship and the income of the partnership of J.M COTTE & J.V COTTE should be nil.
14. Upon realising the errors committed by Flinders Accountants, my new tax agent, Richard Lim and Co, filed amendments through the Electronic Lodgement Declaration (Form 1) …, Years 2006 to 2015 with the lodged amendment details type indicator 4.
Reasons:The Jani-King Cleaning franchise was actually operated by Jean V Cotte as a sole trader ...
In particular, I focus on par 12 of these materials. As I understand the propositions being advanced, the deponent is stating that he was assessed for 50% of the tax under the BAS provisions, which was incorrect and that his assessment should have been 100% and the income in the partnership account should have been nil. I struggle to see how this can amount to a defence.
It is not clear exactly what amounts the deponent is contesting are inaccurate. Insofar as he might be contesting the amounts which are set out in the notices of assessment, his attempts must necessarily be futile for the reasons I have earlier stated. Insofar as he is commenting on the BAS provisions, firstly I cannot understand how it is to his benefit to suggest that he has a defence because only 50% of the BAS was assessed against him whereas it should have been 100%. How that comprises a defence escapes me.
It might perhaps be a defence for the other partner in the partnership, whom I understand is being separately sued, but I do not see how it can be a defence for this defendant to say that he is being charged less than he should have been. It any event, an assessment of BAS against a partnership would make each of the partners liable for the whole of the BAS jointly and severally.
Insofar as the deponent alleges that his tax agent had incorrectly used turnover as profit resulting in a higher tax to be paid, my only comment is that GST is calculated on sales and charges for services provided. Obviously, turnover is the correct benchmark for the calculation of the amount due. Profit has nothing to do with it save that some items relevant to the calculation of profit might well be available as input credits. The whole proposition advanced by the defendant is so hopelessly unparticularised that I am unable to discern anything within it which amounts to a defence.
The proposition upon which the defendant relies to say that the cleaning business was not conducted as a partnership, relies on the fact that the franchise for the cleaning business was taken out by the defendant and not the defendant and his wife. There is, as far as I am aware, no reason whatsoever, why a franchisee may not go into partnership with another in the running of the business permitted to be performed by the franchise. The fact that the defendant was the sole franchisee is not in the least determinative of whether there was a partnership between the defendant and his wife in which is relevant to the assessment of tax. A further point which is made is that contained in par 17 of the affidavit, which was in the following terms:
Since I have made the payments totalling $102,236.85 to the plaintiff on 4 October 2016, based on the incorrect assessment lodged by the previous accountants, I should be given a credit.
In fact, that statement overlooks the fact that on the previous occasion, the Deputy Commissioner of Taxation sued the defendant and obtained judgment against the defendant for failing to pay the taxes he is obliged to pay and that judgment was for $94,702.52 and $1,127.40. The amount of $102,436.86 was paid on 4 October 2016. That is in excess of three years after the judgment was given and during which time interest on the judgment was accruing at the statutory rate of 6% per annum. It is entirely futile to suggest that the payment described gives this defendant any right to any credit. It brings satisfaction to an existing and enforceable judgment against him.
Finally, the defendant states in par 20 of his affidavit.
20. I dispute the amount of tax owed by me as at 16 May 2019 in the sum of $660,336.41. I rely on the 'safe harbour' provisions provided by the plaintiff for the error made by the previous accountants for a remission of penalties. Under the 'safe harbour' provisions, the plaintiff may refer the matter to the Tax Practitioners Board to consider whether there has been a breach of the Code of Professional Conduct under the Tax Agent Services Act 2009. The matter is very complex and all penalties and interest would need to recalculated or waived against me.
I am completely unable to understand how the allegation contained in this paragraph of the defendant's affidavit displays a defence available to this defendant. The paragraph is so wanting in particulars as to be practically meaningless and the propositions of misconduct made by the defendant are wholly unconvincing. For these reasons, I am of the view that the plaintiff should be entitled to summary judgment against the defendant and that is the order I intend to make.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
DH
Court Officer
17 JANUARY 2020