Deputy Federal Commissioner of Taxation v. The Hell's Angels Ltd. (No. 2).

Members:
Beach J

Tribunal:
Supreme Court of Victoria

Decision date: Judgment handed down 11 April 1984.

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Beach J.

On Friday last I refused the defendant's application for an adjournment for a period of one month. I then proceeded to hear the summons for final judgment.

Two arguments were advanced by Mr. Beaumont, who appeared on behalf of the defendant, in opposition to the plaintiff's application. In the first place, he submitted that the plaintiff had not proved the incorporation of the defendant and that that failure was a defect of substance and accordingly the plaintiff's application should be dismissed.

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In the second place, he submitted that the certificate of the Deputy Commissioner under reg. 53 of the Income Tax Regulations was defective in that in certifying the tax payable by the defendant pursuant to the provisions of sec. 226(1) of the Act the Deputy Commissioner had exceeded the powers given him by reg. 53. That argument was based on the contention that pursuant to the Regulations the Deputy Commissioner only has power to give a certificate certifying a sum due in respect of income tax; that the tax imposed by virtue of sec. 226(1) is not income tax but is in fact a penalty imposed upon a taxpayer who fails to duly furnish a return of income and to that extent, therefore, the certificate was defective.

Mr. Davies, who appeared on behalf of the Deputy Commissioner, did not contest the argument raised by Mr. Beaumont in relation to the provisions of reg. 53 and thereafter only sought to have judgment entered against the defendant in respect of the sum of $87,897.62, being the total of the income tax assessed in respect of the three years in question. It is unnecessary, therefore, for me to determine the point raised by Mr. Beaumont and I do not do so.

Failure to prove the incorporation of a plaintiff or a defendant is a defect of substance in an application by which the plaintiff seeks to enter final judgment. See
Moldex Ltd. v. Recon Pty. Ltd. (1948) V.L.R. 59. However, it is not a fatal defect. If the matter can be cured by adjourning the application to enable the plaintiff to produce evidence of the defendant's incorporation, such an adjournment should be granted unless there are compelling reasons why it should not. I can find no such reasons in this case.

If the plaintiff's summons was simply dismissed, it would be dismissed without prejudice to his right to issue a further summons, as was the effect of the order made by O'Bryan J. in the Moldex case. Why cause further delay and unnecessary expenditure in the matter?

If the plaintiff can presently tender evidence of the defendant's incorporation, I propose to allow him to do so. If he cannot, I will grant the adjournment sought on the terms, however, that the plaintiff pay the defendant's costs of today.

Mr. Davies, are you in a position to prove the incorporation of The Hell's Angels Ltd.?

Mr. Davies: Yes, your Honour. I produce a Certificate of Incorporation of The Hell's Angels Ltd. It was incorporated in December of 1979.

His Honour: Yes, thank you.

Mr. Beaumont: May I look at that, your Honour?

(Discussion ensued.)

On the material placed before me I consider there is no basis upon which it can be successfully contended that the Deputy Commissioner is not entitled to judgment in respect of the sum of $87,897.62. It has been urged on me by Mr. Beaumont that I should stay the execution of that judgment. The main basis upon which he puts that argument is that hardship would be caused to the defendant in the event a stay was not granted. He did also argue that, having regard to the matters raised in the affidavit filed on behalf of the defendant, it is clear that the defendant has a strongly arguable case in relation to its appeal and that that too is a factor I should take into consideration.

It is interesting to note what the President of the Court of Appeal, Moffitt P., said in
D.F.C. of T. v. Mackey reported in 82 ATC 4571 at p. 4574; (1982) 45 A.L.R. 284 at p. 287:

``It would be too narrow a view to grant a stay of proceedings or execution merely because an appeal is pending or merely because on examination of the pending appeal there appears to be an arguable case, or perhaps there are complex questions involved which the Board of Review or Federal Court can best determine. The policy of sec. 201 is that when an assessment has been made, the Deputy Commissioner has a right to have the tax paid, despite the pendency of an appeal. While hardship to the taxpayer and the merits of the appeal are relevant matters, other considerations are involved, including the Commissioner's right to have the tax assessed paid. The exercise of discretion may involve, and in my opinion in the present case it requires, some examination of the nature and basis of the liability on which the disputed tax has been assessed and the nature of the dispute.''

Hutley J.A. had this to say:

``The Commissioner starts off with rights under sec. 201 and the taxpayer is seeking on special bases to have a special discretion

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exercised in his favour. It is not possible to work out in advance all possible bases for the exercise of such a discretion and it would not be proper event to attempt to do so. It is an open-ended discretion.

But there are only two cases where it is clear the Court should exercise that discretion. First, the comparatively rare case where the Commissioner abuses his position, for example by assessing and endeavouring to collect tax in defiance of a decision of the High Court or other superior Court precisely in point. Second, in cases of extreme personal hardship to a taxpayer called upon to pay. The obligation to pay which has been cast upon him by law is not a hardship of itself and the mitigation of the effect of inflation and the burden of interest is a matter for the legislature, not for the Court.''

Mr. Beaumont says it is clear that if the defendant is presently called upon to pay the tax assessed that of itself will be a hardship.

As Hutley J.A. pointed out in the passage to which I have just referred, the obligation to pay which has been cast upon the defendant by law is not a hardship of itself, and that is a view with which I agree. There is no evidence before me to demonstrate that the defendant would suffer extreme hardship in some other way in the event it was called upon to pay the tax assessed in respect of the three years in question.

As to the argument that it has a strongly arguable case so far as its appeal is concerned, I also agree that speculation as to the result of appeals is not a factor to be borne in mind. The whole policy of sec. 201 of the Act is that when an assessment has been made the Deputy Commissioner has a right to have the tax paid, despite the pendency of an appeal.

Accordingly, the application for a stay is refused. Leave will be given to the plaintiff to enter final judgment for the sum of $87,897.62, part of the amount claimed.

I order that the action proceed and that the defendant have leave to defend in respect of the residue.

I order that the defendant pay the plaintiff's taxed costs of this application, including the reserved costs, but excluding the costs of today.

I certify for counsel.

(Discussion ensued.)

The judgment will be with interest in the sum of $1,329.74 pursuant to the provisions of sec. 78 of the Supreme Court Act.

Mr. Beaumont: Would your Honour grant a stay of twenty-one days on the payment so as to allow the defendant to appeal?

His Honour: Have you any objection, Mr. Davies?

Mr. Davies: No, your Honour.

His Honour: Yes. I grant a stay of twenty-one days, such stay to include a stay of payment of the amount involved.