Deputy Commissioner of Taxation v McMahon (No. 2)

[2010] NSWDC 258

CITATION:	Deputy Commissioner of Taxation v McMahon (No. 2) [2010] NSWDC 258
HEARING DATE(S):	27 September 2010
EX TEMPORE JUDGMENT DATE:	27 September 2010
JURISDICTION:	Civil
JUDGMENT OF:	Gibson DCJ
DECISION:	(1) Application for stay of judgment refused. (2) defendant pay plaintiff’s costs of the application for a stay. (3) Exhibits retained for 28 days.
CATCHWORDS:	TAXES AND DUTIES - income tax and related legislation - collection and recovery of tax - proceedings for recovery - where appeal pending - application for stay of proceedings or execution - principles governing applications for stay of judgment for amounts of income tax owed to the Deputy Commissioner of Taxation
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW), ss 56 and 67 Evidence Act 1995 (NSW), s 135 Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth), s 14ZZM
CASES CITED:	Australian Machinery & Investment Co Ltd v Deputy Commissioner of Taxation (1946) 20 ALJR 234 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd; DCT v MA Howard Racing Pty Ltd; DCT v Neutral Bay Pty Ltd (2008) 237 CLR 473 Deputy Commissioner of Taxation v Denlay [2010] QCA 217 Deputy Commissioner of Taxation v Mackey (1982) 64 FLR 432 Deputy Commissioner of Taxation v Sakovitis [2010] NSWSC 865 Deputy Federal Commissioner of Taxation (Vic) v Trower (1986) 86 ATC 4157 Snow v Deputy Federal Commissioner of Taxation (WA) (1987) 14 FCR 119
PARTIES:	Plaintiff: Deputy Commissioner of Taxation Defendant: Paul McMahon
FILE NUMBER(S):	2009/00333497
COUNSEL:	Plaintiff: Mr J S Walsh Defendant: Ms R Graycar
SOLICITORS:	Plaintiff: ATO Legal Services Branch Defendant: Bryan Gorman & Co

JUDGMENT - On application for stay of proceedings

[1] HER HONOUR: After I gave judgment in favour of the plaintiff in the sum of $164,926.37, the defendant brought an application for a stay of proceedings pursuant to s 67 Civil Procedure Act 2005 (NSW). Section 67 provides as follows:

“Subject to rules of Court, the Court may at any time and from time to time bar orders, stay any proceedings before it, either permanently or until a specified day.”

[2] This application raises very different issues from those generally referred to in stay applications, by reason of the statutory regime set up under the Income Tax Assessment Act 1936 (Cth) (hereafter “ITAA”): Deputy Commissioner of Taxation v Mackey (1982) 64 FLR 432; Snow v Deputy Federal Commissioner of Taxation (WA) (1987) 14 FCR 119; Deputy Commissioner of Taxation v Sakovitis [2010] NSWSC 865; and Deputy Commissioner of Taxation v Denlay [2010] QCA 217.

[3] The policy of the ITAA gives priority to recovery of revenue over the entitlement of the taxpayer to appeal (Snow v Deputy Federal Commissioner of Taxation (WA) at 139 per French J) and the power to grant a stay is therefore exercised sparingly, with the onus lying on the taxpayer to justify it. This is a very different approach to that adopted by the parties and the court in applications for a stay of judgment arising from a cause of action falling outside this legislative regime.

[4] I shall first set out the evidence that is before me and then deal with the principles as enunciated in these cases.

[5] The plaintiff relies upon material attached to the affidavit of Anton Fernando Pulle dated 12 May 2010 and also upon the reasons for sentencing of Judge Tupman in the District Court of New South Wales on 25 September 2009 which are attached to an affidavit if Irene Chan. Objection was taken to these documents on the basis of relevance and, pursuant to s 135 Evidence Act 1995 (NSW), on the basis that the prejudicial nature of the statements made by Judge Tupman in her Honour’s remarks on sentence (which I note are the subject of an appeal to the New South Wales Court of Criminal Appeal) outweigh their probative value. I should indicate that the approach I will take will be to follow the procedures in an approach laid down by other decisions on this issue, notably the decision of French J in Snow v Deputy Federal Commissioner of Taxation (WA) at 139, and that the degree of weight that I have given to the remarks on sentence of Judge Tupman is very limited. The relevance of what is contained in Judge Tupman’s remarks on sentence is essentially, as counsel for the plaintiff pointed out, the fact that these events were occurring over a particular period of time, and there was a degree of planning involved. Beyond that, the contents of her Honour’s remarks on sentence have played very little part in my consideration of the issues.

[6] The factors relevant to the granting of a stay and to the discretion that the Court should exercise has been set out in a series of decisions helpfully listed for me by counsel for the plaintiff at paragraph 8 of his written submissions. There are lists of the relevant factors to take into account. The first of these, and one which I found particularly helpful, was the list given by French J, as his Honour the Chief Justice then was, in Snow v Deputy Federal Commissioner of Taxation (WA) at 139, where his Honour said:

“It may generally be concluded from the preceding review, that the power of State courts to stay recovery proceedings instituted in them under the ITAA is well established and that courts exercising it have regard to the following propositions:

(1) The policy of the ITAA as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment.

(2) The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.

(3) The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion (although some judges have expressed different views on this point).

(4) Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax.

(5) A stay may be granted in a case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay.

(6) The mere imposition of the obligation to pay does not constitute hardship.

(7) The existence of a request for reference of an objection for review where appeal is a factor relevant to the exercise of the discretion.”

[7] It may readily be seen that the relevant grounds, in the case of the defendant, are numbers 5 and 7, namely that extreme personal hardship is claimed and there is a request for a review and appeal which is a relevant factor. Those issues relied upon by the defendant are number 4, namely an assertion that the taxpayer is party to a contrivance, and ground 3, the lack of merit.

[8] In Deputy Commissioner of Taxation v Sakovitis [2010] NSWSC 865, Harrison AsJ set out a concise summary of 17 matters that should be taken into account as follows:

“(1)The legislative scheme established in relation to tax recovery, as manifested in provisions like s 14ZZM of the Taxation Administration Act, reflects a clear policy in favour of the revenue against the taxpayer. The Commissioner is placed in a position of special advantage and is in general free to pursue recovery proceedings, despite outstanding appeals and reviews against the disallowance of objections: Trade World Enterprise at [19], referring to Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1983) 48 ALR 545; (1983) 14 ATR 563 at 564.

(2) The policy of the ITAA 1936 as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer’s appeal against his assessment: Snow at 4094.

(3) The effect of these sections is to give primacy to the general right of the Commissioner to have tax paid irrespective of the pendency of an appeal and its merits: Mackey at 287; Ho at 272; Feldman at [15];

(4) The mere fact that an appeal or review is pending is not sufficient to ground a stay: Trade World Enterprise at [20]–[21].

(5) The liability to pay the assessed tax is not suspended pending the outcome of the review: Alvaro ; Trade World Enterprise at [11];

(6) Sections 14ZZM and 14ZZR of the Taxation Administration Act provide that the fact that an appeal to the Federal Court of Australia or a review by the Administrative Appeals Tribunal is pending in relation to a taxation decision does not, in the meantime, interfere with or affect the decision and income tax may be recovered on the assessment as if no appeal or reference were pending: Feldman at [15](e); Ho at 271; Trade World Enterprise at [11];

(7) The effect of s 204 of the ITAA 1936 is that the fact that the taxpayer has lodged a Notice of Objection against an assessment does not interfere with the assessment and income tax may be recovered on the assessment: Deputy Cmr of Taxation v Niblett [1965] NSWR 1552; (1965) 8 FLR 134 at 140.

(8) The court has jurisdiction to stay recovery proceedings pending a review or appeal of the assessments, but the power is discretionary and should be exercised with great caution and only in special or exceptional circumstances: Feldman at [15]; Ho at 271; Gergis at 3. In the case of Trade World Enterprise at [20], a stay should only be granted “in the most exceptional circumstances”.

(9) The onus is on the applicant to demonstrate sufficient circumstances to warrant the grant of a stay: Ho at 273. The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it: Snow at 4094.

(10) In exercising such discretion, great weight must be given to the terms of, and intention and policy embodied in s 14ZZM and s 14ZZR of the Taxation Administration Act, formerly s 102 of the ITAA 1936, a provision that which been referred to in a number of decisions of the Supreme Court and the Federal Court of Australia: Mackey at 287; Trade World Enterprise at [20]; Feldman at [15]; Ho at 271.

(11) The effect of s 14ZZM and s 14ZZR must be to preclude the court from considering the prospects of success of any review or appeal by a taxpayer to either the Administrative Appeals Tribunal or the Federal Court of Australia: Ho at 272; Feldman at [15].

(12) Any speculation as to the prospects of the taxpayer on review or appeal is entirely inappropriate in recovery proceedings, such matters fall necessarily for determination by the appropriate forum, which will have before it all relevant and necessary evidence, upon appeal or review under Divisions 4 and 5 of Pt 4C of the Taxation Administration Act: Mackey at 289; Ho at 272; Feldman at [15].

(13) The existence of a valid objection is not a relevant matter for consideration and determination by the Supreme Court in recovery proceedings having regard to the statutory scheme: Ho at 272–273; Feldman at [16].

(14) Hardship to the taxpayer is a relevant matter: Trade World Enterprise at [21]. If the taxpayer can establish “extreme personal hardship” a stay should be granted: Cywinski at 197; Ho at 273; Enal at 24. However:



the mere obligation to pay the assessment is not a hardship in itself: Cywinski at 197; Ho at 273;

the possibility that the taxpayer may be bankrupted is not of itself an extreme personal hardship: Ho at 274; Akers at 4727; and

the extreme personal hardship must be in relation to the taxpayer called on to pay: Snow at 4094;


(15) Whether the Commissioner has abused his or her position is a relevant matter: Cywinski at 197.

(16) Delay by the Commissioner is a relevant matter: Trower at 478.

(17) If a taxpayer has been party to a contrivance to avoid his or her liability to tax, the court should not stay proceedings or execution otherwise than in the most exceptional circumstances: Trade World Enterprise at [21]; Gergis at 3; Mackey at 287.”

[9] In addition, the parties have drawn my attention to a series of cases starting with Deputy Commissioner of Taxation v Mackey (1982) 64 FLR 432 and finishing with the recent case of Deputy Commissioner of Taxation v Denlay [2010] QCA 217, a decision of the Court of Appeal of the Supreme Court of Brisbane of 20 August 2010 and, therefore, a very recent statement of the law. It is of particular assistance to me because it has set out the circumstances in which, on the facts of that case, the Court was in fact prepared to consider the question of extreme personal hardship in favour of the taxpayer.

[10] The submission of the plaintiff is that the affidavit in support of Mr Gorman does not establish exceptional circumstances, this being point 8 in the checklist of Harrison AsJ. What does this affidavit say? I have been greatly assisted in this matter by Ms Graycar for the defendant, but the problem is that this affidavit says very little on a number of crucial issues. I shall go through each of the matters relied upon.

[11] The first and most important point is that the defendant was, on 25 September 2009, sentenced to six years imprisonment with a head sentence of four years. That means that he will be eligible for release on 24 September 2013. The relevance of this is that the period of the stay which is sought is a lengthy one, compared to the very short period in Deputy Commissioner of Taxation v Denlay, where a stay was sought in circumstances where the appeal from the Deputy Commissioner’s rulings was listed for hearing the following month, and where the judgment was stayed for six months or “until another date fixed by further order”, which could have meant, if the hearing was heard expeditiously, that the stay could have been lifted in a very short period of time.

[12] I can readily appreciate the difficulties Mr Gorman has had obtaining instructions from the defendant because of his incarceration, particularly since the defendant is apparently involved in about twenty-six matters, some of which are listed in paragraph 8 of Mr Gorman’s affidavit. These include, most importantly, the following. First, there is an appeal to the Court of Criminal Appeal, which is listed for hearing on 11 February 2011. The defendant pleaded guilty, and this is an appeal in relation to severity. One matter which I have taken into account, which is one of the few matters on which I had regard to Judge Tupman’s sentence, is the nature and extent of the offences for which the defendant was sentenced. While I cannot predict the approach that the Court of Criminal Appeal will take in relation to this appeal, I can safely assume that, in relation to the forty-two counts in the indictment of 28 October 2008, it is likely to be within the parameters of the JIRS statistics but, beyond noting this, I do not propose to speculate as to the issues on appeal.

[13] The next litigation in the list in an appeal to the AAT from the decision of the ATO in these proceedings. That is listed for mention on 22 September 2010. The difficulty with these proceedings is that I have been told from the bar table that they were effectively commenced on 13 July 2010, in circumstances where the proceedings before me were set down for hearing on 14 July 2010. The explanation for the delay is, I have been informed from the bar table, negligence by a previous solicitor, and also the difficulties that Mr Gorman has had obtaining instructions from the plaintiff. It would appear that Mr Gorman was only able to see him in May and June of 2010, and I expect that what was uppermost in the defendant’s mind, and the mind of Mr Gorman, was the Court of Criminal Appeal matter and not the AAT proceedings.

[14] The third matter is a personal injury matter which was apparently commenced in or about late 2009, towards the end of the limitation period, if not after that period had expired, since there is apparently a motion for extension of time outstanding. It is my understanding that there was some uncertainty about whether proceedings had been commenced in time, or served in time, or both. In any event, these proceedings are at the very beginning of their life in terms of a litigation matter. I do note that, in the event that the defendant were not granted a stay, and there were subsequent proceedings for bankruptcy, they would not constitute any bar to his continuing with those proceedings.

[15] The next item is proceedings in the Local Court at Lismore for the return of some items of personal property which appear to have been removed by the police when the defendant was charged with an offence. I see no reason why those proceedings should be affected by a stay or the refusal of a stay.

[16] The next proceeding listed is an action by a company for a declaration that it is the beneficial owner of four farming properties, but the connection of those proceedings to this litigation was not really explained.

[17] Finally, there is an arbitration hearing involving a wages claim which has conciliation/arbitration listed in the Local Court at Lismore.

[18] Mr Gorman deposes at paragraph 9 of his affidavit that the carriage of each of these matters has involved considerable time and expense, and that this is the cause of great hardship to the defendant. Reading through the material, it would appear that the greatest issues of concern to the defendant are partly his own health, but substantially the health and well-being of his wife, who has clearly been very adversely affected by these events. She has given birth to two children during the course of these events, one in 2008 and another in February of this year and she has suffered post-natal depression.

[19] The health issues that involve the plaintiff and his wife dominates the reports which are attached to Mr Gorman’s affidavit and include the circumstances in which, in December 2006, the defendant was the subject of what is described as a “vicious attack” at his office. It would appear that the defendant has some ongoing physical disabilities including pain to his left temple area, cheek, mouth and lower back and suffers back pain and head pain, as well as post-traumatic stress disorder arising from the circumstances of the assault.

[20] The defendant’s wife, who was apparently present shortly after the assault occurred, has also been very distressed by this incident.

[21] The defendant’s medical history and background are set out in a series of reports. Some details of his past life are helpfully set out in the report of Mr Watson-Munro, a clinical forensic psychologist. The defendant suffers from what Mr Watson-Munro describes as,

“A very complex clinical history dating back over many years which was aggravated by his current predicament and more specifically the vicious assault on him in 2006 by some folks who were attempting to take over his business”

[22] The defendant is clearly an intelligent person who enjoyed a good education, including a law degree, a master’s degree and a doctorate. He was employed for a short period as a solicitor, although that is more than twenty-five years ago. He has been in business in the country since that time, and he appears to have been working as a farmer for much of the time that he lived in the country.

[23] Ms Graycar put to me that it is unknown territory whether “extreme personal hardship” (Snow v Deputy Federal Commissioner of Taxation (WA) at p 139) would include physical or mental disabilities. The cases to which I have referred deal essentially with financial hardship, particularly in relation to the carrying on of a business and the impact of refusal to grant a stay. There is very little evidence concerning medical problems in these judgments and it is submitted that there is very little to assist me in determining how I should take such matters into account.

[24] The most helpful way to approach the issue is to look at Deputy Commissioner of Taxation v Denlay, where such an order was granted. Counsel for the plaintiff submitted that the facts of this case (and I note that each of these cases very much turns on its own facts) could be distinguished on the following bases:

(a) In Deputy Commissioner of Taxation v Denlay , there was no delay in bringing the application, whereas the application for a stay in this matter was brought on the day of the hearing.

In my view this makes very little difference. Applications for a stay of judgment are routinely brought after the judgment has been entered and I do not see that that is a difficulty here.

(b) Secondly, it is submitted that there was no question in Deputy Commissioner of Taxation v Denlay of the respondents to the appeal in those proceedings being involved as parties to a contrivance to avoid liability.

[25] That brings me to the question of the evidence concerning the circumstances in which the Australian Taxation Office provided the reasons for decision, which are an annexure to the affidavit of Mr Fernando Pulle.

[26] The decision of the Australian Taxation Office is a long and careful analysis of the circumstances in which capital gains tax was not paid in relation to a property which was purchased on 12 November 2001 for $243,360 and sold on 23 September 2002 for $408,000. Two payments from that sale were made to Ottway Holdings Pty Limited (the sum of $111,311.50) and a company called Ideanhaus GmbH and Properties SA ($254,756.10). The description of these two items is set out in these reasons as follows:

“The payment made to ‘Ottway Holdings Pty Limited’ was the repayment of a mortgage that had been used to partially finance the purchase of the property. That mortgage contract was signed by yourself using the assumed name of Michael Lee.

The payment to Ideanhaus GmbH and Properties SA was made to an account that had been opened for this company by Ian Crabtree. This is also an assumed name. You had full control of this account, being able to use the proceeds in any manner that you determined. The statutory declaration by Klaus Peter is false and he has no knowledge or any involvement in the sale of the property or the funds that were received from this sale. Department of Immigration and Citizenship records indicate that Klaus Peter was not in Australia when this document was signed.

Upon the sale of the property by REH Holdings Pty Limited, the funds are being paid at your direction into an account in the name of Ideanhaus GmbH and Properties SA. These funds are then being used by you. it is considered that a reasonable person would conclude that the payment had been made because of your association with REH Holdings Pty Limited and the capital gain made on the sale of the property is therefore considered to be a dividend under subs 109(C)(1) of the ITAA 1936.

The information that you have provided in your facsimile of 7 October 2008 has been considered. This information however does not provide any substantive information, additional facts or legislative references that alter the decisions as outlined in our ‘Reasons for Decision’ that was forwarded to you on 25 September 2008.”

[27] The precise method for the calculation is set out on p 5 of this judgment and then on p 6 there is a list of the evidence relied upon which includes:

“(a) The plaintiff’s plea of guilty to using the false names of Michael Anthony Bruggy and Bruce Crabtree.

(b) What is called “Your statements under questioning” that the defendant changed the name of his sixth cousin for the use at the Registry of Births, Deaths and Marriages for use in identity frauds.

(c) Information contained in the statutory declaration of Mr Michael Lee as well as witness statements by a number of members of a legal firm, banking records and the like.”

[28] What is significant is the methodology and the degree of planning that went into this transaction. The first of these transactions involved the obtaining of money under a false name. The second involved a transaction of a convoluted nature which counsel for the plaintiff has helpfully agreed I may refer to as a “round robin” but these are sophisticated plans. I note Judge Tupman’s comments concerning the sophistication of the defendant’s activities, which her Honour described at p 14 as “a systematic, frequent and well planned fraud against the Tax Office”, although of course I note I have been very careful to take into account that those charges related to GST frauds and bear no relationship whatsoever with these transactions. I do however note her Honour’s comments that the defendant kept extensive records, in his own handwriting, which were well documented and well kept.

[29] Returning to the facts in these proceedings, the witness statements held by the Tax Office indicate, according to the reasons for decision, that the defendant had meetings and otherwise participated in a series of activities, details of which are set on pages 9 to 12. While I take into account that an appeal has been lodged (and I note that, at my request, a copy of this appeal has been provided). It is dated 3 June 2010, and provides me with no information as to what the basis of appeal may be. The factual material set out in the reasons for decision, in my view, warrants a finding that the defendant has been involved in a contrivance to avoid paying tax. This issue is point 17 of the list of Harrison AsJ and point 4 on the list of French J, and is a matter of importance when considering whether or not to make an order for a stay.

[30] Taking all of the above into account, it is evident to me that the tax liability in the present proceedings, which I note arises from this series of transactions involving the sale of the property on 23 September 2002, with its use of false names, companies controlled by the defendant under a false name and the involvement of unsuspecting persons, whether or not their identity was used, for the purpose of the defendant’s own financial gain with a logical conclusion that it was done so as to avoid capital gains tax. As Moffitt P said in Deputy Commissioner of Taxation v Mackey (1982) 64 FLR 432:

“...if a taxpayer embarks on a scheme such as that involved in the present case, I do not think that the court should aid him by setting s 201 at nought while the board or a court considers whether he has been successful in avoiding his tax by the scheme. A case such as the present is different from that where in the ordinary course of his business a situation has arisen which gives rise to a dispute concerning the liability of the taxpayer for tax.”

[31] That was the case in Deputy Commissioner of Taxation v Denlay, and that is another reason why Deputy Commissioner of Taxation v Denlay can be extinguished.

[32] The third basis upon which Deputy Commissioner of Taxation v Denlay may be distinguished is that there was evidence of financial hardship by each of the taxpayers, both of whom, in circumstances where there was an imminent appeal, would, if there had been no stay granted, have lost their property and consequently been unable to prosecute their appeals (Deputy Commissioner of Taxation v Denlay at [50]). What would have happened would have been the loss of their entire assets and with it any chance of demonstrating that the basis for the assessments was wrong, so they should not have lost their property in the first place. The Court of Appeal considered that that amounted to extreme hardship.

[33] That is not the case here. I have very little evidence about what assets the defendant has, but I have trouble seeing how the grant or refusal of a stay will significantly impact his financial position or any of the litigation in which he is involved except possibly the proceedings which are the subject of conciliation/arbitration in November, although I note that the likelihood of bankruptcy proceedings, if they are instituted, being concluded by the time these proceedings have taken place is limited.

[34] In addition, although not referred to in Deputy Commissioner of Taxation v Denlay, there are the provisions of s 56 Civil Procedure Act 2005 (NSW) and the need for the elimination of delay (s 59). The reason that these matters are not mentioned in Deputy Commissioner of Taxation v Denlay is of course that a stay of very short compass was involved.

[35] A further difficulty with the application brought by the defendant is that it is essentially an open-ended request for a stay. In the notice of motion there is reference to a stay until such time as the proceedings in the AAT have been completed. Quite apart from the fact that that would defeat the purpose of s 14ZZM of the Taxation Administration Act 1953 (Cth), I have no information as to how long that appeal, which appears to have been instituted on 3 June of this year, will take.

[36] In relation to the criminal proceedings, while these are listed for hearing in February 2011, as I have already indicated this being an appeal on severity only, the most the defendant can hope for is a reduction in his sentence of some kind and I have no information as to the basis upon which those hopes are based in circumstances where his current release date is in September 2013.

[37] The effect of a stay would be to deprive the Deputy Commissioner of tax which has been assessed and will add to the legal and administrative cost of recovery. I note there has been delay in this litigation already in that it would appear that there was no action taken by the defendant in these proceedings after they were commenced in 2009 until earlier this year.

[38] The defendant raised the issue of these matters of assessment in the defence that was filed on 16 December 2009 and has had the benefit of legal representation in these proceedings since the defendant’s solicitors filed a notice of appearance on 29 April 2010. In addition he has had the benefit of legal advice from all those advising him in other matters had he wished to raise these issues at an earlier time.

[39] In relation to the Civil Procedure Act 2005, I think it is appropriate to take into account the legislative policy of the ITAA. The Courts have consistently held that the legislative policy in favour of the Deputy Commissioner’s right to have assessed tax paid is a matter to which great weight should be attached (Australian Machinery & Investment Co Ltd v Deputy Commissioner of Taxation (1946) 20 ALJR 234 at 241 per Latham CJ; Deputy Federal Commissioner of Taxation (Vic) v Trower (1986) 86 ATC 4157 at [5]). The rationale behind this principle was set out by Glass JA in Deputy Commissioner of Taxation v Mackey at 438 as follows:

“It is in my view a misconception, as my brother Hutley has said to treat the Commissioner and the taxpayer in proceedings for a stay as litigants who start on equal terms, as to a plaintiff and defendant in equity proceedings, where the balance of convenience has been examined to see if an interim injunction should or should not be granted.

I consider that the effect of the legislative direction in s 201, when modified by the Courts recognise power to stay proceedings in the exercise of its discretion, at a combined effect of a different kind. If the metaphor is to be retained the needle stands in the Commission’s favour close to one hundred and it requires a weighty case to be presented by the taxpayer in order to depress it by the half way mark.”

[40] That is an important issue for my consideration when exercising a discretion in that the plaintiff and defendant in these proceedings do not stand in the usual position of parties seeking a stay. The legislative policy of the Act needs to be taken into account for the reasons explained by Glass JA.

[41] I should briefly note that even if I had been of the view, which I am not, that the health problems, financial worries and concerns about his wife explained to be the defendant’s reasons for asserting he is in a position of extreme personal hardship, I would have exercised my discretion not to make such an order having regard to this policy as well as to the circumstances set out in more detail above. The onus is on the defendant and it is a heavy one, as the High Court noted in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd; DCT v MA Howard Racing Pty Ltd; DCT v Neutral Bay Pty Ltd (2008) 237 CLR 473. While I am satisfied that the defendant has not made out that onus in this case, even if he had, I would have been of the view that I should exercise my discretion to refuse the application taking into account this important principle of the law as well as the facts of this case as set out above.

(1) Application for stay of judgment refused.
(2) defendant pay plaintiff’s costs of the application for a stay.
(3) Exhibits retained for 28 days.

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