Money Tree MGNT SVS P/L v DEP Comm of Taxation (No 4) No. Scgrg-99-837
[2000] SASC 313
•30 August 2000
MONEY TREE MANAGEMENT SERVICES PTY LTD & INSTITUTE OF TAXATION RESEARCH v DEPUTY COMMISSIONER OF TAXATION (No 4)
[2000] SASC 313
Civil
1................ DEBELLE J...... This is an application to set aside an order made by me on 10 August 2000. The application is made pursuant to Rule 84.12. The steps leading to the order are as follows.
On 1 March 2000, the Chief Justice dismissed an application by Money Tree Management Services Pty Ltd (“Money Tree”) for an order setting aside a demand by the respondent, Deputy Commissioner of Taxation (“the Commissioner”), pursuant to s 459E of the Corporations Law, for payment of a debt due to the Commissioner for income tax, penalty and penalty interest. Speaking very broadly, Money Tree had contended that both the Income Tax Assessment Act and the appointment of the Commissioner were invalid. The Chief Justice rejected all of the contentions advanced on behalf of Money Tree. The solicitor acting for Money Tree was Mr Peter David Kerin, who is the present applicant.
In addition to the order dismissing the application by Money Tree, the Chief Justice made an order that Money Tree pay the Commissioner’s costs on an indemnity basis. The order was made on the footing that it should have been very clear to Money Tree, or at least to its advisors, who include Mr Kerin, that the submissions put were manifestly untenable and that there was no prospect of the proceedings being successful. The Chief Justice published reasons for his decision: Money Tree Management Services Pty Ltd v Deputy Commissioner of Taxation (No 1) [2000] SASC 54.
On 6 December 1999 the Commissioner had applied to join as parties to the proceedings Mr Kerin and an organisation called Institute of Taxation Research Pty Ltd (“ITR”). On 20 March 2000, the Chief Justice made an order joining ITR as a party and ordered it to pay the Commissioner his costs on an indemnity basis. The Chief Justice dismissed the Commissioner’s application against Mr Kerin. The reasons for this decision are Money Tree Management Services Pty Ltd v Deputy Commissioner of Taxation (No 2) (2000) 207 LSJS 287.
On 23 March 2000, Mr Kerin filed a notice of appeal on behalf of Money Tree against the orders of the Chief Justice made on 1 March 2000. The appeal was filed out of time. On 4 April 2000, Mr Kerin, acting as the solicitor for ITR, filed a notice of appeal against the Chief Justice’s order made on 20 March 2000.
No further step was taken in the action until 6 July 2000 when the Commissioner filed an application for an order dismissing the appeal by Money Tree as incompetent and, in the alternative, for security for costs. On 3 August, Mr Kerin, as solicitor for Money Tree, filed an application seeking an extension of time within which to appeal and other orders. The application was listed to be heard with the Commissioner’s application dated 6 July 2000. On 4 August, Bleby J adjourned the hearing of both applications until 9 August. On 9 and 10 August 2000, I heard the application.
On 10 August, I made a number of orders. For present purposes, it is sufficient to refer only to paras 1 to 7 of that order:
“1.... That the appeal by Money Tree Management Services Pty Ltd be dismissed as incompetent.
2That the application by Money Tree Management Services Pty Ltd in paragraphs 1, 2, 3, 4, and 6 of its application dated 3 August 2000 be dismissed.
3...... That the application by Institute of Taxation Research Pty Ltd for leave to appeal from a decision of the Chief Justice dated 23 March 2000 be refused.
4That the application by Institute of Taxation Research Pty Ltd in paragraphs 1, 2, 3, 4, and 6 of its application dated 3 August 2000 be dismissed.
5...... That Peter David Kerin be joined as a party to these proceedings.
6That Peter David Kerin and Money Tree Management Services Pty Ltd are jointly and severally liable for the costs of and incidental to the Deputy Commissioner of Taxation’s application dated 6 July 2000 and of the application by Money Tree Management Services Pty Ltd dated 3 August 2000.
7...... That the costs the subject of paragraph 6 of this order shall be taxed on the basis in each case that the costs include all costs of the Deputy Commissioner of Taxation except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the Deputy Commissioner of Taxation is completely indemnified for his costs.”
The present application is to set aside paras 5, 6 and 7 of that order. The application is not expressed in those terms. Instead, the application seeks the following orders:
“1.... That the order made on 10 August 2000 that Peter David Kerin pays the defendant’s costs of the within named proceedings be set aside.
2...... Such further and other orders as this Honourable Court deems fit.”
I have expressed those orders as para 1 and para 2, notwithstanding that they are shown as para 2 and para 3 in the application. There is no para 1 of the application. Thus, the effect of the application is to set aside paras 5, 6 and 7 of the orders made on 10 August.
Before dealing with the application and the submissions which were made on behalf of Mr Kerin, it is necessary to note some other facts.
On 29 March 2000, the Australian Government Solicitor, who is acting for the Commissioner, wrote a letter to Mr Kerin stating, among other things, that the Commissioner intended to apply to have the appeal dismissed as incompetent. In para 4 and para 5 of that letter, the Australian Government Solicitor said that his client will reserve the right to apply for costs against Mr Kerin on an indemnity basis. Paragraphs 4 and 5 read:
“4.... You are further placed on notice that we reserve the right to make application for costs against you personally on an indemnity basis for the costs incurred in relation to this appeal on the following grounds:
4.1... That you must know that this appeal has no or no reasonable prospects of success and, as such, that the Appeal should be discontinued forthwith.
4.2 That the case at first instance and as stated in the appeal can be regarded as an abuse of process.
4.3... It is clear from the evidence before Doyle CJ that the ITR has provided the substance of the submissions made for the applicant in these proceedings, and it is also clear that the ITR has provided the substance of the arguments raised in the Notice of Appeal.
5...... In the event that the Notice of Appeal is not withdrawn by 4.00pm on Friday 31 March 2000, we will proceed with the above applications, and will seek costs on an indemnity basis against your client and against you personally.”
Neither the Commissioner nor his solicitor lodged a written application in terms of para 4 of the letter. However, in the course of the hearing on 4 August 2000, before Bleby J, Mr Slattery, who appeared as counsel for the Commissioner, made it clear that the Commissioner was pursuing a claim for indemnity costs against Mr Kerin. Mr Slattery said:
“It became clear on the last occasion that Mr Kerin had no understanding whatsoever of those matters and was relying entirely on the ITR, the Institution of Taxation Research, as the second appellant, to inform him of those matters and he had no understanding of them but was prepared to bring those matters forward. I wish to bring that before the court again to ensure that is maintained and if it is we would want to be heard in relation to special cost orders, firstly, on an indemnity basis and secondly, against Mr Kerin personally.”
On that occasion Mr Hevey appeared as counsel for the parties. He said that he would get instructions.
The matter resumed on 9 August. Money Tree and ITR were represented by Mr Walsh QC. Mr Hevey did not appear. Mr Slattery repeated that it was the intention of the Commissioner to seek an order for costs against Mr Kerin personally. At the hearing on 9 August Mr Kerin was cross-examined on an affidavit he had sworn in support of the application for an extension of time in which to appeal. At one stage there was some debate whether Mr Walsh QC had a conflict of interest. It is unnecessary to go into the nature and extent of the debate. It is sufficient to note that it concerned the fact that Mr Walsh was appearing for both Money Tree and ITR. Mr Walsh considered his position and decided he would continue to act.
In the course of the cross-examination on his affidavit, Mr Kerin was asked questions which pertained to the issue of his personal liability for costs. At the conclusion of the cross-examination, Mr Walsh QC did not seek to re-examine Mr Kerin. Thus, no evidence was adduced in re-examination in answer to the application made by the Commissioner for costs against Mr Kerin on an indemnity basis, notwithstanding that Mr Walsh QC and Mr Kerin knew of the application that Mr Kerin pay costs on an indemnity basis.
After the evidence, Mr Slattery and Mr Walsh QC both made submissions. In the course of their submissions, they both addressed the question whether Mr Kerin should be liable to pay costs and pay those costs on an indemnity basis. Mr Walsh QC did not then indicate in any form, nor give the slightest hint, that Mr Kerin sought to adduce evidence in opposition to the application.
The matter was not completed on 9 August and was adjourned to 4 pm on 10 August. Mr Walsh QC again appeared. In addition, Mr Dal Cin appeared. Mr Walsh QC informed the court that Mr Dal Cin appeared because the potential conflict of interest had been raised on 9 August by Mr Slattery. Mr Walsh QC acknowledged that he had put some submissions on the question of whether Mr Kerin’s solicitor should be personally liable for costs. He said that he had recommended to Mr Kerin that Money Tree should receive separate advice on the question of costs and that Mr Dal Cin appeared for Money Tree. Mr Dal Cin confirmed that to be the position. I then heard further submissions from Mr Walsh QC and Mr Slattery. At the conclusion of those submissions Mr Dal Cin made brief submissions on behalf of Money Tree to the effect that costs should follow the event in the ordinary way. Mr Dal Cin said that he was not instructed to make any submissions on the question of costs as against Mr Kerin.
Thus, notwithstanding that Mr Kerin had been informed by the letter from the Australian Government Solicitor dated 29 March 2000 of the intention of the Commissioner to apply for indemnity costs against him, notwithstanding that Mr Kerin had been reminded of that fact before Bleby J on 4 August, notwithstanding that Mr Kerin was again reminded at the hearing of 9 August, both as to the terms of the application and by way of questions asked in cross-examination, and notwithstanding that there had been an opportunity to reflect on the matter overnight and during the course of the day on 10 August, no application was made by Mr Kerin himself or by counsel on his behalf for an opportunity to lead evidence in opposition to the application for costs on an indemnity basis or to make any submission on that topic.
Rule 84.12 permits the court to vary or set aside a judgment or order at any time if the justice of the case so requires. The circumstances in which the court will exercise that power have been considered by this Court on a number of occasions. In limited circumstances, it may be preferable to apply under Rule 84.12 to set aside an order instead of instituting an appeal: The Queen v Caruso (1988) 49 SASR 465 at 477 where White J said:
“The Rule seems to be designed to obviate the cost and delay of an appeal in certain circumstances.”
However, it is apparent from the context of His Honour’s remarks that he was adverting to the correction of errors which might not fall within the ambit of the slip rule. He was not referring to applications such as this application which seek to go entirely behind the order. In Copping v ANZ McCaughan (1997) 67 SASR 525, Doyle CJ and Lander J both held that Rule 84.12 may be used to reopen a judgment only if exceptional circumstances exist. As Lander J said at p 569:
“Although this Court does have jurisdiction to vary or revoke a sealed order of the court it is a jurisdiction that would be exercised only sparingly. A fundamental principle of litigation requires that there be an end to litigation: Wentworth v Woollahra Municipal Council (1982) 149 CLR 672; State Rail Authority (NSW) v Codelfa Construction Pty Ltd (1982) 150 CLR 29. A judgment regularly entered after both parties have had full opportunity to present argument on either side, could be only varied or revoked if the justice of the case compelled the variation or revocation of the orders.”
I refer also to the observations of the Full Court in a slightly different context in Collex Waste Management Pty Ltd v Corporation of the City of Enfield (No 2) [2000] SASC 140 para 27 that the court should have regard to the public interest that there should be finality in litigation and that a party should not be permitted “to patch up his case as it wends its way through the judicial system”.
In this case, it is submitted that Mr Kerin should be permitted to adduce evidence because the issues being argued on 9 and 10 August 2000 precluded him from taking steps to adduce evidence or make submissions on his own behalf. Mr Clayton QC, who appeared for Mr Kerin, also submitted that the proper course would have been to have heard the application against Mr Kerin after the application to extend the time within which to appeal and the application to dismiss the appeal as incompetent. Whatever force there may be in those submissions, the fact remains that Mr Kerin had the clearest notice of the intention of the Commissioner to apply for an order for costs against him on an indemnity basis. He was reminded of that application on 4 August and on 9 August. He took no step of any kind to inform the court that he wished to adduce evidence or make further submissions. Indeed, as I have already mentioned, Mr Walsh QC made submissions opposing the application.
A party who has been present in court and who knows that an issue concerning him is being debated and who does not seek to inform the court that he wishes to adduce evidence in opposition to it, cannot later apply to set aside an adverse ruling on the basis that he now seeks to adduce evidence in opposition to the application. This application has all the hallmarks of what the Full Court called an attempt to patch up a case as it wends its way through the judicial system. Nothing has been put which shows that there is any exceptional circumstance which would justify making the order which Mr Kerin seeks. He is an experienced solicitor. He had every opportunity to inform counsel that he wished to make submissions. If he perceived that the counsel he had instructed had a conflict of interest he, himself, could have stood up and indicated that he sought an opportunity to call evidence and make submissions. Obviously, had any such application been made, it would have been carefully considered. And, indeed, I would have acceded to it. That is not to apply to the benefit of hindsight. Rather, it is to state the obvious that a court would be likely to accede to such an application.
Rule 84.12 requires the court to have regard to the interests of justice. Mr Clayton QC has referred to the events of 9 and 10 August. He also refers to the affidavit sworn by Mr Kerin on 18 August 2000 and by Mr P G Alderman on 18 August 2000. He seeks to call both Mr Alderman and Mr Kerin in support of the application. There is a question whether it is appropriate for a court, on hearing an application made under Rule 84.12, to consider whether it should hear further evidence. If that is an appropriate course, and for present purposes I am prepared to assume that it is, it seems to me that it is appropriate to apply the same test as the test which is applied by a court of appeal when considering whether leave should be granted to call further evidence. I repeat that Rule 84.12 requires regard to be had to the interests of justice. Plainly, the principles which apply in relation to an application to call further evidence are grounded on the interests of justice and have an equal application in circumstances such as these. I therefore apply the tests to be satisfied on an application to call further evidence after judgment.
One test is whether the evidence could not, with reasonable diligence, have been obtained for use at the trial. This test, plainly, has not been satisfied. The events which Mr Kerin relies upon all occurred in late March and early April 2000, some five months before the application is heard. They were facts well known to Mr Kerin and, indeed, all of the facts are within Mr Kerin’s own knowledge. Plainly, with any reasonable diligence, he could have adduced the evidence at the hearing on 9 August.
The other test is that the evidence must be such that it would have an important influence on the result of the trial. It must be credible, although not necessarily beyond controversy. Expressed in other terms, the court is required to assess whether there is a real possibility that it would be likely to reach a different result from the result reached at the hearing or trial. With that test in mind, I turn to consider the evidence sought to be adduced. I take the evidence upon its face, assuming that it could be established.
Mr Kerin says that he consulted three practitioners. Mr Patrick Alderman, Ms Layton QC and Mr Hackett-Jones QC, and that he consulted two of them before issuing the notice of appeal on behalf of Money Tree. In his affidavit, Mr Kerin says that he received certain advice from a Mr Henke on 8 March. Mr Henke is described by Mr Kerin as “an employee or officer of some description of the Institute of Taxation Research”. He says that Mr Henke directed him to sections in the Australia Act 1984, the Commonwealth Constitution and Letters Patent dated February 1986 which created the office of the Governor of South Australia. He says that on 8 March he spoke to Mr Alderman who suggested that he should instruct senior counsel to advise on the proposed argument grounded on the Australia Act, the Constitution, and the Letters Patent.
Mr Kerin says that, between 8 and 20 March, he obtained copies of the Australia Act and some pages from what he calls “the Halsbury publication”, a publication which has not been more clearly identified. He further says that on 20 March he received from Mr Henke copies of the Letters Patent and the Government Gazette dated 6 March 1986 and a note of “Morgillo v Chapman & Murphy”. I believe that to be a reference to proceedings in the High Court entitled Moeliker v Chapman & Murphy to which reference is made in my reasons published on 10 August. He also was informed that the matter of R v Hughes (2000) 74 ALJR 802 might be relevant. He says that he drafted a notice of appeal and presented it to Mr Alderman asking him to settle it. Mr Alderman returned it with some amendments but suggested he should get advice from at least one Queen’s Counsel.
Mr Kerin says that on 22 March he redrafted the grounds of appeal and then on 23 March spoke for half an hour with Ms Layton QC and put to her both what he calls “the Seals and Corporations Law” arguments. In relation to the Corporations Law argument, he says that Ms Layton QC said that the matter would have to await a ruling from the High Court. In relation to the Seals argument, he says that Ms Layton QC had said that “there may well be an arguable case” and that he should speak to an expert in the theory of constitutional law and parliamentary process.
Mr Kerin says that on 23 March he showed Mr Alderman an amended draft notice of appeal and Mr Alderman said that the notice revealed a credibly arguable case. He adds that he told Mr Alderman he was going to seek further advice from Mr Hackett-Jones QC and that Mr Alderman said that would be desirable.
In his affidavit, Mr Alderman does not confirm all of the matters to which Mr Kerin deposes. He says that Mr Kerin informed him that he had received instructions to appeal for Money Tree and that the basis of the appeal was that the appointment of the Chief Justice may have been invalid by virtue of the Australia Act 1986, the timing of the use of The Great Seal of the United Kingdom and the appointment of Governor and that by virtue of all this the Governor had not been properly appointed and so could not have validly appointed the Chief Justice.
Mr Alderman asked Mr Kerin to produce a draft which he would consider. He says that Mr Kerin later produced a draft, together with copies of the Letters Patent and with the relevant pages of the legislation and the Gazette. Mr Alderman suggested some amendments but as the grounds of appeal were – to use Mr Alderman’s words – “unusual and technical”, Mr Alderman suggested that it would be in the best interests of Mr Kerin’s client if “he were to seek the advice of a senior counsel with a knowledge of constitutional matters”. He agreed with the suggestion that it might be desirable for Mr Kerin to see Mr Hackett-Jones QC.
It is apparent from Mr Alderman’s affidavit that he did no more than attend to matters which do not bear upon the constitutional arguments that were attempted to be raised or the Corporations Law arguments which were stated in the notice of appeal. Instead, he told Mr Kerin to seek advice.
Mr Alderman says that he was informed by Mr Kerin of an application to Callinan J which is the application in Moeliker v Chapman. He suggested that Mr Kerin should lodge an appeal in case that decision were to uphold the arguments which ITR sought to adduce. He later informed Mr Kerin of the desirability of putting the matter “into suspense” pending the decision of Moeliker v Chapman. He stated that it would be negligent if he did not institute an appeal. Mr Alderman’s evidence, taken at face value, shows that he took no role in the matter other than to suggest to Mr Kerin that he should get the advice of senior counsel.
So far as the advice of Ms Layton QC is concerned, the only evidence in Mr Kerin’s affidavit is to the effect that there may be an arguable case on the Seals argument but, in relation to that, it is to be noted that Ms Layton QC suggested that Mr Kerin should obtain further advice.
So far as the decision of the High Court was concerned, Ms Layton QC said that the argument would have to await a ruling from the High Court. That ruling was later given in R v Hughes (supra) which was delivered before the hearing on 9 August. That did not, in any sense, assist the appellant’s case.
Mr Hackett-Jones QC was not consulted until after the notice of appeal had been issued. There is no evidence from Mr Hackett-Jones QC as to what he advised. The only evidence is hearsay evidence of Mr Kerin. According to Mr Kerin, Mr Hackett-Jones QC said that it was credibly arguable that the office of Governor had not been correctly created in 1986. In relation to the Seals argument he said that it was “somewhat radical” and that he was uncertain as to what the outcome may be.
The effect of all of this evidence is that, if established, it shows that Mr Kerin sought advice from three practitioners. Mr Alderman did not advise upon the constitutional issues but what appear to be peripheral matters. I do not think that there is anything in consultation with Mr Alderman which would be capable of leading to a different result from that which has already been ordered.
The evidence of Mr Hackett-Jones QC, even as related by Mr Kerin, does not take the matter very far, particularly given Mr Kerin’s own evidence that Mr Hackett-Jones was not certain as to the outcome. The fact that an argument is radical is, of itself, not necessarily a reason why an argument on a constitutional issue should not be prosecuted. Some constitutional arguments which have succeeded might once have been classified as either radical or without any prospect of success. In addition, there is the evidence of Ms Layton QC who, according to Mr Kerin, said the case was arguable.
The material question is whether Mr Kerin’s conduct has been unreasonable in that he has failed to advise his client that the case is hopeless and has prosecuted a case which, plainly, had no prospects of success, knowing that to be the position. He has said that he has consulted three legal practitioners. I think that the question, whether his conduct was unreasonable, ultimately turns on the advice that he had received. I will not know the terms of that advice unless and until those practitioners are called.
I give consideration also to the question whether the failure of Mr Kerin, or those advising him, to file an affidavit from both Mr Hackett-Jones QC and Ms Layton QC as to the content of their advice, should be a factor which tells against the granting of the application. Where a person seeks to set aside an order of the court and to adduce further evidence, all the evidence should be before the court in a properly admissible form. No objection has been taken to the form in which the evidence has been adduced. Therefore, with some reluctance I am prepared to proceed on the basis of Mr Kerin’s affidavit and what he reports Ms Layton QC and Mr Hackett-Jones QC to have advised. I do so, notwithstanding the manifest self interest of Mr Kerin in this matter.
Having regard to that evidence, and given that the evidence of Ms Layton QC and Mr Hackett-Jones QC go directly to the question the propriety of Mr Kerin and his conduct, I am, albeit it with a great deal of hesitation, prepared to accede to the application to permit that evidence to be led.
I have already referred to the fact that Mr Kerin took no step to seek to adduce this evidence and to the fact that it militates strongly against his application. In doing so I intend to do no more than to say it will be a factor to which I will have regard in due course. In making the order to enable the evidence to be called, I do not, in any sense, necessarily accede to an order setting aside the application. This is but the first step in the hearing and determination of that application. For these reasons, I make an order permitting evidence to be led in support of the application.
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