Deputy Commissioner of Taxation v Russo No. Scgrg-00-91

DEPUTY COMMISSIONER OF TAXATION v RUSSO
[2000] SASC 109

Magistrates Appeal: Civil

BLEBY J: On 12 April 1999 the appellant commenced proceedings in the Magistrates Court of South Australia against the respondent for the recovery of unpaid income tax, additional tax for late payment, interest for late payment and an amount of provisional tax. The total amount claimed (including costs) was $27,710.91.
The respondent filed a defence as follows:
“I denied (sic) the late penalty due to medical conditions and also the late penalty would cause undue hardship.”
Some negotiations took place between the appellant and the respondent. A payment was made. The claim was not resolved.
By application dated 14 January 2000 the appellant applied for orders to strike out the defence under Rule 12 of the Magistrates Court Rules 1992 and to enter summary judgment against the defendant. There was exhibited to an affidavit in support of the application a certificate by the appellant pursuant to Regulation 67 of the Income Tax Regulations whereby it was certified that:

(a)The respondent was a taxpayer within the meaning of s 6 of the Income Tax Assessment Act 1936 (Cth) (“the Act”);
(b)Assessments of income tax were made against the respondent in respect of the years ended 30 June 1994, 30 June 1995 and 30 June 1998;
(c)Particulars of the amounts payable under each of the assessments were as specified in the certificate;
(d)Notice of the assessments was duly served on the respondent;
(e)The sum of $12,517.40 was due by the respondent to the appellant in respect of income tax.

The certificate set out in detail particulars of the various debits and credits made in respect of the income tax assessed for the years in question and the other debits and credits made in respect of those assessments in accordance with the provisions of the Act. Although it was not apparent from this certificate, the amounts payable under the assessments for the 1994 and 1995 years included substantial amounts of additional tax for late lodgment of the tax returns.
The certificate showed the amount (including the additional amount for late lodgment) due on each assessment, amounts paid from time to time, additional tax for late payment of tax pursuant to s 207 of the Act, interest for late payment pursuant to s 207A of the Act and an amount of provisional tax for the year ended 30 June 1999.
There was also exhibited to the affidavit an extract of the notices of assessment in respect of the years of income in question certified under the hand of the appellant pursuant to s 177 of the Act. However, those extracts did not include the liability for provisional tax, nor, understandably, the late payment tax, interest or credits due or given.
The affidavit also deposed to the fact that the respondent had lodged with the appellant an objection in relation to the penalty components of the assessment, that they had been disallowed, that there had been no application for review or appeal from that decision, and that the time for appeal or review had expired on 8 October 1999.
At the hearing of the summary judgment application the respondent, who was unrepresented, produced documents which he said showed that there was no outstanding liability to the appellant. Copies were made available to the appellant’s representative who then pointed out to the Court that the documents referred to the respondent’s liability for group tax, and had nothing to do with his liability for the income tax. There was a short adjournment while the parties conferred. The respondent continued to argue that there were no amounts outstanding. The appellant’s representative then made submissions to the Magistrate relying upon s 177 of the Act. Before his submission was completed, however, the Magistrate made the order the subject of this appeal.
There was no affidavit filed in opposition to the application for summary judgment.
The order made by the Magistrate was that the hearing of the application for summary judgment be adjourned and that an expert, whom the Magistrate nominated, be appointed to advise the Court whether the appellant’s claim was “accurate”, whether the penalties were properly calculated and “any other matter (the expert) thinks appropriate”. The appeal against that order is brought by leave.
In making his order the Magistrate was no doubt relying on the provisions of s 29 of the Magistrates Court Act 1991 (SA). Section 29 reads:
“29. (1).. The Court may refer any question arising in an action for investigation and report by an expert in the relevant field.
(2) A person to whom a question is referred under this section becomes for the purposes of the investigation an officer of the Court and may exercise such of the powers of the Court as the Court delegates.
(3)... The Court may adopt a report obtained under this section in whole or part.
(4) The costs of the expert’s investigation and report will be borne, in the first instance, equally by the parties or in such other proportions as the Court may direct, but the Court may subsequently order that a party be reimbursed wholly or in part by another party for costs incurred under this subsection.”
To the extent that the order authorised the expert to calculate the accuracy of the assessments, thereby enabling the Magistrate, under s 29, to adopt any report that he made, the order was invalid. Section 177 of the Act relevantly reads:
“177. (1).. 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.
(2)....
(3)....
(4)The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced.”
An extract from the relevant notices of assessment had been exhibited to the affidavit. The combined effect of the two subsections quoted above was that the extracts constituted conclusive evidence of the due making of the assessments and of their correctness for the purpose of these proceedings. Section 177(1) makes it impossible for a taxpayer in proceedings, other than by way of objection or appeal under the Act, to challenge an assessment on any ground. In F J. Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 Mason and Wilson JJ said at 375:
“An explicit and, in our view, correct statement of the effect of s.177(1) was made by Taylor J. in McAndrew (1916) 98 CLR, at pages 281-282. For the reasons there expressed his Honour concluded that ‘s.177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground’. He conceded that the word ‘excessive’ in s.190(b) was inappropriate. However, he considered that an assessment ‘made in purported but not justifiable exercise of a statutory power’ could properly be described as ‘excessive’ (1956) 98 CLR, at page 282.
This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes advantage of s.177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V.”
The Court found that an attack upon an assessment other than by proceedings under Part V of the Act was not competent. Other cases are to the same effect: Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 per Mason CJ at 183 ‑ 184; Deputy Commissioner of Taxation v Collie 95 ATC 4764 at 4770; Deputy Commissioner of Taxation v Cameron 91 ATC 4056 at 4058.
Accordingly, there was nothing that the expert could do to challenge in any way the validity or the amount of the original assessments which formed the basis of the claim. The certificates under s 177 were conclusive evidence of the correctness of the amount and particulars of those assessments. They could not be questioned by the expert, and the magistrate was not at liberty to adopt the report of the expert as to the correctness or otherwise of those assessments.
Those assessments included not only the primary income tax for the years in question but also the additional tax for late lodgment of the returns. It was this additional tax for late lodgment which formed the major portion of the appellant’s claim against the respondent.
However, the content of the assessments, duly certified under s 177, formed only part of the calculation of the amount alleged to be due by the respondent, and for which an order for summary judgment was sought. The amount claimed on summary judgment also included an amount of provisional tax not included in the assessments, additional tax by way of penalty for late payment of tax pursuant to s 207 of the Act and interest pursuant to s 207A. The calculations included credits for various amounts paid by the respondent, a small rounding credit and an amount of $100 for the cost of issuing the claim in an earlier action against the respondent. None of these items was covered by the s 177 certificates. However, all these debits and credits, along with the net amounts of the assessments reflected in the s 177 certificates, were set out in the certificate under Regulation 67 to which I have already referred.
Regulation 67 of the Income Tax Regulations provides:
“67   Evidentiary certificates
In an action against a person for the recovery of tax, a certificate signed by the Commissioner certifying that:
(a).... the person named in the certificate is liable to pay tax; and
(b)    an assessment of tax payable by the person was made against the person in respect of the year set out in the certificate; and
(c)... the particulars of the assessment are as stated in the certificate;
(d)    notice of the assessment was served on the person; and
(e)... the amount referred to in the certificate is, at the date of the certificate, a debt in respect of tax due by the person to the Commonwealth;
is, in the absence of contrary evidence, sufficient evidence of the facts stated in the certificate.”
The appellant, although it seems that his representative was not permitted to complete his submissions to the Magistrate, also relied on the Regulation 67 certificate to establish his entitlement to summary judgment. Whether he could do so depends on whether this was an action for the recovery of “tax” as that word is used in Regulation 67.
The expression is not defined in the Regulations but it is defined in the Act. In that case, the expression, when used in the Regulations has the same meaning as it has in the Act: s 46(1)(a), Acts Interpretation Act 1901 (Cth).
Section 6 of the Act provides that, unless the contrary intention appears, in respect of the 1997/1998 tax year and later years, “income tax or tax means income tax imposed as such by any Act, as assessed under this Act”. In respect of previous years it was defined as meaning “income tax, or income tax and social services contribution, imposed as such by any Act, as assessed under the Income Tax Assessment Act 1936, or under that Act as amended at any time”.
There is no doubt that the expression includes the amounts covered by the s 177 certificates. Provisional tax is levied in accordance with the provisions of Division 3 Part 6 of the Act. Section 221YB imposes a liability to pay provisional tax “for the purpose of enabling the income tax that will be payable by a taxpayer to whom this section applies to be collected during the financial year in which income tax is levied”. It seems to me, therefore, that provisional tax comes within the meaning of “tax” as used in Regulation 67
I turn to the question of additional tax payable by way of a penalty under s 207 of the Act and interest payable under s 207A. Section 209 of the Act at the relevant time provided:
“209(1).... Any tax unpaid may be sued for and recovered in any Court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name.
(2)In subsection (1) ‘tax’ includes interest under section 170AA or 207A and additional tax under section 207 or Part VII.”
Subsection (2) extends the definition of “tax” contained in s 6, but only for the purposes of s 209. It seems reasonably clear that Regulation 67 is designed to complement s 209 and that the action for the recovery of tax referred to in that regulation refers to the recovery authorised by s 209. It follows that “tax” for the purpose of Regulation 67 includes the additional tax payable under s 207 and interest payable under subsection 207A.
The only other component contributing to the final figure claimed by the appellant related to payments and credits shown on the Regulation 67 certificate. They are plainly reflected in the amount certified to be due at the date of the certificate referred to in paragraph (e) of Regulation 67.
We therefore reach the position that, of the various components of the amount claimed by the Commissioner on summary judgment, there was “conclusive” evidence of the liability for the amounts stated in the respective assessments. In the absence of contrary evidence, there was “sufficient evidence” that tax in the form of provisional tax, additional tax under s 207 and interest under s 207A was payable by the respondent. There was also “sufficient evidence” of payments made and other credits given.
There is no doubt that in respect of debits and credits shown in the Regulation 67 certificate, other than those the subject of s 177 certificates, the Magistrate had power to appoint an expert to investigate them and to provide a report thereon to the Court, which the Court could subsequently adopt. However, the power to appoint an expert under s 29 of the Magistrates Court Act, particularly when the Court acts on its own motion and without the request of either party, is a power which should be exercised sparingly, and only when it is necessary to assist in the resolution of a genuine factual dispute. Section 29(4) imposes a cost burden for the appointment of such an expert on the parties. In this case, not only was there conclusive evidence of some portion of the components of the claim, but in the absence of contrary evidence, there was also sufficient evidence of the balance of the components.
I must accept the undisputed assertion in the affidavit filed on behalf of the appellant that the only documents presented to the Court by the respondent on the hearing of the application were documents which went to another issue and not to this one. There was no evidence before the Court to dispute or to raise doubt about the contents of the Regulation 67 certificate. It was therefore “sufficient evidence” of the facts stated in the certificate on which the Magistrate could properly rely. There was no need for the appointment of an expert at all.
This may have been seen as a convenient way of dealing with a perceived problem raised by an unrepresented defendant. However, the magistrate should have appreciated the evidentiary force of the documents before him. It would have been better if he had explained to the respondent the need, if he were to succeed, to place before the Court, preferably by way of sworn evidence, material which would properly call in question the contents of the Regulation 67 certificate other than those parts covered by the s 177 certificate. Even then, it might be explained, such material could only raise questions concerning the imposition of the provisional tax, the penalty tax for late payment, the interest and any payments made by the respondent. There was no acceptable material presented to call in question those items. There was no justification for the appointment of an expert, and there would appear to be little justification for denying the claim for summary judgment.
The appeal must be allowed, and the order appointing the expert must be set aside. The matter must be remitted to the Magistrates Court of South Australia to hear and determine the appellant’s application for summary judgment according to law.
When the appeal was first called on for hearing, the respondent, through his counsel, indicated that he did not wish to be heard on the appeal and did not oppose the order sought by the appellant, save as to costs. The appellant seeks an order for costs of the appeal against the respondent. The respondent resists that order on the basis that the order made by the Magistrate was not made at the request of the respondent, and that the Magistrate appears to have acted of his own volition.
On the other hand, as was pointed out by counsel for the appellant, the evidence before me shows that the action has a long history in the Magistrates Court, where on a number of occasions the respondent has sought to avoid his liability and to go behind the assessments without pursuing the avenues open to him under the Act. For some time he had been an active participant in the Magistrates Court proceedings for that purpose. On other occasions he had not appeared and the matter had been adjourned for his benefit. That is not relevant to the costs of this appeal, but it does provide useful background to the attitude taken by the respondent before the Magistrate on the hearing of the application for summary judgment.
The respondent continued to dispute the appellant’s claim on what appear now to be specious grounds. He was disputing his liability and the amounts claimed. Although he did not request the appointment of an expert to resolve the matter, it was because of his conduct that the Magistrate felt constrained to take the steps he did, even though, in the circumstances, he had no power to do so. The appeal might, perhaps, have been avoided if the appellant had sought the respondent’s cooperation to have the order set aside. However, there is nothing in the history of the matter which would suggest that such cooperation would have been forthcoming. I cannot criticise the appellant for not taking that step. The only alternative was to proceed with the appeal in which the appellant has now been successful. In those circumstances it is appropriate that my discretion be exercised in favour of the appellant and I order that the respondent pay the appellant’s costs of the appeal.

[2000] SASC 109

28 April 2000