Port Bouvard Ltd v NKH Pty Ltd
[2011] WASC 231
•7 SEPTEMBER 2011
PORT BOUVARD LTD -v- NKH PTY LTD [2011] WASC 231
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 231 | |
| Case No: | CIV:1392/2011 | 23 AUGUST 2011 | |
| Coram: | MASTER SANDERSON | 7/09/11 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | PORT BOUVARD LTD NKH PTY LTD |
Catchwords: | Summary judgment application by defendant Defendant says plaintiff's claim timebarred Turns on own facts |
Legislation: | Fringe Benefits Tax Act 1986 (Cth), s 5 Fringe Benefits Tax Assessment Act 1986 (Cth), s 136, pt IIA |
Case References: | Christie v Purves [2007] NSWCA 182 Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 Williamson v Beere May & Meyer (a firm) [2011] WASC 105 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
NKH PTY LTD
Defendant
Catchwords:
Summary judgment application by defendant - Defendant says plaintiff's claim timebarred - Turns on own facts
Legislation:
Fringe Benefits Tax Act 1986 (Cth), s 5
Fringe Benefits Tax Assessment Act 1986 (Cth), s 136, pt IIA
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Ms K F Banks-Smith
Defendant : Mr B F Dodson
Solicitors:
Plaintiff : Norton Rose Australia
Defendant : Allens Arthur Robinson
Case(s) referred to in judgment(s):
Christie v Purves [2007] NSWCA 182
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Williamson v Beere May & Meyer (a firm) [2011] WASC 105
(Page 3)
1 MASTER SANDERSON: This is the defendant's application for summary judgment. There was no dispute between the parties as to the principles which apply to such applications. It is sufficient if I say both parties accepted summary judgment was available only in the clearest of cases where there was no doubt the plaintiff's claim was unsustainable. Moreover, both parties agreed for the purposes of a summary judgment application, the version of events pleaded by the plaintiff in the statement of claim was to be accepted.
2 In my view, this is not an appropriate case in which to grant summary judgment. However, as the matter was fully argued by the parties and as an appeal is available against an order dismissing a summary judgment application by a defendant, I should briefly state the reasons why I have come to this conclusion. In doing so, I will outline only in brief terms why I am not satisfied judgment ought run. I have reached no concluded views on any of the matters in issue between the parties.
3 The facts of the case can be summarised in the following way. The plaintiff is a property developer involved in the development and sale of residential lots in Western Australia. The defendant is a firm of accountants. In about April of 1999, the plaintiff retained the defendant to provide it with advice with respect to the fringe benefits tax implications of providing discounted residential land lots to the plaintiff's directors and employees.
4 The plaintiff alleges that certain advice was given and was relied upon by the plaintiff. As a consequence, fringe benefits tax returns which reflected the advice were lodged for the financial years between 30 June 1999 and 30 June 2007.
5 The plaintiff subsequently became aware the fringe benefits tax advice the defendant had provided was incorrect. On 22 December 2008, the plaintiff's then accountants wrote to the Deputy Commissioner of Taxation pointing out an error had been made in the tax returns lodged for various years and asking the commissioner to amend the returns. This the commissioner did. Accordingly, the plaintiff became liable to pay a substantial amount of further tax.
6 It was the defendant's position that the plaintiff's causes of action in negligence and misleading or deceptive conduct arose at the latest on 31 March 2003. Accordingly, it was argued, time expired for the plaintiff to bring its claim at the latest on 1 April 2009. This action was
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- commenced on 11 March 2011. Therefore, it was submitted, the claim is time-barred. This limitation point was the sole basis upon which this application was brought.
7 Before dealing further with the application, I should refer to what was said by the High Court in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 in relation to determining questions of limitation at an interlocutory stage of proceedings. The majority said (at 533):
We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.
8 That statement of principle was followed recently in this court in Williamson v Beere May & Meyer (a firm) [2011] WASC 105 [63], [64].
9 The defendant's case was put in these terms. The Fringe Benefits Tax Act 1986 (Cth) (the Act), by s 5 says 'Tax is imposed in respect of the fringe benefits taxable amount of an employer of a year of tax'. The 'year of tax' is defined in s 136 of the Fringe Benefits Tax Assessment Act 1986 (Cth) (the Assessment Act). The year starts on 1 April. So, for fringe benefits tax purposes, the tax year runs from 1 April to 31 March in the next year.
10 The 'fringe benefits taxable amount' on which an employer pays fringe benefits tax is calculated under pt IIA of the Assessment Act. Essentially, fringe benefits tax is imposed on the value of the fringe benefits an employer has conferred on its employees in a tax year.
11 In fringe benefits tax terms, the plaintiff alleges that each time it entered into a land sale under the scheme, it conferred a fringe benefit on its employees or directors. That fringe benefit is said to be equal to the discount on the market or arm's length price of the land sold to each employee or director. The benefit is said to have increased the plaintiff's fringe benefits taxable amount for the year of tax in which the sale took place. The plaintiff alleges it was liable for increased fringe benefits tax as a result of that increased fringe benefits taxable amount.
12 Liability of an employer to pay the fringe benefits tax levied by the Act is imposed by s 66(1) of the Assessment Act. When an employer first
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- lodges a fringe benefits tax return for a year of tax, that return is deemed to be the assessment by the commissioner of fringe benefits tax payable for that year. The commissioner has the power to amend assessments within the time periods set out in the Assessment Act.
13 The defendant says the fringe benefits tax consequences of the first alleged land sale transaction in respect of which the plaintiff was reassessed which settled on 22 November 2002 were the plaintiff became liable for the tax as calculated on the appropriate basis. That was the date upon which the liability for tax crystallised. The defendant says on the plaintiff's case therefore, on settlement of the first land sale it suffered a loss. The defendant is prepared to concede the loss may date from 31 March 2003, when the tax liability arose. But, in any event, the defendant says the limitation period expired, at the latest, on 1 April 2009.
14 In making this submission, the defendant relied heavily on the decision of the New South Wales Court of Appeal in Christie v Purves [2007] NSWCA 182. The facts of that case may be summarised as follows. Mr Christie had the defendant, his accountant, prepare tax returns for the period 1989 to 1993. The defendant made numerous errors in preparing those returns. One such error was that the 1991, 1992 and 1993 returns failed to obtain tax deductions for the maximum superannuation contribution payable for a self-employed person. On 11 December 2001, Mr Christie received amended notices of assessment for the years in which his tax return contained errors. Mr Christie commenced proceedings against his accountant on 15 May 2003. Among the claims Mr Christie made was a claim for just under $170,000. This was the amount by which his income tax would have been reduced had he been able to obtain the highest available deductions for superannuation in 1991, 1992 and 1993. The Court of Appeal, by a majority, held that each of Mr Christie's claims was statute-barred.
15 The defendant relied particularly upon what was said by Ipp JA at [53] - [56]:
Section 17, therefore, imposed an obligation on Mr Christie to pay income tax at the appropriate rates for each financial year. It was common ground that the income tax for each financial year only became payable on receipt by Mr Christie of the ATO’s assessment of the taxation payable by him. On 11 December 2001, Mr Christie received amended notices of assessment for the years in which erroneous tax returns had been submitted. His income tax became due and payable as at that date.
For Mr Christie to have reduced his income tax for the financial years 1991, 1992 and 1993 by making appropriate contributions to
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- superannuation, the contributions would have had to have been made in the years in question (and he would have had to have shown in each of those years that he was entitled to the benefit of income tax concessions available to self-employed persons for superannuation contributions).
If no such superannuation contribution was duly made in the financial year concerned, the opportunity for reducing the taxpayer’s taxable income for that financial year was lost, irretrievably, at the end of that financial year.
Thus, at the end of each of the 1991, 1992 and 1993 financial years, Mr Christie, by not making the requisite contributions in each such year (and in being incorrectly described as an employee of Bretfind in the tax returns for those years), irretrievably lost his entitlement to have his taxable income (and the income tax payable by him) reduced for the year in question. The fact that the income tax only became due on receipt of the income tax assessment was immaterial to the question of when his loss occurred [53] - [56].
16 I accept there are parallels between the Christie decision and this case. Once the transaction which led to the liability for tax being incurred was done, it could not be undone. Nonetheless, I have determined summary judgment ought not run. I have reached that conclusion for two reasons. First, in Christie, the Court of Appeal was considering the matter after there had been a full trial of the action. It was not an appeal from an interlocutory decision. While it is difficult to see in this case what further facts might emerge, I am mindful of the warning issued by the High Court in the Wardley decision about determining limitation questions at an early stage in the proceedings.
17 Second, even if the facts in the present case mirror closely the facts in the Christie decision, it seems to me open to question whether the Christie decision is correct. It is to be remembered it was a majority decision of the Court of Appeal. It is possible to imagine a situation where advice was given and acted upon by a party in the position of the plaintiff, with the result of the defendant's case the plaintiff became liable for tax. If it did not then discover it had the liability until more than six years later, its action might be time-barred. This would be the case despite the fact it never knew it had a cause of action. While that might be the proper approach in law, it is not something which, in my view, ought be endorsed on an interlocutory application.
18 For these reasons, I am satisfied the application for summary judgment ought be dismissed. The costs of the application, including the reserved costs, should be costs in the cause.
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