Gasparin v Commissioner of Taxation

1057 1 9%

JUDGMENT NO. .m,esmemm-wmemmm

------------

IN THE FEDERAL COURT OF AUSTRALIA

)

p1	No. QG 176 of 1 9 9 4

GENERAL DIVISION

)

BETWEEN: PETER NOEL BURROWS

AND:	DEPUTY COMMISSIONER OF TAXATION

CORAM

SPENDER J

PLACE

: BRISBANE

DATE

--	2 DECEMBER 1 9 9 4

MINUTES OF ORDER

The appeal and application for an order of review be dismissed, wlth costs.

Note

--	Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

)

QUEENSLAND DISTRICT REGISTRY

)	No. QG 1 7 6 of 1 9 9 4

GENERAL DIVISION

)

BETWEEN: PETER NOEL BURROWS

AND:

CORAM :

SPENDER J

PLACE: BRISBANE

DATE:	2 ~ecember	1 9 9 4
REASONS FOR JUDGMENT

Thls is an appeal to the Federal Court under S. 14V of the Taxatlon Admlnlstratlon Act 1 9 5 3 ("the Act") against an order of the Deputy Commissioner of Taxation made pursuant to S. 14S(1) of the Act. Section 14S(1) empowers the Cornmissloner, by order in accordance with the prescribed form, to prohiblt the departure of a person from Australia to a forelgn country where:

" (a) a person is subject to a tax liablllty; and

(b)	the Commissioner believes on reasonable grounds that it is desirable to do so for the purpose of ensuring that the person does not depart from Australia for a forelgn country without:

(i) wholly discharging the tax liability; or

(il) maklng arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged. "

The term "tax liability", by S. 2 of that Act, means a liability to the Commonwealth arising under or by virtue of a taxatlon law.

By an application filed on 1 December 1994 - that is to say, yesterday - Peter Noel Burrows appealed, pursuant to S. 14V of the Act, and also in that application sought an order of review pursuant to the Adminlstratlve Decisions (Judicial Revlew) Act 1977 ("the ADJR Act"). The application sought revlew or appeal pursuant to S. 14V of the Act concerning the departure order which was made on 25 November 1994 against Mr Burrows.

As stated in the application, Mr Burrows' grounds are that, in the circumstances that apply to him, requiring him to remain in Australia would not bring into effect the purpose of wholly discharging the applicant's tax liability nor making arrangements for that liability to be wholly discharged, and that, in any event, there could be no reasonable grounds for it being desirable to ensure the applicant did not depart Australia. In the application it was said on his behalf that he wished to travel overseas to fulfil a job engagement, and his being prevented from doing so could not provide reasonable grounds for it being desirable to give effect to the purpose in S. 14S(l)(b).

It was said further that the decision was unreasonable, and took into account irrelevant considerations and failed to take lnto account relevant considerations, and that the applicant was denied natural lustice. The applicant sought an order revoking the prohibition order, an order abridging the tune for service of his application, and an

order dispensing with whatever requirements of the Rules would prevent the hearing of the appeal forthwith. Reliance on the ADJR Act was essentially directed at the possibility that, on an interlocutory basis, the court might make an order the effect of which was to permit the applicant to depart Australia pending final determination of his application.

The functlon of S. 14s of the Act has recently been considered by a Full Court of the Federal Court in Poletti v DeDUtY Federal Commissioner of Taxation, reported at 94 ATC 4639 at 4640. The Full Court referred to a number of cases in whlch the function of that section has been considered. As that case makes plain, the hearing of an appeal under s . 14V is not a hearing de novo. The court said at 4643:

" The evident purpose of the right of appeal is to enable departure prohibition orders which the Commissioner may make, to be set aside where the person against whom the order is made is not subject to a tax liability or where the Commissioner's bellef (to which para. (b) of 14S(1) is directed) 1s not held bond fide or is not based on reasonable grounds. "

The Commissioner bears no onus to establish before the court any of the elements of S. 145(1) in an appeal of this kind. The three principal questions to be addressed are: first, whether the person is subject to a tax liability; secondly, whether the Commissioner held the belief of which the subsection speaks; and thirdly, whether reasonable grounds existed for the formation of that belief.

The Full Court said at 4644:

" In our opinlon an appeal under S. 14V is an appeal in

which the person aggrieved must establish that the

order was wrongly made. "

The facts in the present case are that Mr Burrows, who resides in one of a duplex of apartments at 2 Mount Street, Burleigh Heads, is an Australian citizen born on 29 October 1950. The Commissioner has issued assessments for the years 1988, 1989, 1990 and 1991 whlch total $549,768.79. The schedule of the amounts totalling that sum are set out in the departure prohibition order which I set out in full:

" Sub-regulation 16(1)

FORM 3

COMMONWEALTH OF AUSTFSLIA

Taxatron Admlnrstratron Act 1953

DEPARTURE PROHIBITION ORDER

Pursuant to sub-sectron 14S(1) of the Taxatron Admlnlstratron Act 1953, I, John Rlchmond Cox, authorised officer of the delegate of the Commrssloner of Taxatron, belrevrng on reasonable grounds that it is desirable to do so for the purposes of ensuring that Peter Noel Burr-ws, berng a person sublect to the tax liability referred to rn the Schedule, does not depart from Australra for a forergn country wlthout -

(a) wholly drschargrng the tax liabrlity: or

(b)	making arrangements satisfactory to the Commrssioner for Taxatron for the tax lrabilrty to be wholly drscharged,

hereby prohibrt the departure of Peter Noel Burrows from

Australia for a forergn country.

SCHEDIJLE

(Detalls of tax llabrllty)

INCONE TAX ASSESSMENT ACT 1936

yBAR

PRIMARY TAX

ADDITIONAG TAX

1991 45259.35

TOTAL

Dated 25 November 1994

(Sgd) J. R. Cox

Author~sed Offlcer of the Delegate

of the Commlssloner of Taxatlon

The circumstance for the urgency of this application is that Mr Burrows has received an offer of employment in ~uwait by a company A1 Homaizi Foodstuffs Company. In November he travelled to Kuwait for a short period and returned to Australia. In his affidavit he says the job is to commence on 1 December 1994. It appears from the material that he received the job offer in a letter dated 19 November 1994 which he received on 22 November 1994, and on which day he acknowledged his acceptance of the offer.

The prospective employer is unaware of the departure prohibition order, and Mr Burrows says that he fears that should the employer be aware of that, he would lose his employment opportunity, and that he has made strenuous efforts in the last twelve months to obtain employment and is financially desperate to obtain this particular position.

The Commissioner, on 1 March 1994, filed a Supreme Court writ claiming $549,768.79 unpaid tax. The largest component appears to be the result of a view by the Commissioner that funds which Mr Burrows asserts were the income of a company were income of Mr Burrows. The later

years, where the amounts are not so substantial, do not seem

to suffer from the same divergent vlews.

In any event, Mr Burrows has lodged an objection to the assessment, and in respect of an amended assessment only recently issued, has given instructions for an objection to be lodged concerning that amended assessment and, should the objection process be unsuccessful, to pursue the matter in the Admlnlstrative Appeals Tribunal. Mr Burrows asserts that he is without assets. His financial position shows assets of

$3000 as at 30 June 1994 and llabilltles of $58,263.59, with a

contingent liability to the Australian Taxation Office of

$549,768.79.

It is difficult not to sympathise with Mr Burrows in his unsuccessful attempts thus far to obtain employment, and for his concern at his being prevented from pursuing his employment opportunities in Kuwait. However, in May of 1994, there were discussions between Mr Burrows and his representatives and offlcers of the Commissioner, at which he indicated it was likely he would be travelling overseas and that he was seeking employment overseas. He says in his affidavit:

" At one point I was asked to inform the respondent where I was travelling. I offered to do this. In retrospect, I probably did not adhere to the letter of that offer when going over for the lob interview in Kuwait. However I was only away for three days. I had a return ticket. "

There is a further matter whlch, whlle not directly relevant, has a bearing on the reasonableness of the belle£ by the Commissloner as to the deslrablllty of Mr Burrows' attendance in Australia, and that 1s that in April of this year Mr Burrows was charged wlth a number of charges arlsing out of two cheques; one for $1900.00 and the other for

$2500.00, the charges belng either utterlng and mis-

approprlatlon or utterlng and false pretences. The materlal is not clear. It appears that he has been committed to the Calrns Dlstrlct Court in respect of four charges. Mr Burrows says he lntends to resist the charges and that, should an attempt by hlm for a nolle prosequi ln respect of those charges be unsuccessful, he would lntend to return to Cairns to defend them when the trial is listed.

He was bailed on his own undertaking, the terms of which are before me. It appears from a perusal of that undertaking that it may be that he mlght still be required to attend at the sittlngs of the District Court which apparently commenced on 28 November 1994, although it is rlght to acknowledge that Mr Burrows' belief, based on information from his solicitor, is that his trial will not take place until the new year. It may be, nonetheless, that an indictment will be presented some time at the current sittings and that questions of bail would then be the subject of review.

As to the matters of which S. 14s speaks, Mr Burrows

says he has no assets to pay the amount allegedly owing and

that, unless he turns up in Kuwalt in the short term future, he fears loslng hls job and he has no other source of income in contemplation.

The material on behalf of the Commissioner shows that John Richmond Cox who, on 25 November, pursuant to an authorlsatlon from the Deputy Cornmissloner of Taxation to exercise on hls behalf powers delegated to him by the

Commissioner of Taxation, considered and made the departure

prohlbltlon order the subject of the present applications. The material before him appears from his affidavit. It is not in dlspute that for present purposes there is a present

liability in excess of half a million dollars owed by

Mr Burrows to the Commissioner but that, in respect of that amount, there were undetermined objections to the various assessments. Mr Cox, in his affidavit, swears:

" I also considered that it was necessa,-y that the taxpayer be available to be interviewed by the Respondent 'S offlcers particularly to clarify statements made by him in earlier interviews which appeared to conflict wlth the information which suggested that he had a shareholdlng in a company which had acqulred a large shopping centre. "

The material before him included a transcript of an interview on 6 May 1994, to which I have earller referred. In the course of that interview reference is made to two trusts: the P & J Burrows Trust, whlch was involved in a significant

transaction ln 1988, the trustee of which trust was P. Burrows

Pty Ltd; and the Burrows Family Trust, the trustee of that trust being Burshand Pty Ltd. Mr Burrows, in the course of

oral evldence on thls appllcatlon, lndlcated that the trustee had been Burshand Proprietary Limited untll some tune earller In 1994 when the trustee was changed to his present wife, Karen Burrows. My reading of the transcript does not suggest that that change was communicated to the offlcers of the Cornmissloner.

The question by no means is a small one because it appears that the Burrows Famlly Trust, through the trustee, Karen Burrows, owns the duplex in whlch Mr Burrows presently lives and is the source in part of the lncome whlch Mr Burrows said he received in the 1994 tax year.

Further, it appears, again from hls oral evidence today, that the Burrows Family Trust holds 100 of the unlts of a unit trust in a company, CMB No. 1 Pty Ltd. The trustee company, according to Mr Burrows, has no current assets, and in particular is not involved in the acqulsitlon of a shopping centre at Smithfield near Cairns. That shopping centre was the subject of an article whlch appeared in The Courier-Mail and which is referred to in the material attached to the affidavit of Mr Cox. The artlcle asserts that the Smithfield Shopping Centre near Calrns has been sold for $22m:

...	making it the second largest retail sale in north

Queensland in the past year.

Investment company CMB No. 1 Pty Ltd bought the centre from a consortium headed by Calrns Investor Lou Piccone and Jean Grace, a member of Sydney's Grace family (previously associated with Grace Brothers Department store). "

And later the article reads:

" A spokesman for the buyer, Jlm Montgomery, sald he had

great faith in the northern beaches area. "

The effect of Mr Burrows' evldence is that the newspaper report is wrong and that the company CMB No. 1 Pty Ltd, in whlch the Burrows Family Trust had unit interests, was not the purchaser of that shopping centre. He did say that Mr Montgomery had an interest, not in any strictly legal sense, in CMB No. 1 Pty Ltd, but he said that the fears of the Commissioner were baseless.

The question really before me is whether the

Commissioner had reasonable grounds for the belief of which s.

14S(1) speaks. I can understand that the departure for Kuwait

without any notification or advice to the Commissioner is a cause of concern to the Commissioner, but the fundamental question is whether the Commissioner had reasonable grounds for the belief that it was desirable to prohibit Mr Burrows departing from Australia without either wholly discharging the tax liability or making arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged.

I think it plain behind the report on which Mr Cox acted that the main basis for the recommendation for the departure prohibition order is the conflicting information and actions between his interview on 6 May and the subsequent events as they are belleved by the Commissioner to have happened , The concern is directed at two matters: flrst,

that Mr Burrows clalmed he had no assets; and secondly, that because of hls work he is required to travel overseas. The concern about assets arlses, amongst other thlngs, from the trust arrangements, and, in particular, the possiblllty of an involvement by CMB No. 1 Pty Ltd in the Smithfleld purchase.

This 1s not a case such as was referred to by Young J

in Dalco v Federal Commissioner of Taxation 19 ATR 443. His

Honour sald at 447:

" Sectlon 14T glves the clue that the matters which spark the maklng of a S. 14s order are that the recoverablllty of tax wlll be affected by the departure of the taxpayer from Australia. Accordingly, once the Commissioner is satlsfled that the tax is completely irrecoverable then it cannot be the case that collection of the tax will be affected by the taxpayer golng outside Australia and the ralson d'etre for making the order has gone so that the order must be revoked. "

In this case it was reported to Mr Cox:

" Although Mr Burrows indicated that he had no assets, this aspect was not conclusively proved or accepted by the AT0 officers. The deallngs of the taxpayer show that he was involved in trusts. In these cases, in depth revlews of the taxpayer's financial dealings are essential to determine whether:

(a)	any loan dealings occurred between the entities that would be recoverable under bankruptcy legislation;

(b) any preferential payments had occurred;

(c)	any deallngs whereby the transactions could be voided in bankruptcy. "

I t was recommended that a departure prohibltlon order issue in order to protect the revenue, based on information,

first, that Mr Burrows had left the country without advice to the Tax Office; secondly, that the taxpayer who had no funds or assets, had made a gift to his daughter, value unknown; and thirdly, the taxpayer has assets in that he is a director and shareholder of a company whlch owns a $22 million shopping centre in Cairns.

In regard to the second matter, Mr Burrows says that the amount is of a trivial kind and was a small gift made to his nine year old daughter, and he denles that the company of whlch the Burrows Family Trust 1s a unit holder is the purchaser of the Smithfield Shopping Centre. It seems to me, however, that it cannot be sald that the Commissioner did not have reasonable grounds for believing that it was desirable that Mr Burrows remain in Australia in the context of the resolution of the question of how much, if any, tax mlght be recovered from him.

It is not to the polnt that he now complains that things are not as the Commissioner might suspect. It is clearly in his own interests to lay the cards on the table and give full information concerning the matters referred to in the report by Mr C. Cumpsty attached to Mr Cox's affidavit. It seems to me that the basis for the belief of the Commissioner is reinforced by the circumstance that Mr Burrows is facing crimlnal charges in Cairns, in the sense that that circumstance might enlarge a temptation not to return to

Australia. Moreover, he proposes to be absent for two years,

a not inconsiderable perlod of tlme, and lndlcates that he then intends to return. This is not the case of a short absence overseas for a speciflc purpose but is of a long-term nature and in circumstances where there are grounds to believe that the promises to return may have some doubt attaching to them.

It is not for this court to say what it might have done. In my vlew, it cannot be said that the declsion of the Commissioner was wrongly made. That certainly has not been demonstrated on this material. The possibility exists, when the matters are fully canvassed and investigated, that the prohibition order might be varied or revoked. It is unnecessary for me to consider whether that might be an appropriate course depending on what inquiries concerning Mr Burrows' position, including his trust position, might be. I have indicated my sympathy with hls concern concerning his employment, but on this material it cannot be said that the decision of the Commissioner's delegate was wrongly made, and the appeal is dismissed.

I certify that thls and the preceding

tw lve (12) pages are a true copy of

th r reasons for judgment of the

~dnourable

Justice Spender.

2 December 1994

Counsel f o r the applicant:

L . Boccabella

instructed b y	M r Stephen Webb o f McCullough
Robertson

Counsel

f o r the respondent:

P .

Hack

i n s t r u c t e d

P .

McMorrow o f Australian

Government

Sol l c l t o r

Date o f hearlng

2 December 1994

[1994] FCA 1057

2 Dec 1994