Owen, Ronald v Deputy Commissioner of Taxation

[1995] FCA 940

C A T C H W O R D S

BANKRUPTCY - bankruptcy notice issued in respect of debts due in relation to sales tax liability - taxpayer's administrative costs of calculation and compliance with sales tax scheme - whether counter-claim, set-off or cross demand on the basis of compliance costs - no point of principle.

CURRENCY - whether Australian currency legal tender - no point of principle.

Bankruptcy Act 1966 (Cth) - ss.40(1)(g) and 41(7)
Judiciary Act 1903 (Cth)
Reserve Bank Act 1959 (Cth)

Deputy Federal Commissioner of Taxation for the State of South Australia v Ellis & Clark Limited (1934) 52 CLR 85.
Re Dymond (1959) 101 CLR 11
Mutual Pools and Staff Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (1992) 173 CLR 450
Re Skyring (1994) 68 ALJR 618
Re Skyring's Application [No 2] (1985) 59 ALJR 561

RONALD OWEN v DEPUTY COMMISSIONER OF TAXATION
No QG 132 of 1995

Davies, Spender & Kiefel JJ
7 November 1994
Brisbane

IN THE FEDERAL COURT OF AUSTRALIA                 )       No. QG 132 of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY                )
  )
GENERAL DIVISION  )

On appeal from a single judge of the Federal Court of Australia

BETWEEN:RONALD OWEN

Appellant

AND:DEPUTY COMMISSIONER OF TAXATION

Respondent

Coram:        Davies, Spender & Kiefel JJ
Place:         Brisbane
Date:          7 November 1995

MINUTES OF ORDER

THE COURT ORDERS THAT:

The appeal be dismissed with costs.

NOTE:        Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA                 )       No. QG 132 of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY                )
  )
GENERAL DIVISION  )

On appeal from a single judge of the Federal Court of Australia

BETWEEN:RONALD OWEN

Appellant

AND:DEPUTY COMMISSIONER OF TAXATION

Respondent

Coram:        Davies, Spender & Kiefel JJ
Place:         Brisbane
Date:          7 November 1995

REASONS FOR JUDGMENT

This is an appeal from a judgment of Drummond J of 11 August 1995 in which his Honour refused to adjourn proceedings before him and dismissed Mr Owen's application to set aside a bankruptcy notice which had been served upon him.

Section 40(1)(g) of the Bankruptcy Act 1966 (Cth) provides, inter alia, that:-

"A debtor commits an act of bankruptcy ... if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

(i)where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or

(ii)where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service;

comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained;"

Section 41 deals with bankruptcy notices. Section 41(7) provides:-

"Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied."

On the last day of the period available to him, Mr Owen filed an affidavit in the Bankruptcy Division of the Federal Court which put forward a claim that he had a counter-claim set-off or cross demand in accordance with s.40(1)(g). The basis of the matter claimed was that the debt which had been alleged by the creditor, the Deputy Commissioner of Taxation, and which was the subject of a judgment of the District Court of Queensland, was a debt principally for sales tax and that there had been costs incurred in ascertaining and collecting the sales tax for the Deputy Commissioner. Mr Owen wished to claim the wages incurred by his clerk employed to supervise the accountancy and balancing of the sales tax and the stationery and printing costs, etc. It was further said that it became necessary to have one person, either he, Mr Owen himself or an employee, collecting debts full time. Mr Owen said that the costs incurred in complying with the obligations for payment of tax far exceeded in quantum the amount of the Deputy Commissioner's claim against him.

That matter was referred by the Registrar to a judge of the Court and it then came before Drummond J for the purpose of consideration as to whether his Honour was satisfied that Mr Owen had a counter-claim, set-off or cross demand as was specified in s.40(1)(g) of the Act, and for the purpose of considering whether the bankruptcy notice should be set aside.

In the meantime, Mr Owen had attempted to raise his claim in the High Court of Australia and was awaiting a date on which he could seek leave to lodge an application which sought orders by way of mandamus or certiorari.  It is perhaps worth noting that such a claim could not have been the subject of a counter-claim in the District Court for the Judiciary Act 1903 (Cth) does not confer jurisdiction in such matters on that Court.

Drummond J considered that no purpose would be served by an adjournment of the proceedings and his Honour held that, as he understood the matter, all the matters upon which Mr Owen relied to attack the bankruptcy notice could have been made the subject of a counter-claim in the proceedings brought in the District Court by the Deputy Commissioner of Taxation.

For our own part, we are of the view that there was no substance in the claim which Mr Owen wished to propound.  Tax was due.  Sales tax and any other relevant tax which was involved in Mr Owen's case became payable under statutes.  In respect of sales tax it became payable under the Sales Tax Assessment Acts and under the Sales Tax Acts which imposed the tax.  The general validity of the sales tax scheme was considered by the High Court in Deputy Federal Commissioner of Taxation for the State of South Australia v Ellis & Clark Limited (1934) 52 CLR 85. At pp 89-90, Dixon J enunciated the general effect of the Sales Tax Assessment Acts and of the Sales Tax Acts and generally of the sales tax scheme and explained how that scheme fitted within the powers granted to the Parliament by the Australian Constitution.

The constitutional validity of the sales tax scheme was expressly challenged later in Re Dymond (1959) 101 CLR 11. In that case, the Full High Court upheld the constitutional validity of the sales tax legislation.

Not all sales tax legislation has been considered valid, however.  An example where the High Court has found legislation to be invalid is Mutual Pools and Staff Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (1992) 173 CLR 450. In that case there had been an attempt to impose sales tax upon swimming pools constructed in-situ. It was held that the legislation imposing that tax infringed s.55 of the Constitution, in essence because the legislation sought to impose a tax upon services in legislation which generally imposed a tax on goods.

But the result of the past history of such matters in the High Court of Australia is that all courts below the High Court are bound to apply the sales tax scheme and are bound by the High Court's expression as to the validity of that legislation.  For that reason, it would not have been open to Drummond J to have found that there was some basic invalidity in the sales tax legislation, nor would it have been open to Drummond J to have found that there could be a counter-claim, set-off or cross demand for the costs of the collection of sales tax. 

The Sales Tax Assessment Acts state how the tax is to be calculated.  They provide for the issue of assessments.  The amount which is properly assessed under the Sales Tax Assessment Acts and which becomes the subject of tax imposed under the Sales Tax Acts is the amount which is payable.  The amount payable is not that sum less the cost of collecting it.  It would be quite inconsistent with the provisions of the statutes to allow for a cross-claim or set-off of the costs of collection.  The costs, so far as the sales tax legislation is concerned, are the costs of keeping sufficient records to ascertain what is the amount of tax which is payable.  The tax is imposed upon the last wholesaler and it is the last wholesaler who must keep the necessary records so that his liability can be ascertained and the appropriate tax paid.

Mr Owen has submitted that the Constitution does not oblige citizens who pay tax to collect the tax and to keep appropriate records. But that is not so. The Constitution expressly provides for the enactment of Federal legislation with respect to tax and for the imposition of tax. In so doing, it provides for all those things which are necessary for the imposition and collection of tax, that is to say, for the imposition of obligations upon citizens and residents of Australia to keep all necessary records so that the quantum of the tax may be ascertained.

For those reasons, we are of the view that Drummond J correctly refused the adjournment and dismissed the application to set aside the bankruptcy notice. 

In the hearing of this appeal, Mr Owen also put forward what he called the "currency" argument.  They are arguments somewhat similar to those which were put forward by Mr Skyring during a long history of litigation.  They were considered by the
District Court judge who gave judgment against Mr Owen, and they were also considered by the Court of Appeal of Queensland which dismissed Mr Owen's appeal against the judgment of the District Court.  Both courts rejected the arguments.

It seems to us that the arguments are not open to either a court of Queensland or to this Court.  Such arguments have been rejected now by many many courts, including the High Court.  The judgment of Dawson J in Re Skyring (1994) 68 ALJR 618 refers to a number of the decisions which have rejected arguments of the type that Mr Owen wishes to put. There is a reference in Dawson J's decision to cases in the Supreme Court of Queensland and also to the judgment of Deane J in Re Skyring's Application [No 2] (1985) 59 ALJR 561 and to the fact that Deane J's judgment was confirmed on appeal by the Full Court.

In Re Skyring, Dawson J said that the matter was concluded, in the view of the Court, by s.51 (xii) and (xiii) of the Constitution and s.36(1) of the Reserve Bank Act 1959 (Cth). Dawson J concluded that no purpose would be served in further considering the issue of the alleged invalidity of the Australian currency as legal tender and that this issue had been concluded against Mr Skyring.

Just as there were decisions dealing with the currency points that bound Dawson J, so those decisions also bind this Court.  We are bound by the High Court's expression of view.  Thus, the matters raised by Mr Owen with respect to the currency do not found any ground on which this Court could act to set aside the bankruptcy notice. 

For those reasons, the appeal must be dismissed with costs.

I certify that this and the 6 preceding pages
are a true copy of the reasons for judgment herein of
the

Associate:

Date:   7 November 1995 

Appearing for the appellant:               In person

Counsel for the respondent:                P. Hack

Solicitor for the respondent:               Australian Government Solicitor

Date of hearing:  7 November 1995

Date of judgment:  7 November 1995