Deputy Federal Commissioner of Taxation v. Spanjich & Anor

Judges:
Barblett DCJ
Simpson J
Connor J

Court:
Full Court of the Family Court of Australia

Judgment date: Judgment handed down 7 October 1988.

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Barblett D.C.J., Simpson and Connor JJ.

This is an appeal from an order of Ferrier J. made on 20 July 1988 [reported at 88 ATC 4534; (1988) FLC ¶91-936] in which his Honour dismissed an application under sec. 79A(1) of the Family Law Act brought by the Deputy Commissioner of Taxation for Western Australia. The application was dismissed for want of jurisdiction of the Court because his Honour found that the appellant (the Deputy Commissioner) was not ``a person affected by an order made by a Court under sec. 79'' of the Act.

The original order was made on 16 October 1986. Financial matters between the husband and the wife were settled after a four-day hearing but before judgment was given. The relevant parts of those orders are briefly as follows:

• 1. That the husband and wife as tenants in common in equal shares in property situated at Kewdale (a factory complex) be transferred by the parties to the two adult sons of the parties as tenants in common in equal shares subject to encumbrances.
• 4. The husband's interest in a duplex pair of properties in Carlisle registered in the names of the parties as tenants in common in equal shares vest in the wife subject to encumbrances.
• 5. The interest of the husband in the furniture in one of the duplex properties forthwith be assigned to the wife.
• 6. The husband cause to be transferred into the name of the wife a Ford LTD motor vehicle and the wife to the husband a Ford Cortina motor vehicle.
• 7. The husband transfer to the wife a Ford Fairmont motor vehicle.
• 8. The husband pay to the first-mentioned of the two sons the sum of $2,500 and to the second-mentioned the sum of $9,500.
• 9. The wife transfer to the husband her interest in a partnership business in which the parties had been the sole partners, the husband to indemnify the wife against claims arising out of the partnership business and also any income tax owing by the wife on income derived from the partnership.

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  ATC 4987

• 10. The wife pay to the Deputy Commissioner of Taxation her then outstanding liability for income tax, penalties and interest and the husband pay to the Deputy Commissioner of Taxation all assessments of income tax imposed upon him and a company Ivan's Mechanical Repairs Pty. Ltd., including penalties and interest.
• 11. The wife:
  • (a) transfer to the husband her interest in the said company and resign all positions held by her therein;
  • (b) execute all necessary documents to remove her as a beneficiary or other participant in the Spanjich Family Trust;
  • (c) assign to the husband all moneys due and owing by the Trust to her.

By his application field 10 March 1988 the appellant sought that para. 1 and 4 of the order of 16 October 1986 be set aside and that other consequential orders be made. The application was supported by an affidavit of a taxation auditor with the Australian Taxation Office, and authorised by the Deputy Commissioner of Taxation for Western Australia to make the affidavit. The application was clearly made pursuant to sec. 79A(1)(a) of the Act. In the affidavit the appellant claimed:

``(a) at the time the Orders were made it was apparent from the face of the affidavits and Statements of Financial Circumstances (Form 17s) filed in the proceedings that if the property interests of the parties were altered in accordance with the terms of the Orders:

• (i) the husband might not be able to discharge his own personal tax liability from property in which he had a beneficial interest, let alone the additional tax liability imposed upon him by para. 10 of the Orders, and
• (ii) the husband might not be able to discharge the additional tax liability imposed upon him by para. 10 of the Orders even if he vested in himself trust property over which he had effective control;

(b) the husband has failed to discharge any of the said tax liabilities;

(c) the husband is unable either fully to discharge, or even substantially to discharge, the tax liabilities imposed upon him by para. 10 of the Orders, and has been unable to do so since the date on which the Orders were made.''

The affidavit set out the reasoning why the Deputy Commissioner claimed that the husband was unable to pay his income tax. Basically the Deputy Commissioner claimed that at the time of the making of the orders the husband had been assessed under the Income Tax Assessment Act as owing the appellant the sum of ¶188,817.25. The company was also indebted to the appellant's argument was an application for release from the payment of tax by the husband which had been declared to be true by the husband on 11 February 1987. This purported to show that the husband was unable to pay his tax because of the Family Court order and that his total assets were at that date ¶30,700.

On 20 May 1988 the wife field particulars of her argument as to why the Court should find that it lacked jurisdiction to entertain the appellant's application at first instance. On the same day the husband filed an affidavit in which he set out at length the steps which he took to have the appellant intervene in the proceedings which had been on foot since 1984. The wife filed an affidavit of a chartered accountant, which purported to show that the husband could meet the tax liability of both himself and the company.

The matter came on for hearing before his Honour on 23 May 1988. This hearing was regarded by his Honour and by all of the three counsel who appeared before him as being a determination of a preliminary issue, viz. whether the Court had jurisdiction to entertain the application of the appellant. The fact that the hearing was limited to this issue is shown from the particulars filed by the wife to which we have already referred and by the opening statement of the wife before his Honour. In her address to his Honour, counsel for the wife said:

``The application of the wife which is before Your Honour today is that the substantive application filed by the Deputy Commissioner on 10 March be dismissed for want of jurisdiction, and particulars in

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ATC 4988

relation to the matters to be argued today on behalf of the wife were filed on Friday...''

In his reasons for judgment, the learned trial Judge dealt only with the question of jurisdiction.

There were two main objections to jurisdiction; firstly, that the subject application was not a ``matrimonial cause'' pursuant to the definition of that term in sec. 4(1) of the Act and secondly, that the appellant was not ``a person affected'' by the consent order of 16 October 1986.

His Honour held that the application was indeed a ``matrimonial cause'' within para. (f) of the definition in sec. 4(1). There is no cross-appeal against that part of the decision and that argument has been properly abandoned.

However, his Honour did find that the appellant was not ``a person affected'' by the relevant order and accordingly dismissed the appellant's application for want of jurisdiction. His Honour considered carefully the wording of sec. 79A(1) and said [at ATC pp. 4537-4538; FLC p. 76,772]:

``These proceedings relate to an order made under the provisions of sec. 79 of the Act which falls within Pt VIII thereof which is headed `Property, Spousal Maintenance and Maintenance Agreements'. In sec. 79 the principal operative words are `... the Court may make such orders as it considers appropriate altering the interests of the parties in the property...'. The connotations attached to words falling within the Part and within the section relate to financial and property rights and obligations and the powers of the Court in relation to the definition thereof involving concepts of alteration, change or the movement of the rights and interests of the parties from one position to another. This in my opinion, removes from the interpretation of the meaning of the word `affected' any connotation of mood, frustration of expectation or hope on the part of the Deputy Commissioner, and emphasises the connotation of movement or change resulting in an infringement by deterioration of his rights relating to the liabilities of the parties to him as a result of the orders made.

...

In my opinion he did not suffer from any movement or change in the structure of those liabilities to him when the orders were made nor did the orders result in any diminution of his rights as they existed at that time. As an emphasis to this point I observe that his rights to come before this Court to pursue his application are expressed by the past participle `affected' rather than the subjunctive `may be affected'.

At the time when the order was made he had rights against the parties included within which were a right to sue for judgment in respect of various debts of the husband and the company which he alleged were owed to him.

It would appear that in part, at least, such debts were admitted by the husband and the company.

His right to sue was not affected by the orders made. It may be that his expectations arising from the future exercise of his right to sue were affected, but such expectations at the time when the orders were made were conjectural and dependent upon the conferment to him of rights to recover quantified sums of money to be created by judgments of a court, then the failure of the husband to make payment in satisfaction thereof, and then attachment of property to rectify that failure.''

Thus, the gravamen of his Honour's reasons is that the appellant's rights at law were not affected by the consent order. His Honour correctly noted that a miscarriage of justice within the meaning of those words in sec. 79A(1)(a) can only arise from circumstances in existence at the date of the order.

At that date the husband had been assessed for income tax by Notice of Amended Assessment of 28 April 1986 in the sum of $269,387.61. That assessment was for the years ended 30 June 1979 to 30 June 1984 and was payable according to the notice by 30 May 1986. On 10 June 1986 the husband was informed that an additional amount for late payment was accruing at the rate of $1,036.10 per week. By virtue of provisional tax variation issued on 24 June 1986 the husband's income tax liability was reduced to $176,817.61. How the sum owing of $188,817.25 is calculated is set out in para. 7 of the affidavit of the taxation

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ATC 4989

auditor to which we referred above. By virtue of sec. 204 of the Income Tax Assessment Act 1936, tax assessed is due and payable on the date specified in the notice. By sec. 208 when income tax is due it is a debt due to the Commonwealth and by sec. 201(1) the assessment and hence the debt is not affected by any review or appeal and the tax may be recovered as if no review or appeal were pending.

His Honour found [at ATC p. 4538; FLC p. 76,773]:

``... those orders do not in any way infringe upon or alter such rights as he (the appellant) had at that time.''

His Honour's decision was based on the fact that if a person's rights at law are not affected by the order of a court then that person cannot be ``affected by'' the orders and quite clearly then the correctness or otherwise of his Honour's findings depend upon the interpretation of the words ``affected by an order''.

In his reasons the trial Judge quotes from the judgment of McTiernan J. in
Shanks v. Shanks (1942) 65 C.L.R. 334 and from the dictum of Winn L.J. in
Re Bluston, Bluston and Davis (1966) All E.R. 220. Winn L.J. decided that a narrower interpretation of the word ``affected'' was more appropriate notwithstanding the comments of McTiernan J. quoted by his Honour.

In
Re Gasbourne Pty. Ltd. & Ors (1984) V.R. 801. Nicholson J. considered the meaning of the expression ``person affected'' at pp. 832-834. In that judgment Nicholson J. was construing the words ``a person affected'' contained in r. 8(1) of the Companies Rules (Vic.). His Honour equated ``a person affected'' with ``a person aggrieved''. He then considered the words of Lord Denning in
Attorney-General of the Gambia v. N'Jie (1961) A.C. 635 and went on to say:

``In my view, if the test proposed by Lord Denning in N'Jie's case is adopted, then it is difficult to draw any practical distinction between the relevant phrases for present purposes. If on the other hand the words `a person aggrieved' are given a meaning in the context of a particular statute which extends to any member of the public as they were by the Full Court in the Australian Conservation case, then it may be conceivable that the words `a person affected' might have a narrower scope as Dean J. suggested in Miamo v. Lehmann. In the present cases, I think that no practical distinction is to be drawn between the relevant expressions since neither the Code nor the Rules suggest that an overly restrictive interpretation should be given to the words `person affected' appearing in r. 8. On the other hand the words must be given some meaning and I think that their effect is to limit the class of persons who may appeal to those falling within the general category propounded by Lord Denning in N'Jie's case.''

The dictum of Lord Denning upon which Nicholson J. relied reads:

``The words `person aggrieved' are of wide import and should not be subjected to a restrictive interpretation. They do not include of course, a mere busybody who is interfering with things which do not concern him, but they do include a person who has a genuine grievance because an order has been made which prejudicially affects his interests.''

To assist us in determining the meaning of the relevant words we were provided with the dictionary meaning of ``affected'' from the Shorter Oxford, Macquarie and the Collins English Dictionary (Aust. edition). The last appears to be the most germane ``Changed, esp. detrimentally''. The real question is whether if the effect of the order is to prevent the Deputy Commissioner from recovering tax due and owing is he thereby a person affected. In our opinion the ``affect'' may have relation to something more than strict legal rights and include the practical effect of the order on the recovery of moneys due and owing in the circumstances of this case. If the order has the effect of so reducing the property of the husband that the Deputy Commissioner is thereby unable to recover tax owing then it seems to us that he is a person affected by that order. Counsel for the wife conceded that the word ``affected'' may include more than an infringement or alteration of rights. It seems to us that a decision on the question as to whether the Deputy Commissioner was a person affected can only be determined after a hearing of the relevant issues involved in this case.

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ATC 4990

On the basis of the above, we are of the opinion that the appeal should be allowed and the matter remitted to the trial Judge to determine the application according to law on the basis that he has jurisdiction to entertain the application and to determine whether the appellant is ``a person affected'' by the relevant order and whether there has been a miscarriage of justice pursuant to sec. 79A(1) of the Act.