Deputy Commissioner of Taxation v Pownceby

[2009] VCC 277

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE

CIVIL DIVISION

Case No. CI-08-03586

DEPUTY COMMISSIONER OF TAXATION	Plaintiff
v.
DONALD ALLAN POWNCEBY	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	2 April 2009
DATE OF JUDGMENT:	2 April 2009 (Revised 6 April 2009)
CASE MAY BE CITED AS:	Deputy Commissioner of Taxation v. Pownceby
MEDIUM NEUTRAL CITATION:	[2009] VCC 0277

REASONS FOR JUDGMENT

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Catchwords:  Taxation – Conclusiveness of assessment – Possibility that assessment may include tax liability of company associated with taxpayer – Whether liquidation of associated company to be regarded as “recovery” of tax for which individual taxpayer had been assessed – Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 82 ALJR 1177 followed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P. Agardy	Australian Government Solicitor
For the Defendant	Mr P. Crennan	Spigler & Schwarcz
HIS HONOUR:

1     The Deputy Commissioner of Taxation seeks summary judgment against the defendant in the total sum of $3,636,590.67 for unpaid tax, penalties and interest. The defendant submits that, in respect of the claim, there is an arguable defence or that otherwise there are matters which ought to be determined at trial.

2     During the relevant period, the defendant Donald Pownceby worked as a real estate consultant and in association with a large number of companies was involved in many real estate transactions. He has exhibited to his affidavit in opposition to the application for summary judgment, documents obtained under freedom of information legislation from the plaintiff.

3     The documents include audit documents, which show the auditor’s calculation of income by way of commissions allocated to the defendant. These include certain sums where the supporting documentation in the form of contracts of sale, sale authorities or similar

documents appears to show that the person entitled to agent’s commission was not the defendant, but rather a company with which he was associated. The defendant states in an affidavit that certain of these companies have been put into liquidation in respect of

their tax liability to the plaintiff.

4     Plaintiff’s counsel, Mr Agardy, submitted that, notwithstanding, the assessments made by the plaintiff were conclusive against the defendant in these circumstances. The High Court in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 82 ALJR 1177 set out the limited circumstances in which it can be asserted that an assessment by the Commissioner does not satisfy the statutory definition of an assessment.

5     One such case is where the assessment is “tentative or provisional”. For example, in Stokes v Federal Commissioner of Taxation (1999) 136 ALR 632, where the Commissioner made three separate assessments on the same day in respect of the same tax payer for the same tax year. The assessments were put forward as alternatives and in the circumstances were held by the Court not to constitute valid notices of assessment.

6     A second basis set out in Futuris is where there has been “conscious maladministration of the assessment process”. It was only faintly pressed by defendant’s counsel, Mr Crennan, that the facts in the present case might support an arguable basis for this matter to proceed to trial. There was, in my view, no basis on the material in the present case. As the High Court in Futuris made clear, “allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers, are not lightly to be made or upheld” (paragraph 60).

7     The Court in Futuris referred to the fact that there are other remedies that a taxpayer has under the taxation legislation if there is dissatisfaction with an assessment. The limited bases for challenging an assessment is consistent with what the High Court described as, “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” (paragraph 64).

8 Mr Crennan submitted that to include in an assessment of one taxpayer, the tax due on the income of another taxpayer was not a proper exercise of the taxation power in the Constitution. He relied upon a statement of the High Court in MacCormick v Commissioner of Taxation (1984) 158 CLR 622 at 636, in which the Court stated the proposition that, “a law, it is said, is not a law with respect to taxation unless there is a real connection between the objects of the tax and its subject matter”. The Court immediately commented that the “proposition may be doubted”. In my view, the conclusiveness of the assessments in the circumstances of the alleged irregularities make it unnecessary to consider this argument further.

9     Mr Crennan further submitted that part of the income included in the assessment of the defendant may have also been included in the assessment of a company or companies with which the defendant was associated. A number of those companies had been

placed in liquidation upon the application of the plaintiff following non-payment of
taxation, including possibly amounts also claimed from the defendant in the present
proceeding.

10 It was submitted that although the fact “a tax liability remains outstanding against two

taxpayers, pending the ascertainment of the taxpayer truly liable, is no bar to the
exercise of the power to assess both to tax in respect of the same income”, that did not
permit “double recovery of tax” (see Deputy Commissioner of Taxation v Richard Walter

Pty Ltd (1995) 183 CLR 168 at 201-202 per Brennan J).

11 In my view, the liquidation of a company cannot be equated with “recovery“ of a debt.

Under the Corporations Act, a company will be wound up if it is insolvent and unable to pay its debts as they fall due. The company will not be wound up simply to enforce the payment of a debt, and the process of liquidation can therefore not be regarded as

equivalent to the recovery of a debt. Such a process may, of course, lead to recovery of a debt. The defendant has not, however, in the present case, disclosed in his answering material, any basis for the conclusion that the judgment now sought against the

defendant includes any amount recovered against a company wound up at the instance
of the plaintiff.

12 There will be judgment for the plaintiff against the defendant for $3,636,590.67, together with the costs of the proceeding, including any reserved costs, to be taxed on scale D in default of agreement.

Certificate

I certify that these 3 pages are a true copy of the reasons for decision of His Honour Judge

Anderson delivered on 2 April 2009 and revised on 6 April 2009.

Dated: 6 April 2009

Caroline Dawes

Associate to His Honour Judge Anderson