Grusauskas v Deputy Commissioner of Taxation
[2005] VSCA 49
•4 March 2005
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 3711 of 2005
| EDWARD ALBINAS GRUSAUSKAS | |
| Applicant | |
| v. | |
| DEPUTY COMMISSIONER OF TAXATION | Respondent |
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JUDGES: | CHARLES and CHERNOV, JJ.A. |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 4 March 2005 |
DATE OF JUDGMENT: | 4 March 2005 |
MEDIUM NEUTRAL CITATION | [2005] VSCA 49 1st Revision – 23 March 2005 |
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Practice and procedure – Application for adjournment of summary judgment application – Defendant unrepresented – Inability to present case – Solicitor returning from overseas the following day – Natural justice – Audi alteram partem – Appeal allowed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Dr T.J. McEvoy | Holding Redlich |
| For the Respondent | Mr J.P. Moore | Australian Government Solicitor |
CHARLES, J.A.:
On 8 September 2003 the Deputy Commissioner of Taxation of the Commonwealth (the respondent) commenced a proceeding in the County Court claiming $78,832 plus interest and costs from the defendant, now the applicant. The basis of the claim was that the applicant was a director of Rastas Resort Management Pty Ltd ("the company"), at the time it withheld amounts of tax deducted from wages and/or salaries paid by the company to its employees. The claim was that deductions had been made pursuant to Division 12 in Schedule 1 of the Taxation Administration Act 1953, but these deductions had not been paid to the respondent as required by s.16‑70(1) of Division 16 of the Act, nor had the applicant complied with his duties as a director of the company in relation to the deductions as required by s.222AOB of the Income Tax Assessment Act 1936. Accordingly, the respondent claimed that, pursuant to s.222AOC of the Income Tax Assessment Act, the applicant became personally liable to the respondent by way of penalty in respect of, and in the amount of, the unpaid deductions.
On about 7 November 2003 the applicant filed a defence in the County Court proceeding. In that defence he denied most of the allegations made by the respondent, but further claimed that Rastas Resort Management Pty Ltd was not liable to the respondent for the amounts claimed; that the liabilities referred to in the statement of claim were not liabilities of the company; that the respondent had made inaccurate assumptions on the basis of an inadequate audit of a business called Daintree Palms Resort; and further, that the company did not own that business and, accordingly, had not withheld any amounts or incurred liabilities to the respondent as alleged.
On 22 July 2004 a judge of the County Court gave directions for the future management of the case, including that it be referred to a case conference, and the proceeding was fixed for trial on 2 May 2005. The Australian Government Solicitor by letter dated 29 July informed the applicant that the matter had been fixed for hearing on that date.
On 15 December 2004 the applicant was served with a summons for summary judgment to be heard by a judge of the County Court in the Practice Court in Melbourne on 25 January 2005. The summons was supported by three affidavits, all sworn on 2 December 2004, and deposed by Kathleen Parr, Steven White and Vince Zalac.
On 25 January 2005 the summons for summary judgment was heard before a judge. The applicant appeared in person and at the outset informed the judge that he was seeking an adjournment of the proceedings. The application was opposed by counsel for the respondent and the judge began the proceedings by dealing with the application for the adjournment. The applicant informed her Honour that he had been given information by letter from the respondent that the matter was to be heard on 2 May. It was pointed out to the applicant that this was merely a notice of the final hearing and that the respondent was now seeking summary judgment. The matter then continued as follows:
"HER HONOUR: Is there any other basis for you making an application to adjourn?
MR GRUSAUSKAS: Yes, Your Honour. My solicitor at the moment is away on leave. I am not sure when he is returning ‑ Mr Issac Brott. I need to contact witnesses both here and interstate in respect of this matter. The tax office ...
HER HONOUR: You do appreciate that what [counsel for the respondent] is saying is the application today is an application for what is called summary judgment?
MR GRUSAUSKAS: Yes, I understand that, Your Honour.
HER HONOUR: It's not a hearing of the proceeding. It's a hearing of the application by the plaintiff to enter judgment because they say they are entitled to enter judgment ahead of the hearing.
MR GRUSAUSKAS: Unfortunately I think there are a lot of extenuating circumstances here, Your Honour. It's not as clear‑cut as ...
HER HONOUR: At this stage the appropriate course to take is to hear the application that the plaintiff makes and to determine whether or not they were able to make that application. I can't at this stage see any proper grounds for adjourning the application. So I'll need to hear what is happening and what that application entails before I can determine whether or not you need more time or whether or not in the best case scenario for you the application fails on its merits. You have no documents you wish to file ‑ affidavit or any material in opposition.
MR GRUSAUSKAS: No, Your Honour. I wasn't aware that I had to do that, but my solicitor ... "
The judge then permitted counsel for the respondent to open the case at length. On the basis of that opening and the affidavit material filed on behalf of the respondent together with the submissions made by Mr Moore for the respondent today, there is no doubt that the respondent made out a prima facie case and one to which it may very well be that the applicant has no answer at all. After having heard from counsel for the respondent, the judge turned to the applicant and asked what he had to say to the application. The applicant responded that he really had not had the opportunity of looking at the respondent's figures correctly and pointed out that the tax office admitted to having made one mistake in the calculations and continued that he was not sure whether the balance of the figures alleged was correct. He said that he would like the opportunity of being able to discuss the matter with legal representation and said that he had spoken to his solicitor about it, but that he was still overseas and would not be back before the next day. He later added that Mr Brott had been away for the most part of December and had been in Thailand and repeated that he was returning to Australia the next day. The judge then stated that she could see no proper basis for refusing the application that day, that the material that had been put before her was appropriate in the sense that it set out correctly all the matters that the respondent was required to set out and her Honour said she had taken into account the fact that the applicant had been aware of this application for more than a month.
Accordingly, the judge proceeded to make the order sought by the respondent, entered judgment, and ordered the applicant to pay the respondent the sum of $72,005 together with interest and costs to be taxed on County Court Scale D.
The applicant now seeks an extension of time within which to fill a notice of appeal from the decision of the judge. Affidavit material filed on behalf of the applicant demonstrates that his solicitor miscalculated the 14‑day period required for filing a notice of appeal, with the consequence that the notice was filed one day out of time, on 9 February. The affidavit asserts that the delay was not the fault of the applicant, but was entirely the fault of the deponent's firm of solicitors, and was the result of an administrative error made by an articled clerk, and in consequence of the deponent's absence from the office at the relevant time.
A draft notice of appeal filed before this morning discloses that the grounds on which the applicant relies include that the judge made an error of fact in finding that the applicant withheld $78,832 for the purposes of Division 12 in Schedule 1 of the Taxation Administration Act 1953, in his capacity as a director of Rastas Resort Management Pty Ltd, and further, that any alleged non‑compliance with the relevant taxation acts was the result of misappropriation of the financial records and funds of the company by another currently under investigation by the Australian Securities Investment Commission.
A further and different notice of appeal was handed to the Court this morning in which the sole ground relied on by the applicant is that her Honour erred in the exercise of her discretion by declining to grant the defendant's application made in person at the hearing of the summary judgment application for adjournment in order to obtain legal advice.
The transcript of the argument before the judge on 25 January last demonstrates that her Honour was informed that the unrepresented applicant sought an adjournment to consult his solicitor, who was due to return to Australia the next day, having been overseas in Thailand for much of December as well as January. The applicant sought an adjournment until the final hearing date of the action (2 May 2005), but was plainly under a misrepresentation then as to the process of case management by which the matter had been fixed for hearing on 2 May.
In the ordinary course one would have expected a judge, faced with a litigant in person in the circumstances previously outlined, unhesitatingly to have adjourned the matter for a short period (say a week or a fortnight) to enable that party to obtain legal advice. The fundamental importance in a judicial hearing of ensuring that each party has equal and proper opportunity to present his or her own case (which involves full and proper challenge to the case of the opposite party) is really too obvious to require authority; I refer to what was said by Marks J in Gas & Fuel Corporation v. Wood Hall and Leonard[1]. It has not been suggested that a delay of this order would have caused any damage to the respondent or that there was any particular urgency required. Any costs involved could have been protected by an order reserving them for later consideration. As Lord Salmon, speaking for the Privy Council, said in Maharaj v. Attorney‑General for Trinidad and Tobago[2]:
"Their Lordships recognise how important it is not to waste judicial time. But if this can be avoided only by finding against a party without giving him a fair chance of being heard, then such a price for saving judicial time is far too high."
[1][1978] V.R. 385 at 404‑405, and the cases there cited.
[2][1977] 1 All E.R. 411 at 413.
The judge, however, decided to continue with the hearing and invited argument as to whether there should be an adjournment. The applicant commenced to explain why it was that he needed an adjournment, which included not only that his solicitor was away on leave, but also that he needed to contact witnesses both in Victoria and interstate. The passages from the transcript already quoted show that he had proceeded to the point of saying that the case was not as clear‑cut as (presumably it may have appeared to the judge at that point) when her Honour interrupted the applicant in mid‑sentence and announced that she could not see any proper grounds for adjourning the application. Her Honour then forthwith heard the respondent's application for summary judgment. In my view, with respect, this was a clear breach of her Honour's obligation to hear both sides and a denial of natural justice to the applicant.[3]
[3][1978] V.R. 385 at 411.
Much was made, both by the judge and counsel for the respondent, of the fact that the applicant had not filed any answering affidavits. But this was explained by the applicant saying that he was not aware that he had to file affidavits on the application then before the Court. If the applicant's solicitor had been away overseas from the middle of December until late January, an explanation which seems not at all improbable for that time of year and which was not challenged, it was entirely understandable that the applicant should not have been aware that he was required to put affidavit material before the Court or that he was not ready to proceed on 25 January.
Before this Court Mr Moore (who did not appear below) accepted for the respondent that this Court has a discretion to extend time for granting leave to appeal and that ordinarily, particularly where the delay in filing a notice of appeal was due to the solicitor's mistake and was only for a day, there would be good ground for extending time. He argued, however, that it would be futile to extend the time and that the Court should not do so since the appeal is "hopeless".
Mr Moore did not concede that there had been a denial of natural justice by the judge, but he put it that even if there had been, in this case the applicant had no right to have that injustice put right on appeal. His argument was that the Court will not remit the matter when the respondent positively shows that he has no defence and that the hearing of the case would be futile. He submitted that even if the applicant below had been given a full opportunity of being heard, he would not have been better off, and he submitted that the Court will not permit hopeless cases to continue even if error is shown. In his submission the overriding principle is that it is not in the interests of justice to permit hopeless cases to proceed. Mr Moore put before us a convincing argument that the respondent's case is very strong indeed, and it may well be unanswerable.
In my view, however, the proceedings before the judge on 25 January involved a very clear breach of the judge's fundamental obligation, audi alteram partem. The unrepresented applicant was at an obvious disadvantage, he had stated that he needed to obtain advice from his solicitor who was returning the next day, he wished to speak to witnesses and he plainly was not ready to proceed before the judge. He had put no affidavits before the Court because he said he had not been aware that he was obliged to do so. To proceed to hear the matter and to grant the respondent final judgment was, in these circumstances, nothing less than proceeding without giving the applicant any real chance of being heard, and a denial of natural justice to him. One might add that even though the respondent's case might appear strong, even unanswerable, it is really impossible to say what prospect of success the applicant had of defending the action without having heard his case at all.
I would therefore grant the applicant an extension of time to enable him to file notice of appeal.
The parties had been informed by the Registry that, should an extension of time be granted, they should be prepared to continue on and argue the appeal, and Mr Moore did so.
Having heard Mr Moore's forceful submissions this morning, I remain firmly of the view that the applicant (as I shall continue to call him) was denied natural justice by the procedure followed by the judge. In addition, to the Gas & Fuel Corporation case, I refer to Maharaj v. Attorney‑General for Trinidad and Tobago[4]; Queensland v. J.L. Holdings Pty Ltd[5]; Howarth v. Adey[6]; Walker v. Walker[7]; McColl v. Lehmann[8]; Magistrates' Court of Prahran v. Murphy[9]; Smith v. Gannawarra Shire
Council[10].
[4][1977] 1 All E.R. 411 at 413, per Lord Salmon.
[5](1997) 189 C.L.R. 146 at 155, per Dawson, Gaudron and McHugh, JJ.
[6](1996) 2 V.R. 535 at 543‑544 per Winneke, P.
[7][1967] 1 W.L.R. 327 at 330 per Sir Jocelyn Simon, P.
[8][1987] V.R. 503 at 507 per Kaye, J.
[9][1997] 2 V.R. 186 at 210.
[10](2002) 4 V.R. 344 at 352‑353 per Winneke, P.
The respondent plainly has a strong case, and it may well be that the applicant has no defence to it. If this Court allows the applicant's appeal, it should do so without prejudice to the respondent being able to have her application for summary judgment heard without delay, once the applicant has had an opportunity to put affidavit material before the Court. Accordingly, in my opinion, the judgment below should be set aside with costs and the respondent's application for summary judgment remitted to the County Court for hearing before a different judge.
CHERNOV, J.A.:
I agree.
CHARLES, J.A.:
The orders the Court makes are as follows:
1.That the time fixed by the rules for filing a notice of appeal from the judgment of the County Court entered on 25 January 2005 be extended to 4 March 2005.
2. Upon the appeal being heard instanter, the Court orders:
(a) the appeal is allowed with costs;
(b) the judgment entered on 25 January 2005 is set aside;
(c) the respondent's application for summary judgment dated 2 December 2004 is remitted to the County Court for hearing before a different judge.
The Court will grant a certificate.
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