Deputy Commissioner of Taxation v Moltoni
[2018] WASC 259
•28 AUGUST 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: DEPUTY COMMISSIONER OF TAXATION -v- MOLTONI [2018] WASC 259
CORAM: MASTER SANDERSON
HEARD: 22 JUNE 2018
DELIVERED : 28 AUGUST 2018
FILE NO/S: CIV 1515 of 2018
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND
PETER MOLTONI
Defendant
Catchwords:
Taxation - Application by taxpayer for stay of recovery action by Deputy Commissioner of Taxation at early stage of proceedings - Turns on own facts
Legislation:
Taxation Administration Act 1953 (Cth)
Result:
Application for stay dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr A Willinge |
| Defendant | : | Mr MGS Crowley |
Solicitors:
| Plaintiff | : | Australian Taxation Office - Legal Services Branch |
| Defendant | : | Sceales Lawyers |
Case(s) referred to in decision(s):
Southgate Investment Funds Ltd v Deputy Commissioner of Taxation [2013] FCAFC 10
MASTER SANDERSON:
This is the defendant's application for a stay of the action. The writ of summons in this matter was lodged on 23 March 2018. The plaintiff's claim is for an allegedly due and unpaid tax‑related liability in an amount of just over $34,500,000. The defendant entered an appearance on 6 April 2018. On 13 April 2018 the defendant issued a summons seeking the following orders:
1.The proceedings be stayed until the Defendant's taxation objection lodged in October 2017 be finally determined by the Plaintiff, failing which on review by the Administrative Appeals Tribunal, or on appeal to the Federal Court under Part IVC of the Taxation Administration Act 1953 (Cth); alternatively
2.There be a stay of execution on any judgment until the Defendant's taxation objection lodged in October 2017 be finally determined by the Plaintiff, failing which by the Administrative Appeals Tribunal, or the Federal Court under Part IVC of the Taxation Administration Act 1953 (Cth).
The plaintiff, in its submissions filed 24 May 2018 in opposition to the defendant's application for a stay, relies on s 14ZZM and s 14ZZR of the Taxation Administration Act 1953 (Cth). These provisions are the so‑called 'pay now argue later' sections. It is common ground between the parties that the effect of the sections is to require the taxpayer (in this case the defendant) to make payment of the tax the plaintiff says is owing irrespective of whether the liability to pay that tax is disputed.
The present state of the authorities is to the effect that a court can in certain circumstances stay execution of a judgment obtained under these provisions. The leading authority on the issue is the decision of the full Federal Court in Southgate Investment Funds Ltd v Deputy Commissioner of Taxation [2013] FCAFC 10. The principles that emerge from that and other decisions were summarised quite fairly by the defendant in written submissions filed in support of the application. Those submissions read as follows (footnotes omitted):
1.'Great weight' must be given to sections 14ZZM and 14ZZR TAA. The discretion to stay execution should be exercised with great caution and only in special or exceptional circumstances;
2.The mere fact that an appeal or review is pending is not sufficient. The onus is on the applicant;
3.Hardship to the taxpayer is a relevant matter. If the taxpayer can establish 'extreme personal hardship' a stay may be granted;
4.The mere obligation to pay the assessment is not hardship in itself. The possibility that the taxpayer may be bankrupted is not, of itself, an extreme personal hardship;
5.In exercising the discretion to grant a stay, whether the Commissioner has abused his or her position, is a relevant matter;
6.Delay by the Commissioner is also a relevant matter;
7.If a taxpayer has been a 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; and
8.The merits of the pending review proceedings can be taken into account.
The history of this matter is as follows. (This history is taken largely from par 6 of the defendant's written submissions. It is in no way controversial).
In July 2017 the plaintiff issued the defendant a 'position paper' following an audit in respect of the 2007 tax year. The plaintiff alleged that a payment of US$21,000,000 by Singapore‑based Maruti Holdings Pte Ltd to Sinclair Strategies Ltd's (British Virgin Islands entity) Luxembourg bank account was assessable in the hands of the defendant, an Australian resident. The plaintiff invited the defendant's response to the position paper by 1 September 2017. By email dated 27 July 2017 the plaintiff extended the time it required for a response until 30 September 2017. This was an acknowledgement that the defendant was overseas for part of that period. Notwithstanding the plaintiff's invitation to the defendant for a response, on 21 September 2017 the plaintiff issued amended assessments in amounts totalling more than $33,000,000. The defendant lodged an objection on 4 October 2017.
The defendant voluntarily returned to Australia in October 2017 and pre‑arranged a meeting with the plaintiff's officers. The possibility of a departure prohibition order was discussed in advance. On 22 November 2017 the plaintiff issued a departure prohibition order. This had both personal and business consequences for the defendant. The plaintiff did issue a departure authorisation certificate to partly ameliorate these difficulties. That authorisation allowed the defendant to return to London temporarily.
The defendant returned to Australia on 11 March 2018.[1] On 21 March 2018 the plaintiff issued a notice compelling the defendant to submit to a formal interview on 29 March 2018. As noted above the writ in this matter was issued prior to the scheduled interview - the writ was issued 23 March 2018.
[1] Affidavit of Peter Moltoni sworn 15 May 2018 par 60.
On 28 March 2018 the plaintiff withdrew the notice to attend the formal interview.[2] It was rescheduled for 20 July 2018. In fact the interview of the defendant took place on 15 May 2018. It was the plaintiff's position it could not make a decision on the objection lodged 4 October 2017 until the interview of the defendant had occurred. To date the plaintiff has made no decision on the objection.
[2] Affidavit of Peter Moltoni sworn 15 May 2018 attachment 'PM-42'.
By letter dated 29 March 2018, the plaintiff issued reasons for decision in refusing a further departure authorisation certificate.[3] On 6 April 2018 the defendant's solicitors made application to the Administrative Appeals Tribunal for an urgent review of that decision. The application for review was heard 14 May 2018 and the decision reserved.[4]
[3] Affidavit of Peter Moltoni sworn 15 May 2018 par 75.
[4] Affidavit of Peter Moltoni sworn 15 May 2018 par 76.
On 6 April 2018 issued a garnishee notice for more than $34,500,000 to the defendant. This resulted in the defendant defaulting on a mortgage that will result in a forced sale of his property.
It is important to note that in the Southgate case the Deputy Commissioner of Taxation had obtained judgment. What the taxpayer was seeking to do was stay the execution of that judgment. That is the position in all of the cases cited by the defendant (and for that matter the plaintiff). There has been judgment obtained by the Deputy Commissioner of Taxation, generally after an application for summary judgment, and it is the enforcement process which the taxpayer is seeking to halt. Here what the defendant is seeking to do is stay the proceedings - not the enforcement of any judgment. There does not appear to be any case in which such an order has been made. It is worth noting the chamber summons in this matter anticipates a successful summary judgment application and seeks a stay of any such judgment. Again, there appears to be no case where such an order has been made.
In my view the principles of Southgate can have no application to a case such as this. If a summary judgment application is made the plaintiff will require leave - it is now more than 21 days since an appearance was entered. Leave may not be obtained. If it is the summary judgment application may not be successful. The plaintiff certainly has the advantage of the statutory provisions but it is always open to the defendant to raise whatever argument he sees fit. An abuse of process argument may or may not be successful. But I can see no reason why at this stage of the proceedings the plaintiff should be restrained from pursuing what appear to be legitimate statutory purposes.
In his written submissions counsel for the defendant focused on two main issues which it is said would justify a stay. First was the impact of any judgment on the defendant personally. It was said that it would cause the defendant great hardship. But as I have said at present there is no judgment and if a summary judgment application is not brought, or is brought and fails, there may be no judgment until after a trial. True it is the plaintiff has declined to agree to a stay of the action but that is neither here nor there. Focusing on any potential hardship in the circumstances of this case is simply not warranted.
The second matter raised on behalf of the defendant is the merits of the objection. It is unnecessary for me in the circumstances of this case to detail the allegations made by the plaintiff and the objections raised by the defendant. I would accept that the defendant appears to have reasonable grounds for an objection; it certainly cannot be said that the objection is hopeless and without merit at all. That position is supported by the plaintiff's delay in resolving the objection. If it was straightforward doubtless the plaintiff would have rejected the defendant's contentions out of hand. But even accepting the objections have merit does not advance the defendant's position. There is no suggestion of an abuse of process. Given the nature of the statutory provisions in the circumstances of this application no such argument could possibly be advanced. So the merits of the defendant's objections are really of no moment in determining this application.
In my view this application must fail. The defendant should pay the plaintiff's costs of the application including the reserved costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
ASSOCIATE TO MASTER SANDERSON28 AUGUST 2018
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