Starbrake Holdings Pty Ltd (ACN 116 485 682) v Commissioner of Taxation - [2019] WASCA 26

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   STARBRAKE HOLDINGS PTY LTD (ACN 116 485 682) -v- COMMISSIONER OF TAXATION [2019] WASCA 26
CORAM:   MURPHY JA
HEARD:   31 JANUARY 2019
DELIVERED          :   1 FEBRUARY 2019
FILE NO/S:   CACV 4 of 2019
BETWEEN:   STARBRAKE HOLDINGS PTY LTD (ACN 116 485 682)
First Appellant

TINA MICHELLE BAZZO AS BARE TRUSTEE FOR THE GUCCE HOLDINGS TRUST
Second Appellant

AND

COMMISSIONER OF TAXATION
Respondent

Catchwords:

Practice and procedure - Application for a stay - Turns on own facts

Practice and procedure - Application to hear related appeals together - Turns on own facts

Legislation:

Taxation Administration Act 1953 (Cth), s 14ZZM

Result:

Application for stay dismissed
Application to hear related appeals together granted

Category: B

Representation:

Counsel:

First Appellant	:	Ms S M Davies QC
Second Appellant	:	No appearance
Respondent	:	Ms C H Thompson

Solicitors:

First Appellant	:	Kings Park Legal
Second Appellant	:	No appearance
Respondent	:	Australian Government Solicitor

Case(s) referred to in decision(s):

Campbell‑Smith v Lean [2018] WASCA 77
Cywinski v Deputy Commissioner of Taxation [1990] VR 193
Cywinski v Federal Commissioner of Taxation (1999) 88 ATC 4800
Deputy Commissioner of Taxation v Alvaro (1990) 21 ATR 726
Deputy Commissioner of Taxation v Denlay [2010] QCA 217
Deputy Commissioner of Taxation v Ho (1996) 131 FLR 188
Deputy Commissioner of Taxation v Starbrake Holdings Pty Ltd [2018] WASC 397
Deputy Commissioner of Taxation v TDE Nominees Pty Ltd [No 2] [2011] NSWSC 1528
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Federal Commissioner of Taxation v Akers (1989) 89 ATC 4725
Federal Commissioner of Taxation v Mackey (1982) 64 FLR 432
Mercanti v Mercanti [2015] WASCA 206
Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Cold Mining Company Pty Ltd [2011] WASCA 188
Peter Sleiman Investments Pty Ltd v Deputy Commissioner of Taxation [2016] NSWCA 355
Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119
Southgate Investment Funds Ltd v Deputy Commissioner of Taxation [2013] FCAFC 10; (2013) 211 FCR 274
Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191; (2006) 64 ATR 316
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168

MURPHY JA:

This is an interlocutory application filed 25 January 2019 by the appellants in CACV 4 of 2019 for, in effect, an injunction restraining the respondent (Commissioner) from pursuing 'recovery action' in respect of the first appellant's tax‑related liabilities, pursuant to a Deed of Agreement, Guarantee and Indemnity dated 19 June 2015 executed by the Commissioner, the first appellant (Starbrake) and the second appellant (Ms Bazzo). I will refer to this document as the Deed.
The appellants also seek an order, by their application, that the appeal in CACV 4 of 2019 be heard together with a related appeal, CACV 3 of 2019. A number of documents (affidavits and submissions) sought to be relied on by the parties were not filed, but they were given leave to rely on them at the hearing.
The appeal in CACV 4 of 2019 is against Master Sanderson's decision in primary proceedings, CIV 2250 of 2018: Deputy Commissioner of Taxation v Starbrake Holdings Pty Ltd (primary decision).[1] By the primary decision, the learned master granted defendant's summary judgment in favour of the Commissioner against Starbrake and Ms Bazzo in proceedings which they had commenced in reliance on the Deed seeking to restrain recovery action by the Commissioner.
[1] Deputy Commissioner of Taxation v Starbrake Holdings Pty Ltd [2018] WASC 397.
The master also had before him a plaintiff's summary judgment application brought by the Deputy Commissioner of Taxation (who also, for present purposes, may conveniently be referred to as the Commissioner) in proceedings commenced by the Commissioner against Starbrake for tax liabilities in CIV 1043 of 2018. Master Sanderson ordered plaintiff's summary judgment in favour of the Commissioner in that matter. The master's reasons in that matter are also contained in the primary decision. Starbrake's appeal against those orders are the subject of CACV 3 of 2019.
In effect, the master (see pars 8, 9 and 12 in the primary decision) found that:
1.Starbrake admitted the tax debt of approximately $4.4 million claimed by the Commissioner in CIV 1043 of 2018.
2.Starbrake, in its amended statement of claim, in CIV 2250 of 2018, acknowledged that it is presently indebted in respect of the tax debt, but made a claim against the Commissioner under the Deed.
3.It is common ground that if the Commissioner was entitled to defendant's summary judgment in relation to Starbrake's claim under the Deed in CIV 2250 of 2018, then the Commissioner was entitled to plaintiff's summary judgment in CIV 1043 of 2018.
As I have indicated, Master Sanderson granted the Commissioner defendant's summary judgment in CIV 2250 of 2018 and plaintiff's summary judgment in CIV 1043 of 2018. Those orders were made on 20 December 2018. The master, in the primary decision, referred to Starbrake's pleading in CIV 2250 of 2018, the undisputed primary facts and the relevant terms of the Deed. The master concluded that Starbrake (and Ms Bazzo) had no arguable claim as pleaded and that it was an appropriate matter for defendant's summary judgment to be granted.
By way of further background, following the master's decision on 20 December 2018, the Commissioner, on 21 December 2018, sent various garnishee notices to creditors of Starbrake. Starbrake commenced both appeals on 7 January 2019. The Commissioner issued a statutory demand on Starbrake on 9 January 2019. There has been, I was told, an application filed very recently in the Federal Court to set it aside. On 25 January 2019, Starbrake's solicitors requested the Commissioner to withdraw from recovery action and not proceed with any recovery action against Starbrake.
In support of their application for, in effect, an injunction, the appellants referred to the general principles in relation to stay applications as outlined in various authorities by this court, including in Tradesman Technologies Pty Ltd v Ameduri;[2] Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Cold Mining Company Pty Ltd;[3] Eastland Technology Australia Pty Ltd v Whisson;[4] and Campbell‑Smith v Lean.[5]
[2] Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168.
[3] Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Cold Mining Company Pty Ltd [2011] WASCA 188.
[4] Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308.
[5] Campbell‑Smith v Lean [2018] WASCA 77.
The appellants contend that the points referred to in those decisions 'do not reflect the whole of the considerations on a stay' and contend that the principles explained in Peter Sleiman Investments Pty Ltd v Deputy Commissioner of Taxation[6] are applicable, or also applicable. In that decision, the New South Wales Court of Appeal said that it was not necessary that special or exceptional circumstances should be made out, and that it is sufficient for the applicant 'to demonstrate a reason or an appropriate case to warrant the exercise of discretion in its favour'.
[6] Peter Sleiman Investments Pty Ltd v Deputy Commissioner of Taxation [2016] NSWCA 355 [45] ‑ [46].
As to that submission, it may be noted that the New South Wales Court of Appeal was not dealing with s 15(3) of the Civil Judgments Enforcement Act 2004, which in terms refers to 'special circumstances'. Insofar as the appellants rely on r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 for an 'interim order' for a stay, I am of the view that, subject to one matter raised by counsel for the Commissioner to which I will come in a moment, the decisions in the earlier cases to which I have referred, including Eastman Technologies to the effect that a stay will not be ordered 'unless special circumstances are shown justifying the departure from the ordinary rule', should be followed in at least ordinary stay applications outside of the present statutory context concerning tax liabilities. In any event, any difference between the two formulations may be more semantic than substantive in their practical application to any given set of facts. See also in that regard the observations of Fullagar J in Cywinski v Federal Commissioner of Taxation,[7] where his Honour said that the 'word exceptional is unexceptional' if it means 'somehow out of the ordinary run'.
[7] Cywinski v Federal Commissioner of Taxation (1999) 88 ATC 4800, 4801.
Further, I would note that, in the case of an injunction such as the one sought here, the observations in Mercanti v Mercanti[8] would ordinarily be relevant. In that case, the court observed that the question of a reasonably arguable case is, to some extent, interdependent with the question of the balance of convenience.
[8] Mercanti v Mercanti [2015] WASCA 206 [16] ‑ [17].
Counsel for the Commissioner contends that there are further, particular, considerations which ought be taken into account in a stay application in these circumstances. Counsel refers in particular to the policy considerations evident in the Taxation Administration Act 1953 (Cth) pt IVC s 14ZZM, which provides that the fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending. Reference was made to various cases including Federal Commissioner of Taxation v Mackey;[9] Deputy Commissioner of Taxation v Alvaro;[10] Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation;[11] Deputy Commissioner of Taxation v Ho;[12] Southgate Investment Funds Ltd v Deputy Commissioner of Taxation;[13] Deputy Commissioner of Taxation v TDE Nominees Pty Ltd [No 2];[14] Cywinski v Deputy Commissioner of Taxation;[15] Federal Commissioner of Taxation v Akers;[16] Snow v Deputy Commissioner of Taxation;[17] and Deputy Commissioner of Taxation v Denlay.[18]
[9] Federal Commissioner of Taxation v Mackey (1982) 64 FLR 432, 435, 437 ‑ 438.
[10] Deputy Commissioner of Taxation v Alvaro (1990) 21 ATR 726, 730 ‑ 734.
[11] Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191; (2006) 64 ATR 316 [19].
[12] Deputy Commissioner of Taxation v Ho (1996) 131 FLR 188, 190 ‑ 191.
[13] Southgate Investment Funds Ltd v Deputy Commissioner of Taxation [2013] FCAFC 10; (2013) 211 FCR 274 [77].
[14] Deputy Commissioner of Taxation v TDE Nominees Pty Ltd [No 2] [2011] NSWSC 1528 [23] ‑ [32], [39].
[15] Cywinski v Deputy Commissioner of Taxation [1990] VR 193, 197.
[16] Federal Commissioner of Taxation v Akers (1989) 89 ATC 4725, 4727.
[17] Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119.
[18] Deputy Commissioner of Taxation v Denlay [2010] QCA 217.
Whilst there is some force in the submissions made by counsel for the Commissioner in that regard, the urgent unfolding of this application meant that the arguments about principle received scant attention by way of debate. Even applying the observations in Peter Sleiman, which are arguably the most favourable to the appellants, for the reasons which follow, I am not satisfied that it is in the interests of justice to grant a stay. In particular, I am not satisfied that the appellants have demonstrated a reason or an appropriate case to warrant the exercise of discretion in their favour.
First, I assume, without deciding, that the appeal in CACV 4 of 2018 will be rendered nugatory if an injunction or stay is not granted.
Secondly, I am not persuaded, on the material before me, that the appeal has reasonable prospects of success or, more particularly, sufficiently reasonable prospects of success to warrant, in all the circumstances, the grant of an injunction or stay. At the outset, I note that there is no draft appellants' case on which to assess the merits of any appeal. The appellants rely on the arguments summarised in their written submissions in support of the stay application. The appellants' submissions in that regard are, at least on one view of it, far from pellucid. (They were not signed by senior counsel for the appellants who appeared at the hearing.)
The appellants, in their written submissions (par 30 ‑ 31), appear to contend that a 'warranty' is not 'a term' of the Deed on its proper construction, and that the warranty in cl 6.1(k) is not a 'term' of the Deed for the purposes of cl 10.1(e) of the Deed. I am not persuaded on the arguments as presented to me, that the point has reasonable prospects of success in the appeal, or at least I am not persuaded that the point has sufficient cogency to justify, in all the circumstances, the grant of an injunction or stay.
The appellants also say (at par 32 ‑ 34 of their written submissions), in effect, that the master failed to address certain submissions before him as to the proper construction of the Deed. As to that, when the master's reasons are read as a whole, it might be thought that he did address the substance of the points raised. Nevertheless, even if the master did so err, I am not persuaded that, ultimately, the master's conclusion that the appellants had not raised an arguable claim for relief is sufficiently arguably erroneous so as to warrant the grant of an injunction or stay. In other words, I find it difficult to see, on the materials and necessary limited arguments before me, how the points which the appellants say the master failed to address could have affected the ultimate outcome.
The appellants also submit (at pars 35 ‑ 36) that the master erred in his findings at [16] of the primary decision. The master said that it did not make sense to contend, as the appellants had pleaded, that there was implied in the Deed both (1) a reasonable time to procure a valuation and (2) a reasonable time to provide the valuation once procured. The master appears to have accepted that there might be an implied term to procure within a reasonable time, but not that there were two separate implied terms as alleged. I am not persuaded, on the arguments presented to me, that that conclusion can be shown to be sufficiently erroneous for present purposes to warrant an injunction or stay. Further, as I would understand it, when the master's reasons at [16] ‑ [21] are read as a whole, the master found, in effect, that any claim by Starbrake that it was denied the opportunity to procure a valuation within a reasonable time lacked arguable merit because Starbrake, through Mr Caratti, took no step until 8 December 2017 to cause a valuation to be obtained, and then, it only took 62 days thereafter to obtain a valuation, including over the Christmas/January holiday period, which is less than the period provided for by the Commissioner in its request of 25 September 2017. Whilst it may be accepted that a reasonable time is to be considered prospectively, senior counsel for the appellants accepted that this evidence was admissible on that question, and I am not persuaded that the master arguably erred in giving it weight. Nor did the appellants plead what they contended to be a reasonable time in the circumstances. Nor did they plead the circumstances relevant to such a reasonable time. Nor was it suggested to me that there was evidence before the master of any particular circumstances which arguably indicated that the period to 4 December 2017 was not a reasonable period of time. Again, I am not persuaded that the master's ultimate conclusion is erroneous, or at least sufficiently erroneous, to warrant an injunction or stay in all the present circumstances.
The appellants also contend (pars 37 ‑ 39 of their written submissions) that the master failed to address evidence to the effect that 'procuring had occurred prior to expiry of the date specified in the 25 September 2017 Request'. However, the master did refer to the date the subject of the 25 September 2017 Request as being 4 December 2017 (see [12] of the primary decision), and the master found that it was not until 8 December 2017 (nearly three months later) that steps were taken to cause Starbrake to obtain the valuation (see [21] of the master's decision). In light of those findings, the point sought to be made by the appellants is not entirely clear to me. The appellants also contend (pars 40 ‑ 42) that the master should have held that the Commissioner did not act in good faith or acted unreasonably or held that such matters were inapt for summary judgment determination. Having considered the matters referred to, I am not persuaded, from the submissions before me, that any of those points reveal an arguable error, or at least a sufficiently arguable error as to warrant the grant of the orders sought. The same observations apply in relation to the appellants' submissions with respect to unconscientiousness and relief from forfeiture in pars 43 ‑ 45 of their written submissions.
Finally in this context, I think it may be accepted that the master was aware of the principles of summary judgment, and I am not persuaded on the arguments presented to me, that his reasons suggest to the contrary. As to summary judgment, see generally Fancourt v Mercantile Credits Ltd.[19]
[19] Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99.
In their written submissions (pars 46 ‑ 56), the appellants also contend that the master did not afford them procedural fairness. They also refer to the master's use of terms such as 'nonsense' with respect to their pleading as to two implied terms, and 'farce' with respect to the contention that they are entitled to claim relief against forfeiture. Notwithstanding the particular language used by the master, the effect of the decision was that the plaintiffs had not established that they had any arguable claim as pleaded, and that there was no real question to be tried. None of the particular matters referred to by the appellants, singly or collectively, seem to me to provide a basis upon which to conclude, for present purposes, that the appeal has sufficiently arguable prospects to justify the grant of an injunction or stay.
In relation to the balance of convenience, I am not satisfied that it lies in favour of the appellants. As to the particular arguments raised by the appellants (at pars 57 ‑ 61 of their written submissions), it seems to me that there is detriment to the Commissioner in awaiting the outcome of the appeal in that given that the underlying tax debt was admitted, the Commissioner, at least like any creditor, has an interest in collecting debts in a timely way. That point is confirmed and strengthened by, but is not dependent on, a consideration of the legislative policy exemplified in s 14ZZM of the Taxation Administration Act.
Insofar as the appellants rely on the proceedings they had commenced in the Administrative Appeals Tribunal to dispute the underlying tax debt, whilst I have considered the evidence of Mr Poli, the solicitor, in his affidavit sworn 29 January 2019, and the evidence of Mr Caratti in his affidavit of 18 January 2019, I am unable to make any real assessment of the prospects of success of those proceedings. Whilst Mr Poli, the solicitor, says that he 'verily believes' that Starbrake would be successful in the AAT review, that is not evidence to which I could give any real weight on the materials. Nor did any of the materials referred to by senior counsel for Starbrake at the oral hearing provide me with any real degree of confidence that the appellants had a meritorious claim in the AAT.
Insofar as the appellants contend that Starbrake is undertaking a property development, Mr Caratti, in his affidavit of 29 January 2019 (par 5), states that, in his experience, a substantial loss would arise to Starbrake if an external controller were now appointed. However, the information deposed to by Mr Caratti is fairly sketchy. The evidence lacks cogency and is, on that account, incapable of bearing much weight in the scales on the balance of convenience. Also, although Mr Caratti estimates that completion will be in approximately six months, there are no facts deposed to which would enable me to assess the reasonableness of that estimation. Even accepting that there may be some risk of the kind to which Mr Caratti refers, I am not persuaded that it is a significant point in the balance of convenience in the totality of the circumstances.

Insofar as the appellants contend that 'there exists substantial security under the Deed' (par 60 of their written submissions), there is no evidence before me of the value of the security. Further, I note and accept the evidence from the Commissioner in Mr Burns' affidavit to the effect that the properties the subject of the Deed are now in the possession of prior mortgagees.
In relation to the prospect that Starbrake may be wound up, the policy of the Corporations Act, relevantly, is that companies unable to pay their debts as and when they fall due should be wound up in insolvency rather than be left to trade. If Starbrake is unable to pay the taxation debt, as put orally in submissions on its behalf, then in circumstances where it has failed to demonstrate that its prospects of success in the appeal are reasonably arguable or that it has reasonable prospects in the AAT proceedings, that is not a matter which in the circumstances of this case weighs in favour of the grant of an injunction or stay. It rather tends to count the other way.
In any event, there is no satisfactory evidence of the appellants' assets and liabilities. In his affidavit sworn 29 January 2019, Mr Caratti annexed two 'draft' balance sheets which were acknowledged by senior counsel for the appellants to be purpose‑built for this litigation. Ordinarily, it would be expected that evidence as to the company's financial affairs would be provided through ordinary business records, such as accounts signed or approved by the directors.
Although the appellants sought an injunction upon giving an undertaking as to damages, no undertaking of damages has been filed, and it is not clear what value the undertakings would have been in any event.
Further, as there are prior mortgagees in possession of the property the subject of the Deed, the utility of making an order restraining the Commissioner (as later‑ranking mortgagee) from enforcing its security under the Deed against the properties is, to say the least, doubtful.
In oral submissions, senior counsel for the appellants emphasised that the proceedings in the AAT had, to use a colloquial expression, become 'bogged down'. To the extent that it was suggested that this was as a result of some impropriety by the Commissioner (and it was not clear that that was, ultimately, the submission), I would not make that finding. The details of the litigation appear in the affidavit of Mr De Bes sworn 30 January 2019. Having considered that material, there seems to be no proper basis for a complaint of any impropriety on behalf of the Commissioner. To the extent that the submission that the litigation had become 'bogged down' is (irrespective of blame on either side) a matter which ought weigh in favour of the appellants on the balance of convenience, I am unable to accept that submission. Absent the finding that Starbrake's claims in the AAT are meritorious, the mere fact that the proceedings have faltered, somehow, does not assist the appellants in this application.
Further, there is no prospect that the Commissioner would be unable to repay the money if Starbrake paid the tax debt and was subsequently found to have had no, or some lesser, tax liability.
In conclusion, in all circumstances, I am not satisfied that this is an appropriate case to justify the grant of the injunction or a stay.
There is no dispute that the two appeals are related and I would make an order that they be heard together.
Accordingly, I would make the following orders:
1.The affidavits of Allen Bruce Caratti sworn 29 January 2019, of Timothy James Poli sworn 29 January 2019, and of Ross Burns sworn 30 January 2019, and the respondent's written submissions dated 30 January 2019, are accepted for filing.
2.Paragraph 1 of the appellants' application filed 25 January 2019 is dismissed.
3.Paragraph 2 of the appellants' application filed 25 January 2019 is allowed and the appeal in CACV 3 of 2019 be heard together with the appeal in CACV 4 of 2019.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AW
Research Associate to the Honourable Justices Murphy & Mazza
1 FEBRUARY 2019