Deputy Commissioner of Taxation v Moignard - [2013] SADC 165

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
DEPUTY COMMISSIONER OF TAXATION v MOIGNARD
[2013] SADC 165
Judgment of His Honour Judge Soulio
6 December 2013
PROCEDURE
Appeal by defendant against decision of a master - master had granted summary judgment on plaintiff's claim, refused a stay and struck out defendant's counterclaim.
Appeal dismissed.
District Court Act 1991 (SA) s 43; District Court Civil Rules (2002) rr 17, 104, 193, 286; Income Tax Assessment Act 1936 (Cth) ss 101, 166, 177, 298 14ZZM, 14ZZR; Taxation Administration Act 1953 (Cth) Part IVC; Partnership Act 1891 (SA) s 10, referred to.
Commissioner of Police v Channel Seven Adelaide Pty Ltd [2008] SASC 164; Allesch v Maunz (2000) 203 CLR 172; McLean v DID Pilling Pty Ltd [2010] SASC 33; Rahmani v Heng (2010) 270 LSJS 234; Groove is in the Park Pty Ltd v Big Xity Entertainment [2010] SADC 93; Mac Audio & Acoustical Consultants Pty Ltd (in liq) v Eddy [1999] SASC 443; R v Deputy Federal Commissioner of Taxation for SA; Ex Parte Hooper (1926) 37 CLR 368; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168; Marijancevic v Mann (2008) 73 ATR 709; Deputy Commissioner of Taxation v Katalina Park Pastoral Pty Ltd (2005) 61 ATR 298; Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 248 ALR 693; Deputy Commissioner of Taxation v Mackey (1982) 13 ATR 547; Deputy Commissioner of Taxation v Denlay [2010] QCA 217; Held v Deputy Commissioner of Taxation (Victoria) (1988) 88 ATC 4315; Laferla v Birdon Sands Pty Ltd [1998] NTSC 89; Attorney-General v Wentworth (1988) 14 NSWLR 481; Walton v Gardiner (1992) 177 CLR 378; Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146, considered.

DEPUTY COMMISSIONER OF TAXATION v MOIGNARD
[2013] SADC 165
Introduction

The Deputy Commissioner of Taxation (‘the plaintiff’) claimed against Mr Moignard (‘the defendant’) a debt due by way of income tax liability, of an amount of $448,510.02 plus interest. Upon application before a master of this Court the plaintiff was granted summary judgment.
The defendant, by his defence, had denied liability. He lodged a Notice of Objection with the Australian Taxation Office (‘ATO’), and subsequently an application for review in the Administrative Appeals Tribunal (AAT). He sought an order for a stay of execution on the grounds that his AAT application should be determined first, or in the alternative, on the grounds of the hardship which would flow should the judgment be enforced.
The defendant had also filed a counterclaim by which he sought damages for defamation, and pursuant to a number of other pleaded causes of action, largely on the basis of actions taken by the Australian Securities and Investments Commission (‘ASIC’).
The defendant’s application for a stay was rejected and his counterclaim was struck out. The defendant appealed.
Principles on Appeal
The appeal is brought pursuant to s 43(2)(2) of the District Court Act 1991 (SA) and District Court Civil Rules 2002 (DCR6) R 17.
Rule 286(1) of the Rules provides that an appeal is by way of rehearing. While this involves a re-hearing on the merits on the basis of the evidence considered by the master,[1] there is still a need to identify some error on the part of the master before the appeal can be allowed.[2] An appellate court, hearing an appeal, is not entitled to substitute its own discretion for that of the court below unless an error in the exercise of discretion has been made out.[3]
[1]    Commissioner of Police v Channel Seven Adelaide Pty Ltd [2008] SASC 164; Allesch v Maunz (2000) 203 CLR 172 [23].
[2]    McLean v DID Pilling Pty Ltd [2010] SASC 33; Rahmani v Heng (2010) 270 LSJS 234; Groove is in the Park Pty Ltd v Big Xity Entertainment [2010] SADC 93.
[3]    Mac Audio & Acoustical Consultants Pty Ltd (in liq) v Eddy [1999] SASC 443.
Background
The defendant is a beneficiary of the Rupert Street Trust which, in the financial year ending 30 June 2008, sold a building at 43-51 Rupert Street Collingwood in Victoria (‘Rupert Street Property’) for a profit of $480,476.25.
The Commissioner determined that the intention or purpose of entering into the transactions over the Rupert Street property was to make a profit, and that the transactions were made and the profit was made in the course of carrying out a business operation or commercial transaction.
The net proceeds of the sale, just over $900,000, were transferred to bank accounts held personally by the defendant and by a company controlled by him. The Commissioner determined that the Trustee of the Rupert Street Trust had exercised a discretion to pay trust income to the defendant for the purposes of s 101 of the Income Tax Assessment Act 1936 (Cth) (‘ITAA’) and that, as a beneficiary, the defendant was liable to pay tax on the profit.
Summary Judgment
As I have said, the master granted summary judgment in respect of the plaintiff’s claim. In my view, the master correctly set out the principles applicable to an application for summary judgment, which I reproduce:
DCR Rule 232 provides that:
(2) Summary judgment may only be given if the Court is satisfied that
(a)if the applicant is a plaintiff – there is no reasonable basis for defending the applicant’s claim; … (emphasis added)
The onus is on the plaintiff to show it is entitled to such relief - Ceneavenue Pty Ltd v Martin [2008] SASC 158 (FC) at paragraph 78. There the Full Court concluded there was no material difference in the definitions “no reasonable basis for defending the claim” and “no reasonable prospect of success” as set out in the previous rules.
Further there was no real difference with, or as it is sometimes referred to, “no real question to be tried” as set out in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. Judgment should only be given in clear cases see Williams v Reid [2010] SASC 264 and Dey v Victorian Railways Commissioners (1949) 78 CLR 62.
The principles as to the exercise of the discretion were recently discussed by the High Court in Spencer v Commonwealth of Australia (2010) 241 CLR 118 see especially at [25]-[26] and at [53].
Rule 232 is effectively the same as s 31A of the Federal Court Act which enables the Court to enter summary judgment. In Spencer v Commonwealth of Australia (2010) 241 CLR 118 at paragraphs 25 to 26 the Court stated that s 31A required:
… a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.
The basis of the plaintiff’s claim was an assessment by the Commissioner pursuant to s 166 ITAA of the income tax payable by the defendant. The process of making an assessment was described by Isaacs J in the following terms:[4]
An “assessment” is not a piece of paper: it is an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer. When he has completed his ascertainment of the amount, he sends by post a notification thereof called “a notice of assessment.”… But neither the paper sent nor the notification it gives is the “assessment.” That is and remains the act or operation of the Commissioner.
[4] R v Deputy Federal Commissioner of Taxation for SA; Ex Parte Hooper (1926) 37 CLR 368 p 373.
Section 177(1) ITAA provides:
The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.
Similarly, the amounts claimed against a taxpayer by way of penalties and interest have the benefit of the conclusive evidence provisions in s 298(33) ITAA.
Even where there is a challenge to the correctness of the assessment, the provisions mean that the assessment is to be regarded as duly made, and correct in its particulars. In Deputy Commissioner of Taxation v Richard Walter, Brennan J held that:[5]
… if s 175 confers validity on assessments made in a bona fide attempt to exercise the power to make them, it authorises the Commissioner to determine in good faith, rightly or wrongly, the application of the general provisions of the Act to the facts of the particular case subject to correction by the objection, review and appeal procedures. That accords with the policy of the Act which most clearly appears from the text of s 177(1).
[5] Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 p 196.
The only bases for challenging the conclusive evidence provisions are by way of an objection to an assessment pursuant to Part IVC Taxation Administration Act 1953 (Cth) (‘TAA’) proceedings; or by proceedings asserting that there has been conscious maladministration of the assessment process.[6]
[6] See Marijancevic v Mann (2008) 73 ATR 709 p 718; Deputy Commissioner of Taxation v Katalina Park Pastoral Pty Ltd (2005) 61 ATR 298.
Proceedings cannot be brought in this Court seeking to establish a lack of bona fides but must be instituted in the Federal jurisdiction.[7] As was stated in Federal Commissioner of Taxation v Futuris Corporation Ltd:[8]
The evident policy reflected in the terms of s 177(1) is the facilitation of proceedings for the recovery of tax which are instituted by the Commissioner under s 209 of the Act in a court of competent jurisdiction (89). Corresponding provision is made elsewhere in the Act for the recovery of other amounts (90). The action for recovery is facilitated by the “conclusive evidence” provision in s 177(1). That sub-section, as the Commissioner correctly submitted, is not a privative clause in the ordinary use of that term. It does not purport to oust the (necessarily federal) jurisdiction conferred upon any other court in matters arising under the Act. To the contrary, it recognises that there may be Pt IVC proceedings and in those proceedings the “conclusive evidence” provision does not apply.
[7] See Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at [45].
[8] Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at [64].
The learned master concluded that s 177(1) ITAA and s 298-30(3) of Schedule 1 ITAA are conclusive evidence provisions that enabled the matter to be dealt with forthwith; that the notice of assessment was conclusive evidence of the due making of the assessment, and that the amount was correct.
The learned master was satisfied that there was no reasonable prospect of the defendant successfully defending the plaintiff’s claim and granted summary judgment in favour of the plaintiff.
Stay of Proceedings
By his defence, the defendant asserted that a stay of proceedings was warranted pending the outcome of his objection to the assessment, and on the grounds of hardship.
The master correctly held that this Court has jurisdiction to stay recovery proceedings, but that such power should be exercised with great caution and only in special and exceptional circumstances.[9]
[9] See Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 248 ALR 693 at [44]; and see Deputy Commissioner of Taxation v Mackey (1982) 13 ATR 547.
The fact that Part IVC TAA proceedings may be pending in the AAT or Federal Court does not act as a stay of proceedings, or impede a recovery action.[10]
[10] Section 14ZZM, 14ZZR ITAA; and see Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 248 ALR 693.
The question as to whether the consequences of an enforcement of the judgment upon the defendant, relied upon as the basis for a stay, amount to extreme personal hardship such as to justify a stay, is a question of fact and judgment.[11]
[11] Deputy Commissioner of Taxation v Denlay [2010] QCA 217; Held v Deputy Commissioner of Taxation (Victoria) (1988) 88 ATC 4315.
The learned master concluded that the defendant’s application for a review of the assessment did not operate to stay the proceedings, nor justify ordering a stay.
The learned master considered the evidence put forward by the defendant on the issue of hardship, and determined that the defendant had not satisfied the onus of demonstrating that extreme financial hardship existed such as to warrant a stay of the proceedings.
Plaintiff’s Application to Strike out Counterclaim
DCR6 104 provides:
The Court may strike out a pleading in whole or part if the pleading—
(a) does not comply with these rules; and
(b) is an abuse of the process of the Court or prejudices the proper conduct of the action.
Example—
If a statement of claim discloses no reasonable cause of action, or a defence discloses no reasonable ground of defence, the Court may strike it out as an abuse of the process of the Court.
The learned master set out the principles relating to strike out applications as follows:
… a pleading can only be struck out under 6R 104 where both the paragraphs (a) and (b) are satisfied and “prejudice” for (b) may exist in a range of circumstances such as preparing answering pleadings, identification of documents to be disclosed and preparation for, and conduct of, the trial, but it does not extend to identifying issue estoppels: Holcon Australia Pty Ltd v Corporation of the Town of Walkerville (2007) 252 LSJS 236; [2007] SASC 437; BC200710902 (White J), 13 October 2007.
… the Court has a discretion whether to exercise its powers under the rule: Golding v Wharton Saltworks (1876) 1 QBD 374; Knowles v Roberts (1888) 38 Ch D 263; Bulmer v Oakey Co Op Dairy Co [1908] St 6R Qd 216 and observes that the Court will usually require a party to plead properly (Davy v Garrett (1877) 7 Ch D 473 at 486; Peru Republic v Peruvian Guano Co Ltd (1887) 36 Ch D 489 at 496), although in exceptional cases it may allow an action to proceed where a party cannot produce a proper pleading: Rondel v Worsley [1966] 1 All ER 467 at 469.
Rule 193 provides that a court may dismiss proceedings if they disclose no reasonable cause of action or are frivolous, vexatious or an abuse of process of the Court.
“Frivolous” and “vexatious” have a well established meaning and have been the subject of may judicial comments. The designations are not mutually exclusive and often overlap. The expressions were discussed in Attorney General v Wentworth (1988) 14 NSWLR 481 at 491 and are defined in s 39(5) of the Supreme Court Act 1935, which was considered by the Supreme Court in Kowalski v Mitsubishi Motors Australia [2005] SASC 433.
The defendant had sought damages against the plaintiff alleging that the plaintiff was the lead agency in the Wickenby Taskforce which was established to deal with international tax fraud and evasion by Australian tax payers. ASIC was a member of the Wickenby Taskforce. ASIC published its annual report for the year 2007-2008. The defendant pleaded that ASIC was subject to the instructions of the ATO.
The defendant pleaded that the ATO caused to be published by ASIC, in its report, under the heading, “Project Wickenby” the words “from information provided by the Taskforce, ASIC successfully prosecuted Stephen Moignard on 10 counts of managing corporations while disqualified because of insolvency.” The words are alleged by the defendant to be defamatory. The defendant pleaded that the words were false because he was not insolvent, but had rather entered into a Part X personal insolvency agreement. He asserted that he had never been successfully prosecuted on 10 counts of managing corporations while disqualified, but had pleaded guilty to five counts of managing a corporation while under a disability. The defendant claimed a sum of $5 million in damages.
The defendant also claimed damages in negligence, breach of duty of care, unconscionable conduct and equitable estoppel, tortious interference with prospective business relations, expectations, or advantage or prospective economic advantage, and alleged that a lack of procedural fairness was accorded to him by the plaintiff.
The plaintiff sought to strike out the counterclaim pursuant to DCR6 104 and 193.
The defendant’s pleadings appear to be alleging, in summary, that:
The defendant was defamed in the ASIC Annual Report of 2007-2008, published by ASIC. The plaintiff had caused the publication, by its agent ASIC. The plaintiff negligently caused the defendant’s name to be placed on the list of persons suspected of international tax fraud and evasion causing the defendant loss.
The plaintiff, by its agent ASIC, deceptively and unconscionably omitted to advise the defendant that its investigations related to the Project Wickenby Taskforce, causing loss to the defendant. The plaintiff should be estopped from gaining any benefits it had gained from claiming the defendant was ever part of the Wickenby Investigations.
The plaintiff and/or its agents intentionally or recklessly induced customers and staff of the defendant to breach or forego the relationships between the customers and staff, and the defendant, and prospective business relationships.
The plaintiff failed to afford procedural fairness to the defendant by including the defendant’s name on the list of Project Wickenby Taskforce suspects.
The Master’s Findings
The learned master dealt with the issue of the defendant’s pleaded counterclaim at paragraphs 96-106 of his reasons for decision. He concluded that it was clear, having regard to the relevant legislative framework, that the ATO and ASIC had been established as separate government agencies and not as agencies of each other.
While the defendant pleaded that ASIC was subject to the instructions of its principal, the ATO, the master found that there was no relationship of agency as pleaded by the defendant, and no basis to allege otherwise. He rejected the defendant’s argument as to ostensible authority. He accepted the plaintiff’s submission that the particulars provided in support of the defendant’s allegation of defamation failed to disclose a cause of action against the plaintiff. He concluded that the cause of action in defamation could not be made out, and struck out the counterclaim in that respect.
The master dealt with each of the asserted bases of the defendant’s claim, and held that they were unsustainable on the bases that variously, no relationship of agency could be made out, the requisite elements of the claim were not pleaded against the plaintiff, and the allegations were misconceived, ambiguous and embarrassing.

The learned master came to the view that the matters raised in the counterclaim were an abuse of process, disclosed no reasonable cause of action, and were frivolous and vexatious. He ordered that the amended counterclaim be struck out.
Grounds of Appeal
There are then three aspects to the master’s decision: the granting of summary judgment; the refusal to order a stay of proceedings, either on the basis that there was an application for review of the assessment pending, or on the basis that extreme personal hardship would result; and the striking out of the defendant’s counterclaim.
The grounds of appeal were drafted by the defendant who has some legal training. I have endeavoured to relate the grounds of appeal to the three aspects of the master’s decision and in doing so summarise the grounds as follows:
Re Summary Judgment - Ground 2
The defendant complained that in granting summary judgment the learned master found that the defendant had no reasonable prospects of successfully defending the plaintiff’s claim, which finding was inconsistent with the learned master’s ruling dismissing the plaintiff’s claim for indemnity costs, when the master said:
There was a further argument that summary judgment would cause extreme financial hardship to the defendant. Although I have found against him, it was at least arguable – however the defendant failed to satisfy the evidentiary onus.
Ground 1 appears to be based on a misconception, or at least a conflation of the two aspects of the matter. The master found, quite properly, that the defendant had no reasonable prospect of defending the plaintiff’s substantive claim.
The issue of extreme financial hardship went not to the merits of the defence, but rather to the question of whether the master ought to exercise his discretion to order a stay of the proceedings. It was the master’s finding that the unsuccessful application for a stay was at least arguable.
Conclusion – Ground 2 - Summary Judgment
For reasons articulated by the master in his decision, and as discussed above, I consider that the plaintiff’s assessment of the defendant’s income tax liability, fortified as it is by the conclusive evidence provisions, must stand, and the claim of the plaintiff was proved. I agree with the master’s conclusion as to the defendant’s prospects, or rather lack thereof, in defending the claim, and dismiss this ground of appeal.
I dismiss Ground 2.
Stay of Proceedings – Ground 3
The master correctly refused to grant a stay of proceedings on the grounds that there were actions pending in the Federal jurisdiction.
In relation to the ruling on a stay on hardship grounds, the defendant challenged the master’s finding that the defendant bore an evidentiary onus of establishing extreme personal hardship in order to justify a stay of proceedings.
The defendant further complained that the information he provided, or offered to provide, but was not afforded the opportunity to provide, was such as to justify a finding of extreme personal hardship sufficient to warrant a stay of proceedings.
The defendant submitted that at the hearing he was unaware he was required to file an affidavit as to the effect upon him of the enforcement of a judgment against him.
The defendant further submitted that he had requested an adjournment to file an affidavit, but was not aware of the procedure by which he formally needed to do so. He asserted that had he been able to file an affidavit in the form tendered on the appeal, the master’s decision would have been different.
The defendant asserted that there was an obligation upon counsel for the plaintiff to bring to the attention of the court that the defendant, as an unrepresented party, had not called evidence essential to his case. He relied upon the observations of Mildren J in Laferla v Birdon Sands Pty Ltd.[12]
[12] Laferla v Birdon Sands Pty Ltd [1998] NTSC 89 at 14.
Later the defendant submitted that he failed to seek an adjournment because he did not understand that he could have done so and was not given appropriate assistance by the master.
I permitted the presentation of affidavit material by the defendant, in support of his allegation of hardship.
Basis of Defendant’s Assertion of Hardship
The defendant, in putting the argument that enforcement of the judgment debt would result in extreme personal hardship, relied upon a document entitled ‘Affidavit Sixth of Stephen Moignard’ said to have been affirmed on 16 August 2012, and bearing his signature, initialled on each page by another unidentified person, who did not purport to be a person authorised to take an affidavit.
In the document, the defendant asserted that he is the holder of an arts degree, a law degree, and a degree in “computers” and that he worked as an IT consultant between 1988 and 1992, and thereafter was self-employed between 1992 and 2007 and involved in the senior management of private and public companies.
He asserted that in 2008 he sold his house and set up a family trust to purchase an agricultural property, namely a vineyard in the Coonawarra region, and since that time had been involved in viticulture and the production and marketing of wine from that vineyard. He asserted that the vineyard made net losses over the first four years of its operation. The family trust invested in a restaurant in Penola to market the farm’s wines. The restaurant was run by his wife. The restaurant hasd not produced any profit in its three years of operation. The defendant asserted that he derived no income from the restaurant, apart from food and beverage. He asserted that his personal assets totalled $38,500, comprised largely of furniture and effects, and two motorcycles.
He asserted that his wife is the trustee of the Hundred of Comaum Trust (‘the Family Trust’) which owns 75 per cent of the agricultural property, and that he and his wife share a self-managed superannuation fund that owns 25 per cent of that property. He asserted that the Family Trust has a net value of $515,000 being the value of the agricultural property and improvements, together with farm equipment and wine in storage. The Family Trust also owns 85 per cent of a company known as the Terra Rossa Wine Club Pty Ltd (‘Terra Rossa Wine’) which in turn owns and operates the restaurant at 48 Church Street Penola which the defendant asserted has a net value of $90,000.
The defendant asserted that the net value of his own assets, and the combined value of the assets in the Family Trust amount to $643,500. He asserted that he has personal liabilities of $10,000 in legal fees, and $630,000 owed to an entity he described as Finger Graphics i2i, in addition to the debt owed to the plaintiff.
Plaintiff’s Submissions on Hardship
The plaintiff contended, on the appeal, that the material filed by the defendant in support of his contention that refusal to grant a stay would cause extreme personal hardship, cannot be relied upon, is replete with inconsistencies, and fails to make full disclosure to the court of the defendant’s true financial circumstances.
For example, the plaintiff contended that, contrary to the defendant’s assertion that his wife is the trustee of the Family Trust, the trust deed notes the defendant as the trustee.
The starting point of the plaintiff’s analysis is that the Rupert Street property was purchased for $730,000 in June 2007, and sold for $1.3 million dollars in August 2007, resulting in a net profit of the order of $480,000. On 25 October 2007 the proceeds of the sale were paid into the defendant’s personal bank account. The defendant had asserted that the sum of $480,000 was not received by him in his personal capacity, but as trustee of the Wine Logistics Trust. However, that assertion was not made by the defendant, until April 2011.
The defendant has given no explanation as to the subsequent disbursement of the funds resulting from the sale of the Rupert Street property. Documents annexed to the affidavit of Auxilia Leene, tendered by the plaintiff, demonstrate that the defendant personally engaged in share transactions of a very considerable value, with Intersuisse Ltd. The defendant opened an account with Intersuisse on 22 April 2009 and on 10 June 2009 deposited the sum of $900,000 into his Intersuisse account. The documents also disclose that the defendant derived dividend income from shares in the financial year ending 30 June 2010.
The plaintiff has demonstrated that the defendant himself purchased the agricultural property, to which he had referred, for a sum of $500,000. The defendant is the registered proprietor of that property.
Terra Rossa Wine owned the land and building at 48 Church Street Penola. A mortgage over that property was signed by the defendant as a director in August 2009. The defendant remained a director until 16 January 2012, and continues to hold a majority of shares in the company.
The defendant lives in a house at Arthur Street Penola. He asserted that that house was purchased by his wife from his former de facto, in 2010. He said that he does not pay rent. What he did not disclose was that he holds a caveat over the property and the property was transferred by the defendant to his wife on 2 November 2010. Contrary to the defendant’s assertion that his wife purchased the Arthur Street property from his former de facto wife, the documents disclose that the property was in the defendant’s name, and was transferred to his current wife in November 2010.
The defendant’s “hardship affidavit” asserts “nil superannuation.” However the documents demonstrate, by the 2011 returns, that the value of superannuation was declared at $81,000, and that the defendant was the trustee of the superannuation fund.
No mention was made by the defendant of any directorships or shareholdings, but the plaintiff demonstrated that the defendant was the director, secretary and share holder of Pure Capital Investments Pty Ltd; a director and the secretary of i2i Media Pty Ltd, possibly the entity to which the plaintiff claims he was indebted in the sum of $630,000; a director and the secretary of Australian Mail Solutions Pty Ltd; and a shareholder holding 460 of a total of 535 issued shares in Terra Rossa Wine, and was, until 16 January 2012, a director and the secretary of that company.
Conclusion - Ground 3 - Stay Application
I have had regard to the defendant’s submissions and his explanation for the inconsistencies between the information he purported to disclose in the document to which I have referred, and the detailed documentation tendered by the plaintiff.
As has been mentioned, in determining the issue of whether the defendant has satisfied the onus upon him of showing that extreme personal hardship would follow from the refusal to grant a stay, the question is one of fact and judgment.
I am not prepared to rely upon the defendant’s assertions. The documents tendered as annexures to the affidavit of Auxilia Leene, on behalf of the plaintiff, demonstrate a combination of inaccuracies, omissions, and what might, upon a fuller examination, appear to be subterfuge on the part of the defendant.
The master was correct in finding that the defendant failed to satisfy the onus upon him. Even had the master had the additional material before him, he could not have arrived at any contrary conclusion. I dismiss the appeal in so far as it relates to the refusal to grant a stay.
Strike Out Application – Ground 1
The defendant challenged the finding of the learned master that there is no relationship of agency between the Deputy Commissioner of Taxation and ASIC, and the finding that the Deputy Commissioner of Taxation was not either vicariously liable for the actions of ASIC in publishing defamatory material, or liable as a joint tortfeasor.
Defendant’s Submissions on Appeal
Upon appeal the defendant submitted that Project Wickenby was a partnership and a joint undertaking for mutual benefit. He sought to rely on s 10 of the Partnership Act 1891 (SA) to say that every partner was liable for the actions of the others. He posed the question “can the government avoid its liabilities by creating sham projects that are not legal entities?” The defendant argued that in the alternative the plaintiff was vicariously liable for the actions of ASIC, or liable as a joint tortfeasor.
Conclusion – Ground 1
It may be that the defendant has an action against ASIC. I have not considered the merits of such an action. I do not consider that the defendant’s claim against the plaintiff, in respect of the publication by ASIC, can be made out on any of the grounds contended for by the defendant.
I would find that the counterclaim is vexatious within the meaning articulated by Roder J in Attorney-General v Wentworth,[13] and frivolous in the sense of being foredoomed to fail.[14]
[13] Attorney-General v Wentworth (1988) 14 NSWLR 481 p 491.
[14] Walton v Gardiner (1992) 177 CLR 378 p 393.
Nothing put to me in submissions by the defendant caused me to conclude that the master was in error in striking out the defendant’s amended counterclaim. I dismiss the appeal in so far as it relates to a challenge to the master’s decision to do so.
Orders
It follows that I would dismiss the appeal.
I will hear the parties as to the precise terms of the orders to be made.