Deputy Commissioner of Taxation v Georgakopoulos

[2010] VCC 1771

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE
COMMERCIAL LIST

GENERAL DIVISION

Case No. CI-10-00513

DEPUTY COMMISSIONER OF TAXATION	Plaintiff
v.
FOTIOS GEORGAKOPOULOS	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	8 December 2010
DATE OF JUDGMENT:	8 December 2010 (Revised 10 December 2010)
CASE MAY BE CITED AS:	Deputy Commissioner of Taxation v. Georgakopoulos
MEDIUM NEUTRAL CITATION:	[2010] VCC 1771

REASONS FOR JUDGMENT

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Catchwords:  Practice and Procedure – Summary Judgment application – Claim for
outstanding taxation – Conclusiveness of assessments – Relevance of
incorrect basis of assessments – Deputy Commissioner’s certificate of
indebtedness – Judgments entered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S. Linden	ATO Legal Services Branch
For the Defendant	Mr J.D. Loewenstein	Alliance Legal
HIS HONOUR:

1           The plaintiff seeks summary judgment in this proceeding in the total sum of $2,457,395.15. The defendant opposes the application and submits that it is an appropriate case for the Court to grant the defendant leave to defend. The plaintiff is the Deputy Commissioner of Taxation and brings the claim in respect of alleged taxation liabilities for the period 2002 to 2009.

2           The defendant’s liability for taxation was reassessed following an audit conducted by the Australian Taxation Office. The plaintiff has produced today four certificates, dated 8 December 2010, signed by Paul Duffus, a Deputy Commissioner of Taxation of the Commonwealth of Australia. The four certificates state that sums, totalling the amount of the judgment sought by the plaintiff are debts due and payable by the defendant to the Commonwealth of Australia. The certificates are prima facie evidence of the matters set out in them and there is a presumption of regularity in relation to the production of the certificates.

3           The defendant has essentially raised three matters as reasons why it is appropriate for the defendant to be granted leave to defend:

a.	a procedural argument based upon the County Court Rules and the fact that the certificates relied upon by the plaintiff were not served 14 days before the hearing today;
b.	the assessments of tax payable by the defendant are incorrect and rather than tax being payable by the defendant personally, there may be tax that is payable by a trust of which the defendant is a beneficiary;
c.	the amount sought by way of judgment, being the total of the four certificates, is a significantly different figure than the amounts sought in the statement of claim, or the amended statement of claim in respect of which leave is sought so that it may be filed.

4           In regards to the procedural matter, it is common practice in summary judgment applications brought by the present plaintiff to produce certificates pursuant to s.255-45 of Schedule 1 of the Taxation Administration Act 1953 on the hearing of summary judgment proceedings. This is done because the various interest components of the claims are not calculated simply by reference to the Penalty Interest Act or by some other similar calculation. Generally, the amount claimed in the writ and statement of claim has been proved separately in the affidavit material and it is clear that any additional sum referred to in the certificates, in respect of which judgment is sought, relates to interest or other penalties which have accrued from dates referred to in the pleading. I will refer to these matters in more detail when I come to the alleged discrepancies between the claims and the certificates.

5           The affidavit material filed by the plaintiff in support of the summary judgment application does, in my view, prove the matters alleged in the statement of claim and exhibits the relevant notices of assessment. I consider that in these circumstances, the intent of the procedural rules has been complied with and that the Court is entitled, and indeed obliged, to take account of the certificates that have been filed at the time of the hearing to indicate the amount due to the plaintiff today.

6           The substantial defence raised by the defendant is that the assessments made by the plaintiff are incorrect. There is no dispute that assessments have been issued to the defendant which support the claim made in the statement of claim and that copies of the appropriate assessments have been exhibited to the affidavit in support of the summary judgment application. In those circumstances, the Court is bound to accept the assessments as conclusive evidence of the due making of the assessments and the correctness of the particulars of each of the assessments.

7 wrong because of errors made by the defendant’s previous accountants in the returns
that were lodged. The defendant has engaged new accountants who have examined
the defendant’s obligations afresh and have filed material with the plaintiff seeking to
have the assessments of the defendant’s taxation liability amended. It is accepted

The defendant has filed answering material suggesting that the assessments are the assessments presently relied upon by the plaintiff in this summary judgment application.

8           Mr Linden of counsel who appeared for the plaintiff informed me, after taking instructions, that it would not be until about March 2011 that the plaintiff would be in a position to respond to the objections in the sense of advising the defendant as to whether the present assessments were to be amended. Until that formality is undertaken, the relevant legislation provides that the lodging of an objection does not affect the liability of the tax-payer to pay the present assessments.

9           It appears from the material filed in this application that two reviews are currently being undertaken by the plaintiff. The first, as a consequence of the lodging of the notices of objection by the defendant, the second, as a consequence of the submission by the defendant’s new accountant of material on behalf of the trust, of which the defendant is a beneficiary. The material filed in support of the trust’s obligations has apparently been investigated by an officer of the plaintiff, Mr Harjit Sandhu. In a facsimile, dated 27 October 2010, from Mr Kurt Malcolm of the ATO Legal Services Branch to the defendant’s solicitor, Mr Mario Merlo of Alliance Legal, it is stated as follows “We confirm that Harjit Sandhu is conducting an audit with respect

to the company [the trustee for the Georgakopoulos trust]. We further confirm that at entity are not inexorably linked to another, whether or not a related entity. It does not
no stage has Mr Sandhu or Dermott Doherty, who is conducting the review of your
client’s objections, agreed that assessments lodged on behalf of the company or your
client been accepted as evidencing a successful outcome to your client’s objections.

follow that a declaration of the company’s liability will decrease your client's liability”.

10         In an email sent to the defendant’s present accountant, Mr Vince Barca, by Mr Harjit Sandhu on 21 October 2010, it is stated as follows: “Further to our conversation this

morning, the following are the balances outstanding in the abovementioned [the
trustee for the Georgakopoulos trust] tax-payer’s accounts:

SGER (Superannuation) Account – $145,859.98 and will forward to be processed. I will also require a postal address where I will request the payment plan to be despatched. I wish to advise that the payment

CAC (BAS) Account - $596,053.09
proposal has to be on both of the accounts, SGER to be the priority”.

11         The defendant’s argument, put forcibly by his counsel Mr Loewenstein, was that the plaintiff had accepted that there would be an increased taxation liability on behalf of the trust and that, accordingly, it followed that the liability of the defendant would be reduced. The defendant’s present accountant has asserted that this arises because the previous accountant included payments made to the defendant as drawings

rather than the payment of salary, which had the effect of understating the expenses
of the trust and therefore, overstating the income distributed to the defendant.

12         This suggestion has been rejected by the plaintiff. Although Mr Malcolm referred to Mr Sandhu as the person “conducting an audit” with respect to the trust. Mr Linden informed me, after taking instructions, that the taxation liability of the trust referred to

in the email of Mr Sandhu, dated 21 October 2010, was based on a “self-
assessment”, presumably by the trust itself through the accountant, rather than as an
independent assessment by the plaintiff. A document tendered by Mr Loewenstein
confirms that the ATO presently regards the trust as having a liability for taxation of
$897,472.79 and, it appears, that the liability arises as a result of “self-assessment”
by the trust.

13         I have referred already to Mr Malcolm’s contention in relation to the nature of the ATO’s investigations as contained in his facsimile dated 27 October 2010. In that letter, he goes on to say “There has been no reduction in your client’s debt…We note

your contention that Mr Georgakopoulos’s liability will reduce and that the company
will have a commensurate primary tax liability. We advise that in some
circumstances, a tax-payer may direct that credits due to them by the Commissioner
of Taxation may be directed to the payment of a separate entity’s liability…The
Deputy Commissioner does not agree to withdraw his summary judgment

application”.

14         Upon the hearing of the summary judgment application, I invited Mr Linden to seek instructions from his client as to whether the plaintiff was prepared to defer the determination of the summary judgment application until the position was clearer as to whether there was any substance in the defendant’s contention that any increased taxation liability on the part of the trust would have a corresponding decrease in the taxation liability of the defendant, and which might be reflected in an amended assessment once the current review by the plaintiff of the defendant’s liability had been concluded.

15         After taking instructions, Mr Linden informed me that he wished to proceed with the application for final judgment. In my view, notwithstanding the possibility and indeed, perhaps the likelihood, that there might be, at some stage in the future, an amendment of the defendant’s personal taxation assessments by reason of a corresponding increase in the taxation liability of the trust, I consider that I am bound to proceed to enter judgment for the amount claimed by the plaintiff in the absence of any defence which is presently available. I consider that by reason of the conclusiveness of the assessments and the fact that the consideration of the defendant’s objections and the review of the position of the trust have not yet been concluded and amending assessments made, that the plaintiff is entitled to proceed to judgment.

16         The final matter raised by the defendant was what it described as, the discrepancy between the amounts sought in the statement of claim and draft amended statement of claim and the certificates filed with the Court today. The four certificates reflect the four separate claims made by the plaintiff in the proceeding which are set out in the statement of claim and the draft amended statement of claim.

17         The first claim relates to income tax. In the statement of claim and the draft amended statement of claim, the sum of $1,326,806.19 is sought, which includes general interest charges, calculated up to and including 22 December 2009. The certificate filed today refers to the amount owing as $1,415,622.64, as at today. The difference presumably takes account of general interest charges incurred since 22 December 2009 on the one hand and payments made by the defendant and amounts recovered directly by the ATO from bank accounts in the name of the defendant on the other.

18         The second claim relates to a running balance account debt which, in the statement of claim was for $10,639.29, as at 22 December 2009, and in the proposed amended statement of claim is $10,685.54, as at 11 January 2010. The certificate filed today states that the amount of $4,139.21 is owing as at today’s date.

19         The third claim is for administrative penalties. In the proposed amended statement of claim, the sum of $829,552.08 is sought, as at 23 December 2009. The draft amended pleading corrects what was said to be an error in the original proceeding which referred to the relevant date as 12 January 2010. The certificate filed today asserts that the sum due as at today’s date is $925,047.32.

20 statement of claim and amended statement of claim claim the sum of $100,963.53, as

The final claim is in respect of what is described as shortfall interest charge. The the original pleading of 3 June 2006, which was said to be an error. The amount certified as owing in the document filed today, as at today’s date, is $112,585.98.

21         I consider that there is no striking discrepancy in these figures, which should cause me to conclude that the prima facie position should be displaced and therefore, there is no reason why I should not enter judgment for the amount sought by the plaintiff.

22         The plaintiff has made application to amend the statement of claim to correct a number of matters which are described as “errors” in the original pleading. It has not been suggested by the defendant that he will be prejudiced by the making of these amendments. Having looked at the proposed amendments, I consider that it is appropriate to permit the amendments to be made and to dispense with any further service of the amended statement of claim.

23         I consider that because I propose to enter judgment for a substantial sum, in circumstances where it is at least possible that the current review of the defendant’s taxation position may reduce his personal liability, whilst increasing the liability of the trust, it is appropriate for me to grant a stay of execution in respect of the judgment. This will give the defendant an opportunity to lodge a notice of appeal, and the opportunity to either approach the Court of Appeal for an extension of the stay or to negotiate a further stay with the plaintiff.

24         I will make the following orders:

1.	Leave to the plaintiff to amend its statement of claim in accordance with the proposed amended statement of claim, being exhibit GK1 to the affidavit of George Khouri, sworn 28 September 2010.
2.	Further service of the amended statement of claim is dispensed with.
3.	Judgment for the plaintiff against the defendant for $2,457,395.15, in accordance with the four certificates of Paul Duffus dated 8 December 2010 filed today, and the costs of the proceeding, fixed at $1,186.50.
4.	Stay execution on the judgment until 4pm on 11 February 2011, provided that the defendant files a notice of appeal in respect of this order. If the defendant fails to file a notice of appeal in respect of this order within the appropriate time limit, the stay of execution shall immediately cease.
5.	Application by the defendant for a stay of execution until the hearing and determination of any appeal by the defendant is refused.

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Certificate

I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge

Anderson delivered on 8 December 2010 (and revised on 10 December 2010).

Dated: 10 December 2010

Caroline Dawes

Associate to His Honour Judge Anderson