Deputy Federal Commissioner of Taxation v. Briggs.
Judges:Olney J
Court:
Supreme Court of Western Australia
Olney J.
On 24 January 1986, after trial of the action before Wallace J., the plaintiff obtained judgment against the defendant in the sum $1,048,179.82 being the total of income tax and additional tax payable pursuant to assessments issued by the plaintiff pursuant to the Income Tax Assessment Act 1936 (the Act). By summons issued on 31 January 1986 the defendant now seeks orders that:
- 1. execution be stayed pending determination of an appeal against the judgment; or
- 2. execution be stayed pending the final resolution of certain objections lodged by the defendant against the assessments.
On 12 February 1986 the defendant instituted an appeal to the Full Court against the judgment and on 26 February 1986 the plaintiff disallowed the defendant's objections. On 5 March 1986 the defendant took the steps necessary in accordance with sec. 187 of the Act to have the objections referred to this Court.
ATC 4139
The facts before the trial Judge were agreed and incorporated into an agreed statement of facts and exhibits. On the face of it the case was straightforward enough. On 12 July 1983 the plaintiff had issued amended assessments and assessments of tax covering several financial years but the defendant denied that notices of the assessments had been served on him in accordance with the Act and regulations. He also contended that the plaintiff had acted in an arbitrary manner amounting to such an abuse of his position as to justify the Court exercising its discretion to dismiss the claim. In the event, the trial Judge decided each of these issues adversely to the defendant. The defendant's appeal is in respect only of the first matter and on the ground that the trial Judge erred in law
``in holding that the (plaintiff) had effected service of the notices of assessment and amended assessment upon the (defendant) in accordance with s. 174(1) of the (Act) because the (defendant) had acknowledged receipt of the same by lodging objections to them and that there was no need to resort to the construction to be placed upon the Income Tax Regulations.''
As I read the trial Judge's reasons it seems to me that the notice of appeal misstates the basis of his Honour's decision. The evidence was that the notices were forwarded to the defendant at his residential address by pre-paid post on 12 July 1983, that the defendant received the assessments at that address on or before 26 July 1983 and that he lodged objections to the assessments on 9 September 1983. There was further evidence which indicated (to paraphrase reg. 29) that departmental records of the Commissioner disclosed that the defendant had changed his address for service as last given to the Commissioner and had not notified the Commissioner either in a return or by separate written advice of such change. And further, that the Commissioner had in his records a current Commonwealth electoral roll which correctly disclosed the defendant's home address as being at 273 Oceanic Drive, City Beach to which address the notices were forwarded by post. In his reasons the trial Judge reviewed the agreed statement of facts in detail and then expressed his conclusion in these terms:
``In my opinion, however, the plaintiff has effected service of the relevant notices of assessment and amended assessments on the defendant in accordance with s. 174(1) as the defendant has acknowledged and there is no need to resort to the construction to be placed upon the relevant regulations.''
It is misleading to say, as the defendant says in his notice of appeal, that the trial Judge held that service had been properly effected because the defendant ``had acknowledged receipt of the (assessments) by lodging objections to them''. It may be that the lodging of an objection involves an admission that the assessment objected to has been duly served because the right of a taxpayer who is dissatisfied with an assessment to object to an assessment must be exercised within 60 days after service of the notice of assessment. But the facts of this case go beyond that argument. There is unequivocal evidence that the defendant received the assessments at his home address on or before 26 July 1983 and there is further evidence which was capable of giving rise to a finding that pursuant to reg. 29 the defendant's home address had become his address for service.
Whilst it is not appropriate on this occasion that I should speculate as to the ultimate outcome of the appeal, it is nevertheless both legitimate and appropriate in the context of an application for stay of execution to give some consideration to the merits of the appeal at least in a superficial sense and this I have done. Several things can be said of the appeal. First, the grounds of appeal as expressed in the notice of motion misstate the basis upon which the trial Judge decided the issue in contention. Second, the admitted facts clearly distinguish the case from the decision of Everett J. in
D.F.C. of T. v. Naidoo & Anor 81 ATC 4537 which was relied upon both before the trial Judge and before myself as supporting the view contended for by the defendant. And finally, the issue which the defendant wishes to test on appeal raises fairly and squarely one of the issues decided adversely to him upon trial of the action. Having regard to each of these factors, I am of the view that, on the basis that it is presently mounted, the appeal could be described as being arguable. The fact that neither counsel has been able to refer to any judicial authority directly in point supports this view.
The appeal itself does not operate as a stay of execution except so far as the Full Court or a
ATC 4140
judge directs. Order 63 r. 15. The power to stay execution on a judgment arises under O. 47 r. 13 which so far as it is relevant provides:``13(1) The Court, if satisfied by the judgment debtor or other person liable to execution under a judgment or order -
- (a) that by reason of special circumstances it is inexpedient to enforce the judgment or order, or
- (b) that an appeal against the judgment or order is pending or is contemplated, or
- (c) that if the judgment or order is for the payment of money, the applicant is unable from any cause to pay the money,
may stay the execution for such period and on such terms as the Court thinks fit.
(2) An application under this Rule which is not made at the time the judgment is given or the order made, must be made by summons supported by an affidavit of grounds, and may be so made although the applicant did not enter an appearance in the action.
(3) Where the application is made on the ground of the applicant's inability to pay, the affidavit must disclose his income, assets and liabilities.''
As the defendant's counsel indicated that he relied on each of the three paragraphs of r. 13(1) I propose to deal with each separately.
To the extent that the defendant relies upon para. (c), his application fails. His affidavit does not disclose his income, assets and liabilities. Indeed, both the affidavit and the defendant's answers when cross-examined on it demonstrate a desire to avoid compliance with r. 13(3). The defendant's responses under cross-examination fail to convince me that he is as ignorant of the details of his own affairs as he would want me to believe. When the absence of compliance with r. 13(3) was raised from the bench no offer was made either by counsel or the witness to make a complete disclosure of the information specifically referred to in that rule and in my opinion the defendant thereby foreclosed any prospect of success under para. (c) of subr. (1).
The basis upon which the defendant calls in aid para. (a) of subr. (1) in effect has two arms. First, it is said that appeals are presently pending against the disallowance of the defendant's objections to the various assessments of tax which if successful (as the defendant expects them to be) would reduce or even eliminate his liability under the judgment. Second, it is said that the plaintiff has abused his position and acted oppressively in not disposing of the objections for some two and a half years and then only in the period between the judgment and the hearing of the application for stay of execution.
There is ample authority to the effect that by virtue of sec. 201 of the Act the mere fact that an assessment of tax is being challenged through the procedure laid down in the Act is not a special circumstance which renders it inexpedient to enforce the judgment. If this were not the case then sec. 201 would lack any effect. See
D.F.C. of T. v. Mackey 82 ATC 4571,
D.F.C. of T. v. Australian Machinery Investment Co. Pty. Ltd. (1945) 47 W.A.L.R. 9 at pp. 16-17. In Mackey's case, Hutley J.A. said at p. 4575:
``The Commissioner starts off with rights under sec. 201 and the taxpayer is seeking on special bases to have a special discretion 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 even 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 definance 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.
I am also of the opinion that speculation as to the result of appeals is not a significant factor to be borne in mind. This Court should be concerned only with the question of the impact of the assessment upon the particular person concerned and not with what is going to happen in the future to the appeal.''
ATC 4141
With respect, I adopt what Hutley J.A. has said as I believe it to be consistent with both the statute and authority. It is fair, however, to say that whilst his Honour exemplified only two cases in which he said it was clear the Court should exercise a discretion to stay proceedings he specifically avoided any attempt to define the limit of the discretion. It should also be understood that in referring to the result of appeals in the quoted passage Hutley J.A. is referring to appeals pursuant to the Income Tax Assessment Act and not an appeal against a judgment.
The proceedings in Mackey's case arose out of the taxpayer's application to stay proceedings upon the issue of a writ for recovery of the amount of tax assessed and not, as in the present case, following judgment after trial. For present purposes however the defendant claims that the Commissioner's delay in disposing of his objections and the consequential delay in having the matter finally determined in accordance with the ordinary appeal process amounts to an abuse of his position sufficient to justify the Court's intervention. Counsel for the defendant points out quite accurately that the plaintiff has not sought in any way to explain or otherwise justify the apparent long delay. I do not think that there is anything in this particular point. It is an admitted fact that the assessments by their terms made the tax due and payable on 15 August 1983. On the face of it the Commissioner could have issued his writ immediately and it would seem would have been entitled to obtain judgment and execute thereon very shortly thereafter. It would have been of no avail to the defendant at that stage to have said that he had objections pending and indeed if the plaintiff had pursued his remedy through the Court to its limit at that time the defendant could well have found himself in the position of having to satisfy a writ of execution long before he could reasonably expect to have his objections finally disposed of by the plaintiff and possibly by the Court by way of appeal. Relatively speaking, the defendant's position is more favourable now than it would have been had the plaintiff pursued his action at the earliest possible time. This is not a case of the Commissioner having abused his position.
Much of the evidence presented upon the application for stay of execution was directed to establishing that the enforcement of the judgment at this stage would impose extreme personal hardship on the defendant. I do not propose to canvass in detail the facts so far as they relate to the defendant's rather extraordinary methods of conducting his business activities whereby he appears to enjoy all the trappings of considerable wealth whilst eschewing all of the obligations associated with legal ownership of assets. I think the case was put very clearly by Hutley J.A. in the passage quoted above when he pointed out that the obligation to pay assessed tax is cast upon the taxpayer by law and that in itself is not a hardship. Quite apart from anything else, the defendant's lack of frankness to which I have referred earlier in failing to make a full disclosure of his own financial position is sufficient to defeat any case based upon a claim of extreme personal hardship.
For the reasons which I have outlined above I refuse to stay execution on the judgment pending the final resolution of the defendant's notices of objection and the more recent appeals arising out of the disallowance thereof.
The considerations which have led me to refuse to stay execution pending resolution of appeals under the Act are not relevant in respect of the application to stay execution pending determination of the appeal to the Full Court. Although sec. 201 preserves the plaintiff's right to recover income tax on an assessment issued pursuant to the Act notwithstanding that an appeal or reference is pending, it is clear that the appeal referred to in sec. 201 is an appeal under Pt V of the Act. The plaintiff has taken action to recover the tax and has succeeded in obtaining judgment. That judgment is a judgment of this Court and it is subject to testing upon appeal in the same way as any other judgment. The Rules of the Supreme Court in so far as they relate to the Court's power to stay execution on a judgment specifically provide that such a power arises when an appeal against a judgment is pending or contemplated. In this respect the Rules of this Court differ from those that apply in England and the other States of Australia. For the most part, elsewhere in Australia, the corresponding rules provide that the court or a judge may at the time of or after giving judgment, stay execution until such time as it or he shall think fit. In each case there is a rule corresponding in substance if not exactly in form with O. 63 r. 15 which has been used as
ATC 4142
the basis of the power to stay execution after the institution of an appeal but in no other Australian jurisdiction is there a provision similar to O. 47 r. 13(1). The closest similar rule is the English O. 47 r. 1(1) which corresponds with this Court's O. 47 r. 13(1) with the important exception that the English rule does not contain para. (b).Having regard to the specific terms of the Western Australian rule and its significant difference from the rules upon which the English and Australian authorities to which I have been referred are based, and in the absence of any real precedent, I have formed the opinion that whilst the power to order a stay of execution in circumstances to which O. 47 r. 13(1)(b) apply is discretionary it is one of those powers which ought ordinarily to be exercised except where the appeal is not a genuine appeal or is an abuse of process. In particular, I do not think that special circumstances must be established in a case to which para. (b) applies. If it were otherwise, the circumstances to which para. (b) applies would be covered by para. (a) and I do not think that such an effect should be attributed to a paragraph which is a departure from the rule upon which it is based and which has obviously been inserted to cover a specific case. Whatever may have been the position historically, it is now a well established feature of our legal system that litigants are normally entitled as of right to at least one appeal from any judicial determination and such is the case under the Supreme Court Act so far as final judgments of the Court are concerned. The appeal procedure is but an extension of the trial and one which is provided as a mechanism to facilitate the correction of such errors as may from time to time arise. The machinery provisions of the Rules are such that in the ordinary course an appeal is heard relatively promptly after the judgment appealed from is given and the successful party at first instance can effectively ensure that unnecessary delay does not occur. I take the view that an appeal as of right is but an extension of the trial process and just as a plaintiff who may ultimately be successful cannot execute on his judgment until he has obtained a judgment, so it should be, in the ordinary case, that execution should not be levied until the unsuccessful party has had a reasonable opportunity to pursue his statutory right of appeal.
In my opinion the appeal in this action falls into the category of the ordinary case rather than an appeal which is little more than an abuse of process. It is not for me to form a view one way or the other as to the merit of the appeal. The issue raised is clearly arguable and has not previously been decided. It is in the interests of justice that the question be subjected to scrutiny by way of appeal and for this reason I accede to the defendant's application that execution on the judgment be stayed pending the hearing and determination of the appeal to the Full Court. As the sole issue in the appeal is such that if decided in favour of the defendant the whole judgment would fall I do not propose to attach any terms to the stay.
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.