Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty. Ltd. (No. 2).

Judges:
Connolly J

Court:
Supreme Court of Queensland

Judgment date: Judgment handed down 21 December 1984.

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Connolly J.

On 19 November 1984 the Deputy Commissioner of Taxation issued a writ for $3,183,420.08 against Truhold Benefit Pty. Ltd. for Vendor's Recoupment Tax and Late Payment Tax payable under the Income Tax (Unpaid Company Tax - Vendors) Act 1982 and the Income Tax (Unpaid Company Tax) Assessment Act 1982. The writ of summons was specially endorsed and the statement of claim shows that the sum sued for represents the aggregate of three assessment notices, all of which issued on 29 August 1984.

Truhold Benefit demurred to the statement of claim on 7 December 1984 on the ground that the Income Tax (Unpaid Company Tax) Assessment Act 1982 is not a valid law of the Commonwealth. I have before me a summons to set aside the demurrer under O. 29 r. 2 on the footing that the ground of demurrer stated is frivolous. The reason, which is obviously a powerful one, is that the High Court in
MacCormick v. F.C. of T. 84 ATC 4230; (1984) 58 A.L.J.R. 268, decided on 10 August, has declared the Income Tax (Unpaid Company Tax - Vendors) Act 1982 to be a valid law of the Commonwealth. It is apparent, in my judgment, that the Income Tax (Unpaid Company Tax) Assessment Act was also held to be a valid law. It is inevitable that both at first instance and on any appeal to the Full Court of this Court, the demurrer must be overruled, and Mr Jackson, not unnaturally, contends that the demurrer, which on its face is doomed to failure, is properly described as frivolous. In
Papineau v. King (1842) 2 Dowling N.S. 226 Baron Alderson gave as an instance of a situation in which a demurrer would be set

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ATC 4059

aside as frivolous that the pleading was ``in direct opposition to a decided case''. This, however, was said in a context in which the courts, up to and including the House of Lords, regarded themselves as bound by their previous decisions. Now, the avowed object of this demurrer is to seek to persuade the High Court of Australia to reconsider the decision in MacCormick's case. The High Court does not regard itself as bound by its previous decisions and the question is whether a demurrer which has such an object is to be treated as frivolous. To my mind, it cannot be. It is said that other courses were open to Truhold Benefit. Thus proceedings could have been instituted in the High Court for appropriate declarations and an application could be made under sec. 40(1) of the Judiciary Act of the Commonwealth for the removal of the action into that court. This, however, does not alter the fact that Truhold Benefit is sued in this Court in reliance on a statute of the Commonwealth and that it seeks to impugn that statute by way of answer to the plaintiff's claim.

It was suggested that I should assess the company's prospects of persuading the High Court to reconsider MacCormick's case. This, however, is quite inappropriate. I say no more than that the legislation has curious features and that the questions agitated in MacCormick's case were regarded as calling for carefully formulated judgments. I rest my decision on the narrow ground that it is not for a judge of this Court to deny a litigant the right to seek to have the High Court reconsider a decision by way of answer to a cause of action founded on that decision. The summons in action No. 3772 of 1984 will therefore be dismissed with costs.

On 11 December 1984 the company instituted an action claiming an injunction to restrain the presentation of a petition for winding up. This was because on 19 November 1984 the Deputy Commissioner had served a notice on the company under sec. 634 of the Companies (Queensland) Code claiming the amount the subject of action No. 3772. The Australian Government Solicitor had been asked for an undertaking not to proceed upon the notice and had refused. I have before me a motion for such an injunction as I have mentioned. The Deputy Commissioner understandably points to sec. 177(1) of the Income Tax Assessment Act of the Commonwealth by virtue of which production of a notice of assessment is conclusive evidence (except on appeal against the assessment) of its due making, and to sec. 201 by virtue of which the pendency of an appeal or reference does not in the meantime affect the assessment. I am not however persuaded that either of those provisions would justify the winding up of the company in reliance on a statute the constitutionality of which the company, with whatever prospects of success, genuinely desires to challenge. The Commissioner does not appear to me to be at risk. By reason of the conditions of bail in certain criminal proceedings he has a substantial measure of control over the realisation of the company's assets and he will have the undertaking as to damages. If he needs further protection I shall hear argument. The injunction however must be limited in time and will, so far as this Court is concerned, not extend beyond the first motion day in the High Court of Australia in 1985. There will therefore, in action No. 4046 of 1984, be an injunction, the terms of which I shall now discuss with counsel.

The orders of the Court will be as follows: the summons in action 3772 of 1984 will be dismissed with costs.

On the notice of motion of 12 December 1984 in action No. 4046 of 1984, upon the plaintiff by its counsel giving the usual undertaking as to damages, order that until 4 p.m. on 15 February 1985 or further earlier order, the defendant be restrained from presenting a petition for the winding up of the plaintiff pursuant to sec. 364 of the Companies (Queensland) Code.

Reserve the costs of and incidental to the application.