Deputy Commissioner of Taxation v Jones (No. 2)

[2018] NSWSC 1873

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Deputy Commissioner of Taxation v Jones (No. 2) [2018] NSWSC 1873
Hearing dates:	28 November 2018
Date of orders:	07 December 2018
Decision date:	07 December 2018
Jurisdiction:	Common Law
Before:	Johnson J
Decision:	1. Pursuant to Rule 13.1 Uniform Civil Procedure Rules 2005 (NSW), summary judgment is granted in favour of the Plaintiff and against the Defendant in the amount of $5,662,572.87 calculated as at 27 November 2018, together with any additional general interest charge that has accrued since that date and up to today, being the date of judgment. 2. The Defendant is to pay the Plaintiff’s costs of the proceedings.
Catchwords:	TAXES AND DUTIES - taxation debt recovery proceedings - application for summary judgment - whether Defendant has arguable defence to claim in recovery proceedings - conclusive evidence of debt due to Commonwealth - matters relied upon by Defendant do not disclose arguable defence to claim in recovery proceedings - no discretionary reason to decline grant of summary judgment - summary judgment granted
Legislation Cited:	Civil Procedure Act 2005 (NSW) Evidence Act 1995 (NSW) Taxation Administration Act 1953 (Cth) Uniform Civil Procedure Rules 2005 (Cth)
Cases Cited:	Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 Anglo American Investments Pty Limited v Deputy Commissioner of Taxation (2017) 105 ATR 35; [2017] NSWCA 17 Batistatos v Roads and Traffic Authority of NSW (2006) 226 CLR 256; [2006] HCA 27 Clyne v Deputy Commissioner of Taxation (No. 3) (1983) 57 ALJR 673 Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146; [2008] HCA 32 Commissioner of Taxation v Ornelas [2016] FCA 457 Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited (2008) 237 CLR 473; [2008] HCA 41 Deputy Commissioner of Taxation v Elia [2018] NSWSC 58 Deputy Commissioner of Taxation v Harding [2017] NSWSC 772 Deputy Commissioner of Taxation v Jones (No. 1) [2018] NSWSC 1821 Deputy Commissioner of Taxation v Reslan (No. 2) [2018] NSWSC 1865 Dey v Victorian Railway Commissioners (1949) 78 CLR 62; [1949] HCA 1 Dubbo Base Hospital v Jones (1979) 1 NSWLR 225 Fancourt v Mercantile Credits Limited (1983) 154 CLR 87; [1983] HCA 25 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 In the Matter of Green Alliance Pty Limited (Receiver and Manager Appointed) [2012] NSWSC 1224 McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263; [1956] HCA 62 O’Brien v Bank of Western Australia Limited [2013] NSWCA 71 Ren v Wan Ze Property Development (Aust) Pty Limited (in liq) [2014] NSWCA 388 Southgate Investment Funds Limited v Deputy Commissioner of Taxation (2013) 211 FCR 274; [2013] FCAFC 10 Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57
Texts Cited:	---
Category:	Procedural and other rulings
Parties:	Deputy Commissioner of Taxation (Plaintiff) Wayne Curtis Jones (Defendant)
Representation:	Counsel: Mr ST White SC; Ms J Gatland (Plaintiff) Mr J Ireland QC (Defendant)   Solicitors: Australian Government Solicitor (Plaintiff) McGirr Lawyers (Defendant)
File Number(s):	2017/313940
Publication restriction:	---

Judgment

1. JOHNSON J: By Notice of Motion filed on 2 August 2018, the Plaintiff, the Deputy Commissioner of Taxation, seeks summary judgment in recovery proceedings against the Defendant, Wayne Curtis Jones, under Rule 13.1 Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) for the amount of $5,797,923.79 plus any additional general interest charge (“GIC”) that has accrued as at the date of judgment.

The Statement of Claim and Amended Defence in Recovery Proceedings

2. By Statement of Claim filed on 17 October 2017, the Plaintiff sought judgment in recovery proceedings against the Defendant in the then amount of $5,411,352.36. The claim related to the financial years ending 30 June 2012, 30 June 2013 and 30 June 2014 and sought outstanding income tax together with GIC’s and administrative penalties in the sum sought in the Statement of Claim.

3. An Amended Defence was filed on 6 June 2018. The Amended Defence contains a series of admissions and non-admissions, accompanied by assertions (inter alia) that the GIC’s and administrative penalties were excessive and unreasonable (paragraph 23), the administrative penalties were false or misleading in a material particular (paragraph 25), that the Notices of Assessment were the subject of Notices of Objection lodged with the Commissioner of Taxation (paragraph 29) and that the Defendant was entitled to allowable deductions for tax purposes (paragraph 30).

4. In addition, the Amended Defence asserts that the present Commissioner of Taxation (Christopher Jordan) was aware of aspects of the Defendant’s business activities as a result of a loan from Mr Jordan in about 2008 (before Mr Jordan became the Commissioner of Taxation in 2012) (paragraph 32).

5. The Amended Defence then asserts a number of matters, in an elaborately worded paragraph 32, culminating in the assertion (at paragraph 32(p)) that, in the circumstances, it is unconscionable and inequitable for the Plaintiff to continue and maintain these proceedings.

The Hearing of the Summary Judgment Application

6. As noted, the Plaintiff filed the Notice of Motion seeking summary judgment on 2 August 2018.

7. The hearing of the summary judgment application proceeded before me on 28 November 2018. Mr White SC and Ms Gatland of counsel appeared for the Plaintiff and Mr Ireland QC appeared for the Defendant.

8. An affidavit of Vladimir Klendo, an officer of the Australian Taxation Office (“ATO”), sworn 2 August 2018 was read in the Plaintiff’s case. That affidavit recounted the process of calculation undertaken for the purpose of the proceedings, and attached Notices of Assessment (each dated 27 September 2017) directed to the Defendant for each of the 2012, 2013 and 2014 financial years.

9. In addition, Notices to the Defendant dated 27 September 2017 were attached which sought payment of penalties for failure to lodge documents on time, in circumstances where the income tax return for each of the 2012, 2013 and 2014 financial years was not received by the ATO until 13 September 2017.

10. The affidavit of Mr Klendo annexed, as well, a certificate under s.255-45 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (“TA Act”) under the hand of Robert Ravanello, Deputy Commissioner of Taxation and Delegate of the Commissioner of Taxation, which certified that, as at 31 July 2018, the sum of $5,797,923.79 was a debt due and payable by the Defendant to the Commonwealth of Australia (affidavit, Vladimir Klendo, 2 August 2018, Annexure J).

11. A further affidavit of Mr Klendo sworn 28 November 2018 was read at the hearing. Mr Klendo noted that, after certain credits were allowed to the Defendant, the total sum claimed as at 27 November 2018 was $5,662,572.87. A further s.255-45 certificate to this effect was annexed to the affidavit.

12. Mr Klendo was cross-examined shortly on his affidavits (T5-11, 28 November 2018). He stated that he had care and control of the matter under Mr Ravanello, a Deputy Commissioner of Taxation and Deputy Commissioner of Debt (T5-6). Mr Klendo explained that he was authorised by the Plaintiff to make the affidavit under general authorisation delegations (T6). He said that he was the “case owner” for this matter (T6) which had been assigned to him by his team leader, Remayah Dokumen, in September-October 2017 (T10). Mr Klendo had verified the Statement of Claim on 17 October 2017 (T10-11). Mr Klendo was aware that the Defendant’s Notices of Objection lodged on 2 November 2017 had been the subject of a determination by the ATO on 23 November 2018 (T11).

13. For reasons explained in Deputy Commissioner of Taxation v Jones (No. 1) [2018] NSWSC 1821, I upheld an objection by the Plaintiff to the cross-examination of Mr Klendo with respect to his statement of his belief (made for the purpose of Rule 13.1(b) UCPR) that the Defendant had no defence to the claim.

14. An affidavit of the Defendant sworn 14 September 2018 was relied upon in the Defendant’s case. The affidavit was admitted provisionally subject to relevance: s.57 Evidence Act 1995 (NSW); cf Dubbo Base Hospital v Jones (1979) 1 NSWLR 225 at 227. As the permissible scope of evidence which was relevant to recovery proceedings was a critical issue on the application itself, I considered that it was appropriate to examine the tendered material for the purpose of making a ruling (after full argument) in my final judgment.

15. Mr White SC objected to the Defendant’s affidavit upon a number of bases, primarily relevance. Put shortly, it was submitted that almost all of the Defendant’s affidavit material raised matters which were outside the scope of the present recovery proceedings.

16. The Defendant’s affidavit of 14 September 2018 outlined his involvement in what was described as a casino gambling junket business and loans which were undertaken in that respect. The Defendant said that he had met Mr Jordan when the two men worked together at KPMG, well before Mr Jordan was appointed Commissioner of Taxation in 2012. The Defendant asserted that he had been the victim of fraud by a third party involved in the casino gambling junket business.

17. The Defendant outlined his dealings with Mr Jordan in 2008 and 2009, with the last contact the Defendant had with Mr Jordan apparently being in 2009, three years before Mr Jordan took up the office of Commissioner of Taxation. The Defendant stated that he borrowed a total sum of $215,000.00 from Mr Jordan over a period between 2004 and 2006. This money was not repaid and a third mortgage was given to Mr Jordan in 2008 over a property at Pyrmont. When that property was ultimately sold, there were no funds left, after paying out the first and second mortgages, to make any payment to Mr Jordan. According to the Defendant, in August 2009, Mr Jordan signed a statement of claim and proxy form as a creditor in the sum of $264,250.00 with respect to the Defendant.

18. According to the Defendant’s affidavit, his income tax returns for the 2012, 2013 and 2014 financial years (received by the ATO on 23 September 2017) included claims for tax deductions for interest said to be incurred in those financial years upon loans from various persons which he had put into the casino junket gambling business. The interest claimed for those financial years was $1,796,574.00 (2012), $2,227,025.00 (2013) and $2,764,392.00 (2014).

19. The Defendant said that Notices of Assessment for the 2012, 2013 and 2014 financial years were issued on 27 September 2017 by the ATO (under the hand of Mr Ravanello, Deputy Commissioner of Taxation). The Notices of Assessment disallowed the Defendant’s claims for interest.

20. The affidavit annexed Notices of Objection dated 2 November 2017 lodged by the Defendant with respect to the assessments for each of the 2012, 2013 and 2014 financial years.

21. A further affidavit of the Defendant sworn 27 November 2018 was read, subject to relevance. Annexed to the affidavit was a 37-page Determination dated 23 November 2018 by the ATO in response to the Defendant’s Notices of Objection dated 2 November 2017. The Defendant stated in his affidavit that he proposed to appeal against the Determinations and he undertook to lodge the appeals as soon as possible and to prosecute them without delay.

22. Written submissions were provided on behalf of the parties with oral submissions being made as well at the hearing of the summary judgment application.

Principles to be Applied on Application for Summary Judgment

23. Summary intervention of the Court may be exercised where there is a high degree of certainty about the ultimate outcome of the proceedings: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 at 129; Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at 575-576 [57]; Batistatos v Roads and Traffic Authority of NSW (2006) 226 CLR 256; [2006] HCA 27 at 274-275 [44]-[46].

24. The power to order summary judgment should not be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Limited (1983) 154 CLR 87; [1983] HCA 25 at 99.

25. Summary disposal is not confined to cases where argument is unnecessary to evoke the futility of the defence or claim. Argument, even extensive argument, may be necessary to demonstrate that the defence or claim is so clearly untenable that it cannot possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) at 130. The test is not whether the Defendant would probably fail in his defence, it is whether the material before the Court demonstrates that the matter should not be permitted to go to trial in the ordinary way because it is apparent that the Plaintiff must succeed: Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57 at 602-603.

26. A relevant consideration is whether there exists a real defence, and not simply whether one is pleaded: O’Brien v Bank of Western Australia Limited [2013] NSWCA 71 at [3], [8]; Ren v Wan Ze Property Development (Aust) Pty Limited (in liq) [2014] NSWCA 388 at [49]-[55].

27. A further relevant consideration in the exercise of the summary power is whether, if the proceedings were to continue by way of the Amended Defence, such a course would constitute an abuse of process: Dey v Victorian Railway Commissioners (1949) 78 CLR 62; [1949] HCA 1 at 90-91.

28. In exercising the Court’s power to strike out a defence under Rule 13.1 UCPR, the Court should also give effect to the overriding purpose stated in s.56(1) Civil Procedure Act 2005 (NSW), namely to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. Section 58(1) Civil Procedure Act 2005 (NSW) requires the Court to act in accordance with the dictates of justice and s.58(2) requires that the overriding purpose specified in s.56(1) be taken into account: In the Matter of Green Alliance Pty Limited (Receiver and Manager Appointed) [2012] NSWSC 1224 at [13].

29. The real issue in the present application under Rule 13.1 UCPR is whether a triable or arguable defence is disclosed to the claim brought by the Plaintiff which is the subject of this application.

30. There was no dispute concerning these principles on the hearing of the present application. The controversy concerned the decision to be reached after application of these principles.

The Statutory Scheme for Income Tax, Interest Charges, Administrative Penalties and Recovery

31. The parties accepted that the relevant statutory scheme was described accurately by me in Deputy Commissioner of Taxation v Harding [2017] NSWSC 772 at [12]-[19]:

“12   The statutory scheme giving rise to the Plaintiff’s claim is not in dispute and is summarised below.

13 The Commissioner must make an assessment of a taxpayer’s taxable income and the tax payable and serve a written notice of assessment on the taxpayer: s.174 Income Tax Assessment Act 1936 (Cth) (‘ITA Act’). Income tax is then due and payable generally 21 days after the date on which the taxpayer is required to lodge their return with the Commissioner, or the Commissioner furnishes a notice of assessment. Where the Commissioner amends an assessment, any extra tax resulting is again due and payable 21 days after the date on which the Commissioner gives the taxpayer notice of the amended assessment.

14 A taxpayer is liable to pay a shortfall interest charge (‘SIC’) on an additional amount of income tax that they are liable to pay because the Commissioner amends their assessment for an income year: Sch.1, s.280-100(1) Taxation Administration Act 1953 (Cth) (‘TA Act’). A taxpayer is liable to pay SIC for the period from when the income tax should have been paid to the day preceding the issue of the notice of an amended assessment. The Commissioner must give written notice to a taxpayer of their liability to pay SIC. Such a notice is prima facie evidence of the matters stated in it: Sch.1, s.280-110(3) TA Act. SIC becomes due for payment 21 days after the notice is given to the taxpayer.

15   Where income tax or SIC is not paid by the relevant due date, the taxpayer becomes liable to pay a general interest charge (‘GIC’) daily on the unpaid amount of the income tax or SIC and any unpaid GIC: s.5-15 ITA Act.

16   A taxpayer is liable to pay an administrative penalty, inter alia, if:

(a) they make a statement to the Commissioner which is false or misleading in a material particular (whether because of things in it or omitted from it): Sch.1, s.284-75(1) TA Act; or

(b) they are required under a taxation law to give a return, notice, statement or other document (including an income tax return) to the Commissioner in an approved form by a particular day and do not do so: Sch.1, s.286-75(1) TA Act.

17 The Commissioner must make an assessment of the amount of the penalty: Sch.1, s.298-30(1) TA Act. The Commissioner must give written notice to a taxpayer of their liability to pay the penalty and of the reasons why the taxpayer is liable to pay the penalty. The penalty becomes due for payment on the day specified in a notice, which must be at least 14 days after the notice is given to the taxpayer.

18 If any of the penalty remains unpaid after it is due, the taxpayer is liable to pay GIC daily on the unpaid amount of the penalty and any unpaid GIC: Sch.1, s.298-25 TA Act.

19 Each of income tax, SIC, GIC and administrative penalties are tax-related liabilities: Sch.1, s.250-10(2) TA Act. These liabilities may be recovered by the Deputy Commissioner as a debt due to the Commonwealth and payable to the Commissioner: s.3AA(2), Sch.1, ss.255-1 and 255-5 TA Act.”

32. In Deputy Commissioner of Taxation v Reslan (No. 2) [2018] NSWSC 1865, Adamson J provided a helpful summary of procedural provisions in the TA Act which apply to the present proceedings. Her Honour said at [6]-[12]:

“6 Schedule 1 of the Taxation Administration Act 1953 (Cth) (TAA) includes provisions which facilitate the Commissioner’s recovery of tax. Section 255-5 provides that an amount of ‘tax-related liability’ that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner. Liabilities for income tax and GIC are ‘tax-related liabilities’: s 255-10 of Sch 1 of the TAA (items 37 and 70). Section 255-5(2) provides that the plaintiff may sue in a court of competent jurisdiction to recover an amount of tax-related liability that remains unpaid after it has become due and payable. This Court is such a court.

7   Item 2 of s 350-10(1) of Sch 1 to the TAA (formerly s 177 of the ITAA 1936) provides that a notice of assessment is conclusive evidence that the assessment was properly made and, except in proceedings under Part IVC of the TAA on a review or appeal relating to the assessment, that the amounts and particulars of the assessment are correct. The correctness of a notice of assessment cannot be challenged in legal proceedings for recovery of the tax debt: F J Bloemen Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia; Simons v The Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 360 at 375 (Mason and Wilson JJ, Stephen and Aickin JJ agreeing) and 378-379 (Murphy J); [1981] HCA 27.

8 A taxpayer who is dissatisfied with an assessment may challenge it in review or appeal proceedings under Part IVC of the TAA. In that event, the taxpayer bears the burden of proof that the assessment is excessive or incorrect or should not have been made: s 144ZZK(b), TAA. Section 14ZZM relevantly provides that a pending review does not affect the recovery of the unpaid tax.

9 Section 255-45 of Sch 1 of the TAA provides that a certificate signed by the plaintiff is prima facie evidence of certain matters in a proceeding to recover an amount of tax-related liability. The certificate may state that a notice required to be served was, or is taken to have been, served (TAA, Sch 1, s 255-45(2)(c)) or that a sum specified in the certificate is, as at the due date specified in the certificate, a debt due and payable by the person to the Commonwealth (TAA, Sch 1, s 255-45(2)(e)).

10 Section 350-10(3) of Sch 1 of the TAA provides that production of a certificate signed by the plaintiff which states that from the time specified in the certificate an amount was payable under a tax law is prima facie evidence that the amount is payable from that time and that the particulars stated in the certificate are correct.

11 Section 255-50 of Sch 1 to the TAA provides that an allegation in, relevantly, the plaintiff’s pleading is prima facie evidence. The section applies even if evidence is given in support or rebuttal of the matter.

12   The provisions referred to above are among those which placed the Commissioner in a ‘position of special advantage’: Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673 at 674-675 (Gibbs CJ, Murphy, Wilson, Brennan and Deane JJ agreeing). Generally, the Commissioner is entitled to pursue recovery proceedings to judgment even if the taxpayer has commenced proceedings under Part IVC of the TAA: Southgate Investment Funds Ltd v Deputy Commissioner of Taxation (2013) 211 FCR 274; [2013] FCAFC 10 at [77] and s 14ZZM of the TAA.”

33. In Deputy Commissioner of Taxation v Harding, I also referred to some of these procedural provisions at [20]-[21]:

“20   In these proceedings, a statement or averment about a matter in the Plaintiff’s complaint, claim or declaration is prima facie evidence of the matter: Sch.1, s.255-50 TA Act. Further, the production of a notice of assessment is conclusive evidence of its due making and, other than on an appeal against an assessment, that the amount and all the particulars of the assessment are correct: Sch.1, s.350-10(1) TA Act; Anglo American Investments Pty Limited v Deputy Commissioner of Taxation [2017] NSWCA 17 at [40]ff.

21   Accordingly, the taxpayer is precluded from challenging the accuracy of the assessments in recovery proceedings: Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at 166-167 [64]-[67]; [2008] HCA 32; Bell Group NV (In Liq) v Western Australia (2016) 103 ATR 178 at 191 [54]; [2016] HCA 21. The accuracy of assessments can only be challenged in proceedings by way of appeal under Part IVC of the TA Act. A pending appeal of this nature does not affect the obligation to pay tax or the Commissioner’s ability to bring recovery proceedings: ss.14ZZM, 14ZZR TA Act.”

34. Reference will be made to a number of relevant authorities and statutory provisions in the course of determining this application.

Submissions for the Plaintiff

35. Put shortly, Mr White SC submitted that the evidence relied upon by the Plaintiff satisfied the evidence provisions under ss.255-45, 255-50 and 350-10(1) of Schedule 1 TA Act so that the evidence had conclusive effect in recovery proceedings. He submitted that the Amended Defence filed 6 June 2018 disclosed no arguable defence and was destined to fail.

36. Senior Counsel for the Plaintiff referred to the statutory scheme for evidence in recovery proceedings and relied upon the authorities referred to in Deputy Commissioner of Taxation v Harding (see [33] above). He submitted that there is no jurisdiction in this Court in recovery proceedings to go behind the assessments to examine their merits according to competing contentions regarding how much income was derived in the subject years: Deputy Commissioner of Taxation v Elia [2018] NSWSC 58 at [6].

37. It was submitted for the Plaintiff that the Defendant had available to him a right to challenge the assessments in an external forum by way of appeal under Part IVC of the TA Act to the Administrative Appeals Tribunal (“AAT”) or the Federal Court of Australia. It was open to the Defendant to appeal against the assessments at the end of a 60-day period following the day on which the Notices of Objection were lodged by the Defendant: s.14ZYA(1)(a)(i) TA Act. As the Defendant had lodged his Notices of Objection on 2 November 2017, it was open to him to appeal against the assessments from 1 January 2018 in circumstances where there had not been a decision by the ATO with respect to the Notice of Objection. The fact that the ATO did not make a decision concerning the objections until 23 November 2018 did not constitute an impediment to the Defendant bringing an appeal at an earlier time.

38. Mr White SC submitted that the evidence which accompanied Mr Klendo’s affidavit, including certificates under s.255-45 dated 2 August 2018 and 28 November 2018, constituted conclusive evidence in support of the Plaintiff’s claim in these recovery proceedings.

39. It was submitted that there was no evidence to support an assertion that Mr Jordan played any part in the decisions made by the ATO with respect to the assessments issued concerning the Defendant’s taxation liability and the bringing of the present recovery proceedings, including the application for summary judgment.

40. Even if there was some support for the assertion of unconscionability made in the Amended Defence (which was denied), it was submitted that such a claim can have no reasonable prospect of succeeding in recovery proceedings where no application for judicial review was made and Notices of Assessment have been admitted into evidence: Anglo American Investments Pty Limited v Deputy Commissioner of Taxation (2017) 105 ATR 35; [2017] NSWCA 17 at 51 [78].

41. Insofar as it was contended that there was some issue arising from the loan given by Mr Jordan to the Defendant in about 2008, it was submitted for the Plaintiff that this issue was completely irrelevant to the recovery proceedings and that there was, in any event, no evidence which assisted the Defendant with respect to that aspect.

42. Mr White SC submitted that there was no evidence to support a claim of abuse of process or unconscionable conduct. The Defendant’s evidence, at its highest, indicated that Mr Jordan lent some money to the Defendant in a private capacity years before he became Commissioner of Taxation. There was no evidence that Mr Jordan had played any part in the decision making concerning the bringing of the recovery proceedings and the application for summary judgment. The Plaintiff submitted that the Defendant’s evidence on this matter was irrelevant to the issues to be considered on the present application and, in any event, went nowhere.

43. It was submitted that the Court could readily conclude that the Amended Defence was doomed to fail.

44. The Plaintiff submitted that this Court could reach the same conclusion on a summary judgment application as reached by Bromwich J in Commissioner of Taxation v Ornelas [2016] FCA 457 at [7], so that the application for summary judgment should be allowed.

45. With respect to discretionary considerations, it was submitted for the Plaintiff that there was no available and reasonable basis for refusing to grant summary judgment in the exercise of discretion.

46. In circumstances where the Amended Defence was destined to fail and where it had been open to the Defendant since 1 January 2018 to bring an appeal to the AAT or the Federal Court of Australia with respect to the ATO assessments, there was no discretionary reason why the Court should decline to grant summary judgment in this case.

47. The Plaintiff submitted that the Court should make an order as sought in the Notice of Motion.

Submissions for the Defendant

48. Mr Ireland QC accepted the Plaintiff’s submissions with respect to the legal framework for recovery proceedings. His submissions focused upon discretionary considerations which he argued arose in what were said to be the unusual circumstances of this case.

49. It was submitted that the Court should approach the matter upon the basis that the proceedings are brought by the Plaintiff as a delegate of Mr Jordan, the Commissioner of Taxation. It was submitted, as well, that the evidence was that the Defendant had borrowed money from Mr Jordan in 2008 which was not ultimately repaid, and with a mortgage given over property in favour of Mr Jordan which did not see any payment being made to him when the property was sold. It was submitted also that the Defendant’s debt to Mr Jordan was included in a later list of the Defendant’s creditors.

50. Whilst acknowledging that there was no evidence that Mr Jordan had played any part in the decisions concerning the present proceedings against the Defendant, it was submitted that his past involvement with the Defendant was such that there was knowledge within the ATO of the arrangements which existed between the Defendant and Mr Jordan at a time before him becoming the Commissioner of Taxation.

51. It was submitted that the Court may take into account the fact that the assessments issued concerning the Defendant on 27 September 2017 and that the proceedings were commenced soon after on 17 October 2017 by the filing of a Statement of Claim. The Defendant filed Notices of Objection to the assessments on 2 November 2017 with no decision being made with respect to those objections until 23 November 2018. In the meantime, it was noted that the Plaintiff had filed the Notice of Motion seeking summary judgment on 2 August 2018. It was submitted that this chronology revealed what was said to be “urgency and impetuosity” on the Plaintiff’s part with respect to the recovery proceedings and the summary judgment application.

52. Whilst acknowledging that it was open to the Defendant to bring an appeal with respect to the assessment at any time after 1 January 2018, Mr Ireland QC submitted that it would have been difficult for the Defendant to do so in a complex matter such as this without there having been a decision made by the ATO with respect to the objections.

53. Mr Ireland QC submitted that the Court should have regard to the question whether the Defendant has a reasonably arguable case in the present recovery proceedings in deciding whether the substantial step of summary judgment should be ordered: Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited (2008) 237 CLR 473; [2008] HCA 41 at 484 [13]; Southgate Investment Funds Limited v Deputy Commissioner of Taxation (2013) 211 FCR 274; [2013] FCAFC 10 at 292-293 [71]-[75].

54. It was submitted that there was a reasonably arguable case arising in the unusual circumstances of this case in reliance on principles of abuse of process: Batistatos v Roads and Traffic Authority of NSW at 262-268 [2]-[16].

55. Whilst acknowledging that the remedy of a stay was not an appropriate step to be entertained at this time (being a matter which may arise if summary judgment was granted), Mr Ireland QC submitted, nevertheless, that the exercise of discretion in a summary judgment application may be assisted by considerations which arise on a stay application: Commissioner of Taxation v Ornelas at [11]ff. He submitted that the refusal of the summary judgment application at this time would permit the Defendant to proceed with his appeal to the AAT or the Federal Court of Australia arising from the ATO decision with respect to the objections made on 23 November 2018.

56. In what were said to be the unusual circumstances of this case, it was submitted that the Court should refuse the application for summary judgment.

Decision

57. The appropriate starting point is the statutory regime for the recovery of tax-related liabilities laid down in Part 4-15 of Schedule 1 TA Act. The object of Part 4-15 is to ensure that unpaid amounts of tax-related liabilities and other related amounts are collected or recovered in a timely manner: s.250-25.

58. The claim made against the Defendant seeks recovery of a “tax-related liability” within the meaning of s.255-1.

59. I accept that the Deputy Commissioner of Taxation as Plaintiff may sue (in this case) in his official name to recover an amount of tax-related liability: s.255-5(2). In this case, the evidence of Mr Klendo reveals that Mr Ravanello, Deputy Commissioner of Taxation, is the person who holds that office and who has brought these proceedings. There is no evidence that the Plaintiff has brought these proceedings on behalf, or at the direction, of the present Commissioner of Taxation. Indeed, there is no evidence that the Commissioner of Taxation has been involved at all in the decision making with respect to the proceedings against the Defendant (Exhibit 1; T6-7, 28 November 2018).

60. The evidentiary certificates under s.255-45 dated 2 August 2018 and 28 November 2018 constitute prima facie evidence of the matters contained in each certificate in proceedings for recovery of an amount of tax-related liability: s.255-45. Statements or averments about the matter made in the Statement of Claim filed on 17 October 2017 constitute prima facie evidence of the matters contained therein: s.255-50. Mr Klendo has given evidence by affidavit in the present proceedings and he has been cross-examined on that evidence: s.255-55.

61. The effect of s.350-10(1) is that the production of a Notice of Assessment is conclusive evidence that the assessment was properly made, other than in proceedings commenced under Part IVC TA Act, and that the amounts and particulars of the assessments are correct. In the context of recovery proceedings, the conclusiveness of the assessments being properly made, and the particulars of those assessments being correct, are not open to challenge: McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263; [1956] HCA 62 at 270; Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146; [2008] HCA 32 at 166-168 [64]-[70]; Anglo American Investments Pty Limited v Deputy Commissioner of Taxation at 46-47 [43]-[47], 51 [78].

62. The Plaintiff’s evidence and certificates reveal that the tax-related liability of the Defendant arises from assessments made by duly authorised officers of the ATO in respect of the 2012, 2013 and 2014 financial years. The Notices of Assessment in respect to those years issued on, 27 September 2017, are annexed to Mr Klendo’s affidavit of 2 August 2018.

63. The Defendant became liable to administrative penalty amounts pursuant to s.286 of Schedule 1 TA Act for failure to lodge a document on time, and was assessed to be liable for administrative penalties pursuant to s.284-75(3) for failing to provide a document as required. In addition to the primary taxation liabilities, the Defendant is also liable to pay a GIC which has accrued and continues to accrue.

64. The affidavits of Mr Klendo, and the s.255.45 certificates, state that the Defendant’s tax-related liability arising from each of the Notices of Assessment, the Notices of Penalty for failure to lodge documents on time and the Notices of Assessment of Penalty for failing to provide documents on time give rise to an amount of $5,662,572.87 as at 27 November 2018.

65. As these are recovery proceedings, and not proceedings under Part IVC TA Act, the prima facie presumption created by ss.255-45 and 255-50, and the conclusive effect of s.350-10(1), are to be given their full force and effect: Commissioner of Taxation v Ornelas at [7].

66. The Defendant has admitted in the Amended Defence that:

1. he was assessed to pay income tax for the 2012, 2013 and 2014 financial years and that he was served with Notices of Assessment in respect to each of those years (paragraphs 3 and 4);

2. the ATO gave him written Notices of Administrative Penalty in respect to failing to lodge returns on time (paragraph 12); and

3. the ATO made assessments of administrative penalties pursuant to s.284-75 and gave notices of those penalties to him (paragraphs 17 and 18).

67. The Defendant does not admit to any liability for the GIC, apparently on the basis that the debt is not presently due and payable (paragraphs 7, 8, 15 and 21, Amended Defence).

68. In light of these findings, the Plaintiff has laid the groundwork for summary judgment to be given against the Defendant.

69. Has the Plaintiff demonstrated that the Defendant has no arguable defence? It is open to the Court to consider this question on an application for summary judgment in recovery proceedings: Deputy Commissioner of Taxation v Broadbeach Property Pty Limited at 484 [13]; Southgate Investment Funds Limited v Deputy Commissioner of Taxation at 292-293 [71]-[75]. In answering this question, however, it is necessary to keep firmly in mind the nature of the present recovery proceedings.

70. It was open to the Defendant after 1 January 2018 to appeal from what would have been (in effect) the deemed disallowance of his taxation objections under s.14ZY(1) TA Act, by operation of s.14ZYA of that Act. The Defendant did not bring such an appeal. The Defendant has said that he proposes to appeal under Part IVC from the determinations made on 23 November 2018.

71. It was open to the Defendant since 1 January 2018 to appeal under Part IVC, thereby bringing the matter to the AAT or the Federal Court of Australia. It was submitted for the Defendant that it would have been unrealistic for him to appeal without the ATO Determination concerning his objections. Whilst accepting that there was some complexity in the issues to be considered on appeal, I do not consider that the Defendant’s failure to appeal assists him in the exercise of discretion on the present application. If the Defendant was concerned about the possible involvement of Mr Jordan in these matters, he could have appealed under Part IVC, thereby bringing the matters before a different tribunal. No good reason has been advanced for the Defendant’s failure to take this step.

72. The scheme of the legislation reveals that it is open to the Plaintiff to seek judgment against the Defendant in recovery proceedings even though there is on foot an appeal from a decision to disallow an objection. Even if a Part IVC appeal was actually on foot, it would not impede recovery proceedings: s.14ZZM TA Act; Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited, at 488-489 [29].

73. Issues which may arise on an appeal against disallowance of a tax objection are separate from those which fall for consideration in recovery proceedings.

74. Taken at its highest, the Amended Defence asserts that the assessments are contrary to law and that it would be unconscionable and inequitable for these proceedings to be maintained. The evidence relied upon in this respect arises from the circumstances in which a loan was advanced by Mr Jordan to the Defendant in about 2008, long before he was appointed Commissioner of Taxation and the fact that that loan was not repaid. There is a type of general assertion that because of this past transaction, there is some taint of the decision-making process within the ATO concerning the Defendant’s tax returns for 2012-2014, not lodged until 2017, with there being no evidence that Mr Jordan played any part at all in consideration of these matters.

75. In Anglo American Investments Pty Limited v Deputy Commissioner of Taxation, Payne JA (McColl and Meagher JJA agreeing) said at 51 [78]:

“These proceedings are not ‘judicial review’ proceedings of the kind contemplated by the High Court in Futuris. These were taxation debt recovery proceedings being conducted in a State court. The amended defence that was filed in these proceedings was bound to fail, because a claim of conscious maladministration can have no reasonable prospect of succeeding in debt recovery proceedings where no application for judicial review is made and notices of assessment have been admitted in evidence. That is the import of Futuris at [64]-[67], cited above.”

76. To the extent that the submission advanced in the present case is that there was a form of unconscionability with respect to action in the ATO concerning the Defendant, there is no reasonable prospect that the Amended Defence would succeed. The Amended Defence in this case is bound to fail because the matters sought to be agitated on the part of the Defendant are extraneous to the statutory recovery proceedings of the type presently brought by the Plaintiff.

77. I should observe that the evidence relied upon by the Defendant does not in any event, give rise to an arguable case of abuse of process or unconscionable conduct on the part of any person within the ATO. However, even if there were some evidence of this type (and there is not), it would not bear upon the issues to be determined in these recovery proceedings.

76. As noted earlier, objection was taken at the hearing by Mr White SC on the grounds of relevance, to the entirety of the evidence sought to be relied upon by the Defendant concerning events between 1987 and 2009, some years before the assessments concerning taxation debts said to arise for the 2012, 2013 and 2014 financial years. I approached the objection upon the basis that the evidence would be admitted provisionally subject to relevance, with a ruling to be made in the Court’s judgment having heard all submissions touching upon that issue.

77. Having considered the evidence and having heard the submissions bearing upon this question, I consider that the evidence relied upon by the Defendant is not relevant to the issues in these recovery proceedings and thus ought not be admitted into evidence. The evidence is not relevant to the issues to be determined in recovery proceedings: ss.55-56 Evidence Act 1995 (NSW).

78. I accept the submission for the Plaintiff that the helpful analysis undertaken by Bromwich J in Commissioner of Taxation v Ornelas at [7] supports the grant of summary judgment to the Plaintiff in the present proceedings.

79. The remaining question concerns discretionary considerations which arise on an application for summary judgment. I accept that the Court has a discretion whether to grant summary judgment in these proceedings. If the Defendant had an arguable defence by reference to relevant issues in the proceedings, then that aspect would bear upon the question whether summary judgment should be granted.

80. To the extent that it was submitted for the Defendant that a discretionary refusal of summary judgment would allow him to proceed with an appeal to the AAT or the Federal Court of Australia from the disallowance of his objections to the assessment, I note that he has not brought such an appeal so far although it was open for him to do so since 1 January 2018.

81. I am not persuaded that there is any other aspect of the proceedings which constitutes an available and proper basis for the refusal of summary judgment in the exercise of discretion. If the Defendant’s grievance is that his past association with Mr Jordan has, in some way, tainted or influenced the decision-making process in the ATO (as to which there is no evidence), then it was open to him since 1 January 2018 by appeal to take the matter before a separate and independent decision maker, but he has not done so.

82. I do not consider that anything operates in the Defendant’s favour by reference to the timing of various applications being made. To the extent that it was submitted that there was a flavour of abuse of process arising from the history of the proceedings to date, I do not accept this submission. Whilst accepting that the special statutory provisions available in recovery proceedings place the Plaintiff in a “position of special advantage” (Clyne v Deputy Commissioner of Taxation (No. 3) (1983) 57 ALJR 673 at 674-675), I detect no evidence of any impropriety or unconscionability in the way in which these provisions have been utilised in this case.

Conclusion

85. I am satisfied that the Plaintiff has demonstrated an entitlement to recover from the Defendant the tax-related liability alleged against him. I am satisfied that the Defendant has no arguable defence in these recovery proceedings. I am satisfied that it is appropriate to grant summary judgment to the Plaintiff in these circumstances and that there is no discretionary basis to withhold that order in this case.

86. Accordingly, pursuant to Rule 13.1 UCPR, I grant summary judgment in favour of the Plaintiff and against the Defendant in the amount of $5,662,572.87 calculated as at 27 November 2018, together with any additional GIC that has accrued since that date and up to today, being the date of judgment.

87. I order the Defendant to pay the Plaintiff’s costs of the proceedings.

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Amendments

10 December 2018 - Coverpage - Amendment to counsel's name.

[37] - Amendment to date.

Decision last updated: 10 December 2018