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Deputy Commissioner of Taxation v Hooper [2005] VSC 69 (21 March 2005)
Last Updated: 22 March 2005
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IN
THE SUPREME COURT OF VICTORIA
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Not Restricted
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AT
MELBOURNE
DEPUTY
COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA |
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JUDGE:
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WHERE
HELD:
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Melbourne
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DATE
OF HEARING:
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CASE
MAY BE CITED AS:
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Deputy
Commissioner of Taxation v Hooper |
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Income tax – Proceeding to recover income tax,
additional tax, interest and charges for late payment of income tax and
provisional
tax – Notices of assessment – Conclusive evidence -
Certificates constituting
prima facie
evidence of additional tax, interest and charges – Summary judgment
– Whether arguable defence in relation to additional
tax, interest and
charges –
Income Tax Assessment
Act 1936 (Cth)
s 177 –
Taxation Assessment Act 1953 (Cth)
s 8AAZJ, s 255-45.
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APPEARANCES:
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Counsel
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Solicitors
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For the Plaintiff
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ATO Legal Services Branch
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For the Defendant
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S V Winter & Co
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1 In this
proceeding the plaintiff claims from the defendant taxpayer $330,933.37 as the
aggregate of two claims, namely $315,667.62
as the amount owing in respect of
income tax, provisional tax and additional charges for late payment, and
$15,265.75 as the amount
owing under a “Running Balance Account”
(“RBA”) in respect of primary tax debts under the Business Activity
Statement (“BAS”) provisions. They were the amounts owing as at 8
December 2004 when the Listing Master commenced to
hear an application by the
plaintiff under O 22 for summary judgment in the proceeding. The hearing
was resumed and concluded on
17 December 2004 when the Listing Master
ordered that the plaintiff have leave to further amend its statement of claim in
the form
that had been produced to her, and that the defendant pay the plaintiff
$330,933.37 and the costs of the
proceeding.
2 Pursuant
to a notice of appeal filed on 21 December 2004, the defendant now appeals
against the allowance of the amendment and the
orders for summary judgment and
costs.
3 The
further amended statement of claim is in two parts. In the first part it is
alleged that the defendant was assessed to income
tax for the years of income
ended 30 June 1993 to 2000 inclusive, and that notices of assessment in respect
of those years were served
on the defendant on or about the issue dates of the
notices. It is then alleged that the defendant was required to pay provisional
tax in respect of the above years of income and that notices of provisional tax
in respect of those years were served upon the defendant
on or about the issue
dates of the notices. It is alleged that the defendant failed to pay income tax
and provisional tax in respect
of those years on or before the relevant due
dates. As a result the defendant became liable to pay, in respect of both
income tax
and provisional tax, additional tax by way of penalty, interest and
the general interest charge under several specified provisions
of the tax
legislation. The product was the amount claimed. Then follow particulars which
set out the relevant items and amounts.
The format is to state in respect of
each year the amount of each provisional tax liability and income tax liability
and, as to
each, the amount of additional tax, interest and general interest
charge less “payments and/or credits”. In no instance
do the
payments or credits equal the amount of the
liability.
4 In
the second part it is alleged that the Commissioner established an RBA in
respect of primary tax debts under the BAS provisions
and allocated the primary
tax debts and payments and other credits to the RBA. From time to time the
balance of the RBA was in favour
of the Commissioner and there was accordingly
an RBA deficit debt in respect of which the defendant became liable to pay the
general
interest charge for each such day. As a result the defendant was liable
for the amount claimed.
5 The
application for summary judgment was supported by affidavits affirmed by Bee-
Ling Loh, an employee of the Australian Taxation
Office (“ATO”), and
an affidavit sworn by Darren Lane, an employee in the Legal Services Branch of
the ATO. Mr Lane’s
affidavit explained and put in context certain
matters that had occurred in the conduct of the
proceeding.
6 Ms Loh’s
evidence verified the claim both by her own evidence of certain matters and the
production of a number of certificates
of the plaintiff. I refer more
specifically to the certificates below. For the moment I note that the
certificates were made and
produced under several provisions of the taxation
legislation. It is not necessary to identify the several legislative provisions
under the authority of which the various certificates were produced; extracts
of the provisions were produced in argument and there
was no controversy about
them. Nor was there controversy that the certificates in respect of the notices
of assessment of income
tax constitute conclusive evidence of the due making of
the assessment and that the amount and all the particulars of the assessment
are
correct, as provided in s 177(1) of the
Income Tax Assessment Act 1936 (Cth)
(“ITAA”). The only exception permitted by s 177(1) is that on
a review or appeal pertaining to the assessment
the production of the notice is
not conclusive as to the amount or particulars of the assessment. But that is
not this case. In
this proceeding the plaintiff seeks the recovery of amounts
which are debts presently due and payable. Hence, in this recovery proceeding
the defendant is precluded from questioning the amount of the assessments to
income tax and the particulars of the assessments.
See
F J Bloemen Pty Ltd v The Commissioner of
Taxation of the Commonwealth of
Australia
and, as instances in this Court of applications of s 177(1),
Deputy Commissioner of Taxation v
Cameron;
Deputy Commissioner of Taxation v
Collie;
Deputy Commissioner of Taxation v
Loftus.
7 On
the other hand, under the relevant statutory provisions all of the other
certificates constitute prima facie
evidence of the liability and matters stated therein. This includes notices of
instalment of provisional tax, additional tax, interest,
general charge and the
RBA deficit debt. In relation to these it is open to the defendant to challenge
liability for the amount
claimed.
8 The
defendant relied in opposition to the application on an affidavit sworn by
himself on 26 November 2004. He denied being indebted
in the amount claimed or
any amount at all.
9 Before
dealing with the substantive grounds raised by the defendant it is necessary to
deal with two points of a preliminary nature
argued by his counsel. They were
also raised before the Listing Master. The points were these:
(a) as
this was a second application for summary judgment, and the plaintiff had not
sought leave under Rule 22.02(4) to make the
application, let alone file an
affidavit setting out why leave should be granted, the application should be
refused.
(b) the
plaintiff should not have been given leave to further amend the statement of
claim; there had been previous amendments and
the plaintiff should not have a
further indulgence. Further, the need for the amendment should have been
explained by affidavit.
10 Although I
consider that each of these points should be rejected it is necessary to refer
to the history of the litigation to both
understand how the points arise and to
deal with
them.
11 The
proceeding was commenced on 15 May 2002. The statement of claim endorsed on the
writ claimed the defendant owed $214,994.84 in
respect of income tax,
provisional tax and additional charges for late payment in respect of the tax
years 1995 to 2000 inclusive,
and $11,202.17 as the RBA deficit debt. The
defence, which merely denied or did not admit the allegations, was filed on 24
July
2002. On 1 August 2002 Master Bruce made directions for interlocutory
steps. The plaintiff provided particulars of the statement
of claim and an
affidavit of documents but the defendant did not comply with the directions. On
2 December 2002 the plaintiff applied
for an order that the defence be struck
out and that the plaintiff have leave to enter judgment. That was dealt with by
orders in
February 2003 that the defendant provide particulars and an affidavit
of documents, and those orders were complied with. On 13 March
2003 the Listing
Master directed a reply, inspection of documents and interrogatories and
referred the proceeding to mediation.
12 On 29
August 2003 the plaintiff filed a summons for summary judgment in the
proceeding. Affidavits by Ms Loh were filed in support.
The summons was
adjourned on a number of
occasions.
13 At
one point, following (as I was told) the agreement of the plaintiff to consult
with the defendant in relation to his claims as
to his indebtedness, the
plaintiff reviewed the defendant’s account and provided him with a
reconciliation document. That
was followed, on 26 May 2004 by a meeting between
representatives of the parties and the defendant at which the defendant was
provided
with an updated statement of his account with the general interest
charge calculated to 25 May 2004. The defendant said he would
review the
documents but made no subsequent contact to discuss the
matter.
14 Following
that, on 11 June 2004, the Master ordered by consent –
(a) that
the plaintiff’s summons for summary judgment be “dismissed without
prejudice to the plaintiff’s right to
make a further application for
summary judgment”,
(b) that the plaintiff have leave to amend the
statement of claim, and
(c) that the defendant file a defence to the
amended statement of claim.
15 The amended
statement of claim took the claim back to include the 1993 and 1994 tax years
and also amended the amount of some items.
The total amount claimed increased
to
$325,748.37.
16 A
defence was filed on 21 July 2004 but, as before, it consisted merely of bare
denials or
non-admissions.
17 That
was followed, on 18 August 2004, by the plaintiff filing the present summons for
summary judgment. The application was supported
by an affidavit affirmed by
Ms Loh to which were exhibited the following:
(b) notices
of assessment pursuant to s 177(1) of the ITAA for the years ended 30 June
1993 to 30 June 2000 inclusive,
(c) a statement of the defendant’s RBA as at
10 June 2004, and
(d) a
certificate pursuant to
s 8AAZJ of the TAA stating the amount of the
defendant’s RBA deficit debt as at 18 August 2004.
The product of these certificates was a present
debt of $333,532.40. Ms Loh deposed that the additional tax for late
payment, interest
for late payment and the general interest charge imposed on
the defendant and claimed by the plaintiff had been properly calculated
in
accordance with the applicable statutory provisions (which she identified). She
deposed to her belief that there was no defence
to the claim and requested
summary judgment for the above amount.
18 Then followed
several adjournments of the summons.
19 In the
meantime the plaintiff gave consideration to the claim and the evidence in
support. On 28 October 2004 Ms Loh affirmed a further
affidavit in
support. She stated that the plaintiff intended to abandon her claim in respect
of two notices of instalment of provisional
tax in relation to the first and
fourth quarters of the year ended 30 June 1993. The claim was now for
$326,354.44 comprising:
(a) liability
for income tax, provisional tax, late payment penalty and general interest
charge of $311,299.91, and
(b) liability for the RBA deficit debt of
$15,054.53.
A certificate of the plaintiff pursuant to
s 255-45 of the TAA and identifying the provisional tax notices in the 1993
to 1999 tax
years was exhibited to the affidavit. Ms Loh also exhibited 22
notices of instalment of provisional tax in respect of the 1993 to
1999 tax
years and the provisional tax notice in respect of the 2000 tax year. Each were
certified by the plaintiff under the TAA.
Ms Loh deposed that the amounts
of provisional tax on each notice were not paid on the due date whereby the
defendant became liable
to pay the amount outstanding, additional tax for late
payment, interest for late payment and general interest charges under the
several statutory provisions she identified. Finally, Ms Loh deposed that
there was no defence.
20 A proposed
further amended statement of claim was delivered to the defendant’s
solicitors on 4 November 2004 with a request
that the defendant provide a
response. No response was received.
21 The
plaintiff’s summons was adjourned to 8 December 2004 when the Listing
Master commenced hearing the application. When the
hearing commenced the
plaintiff filed a further affidavit of Ms Loh. This affidavit, affirmed on
8 December, exhibited three further
certificates of the plaintiff, namely a
notice of amended assessment for the year ended 30 June 1994 and two
certificates under the
TAA which produced a total present indebtedness of
$330,933.37. She deposed that the amounts for additional tax for late payment,
interest and general interest charge were properly
calculated.
22 Before
the Listing Master, and before me, the plaintiff relied on the affidavits of
Ms Loh affirmed 18 August, 28 October and 8 December
2004. The plaintiff
also relied on Lane’s
affidavit.
23 I
now deal with the two preliminary
points.
24 Rule
22.02(4) provides that except by order of the Court the plaintiff shall make
only one application for judgment under the Order.
Counsel submitted that the
order made on 11 June 2004 did not alter that position. The plaintiff required
leave to bring a second
application and it had neither filed a summons seeking
such leave nor an affidavit as to why such leave should be granted.
Accordingly,
there was no material before the Court which could enable it to
exercise the discretion to allow a second application. It was also
submitted
that leave should be refused on the separate ground of the number of attempts
the plaintiff had made to ascertain the amount
owed and formulate the claim.
This latter submission included reference to an earlier proceeding brought by
the plaintiff against
the defendant which had been
discontinued.
25 The
primary submission on this point is untenable if not disingenuous. The order of
11 June 2004 was made by consent in circumstances
where the plaintiff, following
reconsideration of the matter at the request of the defendant to consult as to
his indebtedness, had
produced an amended statement of claim upon which it
intended to proceed. The effect of the order that the summons be dismissed
without prejudice to the plaintiff’s right to make a further application
for summary judgment was to entitle the plaintiff
to make such a further
application on the amended claim, and to do so without first obtaining leave.
If the order did not have that
operation, then it was empty of meaning. That is
because, absent the order, it was open to the plaintiff to seek leave to make a
second application. If the order still left that requirement on the plaintiff
then it had no effect at all, and that cannot have
been the intention of the
parties or the effect of the order. It therefore being open to the plaintiff to
file a further application
for summary judgment, there was no need for the
plaintiff to also apply for leave to file that summons and to support that
application
by an affidavit to establish why the indulgence should be granted.
The plaintiff was at liberty to file its further application
together with such
affidavits in support as it was advised. I should add that even if I were wrong
in that conclusion it is so overwhelmingly
obvious an appropriate exercise of
discretion in the circumstances that leave would be granted to make the second
application.
26 The second
point was that the plaintiff should not have been given leave to amend the
amended statement of claim. In the circumstances
of this case the submission is
fatuous. In my view leave to amend was properly granted. The amendments were
few, did not change
the nature or substance of the claim, but deleted two
quarterly periods concerning provisional tax instalments in 1993, and reduced
by
recalculation one item, to produce an overall reduction in the amount claimed as
at 10 June 2004. Further, the defendant had
had the amendments since 4 November
2004 and had not suggested any difficulty. And there hardly could have been.
The claim was
supported by the earlier affidavits of Ms Loh, and was
further supported by her affidavit of 8 December 2004 which brought the amount
of the debt up to date. Further, Ms Loh explained the deletion of the 1993
items, and the rest were obvious. There was no need
for any elaboration. In my
view, in the circumstances it was correct to permit the amendment and to proceed
to hear the application
on the basis of the further amended statement of claim.
No other course consistent with the expeditious, economic and just determination
of the proceeding was properly
open.
27 I
turn then to deal with the substantive matters argued on the
application.
28 The
first point is that the evidence of Ms Loh including the certificates
verifies the facts on which the claim is based. Nevertheless,
the defendant
submits that the plaintiff has failed to make out the proofs necessary to obtain
judgment. While not questioning the
conclusiveness of the notices of
assessment, counsel submitted that the prima
facie evidence of the plaintiff concerning additional tax, interest and
general charges was displaced by the earlier statements of account
provided by
the ATO which do not support the claim and in particular disclose allocations of
payments by the defendant that differ
from those shown in the latest
reconciliation. In the face of this conflict in the materials produced by the
plaintiff, it was not
possible for the Court to ascertain precisely what sums,
if any, were due from the defendant. In other words, the defendant should
have
leave to defend not merely on account of his evidence in opposition, but because
the plaintiff’s evidence cannot be accepted
for the purpose of summary
judgment. It was further submitted that the Court could, in its discretion,
grant leave to defend on
terms as to the payment of interest pending the hearing
and determination of the proceeding. It was further requested that the
proceeding
be referred to mediation. The convenient way in which to deal with
the matters relied upon by the defendant is to consider them
in the order in
which they appear in his
affidavit.
29 At
an early part in his affidavit the defendant referred to and exhibited
statements of his account as at 10 February 2004, 13 April
2004 and 9 June 2004
provided to him by the plaintiff. He said that these statements recorded
payments in excess of the amounts
of primary tax, and that the plaintiff’s
claim is for penalty tax and interest. He said that the plaintiff had not
explained
the changes in the further amended statement of
claim.
He then referred to an earlier proceeding, 6006 of 1997, brought by the
plaintiff against him for payment of tax, penalties and interest
in respect of
the same period as the present proceeding but only up to 1997, and to an
affidavit sworn in that proceeding by John
Whitehouse, an employee of the ATO,
on 6 August 1998 in support of an application for summary judgment. The
Whitehouse affidavit
sought to verify the claim in that case and thus set out
details of the claim. One of the exhibits, JW41, recorded the debits and
credits, including the nature of the items, in the defendant’s account in
and between 1989 and 1997. These included certain
items of credit in respect of
provisional tax on pages 18-22 to which counsel drew attention and which,
counsel submitted, showed
that the defendant was then ahead in payment of his
provisional tax and which items should have been credited in his favour. At
the
least, it was said, these items showed that there were issues that required
investigation. I note that this proceeding was discontinued
without
adjudication. The plaintiff then commenced the present
proceeding.
30 Against
that background, in paras 23-26 the affidavit addressed the year ended 30
June 1993. Paragraph 23 set out the item as it
appeared in the particulars to
the further amended statement of claim concerning income tax liability for the
1993 year, namely:
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Income tax
liability for the year ended 30 June 1993 as per notice of assessment issued 19
September 1994 which became due for payment
on 22 October 1994
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64,998.14
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PLUS:
Additional tax for late payment pursuant to section 207 of the ITAA 1936,
calculated to 4 October 1998
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19,978.82
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PLUS: Interest
for late payment pursuant to section 207A of the ITAA 1936, calculated to 4
October 1998
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26,908.53
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PLUS: The
general interest charge pursuant to Item 93 of Schedule 2 of the ANTS(PAYG)A
1999 and Division 1 of Part IIA of the TAA 1953, calculated up to and including
9 June 2004 |
29,448.13
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141,333.62
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LESS:
payments and/or credits
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64,998.14
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76,335.48
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The amount of $76,335.48 formed a portion of the
amount claimed in the further amended statement of claim. This claim, the
defendant
said, was incorrect, it had not been verified by Ms Loh, and the
relevant notice of assessment had not been produced. The correct
position, the
defendant stated in para 26, was evidenced by the copy of notice of
assessment issued on 19 September 1994 which was
Exhibit JW2 to the Whitehouse
affidavit. That certificate recorded that rather than being liable to pay any
tax for the 1993 year
the defendant had a credit in his favour arising out of
surplus provisional tax paid in previous years and as a consequence there
was no
late payment of income tax for the 1993 year. In view of this claim it is
necessary to set out the items in Exhibit JW2.
Exhibit JW2 is headed
“Extract From A Notice Of Assessment” and sets out the following as
details of the defendant’s
assessment.
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YOUR
TAXABLE INCOME IS $158,432
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Tax
on Taxable Income
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$66,277.04 DR
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Medicare
Levy
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1,980.40 DR
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Total
Credit for Tax Stamps/Group Certificates
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2,694.30 CR
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Credit
for 1993 Provisional Tax
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72,124.00 CR
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Rebates
& Other Credits
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565.00 CR
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Balance
of this Assessment
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7,125.86 CR
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31 When the
defendant swore his affidavit, Ms Loh’s final affidavit which exhibited
the notice of assessment for the 1993 year
had not yet been provided. Exhibit
JW2 was in fact an extract from the assessment for the 1993 year and not the
full notice of assessment.
Section 177(4) of the ITAA authorised production of
an extract.
32 The
extract set out, in identical terms, the statement of the amount of the
defendant’s taxable income down to the item “Balance
of this
Assessment $7,125.86”. That is where the extract ends but the actual
notice of assessment contains the following further
items:
Outstanding provisional tax instalment
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$154,018.42 DR
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Net amount payable
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$146,892.57 DR
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The actual amount payable was then rounded down by
the reduction of two cents.
33 Section 177(4)
provides that the production of an extract from a notice of assessment shall be
evidence of the matter therein set
forth to the same extent as the original
would be if it were produced. There is no clash between the items in the
extract produced
as an exhibit to the Whitehouse affidavit and the notice of
assessment, and there could not be as the former is an extract from the
latter.
34 The
amount of the tax liability of $64,998.14 is readily calculable from the items
in the notice of assessment and the extract. It
is thus –
Tax on taxable income
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$66,277.04 DR
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Medicare levy
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$1,980.40 DR
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Credit for tax stamp/group certificates
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$2,694.30 CR
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Rebates and other credits
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$565 CR
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$64,998.14
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For this purpose the credit for 1993 provisional
tax is not taken into account. The item is a credit to reflect the effect of
the
annual adjustment to income tax. It is not a monetary adjustment.
Provisional tax can only give rise to a monetary allowance for
adjustment if it
is actually paid. The system of provisional tax has been explained in
Federal Commissioner of Taxation v
Clyne
and Kinny v Deputy Federal Commissioner of
Taxation.
As Dixon CJ stated in Clyne provisional
tax was not a separate tax but a liability ancillary to income tax. The amount
payable was provisional upon the assessment
for the year. When the assessment
was issued, which stated the amount of the taxable income and the actual tax
payable, the liability
to provisional tax was extinguished. The
Commissioner’s rights then lay in recovery of the tax thus assessed
together with
any amount of additional tax “payable in respect of
provisional tax unpaid during the period when it was due and
payable”.
35 It is seen
that, consistently with this system of taxation, the above claim in respect of
income tax in the 1993 year is for the income
tax liability for the year and
additional tax and interest on account of late payment plus a general interest
charge.
36 In these
circumstances the following conclusions may be expressed concerning the
defendant’s contentions. First, the notice
of assessment has been
produced and the claim has been verified. Secondly, the notice of assessment
and a proper understanding of
the provisional tax system makes it clear that the
defendant did not have a credit for provisional tax paid or a balance in his
favour;
he was in fact in overall debit to $146,892.55. Thirdly, once analysed
it is apparent that the defendant’s attack is upon
the correctness of the
notice of assessment. Indeed, in para 26 he states that the “correct
position” is evidenced by
the Whitehouse extract. However that was a mere
extract and the “correct” position appears in the actual notice of
assessment
which is conclusive of the amount and particulars of the assessment.
For these reasons the contentions in paras 23-26 do not raise
an arguable
defence. Indeed, strictly speaking, the affidavit is not admissible against the
conclusive status afforded the notice
of assessment by s 177(1).
37 I add that
neither in this nor in the other instances did the defendant challenge the
actual calculation of the amounts of the additional
tax, interest and general
interest
charge.
38 In
his affidavit the defendant proceeded to make the same contention in relation to
the 1994 year. For the reasons given above, the
contention is untenable.
39 In
paras 31-38 the defendant agitates the notice of assessment for the 1995
year. In the course of doing so he relied on Exhibit
AEH13 to his affidavit
which is a notice of amended assessment relating to the 1994 year, and which is
therefore irrelevant to the
1995 year. Apart from that, the contentions are not
arguable for the reasons given
above.
40 The
position is the same with the 1996 and 1997 years where contentions are made in
the same form.
41 Then, in
paras 47-54
the defendant relies on an agreement made with the plaintiff in March 1992 in
settlement of a proceeding brought against him by the
plaintiff in the County
Court for tax liabilities. He states that pursuant to “the
agreement” he agreed to pay and the
plaintiff agreed to accept payment of
$138,431.28 in full settlement of all arrears of income tax and provisional tax
then due, plus
additional tax and interest for late payment and costs. In
summary, he was told that this amount brought him up to date, and “would
wipe the slate clean”. He produced a letter from the plaintiff dated 18
March 1992 “confirming the said 1992 agreement”.
In view of that
statement it is necessary to refer to the terms of the letter, which
states:
“Further to your telephone conversation this day
advising that you are making application to the Bank of Melbourne for a Home
Equity Loan for $100,000 and that you need to provide the Bank with written
confirmation of the purpose of the loan.
It is confirmed that this office has sought immediate
payment of arrears of tax due and owing by you in the sum of $135,431.28.
This
amount includes the balance of provisional tax instalments of $74,826.46 and
additional tax for late payment accrued to 18 March
1992 of $60,504.82.
It is further confirmed that you have agreed to apply the
proceeds of the loan towards payment of the above amount and will authorise
the
Bank of Melbourne to pay the amount lent directly to the Deputy Commissioner of
Taxation.”
I note that due to the poor quality of the copy of
the letter produced to me the dollar amounts stated may not be precisely
correct.
42 The defendant
said that he made payments between 18 March 1992 and 15 May 1992 on which date
the plaintiff wrote acknowledging receipt
of $100,000.00 “in respect of
income tax outstanding” and noted that $10,411.30 remained outstanding in
respect of the
balance of additional tax for late payment and legal costs to
finalise his account. He paid this amount by three payments in May
and June
1992. He then alleged, in paras 50 and 51, that in breach of the agreement
the plaintiff had wrongly applied $61,400.93
in purported payment of additional
tax and interest allegedly incurred in the years 1987-1991, which amount should
be offset against
the tax liabilities payable on 5 October 1998 and the
removal of additional tax, interest and general interest penalties imposed
for
late payment of the respective amounts so credited.
43 Then, in
para 52 the defendant said that on 5 October 1998 he paid the plaintiff
$150,000.00 in payment of his income tax liability
for the 1993-1998 years. Of
that amount only $88,235.51 was allocated to payment of income tax for those
years (para 53); $61,764.49
was wrongly applied in payment of additional tax
and interest incurred for late payment of various amounts of tax in the
1987-1991
years (para
54).
44 The
defendant then (in the second para 52) referred to the three statements of
his account provided by the plaintiff and referred
to above, from which it was
apparent the plaintiff had purported to change the allocation of monies paid
between 1988 and 1992 to
represent the payment between those years of the
additional tax and interest for late payment allegedly incurred for late
payments
of various amounts of tax in the 1988-1991 years set out in particulars
in the County Court proceeding and stated therein to have
been paid out of the
$150,000
payment.
45 The
defendant further said, in the second paras 53 and 54, that upon
examination of the three statements of account referred to above
it was apparent
that five amounts totalling $6,346.44 had been wrongly applied in payment of
additional tax and interest alleged
to have been incurred after the making of
the 1992 agreement. As a consequence he was entitled to be credited with that
amount.
46 These
contentions concern and depend on, the 1992 agreement. The defendant stated
that the letter dated 18 March 1992 confirmed the
agreement. In my view the
letter does not confirm an agreement. The letter is of a different nature as is
evident from its terms.
It referred to advice of the defendant as to applying
for a loan, to confirmation that the plaintiff had sought immediate payment
of
arrears of tax due in the sum of $135,431.28 (including the balance of
provisional tax instalments and additional tax for late
payment to 18 March
1992) and confirmation of the defendant’s agreement to apply the proceeds
of the loan towards payment of
that amount. The letter is reflective of a
taxpayer wishing to discharge his liability as at that date. The apparent
purpose of
the letter is to provide information to the Bank in connection with
the making of the loan. In my view it is not a letter which
on its terms
reflects an agreement by the plaintiff to accept a sum in settlement of a
liability for outstanding tax and related
liability. Relevantly, the letter is
merely a statement of the plaintiff of an amount in respect of which the
plaintiff “has
sought immediate payment” and, contrary to the
statement of the defendant, the letter does not refer to income tax as such;
the amount sought as arrears is made up by the stated amounts for provisional
tax instalments and additional tax for late payment.
It was, in short, a
statement by the plaintiff as to the amounts required at that time to be applied
on those
accounts.
47 Furthermore,
the 1992 “agreement” related to tax periods prior to the years of
tax which are the subject of this proceeding.
48 The
question is whether, notwithstanding these matters, in paras 50-54
(including the second paras 52-54) the defendant has raised
an arguable ground
of defence to the amount
claimed.
49 The
argument goes not to question a notice of assessment, and could not be permitted
to do so, but to the allocation of payments and
the correctness of the amounts
due for additional tax, interest and the general charge. The first point to
note is the generality
of the defendant’s contentions, as against the
prima facie evidence of the amount due
to the plaintiff, and the detail in the reconciliation of the defendant’s
account prepared following
the defendant’s request to consult and the
discussion between the parties. It is notable that the defendant relies on the
materials in the earlier County Court proceeding and the two earlier
reconciliation documents as well as the latest one. In my view
the defendant is
entitled to do that for the purpose of seeking to establish doubt and
uncertainty concerning the claim. What the
defendant has not done is address
the latest reconciliation, or indeed the earlier ones in detail, and relate his
broadly expressed
contentions to that document, and in so doing provide an
understandable explanation. Certainly the defendant does not venture a
calculated estimate of his liability, if any. His position is rather to assert
certain matters, point to differences in the materials
provided and submit that
there is a degree of doubt that makes it appropriate to grant leave to defend.
In the end, regarding the
matter overall, I am satisfied that in
paras 50-54 the defendant has raised matters as to the allocation of
payments that merit investigation
and warrant leave to defend.
50 The
defendant’s affidavit then proceeded to set out a number of further bases
upon which he was entitled to a credit. I deal
with each in
turn.
51 In
paras 55-57 the defendant stated that he was entitled to a credit in
relation to his income tax liability for the years ended 30
June 1993, 1994 and
1995 on the basis that his taxable income was reduced by the amount of interest
paid to the Bank of Melbourne
in respect of the loan of $100,000.00 referred to
above for the purpose of paying his tax commitments. He produced a letter to
the
plaintiff from his solicitor dated 22 July 1999 in which a re-assessment was
sought accordingly. This cannot avail the defendant
in this recovery
proceeding. The raising of these claims was properly a matter to be taken by
way of review or objection to the
relevant assessment and cannot now be raised
to challenge the correctness of the relevant notices of
assessment.
52 Next,
in paras 58-63 the defendant calculates that the amount of additional tax,
interest for late payment and the general interest
charge for the years
1993-1999 totals $59,336.72. He states that it would not be fair and reasonable
to obtain heavy penalties in
that sum for failure to pay $194,436.56 by way of
provisional tax “that the plaintiff was never entitled to receive by way
of income tax liability and which if paid would have had to be returned to
[him]”. He believes that the claim is unconscionable
and inequitable in
the circumstances and states that he made application for remission of the
amounts by his solicitor’s letter
dated 22 July 1999 referred to at [51]
above. No response had been forthcoming other than the promise made in 1998
that once his
primary tax was paid he and his representatives would be afforded
an opportunity to support his application and pursue the matter
with the
plaintiff’s officers. However, despite payment of his primary tax the
plaintiff and her officers had declined to
discuss the application. He
therefore requested an order that the plaintiff consider and determine the
applications made in the
solicitor’s letter after giving the defendant an
opportunity to support the applications prior to the further determination
of
the proceeding. Alternatively he requested that the proceeding be stayed
pending the consideration of the applications made in
the said letter. In my
view these contentions do not provide an arguable ground of defence. They also
seem to rest on a misconception
of the effect of non-payment of provisional tax
when it is due, that is to say that penalty tax and interest remain payable.
53 In the
next paragraph, para 64, the defendant stated that he had further
calculated that if the credits referred to in paras 54-57
had been properly
applied at the relevant times and allocated to the payment of provisional tax in
the years 1993-1998, no late payment
of provisional tax for those years should
have occurred which would further reduce the plaintiff’s claim by
$24,151.77. As
to this contention, it is sufficient to refer to the above
discussion concerning the matters raised by the defendant in the second
paras 53
and 54 (see [45]-[49] above) and paras 55-57 (see [51] above). For the reasons
there stated, there should be leave to defend
in relation to this matter insofar
as para 64 relates to the second paras 53 and
54.
54 Then,
in paras 65 and 66 the defendant contends that his income tax liability for
the year ended 30 June 1998 was not correctly stated
and should be re-assessed
in accordance with the application for re-assessment which he had been informed
by his accountant had been
made on his behalf. As a consequence the amounts
alleged to be payable for additional tax, interest, general interest and
provisional
tax set out in the particulars are incorrect. The amount alleged to
represent his income tax liability for the year should be substantially
reduced
and be the subject of an amended assessment. This cannot constitute a basis for
leave to defend. It is an attempt to challenge
the conclusive effect of the
notice of assessment.
55 Then, in
paras 67 to 70 the defendant addressed contentions concerning his income
tax liability for the year ended 30 June 1999 as
alleged in the particulars in
the further amended statement of claim. Again, there had been an application
for a re-assessment and,
in consequence of that re-assessment, the amounts
alleged to be payable for interest, provisional tax and interest thereon as set
out in the particulars are incorrect in that they are based and calculated upon
an incorrect income tax liability for the year.
The amount alleged to represent
that liability, along with the interest, provisional tax and interest thereon,
should be extinguished
and replaced by an amended assessment. He further said
that an amount of $3,185.50 being the group certificate payment that had
been
paid on his behalf should be refunded as a consequence of the re-assessment.
This again is an impermissible attempt to challenge
the conclusive notice of
assessment for the year in question and cannot provide a basis for leave to
defend.
56 In
the next paragraph, para 71, the defendant states that the amounts alleged
to represent additional tax for late payment and the
general interest charges in
relation to the years ended 30 June 1995-1997 are incorrect in that they are not
calculated upon the
correct amounts of his taxable income for each such year.
As a consequence the amounts alleged to be payable for additional tax
for late
payment and general interest charges should be reduced and calculated upon the
re-assessed amounts of income tax liability
for those years. This again comes
back to a challenge to the amounts stated in the relevant notices of assessment
and for this reason
this is not a matter which is open to the defendant to raise
as a ground of defence. As with the other similar matters, the
defendant’s
right was to object and seek a review of the relevant notices
of assessment.
57 I turn
then to paras 72 and 73 in which the defendant stated that the plaintiff
had not, contrary to the allegations in para 2 of
the further and better
particulars of the statement of claim filed on 24 September 2002, given him due
credit in the statement of
claim for the full credits arising from the amended
assessments referred to in those particulars, or made sufficient allowances with
respect to such reductions of his tax liability and in particular with respect
to reductions of general interest and other interest
and additional tax
penalties that are due to him and which have not been acknowledged therein or at
all. He further said that apart
from the credits arising from the amended
assessments referred to in para 2 of the further and better particulars of
the plaintiff’s
claim, no reduction or allowance had been made with
respect to the amounts of provisional tax payable for the following financial
year. He said that a proper re-assessment of provisional tax should have been
made resulting in a consequent reduction in the amounts
of additional tax for
late payment and the general interest charge as set out in the particulars in
the statement of claim for each
provisional tax instalment charged during the
year preceding the financial years ended 30 June 1996-2000. There are several
difficulties
with these contentions. The first issue is whether it is
established, on an arguable basis, that there has been a failure to give
credit
arising from amended assessments or allowance made with respect to such
reductions of the defendant’s tax liability.
No details are provided.
There also seems to be the misconception as to the operation of the provisional
tax system. Nevertheless
sufficient is said to raise questions appropriate for
investigation at
trial.
58 Paragraph
74 stated that the RBA deficit debt should be eliminated or significantly
reduced on a pro rata basis by reason of the matters
deposed to in the preceding
paragraphs of the affidavit. As the defendant has established arguable grounds
in relation to the matters
of allocation and treatment raised in
paras 50-54, 64 (insofar as it relates to the second paras 53-54) and
72-73, there must be
leave to defend in respect of this contention to the extent
it pertains to those matters, but not otherwise.
59 The
affidavit concluded with a general denial of indebtedness, an assertion as to
incorrect calculation of amounts of additional tax
and penalty interest, a
request that the proceeding be referred to mediation or that there be a taking
of accounts prior to determination
of the application, and that the defendant be
granted leave to defend.
60 For the
above reasons the appeal will be allowed and paras 2 and 3 of the orders
made by the Listing Master on 17 December 2004 will
be set aside. I will hear
counsel on the appropriate order for leave to defend which would seem to be that
the defendant have leave
to defend as to the matters raised in paras 50-54
(including the second paras 52-54), 64 (insofar as it relates to the second
paras
53-54) and 72-74 of the affidavit of the defendant sworn 26 November 2004.
I will also hear counsel on the question of costs and
on the matter of
directions for the further conduct of the proceeding.
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