Deputy Commissioner of Taxation v Zeqaj
[2019] FCCA 2740
•26 September 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DEPUTY COMMISSIONER OF TAXATION v ZEQAJ | [2019] FCCA 2740 |
| Catchwords: BANKRUPTCY – Sequestration order sought – taxation debt as assessed by the Commissioner of Taxation – respondent filed notice of grounds of opposition to the sequestration petition – sequestration order allowed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss 43, 52 Bankruptcy Regulations 1966 (Cth), rr 16.01, 16.06 Commonwealth of Australia Constitution Act (The Constitution) 1901, ss 51(xi), 51(ii) Income Tax Assessment Act 1977 (Cth), s 175 Judiciary Act 1903 (Cth), s 39B Magna Carta Hiberniae, 12 November 1215 Taxation Administration Act 1953 (Cth), Part IVC, ss 14ZZN, 14ZZR, 14ZZ |
| Cases cited: Cain v Whyte (1933) 48 CLR 639 Clyne v Deputy Commissioner of Taxation (1983) 48 ALR 545 Deputy Commissioner of Taxation v Visho Zeqaj (2019) VSC 194 Dietrich v The Queen [1992] HCA 57 Frangieh v DCT [2018] NSWCA 337 Momcilovic v The Queen (2011) 245 CLR 1 Nicholas v The Queen (1998) 193 CLR 173 Northern Territory v Mengel (1995) 185 CLR 307 Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28 Re Ditforth (1988) 76 FLR 136 Rosa Caporale v Commissioner of Taxation (2013) FCA 473 Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212 |
| Applicant: | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | VISHO ZEQAJ |
| File Number: | MLG 568 of 2018 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 15 July 2019 |
| Date of Last Submission: | 15 July 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 26 September 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms Shand |
| Solicitors for the Applicant: | Australian Government Solicitor |
| The Respondent appeared In Person. |
ORDERS
That the estate of Visho Zeqaj be sequestrated.
The petitioning creditor costs be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
AND THE COURT NOTES THAT:
The date of the act of bankruptcy is 22 December 2017.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 568 of 2018
| DEPUTY COMMISSIONER OF TAXATION |
Applicant
And
| VISHO ZEQAJ |
Respondent
REASONS FOR JUDGMENT
The applicant seeks orders sequestrating the respondent pursuant to section 43 of the Bankruptcy Act 1966 (Cth). The applicant relies upon a final judgment against the respondent handed down in the Supreme Court of Victoria on 13 July 2016 in the sum of $587,405.43. After taking account of interest and costs orders, the sum now exceeds $600,000. The judgment debt is primarily a taxation debt arising from taxation assessments issued by the Commissioner of Taxation.
Background
The taxation assessment, which is the basis of the present debt, was the subject of an objection by the respondent. Following this objection, amended taxation assessments were issued on 21 July 2015. The respondent then lodged an application for review of the objection decision by the Administrative Appeals Tribunal (‘AAT’) under Part ivc of the Taxation Administration Act. The review was heard by the AAT on 15 February 2016. The AAT gave a written decision on 6 April 2016. The decision of the AAT has not been the subject of an appeal by the respondent to the Federal Court of Australia (‘Federal Court’), which is available under s.14zzn of the Taxation Administration Act 1953 (Cth).
An appeal pursuant to section 14zzn must be lodged within 60 days of the decision. More than two years have now passed since that decision. Even if an appeal were lodged, it would not affect the recoverability of the amount payable: see section 14zzr of the Taxation Administration Act.
Proceedings to enforce the taxation debt
The Deputy Commissioner of Taxation brought proceedings to enforce the taxation debt in the Supreme Court of Victoria. A default judgment was obtained. A Bankruptcy Notice was served on the respondent, who did not comply with the Notice, and the applicant issued the present proceedings seeking the sequestration order. The bankruptcy proceedings in this court were adjourned for a period to allow the respondent to pursue an application in the Supreme Court of Victoria (‘Supreme Court’) in order to attempt to set aside the judgment that had been entered against him.
The application by the respondent in the Supreme Court (attempting to set aside the judgment against him for the taxation debt) was heard by Mukhtar AsJ on 21 March 2019, who gave judgment on 27 March: see Deputy Commissioner of Taxation v Visho Zeqaj [2019] VSC 194 (file number SCI 2015 04511). The respondent was entirely unsuccessful in attempting to have the orders of the Supreme Court set aside.
As with the proceedings before this court, the respondent filed extensive affidavit material in the Supreme Court, as is outlined at paragraphs 14 and onwards of Mukhtar AsJ’s judgment.
In the Supreme Court proceedings, Mukhtar AsJ concluded that the judgment had been ‘entered regularly’ and rejected the respondent’s submission that he had not been personally served with the writ (the respondent had claimed that he had refused to accept service and disputed the process server’s claims that the documents were left for him). Mukhtar AsJ identified that, pursuant to section 175 of the Income Tax Assessment Act 1977 (Cth), an assessment is ‘conclusive evidence that the assessment was properly made’ (save for proceedings pursuant to Part ivc of the Taxation Administration Act). The respondent, therefore, had no defence to the claim.
Applicant’s Case
The applicant seeks a sequestration order based upon the respondent’s act of bankruptcy in failing to pay the amount set out in the Bankruptcy Notice. The applicant has complied with the various formalities required under the Act and that the debt remains unsatisfied.
Respondent’s Grounds of Opposition
The specific grounds of opposition relied upon by the respondent are set out in the notice filed on 16 May 2018 as follows:
1. There were alternative methods of serving documents as listed in Regulation 16.01(1)(2) of the Bankruptcy Regulation Act 1996 (Cth), none were used.
2. The Australian Tax Office violated the taxpayers charter.
3. The Gov/ATO has breached the Constitution a number of times.
4. Schedule 1, section 260-265 (Commissioner may collect amounts from third party of the Taxation Administration Act 1953 (Cth)) is Constitutionally illegal as it deprives life.
5. Section 14ZZK of the Taxation Administration Act 1953 violated my most basic human right, my right to live, indirectly violating the Constitution.
6. Capital Gains Tax is not income under the Constitution.
7. The ATO has defrauded I, Visho Zeqaj as well as all Australians.
8. Losses have accumulated dur to the Gov/ATO malicious conduct.
9. The GOV/ATO owes I, Visho Zeqaj money, there conduct has put the system in disrepute and has gone against the public interest.
10. I invoke section 39B(1A)(b) of the Judiciary Act1903 (Cth) to put an end to the malicious conduct and the violation of the Constitution by GOV/ATO, in which only the Federal Court of Australia and High Court of Australia has jurisdiction to hear this matter.
11. The Victorian Supreme Court order made at Melbourne against me dated 13 July 2016 is dismissed as void and of no effect as I was not notified by the GOV/ATO nor the court of any hearing date. The Victorian Supreme Court never had the jurisdiction to begin with to make orders in relation to my Constitution matter.
In addition to the specific grounds raised by the respondent, there is a large number of other matters set out in the respondent’s affidavit material. It is appropriate to address the substantive issues covered by the Notice, Affidavits and submissions. It was not argued that the respondent is solvent and able to pay his debts, as and when they fall due (indeed such an argument would be contrary to the argument that he put that he was unable to live due to the debt).
I am mindful that, whilst the respondent has framed his arguments as direct attacks upon the underlying taxation assessments and judgment debt, in bankruptcy proceedings it is appropriate to consider the issues through the prism of section 52 of the Bankruptcy Act which provides the court with a discretion to make a sequestration order, and the court will ordinarily do unless there is ‘other sufficient cause’: see generally Re Ditforth (1988) 76 FLR 136. The circumstances that may constitute ‘other sufficient cause’ are not a closed category, although the important considerations were stated by the High Court of Australia in Cain v Whyte (1933) 48 CLR 639 at 646:
… it is for the debtor to show some cause overriding the interest of the public in the stopping of unremunerative trading, and the rights of individual creditors who are unable to get their debt paid to them as they become due. Something has to be put before the court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order.’
At least whilst the respondent pursued proceedings in the Supreme Court, there was sufficient cause to delay the sequestration proceedings as occurred in this case.
The bankruptcy court may also look behind a judgment debt, if there are substantial reasons for doubting whether the debt is just and truly owing. In Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212 the Barwick CJ said (at 224-5):
The Court's discretion […] is a discretion to accept the judgment as satisfactory proof of debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
Most recently, in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, the High Court pointed out that:
54. In point of principle, scrutiny by a Bankruptcy Court of the debt propounded by a judgment creditor seeking a sequestration order in no sense involves an attempt to impeach the judgment. … a Bankruptcy Court is concerned with whether the debt on which it is based is truly a basis for the making of a sequestration order. A Bankruptcy Court has a statutory duty to be "satisfied" as to the existence of the petitioning creditor's debt; a creditor should not be able to make a person bankrupt on a debt which is not provable.
It is in this context that the court must consider whether to make a sequestration order.
Service
In both ground 1 and the affidavit of 16 May 2018 the respondent complains that he was not appropriately served, alleging that there were attempts to “maliciously serve documents” on him in a public workplace. He relies upon regulation 16.01 of the Bankruptcy Regulations 1966 (Cth) which provide:
16.01 [Service of documents] (1) Unless the contrary intention appears, where a document is required or permitted by the Act or these regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
(a)sent by post, or by a courier service, to the person at his or her last-known address; or
(b)left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c)left, in an envelope or similar packaging marked with the person’s name, at the last-known address of the person; or
(d)personally delivered to the person; or
(e)sent by facsimile transmission or another mode of electronic transmission:
(i)to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii)in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(f)in the case of service in accordance with paragraph (1)(a) or (b) – when the document would, in the due course of post or business practice, as the case requires, be delivered to the person’s address or document exchange facility; and
(g)in the case of service in accordance with paragraph (1)(c), (d) or (e) – when the document is left, delivered or transmitted, as the case requires.
It is apparent that the respondent takes great umbrage at having been served in his workplace when alternative methods of service were available under the regulations. The alternative methods of service are not required to be used by a person serving a document: despite the regulations, bankruptcy documents are still commonly served personally to ensure that there is no doubt that the debtor is aware of the documents. There is nothing to prevent a person being served in their workplace, as discussed in some detail by Mukhtar AsJ in the Supreme Court proceedings.
I am not persuaded that this argument provides any basis for showing that the current proceedings are defective or invalid or that the respondent should not be able to proceed with the application.
The respondent also attempts to re-agitate his complaints about service with respect to the Supreme Court proceedings that were dealt with by Mukhtar AsJ. There is nothing that indicates any proper basis for considering that Mukhtar AsJ did not reach the correct conclusion.
In his Affidavit filed on 28 June 2019 the respondent again complains about the method by which he was served. He complains that he did not accept documents at work. However, it is not a matter for the respondent to determine whether or not he wishes to accept documents when he is being served. Service of documents does not rely upon the consent of the person being served. The availability of a method of service by post does not require service by post to be undertaken.
Traditionally, personal service has been the preferred method of service so as to ensure that documents are brought to a person’s attention. There is much common sense in this approach.
To the extent that the debtor is seeking to challenge the nature of service with respect to the hearing before the Supreme Court, I reject these claims on two bases: firstly, the issues were dealt with in the Supreme Court and, secondly, regardless of how service was effected, the proceedings were brought to the notice of the respondent, who was heard at length in the Supreme Court. The respondent also challenges personal service in these proceedings on the basis that service by post was available, this argument must also be rejected for the reasons discussed above.
Jurisdiction
In his first affidavit of 16 May 2018, the respondent refers to the powers of the Federal Court of Australia under section 39b of the Judiciary Act1903. These provisions are not applicable to cases pending before this court as they apply to the Federal Court of Australia, rather than the Federal Circuit Court of Australia. To the extent there are claims that could be litigated in the Federal Court (relying upon the jurisdiction in this section) they could be raised in this court in order to attempt to show cause why a sequestration order should not be made.
In his affidavit of 25 July 2018 (at paragraph 6) the respondent also raises a claim that the Federal Circuit Court of Australia does not have jurisdiction to hear the matter, relying upon his arguments that there is a constitutional issue. Firstly, I am not persuaded that there is an arguable constitutional issue. Secondly, a constitutional issue can be heard and determined in this court (although commonly a serious constitutional issue would be transferred to the Federal Court of Australia).
The Federal Circuit Court has jurisdiction under the Bankruptcy Act to determine whether or not to make a sequestration order, and has such accrued jurisdiction as is necessary to carry out that task. I am not persuaded that there is any lack of jurisdiction to hear and determine this matter, nor that in this case it is appropriate to transfer the proceedings to the Federal Court.
Constitutionality
The applicant raises a number of arguments that appear to attack the constitutional validity of the taxation legislation in grounds 3, 4 and 6. In his affidavit of 16 May 2018 (from paragraph 70 onwards) the respondent argues that Capital Gains Tax (‘CGT’) is unconstitutional. The respondent refers to section 51(xi) of the Australian Constitution, which provides for the Federal Government’s legislative power with respect to currency, coinage, and legal tender. It is difficult to understand how this section of the Constitution is relevant to the power of the Commonwealth to pass taxation legislation directed at imposing taxes upon capital gains.
The constitutional power to make laws with respect to taxation is explicitly stated in section 51(ii) which relevantly provides:
51. The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
…
(ii) taxation; but so as not to discriminate between States or parts of States;
…
In paragraph 5 of his affidavit of 16 May 2018 , the respondent states in simplistic terms that the Commissioner of Taxation is not recognised by the Constitution. I do not accept that the Australian Tax Office (‘ATO’) is not established appropriately by legislation the Government has power to pass under the Constitution. There is no requirement for the statutory position of Commissioner of Taxation to be established in the Constitution. Such a statutory position can be, and has been, established by legislation. There is no detail to this argument and it is obviously untenable.
The substance of the respondent’s claim with respect to CGT is his objection to the policy basis upon which the tax is assessed. Complaints as to the appropriateness of legislative policy must be taken up with the Parliament, not the courts.
The respondent also argued that there was some invalidity in the way that the CGT was structured. This appeared to be based upon his view that, as a matter of policy, the tax upon capital gains should take into account the effects of inflation. He also reiterated that gifts are not, on his argument, CGT events. Policy determining the provision of the legislation are for the parliament, and not the courts.
None of these submissions shows a Constitutional issue in this case.
The respondent makes further argument in relation to the Constitution in paragraphs [14] – [18], saying:
14. I uphold my Constitutional right to test the meaning and application of the Australian constitution. Clearly the government thinks so as shown on Annexure D2.
16. “The Australian Constitution has properly been described as ‘the birth certificate of a nation’. It also provides the basic rules for the government of Australia. Indeed, the Constitution is the fundamental law of Australia binding everbody including the Commonwealth Parliament and the Parliament of each State. Accordingly, even an Act passed by a Parliament is invalid if it is contrary to the Constitution.”
17. The Constitution supersedes all laws and cannot be ignored by any law, tribunal or court.
18. We also have rights in the Constitution, other rights are implied, I will further add to those rights below.
The respondent also takes issue with the administrative powers of the Commissioner for the collection of taxation from third parties, his reasons are detailed in paragraphs [26] – [30], and are contrary to a statutory mandate for an administrative collection process. He argues:
26. What is the bank protected from, handing over all my money or depriving me of life or both.
27. I firmly believe in its current state SCHEDULE 1, SECTION 260 -5 – COMMISSIONER MAY COLLET AMOUNTS FROM THIRD PARTY of the TAXATION ADMINISTRATION ACT 1953 also violates the separation of powers to prevent the conflict of interest, but more importantly deprives one of life. I believe that the Constitution only allows a court that is independent fair and impartial without a conflict of interest to administer a judgment and the power to carry out that judgment, not the Government which has the ATO act maliciously, and is the governments revenue maker, because of the severe conflict of interest renders SCHEDULE 1, SECTION 260 -5, Constitutionally invalid.
28. Of course the ATO is not perfect and out of all the apples that work for the ATO some are rotten, that is understood. What is not understood is how it can continue once it has been pointed out unless there is a conspiracy […].
29. Is there a massive or sever conflict of interest involving the governments law, section 14ZZK of the Taxation Administration Act 1953, Capital Gains Tax and the ATO. Let’s test this.
30. Who is the only one that stands to benefit when Governments revenue maker the ATO, has the power of judge jury and executioner based on belief or say so. The Government. Do courts have the power to act without evidence purely on belief without some element of fact, I think not. I hope not. YES clearly there is a conflict of interest, obviously by design.
Nothing in this material shows that administrative remedies are unconstitutional.
At paragraph [31] of the same affidavit the respondent argues that he was entitled to a trial by jury, relying upon the provisions of the Constitution that relate to trials on indictment for offences. The relevant provision of the constitution only provides:
80. [Trial by jury] The trial on indictment of any offence against any law of the Commonwealth shall be by jury, and every such trial shall be held in the State where the offence was committed, and if the offence was not committed within any State the trial shall be held at such place or places as the Parliament prescribes.
The pursuit through civil proceedings of tax debts due and owing to the Commonwealth are not trials ‘on indictment of any offence’ and are therefore not within the ambit of section 80 of the Constitution.
The respondent argued that he ought not to have borne the onus in any proceedings before the AAT despite the legislative provisions of the taxation legislation. Contrary to the respondent’s claims at paragraph [32] of his affidavit there is nothing unconstitutional about reversing the onus of proof in proceedings. The power of the legislature to reverse the onus of proof has even been accepted in a number of cases involving offences: see for example, Nicholas v The Queen (1998) 193 CLR 173 and Momcilovic v The Queen (2011) 245 CLR 1.
Human Rights Claims
Ground 5 raises Human Rights claims. In his affidavit filed on 15 May 2018 after paragraph 11 is a heading ‘Human Right to Live, Reversing the Onus and Test,’ under which the respondent claims that in some way the imposition of taxation under the Australian taxation system arbitrarily deprived him of life, relying upon article 9 of the Victorian Charter of Human Rights and Responsibilities Act. Article 9 provides:
9. Right to life
Every person has the right to life and has the right not to be arbitrarily deprived of life.
The respondent also raises the argument about the onus of proof in the context of his argument about human rights. The right to a presumption of innocence in criminal prosecutions is recognised in key international instruments, such as the International Covenant on Civil and Political Rights (ICCPR) which states that ‘Everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law’ and a the same provision which appears in article 11.1 of the Universal Declaration of Human Rights.
Such arguments are not tenable in this case for a number of reasons. Firstly, it is an argument that applies to criminal law proceedings and these are civil proceedings; secondly, there are not such protections in Commonwealth legislation; and thirdly, the Victorian parliament cannot limit the power of the Commonwealth in any event, with respect to taxation.
I do not accept that any issues as to Human Rights rise in this case.
Magna Carta
At paragraph 41 of the affidavit filed on 15 May 2018 the respondent turned his attention to the Magna Carta and in particular, chapters 39 and 40 which relevantly provide:
(1) ... To all free men of our kingdom we have ... granted, for us and our heirs for ever, all the liberties written out below, to have and to keep for them and their heirs, of us and our heirs:
...
(39) No free man shall be seized or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any way, nor will we proceed with force against him, or send others to do so, except by the lawful judgment of his equals or by the law of the land.
(40) To no one will we sell, to no one deny or delay right or justice.
As Justice Crennan notes in her address ‘Magna Carta, Common Law Values and the Constitution’ [2015] MelbULawRw 23; (2015) 39 Melbourne University Law Review 331:
[…] a demand for ‘common consent’ to taxation, which was dropped from the original version, foreshadowed the allocation of the power to tax to Parliament as effected judiciously enough by King Edward I. He initiated a series of reforms culminating in a ‘Model’ Parliament of 1295, a body to which he turned for the raising of taxes.
None of the provisions, either in their English translation or original from, provide a basis for concluding that the assessment of taxation under the Australian Tax Acts are either unconstitutional or, in any other form, face legal impediments. In any event, most of the provisions of the Magna Carta were repealed in the 19th century in England and do not constrict the power of the Commonwealth under the Australian Constitution. It is often overlooked that the primary purpose of the Magna Carta was to constrain the Royal Prerogative, in favour of the rule of law, and not to constrain the power of a Parliament elected by the people. Whilst it is a document of enormous historical importance, it has little legal relevance today in Australia.
The remainder of the Constitutional arguments set out by the applicant in paragraphs 47 onwards of the affidavit are similarly unfounded. The respondent makes mention of historical policies regarding capital and corporal punishment in Australia however, neither corporal nor capital punishment is involved in this case.
Maladministration Claims (and Taxpayer Charter issues)
Grounds 7 to 10 make claims of maladministration. In the affidavit of 27 May 2019, the respondent makes a claim that there has been conscious maladministration by the ATO. The claim commences with an argument that section 14zzk of the Taxation Administration Act is unconstitutional, however, it is difficult to see why this could be said to be the case. In substance, this is effectively a complaint about the outcome of the decision made to assess him to pay tax, which was affirmed by the AAT.
In Northern Territory v Mengel (1995) 185 CLR 307 the High Court of Australia considered the relevant matters that would need to be proved in a case of misfeasance in public office, identifying:
a)An invalid or unlawful act;
b)Performed by public officer;
c)Knowingly breaching the law (or recklessly indifferent);
d)An intention to cause harm or knowing of the probability of harm or conscious and reckless indifference to the risk of foreseeable harm
A useful example of the application of these tests in a case concerning the ATO appears in the judgment in Frangieh v DCT [2018] NSWCA 337. It does not appear that in this case any officer of the ATO performed acts that are invalid or unlawful and relevant to the actual assessment that issued.
Victoria police
From paragraph 9 to 11 of the affidavit filed on 15 May 2018, the respondent alleges that there was impropriety by the ATO in having received information from Victoria Police, which alleged that he had been dealing in marijuana. However, the ATO did not assess him to pay tax on such a simplistic basis. The assessment was based upon the assets that he has and an appraisal of the amount of income available to him.
The respondent puts a case forward on the basis that the ATO ought not to have been able to act upon allegations made by Victoria Police regarding claims of involvement with criminal activities with respect to drugs (of which he was not convicted).
The respondent relies upon the decision of Victorian Civil and Administrative Tribunal (‘VCAT’) which awarded him $1,000 in compensation for a complaint concerning statements made by Victoria Police in relation to his alleged conduct.
This does not appear to me to provide a basis for challenging the taxation assessment. Even if the matter that prompted the ATO to consider the respondent’s financial affairs (and in turn led to a taxation assessment), was information that ought not to have been provided by the Victoria Police, it is not that the ATO were prompted to inquire into the respondent that is at issue. The issue is whether or not the assessment that flowed from their inquiries was sustainable and the AAT concluded that it was.
The assessment was not ultimately based on whether or not the respondent had engaged in illegal activity. Rather, the ATO made an assessment based on an audit of the respondent’s assets compared with his declared receipts of moneys. That the ATO’s attention or interest in the applicant may have been sparked by Police allegations does not alter the fact that the assessment was not based upon those allegations, but an analysis of his wealth compared to his explanations of its source.
As is clear from the AAT decision that there were sums of which the respondent was not able to show the provenance, resulting in the tax assessment. Whilst the respondent uses words that are particularly inflammatory, such as ‘false’, ‘malicious’ and ‘criminal’, nothing in these paragraphs indicates a basis for concluding these allegations are arguably made out or that there is a prima facie case.
The fact that section 14ZZK of the Taxation Administration Act reverses the onus once an assessment is issued, so that the taxpayer bears the onus of proof, neither makes it unconstitutional nor the ATOs reliance upon it some form of misfeasance or maladministration.
Taxpayers Charter
The respondent also raised the claim that the Taxation Office has violated the Taxpayers’ Charter. Even if there were violations of the charter, this does not seem to affect the assessment issued by the Tax Office, as affirmed by the AAT.
The key difficulty for the respondent with respect to his arguments based upon the Taxpayers’ Charter is that the Charter does not take effect as a legally enforceable document. The role of the Charter is discussed in detail in the 2016 report by the Inspector-General of Taxation ‘Review into the Taxpayers’ Charter and Taxpayer Protections’ (for a history of the roles of such charters see generally James, S., Murphy, K., and Reinhart, M., ‘The Taxpayers' Charter: A case study in tax administration’ (2004) 7 Journal of Australian Taxation 336). As a result, even if there is breach of the charter it does not result in a remedy, unless the conduct is a breach of a legislative requirement.
In the circumstances of this case, I am not persuaded that the respondent has been able to set out facts and circumstances to show an arguable case of misfeasance or maladministration on the part of the ATO which may in some way undermine the judgment or provide a claim for damages that could be set off against that judgment. It does not appear that the Tax Payers Charter affects the capacity of the ATO to make an assessment despite the respondent’s claims in ground 2.
Capital Gains Tax
At paragraph 133 of the Affidavit of 16 May 2018 the respondent makes allegations that the ATO has defrauded him (as well as all Australians) based upon his claims with respect to the policy underpinnings of the CGT scheme. The respondent explains (at paragraph 96 of his affidavit):
96. The Australian Bureau of Statistics (ABS) web page, calculates its own CPI, is that fair as it would not be the same as if I had calculated my own CPI, is there a conflict of interest, how can capital gains tax apply with CPI when the system has no idea what I am purchasing on average meaning inflation could never be applied fairly to CGT and would also rule out any gain. One can never calculate ones income using CPI or inflation accurately like in one’s tax returns the total amount earned, exact donations given, total cost of work related expenses tools and or other. These are all exact figures relating to the individual. CGT relating to CPI is nothing exact in fact CPI is an inaccurate average of inaccurate items as it is not based on what I have purchased as an individual.
As appears in his 16 May 2018 affidavit, he believes that CGT should only be assessed upon a capital gain calculated after having regard to inflation as it affects him personally rather than on the gross capital gain achieved upon a CGT event (most commonly a sale of the asset). Whilst there is long and detailed argument on this issue, it is ultimately a policy question for government as to how to calculate the CGT, and not one for the courts.
The fact that the government has taken a different policy position to that preferred by the respondent does not make the legislation invalid or the CGT in some way assailable for constitutional or other legal reasons.
From paragraph 154 onwards in the same affidavit there appears to be a claim by the respondent for damages for losses he says he has suffered as a result of conduct of the ATO. There appears to be no basis in law for such claims.
Representation
At paragraph 34 to 40 of his affidavit of 15 May 2018 the respondent also argues that he ought to have been given legal representation at public expense, relying upon Dietrich v The Queen [1992] HCA 57. This misconceives the nature of the decision in Dietrich’s Case. These are not proceedings for criminal offences, but civil debt proceedings based upon assessments of taxation, payable as a proportion of the moneys that the respondent held. Whilst there may be a legal requirement to ensure a person is legally represented in certain complex criminal proceedings to ensure a fair trial, this does not appear to me to have any applicability to taxation assessments and disputes as to the appropriateness of tax assessments.
Merits of the underlying decisions and legislative policy
In the respondent’s written argument, he submits that the assessment was invalid and that this court ought to make orders quashing the assessment and prevent the Commissioner from taking any further action against him. He also says that he has new evidence of substantial changes that have occurred since the previous hearings, and therefore submits that the previous decisions are no longer valid.
In oral submissions, the respondent argued that he has no debt to the ATO as the assessment was based upon gifts that he received from family and that he is not obliged to show evidence to the ATO of where the money came from, particularly with respect to gifts said to have occurred more than five years ago.
He also argued that the rental income paid into his account was paid by mistake and ought to have been paid to his mother and that the AAT ought to have accepted that claim. He was still unable to provide any copy of his mother’s tax return showing that she had paid the tax on that sum as he claimed.
None of this material appears to have been unavailable at the time of the AAT hearing, nor does the material appear to raise any real argument that the tax assessment is assailable.
Previous decisions
Ground 11 attacks the previous decision of the AAT and Supreme Court of Victoria. The respondent sets out complaints about the way in which the AAT decision and the Supreme Court judgment are framed, however complaints in this regard would be properly addressed to the relevant jurisdiction that hears appeals from the respective decisions. These complaints do not appear to me to be well founded nor undermine the substantive decisions that were made.
Similarly, complaints about how the ATO has interacted with the respondent, in reliance upon the ATO Charter, do not appear to undermine the effect of the judgment or AAT decision, nor the assessment itself.
Conclusion
Ultimately, I am not persuaded that any of the grounds relied upon by the respondent have been made out.
In this case, I am not persuaded that the respondent has matters upon which it is arguable that he has a claim against the ATO that would offset the debt either at law or otherwise. Nor am I satisfied that the respondent’s claims with respect to the method of assessment and the decision of the AAT are such as to justify looking behind the assessment. Even if I am in error in concluding that the respondent has no arguable basis for challenging the tax assessment, the effect of the decision of the High Court in Clyne v Deputy Commissioner of Taxation (1983) 48 ALR 545 at 547 is that a notice of assessment under the Income Tax Assessment Act is conclusive and, therefore, a dispute as to the assessment of taxation does not affect the capacity of a Commissioner of Taxation to proceed by way of bankruptcy proceedings. This reasoning was applied by Robertson J in Rosa Caporale v Commissioner of Taxation [2013] FCA 473.
If the debtor had commenced proceedings in the Federal Court to appeal from the AAT decision in a timely manner, it may have been appropriate to adjourn the bankruptcy proceedings to allow such an appeal to be determined, just as in these proceedings the matter was adjourned to allow the respondent to pursue his application to set aside the default judgment in the Supreme Court. The respondent has not sought to pursue an appeal from the AAT to the Federal Court.
In all of the circumstances, I am therefore satisfied that the Deputy Commissioner of Taxation is owed in excess of $667,000.00 which forms the basis for the creditors petition and the bankruptcy notice. I am satisfied that the bankruptcy notice was served on the respondent and that he has failed to comply with the bankruptcy notice. He has therefore committed an act of bankruptcy. The debtor has not demonstrated that he is otherwise solvent in the sense of being able to pay his debts as and when they fall due. As a result, the Deputy Commissioner of Taxation has a prima facie right to a Sequestration Order.
I am not persuaded that the matters raised by the debtor show a sufficient cause, for the purposes of section 52 of the Bankruptcy Act, such as to make it appropriate for the court to refuse to make a Sequestration Order. It was not argued that the other formal matters were not complied with and I accept that the applicant has met the other formal requirements for a sequestration order.
I therefore make a sequestration order.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Associate:
Date: 26 September 2019