| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : DEPUTY COMMISSIONER OF TAXATION -v- RAMON RONALD OSBORNE as Trustee for THE OSBORNE FAMILY TRUST [2013] WADC 139 CORAM : MCCANN DCJ HEARD : 17, 18, 20 DECEMBER 2012 & 5 APRIL 2013 DELIVERED : 30 AUGUST 2013 FILE NO/S : CIV 106 of 2011 BETWEEN : DEPUTY COMMISSIONER OF TAXATION Plaintiff
AND
RAMON RONALD OSBORNE as Trustee for THE OSBORNE FAMILY TRUST
Defendant
Catchwords: Debt - Action for recovery of the tax liabilities of a trust - Liability of a trustee - Evidentiary effect of the Australian Business Register - Turns on own facts - Estoppel - Unsustainable on the facts and at law Legislation: A New Tax System (Australian Business Number) Act 1999 (Cth) s 27
Evidence Act 1995 (Cth) s 350-10, item 1(b)
Tax Administration Act 1953 (Cth) s 8AAZF, sch 1: s 1055(1), s 105100, s 105110, s 25550(1), s 26545(1)
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Result: Judgment for the plaintiff for the current balance of the running balance account of the Osborne Family Trust
Representation: Counsel:
Plaintiff : Ms F Vernon
Defendant : Mr B F Stokes
Solicitors:
Plaintiff : Australian Government Solicitor
Defendant : Brians Solicitors
Case(s) referred to in judgment(s):
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161
Collector of Customs v Palmer Steel Trading (Aust) Pty Ltd [2003] QSC 434
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360
Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1994) 125 ALR 213
Jones v Dunkel (1959) 101 CLR 298
The King v Hush; Ex parte Devany (1932) 48 CLR 487
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Introduction 1 In this matter the plaintiff claims monies alleged to be due and owing by the defendant pursuant to a running balance account in the joint names of the defendant and his former wife, Beryl Osborne, in their capacities as trustees of the Osborne Family Trust (the OFT). 2 There is a single issue in dispute. The defendant denies being a trustee of the OFT and contends that Beryl Osborne was the sole trustee at all material times.
The plaintiff's case 3 Pursuant to s 105-5(1) of sch 1 of the Tax Administration Act 1999 (Cth) (TAA), the Australian Tax Office acting on behalf of the plaintiff issued a notice of assessment to the OFT on 1 April 2009 for a GST net amount (i.e. a GST liability) of $42,500 for the period 1 April – 30 June 2007. The due date for payment was deemed to be 27 August 2007, being the date for payment of GST for the June 2007 quarter. In other words, the plaintiff made a retrospective assessment of the OFT's GST liability. 4 The plaintiff allocated the GST net amount to the OFT's running balance account and added penalties of $15,793.70 and interest (which has continued to accrue pursuant to s 8AAZF and pt 11A of the TAA). As at 14 December 2012 the running balance was $104,066.99 (exhibit 2). 5 Pursuant to s 105-100 and s 105-110 of sch 1 to the TAA (replaced by item 1(b) of s 350-10 of the Commonwealth Evidence Act 1995 as and from 1 July 2012), and in the absence of any objection having been raised by the OFT, the notice of assessment is conclusive evidence that it was properly made and that the amount of the assessment was correct. This court has no jurisdiction to look behind it and it is not disputed in these proceedings. (F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360, 378 Mason & Wilson JJ.) 6 Pursuant to s 265-45(1) of sch 1 of the TAA, multiple trustees of a trust are jointly and separately liable to pay the whole amount of any tax liability of the trust. 7 The plaintiff relies on a number of statutory deeming provisions as evidence that the defendant was a trustee of the OFT. (Page 4)
8 Pursuant to s 27 of the A New Tax System (Australian Business Number) Act 1999 (Cth) (the ABN Act), the Australian Business Register (the ABR) is admissible in proceedings as evidence of the matters registered in the ABR, and certified extracts of the same are admissible in proceedings without any further proof of the original or its production. Section 255-50(1) of sch 1 of the TAA also provides that a statement or averment about a matter in a complaint, claim or declaration (i.e. pleading) is prima facie evidence of that matter. 9 Provisions of this kind do not reverse the burden of proof, which remains on the plaintiff. Rather, they establish that, in the absence of any other evidence, the evidence led by the plaintiff in reliance on those provisions is sufficient to discharge its burden of proof (The King v Hush; Ex parte Devany (1932) 48 CLR 487, 507 – 508, Dixon J). Section 255-50(4) of sch 1 of the TAA reflects this by providing that all evidence must be considered on its merits. 10 The task for the court to decide is whether on the evidence (including averments) the fact in issue has been established to the requisite degree of proof, namely to the actual satisfaction of the court on the balance of probabilities (Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 [142], [144], Hayne J). 11 The defendant and Beryl Osborne were registered in the ABR as the trustees of the OFT on 21 April 2000. This remained the case at all material times and has been averred (pleaded) by the plaintiff in these proceedings. 12 There is therefore no dispute that the plaintiff has established a prima facie case that the defendant was a trustee of the OFT at all material times and is indebted to the plaintiff for the current balance of the OFT's running balance account. 13 The plaintiff contends that this case is supported by objective evidence, which I accept, as to the process and essential requirements for entering, varying and removing data in the ABR. That process was computerised and could be effected online at all material times (see Mr Robert Benn, ts 100, 105 - 6, 108-9). It was necessary for a user to use a password and to input certain confidential details about the entity or person being registered, such as their tax file number (TFN), address and date of birth. Accordingly, the plaintiff contends that an inference may be drawn to the effect that the defendant was a party to, or authorised, his own registration as a trustee of the OFT. (Page 5)
14 The plaintiff also relies on certain admissions which were made by the defendant in his own evidence.
The defendant's case 15 The defendant gave evidence and tendered a number of documents. 16 Exhibit 21 was said to be a copy of the deed of trust of the OFT, which I accept. The original was lost when the OFT changed accountants in 1982 (ts 113). 17 The deed was made on 22 December 1976 between Mr R F Stowe as settlor and Mr J G Morris as trustee. The defendant was nominated as appointor of the trust. The beneficiaries were members of the defendant's family, namely Beryl Osborne, Paul Ramon Clayton Osborne and Natalie Lisa Osborne and their issue and certain entities associated with them. 18 Pursuant to cl 9 of the trust deed, in the event of any trustee dying prior to the vesting date (30 September 2056) without having appointed a replacement, his legal personal representative became trustee in his stead, subject to the appointor's (i.e. the defendant's) power of appointment. 19 Pursuant to cl 11 of the trust deed, the defendant, as appointor, was entitled by instrument in writing at any time, and from time to time, in his absolute discretion to remove a trustee and appoint an additional trustee or trustees, subject to a proviso which is not relevant to these proceedings. 20 The defendant testified that Mr Morris ceased to act as trustee of the OFT some time before his death in early 1982 (ts 141 – 2). However, the defendant gave no evidence as to who, if anyone, replaced Mr Morris at that time, including whether or not Mr Morris' executor did so. But, self evidently, he accepted that Beryl Osborne was appointed at some stage. 21 The defendant testified that he personally had never been a trustee of the OFT and sought to explain how the ABR recorded otherwise. He testified that on 21 April 2000 he was the sole proprietor of an accountancy practice, McMillan Partners (ts 138 - 9). The OFT was a client of McMillan Partners and needed to be registered in the ABR, which required the trustee's details to be registered. He said (ts 130, 162 -3) that this task fell to an employee of his, most likely his son-in-law and former partner William Fulcher, but possibly a Ms Ng (neither of whom gave evidence). Mr Osborne opined in his evidence that one of (Page 6)
these employees must have erroneously entered his name as a trustee whilst registering that of Beryl Osborne. 22 The defendant also opined as to how the mistake could have happened (ts 139 – 140). He said that he was not computer literate in 2000 (and still is not) and had his staff attend to all online matters, including the registration of details in the ABR. For that purpose he always gave them written instructions and trusted them to implement them accurately. His staff had access to all of the clients' details necessary to gaining access to the ABR, including the TFNs. In the case of the OFT Beryl Osborne was supposed to be registered as the trustee whilst he was only supposed to be registered as the contact person and tax agent. He believed that the employee concerned must have misunderstood and registered him as a trustee as well. 23 The defendant acknowledged that subsequent to 2000 he had numerous interactions on behalf of the OFT with the ATO. However, he contended that he only ever held himself out as the contact person and/or tax agent and contended that he was accepted as such by the ATO. It is not necessary to set out that evidence at length. At its highest, from the defendant's point of view, it establishes that: (i) The ATO addressed some correspondence relating to the OFT solely to Beryl Osborne and referred to the defendant as her representative (see p 13 of annexure 'TJM1' to exhibit 3 for example). (ii) The ATO proceeded against Beryl Osborne separately in respect of the running balance account liability. (That action was dismissed in 2012 due to inactivity: exhibits 22 and 23.) (iii) The defendant was told by the ATO that they regarded him to be liable as a trustee of the OFT in late 2010 by a notice of demand dated 4 December 2010 (the salutation of which referred to the 'trustees'; ts 170 -171, part of exhibit 12), by service of a writ of summons on 3 February 2011 (exhibit 12, p 16 and ts 146 – 7) or in a telephone conversation between the defendant and Mr John De Vaney of the ATO on 16 March 2011 (ts 124, 145 - 6, exhibit 28).
Analysis of the evidence 24 Both counsel provided detailed written submissions which were of assistance to me. (Page 7)
25 Ms Vernon embarked on a sustained attack on the defendant's credibility. She accused him of lying about his role as the trustee of the OFT and his recollection of events. I accept that his evidence was highly problematic. There were a number of difficulties and I find that he was self-serving and unreliable. These are my reasons. 26 I firstly point to the improbability of the defendant's assertion that he was registered in the ABR as a trustee of the OFT by mistake. The person who actually did so (probably Mr Fulcher based on the defendant's own recollection) had access to his personal details, including his TFN and date of birth. Of itself that is equivocal because a trusted employee such as Mr Fulcher could be expected to have that access. 27 More importantly, the defendant was the accountant and tax agent for the OFT on 21 April 2000 (ts 139) and was the obvious person to have initiated the OFT's registration which, I find, he did in writing. I discount the possibility that Mr Fulcher misconstrued that written instruction (especially given the unexplained absence of evidence from him). 28 Ms Vernon submitted that it stretches credulity to suggest that a mistake happened, but I would not go that far. Errors of that kind sometimes occur and, it must be remembered, the defendant has never disputed that he was supposed to be nominated as the contact person and tax agent for the OFT. Hypothetically, it is not inconceivable that an employee could make a mistake about that. But, I am satisfied that the defendant's hypothesis is very improbable in this instance and there is no direct or circumstantial evidence to support it. 29 Ms Vernon also relied on the defendant's failure, or at least inability, to condescend to relevant particulars of the history of the OFT in his evidence. On his evidence the OFT was his family's trust and he was the appointor and its accountant and tax agent until his bankruptcy in 2003 or 2004 (ts 114, 134 and 142). Yet he could say very little about how or when his wife became a trustee and he was completely unconvincing in his evidence about the date (see par 52 of Ms Vernon's submissions). At one point it was his evidence (ts 124 - 125) that Beryl Osborne 'was always' the trustee which could not be correct. I accept Ms Vernon's submission that the defendant simply said whatever he considered to be expedient about this aspect. 30 Ms Vernon referred in her submissions to a number of other relatively subsidiary credibility-related matters which all have merit (pars 46 - 60 and pars 63 - 64). It is not necessary to canvass them in (Page 8)
detail and suffices to say that the defendant contradicted himself (especially in relation to dates) and tailored his evidence about some dates in the face of inconsistent evidence. 31 Ms Vernon also submitted that this is a case in which an inference can be drawn pursuant to the principles enunciated in Jones v Dunkel (1959) 101 CLR 298, namely that any evidence from the defendant as to the history of the OFT prior to 21 April 2000 and as to the appointment of the trustee(s) who were in office on that date would not assist his defence. 32 Mr Stokes sought to mitigate the shortcomings in the defendant's evidence. He pointed out that: (i) The defendant has not had the professional day to day responsibilities of the trust (as tax agent) since he became bankrupt. (ii) He passed his client files (including the OFT's files) to the purchaser of McMillan Partners when he sold that practice and he has not had access to them to refresh his memory. (iii) Meanwhile, he is no longer practicing as an accountant, he works in a clerical position and is of advanced age (72 years when he gave his evidence). 33 Mr Stokes submitted that in these circumstances the defendant's 'poor recollection and lack of grip on the facts surrounding this case [was] … unsurprising'. There is a modicum of force in that submission but, critically, it was not explained to my satisfaction why the defendant lacked access to the relevant files (upon which his evidence was less than understandable) or, more basically, as to why, as appointor of the OFT, he could shed so little light on his wife's (or anyone's) appointment as trustee after Mr Morris ceased to be trustee. I do not accept that he is unable to condescend to particulars about this, and I am satisfied that to do so would not assist his case. The defendant's evidence was really a bare ipse dixit so far as the ultimate issue is concerned. 34 It suffices to say that, in spite of Mr Stokes' submissions, and to some extent in the light of them, I find myself unable to attach any weight to the defendant's evidence, save where it comprised admissions (eg, that he gave written instructions about the OFT's registration in the ABR). 35 I am not persuaded that anything turns on the way in which the defendant held himself out to the ATO in his dealings on behalf of the (Page 9)
OFT, or in respect of the way in which the ATO regarded him. The fundamental issues are whether the defendant was a trustee of the OFT at all material times and whether his registration in the ABR was a mistake. 36 In any event, I am not satisfied that anything in his communications with the ATO before he was sued unequivocally suggested he was not a trustee. In fact, the defendant drafted and/or sent letters on behalf of the OFT in relation to the notice of GST assessment which suggested that he was a trustee. In particular, they referred to the trustees in the first person plural (i.e. 'we'). 37 The first occasion was an objection to the assessment of the GST liability (exhibit 30A, dated 3 June 2009, see also exhibit 33) and the second was a letter seeking an extension of time to comply with a request for further information in relation to that objection (exhibits 34A and 34B dated 5 August 2009). I accept that exhibits 30A, 34A and 34B were signed by 'B N Osborne trustee', but that, in a sense, serves to validate the plaintiff's case because it tends to show that the defendant was regarded as a trustee by Beryl Osborne. 38 As I understand the defendant's evidence (ts 166 – 7) he used 'we' in this correspondence in error because he was used to using the first person plural when writing on behalf of his firm (McMillan Partners) or, at least, as an accountant. That explanation is unbelievable. Exhibits 34A and 34B contained the statement 'we advise that our tax agent … has been overseas', which speaks for itself. 39 On 24 September 2009 (exhibit 35) the defendant himself wrote to the ATO about the withdrawal of the OFT's objection, citing the need for another tax agent to be appointed. The letter stated 'we confirm the withdrawal of the objection …'. 40 The defendant pointed out that he was sometimes described in the ATO's records as the 'contact person' of the OFT rather than the 'contact trustee' or a 'trustee', but that is not decisive and carries very little weight. Mr Steven Hardey, an employee of the ATO, testified (ts 81, 86 - 89) that the titles of 'contact person', 'contact trustee' and 'trustee' were not mutually exclusive from the ATO's point of view. I am satisfied that nothing turns on which of two registered trustees was nominated for the roles in ATO's or the OFT's records or correspondence – the ATO's systems simply required that someone be nominated. In any event the defendant is noted as a trustee of the OFT on some ATO records besides (Page 10)
the ABR (see evidence of Mr Timothy Manton and exhibits 5, 6, 7, 8, 9, 14, 16, 17 and 18).
Findings 41 In summary, when the defendant's entirely unconvincing evidence is weighed against the circumstantial evidence supporting the plaintiff's case (i.e. even putting to one side for a moment the prima facie position arising from the plaintiff's averments), I have no difficulty in rejecting the former. I am satisfied on the balance of probabilities that the defendant's bare assertion that he was not a trustee of the OFT at all material times is not credible and should be rejected. 42 Similarly, I do not accept the defendant's evidence that his registration as a trustee of the OFT in the ABR occurred by mistake and I infer that he gave express instructions which resulted in that registration. I further infer that his instructions reflected the then state of the affairs of the OFT because the defendant was the appointor of the trust and its accountant. 43 There is no documentary evidence of the defendant's appointment, but the same observation applies to Beryl Osborne's appointment which he has never disputed. I am satisfied that both of them must have been appointed, especially in the absence of any evidence from the defendant as to how she became a trustee and he did not. 44 I therefore find that the defendant was a trustee of the OFT at all material times and is liable to the plaintiff as claimed.
Other issues 45 Prior to the trial the defendant raised other defences, namely his own bankruptcy and the purported vesting of the trust, but these were abandoned. 46 At the commencement of the trial he sought leave to amend his defence to plead an estoppel as a bar to the plaintiff's claim. As amended, par 4 of the defence would have read as follows if leave had been granted: Beryl Norma Osborne is the trustee of the Osborne Family Trust. The Osborne Family Trust vested in November 2007. The plaintiff's own documents in the file of the said trust show that between 31 October 2006 and 19 August 2009 the plaintiff looked to the said Beryl Norma Osborne …. as the trustee of the said trust. (Page 11)
(a) the defendant relied upon the said dealings by the plaintiff with Beryl Norma Osborne as trustee of the Osborne Family Trust ('OFT') between 2000 and 2011 in all his communication with the plaintiff as the tax agent and/or contact person for the OFT; (b) such reliance was to the defendant's detriment.
Particulars
(i) the defendant in his dealings with the plaintiff had no notice from the plaintiff that it regarded the defendant as a joint trustee of the OFT; (ii) the defendant in acting as a declared agent of the OFT unknowingly exposed himself to prospective personal liability to the plaintiff under the statutory taxation regimen; (iii) had the defendant known that at some time in the future the plaintiff may look to him as trustee of the OFT for personal liability for the tax and GST debts of the OFT then the defendant would have advised Beryl Norma Osborne to appoint another person as tax agent and/or contact person of the OFT; (iv) had the defendant also so known, then he would have made arrangements to have the primary GST debt of $42,500 paid promptly so avoiding the liability for interest and penalties; and (v) had the defendant been issued and/or served with a Notice of Assessment as trustee then he would have been able to exercise his right to object to same within the prescribed time limits; (c) at no time prior to the 16 March 2011 did the plaintiff advise the defendant that it regarded him as a joint trustee of the OFT; (d) the defendant says that the plaintiff is estopped from now looking to the defendant as trustee when it looked to the said B.N.Osborne from 2000 to 2011 inclusive. 47 I refused leave to amend during the hearing and gave some reasons (ts 157 – 160). I wish to supplement those reasons in the light of the evidence and these reasons. 48 First, I remain satisfied that if allowed the proposed amendments would have significantly enlarged upon the issues in the trial and required a lengthy adjournment. For example, it would have become necessary to (Page 12)
enquire into the prospects of success of a Notice of Objection to the GST assessment. I found that the defendant had had a reasonable opportunity (indeed, ample opportunity) to plead and agitate the estoppel issue, that it was now too late to do so and that an order for costs against the defendant would not sufficiently mitigate the consequential prejudice (delay) (Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175). 49 Second, the proposed amendment was unmeritorious because, assuming that the defendant was found to be a trustee of the OFT (as has eventuated), the estoppel which the defendant sought to raise is unsustainable at law since it seeks to raise an estoppel against the operation of the taxation legislation (Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1994) 125 ALR 213, 222, Brennan, Deane Dawson, Toohey JJ; Collector of Customs v Palmer Steel Trading (Aust) Pty Ltd [2003] QSC 434, [7] McMurdo J). 50 Further, on the merits as to whether or not he was a trustee, the doctrine of estoppel upon which the defendant sought to rely prevents a party from resiling from an assumption (including as to litigious intentions) which that party has induced or allowed another party to make, provided that it would be unconscionable to resile. The doctrines of election and waiver may also apply in such circumstances. (Commonwealth of Australia v Verwayen (1990) 170 CLR 394). Having received evidence and made findings, I remain unsatisfied that the alleged conduct of the ATO sought to be pleaded by the defendant could have given rise to either an assumption that the ATO would not look to him as a trustee of the OFT or, alternatively, any unconscionability if the ATO had once done so but resiled from its position. This is because the defendant could not have changed the legal and factual position viz a viz his trusteeship of the OFT at any material time, irrespective of the ATO's apparent position. The basic issue was whether or not he was a trustee of the OFT when the relevant GST liability accrued. Unilateral correction of the ABR by the defendant after that would only operate prospectively and, even if it did operate retrospectively, it would only remove one evidentiary component of the plaintiff's case. In other words, the defendant could not have been induced, and was not induced, to act or refrain from acting in a way which prejudiced his legal position, because his ability to contest the issue in dispute in the trial was not materially affected by any acts or omissions of the ATO. (Page 13)
51 I would add that there is no proportionality between the remedy which the defendant sought to assert by the proposed amendment (a complete bar) and any detriment which may have accrued to him. 52 Further, there was no evidence to support a finding that the plaintiff's rights were extinguished or varied by an election or waiver on the ATO's part.
Conclusion 53 I find that the defendant was a trustee of the OFT at all material times and is liable to the plaintiff for the current amount of the OFT's running balance account. The plaintiff is entitled to judgment accordingly.
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