Grollo, M. v Deputy Commissioner of Taxation
[1985] FCA 25
•13 FEBRUARY 1985
Re: MARIO GROLLO and BRUNO GROLLO
And: THE DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Nos. VG 314 of 1984 and VG 315 of 1984
Applications for Review of Decisions Made by Deputy Commissioner - Income Tax
4 FCR 163
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Sweeney J.(1)
CATCHWORDS
Applications for Review of Decisions Made by Deputy Commissioner - assessments for unpaid vendor's tax made pursuant to Taxation (Unpaid Company Tax) Assessment Act 1982 and additional tax under s.207 income Tax Assessment Act - proceedings issued in Supreme Court for recovery of assessed amounts - motions to restrain Deputy Commissioner from continuing Supreme Court proceedings until hearing and determination of the applications - construction of requirement for assessibility under the Act.
Taxation (Unpaid Company Tax) Assessment Act 1982 s.5(1)(g).
Income Tax Assessment Act 1936 (as amended) s.207.
Administrative Decisions (Judicial Review) Act 1977 ss.13(1), 15.
Freedom of Information Act 1982 s.15.
Income Tax - Recoupment tax legislation - Unpaid company tax - Meaning of "unpaid" - Commissioner commencing recovery proceedings against vendor shareholder - Application for judicial review of Commissioner's decision - Motion for interlocutory injunction to stay recovery proceedings - Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth), s 5(1)(g) - Administrative Decisions (Judicial Review) Act 1977 (Cth), s 15.
HEADNOTE
Held: (1) There was no real prospect of the applicant persuading the court that the word "unpaid" in s 5(1)(g) of the Taxation (Unpaid Company Tax) Assessment Act 1982 in connection with an amount of company tax should be construed as meaning "irrecoverable".
MacCormick v. Federal Commissioner of Taxation (1983) 52 ALR 53 at 55; Re Gasbourne Pty Ltd (1984) VR 801 at 861-862, distinguished.
(2) Accordingly, the applicant's motion seeking an order restraining the Commissioner from continuing recovery proceedings in respect of recoupment tax, pending the hearing of his application under the Administrative Decisions (Judicial Review) Act 1977, should be dismissed.
HEARING
1985, February 13. #DATE 13:2:1985
INTERLOCUTORY MOTION
Motion seeking an order restraining the respondent from continuing certain proceedings in the Supreme Court of Victoria until the determination of an application to this Court for an order of review under the Administrative Decisions (Judicial Review) Act 1977 (Cth).
H Reicher, for the applicants.
N Moshinsky, for the respondent.
Solicitors for the applicants: Herbert Geer & Rundle.
Solicitor for the respondent: Australian Government Solicitor.
FPC
ORDER
The motion of the applicant be dismissed with costs, including reserved costs.
The directions hearing is adjourned to March 22, 1985.
Liberty to apply is reserved generally.
Application dismissed
JUDGE1
In each of these applications, which, by consent, have been heard together, the applicant seeks an order of review of:
1. The decision of the respondent to institute proceedings in the Supreme Court of Victoria for the immediate recovery of Vendor's Recoupment Tax alleged to be due and payable pursuant to the provisions of the Taxation (Unpaid Company Tax) Assessment Act 1982 ("the Recoupment Act") and additional tax under section 207 of the Income Tax Assessment Act ("the Act") alleged to be due and payable by the applicant.
2. The decision of the respondent to apply to the Supreme Court of Victoria for leave to sign final judgment in the abovementioned action against the applicant.
3. The failure of the respondent to institute recovery proceedings against Enlander Pty. Ltd. (formerly New England Homes Pty. Ltd.) ("the company") to recover from the company income tax due and owing by it to the respondent.
4. The failure of the respondent to institute proceedings to wind up Enlander Pty. Ltd. and seek the appointment of a liquidator to the company so as to enable the liquidator to recover and realise assets of the company out of which he would be able to pay to the respondent income tax due and owing by it.
In each application the applicant seeks an order that the respondent be restrained, whether by himself, his servants or agents or any of them or otherwise howsoever, from continuing proceedings No. 3567 of 1984 in the Supreme Court of Victoria until the hearing and determination of the Applicant's Application herein.
Six notices of assessment were issued to each applicant, relating to the tax years ended 30 June 1978, 1979 and 1980, for amounts totalling $381,703.20 against each applicant.
On 17 August 1984 the respondent issued proceedings in the Supreme Court of Victoria seeking judgment against each applicant for $398,226.00, of which the following particulars were given:
"RECOUPMENT TAX DATE OF ISSUE DUE DATE AMOUNT YEAR OF ASSESSMENT NO. FOR PAYMENT INCOME
364996/004 26 April 1984 29 May 1984 $ 27,695.75 1978 364997/004 26 April 1984 29 May 1984 $ 4,304.08 1978 364996/005 26 April 1984 29 May 1984 $ 56,836.71 1979 364997/005 26 April 1984 29 May 1984 $ 10,124.47 1979 364996/006 26 April 1984 29 May 1984 $240,409.28 1980 364997/006 26 April 1984 29 May 1984 $ 42,332.91 1980
Additional tax for late payment pursuant to section 13 of the said Act calculated at the rate of 20 per centumn per annum, from time to time, from 30 May 1984 to 16 August 1984 $16,523.00"
Neither of the applicants had sought to appeal against these assessments.
On 29 October 1984 the respondent issued a Summons for Final Judgment in the Supreme Court proceedings, returnable on 6 December 1984.
On 6 December 1984 the applicants' solicitors wrote to the respondent making requests under s.13(1) of the Administrative Decisions Judicial Review Act (the ADJR Act). The letter written on behalf of Mr Bruno Grollo read as follows:
"Pursuant to Section 13(1) of the Administrative Decisions (Judicial Review) Act we request on behalf of our client Mr. Bruno Grollo that you furnish a statement in writing setting out the findings of material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for your decisions to institute recovery proceedings in the Supreme Court of Victoria in the abovementioned action.
Secondly pursuant to Section 13(1) of the Administrative Decisions (Judicial Review) Act, we request on behalf of Mr. Bruno Grollo that you furnish a statement in writing setting out the findings of material questions of fact, referring to the evidence or other material on which these findings were based and giving the reasons for your decision to seek liberty to enter final judgment in the above action against the Defendant Mr. Bruno Grollo.
Thirdly pursuant to Section 13(1) of the Administrative Decisions (Judicial Review) Act, we request on behalf of Mr. Bruno Grollo that you furnish a statement in writing setting out the findings of material questions of fact, referring to the evidence or other material on which these findings were based and giving the reasons for your decision not to institute recovery proceedings against Enlander Pty. Ltd. for the recovery of income tax due to you by that company.
Fourthly pursuant to Section 13(1) of the Administrative Decisions (Judicial Review) Act, we request on behalf of Mr. Bruno Grollo that you furnish a statement in writing setting out the findings of material questions of fact referring to the evidence or other material on which these findings were based and giving the reasons for your decision not to seek the appointment of a liquidator to Enlander Pty. Ltd. so as to enable the liquidator to recover assets of the company with which it would be able to pay the income tax due to you. In relation to this matter we particularly refer you to the decision of His Honour Mr. Justice Nicholson in Re: Gasbourne Pty. Ltd. wherein he held in relation to companies in a similar position to Enlander Pty. Ltd. they had arguable claim against various defendants as constructive trustees. In particular we refer you to the criticism of His Honour Mr. Justice Nicholson of the failure of the Commissioner of Taxation to intervene so as to enable a liquidator to institute such proceedings.
Finally we request on behalf of Mr. Bruno Grollo that the Commissioner exercise his discretion under Section 206 of the Act to grant an extension of time for the payment of Vendor's Recoupment Tax until all appropriate recovery action against Enlander Pty. Ltd. and recovery actions taken by a liquidator appointed to Enlander Pty. Ltd. be exhausted."
A letter in the same terms was also written on the same day on behalf of Mr Mario Grollo.
On 6 December 1984 the present proceedings were issued in this Court and on the same day the solicitors for the applicants forwarded to the respondent requests under s.15 of the Freedom of Information Act 1982 (the F.O.I. Act) in the following terms:
"We act on behalf of the abovenamed and on behalf of our client request pursuant to Section 15 of the Freedom of Information Act access to all documents and files in your possession in relation to Enlander Pty. Ltd. and all documents and other information in relation to the decisions taken by you in connection with proceedings instituted against Enlander Pty. Ltd. for the recovery of income tax due by it.
We look forward to your early reply."
When the Summons for Final Judgment came on for hearing before Master Evans on 18 December 1984 the applicant applied for an adjournment pending the hearing and determination of the application in this court. The Master ordered that the further hearing of the summons be adjourned to 14 February 1985 and said:
"In the event that the defendant fails to make application to the Federal Court by the 31st day of January 1985 for an order restraining the plaintiff from further prosecuting this action, the plaintiff have leave to bring this application on for hearing earlier on two days written notice to the defendant."
A notice of motion of each applicant came before a single judge of this court on 31 January 1985 and the hearing of it resumed before me on 8 February 1985. By each motion, the applicant sought an order that the respondent be restrained from continuing his proceedings in the Supreme Court until the hearing and determination of his application to this court.
Under s.5(1)(g) of the Recoupment Act one of the conditions giving rise to a primary taxable amount being taken to exist in relation to a vendor of shares in a company is expressed as follows:
"(g) at any time (in this sub-section referred to as the "relevant time") after the commencement of this Act, there remains unpaid an amount (in this sub-section referred to as the "overdue company tax") of ordinary company tax or undistributed profits tax, as the case may be, due and payable by the company in relation to the relevant year of income;".
The applicants did not seek to challenge the fact that an amount of company tax remained unpaid by the company but they contended that the word "unpaid" in the sub-section was to be construed as meaning irrecoverable, in the sense that the respondent could satisfy this statutory condition only if he could show that he had taken unsuccessful recovery proceedings against the company itself and had instituted proceedings to wind up the company and seek the appointment of a liquidator to enable him to recover and realise assets of the company, out of which he would be able to pay to the respondent any company tax due by it.
This submission was based upon the fact that in MacCormick v Federal Commissioner of Taxation (1983) 52 ALR 53, members of the High Court referred to the Act as being "aimed at the collection of moneys found to be irrecoverable by way of company tax from companies which were stripped of their assets" (see p 55). The High Court in that case was dealing with a constitutional challenge to the validity of the Act and its descriptive use of the word "irrecoverable" cannot, in my opinion, support the superstructure which the applicants seek to build upon it. If the legislature had intended that it should be a condition precedent to the institution of proceedings against former shareholders of the company that the respondent had unsuccessfully taken the steps referred to by the applicants it would have said so in plain terms.
The applicants also sought to rely upon observations made by Nicholson J. in Re Gasbourne Pty. Ltd. (see Australian Company Law Cases, 5 March 1984, 103 at 141) when he delayed pronouncing final orders to give the Commissioner of Taxation an opportunity to apply for leave to take part in proceedings brought by former shareholders of "bottom of the harbour" companies, which were designed to enable liquidators of the companies to be appointed and to pursue remedies to which they were said to be entitled against Westpac Banking Corporation. In that case his Honour noted that the Commissioner had either recovered or made arrangements for the recovery of the principal of the unpaid company tax from the former shareholders and the court simply afforded the Commissioner the opportunity to apply to join in the proceedings, if he wished to do so, in respect of a claim for interest upon that principal.
I find nothing in those observations which offers any comfort to the applicants in the present cases.
The interlocutory relief sought by the applicants is expressed as a claim for an injunction. No doubt it is made pursuant to s.15 of the ADJR Act, under which the Court or a Judge may on such conditions (if any) as it or he thinks fit, suspend the operation of a decision, of which a review is sought, and stay all or any proceedings under it.
However one expresses the test to be applied in such a case (see Faingold v. Zammit, V.G.279 of 1983, Bullock v. The Federated Furnishing Trades Society of Australasia V.G.309 of 1984, Epitoma v. AMIEU (1984) 54 ALR 730), it seems to me to be fatal to the applicants' claim for a suspension or a stay of the decisions challenged.
In my opinion, nothing has been disclosed to suggest that the applicants have any real prospect of persuading the Court that it should give any meaning to the word "unpaid" of the kind for which they contend. The word should be given its ordinary and natural meaning and so understood would be fatal to the applicants' claim for suspension or stay.
If, contrary to my opinion, there is any substance in the submissions of the applicants on the construction of the Recoupment Act, those submissions would be available to them in the Supreme Court.
The Court orders, in each case that the motion of the applicant be dismissed with costs, including reserved costs.
In each application, the directions hearing is adjourned to March 22, 1985. Liberty to apply is reserved generally.
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