Deputy Commissioner of Taxation v Marijancevic
[2004] VSC 386
•13 September 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 6871 of 2003
| DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA | Plaintiff |
| v | |
| WILLIAM MARIJANCEVIC | Defendant |
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JUDGE: | Cummins J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 30, 31 August 2004 and 7 September 2004 | |
DATE OF JUDGMENT: | 13 September 2004 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Marijancevic | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 386 | |
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Income tax – default assessment – related Federal Court proceeding – summary judgment.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms H. Riley | Australian Government Solicitor |
| For the Defendant | Ms A. Richards QC with Mr S. Gillespie-Jones | Francis Daniel |
HIS HONOUR:
This is a proceeding by the plaintiff, the Deputy Commissioner of Taxation, against the defendant, William Marijancevic, for summary judgment in the sum of $536,454.45.
Under s.167 Income Tax Assessment Act 1936 the plaintiff on 11 February 2003 issued default assessments to the defendant for the 1998, 2000, 2001 and 2002 tax years. The defendant had not in fact filed any tax returns since obtaining a tax file number in 1995. By writ of 25 July 2003 in this Court the plaintiff pleaded the facts that I have briefly stated, that the defendant was indebted in the sum of $1,008,564.95 in respect of income tax for those years and additional charges for late payment, and claimed those amounts. Particulars thereof were set out in the statement of claim.
By defence filed 2 October 2003, the defendant denied the indebtedness alleged and alleged (paragraph 2) that “the Commissioner has not made any bona fide assessment (within the meaning of ss.166 and 167 of the Income Tax Assessment Act 1936) of the amount of the defendant’s taxable income in the (years stated).”
By summons filed 12 February 2004 the plaintiff seeks summary judgment, as I have said.
By summons filed 9 June 2004 the defendant sought an order pursuant to s.5(1) Jurisdiction of Courts (Cross-Vesting) Act 1987 transferring the proceeding to the Federal Court of Australia.
After a number of adjournments of the matters, Byrne J. on 17 June 2004 adjourned the plaintiff's summons for summary judgment to a date to be fixed, and likewise the defendant's summons for cross-vesting. Liberty was granted to both parties upon 48 hours notice to apply. The following is noted in the Order under the heading “Other Matters”:
“1.The defendant has commenced a proceeding in the Federal Court which, if successful, will defeat the plaintiff's claim in this proceeding. The plaintiff intends to apply to the Federal Court to strike out the defendant's claim.
2.The defendant's application is to be adjourned pending disposition of the Federal Court proceeding.”
The relevant financial matters have been deposed to in affidavits of Mr B. Healey, Commonwealth administrative services officer, of 10 February and 14 April 2004 and which for the purposes of this proceeding I do not need to rehearse save to say that in the second affidavit the relevant history is set forth. It is there deposed that on 14 April 2004 the plaintiff issued credit amended assessments for the relevant years leading to a net result as at the date of deposition, 14 April 2004, of $512,462.30 together with general interest.
The defendant’s proceeding was heard in the Federal Court by Heerey J. and on 25 August 2004 in Marijancevic v Deputy Commissioner of Taxation[1] he determined the matter. In his judgment His Honour noted the brief history that I have stated, and then stated the issues before him as follows (paragraph 15):
[1](2004) FCA 1084.
“The statement of claim discloses essentially three grounds:
· the Commissioner did no more than treat receipts, either in the form of bank deposits or cash seized by the Queensland police, as to assessable income;
· the assessments were merely a device to obtain the cash seized by the Queensland police;
· the assessments were tentative or provisional.”
His Honour considered the matters and dismissed the claim as being untenable. He ordered judgment for the respondent before him, the Commissioner of Taxation. An application for leave to appeal Heerey J’s judgment was filed by notice of motion in the Federal Court on 1 September 2004.
The matter has an unusual history before me in the Practice Court. It came on before me on 13 August 2004 and I had the benefit of hearing counsel for the plaintiff and also counsel for the defendant, Mr Gillespie-Jones. I reserved the matter overnight to give my judgment at 9.30 am. the next morning, Tuesday 31 August 2004. When I came onto the Bench at 9.30 am. to deliver judgment, Ms Richards QC sought leave to appear for the defendant and to make further submissions to me on the matter. Normally that is not a procedure which the Court allows or encourages. However there were three reasons why I acceded to Ms Richards’ application: first, out of respect and courtesy to her; second, because Mr Gillespie-Jones, who had made most helpful and thorough submissions on behalf of the defendant the afternoon before, nonetheless had received the brief somewhat late; and third and importantly, because the defendant was in custody and I considered it was fair and proper on that account to allow the matter to be further argued. Accordingly I granted leave. The matter was very fully argued by Ms Richards that morning and in reply a week later, on Tuesday 7 September 2004. However, despite the benefit of her submissions, I am wholly unpersuaded that judgment ought not be entered.
This is a proceeding for recovery of income tax. By s.177 Income Tax Assessment Act 1936 a copy of the notice of assessment is conclusive evidence of the due making of the assessment: see also F.J. Bloemen Pty Ltd v. Federal Commissioner Taxation[2]. The principle in Bloemen applies to tax recovery proceedings. Of course the taxpayer may apply, as indeed here the defendant did, to the Federal Court under s.39B Judiciary Act 1903 for appropriate relief on the grounds that the assessment was tentative or provisional or made in bad faith: see Deputy Commissioner of Taxation v. Richard Walter Pty Ltd[3]. An assessment which is tentative or provisional is not an assessment: Commissioner of Taxation v. Hoffnung[4]. However an assessment is not to be treated as tentative merely because it may be the subject of review when further information is provided: McCleary v. Federal Commissioner of Taxation[5].
[2](1981) 147 CLR 360 particularly at 375-376 per Mason and Wilson JJ.
[3](1995) 183 CLR 168.
[4](1928) 42 CLR 39.
[5](1992) 97 ATC 4266 per Hill J at 4270.
Not only in this area but generally, it is demonstrable that making out a case of bad faith is a substantial undertaking: SBBS v. Minister for Immigration and Multicultural and Indigenous Affairs[6], wherein the Full Federal Court affirmed well known principle that an allegation of bad faith is not to be lightly made and must be clearly alleged and proved, that mere error does not of itself demonstrate lack of good faith, and that poor decision-making or error will not of itself demonstrate bad faith. Those principles in the income tax context were applied by Kenny J in Briglia and Anor v. Federal Commissioner of Taxation[7].
[6](2002) 194 ALR 749.
[7](2000) 44 ATR 166 at [8]-[9].
Here the defendant Mr Marijancevic said before Heerey J. that the Commissioner simply added up the deposits in a bank account (not in Mr Marijancevic’s name but in the clandestine name of John Henderson utilised by him) and concluded that they were income. Heerey J concluded there was a substantial possibility that the deposits were of income and that it cannot be said that the Commissioner acted in bad faith in treating the deposits as income. The defendant also said that the Commissioner knew or ought to have known that the amounts deposited could not be a correct or accurate estimate of the taxable income, and against Heerey J found against the defendant in that respect. The defendant also said that the Commissioner raised the assessments for the so-called improper purpose of using them as a basis for a statutory garnishee notice of the Queensland police in respect of $592,000 the police had seized from the defendant, and again Heerey J. found against the defendant in that respect.
The principle in Bloemen applies to tax recovery proceedings. The decisions of McDonald J in Deputy Commissioner of Taxation v. Collie[8] and Beach J in Deputy Commissioner of Taxation v. Loftus[9] are well established principles of law applicable in this Court. Richard Walter was not a tax recovery proceeding but a s.39B proceeding. As a matter of law no question of validity of the assessments is an issue in these proceedings.
[8](1998) 2 VR 106.
[9](2002) 49 ATR 131.
The defendant objected to the assessments originally made, which objections were allowed in part on 4 March 2004. The defendant lodged an A.A.T. application for review on 29 April 2004. By operation of ss.14ZZR and 14ZZM Taxation Administration Act 1953 such review does not inherently stay recovery process: see also Cywinski v Deputy Commissioner of Taxation[10] Beach J in Deputy Commissioner of Taxation v Van Thong Chiem[11] stated:
“The fact that an appeal or review is pending does not impede the Commissioner in recovering amounts which have been assessed. Sections 14ZZR and ZZM provide that assessed amounts ‘may be recovered as if no appeal or review were pending’.”
[10](1990) VR 193 at 196 per Kaye J.
[11](1999) VSC 537.
The circumstance that there were errors either in the date or in other details in the Notices does not invalidate the Notices, given the provisions of the Act. Although in San Remo Macaroni Company Pty Ltd v. Commissioner of Taxation[12] the relief there sought was granted, in that case it had already been determined that the plaintiff’s claim was not so clearly untenable that it should be struck out. The opposite has occurred in this case. Although it is strictly speaking unnecessary for me to look at the matters before Heerey J, out of respect to the submissions of Ms Richards and the fact that a person is in custody I have done so. Nothing I have seen derogates from the findings and decision of Heerey J. It is of course inappropriate of me to presume to sit in judgment on Heerey J. and I do not do so.
[12](1998) FCA 610.
The defendant submitted that it would be unjust to enter judgment against him while an appeal was pending in the Federal Court. I consider there is no injustice. Byrne J. adjourned the summary judgment matter to enable proceedings to be taken by the defendant in the Federal Court. Heerey J. gave a considered decision. The defendant lost. I consider there is no injustice in not waiting until the appellate process in the Federal Court is exhausted, whenever that might be. Further delay is not justified.
Further I consider that a transfer to the Federal Court is inappropriate entirely. This is a tax recovery proceeding which is appropriate in this Court, based upon proofs which are here submitted. In my view the proofs clearly establish the relief which the plaintiff seeks. I consider the defendant's contentions are unsustainable and indeed misconceived. It is the defendant who has filed no income tax returns for the year stated, has used a clandestine name and had substantial funds in an account in that name, and has left the plaintiff in the dark. In my view there is nothing to suggest bad faith on the part of the plaintiff. On the contrary I consider the contention by the defendant of bad faith in the plaintiff is in the circumstances of the defendant’s own conduct, oxymoronic.
In my view the relief sought ought be granted. The amount on Mr Holland's certificate under s.255-45 to 30 August 2004 is now $536,454.45 (as at 30 August 2004).
I enter judgment for the plaintiff against the defendant Mr William Marijancevic in the sum of $537,923.06. I dismiss the summons of 9 June 2004. I order the defendant pay the plaintiff’s costs of these proceedings.
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