Giacomo Caporale v Deputy Commissioner of Taxation - [2012] FMCA 1178

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GIACOMO CAPORALE v DEPUTY COMMISSIONER OF TAXATION

[2012] FMCA 1178

BANKRUPTCY – Application to set aside or extend time for compliance with Bankruptcy Notice – where notice relates to a judgment on a default assessment under the ITAA – where appeals are proposed against decisions of AAT and Federal Court – where no appeal against judgment on the debt.

Income Tax Assessment Act 1936, ss.167, 177
Bankruptcy Act 1966 (Cth), s.41(6A)
Federal Magistrates Court (Bankruptcy) Rules 2006

Applicant:

GIACOMO CAPORALE

Respondent:

DEPUTY COMMISSIONER OF TAXATION

File Number:

SYG 2571 of 2012

Judgment of:

Raphael FM

Hearing date:

19 November 2012

Date of Last Submission:

19 November 2012

Delivered at:

Sydney

Delivered on:

19 November 2012

REPRESENTATION

For the Applicant:

In person

Solicitors for the Respondent:

ATO Legal Services

ORDERS

Application dismissed.
Applicant to pay the respondent’s costs to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2571 of 2012

GIACOMO CAPORALE

Applicant

And

DEPUTY COMMISSIONER OF TAXATION

Respondent

REASONS FOR JUDGMENT

There comes before me today an application filed on 8 November 2012 to set aside a bankruptcy notice issued on 18 September 2012 being Bankruptcy Notice BN 5885/12. The bankruptcy notice seeks payment of a debt to the Commissioner for Taxation in the sum of $860,365.13. It is based upon a judgment given in the Supreme Court of New South Wales on 3 August 2012 for $851,524.17 to which interest has been added. The debtor is represented in these proceedings by his daughter, Ms Rosa Caporale, who affirmed an affidavit on 8 November 2012. Her father, the debtor, also affirmed an affidavit on 8 November 2012 which was, to all intents and purposes, a mirror image of his daughter’s. I have considered the objections of the respondent to Ms Rosa Caporale’s affidavit and have struck a large portion of it on a number of bases. I have struck paragraphs 33 to 64 on the basis that this is, in effect, a history of proceedings between the Commissioner and Mr Caporale. It is argumentative as to the results of those proceedings, and is, to my mind, irrelevant to the current proceeding before this court.
I have struck paragraphs 90 to 124 on the basis that it contains some scandalous material of allegations against the Tax Office in respect of which no evidence is produced. It is irrelevant and it is argumentative. I have struck the whole of Mr Giacomo Caporale’s affidavit because it does not advance the matter any further, it being a mirror image of his daughter’s affidavit. From the contents of the affidavits, the submissions made to me by Ms Rosa Caporale and the assistance given by Mr Green on behalf of the Commissioner I have ascertained what I believe to be the following facts.
Mr Caporale is a garage operator who appears to have been involved in a number of business activities. He did not file tax returns between 1995 and 2000. At some stage the Deputy Commissioner made a default assessment against him pursuant to the provisions of s.167 of the Income Tax Assessment Act 1936[1]. It was that default assessment that was the subject of the judgment in the Supreme Court of New South Wales.
[1] “Act”
The judgment was obtained in the Supreme Court of New South Wales pursuant to the provisions of s.177 of the Act which provides:
“[177]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.”
It would appear that at some time Mr Caporale has sought the Commissioner’s agreement for an extension of time in which to file tax returns for the relevant years. After considering the matter the Commissioner declined to grant him that extension and sought payment of the debt assessed. Mr Caporale, as he was entitled to, appealed that decision of the Commissioner to the Administrative Appeals Tribunal. The Tribunal held a hearing at which Mr Caporale was represented. It came to the conclusion that it should not require the Commissioner to grant Mr Caporale the extensions of time.
That decision of the AAT was appealed to Robertson J of the Federal Court of Australia. On or about 17 February 2012 Robertson J dismissed the application to appeal the decision of the AAT.
It seems that another application was made to the AAT by Mr Caporale essentially making the same arguments as in the original application. The AAT determined that it did not have jurisdiction to hear this matter as it was functus. I am told by Ms Caporale that it is intended to appeal that decision but no appeal has yet been filed. In any event these proceedings are only tangentially relevant to the debt. At best they will allow Mr Caporale to file tax returns for the years in question in respect of which, at the moment, there is a default assessment that has not been paid and in respect of which a judgment has been entered. No appeal has been made against that judgment.
The application before me seeks either the setting aside of the bankruptcy notice or an extension of time for compliance therewith until the appeal against the AAT decision, which has not yet been filed, is determined. It also seeks an extension of time until an appeal against Robertson J’s decision has been determined. And there is some suggestion that the bankruptcy notice should be set aside on the grounds that Mr Caporale has a cross claim for damages against the Commissioner for acting in breach of his duties in respect of the formulation of the assessment and in respect of his decisions not to grant Mr Caporale the extensions of time to file his tax returns. It has been suggested by Ms Caporale that if Mr Caporale was allowed to file his tax returns it would be shown that he did not owe the tax because he had significant interest deductions.
I have been provided with no evidence as to why Mr Caporale did not file the income tax returns between 1995 and 2000. In the absence of such evidence the decision of the Commissioner to create a default assessment seems to me to be eminently reasonable. Having created a default assessment the Commissioner was also acting appropriately in proceeding upon it to obtain judgment against Mr Caporale and to enforce that judgment by way of bankruptcy proceedings. There is no argument that the bankruptcy notice was not properly served nor is there any argument that the judgement upon which it is based is not a valid judgment. The contentious matters raised by Ms Rosa Caporale are understandably to the forefront of her family’s minds but they do not represent proper grounds for setting aside or extending the time for compliance with the bankruptcy notice.
Under s.41(6A) of the Bankruptcy Act 1966 (Cth):
“Where before the expiration of the time fixed for compliance with the requirements of a Bankruptcy Notice:
(a)proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b) ...
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.”
At the present time no application has been made to set aside the judgment upon which the bankruptcy notice has been based and so the applicant cannot pray in aid s.41(6A). The appeals which the applicant has made and claims that he will make against the decisions of the AAT and Robertson J are not appeals against the judgment. It seems to me that in these circumstances there is no merit in the application because, as I have said, even a successful appeal will not set aside the existing judgment, and, although a successful appeal may result in a stay of execution, no such stay has yet been obtained.
I am also sensible of the fact that what we have before us today is a bankruptcy notice. It is not a petition. If events have developed to such a degree that a court might find some merit in the arguments being put forward by Mr Caporale at the time of the hearing of the petition then those matters can be considered then. For the present it is not appropriate to put a halt on the proceedings.
I dismiss the application. I order the applicant to pay the respondent’s costs to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Raphael FM

Date: 7 December 2012