Koadlow v. Deputy Federal Commissioner of Taxation.
Judges:Young CJ
Starke J
Murphy J
Court:
Supreme Court of Victoria (Full Court)
Young C.J., Starke and Murphy JJ.
This is an appeal from an order made by Gobbo J. ordering that the respondent have leave to enter judgment against the defendant. No sum of money is specified in the order.
His Honour's order was made on the hearing of a summons in which the present appellant sought (inter alia) that he be granted leave to appeal against an order made by Master Barker and that the time for filing a notice of appeal be enlarged. It is not clear why it was thought necessary to ask for leave to appeal from the Master's order. Master Barker had on 16 April 1984 ordered that the plaintiff have leave to enter final judgment in the sum of $50,024.14 together with interest at the rate of 13.3% per annum on $19,477.32 from 11 November 1983 to date of entry of judgment.
No order was made by Gobbo J. enlarging the time for appealing from the order of the Master. Nor was any process issued or served upon which Gobbo J.'s order could properly have been made. But counsel for both parties agreed that Gobbo J.'s order might be regarded as either dismissing an appeal from the Master or as refusing to enlarge the time for appeal upon the ground that it would be futile to do so because an appeal would be bound to fail.
The appellant by his notice of appeal seeks to have Gobbo J.'s order set aside and an order made that he be given leave to defend the action in whole or in part. The notice of appeal does not ask for an enlargement of time and it seems to us that before Gobbo J. could have granted to the appellant leave to defend it would have been necessary for him to enlarge the time for appealing from Master Barker's order. Master Barker's order was made on 16 April 1984 and the appellant's summons seeking an enlargement of time within which to appeal was not issued until 10 May 1984.
The amount for which Master Barker gave the respondent leave to enter judgment ($50,024.14) was the amount claimed in the writ. It comprised six separate items, viz:
$
(a) primary tax for the year of
income ended 30 June 1978 19,477.32
(b) additional tax pursuant to
sec. 226(1) 1,023.96
(c) additional tax pursuant to
sec. 226(2)
The respondent clearly established that the first four of these items were due and owing by the appellant. The proof consisted in the production of an extract of a notice of assessment of income tax in respect of the year ended 30 June 1978 and reliance upon sec. 177 of the Income Tax Assessment Act (Cth) (which we shall refer to as ``the Act''). The remaining two items, (e) and (f), were said to follow as a matter of calculation. They comprised additional tax for late payment pursuant to sec. 207 of the Act calculated at the rate or rates stipulated by that section on the amounts outstanding from time to time. These amounts were proved to be owing by the production of a certificate signed by the respondent pursuant to reg. 53 of the Income Tax Regulations.
The appellant objected to the respondent's assessment but his objection was disallowed. He says that his tax agent, within the prescribed time, requested the respondent to refer the disallowance of his objection to a Board of Review for review but the respondent says, in effect, that his office never received the request. Consequently, the respondent has not referred his disallowance of the appellant's objection to a Board of Review. The learned trial Judge treated the question whether there had been a valid request for a reference as fundamental to the appellant's case and concluded that the material did not establish that a request had been made to the respondent. As a result the appellant had lost his right to have the merits of his objection heard and determined and his Honour accordingly did not disturb the order of the Master.
In this Court it was first of all submitted that even if the learned judge's conclusion upon the question whether there had been a valid request for a reference were correct, the respondent should not have been allowed to enter judgment for items (e) and (f), because, it was submitted, the imposition of those taxes or penalties was not authorised by the Act.
Items (e) and (f) comprise additional tax pursuant to sec. 207 calculated upon the additional tax imposed under sec. 226(1) and (2). Those subsections at the relevant time read as follows:
``226(1) Notwithstanding anything contained in the last three preceding sections, any taxpayer who fails to duly furnish as and when required by this Act or the regulations, or by the Commissioner, any return or any information in relation to any matter affecting either his liability to tax or the amount of the tax, shall be liable to pay as additional tax an amount equal to the tax assessable to him or the amount of Two dollars whichever is the greater.
(2) Any taxpayer who omits from his return any assessable income, or includes in his return as a deduction for expenditure incurred by him an amount in excess of the expenditure actually incurred by him, shall be liable to pay as additional tax an amount equal to double the difference between the tax properly payable by him and the tax that would be payable if it were assessed upon the basis of the return furnished by him, or the amount of Two dollars, whichever is the greater.''
The contention of the appellant is that sec. 207 upon its proper construction does not authorise the imposition of a penalty upon the non-payment of an amount of additional tax imposed pursuant to sec. 226(1) or (2). Section 207 reads as follows:
``207(1) If any tax remains unpaid after the time when it becomes due and payable, additional tax shall be due and payable at the rate of ten per centum per annum on the amount unpaid, computed from that time or, where an extension of time has been granted under the last preceding section, from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable:
Provided that the Commissioner may in any case, for reasons which he thinks sufficient, remit the additional tax or any part thereof.
(2) Notwithstanding anything contained in this section, the Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable.''
ATC 4150
It was said that the word ``tax'' where first occurring in sec. 207 did not include ``additional tax'' and that this is the correct construction was said to be borne out by a consideration of sec. 112 of the Taxation Laws Amendment Act 1984 which was passed after the year of income with which this case is concerned and which, inter alia, adds to sec. 207 a new subsec. (3) reading:
``(3) In this section, unless the contrary intention appears, `tax' includes additional tax under Part VII.''
(Section 226 is to be found in Pt VII of the Act.) If the word ``tax'' in sec. 207 before the introduction of subsec. (3) had properly included ``additional tax'', the amendment, it was said, would not have been necessary.
It was also submitted that the appellant's contention was not one which could be raised on an objection to the assessment because the amounts sought to be recovered by the respondent under items (e) and (f) were not part of the tax referred to in the notice of assessment.
We shall not set out the whole of the argument that was advanced in support of this contention. Reference was made to
Re Dymond (1959) 101 C.L.R. 11 at pp. 18, 21-22 and 23 and to
D.F.C. of T. v. Carpenter (1959) V.R. 470 at p. 472. Mr Burnside for the respondent, however, conceded that there was no authority directly in point and we think that the contention raises a question of law which is fit to be investigated: see
Australian Can Co. Pty. Ltd. v. Levin & Co. Pty. Ltd. (1947) V.L.R. 332 at p. 334. We shall not express any view upon the merits of the point.
It is a question, however, whether the appellant should be allowed at this stage to rely upon this point or whether he should be treated as simply having sought an enlargement of time within which to appeal from the Master's order. When first confronted with the summons for judgment before the Master the appellant relied upon an assertion that the respondent had never notified the appellant of the respondent's decision on his objection. This assertion was proved wrong. Then it was said that the appellant had asked for the disallowance of his objection to be referred to a Board of Review. The material upon which the appellant relied evidently did not impress Master Barker. The appellant accordingly sought to rely upon further material before the learned judge. (The hearing before Gobbo J. was before the coming into operation of the amendment made on 31 August 1984 to r. 16(6) of O. 54 of the Rules of the Court.) As has already been pointed out even the further material did not succeed in persuading the learned judge that there had been a valid request for a reference.
The order signed by the learned judge which was taken out by the solicitors for the appellant differs from the endorsement on the court file which simply states, ``Application dismissed. Plt's costs to be taxed and paid by def. Stay Execution for 14 days. Certify.'' On the other hand, at the conclusion of his Honour's reasons he stated unequivocally that there should be leave to enter judgment.
In these circumstances we should not go behind the order signed by the learned judge. Since his Honour ordered that there should be leave to the plaintiff to enter judgment, his Honour should we think be treated as having granted the appellant an extension of time within which to appeal from the Master, as having entertained the appeal and as having dismissed it. If that be the true view of what occurred in the court below, then the question whether the appellant should have leave to defend is properly before us. We are not confined to considering whether the appellant should have an extension of time. In these circumstances we think that the appellant should have leave to defend in respect of items (e) and (f).
It is a little difficult to be sure whether the point was raised before Gobbo J. but it seems that it was, for in the course of his reasons his Honour said that a number of matters had been canvassed including ``the question as to whether a Commissioner can ever claim payments under sec. 207 on additional tax payments under sec. 226(1) and sec. 226(2).''
So far as items (a), (b), (c) and (d) are concerned, the contentions of the appellant are of a different character. In substance it is said that the question whether the appellant did make a request to the respondent for a reference of his disallowance of the appellant's objection is a triable issue or a question of fact fit to be investigated and that leave to defend ought to be given on that ground. It is, however, necessary to consider the relevance of a request for a reference if one were made. Its only relevance is to the exercise of the court's
ATC 4151
discretionary judgment. Thus if a taxpayer has requested a reference, the taxpayer can say that he has done all in his power to challenge his liability to tax and that as a matter of discretion the court should either stay the recovery proceedings or stay execution on any judgment which might be entered in such proceedings.A request for a reference is only one factor which is relevant to the exercise of the discretion. Another factor is the prospect of success on such a reference in the sense that if it were shown that a taxpayer's objection was frivolous or hopeless, no stay of proceedings would be granted.
In the present case the appellant asserts that the facts of his case are on all fours with those of the taxpayer in
Curran v. F.C. of T. 74 ATC 4296; (1974) 131 C.L.R. 409 and that this consideration provides a complete answer to the respondent's assessment. Further he says that the decision of the Full Court of the Federal Court in
F.C. of T. v. Sahhar (85 ATC 4072) affirming the decision of Fullagar J. in that case reported at 84 ATC 4167 at pp. 4171-4172 provides a complete answer to the respondent's claim for penalties under sec. 226(2) of the Act, in that sec. 226(2) has no application in respect of any claim for deduction made in a partnership return. We need not stay to examine the merits of these arguments. We are prepared to assume for present purposes that they are arguments of substance. The question for decision, however, is whether the appellant is in all the circumstances entitled to leave to defend.
It is clear that there is on foot no reference to a Board of Review of the respondent's disallowance of the appellant's objection to the assessment. We cannot decide on the present material whether there should be such a reference. Nor is that question one which it is appropriate to have determined at a trial of the present action. It is not appropriate for such determination because it is irrelevant to any issue which could arise in the action. At the very most it is a factor which might be relevant to the consideration of whether a stay of execution might be granted. But no stay of execution was sought from the learned judge at first instance and no stay of execution was sought from this Court.
We were pressed with the decision of Needham J. in
Re Norper Investments Pty. Ltd. & the Companies Act 77 ATC 4212; (1977) 33 F.L.R. 87 in which his Honour dismissed as an abuse of process a petition by the Commissioner of Taxation to wind up a taxpayer company on the ground presumably that it was unable to pay its debts when the Commissioner had not complied with his statutory duty to refer the taxpayer's objection to the court pursuant to a request to do so. In the course of his reasons for judgment Needham J. said (at ATC p. 4216; F.L.R. p. 92) that if an appeal against the assessment had been properly on foot he had no doubt that he would have granted a stay of proceedings. But it was the failure of the Commissioner to comply with his statutory duty in the circumstances that led his Honour to conclude that the petition in that case was oppressive and an abuse of process. We see no parallel between that case and this. If there were an appeal by the appellant against his assessment properly on foot, that fact would not entitle the appellant to leave to defend. At most it would be a factor to be taken into account on an application to stay the proceedings. The appellant has in our opinion shown no reason why he should be allowed to defend the proceedings in relation to items (a), (b), (c) or (d).
We shall accordingly allow the appeal and set aside the order of Gobbo J. So that there be no doubt in the matter we shall also set aside the order made by Master Barker on 16 April 1984 and order that the respondent have leave to enter final judgment in the sum of $43,082.13 with interest at the rate of 13.3% per annum on $19,477.32 from 11 November 1983 to date of entry of judgment and costs including reserved costs to be taxed. We shall also order that the appellant have leave to defend the action in respect of the respondent's claim for additional tax pursuant to sec. 207 calculated on the sec. 226(1) penalty, viz. $514.21 and in respect of the respondent's claim for additional tax pursuant to sec. 207 calculated on the sec. 226(2) penalty, viz. $6,427.80. As the appellant has succeeded on one aspect of the case only, the respondent should pay only one third of the costs of the appeal. Having regard to the way the proceedings have been conducted below we think the appellant should pay the costs of the proceedings before Master Barker and before Gobbo J. Certify for Counsel before Gobbo J. and Master Barker.
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