Joosse v Deputy Commissioner of Taxation of the Commonwealth of Australia
[2003] FCA 1325
•29 OCTOBER 2003
FEDERAL COURT OF AUSTRALIA
Joosse v Deputy Commissioner of Taxation of the Commonwealth of Australia
[2003] FCA 1325CORRIGENDUM
WOLTER JOOSSE v DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
V 7033 of 2003GRAY J
29 OCTOBER 2003 (CORRIGENDUM 27 NOVEMBER 2003)
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 7033 of 2003
BETWEEN:
WOLTER JOOSSE
APPLICANTAND:
DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
RESPONDENTJUDGE:
GRAY J
DATE OF ORDER:
29 OCTOBER 2003
WHERE MADE:
MELBOURNE
CORRIGENDUM
- On page 19 at paragraph 56 of the Reasons for Judgment delete ‘Public Service Act 1999 (Cth)’ and insert ‘Public Service Act 1922 (Cth)’.
I certify that the preceding one (1) paragraph
is a true copy of the Corrigendum to
the Reasons for Judgment of
his Honour Justice GrayAssociate:
Date: 27 November 2003
FEDERAL COURT OF AUSTRALIA
Joosse v Deputy Commissioner of Taxation of the Commonwealth of Australia [2003] FCA 1325
BANKRUPTCY – bankruptcy notice – default judgment – whether default judgment satisfactory proof of debt – whether the Court can go behind the judgment to assess for itself whether there is a debt owed – whether there is substantial reason to go behind judgment – whether arguable defence – whether defect in bankruptcy notice – whether counterclaim, set off or cross-demand available
Income Tax Assessment Act 1936 (Cth) ss 222AFA, 222AGA, 222AGB, 222AGC, 222AGD, 222AGF, 222AHA, 222ANA, 222APB, 222APC, 222APE, 222AOF
Taxation Administration Act 1953 (Cth) Sch 1 s 255-5
Judiciary Act 1903 (Cth) s 78BFederal Court Rules (Cth) O 77 r 7, O 77 r 8(3)
Wren v Mahony (1972) 126 CLR 212 followed
Wolff v Donovan (1991) 29 FCR 480 followed
Joosse v Deputy Commissioner of Taxation [2002] VSCA 48 referred to
Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd (unreported, 19 November 1998) considered
Textile Clothing & Footwear Union of Australia v Bellhop [1999] FCA 967 considered
Textile Clothing & Footwear Union of Australia v Bellhop [1999] FCA 1095 considered
James v Deputy Commissioner of Taxation (1957) 97 CLR 23 followedO’Reilly v The Commissioners of the State Bank of Victoria (1983) 153 CLR 1 followed
WOLTER JOOSSE v DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
V 7033 of 2003GRAY J
29 OCTOBER 2003
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 7033 of 2003
BETWEEN:
WOLTER JOOSSE
APPLICANTAND:
DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
RESPONDENTJUDGE:
GRAY J
DATE OF ORDER:
29 OCTOBER 2003
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The application the subject of the notice of motion filed on 14 October 2003 be
dismissed.
2.The decision of Registrar Mussett, made on 23 September 2003, refusing to set aside
the bankruptcy notice served on the applicant, be affirmed.
3. The applicant pay the respondent’s costs of the application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 7033 of 2003
BETWEEN:
WOLTER JOOSSE
APPLICANTAND:
DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
RESPONDENT
JUDGE:
GRAY J
DATE:
29 OCTOBER 2003
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
By notice of motion, filed on 14 October 2003 the applicant applied to review a decision of Registrar Mussett, made on 23 September 2003. The registrar refused to set aside a bankruptcy notice, directed to the applicant, dated 19 March 2003. By O 77 r 7 of the Federal Court Rules (Cth), the registrar had the power to exercise the powers of the Court in relation to the question of setting aside the bankruptcy notice. Order 77 r 8(3) provides for the review by the Court or a judge of such a decision. Such a review is essential for constitutional purposes, because it is necessary to have a judge to exercise, at the final stage, the judicial power of the Commonwealth. The authorities establish that such a review is to be by way of hearing de novo. That is to say, the task I have is not to consider whether the registrar reached the correct decision on the material before her, but to consider on the material before me what is the correct decision.
The bankruptcy notice claims a debt in the sum of $238 169.71. The debt consists of the amount of a judgment entered on 2 August 2001 in the County Court, together with interest after the date of judgment up to the date of the bankruptcy notice. The proceeding in the County Court was in respect of penalties pursuant to Divs 8 and 9 of Pt VI of the Income Tax Assessment Act 1936 (Cth) (‘the Tax Act’). Such penalties were imposed by the Tax Act on the applicant as a director in respect of group tax estimated to be owed and unpaid by a company called Bellhop Pty Ltd. The penalties were sued for by Erin Kathleen Holland, Deputy Commissioner of Taxation of the Commonwealth of Australia (‘the Deputy Commissioner’).
The Deputy Commissioner appeared before me by counsel on 27 and 28 October 2003 to oppose the application. The applicant appeared in person.
The material that was before the registrar, and that before me, identifies three general grounds on which the applicant sought to overturn the bankruptcy notice. The first ground was that he had a counterclaim, set off, or cross-demand, that he could not have set up in the County Court proceedings. The second ground was defects alleged to exist in the bankruptcy notice, or in the procedures that led to its issue. The third ground was the assertion that, notwithstanding the judgment of the County Court, there was in fact no debt owing.
The first two of these grounds are related. The counterclaim that the applicant alleges he has is said to be the result of unlawful acts on the part of the Deputy Commissioner, or an officer of the Australian Taxation Office, in suing and in issuing and serving the bankruptcy notice, and perhaps in relation to other acts not relevant to the bankruptcy notice. The applicant claims to be entitled to sue for unspecified damages in respect of these allegedly unlawful acts.
It is convenient to look at the third ground before coming to the first and second grounds. The effect of the third ground is that the applicant has invited the Court to go behind the judgment and to assess for itself whether there is a debt owed. There can be no doubt that the Court has the power to go behind a judgment, but equally no doubt that it will not do so in all cases. In Wren v Mahony (1972) 126 CLR 212 at 224-225, Barwick CJ, with whom Windeyer and Owen JJ concurred, said:
‘The judgment is never conclusive in bankruptcy. It does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment. But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor’s debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment to what is its consideration. It is not the law, in my opinion, that whether in any case the Court of Bankruptcy will consider whether there is satisfactory proof of the petitioning creditor’s debt is a mere matter of its own discretion … Rather the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor's debt. The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that 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.’
In Wolff v Donovan (1991) 29 FCR 480 at 486, Lee and Hill JJ quoted that passage from the judgment of the Chief Justice and continued:
‘Where a judgment is obtained by default the court in bankruptcy will more readily look behind the judgment than it would if the judgment were obtained following a hearing on the merits’.
Their Honours cited authority for that proposition. In the light of these authorities I proceed on the basis that I should accept the judgment of the County Court as satisfactory proof of the debt, unless a substantial reason is shown why it should not be accepted.
Where, as in the present case, the judgment was obtained by default, it is sometimes necessary to accept more readily that there may be a substantial reason. The history of the County Court judgment in the present case, however, suggests that the case for a substantial reason on the basis that it was obtained by default may not be as strong as in other cases. It appears from the material before me that, after service on him of the initiating process in the County Court, the applicant filed a notice of appearance. Subsequently, he received a notice dated 27 June 2001, which ordered him to attend before the judge in charge of the business/damages list at the County Court on 21 February 2002 and advised him that at that time directions would be given as to the further conduct of the hearing. I note that the date of the proposed directions hearing was almost seven months after the date of the notice. The notice did not say that the applicant should take any step in the County Court proceeding in the meantime. The applicant apparently did not take any further step in that proceeding. On 2 August 2001, without further notice to the applicant, the Deputy Commissioner entered judgment in the County Court, apparently in default of the applicant filing a defence in that proceeding.
If this were the entire history of the proceeding, the Court would no doubt have considerable sympathy for the applicant’s position. Although he has some prior experience of litigation and was no doubt aware that the procedures of courts were governed by rules, the applicant is not a lawyer. He could not be expected to know that, as well as attending a directions hearing and obtaining directions for the further conduct of the hearing, he was supposed to file a defence first.
That is not the end of the matter, however. The applicant applied to the County Court to set aside the judgment. He failed, apparently on the ground that he could not show the County Court judge that he had an arguable defence on the merits. The applicant sought leave of the Court of Appeal to appeal from that interlocutory judgment. His application was finally heard by the Court of Appeal on 12 April 2002. In its reasons for judgment, the Court of Appeal noted that it spent considerably longer dealing with the matter than it would ordinarily spend on an application for leave to appeal in such a case. It heard the matter from 11.15 am until 4.30 pm, with an hour and 20 minutes break for lunch. The Court of Appeal considered a quantity of material filed by the applicant, which had not been before the County Court judge.
On 15 April 2002 the Court of Appeal dismissed the application for leave to appeal. Its reasons for judgment are found in Joosse v Deputy Commissioner of Taxation [2002] VSCA 48. At the conclusion of his judgment, at [19], Batt JA said:
‘In the light of the foregoing reasons I consider that Mr Joossé has no possible defence. His Honour’s decision dismissing the application to set aside the default judgment is not attended with sufficient doubt to warrant the granting of leave to appeal and the taking up of the attention of a court of three. Indeed, in my opinion, it is not attended by any doubt at all as to its correctness.’
The other member of the Court of Appeal on that occasion, Buchanan JA, agreed. His Honour said at [22]:
‘For the reasons stated by Batt, J.A., there is no doubt attending the decision of the County Court judge. His Honour was plainly correct in deciding that there was no arguable defence to the respondent’s claim.’
The applicant applied to the High Court of Australia for special leave to appeal from that judgment of the Court of Appeal. On 14 February 2003, his application was refused.
The judgment of the County Court is therefore not to be regarded as just an ordinary default judgment. The test for setting aside a default judgment is a relatively easy one to satisfy. As it was stated by Batt JA in the Court of Appeal’s reasons for judgment at [4], it required only an arguable defence, not one that is bound to succeed. If the applicant has been found to fail to meet such a test, ie to fail to show that he has an arguable defence, by the Court of Appeal, as well as by a County Court judge, it cannot be said that the circumstances in which the default judgment was entered were themselves sufficient to amount to a substantial reason for going behind it.
I turn, then, to the applicant’s third ground, that there was, in truth, no debt. There were two main aspects of this ground. The first was, as the applicant said, that there could not have been a debt because Bellhop Pty Ltd had no employees in the relevant period. The relevant period was the financial years ended 30 June 1998 and 30 June 1999. If Bellhop Pty Ltd had no employees during that period, then it had no obligation to deduct from the salaries or wages of employees amounts in respect of income tax, and to remit those amounts, known as group tax, to the Australian Taxation Office. If there were no such obligation on Bellhop Pty Ltd, then the applicant, as a director of that company, could not have been liable for a penalty in respect of the company’s failure to remit those payments.
The second main aspect of this ground was unrelated to the first. The applicant argued that there could not have been any penalty imposed on him because a period of 14 days’ notice was required before such penalty came into existence, and it was necessary for that 14 days to elapse without the company concerned being wound up. The applicant asserted that Bellhop Pty Ltd was wound up within 14 days of the actual service of the notice on him. To resolve these issues, it is necessary to look at the provisions of the Tax Act relating to penalties of the kind claimed in the County Court. The relevant provisions are to be found in Div 8 and 9 of Pt VI of that Act.
Section 222AFA states the purpose of Div 8, which is to enable the Commissioner of Taxation (‘the Commissioner’) to take prompt and effective action to recover amounts not remitted as required by various other provisions of the Tax Act and provisions of the Taxation Administration Act 1953 (Cth) (‘the Administration Act’). I take it that those provisions included the provisions requiring the remission of group tax at the required dates. According to subs (2), the Division accomplishes this purpose by empowering the Commissioner to make an estimate of the amounts and to recover the amount of the estimate. By subs (3) it is said that, although an estimate creates a liability distinct from the underlying liability to remit amounts, the person liable can ensure that the Commissioner does not keep more than those amounts.
The power to make an estimate is found in s 222AGA. It can be exercised if the Commissioner has reason to suspect that a person who is liable to pay amounts equal to deductions from payments made during a period, and the liability to pay those amounts remains undischarged after the due date. The Commissioner may make a reasonable estimate of the unpaid amount of that liability. It is clear that, in making such an estimate, the Commissioner may have regard to anything he or she thinks relevant, but particularly to information about amounts deducted by the person during earlier periods. Once the estimate is made, notice of it must be given to the person liable under s 222AGB. There are provisions in s 222AGC for reducing the amount of the estimate, and in s 222AGD for revocation of the estimate where no deductions have been made in respect of the relevant amounts.
Section 222AGF provides for a statutory declaration by the person who receives a notice, in effect so that the person liable can indicate either absence of liability or state what the true amount is. It is made clear by subs (7) that, if the person is a company, the declaration must be made by a director of the company. Section 222AHA creates in the recipient of that notice a liability to pay the estimated amount. There is provision for parallel liabilities and for the reduction of a liability if some other person makes a payment.
Division 9 deals with penalties for directors of non-remitting companies. By s 222ANA it is made clear that the purpose of the Division is to ensure that a company either meets its obligations, including those relating to group tax at the relevant times, or goes promptly into voluntary administration or into liquidation. The Division imposes a duty on the directors to cause the company to do so and the duty is enforced by penalties. A penalty can be recovered only if the Commissioner gives written notice to the person concerned. The penalty is automatically remitted if the company meets its obligations or goes into voluntary administration or liquidation within 14 days after the notice is given. The penalty is applied towards meeting the company’s obligations under the relevant provisions.
Subdivision C of Div 9 applies particularly to the circumstances in which a company fails to pay an estimated amount under Div 8. The directors have certain obligations under s 222APB to cause the company to pay the estimated amount or to go into voluntary administration or liquidation. Section 222APC provides as follows:
‘If section 222APB is not complied with before the end of the 14 days, each person who was a director of the company at any time during the 14 days is liable to pay to the Commissioner by way of penalty, an amount equal to the unpaid amount of the estimate.’
Section 222APE provides that the Commissioner is not entitled to recover from a person such a penalty until the end of 14 days after the Commissioner gives to the person a notice. Subsection (1) contains the requirements for such a notice. It is not necessary to canvass those requirements in detail in this proceeding. Subsection (2) provides that s 222AOF applies to a notice under the section in the same way as it applies to a notice under an earlier section. Section 222AOF relates to the giving of notices. One of the ways in which it permits the giving of notice to a person, who appears from documents held by the Australian Securities and Investments Commission to be a director of a company, is to leave the notice at an address that appears from such documents to be the person’s place of residence.
The applicant contended that, during the relevant period from 1 July 1997 to 30 June 1999, Bellhop Pty Ltd had no employees. He suggested that all of them were employed by a company called Bellechic Pty Ltd. He referred to the judgment of Ryan J in Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd (unreported, 19 November 1998). It appears that, in that judgment, his Honour was dealing with a question which he had directed should be tried separately from any other question in the proceeding. That question was:
‘Whether at any time between 1 January 1996 and 20 January 1997 the second respondent David Keys Australia Pty Ltd or the third respondent, Bellhop Pty Ltd was the employer of any and which persons named as employees in the further amended statement of claim herein.’
It is noteworthy, therefore, that the judgment of Ryan J related to a period that was outside the period relevant to the present proceeding. Such findings as his Honour made could not be regarded as being conclusive of the question whether in the period relevant to this proceeding, at any time Bellhop Pty Ltd had any employees.
From the applicant’s own material it appears that Bellechic Pty Ltd went into liquidation on 28 October 1997. This was less than four months into the relevant period. It is unlikely that after that date Bellechic Pty Ltd continued to employ people. The applicant was
not able to say that the liquidator continued any business conducted by Bellechic Pty Ltd in that company’s name.
In 1999, Bellhop Pty Ltd was involved in another proceeding in this Court, that came before Marshall J. That proceeding is the subject of an interlocutory judgment of his Honour, Textile Clothing & Footwear Union of Australia v Bellhop [1999] FCA 967, given on 12 July 1999, and a final judgment, Textile Clothing & Footwear Union of Australia v Bellhop [1999] FCA 1095, given on 23 July 1999.
The applicant in that proceeding was seeking the imposition of penalties on Bellhop Pty Ltd, Jacqueline Yvonne Joosse and Wolter Joosse (the present applicant), for failing to make superannuation contributions, pursuant to an award, on behalf of the company’s employees. The interlocutory judgment records that, on 12 July 1999 Bellhop Pty Ltd and Mrs Joosse were represented by a solicitor. As his Honour said, the solicitor was in the process of bringing about the end of his responsibilities on behalf of those parties and appeared as a matter of courtesy to inform the Court of that fact, and of the fact that he had no instructions which enabled him to put any submissions on that day. On that occasion, and on 23 July 1999, the only participating appearance on behalf of any of the respondents in that proceeding was by the present applicant, who appeared in person on each occasion. Indeed on 23 July 1999 his appearance was the only one on behalf of any of the respondents.
From his Honour’s reasons for judgment given on 23 July 1999, it is apparent that there was no serious issue that the employees concerned were employed by Bellhop Pty Ltd. At pars 3, 4 and 5 of his Honour’s reasons for judgment he recited the employment history of each of the employees, under the heading ‘Background Facts’. The case concerned 10 employees. The periods with which the case dealt all began on 30 June 1997. Six of them were said by his Honour to be continuing as at 23 July 1999. The other four all extended into the second year of the two-year period that is relevant to this proceeding, although one of them by only three days. The periods that his Honour noted as continuing, of course, continued past the end of the period that is relevant for the present case.
In those circumstances, if it had been the case that the 10 employees were not employees of Bellhop Pty Ltd, it is hard to believe that the applicant would not have taken issue with the proposition that they were. The applicant is intelligent, articulate and well and truly prepared to make submissions to a court, whether those submissions be of substance or not. He now says that the finding that Marshall J made in that case was based on 10 affidavits that were sworn fraudulently by their deponents. To support this allegation, the applicant says that he has available documents that make it absolutely clear that the affidavits were sworn fraudulently.
One such document is in evidence, along with the affidavit of the relevant deponent in that proceeding. The document is an employment declaration of the kind required to be filled out in relation to employees, in connection with the deduction from their salaries or wages of amounts by way of income tax. In this case, section A of the form, on its left-hand side, has been filled in with the name and address of the employee concerned and apparently signed by her on 5 March 1997. Section B, on the right-hand, side has been filled in, in different handwriting, and apparently signed by someone on behalf of the company named as the employer on 7 March 1997. The company named is Bellechic Pty Ltd. Its name appears only in section B of the form. It is by no means clear that the deponent of the affidavit signed the form at a time when the name of the company as her employer appeared on it. The form itself is consistent with the name and details of the company being added later by some person on behalf of the company. In no sense could the document be said to be a statement by the deponent of the affidavit inconsistent with her affidavit in the proceeding before Marshall J. She signed the document outside the period relevant to that case and outside the period relevant to this case. The form itself cannot amount to a prior inconsistent statement by her. It cannot be said to make it clear that her affidavit is incorrect, let alone that she swore it fraudulently. The manner in which the applicant was involved in the proceeding before Marshall J provides powerful evidence suggesting that his assertion that Bellhop Pty Ltd had no employees at the relevant dates cannot be relied on.
It is also useful to point out that there is no suggestion that, in response to the notices given to Bellhop Pty Ltd of estimates of amounts owing by that company, or to the notice given to the applicant himself in relation to the penalty imposed on him for non-payment by the company, the applicant made any representation to the Australian Taxation Office that Bellhop Pty Ltd had no employees. Provision is made in the scheme relating to penalties for the provision of statutory declarations. The applicant says that he could not make a statutory declaration acknowledging that Bellhop Pty Ltd was an employer and had made the deductions. There is no reason why he could not have made a statutory declaration to the effect that it had not made any deductions and that the reason it had not made any deductions was that it had no employees. There is no reason why he could not have protested or otherwise informed the Commissioner that Bellhop Pty Ltd had no employees. Having observed the applicant for significant parts of the two days on which I have heard this proceeding, I am confident that it cannot be said that he would have been afraid to say that Bellhop Pty Ltd had no employees, if that were the fact.
Further, after the winding up of Bellhop Pty Ltd the applicant completed a questionnaire directed to him by the liquidator about the affairs of that company. He completed the questionnaire, as director and secretary of the company, on 24 November 1999. The information provided in the answers to the questionnaire is instructive. In answer to the question:
‘When did the Company commence trading?’
the applicant said:
‘7/89 then closed operating and commenced again in 1997’.
In answer to the question:
‘How many employees did the Company have in each of the three years preceding its liquidation?’
the applicant said:
‘1999 app 9
1998 app 14
1997 app 16’.The applicant indicated that he was the person responsible for the day-to-day management of the company. He said that he and others maintained the books and records of the company.
In response to the question:
‘Were any creditors (including the bank) aware of the Company’s financial difficulties? If so, provide details.’
the applicant said:
‘Staff were, but were happy with continuous employment’.
In answer to the question:
‘Did you need to pay any of these creditors to prevent legal actions? If so, provide details of any pressure which was applied and the amounts paid.’
the applicant said:
‘Yes TCFUA & former staff members’.
and then referred to Federal Court proceedings involving, apparently, the Textile Clothing and Footwear Union of Australia.
In answer to the question:
‘Are there any other matters which you feel should be brought to the Liquidator’s attention? Please specify.’
the applicant said:
‘All staff were aware of the companies [sic] problem to secure sufficient work, and were aware that taxes + super were not met[.] If these were to be met the company would have closed down much sooner. The staff rather had employment. No benefit to the company or director was gained in doing so.’
It is obvious that the information that the applicant was prepared to supply to the liquidator of Bellhop in November 1999 was far from consistent with what he now says. His explanation for the inconsistency was that he was confused and was not able to say by which of several companies the employees were employed. I have great difficulty accepting this. If indeed the applicant was in control of the affairs of the companies, it is hard to see how he would not know. Again, it is difficult to see why, if Bellhop Pty Ltd had no employees, the applicant would not have said so. Even if he were uncertain as to that fact, it is difficult to understand why he would not have said so.
In addition, the applicant is presently unable to say by which company the employees referred to were employed, if it were not Bellhop Pty Ltd. Several times during the course of the proceeding he said that the employees were employed by Bellechic Pty Ltd. When it was pointed out to him that that company went into liquidation on 28 October 1997, he was unable to specify which company employed, or might have employed, the employees who did the work. It is noteworthy that the fact that Bellechic Pty Ltd went into liquidation on 28 October 1997 is consistent with the applicant’s statement to the liquidator that Bellhop Pty Ltd commenced operating again in 1997.
Finally, the applicant did not contend that any person or company, other than Bellhop Pty Ltd, had in fact made deductions in respect of income tax from the salaries or wages of any employees and had paid group tax in respect of them.
The combination of facts in the evidence before me suggests that the applicant would have no chance at all of succeeding in relation to a defence that Bellhop Pty Ltd had no employees in the relevant period and for that reason the penalties could not have been imposed.
I turn then to the question of the service of the notices. There is evidence by way of an affidavit of David Ian Johnston that two notices pursuant to s 222APE of the Tax Act were sent by post to the applicant on 15 June 1999 and 15 September 1999 respectively. Two more were served on 16 October 1999 by delivering them to the letterbox at the address that appeared from Australian Securities and Investments Commission documents to be the applicant’s place of residence. The applicant relied on affidavit evidence that his daughter saw the envelopes in the letterbox on 20 October 1999 and his wife found and opened them on 21 October 1999.
If 21 October were the date of service, Bellhop Pty Ltd would have been wound up within 14 days of service of two of the notices and the greater part of the debt on which the County Court judgment was based would not have been owed. If 16 October were the actual date of service, there would have been no problem. I note for this purpose that service sufficient to satisfy the statutory requirements was accomplished by leaving the documents at the relevant address.
So far as the evidence goes, there is nothing inconsistent between Mr Johnston’s account of what he did and the accounts of the applicant’s wife and daughter. The applicant, however, suggests that Mr Johnston’s account should not be accepted for several reasons. First, 16 October 1999 was a Saturday. The applicant queries whether an official of the Australian Taxation Office would be troubling to travel down the Mornington Peninsula some distance, on a Saturday, for the purpose of serving the documents. These actions, however, are consistent with a conscientious approach to work, with awareness of the pending date for the hearing of an application to wind up Bellhop Pty Ltd, and with a desire to ensure that the notices were served at such a time as to make them effective if the company were to be wound up on that day.
Second, the applicant says that the envelopes were addressed to a street number, but the letterbox in which they were found did not have that street number on it. It had a roadside mail delivery box number. He contended that it is impossible to locate the right place by using a street number. I do not see why it should be accepted that there is such an impossibility merely because of the use of different styles of numbering. Considerably more facts would be required so as to make it clear that location of the place of residence of the applicant, as recorded in the documents in the Australian Securities and Investments Commission, was impossible.
The applicant also wished me to accept that the letterbox was checked daily. There is no affidavit evidence of this. The applicant explained this by saying that the limited material he placed before the Court of Appeal was limited only because he was responding to an affidavit of Mr Johnston, in which he had described what he had done as ‘hand delivering’ the notices. I do not accept this submission. The applicant was not merely responding to whatever Mr Johnston might have said. He was seeking to demonstrate to the Court of Appeal that he had a defence on the merits. The question of daily checking of the letterbox would have been an obvious element of his attempt to bring the service within the 14-day period. I cannot accept that he would not have obtained affidavit evidence of it if that were available. There is considerable danger in legal proceedings in allowing the filing of further affidavit material when a gap in the evidence is demonstrated. The temptation for someone to swear an affidavit that might be false is very great if the purpose of that affidavit is to plug a gap in the remainder of a case.
The applicant also took up a suggestion that was inherent in something I said in the course of the argument. He said that it was possible that the notices had been placed in a neighbour’s box in error and that the neighbour had put them in the applicant’s letterbox, being aware of the name of the person to whom they were addressed and of the location of the residence and the letterbox of that person. There is no evidence of this. Again, it is an obvious possibility, but there is no indication that the applicant has made any inquiries of his neighbours to try and find any evidence of it. There is certainly no such evidence.
I do not accept the applicant’s argument that the circumstances point to a realisation by Mr Johnston that less than 14 days were to elapse before the date fixed for the hearing of the application to wind up Bellhop Pty Ltd and that he then chose to deliver the notices within that 48-hour period and to perjure himself as to the date of delivery. So far as the evidence goes, the facts are consistent with what both sides say. Anything else is mere speculation. There is no reason why it could not be accepted that Mr Johnston, knowing the date of the winding-up hearing had been set and desiring to ensure that the penalty was imposed effectively, delivered the notices on a Saturday to ensure that they would be served more than 14 days before the winding-up. It is unlikely that a public servant in the Australian Taxation Office would be sufficiently motivated by a desire to collect money to perjure himself. The Australian Taxation Office collects money constantly, and frequently fails to collect it, for a variety of reasons.
Like the Court of Appeal, I am, therefore, of the view that the applicant has failed to set up an arguable case based on the short service of the notice by way of a defence.
The applicant also raised some other points as to why he said that the debt could not exist. He said that for the Commissioner to impose a penalty was an exercise of the judicial power of the Commonwealth and was unconstitutional. He said that the provisions relating to a penalty of this kind were more drastic than other provisions of the Tax Act under which penalties could be imposed for various offences after conviction. He drew attention to the absence of any safeguard of a proceeding leading to conviction. He invoked the principle of equality before the law, to say that this principle prevented the Commissioner from being made into a preferred creditor. For these reasons, he said that the relevant provisions of Divs 8 and 9 of Pt VI of the Tax Act were invalid.
In truth, the penalty, so-called, is not a penalty imposed by a decision of the Commissioner at all. The legislation itself imposes the penalty and not the Commissioner. All that needs to be done to attach the liability, which is called a penalty, is for the right circumstances to exist and the right notice to be given in the right manner. There is no exercise of the judicial power involved. There is no question of the constitutional validity of the process and consequently no matter arising under the Constitution, or involving its interpretation, that arises in this proceeding. There is no occasion for the delivery to the various Attorneys-General of notices pursuant to s 78B of the Judiciary Act 1903 (Cth) and therefore no need to adjourn the proceeding to enable the service of such notices.
The use of the term penalty to describe the creation of the liability under Div 9 of Pt VI of the Tax Act does not mean that the liability is to be equated with a penalty imposed after conviction for an offence. As I have said, the legislation itself lays down how what is described as a penalty comes to be imposed. The liability might have been described by any other appropriate term.
I am not aware of any doctrine of the invalidity of one provision in a statute on the ground that it is repugnant to another. I am aware of much authority as to the obligation of a court to interpret an Act as a whole, so that each provision is to be so far as possible made harmonious with others, but it is not open to the Court to choose to disregard one provision of an Act simply because another provision contains matter that might be seen to be inconsistent with it. In any event, there is no difficulty when a comparison is made between the criminal offence provisions of the Tax Act and the provisions of Divs 8 and 9 of Pt VI of that Act. It is easy to understand the purpose of Div 9 and the creation of the so-called penalty. Its purpose is to prevent the evasion of taxation obligations by persons who would shelter behind the limited liability attaching to a corporation. The piercing of the corporate veil has been considered appropriate by Parliament, as a means of assisting the collection of public revenue. There might be political objection to Parliament’s choice to do this, but such political objection can have no weight in a court of law.
There is also no reason why Parliament could not choose to make the Commissioner a preferred creditor, if that were its choice. In fact, as an analysis of the provisions shows, it has not done so in any sense relevant to this case. The creation of a statutory debt as a result of events prescribed in the statute is not the process of making the person to whom that debt is owed a preferred creditor. It does not infringe any principle of equality before the law. It would be absurd to suppose that some principle of equality before the law operated to prevent Parliament making the law such that it imposed different obligations and bestowed different rights on different people.
As a result, in my view no substantial reason has been advanced why the applicant should be allowed to go behind the judgment of the County Court and to contend that he owes no debt to the Deputy Commissioner. At both of his previous attempts in the County Court and in the Court of Appeal, the applicant has failed to show that he has an arguable defence on the merits to the Deputy Commissioner of Taxation’s claim. In my view, he has failed again before me.
It is now necessary to return to the question of the defects in the bankruptcy notice. These alleged defects are catalogued in the applicant’s affidavit of 14 October 2003 filed with his application for review of the registrar’s decision. They include the propositions that:
- the purported creditor in the bankruptcy notice was not the plaintiff in the default judgment;
- the Deputy Commissioner of Taxation of the Commonwealth of Australia is not an incorporated office, legal personality or body politic and is incapable of making any claim, demand or application;
- the creditor in the bankruptcy notice is not a legal entity or body politic that could lawfully delegate to Mr Johnston the power to make an affidavit on its behalf;
- Erin Kathleen Holland has never filed an affidavit alleging the debt to be owing in truth and reality;
- the plaintiff in the default judgment is not a legal entity or body politic and has never filed an affidavit alleging that the debt is owing;
- the Australian Taxation Office is not an incorporated office, body politic or legal personality and, as such, cannot employ anyone or make any demands;
- the Commissioner of Taxation was not granted the power to delegate under the terms of his commission;
- neither the Parliament nor the executive could alter the terms and conditions of the Commissioner’s commission, and the Commissioner cannot lawfully act as the head of a public service department as a Crown officer;
- Michael Joseph Carmody, in his capacity as a Secretary under the Public Service Act 1999 (Cth), cannot assign or delegate his powers as a Commissioner of Taxation and Crown officer;
- the Crown cannot effect any position or appointment within the public service and the government can neither appoint a Crown officer nor alter his or her commission; and
- only the Crown can impose taxes and penalties and can lawfully collect the same.
This collection of points can be dealt with relatively briefly. First, it is necessary to make reference to s 255-5 in Sch 1 to the Administration Act. That section provides as follows:
‘(1) An amount of a tax-related liability that is due and payable:
(a) is a debt due to the Commonwealth; and
(b) is payable to the Commissioner.
(2)The Commissioner, a Second Commissioner or a Deputy Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable.’
From my examination of the documents it appears that the name of the plaintiff in the judgment of the County Court is the same as the name of the creditor in the bankruptcy notice. The Deputy Commissioner is not required to be a body corporate or a legal entity. Such a person is a natural person, holding a statutory office, and empowered to sue in his or her official title to recover a debt due to the Commonwealth. So much was made clear by the High Court of Australia in James v Deputy Commissioner of Taxation (1957) 97 CLR 23.
The Commissioner and the Deputy Commissioner did not need to delegate the power to make an affidavit or to do anything else. The Deputy Commissioner did not need to make an affidavit herself. She had the power to authorise someone else to make an affidavit and to do other things on her behalf. So much is made clear by O’Reilly v The Commissioners of the State Bank of Victoria (1983) 153 CLR 1. The Australian Taxation Office did not have to be incorporated or a body politic or a legal personality. The administrative arrangements in relation to that office do not appear to me to be relevant to these proceedings.
Those points answer most of the issues raised by the applicant. The rest of the points raised by him do not appear to be relevant. The applicant also relied on some vague arguments about the legitimacy of the courts of Victoria, ‘the Bill of Rights’ and ‘the Imperial Acts Application Act’. The arguments were not made clear. To the extent to which they were put before the Court of Appeal, they were rejected by the Court of Appeal. For the same reasons, I would reject them. There were also allegations, in the applicant’s affidavit of 14 October 2003, of improprieties on the part of Mr Johnston in relation to matters not associated with this proceeding. Those allegations were not pressed and were not made out.
I am therefore not able to find that there were any defects in, or in relation to, the bankruptcy notice. I am not able to find that the applicant had, by reason of any such alleged defects or otherwise, any counterclaim, set off, or cross-demand against the Deputy Commissioner. For these reasons, it is necessary for me to dismiss the applicant’s application and to affirm the decision of Registrar Mussett, made on 23 September 2003, refusing to set aside the bankruptcy notice served on the applicant.
There appears to be no reason why the usual order that costs follow the event should not be made.
The orders of the Court, therefore, will be:
1.The application the subject of the notice of motion filed on 14 October 2003 be
dismissed.
2.The decision of Registrar Mussett, made on 23 September 2003, refusing to set aside
the bankruptcy notice served on the applicant, be affirmed.
3. The applicant pay the respondent’s costs of the application.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray. Associate:
Dated: 18 November 2003
Counsel for the Applicant: The Applicant appeared in person Counsel for the Respondent: H Riley Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 27, 28 October 2003 Date of Judgment: 29 October 2003
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